RNS Number:9547I
Mid Kent Water PLC
30 November 2007
Chairman's statement
Introduction
As the financial year commenced, the company entered a new period of challenge.
In May 2007, the Competition Commission ruled that the merger between Mid Kent
Water Limited and South East Water Limited could go ahead and that it would
create limited prejudice to Ofwat's ability to measure the performance of water
companies. Following their ruling, our shareholders, Utilities Trust of
Australia and Hastings Diversified Utilities Funds, together with the South East
Water Board and Mid Kent Water Board approved the merger. Since this time the
management of both businesses have been preparing for the merger. The Board has
also been working with the shareholders and their advisors to ensure that full
due legal and regulatory processes are followed. These processes will lead to
the creation of a new company using the name of South East Water Limited and the
removal of the name of Mid Kent Water Limited from the list of English Water
Companies after a period of 119 years of operation.
This has been a challenging time for staff in the business who have continued to
focus on the company's operational requirements whilst activity on the merger
front continues in parallel. There have been no significant supply issues in the
six months to September 2007 and water resources available for supply are at an
acceptable level.
Mid Kent Water concluded the last financial year with the lifting of water
restrictions in its area of supply. Mid Kent Water was the last Water Company to
lift restrictions in the South East of England. Operationally, the business has
continued to perform in the current year to the high standard expected by its
customers. An OPA score of 270 was reported in November 2007 for the year to 31
March 2007. This represents a drop from 275 in the previous year. It is worth
noting that 9 points were lost in 2006/7 owing to the introduction of water
restrictions.
Results
Profitability remains strong for the first half of 2007/8, with Operating Profit
increasing by #1.2m from #8.0m for the six month period to 30 September 2007 to
#9.2m for the corresponding six month period in the previous year.
Turnover increased by #1.2m from #23.5m to #24.7m. This represents an increase
of 5.2% on last year's first half performance. With the price increase allowed
by Ofwat of 1.9% and RPI of 3.78% reflective in our tariff base from 1 April
2007, the revenue levels for the six month period are broadly in line with the
same period for the previous year. Changes in customer behaviour, in terms of
water consumption and conservation from the year in which drought restrictions
were in place into the current year, is evident. The wetter than predicted
summer resulted in a summer where no water restrictions were imposed.
Operating costs of the business have been maintained at #15.5m with the
underlying increase in costs being compensated by efficiencies within the
business.
Whilst interest receivable has increased marginally by #241k for the period to
30 September 2007, compared to the previous year, interest payable has increased
from #4.5m to #6.7m, an increase of #2.2m. This is due to the increase in RPI
applicable to the company's index linked loans in the 6 months to 30 September
2007 compared to the same period in the previous year.
Profit on ordinary activities after tax has reduced from #4.2m to #3.0m.
Capital Expenditure
The Company continues to deliver the capital programme with capital expenditure
for the first half of the year at #16.5m - a significant increase on the same
period for the previous year (#11.4m).
Water Quality
Our Water Quality performance has improved, with compliance indices above the
Industry Average for the first six months of the year.
Looking ahead
The merger planning process has almost concluded and the business will shortly
be executing those plans. The assets, staff and liabilities of Mid Kent Water
will be transferring under a statutory transfer scheme to South East Water in
compliance with the Water Industry Act 1991.
I would again thank and commend all the staff in Mid Kent Water for their
contribution and commitment over the past 6 months and I wish them all well in
the newly formed company. It has been a privilege to serve as Executive Chairman
for the past 14 months.
Graham Setterfield
Chairman
23 November 2007
Profit and loss account
Notes Half year ended Half year ended Year ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
#000 #000 #000
3 Turnover 24,699 23,467 47,125
Operating costs 15,493 15,476 31,096
---------- ---------- ----------
4 Operating profit 9,206 7,991 16,029
Profit on sale of fixed 232 19 476
assets ---------- ---------- ----------
Profit on ordinary 9,438 8,010 16,505
activities before
interest
Interest receivable 2,105 1,864 3,826
Interest payable and (6,698) (4,536) (12,864)
similar charges
Return on pension scheme 150 150 364
assets ---------- ---------- ----------
Profit on ordinary 4,995 5,488 7,831
activities before
taxation
Tax charge/(credit) on (1,965) (1,309) 2,298
profit on ordinary ---------- ---------- ----------
activities
Profit on ordinary 3,030 4,179 10,129
activities after ---------- ---------- ----------
taxation
Earnings per ordinary 15.3 21.1 51.2
share ---------- ---------- ----------
Statement of recognised gains and losses
Notes Half year ended 30 Half year ended 30 Year ended 31
September 2007 September 2006 March 2007
(unaudited) (unaudited) (audited)
#000 #000 #000
Profit for the 3,030 4,719 10,129
financial period
Pension schemes 2,052 (868) 1,263
actuarial gain/ ---------- ---------- ----------
(loss)
5,082 3,311 11,392
---------- ---------- ----------
Balance sheet
Notes Half year ended Half year ended Year ended
30 September 30 September 31 March
2007 2006 2007
(restated)
(unaudited) (unaudited) (audited)
#000 #000 #000
Fixed assets
Tangible assets 224,977 204,353 214,137
---------- ---------- ----------
Current assets
Stocks 1,036 720 618
Debtors: amounts falling 9,836 10,335 9,242
due within one year
Debtors: amounts falling 42,827 39,375 41,033
due after more than one
year
Investments 2,000 9,000 10,662
Cash at bank and in 4,777 4,405 1,703
hand ---------- ---------- ----------
60,476 63,835 63,258
Creditors: amounts (33,343) (23,276) (27,349)
falling due within one ---------- ---------- ----------
year
Net current assets 27,133 40,559 35,909
---------- ---------- ----------
Total assets less current 252,110 244,912 250,046
liabilities
Creditors: amounts (190,066) (182,154) (187,058)
falling due after more
than one year
Provision for liabilities (13,486) (14,519) (11,656)
and charges ---------- ---------- ----------
Net assets excluding 48,558 48,239 51,332
pension asset
Pension asset 5,105 286 2,738
---------- ---------- ----------
Net assets 53,663 48,525 54,070
---------- ---------- ----------
Capital and reserves
Called up share capital 19,781 19,781 19,781
Share premium account 5,672 5,672 5,672
Profit and loss account 28,210 23,072 28,617
---------- ---------- ----------
Capital employed 63,663
48,525 54,070
---------- ---------- ----------
Cash flow statement
Notes Half year Half year Year ended
ended 30 ended 30 31 March
September September 2007
2007 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
5 Net cash inflow from operating 14,938 12,639 25,326
activities
6 Returns on investment and (3,366) (3,066) (6,133)
servicing of finance
Taxation and group relief - - (300)
6 Net capital expenditure (15,892) (11,206) (24,562)
6 Equity dividends paid (1,268) (1,503) (5,307)
---------- ---------- ----------
Cash inflow/(outflow) before (5,588) (3,136) (10,976)
management of liquid resources
and financing
6 Management of liquid 8,662 6,312 4,650
resources
6 Financing - - 6,800
---------- ---------- ----------
3,074 3,176 474
---------- ---------- ----------
Notes to the accounts
1 The figures for the year ended 31 March 2007 do not constitute the Company's
statutory accounts for that period but have been extracted from the statutory
accounts, which have been filed with the Registrar of Companies. The auditors
have reported on those accounts and that report was unqualified and did not
contain a statement under Section 237 (2) of the Companies Act. The accounts
for the six months ended 30 September 2007 have not been audited, nor have the
accounts for the equivalent period in 2006. They comply with relevant
accounting standards and have been prepared on a consistent basis using
accounting policies set out in the 2007 Annual Report.
2 The tax charge for the period ended 30 September 2007 has been based on the
estimated effective rate for the full year.
Half year Half year Year ended 31
ended 30 ended 30 March 2007
September September
2007 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
3 Analysis of turnover
Unmeasured supplies 11,818 11,592 22,903
Measured supplies 11,196 10,213 20,514
Other activities 1,685 1,662 3,708
---------- ---------- ----------
24,699 23,467 47,125
---------- ---------- ----------
4 Operating profit
Operating profit is stated after
charging
Refinancing costs 13 25 40
---------- ---------- ----------
5 Reconciliation of operating profit to net cash inflow from operating
activities
Operating profit 9,206 7,991 16,029
Depreciation charge 5,621 5,187 10,642
(Increase)/decrease in stocks (418) (84) 18
Decrease/(increase) in debtors (608) (1,470) (371)
(Decrease)/increase in creditors 1,437 1,264 (498)
Adjustment for pension funding (300) (249) (494)
--------- ---------- ---------
14,938 12,639 25,326
--------- ---------- ---------
6 Analysis of cash flows for headings netted in cash flow statement
Returns on investments and servicing of finance
Interested received 325 367 665
Interest paid (3,691) (3,406) (6,770)
Loan issue costs - (27) (28)
--------- ---------- ---------
(3,366) (3,066) (6,133)
--------- ---------- ---------
Net capital expenditure
Purchase of tangible fixed assets (17,555) (12,496) (28,217)
Contributions to infrastructure 1,408 1,261 3,054
assets
Sale of tangible fixed assets 255 29 601
--------- ---------- ---------
(15,892) (11,206) (24,562)
--------- ---------- ---------
Half year Half year ended Year ended
ended 30 30 September 31 March
September 2006 2007
2007
(unaudited) (unaudited) (audited)
#000 #000 #000
6 Analysis of cash flows for headings netted in cash flow statement (continued)
Equity dividends paid
Dividends paid (1,268) (1,503) (5,307)
--------- ---------- ---------
Management of liquid resources
Decrease/(Increase) in cash 8,662 6,312 4,650
deposits --------- ---------- ---------
Financing
Bank loans repaid - - (21,500)
Index linked loan - - 34,000
--------- ---------- ---------
- - 12,500
--------- ---------- ---------
At 1 April Cash flow Non-cash At 30
2007 changes September
2007
#000 #000 #000 #000
7 Analysis of net debt
Cash at bank and in 1,703 3,074 - 4,777
hand
Short term deposits 10,662 (8,662) - 2,000
--------- --------- ---------- ---------
12,365 (5,588) - 6,777
Index linked loan (189,059) - (2,959) (192,018)
Bank loans (6,800) - - (6,800)
Issue costs 2,461 - (48) 2,413
Debenture stock (461) - - (461)
--------- --------- ---------- ---------
(181,494) (5,588) (3,007) (190,089)
--------- --------- ---------- ---------
Half year Half year Year ended 31
ended 30 ended 30 March 2007
September September
2007 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
8 Reconciliation of net cash to movements in net debt
Increase in cash in period 3,074 3,176 474
Cash inflow from increase in debt - - (6,772)
financing
Cash (inflow)/outflow from movement (8,662) (6,312) (4,650)
in liquid resources --------- --------- ---------
Movement in net debt resulting from (5,588) (3,136) (10,948)
cash flows
Loan indexation (2,959) (1,144) (6,002)
Amortisation of loan issue costs (48) (21) (95)
Net debt at start of period (181,494) (164,449) (164,449)
--------- --------- ---------
Net debt at end of period (190,089) (168,750) (181,494)
--------- --------- ---------
This information is provided by RNS
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