Treasury and Resources
Ministerial Decision Report
Jersey New Waterworks Company Limited 2017 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 11th May 2017.
- 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 eleven 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 2016.
The following paragraphs summarise the key financial matters that are included in the company’s Financial Statements: -
Turnover for 2016 was £15.720 million (2015: £15.373 million) an increase of 2.26%. This was driven by an increase of £498k (3.4%) in water sales income compared to 2015.
Metered income in 2016 was £13.516 million (2015: £12.552 million), an increase of £964k (7.68%). Metered water sales now account for 90% of water revenue compared to 87% in 2015. The increase in metered water revenue is due to an increase in metered property arising from 374 new connections (2015: 506), the island wide metering programme, a 2.0% tariff increase and higher than average water consumption.
Unmeasured water income totalled £825k in 2016 compared to £1.285 million in 2015 and £1.639 million in 2014. Unmeasured water income now only accounts for 6% of water revenue compared to 9% in 2015.
Rechargeable works income decreased by £105k to £428k, primarily due to fewer large housing developments requiring connections.
Operating costs in 2016 were £10.696 million (2015: £10.532 million), an increase of 1.56% mainly driven by additional costs in pursuit of regulatory compliance and best practice across the business. These were associated with more extensive testing of raw water quality subsequent to the discovery of oxadixyl and other pesticides in the raw water supply.
Operating profit for the year was £5.024 million (2015: £4.841 million), an increase of 3.78%.
Net Finance costs have decreased by 22% or £88k to £305k (2015: £393k), largely attributable to interest income on pension fund assets exceeding the interest cost on the pension liabilities by £53k as a result of market changes.
Profit before taxation in 2016 was £4.256 million compared to £4.076 million in 2015 – a 4.42% increase.
Income Tax for 2016 totalled £922k compared with £740k in 2015, driven by higher profits, lower capital expenditure deductible for tax purposes, and an increase in the deferred tax charge related to accelerated capital allowances.
Cash flow – there was a net cash outflow of £860k which is £1.523 million lower than the prior year outflow of £2.383 million.
Capital expenditure – totalled £4.589 million (2015: £6.611 million) mainly attributable to lower spend on the replacement of the desalination plant.
Loans and borrowings as at 31 December 2016 remained unchanged at £20.282 million.
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Defined pension scheme – as at 31st December 2016, there was a net deficit on the combined FRS 102 valuation of the Company’s defined benefit plan of £2.942 million, compared with a surplus of £1.279 million in 2015. This resulting decrease of £4.221 million on the statement of financial position is mainly due to experience losses of £355k and market driven changes in discount rate and inflation assumptions increasing the value of future liabilities by £5.835 million. £1.956 million of these losses is offset by better than expected investment performance in the year.
Appendix B provides a summary of the Key Performance Indicators.
3.2 Ordinary Resolution 2 - To declare a final net dividend of 13.559 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 13.559 pence per share, bringing the total paid and proposed for 2016 to 20.345 pence per share, an increase of 2% on 2015 (19.946 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 on11th May 2017 to all shareholders on the register of members on 26th April 2017.
3.3 Ordinary Resolution 3 – In accordance with Article 44 of the Company’s Articles of Association, the maximum number of directors be increased from eight to ten.
The Board has recommended that the maximum number of directors be increased from eight to ten, this being in the best interests of the Company and in order to meet the succession planning needs of the Company.
3.4 Ordinary Resolution 4 – To re-elect Mr Helier Smith (who retires by rotation in accordance with the Articles of Association of the Company) as a director of the Company.
Ordinary Resolution 5 - To re-elect Mr Anthony Cooke (who has completed more than nine 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.
Ordinary Resolution 6 - To re-elect Mrs Mary Curtis (who has completed more than nine 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.
Ordinary Resolution 7 - To elect Ms Heather MacCallum, who was appointed by the Board as a director on 1st October 2016 to fill a vacancy and who retires in accordance with Article 49.1 of the Articles of Association, as a director of the Company.
Ordinary Resolution 8 - To elect Mr Daragh Mc Dermott who was appointed by the Board as a director on 1st October 2016 to fill a vacancy and who retires in accordance with Article 49.1 of the Articles of Association, as a director of the Company.
Ordinary Resolution 9 - To elect Mrs Natalie Passmore as a director of the Company, as a new appointment to the Board, with her appointment being effective from 11th May 2017.
The Board considers that each of the Directors standing for re-election, re-appointment and election continue to make an effective and valuable contribution and that they do demonstrate commitment to their respective roles.
3.5 Ordinary Resolution 10 - To approve the annual directors fees of £27,000 for the Chairman and £19,000 for the Non-Executive Directors (2015 & 2016: £26,000 and £18,500 respectively).
The last increase was in fees was approved at the 2015 AGM.
3.6 Ordinary Resolution 11 - To appoint Deloitte LLP as auditors of the Company at a fee to be agreed by the Directors.
The Company has undertaken an audit process and following this process, the Company would like to put forward Deloitte LLP as auditors of the Company.
- 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 : 28th April 2017 |
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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