Treasury and Resources
Ministerial Decision Report
Jersey New Waterworks Company Limited 2015 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 30 April 2015.
- Background
JNWWC is a public company with its Ordinary shares being traded, relatively infrequently, (the current price being in the region of £6.25). 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 eight Ordinary Resolutions to be considered at the AGM Meeting, these are outlined in the Notes in the Form of Appointment of Proxy (Appendix A). The AGM will be held on Thursday 30 April 2015.
- 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 of The Jersey New Waterworks Company Limited for the year end 31 December 2014
In accordance with Article 105, the Board shall prepare annual accounts in respect of each financial period of the company, which shall be audited and laid before the members at the AGM next ensuing.
The following paragraphs summarise the key financial matters that are included the company’s Financial Statements: -
Turnover for 2014 was £15,184,000 (2013: £14,916,000) an increase of 1.8%, income from the sale of water totalled £14,342,000 (2013: £14,166,000.)
Metered income in 2014 was £12,140,000 (2013: £10,890,000), an increase of 11.5% on 2013. The change in metered income is attributable to an increase in overall demand for water of 0.5%, the addition of 2,800 metered properties, 403 new connections and a 1% tariff increase. Metered water sales accounted for 85% of water related turnover compared to 77% in 2013.
Unmeasured water income totalled £1,639,000, compared to £2,686,000 in 2013. The reduction of £1,047,000 corresponded with the transfer of customers to metered billing. Unmeasured charges now account for just 11% of water related turnover (2013: 19%).
Turnover in relation to rechargeable works was £484,000 (2013: £320,000). Rechargeable works relate mainly to the installation of new water connections. The increase of £164,000 has arisen from the upturn in the construction industry with an increase in the number of larger new connections to the network in the year. Each job is individually priced and the nature of the specific works undertaken during 2014 meant a higher
average price than in 2013.
Operating expenditure for the year was £10,213,000 (2013: £10,116,000). This 1.0% increase was due to the following factors: -
- Increased Electricity charges (Materials, consumables, hired in services and other costs) of £99,000 (2.4%)
- All other costs were broadly in line with 2013, including net employment costs.
The operating profit for the year before exceptional items was £4,971,000 (2013: £4,800,000), an increase of 3.6% from the prior year.
There were fewer disposals during 2014; the Company generating a profit of £1,000 for the sale of a small parcel of land. In 2013 profits of £179,000 were received due to the Company disposal of two small areas of land.
There was a 40% reduction in net finance costs in 2014. The charge reduced by £264,000 to £397,000 as a result of the combined effects of lower interest payable on debt and an increase in the notional net finance income arising from the Company’s pension scheme.
After the deduction of finance costs, the Company generated a Profit before tax of £4,575,000, an increase of £257,000 or 6.0% on the prior year. The increase was principally due to lower net finance costs, increased water revenue and rechargeable works offsetting the increase in operating costs and the decrease in profit on disposal of fixed assets.
The total recognised gains for the year amounts to £2,218,000 (2013: £3,694,000). The main reason for the decrease on the prior year is due to losses arising on the defined benefit pension scheme of £1,438,000 (2013: gain of £427,000.)
The Company’s capital programme continued in 2014 with the investment in capital works totalling £2,880,000 (2013: £2,878,000). The majority of the capital expenditure was spent on metering, £703,000, and mains renewals, £902,000, in line with the Company’s focus on these areas to reduce leakage and the
discretionary use of water.
Loans and borrowings as at 31 December 2014 remained unchanged at £20,282,000, which was made up of bank loans and non-equity preference shares. In February 2015, the Company renewed loans totalling £3,650,000 with HSBC Plc. for a further term of ten years.
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 2013. Cash at the bank increased from £4,598,000 in 2013 to £5,834,000 in 2014.
Earnings per Ordinary share of £0.38 (2013: £0.36) is based on earnings of £3,656,000 (2013: £3,438,000), being the profit available for distribution to equity shareholders and 9,660,000 (2013: 9,660,000) Ordinary and ‘A’ Ordinary shares of £0.50 in issue.
The opinion provided in the Auditors’ Report, signed by PricewaterhouseCoopers CI LLP, is that the financial statements:
- give a true and fair view of the state of the Company’s affairs as at 31 December 2014 and of its financial performance and its cash flows for the year then ended;
- have been properly prepared in accordance with United Kingdom Accounting Standards; and
- have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Appendix B provides a summary of the Key Performance Indicators.
3.2 Ordinary Resolution 2 - To Declare Dividends
In accordance with Article 92 the Board has recommended the payment of a final net dividend of 13.000p per share on the Ordinary and ‘A’ Ordinary shares of the Company. The dividend will be paid (net of tax) by the Company on 5 May 2015 to all shareholders on the register of members on 20 April 2015.
The States of Jersey hold 50% of the Ordinary shares and 100% of the ‘A’ Ordinary shares.
The proposed final dividend for this year is 13.000p per share, a 3.9% increase from the previous year where a final dividend of 12.516p was declared and paid. During the year an interim dividend of 6.555p per share was paid (2013: 6.426p). Dividends paid and proposed in respect of 2014 totalled 19.555p per share, an overall increase of 3.2% on 2013. The dividend due to the States of Jersey is favourably ahead of the planned 2015 budget; although the final out-turn against plan is dependent on the interim dividend declared in November 2015.
3.3 Ordinary Resolutions 3 – 6 - To elect two new Directors and re-elect two Directors 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.
Except where a Director is appointed to fill a casual vacancy, all Directors are appointed by the Shareholders at the AGM. In accordance with the provisions of Article 49, one third of the Directors, or where the number of Directors is not a multiple of three, the number nearest to one third, retire by rotation (based upon length of service) and where eligible, seek re-election each year. No Director may serve a term of longer than three years without seeking re-election.
The Company has adopted a policy of requiring Non-Executive Directors who have served on the Board for nine years or more to retire from the Board and seek re-election on an annual basis.
Directors appointed to fill a casual vacancy must seek formal appointment by the shareholders at the next AGM.
Mr Tim Herbert and Mrs Liz Vince were appointed from 1 January 2015 under the provisions of Article 48 and must seek appointment at this forthcoming AGM under the provisions of Article 49.
In accordance with the provisions of Article 49 of the Company’s Articles of Association, Mr Tony Cooke and Mrs Mary Curtis have served three years since being re-elected and accordingly are resigning by rotation and will offer themselves for 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.
Mr Howard Snowden is retiring at the AGM after serving on the Board for fifteen years and is not offering himself for re-election. It is acknowledged that the Minister would like to thank Mr Howard Snowden for his services to the Company.
3.4 Elect Mr Tim Herbert as a Director of the Company
Mr Tim Herbert was appointed to the Board with effect from 1 January 2015 as a Non-Executive Director. Mr Herbert is a Jersey Advocate. He was a partner at Mourant Ozannes for over twenty-five years including a term as Managing Partner and since July 2012 has been retained as a consultant to the firm. He chairs the Jersey Innovation Fund Advisory Board and holds a number of other roles in the community.
Mr Herbert is a member of the Remuneration Committee and the Nomination Committee.
Mr Herbert was appointed by the Board as a Director on 1 January 2015, to fill a vacancy and who retires in accordance with Article 49.1 of the Articles of Association of the Company, as a Director of the Company.
3.5 Elect Mrs Liz Vince as a Director of the Company
Mrs Liz Vince was appointed to the Board with effect from 1 January 2015as a Non-Executive Director. Mrs Vince is a qualified Accountant and the Finance Director and Company Secretary for Jersey Post (Jersey Post is 100% owned by the States of Jersey.)
Previously Mrs Vince was the Chief Internal Auditor for the States of Jersey and originally qualified as an Accountant with the National Audit Office in London. Mrs Vince holds a number of qualifications including both the Institute of Directors Certificate and Diploma in Company Direction.
Mrs Vince chairs the Audit Committee and is a member of the Nomination Committee.
Mrs Vince was appointed by the Board as a Director on 1 January 2015, to fill a vacancy and who retires in accordance with Article 49.1 of the Articles of Association of the Company, as a Director of the Company.
3.6 Re-elect Mr Tony Cooke as a Director of the Company
Mr Tony Cooke became a Non-Executive Director of the Company in June 2008. Mr Cooke is an economist by background and he is the former Managing Director of Bournemouth & West Hampshire Water Plc. He has previously held a number of chief executive and senior management roles in the United Kingdom and
internationally. Mr Cooke is a Trustee of Utilities and Service Industries Training Ltd, a Trustee of a pension fund and an independent utilities consultant.
Mr Cooke is the Board’s Senior Independent Director and is a member of the Audit and Nomination Committees.
3.7 Re-elect Mrs Mary Curtis as a Director of the Company
Mrs Mary Curtis joined the Board as a Non-Executive Director in June 2008. Mrs Curtis is a Fellow of the Chartered Institute of Personnel & Development and is a Director of a privately owned consultancy business, Calmera Business Consultancy. She formerly worked in London before moving to Jersey in the roles of Offshore Island Regional Human Resources Manager at Deloitte & Touche and then Director of Human Resources at Mourant du Feu & Jeune (now Mourant Ozannes).
Mrs Curtis chairs the Remuneration Committee and is a member of the Nomination Committee.
Under Article 44, unless otherwise determined by an ordinary resolution of the Company, the number of Directors shall not be less than four nor greater than eight. After the retirement of Mr Howard Snowden, the Managing Director, the two appointments and the two re-appointments of Directors this will bring the number of Directors to seven.
3.8 Ordinary Resolution 7 - To approve the Directors fees for 2015 of £26,000 for the Chairman and £18,500 for the Non-Executives Directors (2014: £25,000 and £18,000 retrospectively.)
In accordance with Article 53, the shareholders are being requested to approve the payment of fees to the Chairman and Non-Executive Directors. Small increases are proposed for the Chairman and Non-Executive Directors’ fees of £1,000 and £500 per annum.
The Remuneration Committee currently comprises of Mary Curtis (Chairman appointed 15 May 2014), Tim Herbert (appointed 1 January 2015) and Peter Yates (appointed 1 January 2015). Stephen Marie and Kevin Keen were members of the Remuneration Committee until they retired as Directors on the 15 May 2014 and 31 December 2014 respectively. The Executive Directors, Howard Snowden and Helier Smith, may also attend the meeting by invitation.
No Directors are allowed to be party to discussions regarding, or play any role in, the determination of their own remuneration.
The Remuneration Committee met three times during the year. The Committee also reviews and determines the levels of remuneration for Executive Directors and the Senior Management Team.
3.9 Ordinary Resolution 8 - To re-appoint PricewaterhouseCoopers CI LLP as Auditors of the Company at a fee to be agreed by the Directors.
In accordance with Article 106.1 of the Company’s articles, a resolution is proposed to re-appoint PricewaterhouseCoopers CI LLP as the auditors at the forthcoming AGM.
For the year to 31 December 2014, the Auditors were remunerated £45,000 for the statutory audit of Jersey New Waterworks Company Limited. A further £11,000 was paid in relation to the Pension scheme audit and Tax compliance services.
Under Article 106.3 of the Company’s articles the remuneration of any auditor appointed by the Company shall be fixed by the Company at the AGM at which such appointment shall be made or in such manner as such meeting may determine. In this resolution it is proposed that the Directors be authorised to set the remuneration of the auditors.
- 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
The financial implications are as detailed in the report.
Report author : Head of Shareholder Relations | Document date : 14 April 2015 |
Quality Assurance / Review : | File name and path: |
MD sponsor : Head of Shareholder Relations |
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