Treasury and Resources
Ministerial Decision Report
Jersey Electricity plc 2016 Annual General Meeting voting instructions
- Purpose of Report
To consider the resolutions put forward for the Jersey Electricity plc (“JEC”) Annual General Meeting (“AGM”) on Thursday 3rd March 2016.
- Background
The States of Jersey is holder of all of the Ordinary 5p shares which amounts to 62% of the ordinary share capital of the JEC. This represents 86.4% of the total voting rights. The Directors of the company have proposed 8 Ordinary resolutions to be considered at the AGM. These are outlined below and in the Notice of Annual General Meeting (Appendix B) and Form of Proxy (Appendix C).
- Resolutions
The following resolutions have been put forward for consideration at the AGM.
Ordinary Resolution 1 – To receive the accounts and the reports of the Directors and the Auditors thereon for the year ended 30 September 2015.
The company’s annual report and accounts contains the full Directors’ Report, Accounts and Auditors Report. The following paragraphs summarise the key financial matters.
Group revenue for the year to 30th September 2015 was £100.5 million, this being 2% higher than the previous financial year. Pre-tax profits, pre-exceptional items rose 24% to £12.4 million from £10 million. Profit before tax, after exceptional items rose from £6.5 million to £13.2 million.
Unit sales volumes of electricity were 1.0% higher than the previous year with energy revenues rising 1.6% to £80.7 million. This 1% increase compares with a 6% reduction in the previous year.
Turnover in other business segments was as follows:-
- Retail: £11.1 million – a decrease of 3%, linked to a reduction in the floor space utilised by the business. Profit was £0.3 million compared to a loss of £0.1 million in the previous year.
- Property: £2.1 million - an increase of 5%, linked to changes in tenancy arrangements during the last two financial years. Profit was £1.4 million compared to £1.3 million in the previous year.
- Building services (JEBS): £5 million - an increase of 18% and follows a management re-structure and re-focus on its core activities. A marginal loss was produced.
- Other businesses: remained at £3.2 million.
Cost of sales fell by £3.9 million to £64.6 million, associated mainly with a higher level of electricity importation displacing oil purchases in the energy business. Operating expenses of £22 million rose by £1.9 million from their 2014 level, this being due to a £1.7 million rise in depreciation linked to the recent material infrastructure spend.
Interest paid in 2015 was £1.5 million whereas in 2014 it was negligible as most of this cost was capitalised up to the date of commissioning of the new N3 subsea cable.
Tax paid at £2.4 million was higher than the £1.5 million paid in 2014 due to higher profits and the taxation of exceptional items.
Dividends paid in the year, net of tax, rose by 6% from 11.80p in 2014 to 12.45p in 2015. The proposed final dividend for the year is 7.60p. A 6% rise on the previous year.
Capital expenditure for the year was £16.8 million compared to £33.0 million in the previous year, principally as a result of the Normandie 3 project.
Net debt at the financial year end was £17.5 million which was £2.7 million lower than the previous year.
Defined benefit pension scheme deficit under IAS 19 “Employee Benefits” rules was £5.8 million, net of deferred tax, compared with a deficit of £1.1 million as at 30th September 2014. The defined benefits pension scheme is identified as an area of risk that continues to require careful monitoring. The final salary scheme was closed to new members in 2013. The next triennial actuarial valuation of the defined benefit scheme has an effective date of 31st December 2015, the results of which are expected to be known in the current financial year.
The opinion provided in the Auditor’s report signed by Deloitte LLP is that:-
In our opinion the financial statements:
- give a true and fair view of the state of the group’s affairs as at 30 September 2015 and of the group’s profit for the year then ended;
- have been properly prepared in accordance with International Financial Reporting Standards IFRSs) as adopted by the European Union; and
- have been properly prepared in accordance with the Companies (Jersey) Law, 1991.
Appendix A provides a summary of the key performance indicators.
Ordinary Resolution 2 – To declare a dividend
62% of the ordinary share capital of the Company is owned by the States of Jersey with the remaining 38% held by around 600 shareholders via a full listing on the London Stock exchange.
A final dividend of 7.60 pence on the Ordinary and “A” shares for the year ended 30th September 2015 is recommended for payment by the Directors. A participating dividend of 1.5 per cent per annum less Income Tax on the Cumulative Participating Preference Share Capital for the period ended 30th September will also become payable.
Ordinary resolutions 3 to 6 – Re-election of Directors
In accordance with the requirements of the UK Corporate Governance Code, Directors should offer themselves for re-election no less frequently than every three years. Accordingly, Mr Aaron Le Cornu will retire and being eligible, offer himself for re-election.
Furthermore, Directors with more than 9 years’ service should offer themselves for re-election on an annual basis. Accordingly Mr Geoffery Grime and Mr Mike Liston will retire and being eligible, will offer themselves for re-election. Mr Clive Chaplin will not offer himself for re-election as he is retiring at the AGM.
The Board appointed Mr Alan Bryce as a non-executive Director on 17th December 2015 and in accordance with Article 115 of the Company’s Articles of Association he is offering himself for re-election.
Resolution 3 – To re-elect Mr G J Grime as a Director of the Company.
Joined the board in 2003. Age 68. Sits on the Remuneration and Nominations Committee. CV as per Report and Accounts.
Resolution 4 – To re-elect Mr A D Le Cornu as a Director of the Company
Joined the board in January 2011. Age 45. Sits on the Audit and Risk and Remuneration Committees. CV as per Report and Accounts.
Resolution 5 – To re-elect Mr M J Liston as a Director of the Company
Age 64. Sits on Remuneration and Nominations Committee. CV as per Report and Accounts.
Resolution 6 – To re-elect Mr A Bryce as a Director of the Company
The following information is provided by the Board.
Mr Bryce, 55, is a non-Executive Director of Scottish water, Chair of the wind-farm developer Viking Energy Shetland and an advisor in the utilities industry. Until recently Mr Bryce was a non-Executive Director of Infinis Energy plc. Prior to 2010 he held a number of senior positions at Scottish Power including Managing Director of Energy Networks and Managing Director of Generation. He is a Chartered Engineer and Fellow of the Institution of Engineering and Technology.
Resolution 7 – To re-appoint the Auditors and authorise the Directors to agree their remuneration.
In the 2014 Annual Report and Accounts it was reported that consideration was likely to be given to conducting a competitive tender to select an external auditor for the year ending 30th September 2016. This was on the basis that this coincided with the rotation of the Deloitte LLP partner and also because they have been incumbent since 2003. A tender did take place and Deloitte LLP were reappointed.
It should be noted that the Directors have delegated the responsibility of setting the auditors’ remuneration to the board’s Audit & Risk Committee.
Resolution 8 – To transact special business, namely; Consider, and if thought fit, approve an increase in aggregate Director’s fees from £125,000 per annum to £175,000 per annum.
This refers to the approval of an aggregate maximum increase in non-executive fees per annum. The aggregate was last increased in 2007.
For the year to 30th September 2015 (and 2014) the remuneration of Non-Executive Directors was:-
Basic fees(£) Benefits Total(£) Total (£) in kind(£) 2015 2014
G Grime 31,500 3,404 34,904 34,562
M J Liston 17,850 1,702 19,552 19,381
C.A.C Chaplin 19,950 1,602 21,552 21,449
J.B. Stares (ret’d) 8,983 766 9,749 22,531
A.D. Le Cornu 19,629 1,602 21,231 19,399
Total 97,912 9,076 106,988 117,322
The difference in fees paid to Directors relates to fees paid for individual roles on Audit & Risk, Nominations and Remuneration Committees.
- Recommendation
The Treasurer of the States and the Greffier of the States are recommended to vote by proxy in favour of the resolutions to be put before the Annual General Meeting of Jersey Electricity plc on the 3rd March 2016.
- Reason for Decision
To fulfil the States’ role as shareholder of the Jersey Electricity plc by exercising voting rights at the Annual General Meeting.
- Resource Implications
The financial implications are as detailed in the report.
Report author : Head of Shareholder Relations | Document date : 18th February 2016. |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2016-0018 - JEC AGM Voting Instructions |
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