Jersey Telecom, Jersey New Waterworks, and Jersey Post: Report and Accounts: Presentation to the States

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A decision made 28 June 2012:

Decision Reference: MD-TR-2012-0056
Decision Summary Title:	Presentation of Three States of Jersey Owned Companies’ 2011 Financial Reports and Accounts to the States		Date of Decision Summary:	28th June 2012
Decision Summary Author:	Treasurer of the States		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Presentation of Three States of Jersey Owned Companies’ 2011 Financial Reports and Accounts to the States		Date of Written Report:	28th June 2012
Written Report Author:	Treasurer of the States		Written Report : Public or Exempt?	Public
Subject: Presentation of three States owned companies’ Financial Reports and Accounts for 2011.
Decision(s): The Minister for Treasury and Resources decided to present the following 2011 Financial Reports and Accounts to the States:- Jersey Telecom Group Limited Jersey New Waterworks Company Limited Jersey Post International Limited Accounts for Jersey Electricity Plc and States of Jersey Development Company were already presented to the States earlier this year.
Reason(s) for decision: To present the States owned companies’ accounts to the States.
Resource Implications: There are no further financial or manpower implications.
Action required: The Greffier of the States is requested to present the attached company reports and accounts to the States.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Jersey Telecom, Jersey New Waterworks, and Jersey Post: Report and Accounts: Presentation to the States

Treasury and Resources

Ministerial Decision Report

PRESENTATION OF THREE States of Jersey Owned Companies 2011 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 2011 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 2012; 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 2011 (Wholly owned)

States Holding as at 31st December 2011

Issued and Fully Paid		Nominal

Ordinary shares of £1 each		£20,000,000
9% Cumulative Preference shares		£20,000,000

The Company generated a retained profit of £12,246,000 (2010: £8,713,000) for the financial year ended 31 December 2011.

Group turnover was £107,879,000 (2010: £96,173,000) which was the highest in its history.

Operating expenses increased from £62,277,000 in 2010 to £64,171,000 in 2011 mostly due to increases in staff costs. Whilst there were other smaller increases in other operating costs these were offset by a reduction in Depreciation costs in 2011.

Interest expenses and similar charges were £2,214,000 (2010: £2,282,000).

The total recognised gains for the year amounted to £11,992,000 (2010: £13,820,000). The main reasons for change were due to an actuarial loss on Public Employees Contributory Retirement Scheme sub-fund of £-314,000 (2010: gain £6,370,000); adjustment on deferred taxation on the actuarial gain £63,000 (2010: £-1,278,000) and offset by changes in profits for the year £12,246,000 (£2010: £8,713,000).

The Company manages an asset base of £66,101,000 which is an increase of £6,061,000 on the previous financial year. Total assets were £132,136 compared to £120,760. In 2010 the acquisition of ekit was reflected in Non-current assets, as a debtor for the purchase of £12million and £460,000 for the provision for transaction costs associated with the acquisition. JT Group Limited took control, indirectly through its subsidiary Jersey Telecom UK Limited, of eKit.com Inc on 1 January 2011 therefore the numbers were no longer reported under Non-current assets.

Net current assets were £1,013,000 compared to 2010: £3,035,000. Bank and cash balances held were £6,681,000 (2010: £6,339,000). Total borrowings were £8,777,000 for 2011 which compares with £10,500,000 for 2010.

Notes in the accounts make a reference to the Board’s approval but not yet contracted out work, for Gigabit Isles project (£41.5million). In conjunction, a further note states that a post balance sheet event was the States of Jersey agreement in December 2011 to inject £10m in JT in exchange for 2.5% preference shares (an Infrastructure Investment).

The Board of Jersey Telecom Group Limited, after discussions with the States, has decided to propose a final dividend for 2011 of £2.6m. This return on 2011 profits is in line with the expected dividend yields of 50% of distributable profits. The States of Jersey owns 100% of the issued £20million ordinary shares and 100% of the £20million 9% Preference shares in JT Group Limited.

Jersey New Waterworks Company Limited – year end 31st December 2011 (Majority owned)

States Holding as at 31st December 2011

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

The Company generated a retained profit of £4,581,000 (2010: £3,321,000) for the financial year ended 31 December 2011.

Turnover for the year ended 31st December 2011 was £14,811,000 (2010: £14,652,000), water related income totalled £13,973,000 (2010: £13,854,000). Prices for metered water remained unchanged in 2011 whilst those for unmeasured water increased by 1.5% from 1 April 2011

Operating expenditure for the year was £9,953,000 (2010: £9,594,000). This 3.7% increase is due to the following factors: -

In 2011 there were costs of £240,000 associated with the operation of the desalination plant due to long dry periods of weather. Production of desalinated water commenced on 2 November 2011 and the company produced 200 million litres of water. Production of water at the desalination plant ceased on 16 December 2011.
In 2011 there were one off charges in relation to staff changes totalling £128,000.
There were unavoidable increases in completed works depreciation of £196,000 associated with the roll out of metering, mains renewals and other important capital projects. However these costs were offset by other savings in operating expenditure.

Profit on disposal of fixed assets was £918,000 (2010: £93,000). Net Interest payable and non-equity dividends totalled £815,000 (2010: £1,000,000).

The total recognised gains for the year amounts to £3,470,000 (2010: £4,719,000). The main reason for the reduction on the prior year is due to an unrealised loss on the defined benefit pension scheme of £(1,111,000) (2010: gain of £84,000). There were no gains or losses arising from the revaluation of investment property during the year.

The Company manages an asset base of £44,756,000 which is an increase of £1,799,000 on the previous financial year. Net current assets were £3,623,000 compared to 2010: £-1,128,000. Bank and cash balances held were £1,397,000 (2010: £1,652,000). Bank Loans were £nil for 2011 which compares with £5,250,000 for 2010.

Earnings per ordinary share of £0.47 (2010: £0.34) is based on earnings of £4,581,000 (2010: £3,321,000), being the profit available for distribution to equity shareholders and 9,660,000 (2010: 9,660,000) ordinary and ‘A’ ordinary shares of £0.50 in issue. Earnings per share and the number of shares in issue for 2010 have been restated for the capital reorganisation during 2011.

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 11.75p per share, a 5% increase from the previous year where a final dividend of 11.2p (restated) was declared and paid. During the year an interim dividend of 6.10p per share was paid (2010: 5.80p (restated)).

A summary of the operational statistics are as follows:-

	Units	2011	2010	2009	2008(1)	2007(1)
Total Water supplied	MI	7,152	7,220	7,253	7,402	7,182
Maximum Daily demand	MI	24.7	25.8	25.7	26.2	25
Annual rainfall	Mm	773	982	843	1,042	915
New Mains laid	Km	2.0	1.7	3.1	4.6	5.6
Mains re-laid/relined	Km	4.0	2.7	1.8	2.8	2.0
New connections	No	492	337	412	508	453
Live unmeasured supplies	‘000	18	21	23.8	25.2	26.1
Live metered connections	‘000	20	16.2	13.2	11.2	10.6
Employees	No	83	84	80	107	107
Compliance with water quality parameters	%	99.81%	99.86%	99.84%	99.97%	99.86%

(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 2011

Issued and Fully Paid		Nominal

Ordinary shares of £1 each		£5,000,000

The Company generated a retained profit of £1,251,000 (2010: £111,000) for the financial year ended 31 December 2011.

Turnover for 2011 reduced by just over 1% to £64,868,000 (2010: £65,648,000) as volume reductions were mitigated by some price increases. Gross Profit of £8,774,000 represented 13.5% of sales which was favourably impacted by lower staffing costs. Administrative expenses increased by 10% to £7,545,000 principally due to one off costs totalling £1,200,000. The Financial benefits of the change program implemented over the last couple of years meant that operating profits of £1,229,000 were improved dramatically from the disappointing performance of 2010 (2010: £595,000) although Jersey Post continue to rely heavily on the contribution of the logistics division for this profitability which they advise they will not be able to continue to do in 2012 due to the removal of LVCR.

An analysis of this is included in the table below;-

	2011 £ million	2010 £ million
Profit after tax	1.3	0.1
Actuarial gain on pensions	-	(1.9)
Gain (Loss) after restructuring costs	1.3	(1.8)
Restructuring costs	0.6	2.6
Non operating income	(0.7)	(0.2)
Taxation		-
Operating profit	1.2	0.6

Exceptional costs - the Group invested £633,000 in its restructuring costs during the year (2010: £2,601,000). This consisted of one off redundancy costs £323,000 (2010: £2,000,000); asset impairment £150,000 (2010:£nil) and IT Transitional costs £160,000 (2010:£601,000).

The total recognised losses for the year amounted to £-6,497,000 (2010: gain £512,000). The main reason for the reduction on the prior year is due to an unrealised loss on the pension scheme of £-7,748,000 (2010: gain of £401,000). This is mainly due to the difference between the actual and expected return on the pension scheme assets and the effect of changes in assumptions underlying the present value of scheme’s liabilities.

The Company manages an asset base of £11,510,000 which is a decrease of £6,497,000 on the previous financial year. Net current assets were £12,891,000 compared to 2010: £11,384,000. Bank and cash balances held were £15,276,000 (2010: £8,996,000), this increase was due to a change of timing for a payment to Royal Mail. Creditors’ amounts falling due within one year were £14,501,000 for 2011 which compares with £9,599,000 for 2010. Pension Deficit was £-9,392,000 for 2011, compared with £1,772,000 for 2010.

No dividends were paid during the financial year. At the AGM a net dividend of £375,000 was declared (£468,750 gross). No dividends were declared for 2010.

The States of Jersey owns 100% of the issued ordinary shares (5 million at £1 per share). The dividend declared represents 7.5p per share (net of tax). The proposed dividend of £375,000 (net of tax) represents one third of the net profit.

A summary of the operational statistics are as follows:-

	Units	2011	2010	2009	2008	2007
Mail Volumes	Millions	84	91	94	97	86
Number of Post offices	No	21	21	22	22	22
Cost of a local stamp	Pence	37 & 42	36 & 39	37	35	35
Cost of a UK stamp	Pence	50	45	42	39	39
Number of Staff (FTE)	No	357	370	407	389	376
Staff Costs	£million	14.6	16.3	16.6	16.6	16.3
Average Cost of employee	£’000’s	41	44	41	43	43

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 2012.

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 : 28th June 2012
Quality Assurance / Review : Head of Financial Management, Reporting and Accounting	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2012-0056 - Presentation of 2011 Utilities Accounts - LJR\WR - Presentation of Utilities Reports and Accounts 2011 - LR.doc
MD sponsor : Treasurer of the States