Treasury and Exchequer
Ministerial Decision Report
Jersey New Waterworks Company Limited - 2020 Annual General Meeting voting instructions
- Purpose of Report
To consider the resolutions put forward for the Jersey New Waterworks Company Limited (JNWWC) Annual General Meeting (AGM) on Thursday 6th February 2020.
- Background
JNWWC is a public company with its Ordinary shares being traded, relatively infrequently. The States of Jersey is the majority shareholder owning 100% of ‘A’ Ordinary shares, 50% of the issued Ordinary shares and a substantial holding of Preference Shares. This gives the States of Jersey 83.33% of the voting rights.
The Directors of the company have proposed seven Ordinary Resolutions to be considered at the AGM Meeting and these are outlined in the Notice of Annual General Meeting attached (Appendix A).
- Resolutions
The following resolutions have been put forward for consideration at the AGM.
3.1 Ordinary Resolution 1 -To receive the financial statements and the reports of the directors and auditors thereon for the year end 30 September 2019
At the request of the States of Jersey, as majority shareholder, Jersey Water has changed its financial year end to 30th September. The following paragraphs therefore summarise the key financial matters that are included in the company’s Financial Statements for the nine month period to 30 September 2019. In order to aid comparison as to how the company has performed against prior periods, certain comparative figures for the nine months to 30 September 2018 have been provided in the financial statements by Jersey Water. These are unaudited 9 month equivalents based on the audited annual report for the financial year ending 31st December 2018.: -
Turnover for 2019 was £13,229k (2018: £12,669k for the relevant period) an increase of 4.4%. Income from the sale of water was £12,568k (£12,123k in 2018). The overall increase in water revenue arose from a combination of higher billed water consumption particularly over the hot, dry summer months, 276 new connections to the network (30 September 2018: 277) and the below inflation tariff increase of 3.8% in April. Revenue generated from the delivery of water by De La Haye plant was £106k (30 September 2018: £95K).
An insurance claim was received by the company for the amount of £49k in respect of replacement membranes for the desalination plant.
Operating costs increased by 15% or £1,432k to £10,643k during 2019 (30 September 2018: £9,231k). The increase in operating costs was mainly due to:-
- the delivery of key strategic projects such as the Connect Programme and Water Resource Management Plan.
- the low raw water levels at the beginning of 2019 which created an unforeseen increase in electricity costs to pump water between reservoirs to meet demand.
- Market driven decrease in discount rate which increased the current service cost of the defined benefit pension scheme for the period.
- The write off of costs with regards to the rejected planning application for the proposed Val de la Mare bypass and Brexit preparations.
Operating profit for the year decreased by 25% (£852k) in comparison to the corresponding prior period (30 September 2018). The operating profit for the year was £2,586k (30 September 2018 £3,438k).
Net interest expense totalled £598k in 2019 which is a £19k increase on the same period in 2018 (£570k). The increase is mainly attributable to the impact of higher net interest income on the pension scheme being recognised in 2019. The movement arises from market driven changes.
Profit before taxation for the 9 month period was £1,997k, which is £872k or 30% lower than the same period in 2018.
Income Tax charged in the period decreased by £40k on the prior period equivalent to £140k due to a decrease in taxable profits after adjusting for the higher annual depreciation charge and lower capital expenditure on mains renewals deductible for tax purposes.
Cash flow there was a new cash inflow of £347k in the period compared to a prior year equivalent inflow of £228k. The higher cash inflow is a result of an increase of £111k in cash from operating activities (2019: £4,421k, 30 September 2018: £4,348k).
Capital expenditure totalled £2,818k for the 9 month period.. This figure includes £587k of expenditure on the desalination plant for the ongoing performance testing phase and the replacement of the reverse osmosis membranes. This project was completed in October 2019. £2,231k was spent in line with Jersey Water’s focus on achieving best practice standards and resilience. £437k was spent on new and upgraded assets throughout the business and £1,794k was spent on mains renewals and metering continuing our work to reduce leakage and improve water quality.
Fixed assets at the period end the company held assets with a net book value of £76,972 (31 December 2018: £77,478k) with tangible assets making up 99% of the book value at £76,500k (31 December 2018 £76,179k).
Loans and borrowings as at 30 September 2019 remained unchanged at £20,282k.
Investment properties the company disposed of its one remaining investment property. The disposal resulted in a profit on disposal of £110k.
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Defined pension scheme Under FRS 102 the Company’s defined benefit plan net surplus reduced by £593k during the period, resulting in a net surplus remaining of £420k (31 December 2018: £1,013k surplus). The reduction in the surplus is primarily due to the reduction in the discount rate used to calculate the present value of the defined benefit obligations. As a result the present obligation increased by £4,274k, although this was significantly offset against the continued strong performance on the value of the plans assets which saw an increase of £3,681k in the period.
Appendix B provides a summary of the Key Performance Indicators.
3.2 Ordinary Resolution 2 - To declare a final net dividend of 10.835 pence per share on the ordinary and “A” ordinary shares of the Company.
The Directors are recommending a final dividend on the Ordinary and “A” Ordinary shares of 10.835 pence per share for the period ended, for the 9 month period to 30 September 2019 (31 December 2018: 14.447 pence) bringing the total paid and proposed for the 9 month period to 30 September 2019 to 16.188 pence per share (31 December 2018: 21.584 pence).
The States of Jersey hold 50% of the Ordinary shares and 100% of the ‘A’ Ordinary shares.
The dividend will be paid (net of tax) by the Company on 6 February 2020 to all shareholder on the register of members on 15 January 2020.
Note on Resolutions 3 - 6
The Board have agreed that at AGM one-third of directors, or if their number is not three or a multiple of three, the number nearest to one-third, shall retire from office. The directors to retire by rotation include any director who wishes to retire and not offer them self for re-election.
The Board has undertaken an annual formal assessment of its performance and that of individual Directors, including structured meetings between the Directors being assessed and the Chairman. Following this review, the Chairman and Senior Independent Director have confirmed that the Directors standing for re-election at the AGM continue to perform effectively and demonstrate commitment to their roles.
3.3 Ordinary Resolution 3 – To re-elect Heather MacCallum (who retires by rotation in accordance with the Articles of Association of the Company) as a director of the Company.
Heather MacCallum was first appointed to the Board in October 2016 and has been Chair of the Audit Committee, and a member of the Nomination Committee. Heather has agreed, subject to re-election, to take over as Chair of the Board, to replace Peter Yates who shall retire by rotation and not seek re-election, after 10 years on the Board.
3.4 Ordinary Resolution 4 – To re-elect Daragh McDermott (who retires by rotation in accordance with the Articles of Association of the Company) as a director of the Company.
Daragh McDermott was first appointed to the Board in October 2016. He is a member of the Audit Committee and Nomination Committee.
3.5 Ordinary Resolution 5 – To re-elect Natalie Passmore (who retires by rotation in accordance with the Articles of Association of the Company) as a director of the Company.
Natalie Passmore was appointed to the Board as Finance Director in May 2017.
3.6 Ordinary Resolution 6 – To re-elect Helier Smith (who retires by rotation in accordance with the Articles of Association of the Company) as a director of the Company.
Helier Smith was first appointed to the Board as Finance Director in October 2003. Since April 2015, he has held the position of Chief executive.
3.7 Ordinary Resolution 7- To re-appoint Deloitte LLP as auditors of the Company at a fee to be agreed by the directors.
Deloitte LLP as the current auditors, have indicated that they are willing to be re-appointed as the auditors of the Company.
- Recommendation
That the Treasurer and Greffier of the States are instructed to vote by proxy, in favour of the resolutions to be put before the Annual General Meeting of the Jersey New Waterworks Company Limited on the 6 February 2020.
- Reason for Decision
To fulfil the States’ role as shareholder of the Jersey New Waterworks Company Limited by exercising voting rights at the AGM.
- Resource Implications
There are no additional resource implications as a result of this decision.
Report author : Advisor - Shareholder Relations | Document date : 16 January 2020 |
Quality Assurance / Review : Head of Shareholder Relations/ Head of Financial Governance | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2020-0003 - Jersey Water AGM voting instructions |
MD sponsor : Director of Treasury Operations and Investments |
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