|
Registered number: 04617059
ANCALA WATER SERVICES (DEFENCE) LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
Independent auditors' report
|
|
Statement of comprehensive income
|
|
|
|
|
Statement of changes in equity
|
|
Notes to the financial statements
|
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
COMPANY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit 1B Redbrook Business Park
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Westminster Bank PLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2023
The directors present their strategic report and the audited financial statements for the year ended 31 March 2023.
Ancala Water Services (Estates) Limited and Ancala Water Services (Defence) Limited
Ancala Water Services (Estates) Limited (AWSE) operates a Public Private Partnership Concession Contract with the Ministry of Defence (MOD) for water and wastewater services covering the areas of Wales and the South West of England for a 25-year period which commenced on 1 December 2003.
Since commencement all operational activities required in delivering the contract as specified by the MOD on behalf of Ancala Water Services (Estates) Limited (AWSE) have been carried out under contract by Ancala Water Services (Defence) Limited (AWSD).
Financial performance and outlook
|
This year, the company delivered strong financial performance with turnover of £67,153k (2022 - £54,130k). The increased turnover and improved overall operational efficiency resulted in an operating profit of £9,599k (2022 - £6,448k). Net assets at the conclusion of the financial year were £21,245k (2022 - £17,425k).
Furthermore, the company continued to engage in employee training with an emphasis on efficiency to accomplish our main business targets, as we strive to "deliver water and wastewater asset management and optimisation for a sustainable future." AWSD remains well placed to achieve its vision of “delivering a sustainable future” and will continue to work together with the MOD to deliver an effective partnership.
Health and safety of employees and contractors is of the highest importance to the company, with regular reporting and review of safety statistics, practices and risks at board level.
The business performed all its duties without any reportable health and safety incidents and continued to provide health insurance for all employees as further commitment to wellbeing.
Environmental performance and water quality standards remain a key focus for the business and are subject to close monitoring and review, enabling proactive plans to be developed and implemented. There were no formal penalties by any of the regulatory bodies during the year.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
Key performance indicators
|
The company measures overall performance by monitoring activities against four key strategic priorities:
∙Deliver our customer and regulatory commitments.
∙Develop and engage our people.
∙Improve performance, efficiency and effectiveness.
∙Deliver sustainable growth
Deliver our customer and regulatory commitments
The company has delivered exceptional operational performance, with no work-related lost time incidents or RIDDOR in the year, water and wastewater quality standards meeting 99.98% compliance, and exceeding its targeted Asset Condition Grade enhancements. Leakage performance remained above industry average while falling just short of challenging internal targets.
Develop and engage our people
The company continues to invest in our people and processes, including increased benefits for employees and implemented the findings of an independent compensation benchmarking exercise for the entire organisation in year. Employee wellbeing and engagement remain a priority, as evidenced by a considerable increase in the employee engagement score from 77 percent last financial year to 84 percent this year, which is 9 percent higher than the industry average in annual employee surveys. This year, the company has continued to invest in and focus on training and development for all levels within the company and has trebled the number of qualified Mental Health First Aid professionals throughout the organisation. The company also offers a variety of health provider employee benefits, as well as critical illness insurance for all employees.
Improve performance, efficiency and effectiveness
Operating profit is a key indicator of performance throughout the year and was £9,599k (2022 - £6,448k).
The business will continue to focus on improving operational performance and making operational efficiencies by fully utilising investment in new systems and by continuing to invest in developing the skills of staff. We will proactively seek opportunities to give something back to the community, by supporting charities and improving the communities that we work in.
Deliver sustainable growth
We will continue to work in partnership with our current customers and actively seek new opportunities to grow the business.
Principal risks and uncertainties
|
Strategic, financial, commercial, operational, social, environmental and ethical risks are all considered as part of the groups’ controls, which are designed to manage rather than eliminate the risk of failure to achieve business objectives. Therefore, they can only provide reasonable, not absolute, assurance against material misstatement or loss provided for in the contract. At present there are no immediate risks identified which are considered likely to have a significant impact on the short or long-term value of the group.
The company has continued to assess the risks associated of rising inflation, the conflict in Ukraine, rising interest rates and cyber security. Inflation has become a more significant factor in the last 24 months, but its impact has been limited due to contract protection with primary customers through charge out tariffs increasing in line with inflation each year. The conflict in Ukraine has had no negative impact on our performance, and we do not expect that to change in the next 12 months. Rising interest rates pose little risk as all debt bearing interest is fully hedged with an interest rate swap. While cyber security remains a significant risk, the company
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
has continued to take steps to strengthen systems and has provided quarterly training and updates to all employees to raise awareness.
The primary 25 year contract with MOD runs to 30 November 2028 and the strategic partnership and relationship with the customer, the Defence Infrastructure Organisation (DIO), remains positive.
In the coming financial year 2023/24 DIO will be conducting its quinquennial review of the asset condition grading, whilst there is a low risk of a negative review Ancala Water Services remain committed to fulfilling all its obligations as set out in the Aquatrine contract. The company has invested substantially in the MOD assets over the past two years to the value of £11.7m. Capital spending of £8.7m is planned in the coming year and a further £12m forecast across the financial years ending 2025 and 2026.
Financial risk management
|
The company’s non-derivative financial instruments comprise bank balances, intercompany balances, trade debtors and trade creditors. The main purpose of these instruments is to finance the company’s operations. The liquidity risk of trade creditors is managed by ensuring sufficient funds are available to meet amounts due.
In respect of bank balances, the liquidity risk is managed by maintaining a balance between the continuity of funding and flexibility through the operation of intercompany cash management and forecasting.
Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits. The amounts presented in the balance sheet are net of allowances for doubtful debtors.
The company has in place a risk management programme that seeks to limit the adverse effects on the financial performance by monitoring levels of debt finance and the related finance costs.
Price risk
Due to the relatively small size of the group’s operations and the nature of its contracts with MOD, there is little exposure to commodity price risk. Given the rise in inflation, management has recognised this will need to be continually assessed, however, the costs of managing exposure to commodity price risk currently exceeds any potential benefits. The directors will revisit the appropriateness of this policy should the group’s operations change by monitoring levels of debt finance and the related finance costs.
Credit risk
The MOD is the primary customer of AWSE. AWSE is the primary customer of AWSD, and therefore credit risk is assessed as very low.
Liquidity risk
The group actively maintains a mixture of long-term and short-term debt finance that is designed to ensure the group has sufficient available funds for operations.
Interest rate cash flow risk
The group uses a derivative financial instrument in the form of an interest rate swap to reduce its exposure to interest rate fluctuations on its floating rate bank loan.
Directors' statement of compliance with duty to promote the success of the company
|
The board of directors consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1) Companies Act 2006) in the decisions taken during the year ended 31 March 2023.
AWSD is committed to being a responsible business. Our mission is to own and manage water and waste water assets and optimise operations to create value for customers and shareholders. The core values that underpin
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
the strategy and objectives are Integrity, Passion, Ambition and inclusivity. This is demonstrated and actively encouraged in dealings with our employees, customers, suppliers and stakeholders in the wider community. Internal communications play a key part in keeping the company employees engaged and aligned to the overall strategy, the CEO provides regular updates to employees via the monthly business update, to ensure that timely and consistent messages are provided to all employees.
As the Board of Directors, our intention is to behave responsibly and ensure that management operate the business in a responsible manner, operating within the high standards of business conduct and good governance expected for a business such as ours and in doing so, will contribute to the delivery of our plan. The intention is to nurture our reputation, through both the construction and delivery of our plan, that reflects our responsible behaviour.
Our Governance structure through Board, Committee (for example: EMT, Ops Sub Group, H&S groups, Employee Forum, etc) and audit fosters a culture of openness, scrutiny and challenge. Good working relationships have been developed, with regular Board interactions and the opportunity for Board members to get involved in Group wide business.
As the Board of Directors, our intention is to behave responsibly toward our shareholders and treat them fairly and equally, so they too may benefit from the successful delivery of our plan.
These items are given as examples of the Directors’ application of the principles of s172 Companies Act across the year, and is not an exhaustive list.
This report was approved by the board on 11 September 2023 and signed on its behalf.
................................................
M J Howarth
Director
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2023
The directors present their report and the financial statements for the year ended 31 March 2023.
Directors' responsibilities statement
|
The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Ancala Water Services (AWS) continue to measure scope 1 and 2 emissions in order to calculate the carbon footprint. This includes the following:
∙Office electricity
∙Electricity used for the operation of the asset base
∙Fuel for the asset generators
∙Fuel used by the ‘grey fleet’ (business miles)
∙Fuel used by the ‘silver fleet’ (operational team vehicles)
AWS uses the government published conversion factors to convert energy units into tonnes of carbon dioxide equivalent (CO2e) which is a widely recognised indicator of an organisation’s performance.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
FY2022/23 target was 1,924 tonnes CO2e which was achieved as follows (recorded at 10 May 2023, updates will be made when the final actual meter readings and invoices for the period ending 31 March 2023 are received):
Since the introduction of this metric to the business scorecard (BSC) AWS have launched a Carbon Management Working Group (CMWG). The CMWG brings together key internal stakeholders who managed emissions data and team members with influence over emission reduction initiatives.
The profit for the year, after taxation, amounted to £8,248k (2022 - £5,667k).
Interim dividends of £5,001k (2022 - £9,455k) were paid during the year. The Directors do not recommend the payment of a final dividend.
After due consideration of all relevant factors, including the current economic environment and the net current liability position of the group, the directors have a reasonable expectation that the company & group have adequate resources to continue in operational existence for the foreseeable future.
The directors have prepared forecasts for at least 12 months from the date of approval of these financial statements, which takes into account their trading forecasts. The directors have also taken into account the financing available to the company & group, including consideration of compliance with loan covenants. The directors have performed sensitivity analysis and concluded that the level of decline in revenues to result in a covenant breach is not plausible. In arriving at their conclusion the directors have also taken into account mitigating factors such as delaying the repayment of the external loan notes, if required. Accordingly, the directors do not believe there are any material uncertainties which may cast significant doubt on the ability of the company & group to continue as a going concern, as such, they continue to adopt the going concern basis in preparing the annual report and accounts.
The directors who served during the year were:
|
|
|
|
S Statelova (appointed 19 May 2022, resigned 14 August 2023)
|
|
|
|
|
M Papaiacovou (resigned 19 May 2022)
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
Important adjusting events after the financial period
|
There have been no significant events affecting the company since the year end.
As permitted by the Articles of Association, the directors have the benefit of an indemnity which is a qualifying third-party indemnity provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force.
The Company also purchased and maintained Directors’ and Officers' liability insurance in respect of itself and its Directors throughout the financial year.
Disclosure of information to auditors
|
Each director of the company who held office at the date of the approval of this Annual Report, as set out above, confirms that:
• so far as they are aware, there is no relevant audit information (information needed by the company's auditors in connection with preparing their report) of which the company's auditors are unaware, and
• they have taken all the steps they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company's auditor is aware of that information.
The auditors, BDO LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board on 11 September 2023 and signed on its behalf.
................................................
M J Howarth
Director
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) LIMITED
Opinion on the financial statements
In our opinion, the financial statements:
∙give a true and fair view of the state of the Company’s affairs as at 31 March 2023 and of its profit for the year then ended;
∙have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
∙have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Ancala Water Services (Defence) Limited (“the Company”) for the year ended 31 March 2023 which comprise Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Directors report and financial statements, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) LIMITED
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
∙the financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of Directors’ remuneration specified by law are not made; or
∙we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) LIMITED
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
As part of the audit we gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates in, and considered the risk of acts by the company that were contrary to the applicable laws and regulations, including fraud. We considered the company’s compliance with laws and regulations that have a direct impact on the financial statements including, but not limited to, UK company law and UK tax legislation, and we considered the extent to which non compliance might have a material effect on the company financial statements.
Based on our understanding we designed our audit procedures to identify instances of non compliance with such laws and regulations. Our procedures included reviewing the financial statement disclosures and agreeing to the underlying supporting documentation where necessary. We made enquiries of management and of the Directors as to the risk of non compliance and any instances thereof. We also addressed the risk of management override of internal controls, including testing journal entries processed during and subsequent to the year that represented a risk of material misstatement due to fraud. We specifically reviewed manual journal postings to revenue and cash to assess for any evidence of manipulation of the account balances. We also assessed managements estimates made in the financial statements for evidence of bias. In particular we considered the appropriateness of accruals.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
https://www.frc.org.uk /auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Neil Ebdon (Senior statutory auditor)
for and on behalf of
BDO LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) LIMITED
11 September 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest receivable and similar income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the financial year
|
|
|
|
There was no other comprehensive income for 2023 (2022:£000NIL).
|
The notes on pages 16 to 28 form part of these financial statements.
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
REGISTERED NUMBER: 04617059
BALANCE SHEET
AS AT 31 MARCH 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: amounts falling due within one year
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
|
|
|
Creditors: amounts falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 11 September 2023.
................................................
M J Howarth
|
|
|
The notes on pages 16 to 28 form part of these financial statements.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 16 to 28 form part of these financial statements.
|
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 16 to 28 form part of these financial statements.
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
1.Accounting policies
Ancala Water Services (Defence) Limited is a private company, limited by shares, incorporated in England and Wales under the Companies Act 2006, company number 04617059. The registered office is at Unit 1B Redbrook Business Park, Wilthorpe Road, Barnsley, S75 1JN.
|
|
|
Summary of significant accounting policies and key accounting estimates
|
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
|
|
|
Basis of preparation of financial statements
|
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The financial statements are presented in pounds sterling and rounded to thousands.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the company's accounting policies (see note 2).
|
|
|
Financial Reporting Standard 102 - reduced disclosure exemptions
|
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Ancala Water Services Midco2 Limited as at 31 March 2023 and these financial statements may be obtained from Companies House.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
1.Accounting policies (continued)
After due consideration of all relevant factors, including the current economic environment and the net current liability position of the group, the directors have a reasonable expectation that the company & group have adequate resources to continue in operational existence for the foreseeable future.
The directors have prepared forecasts for at least 12 months from the date of approval of these financial statements, which takes into account their trading forecasts. The directors have also taken into account the financing available to the company & group, including consideration of compliance with loan covenants. The directors have performed sensitivity analysis and concluded that the level of decline in revenues to result in a covenant breach is not plausible. In arriving at their conclusion the directors have also taken into account mitigating factors such as delaying the repayment of the external loan notes, if required. Accordingly, the directors do not believe there are any material uncertainties which may cast significant doubt on the ability of the company & group to continue as a going concern, as such, they continue to adopt the going concern basis in preparing the annual report and accounts.
Turnover for the Aquatrine contract is recognised in the period in which the services are provided. The group maintains and upgrades the MOD infrastructure assets and provides operating services for water and waste water. Both the maintenance and upgrade services, and the operating services are charged under a volumetric tariff, along with standing charges, which are adjusted with inflation as agreed in the contract.
Additional business development contract work is recognised in accordance with the stage of completion.
Turnover is only recognised when all of the following conditions are satisfied:
- The amount of turnover can be measured reliably;
- It is probable that the group will receive the consideration due under the contract;
- The stage of completion of the contract at the end of the reporting period can be measured reliably;
and
- The costs incurred and the costs to complete the contract can be measured reliably.
The other operating income relates to pre commencement change assets income of £10m received in 2005. This is being released evenly over the remaining term of the contract.
Interest income is recognised in profit or loss using the effective interest method.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
1.Accounting policies (continued)
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
|
|
|
Current and deferred taxation
|
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Dividend distribution to the company’s shareholders is recognised as a liability in the financial statements in the reporting period in which the dividends are declared.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
1.Accounting policies (continued)
Defined contribution pension plan
The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet. The assets of the plan are held separately from the company in independently administered funds.
The group operates a management incentive programme through Ancala Water Services Topco1
Limited. This is a cash settled scheme which pays out at set crystallisation dates that is settled by the parent entity. Employees of the programme are employed by Ancala Water Services Defence Limited.
In accordance with FRS102 the awards are treated as equity-settled because the subsidiary does not have an obligation to settle the award. An expense is recognised in the income statement over the vesting period, and a credit is recognised in equity as a capital contribution from Ancala Water Service Topco1 Limited.
The fair value of the management incentive programme is calculated at inception of the awards based on expected returns for the group, using the group business plan which are forecasted figures, for the purpose of treating it as an equity settled scheme. The calculation also takes into account the expected attrition rate of the scheme, this is based on expectations of management retention for the scheme period.
The company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors and loans from banks.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or in case of an out-right short-term loan that is not at market rate, the financial asset or liability is measured, initially at the present value of future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost, unless it qualifies as a loan from a director in the case of a small company, or a public benefit entity concessionary loan.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of comprehensive income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
1.Accounting policies (continued)
|
|
|
Financial instruments (continued)
|
asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the company would receive for the asset if it were to be sold at the balance sheet date.
Financial assets and liabilities are offset and the net amount reported in the Balance sheet when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
|
|
Judgements in applying accounting policies and key sources of estimation uncertainty
|
In preparing these financial statements, the directors have made the following judgements and estimates:
- Accounting accruals in respect of statutory undertaker consumption are recognised using the best information available at the reporting date. Accruals include significant balances for Statutory Undertaker Consumption of water and waste water primarily as a result of invoicing delays from statutory undertakers. Furthermore, the incumbent is only legally obliged to provide one actual meter read per year as a result best estimates are made based on historical usage.
- The movement in fair value of the management incentive programme is calculated based on expected returns for the group, using the group business plan which are forecasted figures. The calculation also takes into account the expected attrition rate of the scheme, this is based on expectations of management retention for the scheme period.
Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made.
|
|
Turnover, which is stated net of Value Added Tax, represents the value of goods and services supplied to third parties. Turnover is attributable primarily to one continuing activity, the contract between AWSE and the MOD for the provision of water and waste water services in the area covering Wales and the South West of England.
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
|
|
|
|
The analysis of the company's operating costs for the year is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of defined contribution scheme
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average monthly number of employees, including the directors, during the year was as follows:
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
|
Total directors renumeration for the group was £338k (2022 - £320k).
The total value of the group's contributions paid to a defined contribution pension scheme was £33k (2022 - £32k).
The highest paid director received remuneration of £222k (2022 - £224k).
The value of the company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £21k (2022 - £21k).
During the year 1 director received shares under the long-term incentive schemes (2022 - 1)
|
|
|
|
|
|
Auditor's remuneration of £22,000 (2022 - £12,200) was incurred for the period.
Fees payable to the auditors in relation to all other services amounted to £21k (2022 - £nil).
|
|
|
Interest from group undertakings
|
|
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
|
|
|
|
|
|
Current tax on profits for the year
|
|
|
|
|
Adjustments in respect of previous periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of timing differences
|
|
|
|
|
Adjustments in respect of prior periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation on profit on ordinary activities
|
|
|
|
|
Factors affecting tax charge for the year
|
|
|
The tax assessed for the year is lower than (2022 - lower than) the standard rate of corporation tax in the UK of 19% (2022 - 19%). The differences are explained below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before tax
|
|
|
|
|
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2022 - 19%)
|
|
|
|
|
|
|
|
|
|
Expenses not deductible for tax purposes
|
|
|
|
|
Adjustments to tax charge in respect of prior periods
|
|
|
|
|
Other differences leading to an increase in the tax charge
|
|
|
|
|
|
|
|
|
|
Total tax charge for the year
|
|
|
|
|
Factors that may affect future tax charges
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
10.Taxation (continued)
The UK Government announced an increase in the corporation tax rate from 19% to 25%, with an effective date of 1 April 2023. Temporary differences have been remeasured using the enacted tax rates that are expected to apply when the liability is settled or the asset realised.
|
|
|
|
|
|
|
|
|
|
Charged to profit or loss
|
|
|
|
|
|
|
The deferred tax asset is made up as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term timing differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by group undertakings
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments and accrued income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by group undertakings relate to intercompany trading and are unsecured and repayable on demand.
Included within trade debtors is a bad debt provision of £248k (2022 - £222k).
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: Amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed to group undertakings
|
|
|
|
|
Other taxation and social security
|
|
|
|
|
|
|
|
|
|
Accruals and deferred income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed to group undertakings that relate to intercompany trading are unsecured and repayable on demand.
The deferred income relates to pre commencement change assets income of £10m received in 2005, the amount is being released over the term remaining of the contract.
|
|
|
Creditors: Amounts falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruals and deferred income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The deferred income relates to pre commencement change assets income of £10m received in 2005, the
amount is being released over the term remaining of the contract.
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
|
Pension and other schemes
|
The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £368k (2022 - £379k). Contributions totalling £51k (2022 - £49k) were payable to the fund at the reporting date and are included in creditors.
|
|
Commitments under operating leases
|
|
|
At 31 March 2023 the company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Later than 1 year and not later than 5 years
|
|
|
|
|
|
|
|
|
|
The amount of non-cancellable operating lease payments recognised as an expense during the year was
£400k (2022 - £420k).
|
|
|
Interim dividend of £5,001 (2022 - £9,455) per each Ordinary share
|
|
|
|
|
|
|
|
|
|
|
Allotted, called up and fully paid
|
|
|
|
|
|
|
|
|
|
|
|
500 (2022 - 500) Ordinary A shares of £1 each
|
|
|
|
|
|
500 (2022 - 500) Ordinary B shares of £1 each
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. There are two classes of shares, Ordinary A and Ordinary B, 500 of each are held by Ancala Water Services Bidco Limited. These shares rank pari passu in all respects and have the same rights.
|
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
19.Share capital (continued)
Called up share capital
This reserve represents the nominal value of equity shares issued.
Profit and loss account
This reserve represents the cumulative profits or losses, net of dividends and other adjustments.
|
|
|
|
|
Management Incentive Plan
Scheme details and movements
The management incentive plan is treated as an equity settled scheme for these financial statements. During the year it was identified that the group had incorrectly recorded entries in the prior year as a cash settled scheme. However, the group has no obligation to settle the awards as this is the responsibility of the parent entity, Ancala Water Services Topco1 Limited. The amounts recorded in the prior year are not material and as a result an adjustment has been made at the 31 March 2023 to correct the prior year amount of £233k.
The amounts recorded in profit and loss are being spread across the life of the scheme, adjusting for expected attrition, with a corresponding entry in equity as a capital contribution.
Effect of share-based payments on profit or loss and financial position
The total expense recognised in profit or loss for the year was £339k (2022 - £233k). The total amount recorded in equity in the year is £573k (2022 - £nil), which includes a reclassification of the prior year liability of £233k as noted above.
|
The company has provided a fixed and floating charge over its assets to the group’s bankers AIB (UK) Plc (as security agent) in relation to the Parent company's term loan, with AIB Group (UK) Plc and Santander UK Plc.
The balance of the loan at the year is £11.443m (2022 - £14.068m).
The company has also provided a cross guarantee in relation to the above parent company bank loan.
|
|
ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
|
Related party transactions
|
|
|
Key management personnel include all directors across the group who together have authority and responsibility for planning, directing and controlling the activities of the group. The total compensation paid to directors in the group for services provided was £372k (2022 - £352k).
AWS Defence was supplied by Portsmouth Water Limited. Both companies are controlled by Ancala Partners LLP.
All transactions between AWS Defence and Portsmouth Water are conducted at arms length for the supply of water. The total spend with Portsmouth Water in the financial year was £237k (2022 - £216k).
At 31 March 2023 the balance owing from AWS Defence to Portsmouth Water was £Nil (2022 - £Nil).
The company has taken advantage of the FRS102 exemption in relation to balances with other group companies.
|
The company's immediate parent is Ancala Water Services Bidco Limited, registered in England and Wales.
The results of the company are consolidated into the financial statements of Ancala Water Services Midco2 Limited, a company registered in England and Wales.
The largest parent is Ancala Water Services Investco Limited, registered in England and Wales. This company prepares consolidated accounts which include the Company and are available from Companies House.
Whilst Ancala Water Services Investco Limited has no single ultimate controlling party, funds managed by Ancala Partners LLP collectively control the entity.
|
