RNS Number:3800F
Mid Kent Water PLC
15 June 2001
Mid Kent Water plc
Preliminary Results
for the year to 31 March 2001
Chairman's Statement
Introduction
On 18th May 2001, the offer by Swan Capital Investments ("Swan") for the share
capital of Mid Kent Holdings plc ("MKH") was declared wholly unconditional and
ownership transferred. During the offer period Swan gave undertakings to the
Office of Water Services (OFWAT) that Mid Kent Water plc (a 99.9% subsidiary
of MKH) would act, from the acquisition date, as if its conditions of
appointment under the Water Industry Act 1991 had been modified along lines
proposed by the Director General of Water Services.
Accordingly, Mid Kent Water plc presents its preliminary results for the year
to 31 March 2001 as if it were a company whose shares are for the time being
listed on the London Stock Exchange.
Results
The turnover for the year was #36.6m, down 15.3% from #43.2m last year. This
was attributable to the reduction in water prices of 19.7% set by the
regulator at the recent Periodic Review, partly offset by the effects of
inflation, population growth and an increase in unregulated revenue.
Operating profit decreased by 54.6% from #19.4m to #8.8m as a direct result of
this reduction in revenue, coupled with the impact of exceptional costs
including redundancy and restructuring costs, legal fees and costs relating to
the successful Competition Commission Appeal.
The company made further good progress in identifying properties surplus to
operational requirements and effected value-added sales resulting in profits
of #1.9m this year - up from #0.8m in the previous year.
Taxation costs in the year were dramatically reduced as a result of the lower
profit base set against a significant increase in capital allowances based on
our increasing investment programme.
Dividends paid up to MKH and minority interests were reduced from #5.0m to #
4.2m reflecting the published dividend policy of the Mid Kent Holdings Group.
Mid Kent Water plc became an indirect subsidiary of Swan after the year end,
and its dividend policy for the future will be reconsidered in due course.
Operations
The Company has undertaken a major exercise to reduce costs through
restructuring the organisation to focus on the delivery of a high quality
customer service. Significant changes have also been made to the senior
management of the Company, including the promotion of the Finance Director to
the role of Managing Director, and the external appointment of a new Customer
Services Director and Commercial Director.
Our appeal to the Competition Commission against OFWAT's price determination
was successful, enabling us to increase our investment plans over the next
four years by an estimated #14m. This will be reflected in water price
increases in 2001/02 of 4.5% and the year after of 3.2%, above inflation.
Major additional capital projects have already been started including the
reconstruction of a number of treatment works, and the refurbishment of 350km
of mains. These projects will enable us to further enhance the quality and
reliability of supply.
We were very pleased that water supplies were uninterrupted despite the severe
weather conditions during last winter's floods, due to appropriate and
innovative advance planning. Additionally we achieved record levels of water
quality with 99.85% of samples meeting stringent quality criteria.
The future
The acquisition of the company by Swan has enabled borrowing facilities to be
accessed which will ensure coverage for the company's significant investment
programme over the next four years.
Changes to internal organisation working practices and management should also
ensure that the Company is poised to deliver increasingly improved and
efficient services to its customers. I am indebted to those who work in the
Water Company for their dedication and loyalty, and I look forward to working
with them in an already brighter future.
Keith Tozzi
Chairman
14 June 2001
PROFIT AND LOSS ACCOUNT
Year ended 31 March
2001 2000
#000 #000
Turnover 36,561 43,198
Operating costs 27,758 23,792
-------- --------
Operating profit 8,803 19,406
Profit on sale of fixed assets 1,875 842
======== ========
Profit on ordinary activities before
interest 10,678 20,248
Interest receivable 604 402
Interest payable and similar charges (3,946) (3,813)
======== ========
Profit on ordinary activities before taxation 7,336 16,837
Tax on profit on ordinary activities 109 4,002
-------- --------
Profit on ordinary activities after taxation 7,227 12,835
Dividends paid and proposed 4,200 4,955
======== ========
Retained profit for the year 3,027 7,880
-------- --------
Earnings per ordinary share 38.8p 68.8p
-------- --------
Dividends per ordinary share 22.53p 26.57p
-------- --------
All recognised gains and losses are included in the profit and loss account
for the year.
BALANCE SHEET
At 31 March
2001 2000
#000 #000
Fixed assets
Tangible assets 133,869 123,173
-------- --------
Current assets
Stocks 459 525
Debtors 7,335 7,223
Cash at bank and in hand 5,184 9,057
-------- --------
12,978 16,805
Creditors: amounts falling due within one
year 37,172 33,272
-------- --------
Net current liabilities (24,194) (16,467)
-------- --------
Total assets less current liabilities 109,675 106,706
Creditors: amounts falling due after more
than one year 42,531 42,589
-------- --------
Net assets 67,144 64,117
-------- --------
Capital and reserves
Attributable to equity interests
Called up share capital 18,646 18,646
Profit and loss account 48,498 45,471
-------- --------
Capital employed 67,144 64,117
-------- --------
CASH FLOW STATEMENT
Year ended 31 March
2001 2000
#000 #000
Net cash inflow from operating activities 17,718 29,154
Returns on investments and servicing of
finance (3,349) (3,400)
Taxation (2,537) (2,665)
Capital expenditure (11,051) (16,553)
Equity dividends paid (4,600) (4,817)
======== ========
Cash (outflow)/inflow before financing (3,819) 1,719
Financing (54) (49)
-------- --------
(Decrease)/increase in cash (3,873) 1,670
-------- --------
NOTES
1. Basis of preparation
(i)The financial information included within this statement
has been prepared on the basis of accounting policies
consistent with those set out in the Report and Accounts for
the year ended 31 March 2000.
(ii)The information shown for the years ended 31 March 2001
and 31 March 2000 does not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985
and has been extracted from the full accounts for the years
ended 31 March 2001 and 31 March 2000 respectively. The
reports of the auditors on those accounts were unqualified and
did not contain a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985. The accounts for the
year ended 31 March 2000 have been filed with the Registrar of
Companies. The accounts for the year ended 31 March 2001 will
be delivered to the Registrar of Companies in due course.
(iii) The financial information included in this statement
was approved by the Board on 14 June 2001.
2. Corporation tax
Year ended 31 March
2001 2000
#000 #000
Corporation tax at 30% 1,105 3,898
(Over)/under provision in previous years (517) 104
Group relief surrended at nil charge by other
group undertaking (479) -
-------- --------
109 4,002
-------- --------
3. Dividends
A second interim dividend of 13.52p per ordinary share in respect of
the year ended 31 March 2001 will be paid on 26 July 2001. The second
interim dividend is in addition to the first interim dividend of
9.01p, already paid, making a total of 22.53p for the year. This
compares with a second interim dividend last year of 15.65p and a
first interim dividend of 10.92p, making a total of 26.57p for that
year.
4. Earnings per ordinary share
Earnings per ordinary share are calculated on the weighted average number
of shares in issue of 18,646,142 (2000: 18,646,142).
5. Reconciliation of operating profit to operating cashflow
Year ended 31 March
2001 2000
#000 #000
Operating profit 8,803 19,406
Depreciation charge 6,619 6,156
Decrease/(increase) in stocks 66 (44)
Increase in debtors (112) (889)
Increase in creditors 2,342 4,525
-------- --------
17,718 29,154
-------- --------
6. Analysis of cash flows for headings netted in cash flow
statement
Year ended 31 March
2001 2000
#000 #000
Returns on investments and servicing of finance
Interest received 608 402
Interest paid (3,941) (3,782)
Interest element of finance lease rental
payments (16) (20)
-------- --------
(3,349) (3,400)
-------- --------
Capital expenditure
Purchase of tangible fixed assets (18,477) (25,209)
Contributions to infrastructure assets 4,976 7,409
Sale of tangible fixed assets 2,450 1,247
-------- --------
(11,051) (16,553)
-------- --------
Financing
Capital element of finance lease rental
payments (54) (49)
-------- --------
7. Analysis of net debt
At At
1 April Cashflow 31 March
2000 #000 2001
#000 #000
Cash in hand and at bank 9,057 (3,873) 5,184
Finance leases (182) 54 (128)
Loan from holding company (38,000) - (38,000)
Debenture stock (4,461) - (4,461)
-------- -------- --------
(33,586) (3,819) (37,405)
======== ======== ========
8. Reconciliation of net cash flow to movement in net debt
Year ended 31 March
2001 2000
#000 #000
(Decrease)/increase in cash in the year (3,873) 1,670
Cash outflow from lease repayments 54 49
-------- --------
Change in net debt resulting from cash
flows (3,819) 1,719
Net debt at 1 April (33,586) (35,305)
-------- --------
Net debt at 31 March (37,405) (33,586)
======== ========
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