Treasury and Exchequer
Ministerial Decision Report 
Jersey New Waterworks Company Limited - 2019 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 16th May 2019.
- 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 six 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 31 December 2018.
The following paragraphs summarise the key financial matters that are included in the company’s Financial Statements: -
Turnover for 2018 was £17.199 million (2017: £15.960 million) an increase of 7.8% as a result of an increase in billed water consumption combined with the introduction of De La Haye Plant water haulage services and income from an insurance claim.
Income from the sale of water was £15.937 million compared to £15.171 million in 2017.The overall increase in water revenue arose from a contribution of higher billed water consumption particularly over the hot dry summer months, 340 new connections to the network (2017:303) and the below-inflation tariff increase of 2.75%.
Revenue generated from the delivery of water by De La Haye Plant was £113k (2017: nil). Compensation received on an insurance claim was £511k, in respect of replacement membranes for the desalination plant.
Rechargeable works income decreased by 30.9% to £327k from £473k in 2017. These works relate mainly to the installation of new water mains and connections. Although there were a higher number of connections made in 2018 compared to 2017 the decrease in income is principally due to differences in the size and nature of each connection.
Operating costs in 2018 were £12.633 million (2017: £11.055 million), an increase of 14.2%. This increase mainly relates to four weeks operation of the desalination plant in December 2018, a full year of depreciation
Operating profit for the year was £4.566 million (2017: £4.905 million), a decrease of 6.9%.This was due to the increased operating costs which were only partially offset by increases in turnover.
Net interest expense was £364k (2017: £417k), a decrease of £53k, largely attributable to the decrease in net interest expense on pension obligations to £3k compared to £73k in 2017, driven by market changes.
Profit before taxation was £3.821 million compared to £4.107 million in 2017 – a 7% decrease.
Income Tax for 2018 totals £852k compared with £811k in 2017.
Cash flow – there was a net cash inflow of £215k in the year compared to an outflow of £1.061 million in 2017.
Capital expenditure – totalled £3.910 million (2017: £3.275 million). This included the renewal of 2km of treated water mains network, the extension of the network by 2.5km, investing £800k in water quality improvement and resource initiatives and adding 340 new connections.
Loans and borrowings as at 31 December 2018 remained unchanged at £20.282 million.
Defined pension scheme – Under FRS 102 the Company’s defined benefit plan net liability reduced by £1.249 million during the year, resulting in a net surplus of £1.013 million (2017: £236k deficit). The elimination of the deficit and resulting surplus is mainly due to an improvement in funding status following market driven changes in assumptions used to calculate the plan’s liabilities which offset lower than expected investment performance on plan assets during the year.
Appendix B provides a summary of the Key Performance Indicators.
3.2 Ordinary Resolution 2 - To declare a final net dividend of 14.447 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 14.447 pence per share (2017: 13.932), bringing the total paid and proposed for 2018 to 21.584 pence per share, an increase of 3.5% on 2017 (20.854 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 16th May 2019 to all shareholders on the register of members on 24th April 2019.
3.3 Ordinary Resolution 3 – To re-elect Mr Stephen Kay (who retires by rotation in accordance with the Articles of Association of the Company) as a director of the Company.
Mr Kay was first appointed to the Board in April 2013. He is the Board’s Senior Independent Director, a member of the Audit committee and the Nomination Committee.
3.4 Ordinary Resolution 4 – To re-elect Mr Peter Yates (who has completed more than 9 years’ service on the Board and needs to resign and seek re-appointment on an annual basis in accordance with the internal corporate governance practices set by the Company) as a director of the Company.
Mr Yates was first appointed to the Board in May 2009. He has agreed with the Board that he will retire from the Board at the 2020 AGM. A process for selecting his replacement is underway.
Mary Curtis is also retiring from the Board after 10 years. It is the Board’s intention that a replacement will not be sought, reducing the overall size of the Board by one, which they believe is more in keeping with the size and nature of the Company.
3.5 Ordinary Resolution 5 – To approve the annual non-executive directors’ fees of £29,000 for the Chair and £20,500 for the Non-Executive directors (2017 & 2018: £27,000 and £19,000 respectively) and the fees of £3,000 for the Chair of the Audit Committee and £1,000 for the Audit Committee Members.
Shareholders are being requested to approve the annual non-executive directors’ fees of £29,000 for the Chair and £20,500 for the Non-Executive Directors (no increase was proposed at the 2017 or 2018 AGM) and the fees of £3,000 for the Chair of the Audit Committee and £1,000 for the Audit Committee Members.
The general increase in fees represents the approximate application of RPI over two years since the last increase.
In respect of the Audit Committee increase, there are currently two other members of the Audit Committee in addition to the Chair. The Chief Executive has stated that the work of the Audit Committee is increasing as financial reporting, corporate governance compliance and risk management processes get more complex. It is recognised that members of the Audit Committee must devote a substantial amount of time specifically to these issues. This will be especially so as the Company transitions to a 30th September year end and the impact this will have over the coming year.
3.6 Ordinary Resolution 6- 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. Re-appointment will be their third term as auditor.
- 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 16th May 2019.
- 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 : Head of Shareholder Relations | Document date : 11th April 2019 |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2019-0038 - Jersey Water - 2019 AGM Voting Instructions |
MD sponsor : Director of Treasury Operations and Investments |
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