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
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