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Name | Symbol | Market | Type |
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Sutton E.s.bds | LSE:BM50 | London | Bond |
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RNS Number:2189K Sutton & East Surrey Water PLC 19 December 2007 Sutton & East Surrey Water plc The Company announces today its interim results for the six months ended 30 September 2007. Chairman's Statement During the period under review the Company experienced very different weather conditions to those on which we reported last year. We had then encountered both a severe winter drought and a very hot summer, yet still managed to supply high quality water to our customers for all essential purposes. In contrast we have in the past year benefited from wet weather throughout the winter and summer. These accounts reflect the unusually high levels of summer rainfall in May, June and July, which resulted in several flooding incidents in our area of supply, one of which affected our Cheam Works. Water resources and leakage Our ability to meet customers' demands depends upon the level of rainfall, particularly in the winter months, which replenishes the aquifers and reservoir for use in the summer. After two dry winters, leading to one of the severest droughts in the Company's history, I commented in my June report that the winter of 2006/07 was wetter than average, that our borehole resources had recovered and that our surface reservoir at Bough Beech was full. We did not therefore anticipate any problems with supplying water during the subsequent summer. In fact, during last summer levels of rainfall were a healthy 7% above average for the period. However the pattern was unusual, in that in April we received only 4% of the monthly average, while May, June and July were significantly above average. August meanwhile was average, but September well below. One impact of the wet summer was that it reduced demand, especially peak demand, which was around 5% less than we would have expected in a "normal" year. The good resource position with which we started the period, combined with the higher than average level of rainfall and low demand, ensured that we were able to meet all requirements for water during the summer. Unfortunately October rainfall levels have proved disappointing, but we are hoping for a more normal pattern during the remainder of the winter period, thereby enabling recharge of our resources. One of the more notable aspects of the heavy rainfall in July was that it fell in concentrated bursts that caused severe flooding across the country. In our area, the Cheam works received a month's rainfall in three hours, while nearby in Wallington the same event caused severe flooding in the town centre. A localised flood at Cheam resulted in a very small amount of rainwater entering our system and, as a result, some contaminated water going into supply. All the Health Authorities agreed that there was no danger to public health, but it was decided to issue a precautionary boil water notice to 50,000 properties supplied by that works. I am pleased to report that the emergency planning procedures that we have established worked very well. All affected customers were notified, hospitals and the vulnerable were supplied with bottled water and supplies of water were maintained. The result was that the precautionary boil water notice was lifted after 60 hours and test results proved that water supplied throughout the period met all quality standards and there was no risk to public health. Our staff responded magnificently to this very demanding situation. Our environmental track record remains strong - indeed, we continue to be one of the most successful companies in minimising water loss from the network. We have met Ofwat's challenging leakage target of 24.5Mld during this period and expect to continue this level of achievement during the remainder of the year. We are extensively promoting the virtues of water efficiency among our customers. We have adopted Ofwat's Good Practice Register in determining our range of activities and policies in this area. These include the distribution of cistern displacement devices, water audits for domestic and commercial consumers and an extensive customer education programme. Our most innovative activity is our joint venture with Reigate and Banstead Borough Council, Waterwise and the Environment Agency to retrofit a local social housing estate with rainwater harvesting and water efficient fittings, measuring the impact of these upon consumption patterns and consumer behaviour. Customer service We continue to hold our position among the best performing companies in the water industry, leading the way in distributing high quality water and achieving 99.95% mean zonal compliance with mandatory standards, supported at all times by very high levels of service. Capital expenditure During the period the company has spent £11.1m on new plant and infrastructure, a significant increase on last year. Work continues on the second stage of refurbishing our Cheam works and developing new resources at Outwood Lane and Mitcham, in order to improve supplies. We have also invested £6.3m in our mains network for structural and quality reasons, and a further £1.1m in installing customer meters. We are currently in the process of preparing tenders for the refurbishment of our Bough Beech works. We fully expect to achieve our spending targets, as set by Ofwat, within this quinquennium. Financial results The results for the period have been adversely affected by the reduced level of demand in the summer referred to above, resulting in measured revenues below expected levels. Turnover was £24.2m (£22.9m), benefiting from the 5.2% increase in prices allowed by Ofwat in respect of inflation and the "K" factor. Revenues however reflected the reduced demand from our measured customers, resulting in income from this source falling £0.4m below our expectations for a typical year. There was no change in our operating costs which, at £18.1m, have benefited from avoiding the expenses associated with last year's drought (£0.8m), although we have suffered increased depreciation (£0.3m) arising from our high levels of capital expenditure, and the effects of inflation upon the remainder of our expenditure. Operating profits increased to £6.1m (£4.7m), and interest charges by £1.4m to £3.8m as a result of higher indexation charges on our Bond and interest earned on lower cash balances. Other finance income, arising from the good performance of our pension fund investments, increased to £0.9m from the £0.7m achieved last year. These factors led to the profit before tax increasing by £0.1m to £3.1m for the period. Our final salary pension scheme continues to remain in surplus, on an FRS 17 basis. The post-tax surplus increased during the period by £3.5m to £9.2m. Our contributions of 30% of salary, together with the effective management of the scheme have produced this satisfactory result. A dividend of £2.8m was paid in the period. This is significantly less than the £14.9m paid last year, but that included a £12.0m special dividend agreed with Ofwat. Risks and Uncertainties The principal risks and uncertainties facing the Company in the next six months are largely associated with the weather and rainfall levels. We need winter rainfall to recharge our resources, and if this is significantly below the average we may have to implement restrictions next summer. Finally I would like to thank all our staff for the invaluable contribution that they continue to make on the Company's behalf. Pat Barrett 19 December 2007 Sutton and East Surrey Water plc Profit and Loss Account 6 months to 6 months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 (Unaudited) (Unaudited) £'000 £'000 £'000 Turnover 24,233 22,920 46,739 Operating costs (18,147) (18,183) (33,737) -------------------------------------------- Operating profit 6,086 4,737 13,002 Net interest payable and similar charges (3,876) (2,452) (7,416) Other finance income 862 676 1,257 -------------------------------------------- Profit on ordinary activities before taxation 3,072 2,961 6,843 Taxation on profit on ordinary activities 811 (393) (1,894) -------------------------------------------- Profit on ordinary activities after taxation 3,883 2,568 4,949 ============================================ Sutton and East Surrey Water plc Statement of total Recognised Gains and Losses 6 months to 6 months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 (Unaudited) (Unaudited) £'000 £'000 £'000 Profit for the period 3,883 2,568 4,949 Actuarial gain recognised in the pension scheme 4,069 921 3,542 Deferred tax arising on gains in the pension scheme (1,386) (568) (974) --------------------------------------- Total recognised gains and losses relating to the period 6,566 2,921 7,517 --------------------------------------- Sutton and East Surrey Water plc Balance Sheet At 30 Sept At 30 Sept At 31 March 2007 2006 2007 (Unaudited) (Unaudited) £'000 £'000 £'000 Fixed assets Intangible assets 8,268 9,241 8,754 Tangible assets 156,202 144,199 151,267 ------------------------------------------- 164,470 153,440 160,021 ------------------------------------------- Current assets Stocks 877 894 868 Debtors 18,397 9,776 13,501 Cash at bank and in hand 9,802 19,642 15,005 ------------------------------------------- 29,076 30,312 29,374 Creditors: amounts falling due within one year (23,622) (24,220) (24,249) ------------------------------------------- Net current assets 5,454 6,092 5,125 ------------------------------------------- Total assets less current liabilities and charges 169,924 159,532 165,146 ------------------------------------------- Creditors: amounts falling due after more (120,343) (115,090) (118,301) than one year Provisions for liabilities and charges (7,900) (8,831) (8,798) ------------------------------------------- Net assets 41,681 35,611 38,047 ------------------------------------------- Capital and reserves Called up share capital 3,105 3,105 3,105 Profit and loss account 38,576 32,506 34,942 ------------------------------------------- Shareholders' funds - equity 41,681 35,611 38,047 ------------------------------------------- Sutton and East Surrey Water plc Cash Flow Statement 6 months to 6 months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 (Unaudited) (Unaudited) £'000 £'000 £'000 Cash flow from operating activities 10,416 12,334 25,236 Return on investment and servicing of finance: Interest received 526 534 1,074 Interest paid (1,742) (1,691) (3,296) Interest element of finance lease rentals 0 (21) 0 Preference dividends to shareholders (483) (483) (966) ------------------------------------------ Net cash outflow from returns on investments and servicing of finance (1,699) (1,661) (3,188) UK corporation tax received 0 36 36 Capital expenditure and financial investment Purchase of tangible fixed assets (11,113) (9,247) (22,395) Sale of tangible fixed assets 43 21 56 Dividends paid on shares classified in shareholders' funds (2,850) (12,000) (14,900) ------------------------------------------ Cash inflow before management of liquid resources and financing (5,203) (10,517) (15,155) Management of liquid resources 8,359 10,182 10,901 ------------------------------------------ Increase/(Decrease) in cash in the period 3,156 (335) (4,254) ------------------------------------------ Financing: Capital element of finance lease rental payments 0 (210) (210) ------------------------------------------ Increase/(Decrease) in cash in the period 3,156 (545) (4,464) ------------------------------------------ Note to the interim results Basis of preparation The unaudited interim financial statements for the half year ended 30 September 2007 have been prepared in accordance with the historic cost convention. These interim financial statements are consistent with the regulatory historic cost financial statements for the year ended 31 March 2007, which the Company prepares in accordance with Condition F of the Instrument of Appointment by the Secretary of State for the Environment as a water and sewerage undertaker under the Water Industry Act 1991. The effect of departures from applicable UK Accounting Standards, which are necessary to comply with regulatory reporting requirements laid down by the Water Services Regulation Authority (OFWAT), are set out in the regulatory financial statements for the year ended 31 March 2007. The statutory accounts for the year ended 31 March 2007 have been delivered to the Registrar of Companies. The auditors' report on these accounts was unqualified and did not contain a statement under s.237(2) or (3) of the Companies Act 1985. The regulatory accounts for the year ended 31 March 2007 have been delivered to OFWAT. The auditors' report on these accounts confirmed that they contained the information required to comply with Condition F of the Instrument of Appointment granted by the Secretary of State for the Environment to the Company as a water and sewerage undertaker under the Water Industry Act 1991. The financial information contained in this announcement does not constitute statutory accounts within the meaning of s.240 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange END IR FFAFWASWSEFE
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