Treasury and Resources
Ministerial Decision Report
Jersey New Waterworks Company Limited 2016 Annual General Meeting voting instructions
- Purpose of Report
To consider the resolutions put forward for Jersey New Waterworks Company Limited (JNWWC) Annual General Meeting (AGM) on Thursday 28th April 2016.
- 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% of voting rights.
The Directors of the company have proposed five Ordinary Resolutions to be considered at the AGM Meeting, 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 2015.
The following paragraphs summarise the key financial matters that are included in the company’s Financial Statements: -
Turnover for 2015 was £15.373 million (2014: £15.184 million) an increase of 1.24%. Income from the sale of water was £14.447 million (2014: £14.342 million).
Metered income in 2015 was £12.552 million (2014: £12.140 million), an increase of 3.4%. Metered water sales now account for 87% of water revenue compared to 85% in 2014 and 77% in 2013.The increase in metered water revenue is due to an increase in metered property arising from 506 new connections (2014: 403), the island wide metering programme and a 1.75% tariff increase.
Unmeasured water income totalled £1.285 million in 2015, compared to £1.639 million in 2014. Unmeasured water income only accounts for 9% of water revenue compared to 11% in 2014.
Rechargeable works income totalled £533k in 2015 (2014: £484k) reflecting increased activity in the construction sector and new connections to the network.
Operating costs in 2015 were £10.532 million (2014: £10.213 million), an increase of 3.12%. This increase was due to additional water quality and compliance costs, increased electricity usage, higher pension costs and increases in hired in services.
Operating profit for the year was £4.841 million (2014: £4.971 million), a decrease of 2.6% from the prior year.
Finance costs have increased by 13% to £393k (2014: £349k), mainly attributable to an increase in the notional net finance expense on the pension fund.
Profit before taxation in 2015 was £4.076 million compared to £4.242 million in 2014 – a 3.9% decrease. This results from the higher operating expenditure and interest charges.
Income Tax for 2015 totalled £740k compared with £852k in 2014.
Equity dividends – the Directors are recommending a final dividend on the Ordinary and “A” Ordinary shares of 13.260 pence per share, bringing the total paid and proposed for 2015 to 19.946 pence per share, an increase of 2% on 2014 (19.555 pence).
Cash flow – there was a net cash outflow of £2.383 million compared to an inflow of £4.736 million in 2014, principally as a result of the desalination plant capital works. Cash balances at the year end totalled £3.451 million (2014: £5.834 million).
Capital expenditure – totalled £6.611 million (2014: £2.880 million) mainly attributable to the replacement of the desalination plant.
Loans and borrowings as at 31 December 2015 remained unchanged at £20.282 million.
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Defined pension scheme – as at 31st December 2015, there was a net surplus on the combined FRS 102 valuation of the Company’s defined benefit plan of £1.279 million, compared with a net deficit of £1.226 million in 2014. This is mainly due to market driven changes in discount rate and inflation assumptions reducing the value of future liabilities by £2.716 million. This increase offsets the fall in investment returns on assets which are £2.864 million lower than the prior year at £467k.
Appendix B provides a summary of the Key Performance Indicators.
3.2 Ordinary Resolution 2 - To declare a final net dividend of 13.260 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 13.260 pence per share, bringing the total paid and proposed for 2015 to 19.946 pence per share, an increase of 2% on 2014 (19.555 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 4th May 2016 to all shareholders on the register of members on 18th April 2016.
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.
Ordinary Resolution 4 – To re-elect Mr Peter Yates (who retires by rotation in accordance with the Articles of association of the Company) as a director of the Company.
In order to ensure the Board continues to operate effectively, it has developed and implemented a process of performance evaluation. The process measures the performance of the Board as a whole against a set of predefined targets and of individual Directors by way of self and peer appraisal. The results of the performance assessments and appraisals are fed back to the individual Directors and the Board as a whole (as appropriate) and action taken accordingly.
Any director who has served three years or more is required to retire by the articles of the Company and seek re-election. Mr Kay and Mr Yates have served three years since last being re-elected and accordingly are resigning by rotation and seeking re-election.
The Board considers that each of the directors standing for re-election continues to make an effective and valuable contribution and that they demonstrate commitment to their respective roles.
Stephen Kay, a Chartered Engineer joined the Board as a Non-Executive Director (“NED”) in April 2013. He is also a NED of the South Staffordshire Water Plc and was previously Managing Director of Cambridge Water Plc. He is Chairman of the Water UK Standards Board and Chairman of the water Regulations Advisory Scheme. He is also a trustee of the Water Companies’ Pension Scheme.
He is a member of the Audit and the Nomination Committee.
Peter Yates was appointed to the Board in May 2009. He is a Chartered Accountant and was previously a Partner of PricewaterhouseCoopers working in the UK and Jersey for over thirty one years. He is NED and Chairman of the Audit committee of Invesco Perpetual Enhanced Income Fund Plc and also a NED of Bathroom Brands Plc and Bathroom Brands Distribution Ltd.
Mr Yates is Chairman of the Board and chairs the Nomination Committee.
3.4 Ordinary Resolution 5 - To re-appoint PricewaterhouseCoopers CI LLP as Auditors of the Company at a fee to be agreed by the directors.
For the year to 31 December 2015, the Auditors were remunerated £48k for the statutory audit of Jersey New Waterworks Company Limited. A further £11k was paid in relation to the Pension scheme audit and Tax compliance services.
- Recommendation
The Treasurer of the States and Greffier of the States are instructed to vote by proxy, in favour of the resolutions outlined above.
- 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 other than those identified within this report.
Report author : Head of Shareholder Relations | Document date : 19th April 2016 |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2016-0035 - Jersey Water AGM Voting Instructions |
MD sponsor : Head of Shareholder Relations |
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