RNS Number:3343S
East Surrey Holdings PLC
21 November 2003
East Surrey Holdings PLC
EAST SURREY ANNOUNCES SOLID INTERIM RESULTS
AS IT ANNOUNCES PHOENIX ACQUISITION
East Surrey Holdings plc, ("East Surrey"), the water and gas utility company,
has today announced its interim results for the six months to 30 September 2003.
* Turnover #26.6 million (2002: #25.9 million)
* Operating profit #5.6 million (2002: #5.4 million)
* Pre-tax profit #3.7million (2002: #9.4 million*)
* Earnings per share 5.6p (2002: 18.1p*)
* Interim dividend 4.75p (2002: 4.6p)
* Acquisition of two Independent Gas Transporters
*Includes exceptional profits on disposals and prior year tax adjustment
Pat Barrett, Chairman, commenting on the results said,
"We are delighted to be announcing the acquisition of the 75.5% of Phoenix that
we do not already own. This is an important and very exciting step in the
development of the Group.
"Meanwhile, the core operations have continued to perform well. I look forward
to the future of the enlarged Group with confidence."
This statement is published at the same time as the formal circular to
shareholders announcing the agreement, subject to shareholder approval, to
acquire the 75.5 per cent. of Phoenix Natural Gas Ltd. that is not already owned
by East Surrey, and the placing and open offer to raise funds to finance the
acquisition. This investment, which is explained in the circular, will allow
shareholders to fully participate in the expected growth of the natural gas
market in the Greater Belfast area.
-ends-
Date: 21 November 2003
For further information contact:
East Surrey Holdings plc 01737 772000
Phil Holder, Managing Director
Nick Fisher, Finance Director
City Profile 020 7448 3244
Simon Courtenay
Interim results for the six months ended 30 September 2003
The following is the full text of the interim results for the six months ended
30 September 2003 which were released earlier today:
Chairman's Statement
This statement is published at the same time as the formal announcement of our
agreement, subject to shareholder approval, to acquire the 75.5 per cent. of
Phoenix Natural Gas that we do not already own, and the placing and open offer
to raise funds to finance the acquisition. This investment, which will be
explained in more detail in a circular to be sent to Shareholders later today,
will allow shareholders to fully participate in the expected growth of the
natural gas market in the Greater Belfast area.
As regards other strategic activities, Sutton and East Surrey Water has
continued to achieve its targets despite difficult operating conditions and E.S.
Pipelines has acquired two independent public gas transporters to consolidate
its operations.
Operating profits for the six months ended 30 September 2003 were #5.6m (2002:
#5.4m) on a turnover of #26.6 million (2002: #25.9 million).
Sutton and East Surrey Water
Turnover in Sutton and East Surrey Water increased by 1.0 per cent. to #18.8
million (2002: #18.6 million). This increase was less than the rate of inflation
because of the 1.21 per cent. price reduction agreed by OFWAT to reflect a lower
number of customers switching to meters than anticipated. Due to the warm
weather this summer, demand from domestic customers has been high. As a result,
metered income is ahead of forecast at the half year. However, the additional
costs associated with high demand and with repairing significantly more burst
mains than usual due to increased ground movement have adversely affected
operating costs. The overall impact of all these factors was to leave operating
profits unchanged at #5.8 million.
At the operational level, it is well known that August, September and October
have been some of the hottest and driest months on record. During the summer
period rainfall was only 77 per cent. of normal levels with September being the
eighth consecutive month of below average rainfall. Despite these problems we
continued to supply without interruption despite daily average demand in August
being 35 per cent. above typical levels. However, if rainfall over the course of
the winter does not reach long-term average levels then there could be resource
difficulties next summer. In other operating areas we have continued to meet our
leakage targets and maintain our high levels of customer service.
Our business plan, submitted to OFWAT in mid-August, showed that there are a
number of issues that require further clarification before the final business
plan is submitted in April 2004. We are encouraged by OFWAT's initial response
to those plans, which showed a reasonable approach to financing issues but is
more contentious on some operating cost and efficiency issues. We are currently
preparing for our meetings with OFWAT and look forward to some constructive
discussions.
As announced by the Company on 3 October 2003, Sutton and East Surrey Water has
agreed with OFWAT that adjustments to Sutton and East Surrey Water's charges for
2004/05 should be carried forward and taken into account in the calculation of
prices for 2005/10. The total impact of this adjustment over the five year
period 2005/10 will be #1.16 million (equivalent to #0.23 million per annum)
before tax in 2002/03 prices.
Phoenix Natural Gas Ltd
Phoenix Natural Gas continues to make good progress and is achieving its
operational targets. East Surrey Holdings' share of turnover increased by 13 per
cent. to #3.2 million although this was lower than anticipated due to an 'early
turn-off' in the spring caused by the warm weather at that time followed by an
unusually hot summer. However, the number of connections reached 61,000 by the
end of the September. East Surrey Holdings' share of the loss in the summer
period was #0.4 million (2002: #0.5 million). At the beginning of October,
Phoenix Natural Gas increased its prices by 10.8 per cent. This increase
included amounts for inflation and the increased cost of natural gas.
Since my last report, the regulator (OFREG) has decided to award preferred
bidder status to another company for natural gas distribution licences to new
areas of Northern Ireland. Phoenix Natural Gas considered that this was a flawed
process and applied for a judicial review of the decision, which is scheduled to
start later this month. Neither the preferred bidder status nor the judicial
review will have any effect on Phoenix Natural Gas' existing business covering
the Greater Belfast area.
Phoenix Natural Gas is in discussions with OFREG regarding the conversion of its
current licence (the Phoenix Licence) to one which is based on regulatory asset
value, whereby the value of the business increases with investment and short
term under-recoveries and is depreciated over an appropriate period for a gas
infrastructure business. Any revision to the existing Phoenix Licence would
require the consent of Phoenix Natural Gas.
E.S. Pipelines
I am very pleased to report that on 28 October 2003 we acquired the natural gas
networks operated by United Utilities plc for a cash consideration of #3.1
million. These networks comprise around 10,000 revenue-earning connections,
which the Directors anticipate will increase to 12,000 over the course of the
next two years, and will provide a sound revenue stream and firm basis from
which E.S. Pipelines can grow. In addition, E.S. Pipelines continues to find and
develop its own projects and has recently started construction at Culloden,
Llay, Invergorden and Alloa. Work also continues on major projects at St Osyth,
Cleveland and Edinburgh Waterfront. In all there are 50 projects currently being
constructed or earning revenue.
We mentioned in our 2003 Financial Statements that the Office of Gas and
Electricity Markets (OFGEM) was consulting on changes to the methodology that
determines natural gas transportation charges. OFGEM has now completed this
process and issued proposed guidelines. Essentially the proposal will allow E.S.
Pipelines to offer reduced capital contributions, but higher than standard
transmission charges, for customers wishing to connect to our natural gas
networks. The proposal protects the position of infill developments, in which
E.S. Pipelines specialises and is a satisfactory outcome to what could have been
a serious threat to E.S. Pipelines' viability.
Non-core companies in the Group have performed well generating profits of #0.5
million (2002: #0.4 million). Last year's results included #0.1 millon from
discontinued operations. Demand at both Advanced Minerals Limited and Allmat
(East Surrey) Limited have exceeded expectations.
Financing costs of #1.9 million (2002: #0.2 million) included bond indexation
charges of #1.5 million (2002: #nil) reflecting the change in the Retail Price
Index over the period. Last year there was no increase in that index in the
period.
The tax charge for the period of #0.4 million (2002: #0.1 million benefit) does
not include any prior year tax adjustments although last year's results included
#1.8 million of such refunds.
Dividends
The results reported are consistent with our long-term plan. Therefore, in line
with its policy of increasing dividends in line with inflation across the full
financial year and providing real increases when Phoenix Natural Gas becomes
cash generative, the Board has declared a dividend of 4.75 pence (2002: 4.60
pence).
The interim dividend will be paid on 12 January 2004 to shareholders on the
register on 12 December 2003. New shares issued pursuant to the proposed placing
and open offer will not qualify for the interim dividend but will rank pari
passu with existing shares in all other respects.
Following the acquisition of Phoenix, the directors of East Surrey Holdings look
forward to the future of the Enlarged group with confidence.
Pat Barrett
Chairman
21 November 2003
Consolidated Profit and Loss Account
For the six months ended 30 September 2003
Six months ended Six months ended Year ended
_________________ _________________ _________________
30 Sept 30 Sept 30 Sept 30 Sept 31 March 31
March
2003 2003 2002 2002 2002 2003
Note #'000 #'000 #'000 #'000 #'000 #'000
_________________________ _______ _______ _______ _______ _______ _______
Turnover: Group and 2 26,623 25,905 55,550
share of joint venture
Less: Share of joint (3,189) (2,831) (9,007)
venture turnover
_________________________ _______ _______ _______
Group turnover 23,434 23,074 46,543
Operating costs (17,127) (16,859) (33,567)
_________________________ _______ _______ _______
Group operating profit 6,307 6,215 12,976
Joint venture
Share of operating (419) (516) 596
(loss)/ profit
Amortisation of licence (115) (100) (176)
_________________________ _______ _______ _______
(534) (616) 420
Amortisation of goodwill (174) (174) (347)
_________________________ _______ _______ _______
Total operating (708) (790) 73
(loss)/profit on joint
venture
_________________________ _______ _______ _______
Total operating profit - 5,599 5,425 13,049
Group and share of joint
venture
Exceptional items 3
Profit on sale of - 2,414 2,414
subsidiary
Profit on disposal of - 1,815 1,815
tangible fixed asset
_________________________ _______ _______ _______
Net exceptional profits - 4,229 4,229
Net interest
(payable)/receivable
- Group (1,930) (251) (2,127)
- Joint Venture 18 17 38
_________________________ _______ _______ _______
4 (1,912) (234) (2,089)
_________________________ _______ _______ _______
Profit on ordinary 2 3,687 9,420 15,189
activities before
taxation
Taxation on profit of 5 (416) 103 515
ordinary activities
_________________________ _______ _______ _______
Profit on ordinary 3,271 9,523 15,704
activities after
taxation
Dividends - equity and 6 (2,862) (2,787) (7,914)
non-equity shares
Retained Profit for the 409 6,736 7,790
period
======================== ======= ======= =======
Basic and fully diluted
earnings per share
- Basic and diluted 7 5.6p 18.1p 29.5p
- Before exceptional 5.6p 10.4p 21.6p
items
- Before exceptional 5.6p 6.7p 15.4p
items and prior year tax
adjustment
======================== ======= ======= =======
The turnover, operating profit and exceptional profits of the Group arise solely from continuing operations.
Consolidated Balance Sheet
As at 30 September 2003
30 Sept 30 Sept 30 Sept 30 Sept 31 March 31 March
2003 2003 2002 2002 2003 2003
Note #'000 #'000 #'000 #'000 #'000 #'000
________________________ _______ _______ _______ _______ _______ _______
Fixed Asset
Intangible assets 113 119 116
Tangible assets 126,075 110,921 117,821
Investment in joint venture 8
- Share of gross assets 61,834 58,241 61,647
- Share of gross liabilities (7,912) (7,455) (7,989)
- Goodwill 4,322 4,669 4,496
________________________ _______ _______ _______
Total Investment in joint venture 58,244 55,455 58,154
________________________ _______ _______ _______
184,432 166,495 176,091
Current assets 9 78,846 83,852 76,981
Creditors: Amounts falling due (27,244) (21,138) (19,626)
within one year
________________________ _______ _______ _______
Net current assets 51,602 62,714 57,355
________________________ _______ _______ _______
Total assets less current 236,034 229,209 233,446
liabilities
Creditors: Amounts falling due (95,885) (89,886) (93,631)
after more than one year
Provisions for liabilities and 10 (6,690) (7,336) (6,759)
charges
________________________ _______ _______ _______
Net assets 2 133,459 131,987 133,056
====================== ======= ======= =======
Share capital and reserves
Called up share capital 15,212 15,212 15,212
Other reserves 15,550 15,550 15,550
Profit and loss account 102,447 100,984 102,038
________________________ _______ _______ _______
Shareholders funds 11 133,209 131,746 132,800
Minority interest - non equity 250 241 256
________________________ _______ _______ _______
133,459 131,987 133,056
====================== ======= ======= =======
Summarised Consolidated Cash Flow Statement
For the six months ended 30 September 2003
Six months ended Six months ended Year ended
___________________________ ________________ _______________ ________________
30 Sept 30 Sept 30 Sept 30 31 March 31 March
Sept
2003 2003 2002 2002 2003 2003
Note #'000 #'000 #'000 #'000 #'000 #'000
___________________________ _______ _______ _______ ______ _______ _______
Net cash inflow from 12 15,679 10,012 18,246
operating activities
Net cash outflow from (695) (174) (660)
returns on investments and
servicing of finance
UK corporation tax 2,093 (1,330) (1,771)
received / (paid)
Capital expenditure and
financial investment
Purchase of tangible fixed (11,977) (7,946) (18,556)
assets
Sale of tangible fixed 44 252 705
assets
Exceptional proceeds on - 2,799 2,799
disposal of subsidiary
Exceptional proceeds on - 4,095 4,095
disposal of tangible fixed
assets
___________________________ _______ _______ _______
Net cash outflow from (11,933) (800) (10,957)
capital expenditure and
financial investment
Acquisitions and disposals
Purchase of interest in (673) (1,678) (3,969)
joint venture
Net cash disposed with - (2) (2)
subsidiary
___________________________ _______ _______ _______
Net cash outflow from (673) (1,680) (3,971)
acquisitions and disposals
Equity dividends paid (4,632) (4,482) (6,772)
___________________________ _______ ______ _______
Net cash (outflow)/inflow (161) 1,546 (5,885)
before management of
liquid resources and
financing
Management of liquid 11,040 (650) 1,760
resources
Financing:
Bank loans received 399 - 1,411
Bank loans repaid (146) - (79)
Loan notes repaid - (15) (31)
Capital element of finance - - (157)
lease rental payments
___________________________ _______ _______ _______
Net cash inflow/(outflow) 253 (15) 1,144
from financing
___________________________ _______ ______ _______
Increase/(decrease) in 11,132 881 (2,981)
cash
===================== ===== ===== ======
Consolidated Statement of Total Recognised Gains and Losses
For the six months ended 30 September 2003
Six months Six months Year
ended ended Ended
30 Sept 2003 30 Sept 2002 31 March 2003
Note #'000 #'000 #'000
__________________________ _________ _________ _________
Total gains and losses recognised since the last annual 3,271 9,523 15,704
report
============================== ======== ========== ===========
Notes to the accounts
1. Basis of preparation
The interim Financial Statements have been prepared on the basis of the accounting policies set out in the Group
financial statements for the year ended 31 March 2003. The statements do not comprise full financial statements
within the meaning of Section 240 of the Companies Act 1985.
2. Segmental analysis
Six months
ended
Gas 30 Sept 2003
Water joint venture Other Total
#'000 #'000 #'000 #'000
________ ________ ________ ________
Turnover 18,759 3,189 4,675 26,623
Operating profit/(loss) 5,829 (419) 478 5,888
Amortisation of goodwill and intangible asset - (289) - (289)
Exceptional items - - - -
Interest (payable)/receivable (2,405) 18 475 (1,912)
________ ________ ________ ________
Profit/(loss) on ordinary activities before taxation 3,424 (690) 953 3,687
________ ________ ________ ________
Net assets 60,860 58,244 14,355 133,459
======= ======== ======= ========
Six months
ended
Gas 30 Sept 2002
Six months ended 30 Sept 2001 Water joint venture Other Total
#'000 #'000 #'000 #'000
________ ________ ________ ________
Turnover 18,575 2,831 4,499 25,905
________ ________ ________ ________
Operating profit/(loss) 5,853 (516) 362 5,699
Amortisation of goodwill and other intangible asset - (274) - (274)
Exceptional items - - 4,229 4,229
Interest (payable)/receivable (842) 17 591 (234)
________ ________ ________ ________
Profit/(loss) on ordinary activities before taxation 5,011 (773) 5,182 9,420
________ ________ ________ ________
Net assets 59,796 55,455 16,736 131,987
======= ======= ======= =======
Year ended 31 March 2003
Gas
Water joint venture Other Total
#'000 #'000 #'000 #'000
________ ________ ________ ________
Turnover 37,167 9,007 9,376 55,550
________ ________ ________ ________
Operating profit 12,016 596 960 13,572
Amortisation of goodwill and other intangible - (523) - (523)
asset
Exceptional items - - 4,229 4,229
Interest (payable)/receivable (3,262) 38 1,135 (2,089)
________ ________ ________ ________
Profit on ordinary activities before taxation 8,754 111 6,324 15,189
________ ________ ________ ________
Net assets 58,478 58,154 16,424 133,056
======= ======= ======= =======
3. Exceptional items
Profit on disposal of subsidiary during the year ended 31 March 2003
The Classic Water Company Ltd was sold on 23 July 2002 producing a profit of #2,414,000. There is no tax liability
arising from this disposal.
Profit on disposal of tangible fixed asset during the year ended 31 March 2003
Land at Kenley was sold producing a profit of #1,815,000. Within the tax charge, a provision of #291,000 has been
made relating to this profit.
4. Net interest (payable)/ receivable
Six months Six months
ended ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Interest payable:
Bond
- interest (1,519) (1,479) (2,956)
- indexation (1,463) - (1,525)
- amortisation of costs (227) (227) (456)
__________ __________ __________
Total bond costs (3,209) (1,706) (4,937)
Bank loans and overdrafts (37) - (36)
Other loans and finance leases (18) (82) (138)
__________ __________ __________
Total interest payable and similar charges (3,264) (1,788) (5,111)
__________ __________ __________
Interest receivable - Group 1,334 1,537 2,984
- Joint venture 18 17 38
__________ __________ __________
Total interest receivable and similar income 1,352 1,554 3,022
__________ __________ __________
Net interest payable and similar charges (1,912) (234) (2,089)
========= ========= =========
5. Taxation
Six months Six months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
UK Corporation tax
Current tax on income in the period 593 1,561 2,546
Adjustments in respect of prior periods (1) (1,828) (3,124)
__________ __________ __________
Total current tax 592 (267) (578)
Deferred tax
Timing differences and discount (69) 315 (262)
Share of joint venture deferred tax (107) (151) 325
__________ __________ __________
Tax on profit on ordinary activities 416 (103) (515)
========= ========= =========
6. Dividends
Six months Six months Year
ended ended Ended
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Ordinary 2,366 2,291 6,922
Preference 496 496 992
__________ __________ __________
2,862 2,787 7,914
========= ========= =========
The Directors have declared an interim dividend of 4.75p (4.6p) per ordinary share. This will be paid on 12 January
2004 to shareholders on the register at the close of business on 12 December 2003. The ex-dividend date is 10
December 2003.
7. Earnings per ordinary share
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Profit of ordinary activities after taxation 3,271 9,523 15,704
Preference dividends (496) (496) (992)
__________ __________ __________
Adjusted earnings 2,775 9,027 14,712
Exceptional profits net of tax - (3,850) (3,938)
__________ __________ __________
Earnings excluding exceptional items 2,775 5,177 10,774
Less prior year tax adjustment (see note 5) (1) (1,828) (3,124)
__________ __________ __________
Earnings excluding exceptional items and prior year tax 2,774 3,349 7,650
adjustment
========= ========= =========
Number number Number
000 000 000
Weighted average number of shares in issue 49,798 49,798 49,798
========= ========= =========
8. Investments - Joint venture
The joint venture was acquired on 19 March 2001 and represents 24.5% of the net assets of Phoenix Natural Gas
Limited. A further #0.7 million was invested in the period.
9. Current assets
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Stock 988 1,070 1,104
Debtors 9,003 7,747 7,114
Cash at bank and in hand 68,855 75,035 68,763
__________ __________ __________
78,846 83,852 76,981
========= ========= =========
10. Provisions - deferred tax
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Balance brought forward 6,759 7,041 7,041
Amount charged in the profit and loss account (69) 315 (262)
Sale of subsidiary - (20) (20)
__________ __________ __________
Balance carried forward 6,690 7,336 6,759
========= ========= =========
11. Reconciliation of movements in shareholder's funds
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Profit for the period 3,271 9,523 15,704
Dividend (see note 6) (2,862) (2,787) (7,914)
__________ __________ __________
Net addition to shareholders' funds 409 6,736 7,790
Opening shareholders' funds 132,800 125,010 125,010
__________ __________ __________
Closing shareholders' funds 133,209 131,746 132,800
========= ========= =========
12. Cash flow from operating activities
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Operating profit 5,599 5,425 13,049
Joint venture operating loss/(profit) 419 516 (596)
Depreciation, amortisation and profit / loss on disposals 3,971 3,682 7,104
Decrease in working capital 5,690 389 (1,311)
__________ __________ __________
15,679 10,012 18,246
========= ========= =========
13. Reconciliation of net cash flow to movement in net debt
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
#'000 #'000 #'000
__________ __________ __________
Increase/(decrease) in cash in period 11,132 881 (2,981)
Cash (inflow)/outflow from (decrease)/ increase in liquid (11,040) 650 (1,760)
resources
Cash (inflow)/outflow from (increase)/decrease in debt and (253) 15 (1,144)
lease finance
__________ __________ __________
Movement in net debt resulting from cash flow (161) 1,546 (5,885)
Non cash movement (1,690) (227) (1,980)
__________ __________ __________
Movement in net debt in period (1,851) 1,319 (7,865)
Net funds at beginning of period (23,676) (15,811) (15,811)
__________ __________ __________
Net funds at end of period (25,527) (14,492) (23,676)
========= ========= =========
This information is provided by RNS
The company news service from the London Stock Exchange
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