Treasury and Resources
Ministerial Decision Report
Jersey New Waterworks Company Limited 2013 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 Friday 26th April 2013.
- Background
JNWWC is a public company with its Ordinary shares being traded, relatively infrequently, (the current price being in the region of £4.75). 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 8 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 Friday 26th April 2013.
- 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 Directors and Auditors Report of the Jersey New Waterworks Company Limited for the year end 31 December 2012
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 2012 was £14,609,000 (2011: £14,811,000), water related turnover reduced by 1% and totalled £13,841,000 (2011: £13,973,000). The transition to metering has increased the variability of income and its dependence on the weather. The significant rainfall experiences in 2012 particularly during the spring and summer months, meant that overall demand for water was 1.9% lower than the prior year. Tariffs were increased by 2.5% in April 2012.
Operating expenditure for the year was £9,849,000 (2011: £9,953,000). This 1% decrease was due to the following factors: -
- Non recurring expenditure in 2011 relating, in part, to the operation of the desalination plant meant a reduction in expenditure in 2012 of £340,000.
- Fewer new water connection installations in 2012, resulted in savings in the year of £83,000.
- The savings were offset by the planned increase of £224,000 in depreciation charges for the year relating to metering, mains renewals, 2011 lining of the Val de la Mare dam and other elements of the capital program.
- There was a one off cost totalling £107,000 relating to staff changes incurred during the year.
- Increases in power costs were offset by reductions in expenditure on contractors, advisory services, materials and staff costs.
The operating profit for the year after exceptional items was £4,630,000 (2011: £4,858,000), a decrease of 4.7% from the prior year. The reduction in operating profit was due to lower turnover in the year countered by reduced operating costs, coupled with one off £130,000 of charitable contributions associated with the Company’s 130th Anniversary Fund.
During the year the Company disposed of 3 freehold properties and other assets generating profits on sale of £598,000 (2011: £918,000) and proceeds of £714,000 (£2011: £1,275,000).
After the deduction of finance costs, the Company generated a Profit before tax of £4,486,000, a reduction of £475,000 or 9.6% on the prior year.
The total recognised gains for the year amounts to £3,372,000 (2011: £3,470,000). The main reason for the reduction on the prior year is due to lower profits during 2012, offset by reduced unrealised losses arising on the defined benefit pension scheme of £(231,000) (2011: loss of £1,111,000).
A loss of £94,000 arose in the year relating to the Directors’ internal valuation for the revaluation of investment property (2011:£nil). The last external valuation was completed in December 2010.
The Company’s capital programme continued in 2012 with the investment in capital works totalling £2,905,000 (2011: £5,574,000). 2011 Capital expenditure was increased mainly due to the lining of the dam at Val de la Mare. The focus during 2012 was on the continued installation of meters and the renewal of old mains.
Loans and borrowings as at 31 December 2012 remained unchanged at £20,282,000, which was made up of bank loans and non-equity preference shares. 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 2011. Cash at the bank increased from £1,397,000 in 2011 to £2,653,000 in 2012.
Earnings per Ordinary share of £0.38 (2011: £0.47) is based on earnings of £3,697,000 (2011: £4,581,000), being the profit available for distribution to equity shareholders and 9,660,000 (2011: 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 2012 and of its profit and 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 12.09p per share on the Ordinary and ‘A’ Ordinary shares of the Company. The dividend will be paid (net of tax) by the Company on 30 April 2013 to all shareholders on the register of members on 19 April 2013.
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 12.09p per share, a 3% increase from the previous year where a final dividend of 11.75p was declared and paid. During the year an interim dividend of 6.30p per share was paid (2011: 6.10p). Dividends paid and proposed in respect of 2012 totalled 18.39p per share, an overall increase of 3% on 2011. The dividend due to the States of Jersey is favourably ahead of the planned 2013 budget; although the final out-turn against plan is dependent on the interim dividend declared in October 2013.
3.3 Ordinary Resolutions 3 – 6 - To Re-elect Three Directors and Elect one 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.
The Board has undertaken a formal assessment of its performance and the individual Directors, including structured meetings between the Directors being assessed and the Chairman. Following the review, the Chairman has confirmed that the Directors standing for re-election at the AGM continue to perform effectively and demonstrate commitment to their roles.
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.
In accordance with the provisions of Article 49 of the Company’s Articles of Association, Mr Peter Yates, Mr Howard Snowden and Mr Stephen Marie will retire at the AGM, and being eligible, 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.
The Directors also recommend the election of Mr Stephen Kay in accordance with Article 46.2(a), as a Non-Executive Director of the Company.
3.4 Re-elect Peter Yates as a Director of the Company
Peter Yates was appointed to the Board in May 2009. Mr Yates, a Chartered Accountant and former President of the Jersey Society of Chartered and Certified Accountants, was previously a partner of PricewaterhouseCoopers working in the United Kingdom and Jersey for over 31 years. He is a Non-Executive Director and Chairman of the Audit Committee of Invesco Leveraged High Yield Fund plc and also a Non-Executive Director of Bathroom Brands Limited.
Mr Yates chairs the Audit Committee and is a member of the Nomination Committee.
3.5 Re-elect Howard Snowden as a Director of the Company
Howard Snowden joined the Company in 1992 as Senior Engineer and became Managing Director in May 2000. Mr Snowden has worked in the water industry since 1970 for a number of companies including Yorkshire Water Authority (the forerunner to Yorkshire Water Plc). He is a fellow of the Institution of Civil Engineers, the Institution of Mechanical Engineers, the Institution of Engineering and Technology and is a member of the British Dam Society and is a Panel Supervising Engineer under the Reservoirs Act 1975.
3.6 Re-elect Stephen Marie as a Director of the Company for a term of one year
Stephen Marie became a Non-Executive Director of the Company in 2002. He is the Managing Director of ComProp (C.I.) Limited, a Channel Island commercial property development company and in 2012 was appointed as a Non-Executive Director to the Property Board of Fox International Property Holdings Limited (Fox Group). Mr Marie has been involved, at both Senior Executive and Director levels, in the property industry for a number of years. He is a fellow of the Institute of Clerks of Works and Construction Inspectorate of Great Britain Inc., a member of the Institute of Facilities Management and an associate of the Chartered Institute of Building. Mr Marie chairs the Remuneration Committee and is a member of the Nomination Committee.
The Board, adopting the principles of the UK Corporate Governance Code June 2010, has a policy of requiring Directors who have served nine years or more on the Board to resign by rotation and seek re-election on an annual basis. Mr Marie has served for eleven years and is therefore seeking re-appointment for a term of one year.
3.7 To elect Stephen Kay as a Director of the Company
In accordance with Article 46.2(a) the board recommends the election of Mr Stephen Kay as a Non-Executive Director, to be elected at the forthcoming AGM. In accordance with Article 46.1 the shareholders are being requested to approve an Ordinary resolution to elect Mr Stephen Kay as a Director to fill a vacancy.
The Nomination Committee sought advice from external recruitment consultants in respect of the proposed appointment of a Non-Executive Director to fill the vacancy created by the retirement of Mr Carl Hinault who retired from the Board on 20 April 2012.
Mr Kay is the Managing Director of Cambridge Water Plc and also holds a number of Non-Executive appointments in the water sector, namely as Chairman of Iceni Waters Ltd, Trustee of the Water Companies Pension Scheme, Chairman of the Water UK Technical Standards Board and Chairman of the Water Regulations Advisory Service. He is a Chartered Engineer who has spent his career in the water industry both in the UK and internationally.
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. The proposed appointment would bring the number of Directors up to eight (the maximum).
3.8 Ordinary Resolution 7 - To approve the Directors fees for 2013 of £25,000 for the Chairman and £18,000 for the Non-Executives Directors
In accordance with Article 53, the shareholders are being requested to approve the payment of fees to the Chairman and Non-Executive Directors. An increase of £2,500 is proposed for the Chairman and £3,000 for each Non-Executive Director. 2012 Directors fees were £22,500 for the Chairman and £15,000 for the Non-Executive Directors.
The Remuneration Committee comprises of Stephen Marie (Chairman), Mary Curtis and Kevin Keen. The Executive Directors, Howard Snowden and Helier Smith, may also attend the meeting by invitation. No Directors 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 Senior Management.
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 2012, the Auditors were remunerated £42,000 for the statutory audit of Jersey New Waterworks Company Limited. A further £12,000 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 Water Works 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 : 9 April 2013 |
Quality Assurance / Review : Business Manager | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2013-0019 - JNWCL AGM voting instructions - DS\WR - JNWCL AGM voting instructions - DS.doc |
MD sponsor : Head of Shareholder Relations |
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