Treasury and Resources
Ministerial Decision Report
PRESENTATION OF THREE States of Jersey Owned Companies 2012 Financial Reports and Accounts to the states
1. Purpose of Report
To present States owned company annual reports and accounts to the States.
2. Background
The States is a major shareholder and in some cases the sole shareholder in States owned companies. The Minister decided to present the 2012 Financial Reports and Accounts for the following companies to the States:-
- Jersey Telecom Group Limited (Appendix A)
- Jersey New Waterworks Company Limited (Appendix B)
- Jersey Post International Limited (Appendix C)
Jersey Telecom Group Limited has decided to resume their annual Presentations of Financial Results to all States Members. This year they will also use it as an opportunity to update States Members on the progress of Gigabit Jersey. Their presentation is planned for the 2nd July 2013; therefore they request that accounts be presented on the same day.
3. Company Report and Accounts
The companies have all held the relevant Annual General Meetings and their report and accounts are now available for presentation to the States. A Summary of the financial Performance for the 3 Companies is given below.
Jersey Telecom Group Limited – year end 31st December 2012 (Wholly owned)
States Holding as at 31st December 2012
Issued and Fully Paid | | Nominal |
| | |
Ordinary shares of £1 each | | £20,000,000 |
The Company’s Annual Report and Financial Statements contain the full Directors’ Report, Accounts and Auditors Report. The following paragraphs summarise the key financial matters.
As the accounts contained in this document show, the financial year ending 31st December 2012 resulted in Group turnover being £119.7 million (2011: £107.9 million), which was the highest in its history. The increase in turnover is related to the recent acquisitions of Worldstone Inc in 2012 and Ekit and other smaller acquisitions during the year.
Other Operating expenses decreased from £64.9 million in 2011 to £60.8 million in 2012 mainly due to lower equipment costs (£3.2 million lower) coupled with lower staff costs, premises and transport costs and marketing communications costs. These reduced costs were partly offset by increased depreciation and amortisation costs upon acquisition (£2.7 million increase).
Interest receivable increased from £23,000 in 2011 to £1.1 million in 2012 mainly relating to income from Pension costs held. Whilst Interest payable increased from £2.2 million in 2011 to £3.2 million in 2012 this was mainly due to the interest payable on the private placement with M&G Investments. During 2012 the Company paid both a 9% cumulative preference dividend and interest on the private placement. For 2013 it is anticipated that the costs will be significantly lower as a result of the 9% preference shares being redeemed during 2012.
2012 Profit before Tax was £14.9 million which was in line with 2011 results. Profit for the financial year after tax was £11.9 million; £0.3 million lower than last year as a result of increased calculated tax charges.
The net assets of JT Group continued to increase from £66.1 million in 2011 to £70.9 million in 2012. Most of the increases were as a result of recent acquisitions, the largest being Worldstone. Smaller acquisitions were Donate Mobile Limited and Fonepool Inc. As a result of the acquisitions, the shape of the Balance Sheet has changed seeing increases in Fixed Assets, working capital and goodwill. Note 10 of the accounts makes specific reference to the Goodwill calculations for the various acquisitions.
During 2012, JT repaid the Bank Loan facility (£10.5 million balance drawn down as at 31st December 2011). The company entered into a private placement with M&G Investments raising £51 million. These monies were used to repay the bank loan; acquire Corporate Communications Holdings Limited (Worldstone) for £17.8 million and to repay the £20 million 9% Cumulative Preference shares held by the States of Jersey.
The Board of Jersey Telecom Group Ltd after discussions with the States’ has decided to propose a final dividend for 2012 of £2.8 million. This return on 2012 profits is in line with the expected dividend yields of 50% of distributable profits.
This results in total dividends received during 2013 Jersey Telecom Group Ltd being in the above the latest forecasts.
Jersey New Waterworks Company Limited – year end 31st December 2012 (Majority owned)
States Holding as at 31st December 2012
Issued and Fully Paid | | Percentage owned | Nominal owned |
| | | |
Ordinary Shares of £0.50 | | 50% | £2,520,000 |
‘A’ Ordinary shares of £0.50 | | 100% | £4,620,000 |
10% 5th Cum Pref. shares of £5 each | | 100% | £900,000 |
Turnover for 2012 was £14,609,000 (2011: £14,811,000), water related turnover reduced by 1% and totalled £13,841,000 (2011: £13,973,000). The transition to metering has increased the variability of income and its dependence on the weather. The significant rainfall experiences in 2012 particularly during the spring and summer months, meant that overall demand for water was 1.9% lower than the prior year. Tariffs were increased by 2.5% in April 2012.
Operating expenditure for the year was £9,849,000 (2011: £9,953,000). This 1% decrease was due to the following factors: -
- Non recurring expenditure in 2011 relating, in part, to the operation of the desalination plant meant a reduction in expenditure in 2012 of £340,000.
- Fewer new water connection installations in 2012, resulted in savings in the year of £83,000.
- The savings were offset by the planned increase of £224,000 in depreciation charges for the year relating to metering, mains renewals, 2011 lining of the Val de la Mare dam and other elements of the capital program.
- There was a one off cost totalling £107,000 relating to staff changes incurred during the year.
- Increases in power costs were offset by reductions in expenditure on contractors, advisory services, materials and staff costs.
The operating profit for the year after exceptional items was £4,630,000 (2011: £4,858,000), a decrease of 4.7% from the prior year. The reduction in operating profit was due to lower turnover in the year countered by reduced operating costs, coupled with one off £130,000 of charitable contributions associated with the Company’s 130th Anniversary Fund.
During the year the Company disposed of 3 freehold properties and other assets generating profits on sale of £598,000 (2011: £918,000) and proceeds of £714,000 (£2011: £1,275,000).
After the deduction of finance costs, the Company generated a Profit before tax of £4,486,000, a reduction of £475,000 or 9.6% on the prior year.
The total recognised gains for the year amounts to £3,372,000 (2011: £3,470,000). The main reason for the reduction on the prior year is due to lower profits during 2012, offset by reduced unrealised losses arising on the defined benefit pension scheme of £(231,000) (2011: loss of £1,111,000).
A loss of £94,000 arose in the year relating to the Directors’ internal valuation for the revaluation of investment property (2011:£nil). The last external valuation was completed in December 2010.
The Company’s capital programme continued in 2012 with the investment in capital works totalling £2,905,000 (2011: £5,574,000). 2011 Capital expenditure was increased mainly due to the lining of the dam at Val de la Mare. The focus during 2012 was on the continued installation of meters and the renewal of old mains.
Loans and borrowings as at 31 December 2012 remained unchanged at £20,282,000, which was made up of bank loans and non-equity preference shares. The States of Jersey continues to provide guarantees for the 3 loans with HSBC Bank Plc up to a maximum of £16,200,000. Currently £14,900,000 is drawn down against this facility; the amount remains unchanged compared to 2011. Cash at the bank increased from £1,397,000 in 2011 to £2,653,000 in 2012.
Earnings per Ordinary share of £0.38 (2011: £0.47) is based on earnings of £3,697,000 (2011: £4,581,000), being the profit available for distribution to equity shareholders and 9,660,000 (2011: 9,660,000) Ordinary and ‘A’ Ordinary shares of £0.50 in issue.
The proposed final dividend for this year was 12.09p per share, a 3% increase from the previous year where a final dividend of 11.75p was declared and paid. During the year an interim dividend of 6.30p per share was paid (2011: 6.10p). Dividends paid and proposed in respect of 2012 totalled 18.39p per share, an overall increase of 3% on 2011.
A summary of the operational statistics are as follows:-
| Units | 2012 | 2011 | 2010 | 2009 | 2008(1) |
Total Water supplied | MI | 7,015 | 7,152 | 7,220 | 7,253 | 7,402 |
Maximum Daily demand | MI | 23.4 | 24.7 | 25.8 | 25.7 | 26.2 |
Annual rainfall | Mm | 1,089 | 773 | 982 | 843 | 1,042 |
New Mains laid | Km | 1.5 | 2.0 | 1.7 | 3.1 | 4.6 |
Mains re-laid/relined | Km | 2.1 | 4.0 | 2.7 | 1.8 | 2.8 |
New connections | No | 349 | 492 | 337 | 412 | 508 |
Live unmeasured supplies | ‘000 | 13 | 18 | 21 | 23.8 | 25.2 |
Live metered connections | ‘000 | 24 | 20 | 16.2 | 13.2 | 11.2 |
Employees | No | 79 | 83 | 84 | 80 | 107 |
Compliance with water quality parameters | % | 99.99% | 99.81% | 99.86% | 99.84% | 99.97% |
(1) Relevant figures have been restated to show the effect of the prior year adjustment made in 2009
Jersey Post International Limited - end 31st December 2011 (Wholly owned)
States Holding as at 31st December 2012
Issued and Fully Paid | | Nominal |
| | |
Ordinary shares of £1 each | | £5,000,000 |
Turnover reduced by 32% to £44.2 million (2011: £64.9 million) due to the withdrawal of Low Value Consignment Relief (LVCR) for Channel Island exports in April 2012. Excluding the impact of LVCR, turnover actually increased very slightly in spite of the continued reduction in letter volumes. Gross Profit of £7.7 million was £1.1 million lower than 2011. This represented 17.4% of sales. JPIL advised that the gross profit could have been much worse if front line staff costs had not been reduced by £1.1 million on the previous year.
Administrative expenses reduced by 9% down to £6.7 million (2011: £7.3 million). Any savings were partially offset by the inclusion of a £1 million charge for the FRS17 valuation of the pension fund (see note 1.10 of their accounts). JPIL advised that the company worked hard to deliver cost savings at all levels subject always to the proviso that these did not undermine the long term prospects for the business in favour of short term savings.
Operating profits before exceptional items was £1.0 million in 2012 (2011: £1.5 million), a 29% reduction on the restated operating profit for 2011.
Profit before tax was £1.3 million compared with £2.7 million in 2011(This included an exceptional item, credit of £1.1 million pension restatement in 2011 which increased the prior year profits). This was substantially below last year but credible when the impact of the loss of LVCR and further additional charges from our pension scheme are taken into account.
The net assets of JPIL decreased from £15.2 million in 2011 to £12.8 million in 2012. The reduction was mainly due to a special dividend of £4.5 million (net of tax) being either paid or provided for as at the 2012 year end.
The working capital position was also materially impacted due to a much smaller logistics business; seeing amounts due by customers and due to suppliers reduced due to lower volumes. The liquidity position of the company continued to remained strong with total cash and short-term investment balances of £13.7 million in 2012 (2011: £18.9 million).
The current assets for the company were £10.3 million in 2012, compared with £12.9 million in 2011.
There was an investment in fixed assets held by the company of £0.9 million of which £0.4 million related to the replacement of delivery vehicles. Investment in our Rue De Pres site and the Group’s IT infrastructure made up the balance. At the year-end fixed assets were reported as £7.9 million (2011: £8.0 million), the majority of this related to freehold property.
No external financing was required during 2012.
Other Key Performance Indicators:-
- Volumes in the traditional mail business were some 6% down at 35 million items. The most significant element was the large reduction in outward mail which reduced by 17%. In contrast, mail delivered locally saw volumes reduce by less than 2%. Local delivery volumes benefited from the increasing popularity of internet shopping in Jersey where volumes of packets and parcels delivered locally grew by 28%, a trend which JPIL expected to continue. The unaddressed mail products of Direct2Home and Direct2Business also did well seeing volumes increase by 64% in the year
- The number of post offices continued to remain in line with 2011 at 21 post offices.
- The latest customer service in March 2012 showed 86.5% rating their postman as good or very good; 70.68% rating the overall delivery service as good or very good and 70.9% rating the retail network as good or very good.
- For the regulatory target – JPIL managed to achieve the local mail target of at least 95% for local mail reaching a local destination each day and saw an improvement on the 2011 statistics. Work is ongoing to improve results for mail posted outside of Jersey, handled by Royal Mail.
The States of Jersey own 100% of the issued ordinary shares (5 million at £1 per share).
In accordance with Article 97, it is recommended to propose a final ordinary dividend of £382,000 (net of tax), this represents one third of the net profit in line with the approved dividend policy. 2011 final dividend declared was £375,000 (£468,750 gross).The 2012 final dividend declared represents 7.6p per share (net of tax).
In addition, in December 2012 JPIL paid a special Dividend of £3 million (net) to the States of Jersey. A further Special Dividend of £600,000 (net) was paid on 31st January 2013 and a third Special Dividend of £900,000 (net) is due to be paid in July 2013.
4. Recommendation
It is recommended that the Minister request the Greffier of the States to present the attached reports and accounts to the States on 2nd July 2013.
- Reason for Decision
To present the Financial Reports and Accounts for the above companies to the States.
- Resource Implications
This decision has no resource implications.
Report author : Head of Shareholder Relations | Document date : 20th June 2013 |
Quality Assurance / Review : Business Manager | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2013-0045 - Presentation of Utilities Reports and Accounts 2012\WR - Presentation of Utilities Reports and Accounts 2012.doc |
MD sponsor : Head of Shareholder Relations |
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