BWB3401
INFORMATION REPORT
CONFIDENTIAL
MEMORANDUM TO THE BO ARD
F I N AN C E R E P O R T – M AY 2 0 1 0
Report by Finance Director
1.
PURPOSE
1.1
The report covers the following topics:
the latest cash position and bank loans in joint ventures,
the commercial capital forecast,
the first draft of the trading results for the full year to March 2010, and
the draft full year results presented in Statutory Accounts format.
2.
RECOMMENDATION
2.1
Board Members are recommended to note and comment on the information in this report.
3.
ACTUAL CASH AND DEBT POSITION
3.1
[ Table redacted ]
3.2
The planned transfer of £7m from the Commercial Capital account was made at the end
of the financial year. The expected significant cash outflows on the trading account
occurred during April as the costs of the winter outsourced Core and Major Works
activities were paid.
3.3
The graphs attached show the trend. An additional graph on a weekly moving average is
also attached with a line to show what the balance on the No 1 account would have been
had the £7m transfer not been done.
3.4
The bank loan position in Joint ventures is as shown in the table below:
[ Table redacted ]
3.5
[ Text redacted ]
.
4.
COMMERCIAL CAPITAL FORECAST
4.1
The latest commercial capital cash flow Plan is shown below. This is the same schedule
as shown in the Group Business Plan document.
The main points to note are:
*
the cash balance does not fall below £10m across the four years,
*
new property investments are assumed for 2010/11 to total £16.8m, which
includes [ Text redacted ]
*
it is assumed that £5m will be applied to purchase [ Text redacted ] , and
*
a further £10m transfer to trading account in 2010/11.
4.2
[ Text redacted ] .
4.3
Commercial Capital cash flow forecast – quarterly
[ Table redacted ]
5.
COMMENTARY ON FULL YEAR DRAFT RESULTS
5.1
Summary
[ Table redacted ]
5.2
The draft final result shown above is broadly in line with the position shown in the F10
forecast. [ Text redacted ] .
5.3
[ Text redacted ] .
5.4
A statutory accounting presentation of the result is included in the next section. [ Text
redacted ] .
5.5
As explained previously the mid-year reorganisation has made meaningful comparisons
with the original Plan more difficult than normal. Many cost elements have moved around
the structure resulting in complex reconciliations between business areas for plan
comparisons.
5.6
In Property, improved performance on service charges and lower operating cost generally
explain the improvements.
5.7
[ Text redacted ] .
5.8
The management cost section includes a charge of £800k for redundant property leases,
as previously reported. The charge for the reorganisation (within HQ) has been increase
by £400k to £3.9m to reflect additional redundancy and severance costs and an risk
allowance for matters arising from Employment Stability provisions and tribunal claims.
5.9
Some significant amounts of work on the waterways were completed in the final two
months of the year with the result that the final outcome for General and Major works was
marginally in excess of the Plan. This confirms that the fiscal stimulus funds advanced by
Defra have delivered the intended programme of works and that the planned
maintenance programme has been delivered, in financial terms.
5.10
[ Text redacted ] .
5.11
[ Text redacted ]
5.12
The full schedule of income and CBIT, with comparisons against F8, F10 and Plan, is
included at the end of this report. The full managing accounting “Blue Book” is available if
required as a record of the result for the year.
6.
STATUTORY FORMAT P&L 2009/10
6.1
The final results in statutory format are shown below. [ Text redacted ] . The tax entries
have not yet been determined. (This is an early rough draft – surplus/(deficit) and
(loss)/profit will be corrected).
Group Income statement for the Year ended 31 March 2010
2009/10
2008/09
Movement
£m
£m
£m
Revenue
116.9
149.0
( 32.1)
Government Grant
70.2
74.3
( 4.1)
Total revenue
187.1
223.3
( 36.2)
Government cost of subsidy
27.7
31.2
( 3.5)
214.8
254.5
( 39.7)
Operating Expenditure
(
191.7)
( 217.7)
26.0
Government cost of capital charge
(
27.7)
( 31.2)
3.5
(
219.4)
( 248.9)
29.5
Operating Profit
(
4.6)
5.6
( 10.2)
Share of profits and losses of associates and joint ventures
(
20.3)
( 33.3)
13.0
Profit on sale of investment properties
4.4
4.7
( 0.3)
Gains/(Losses) on revaluation of investment properties
7.8
( 66.4)
74.2
Profit on sale of assets held for sale
-
-
-
Profit from operating activities
(
12.7)
( 89.4)
76.7
Financing income
0.6
2.4
( 1.8)
Financing cost
(
8.3)
( 5.8)
( 2.5)
Profit for the financial year before taxation
(
20.4)
( 92.8)
72.4
Taxation credit /(charge)
-
19.9
( 19.9)
Profit for the financial year after taxation
(
20.4)
( 72.9)
52.5
Transfer to capital reserve
5.4
73.6
( 68.2)
Profit for the year
(
15.0)
0.7
( 15.7)
6.2
After transferring capital profits and losses to capital reserves the revenue loss comes out
at around £15m, which is in line with the management accounts presentation. The tax
position, and allocation between revenue and capital, is yet to be determined. The two
tables opposite show the analysis of the result between Operational (revenue) and Non-
operational (capital), as shown in the annual report.
6.3
The transfer of £7m from commercial capital to the trading bank account (which
happened in March 2010) may justify a further transfer of £7m of the trading loss to
capital reserves, on the basis that the loss has been funded by capital funds. This needs
further discussion with the external auditors.
6.4
The schedules below show the split between Operational and Non-operational that
appears in the Annual Report. Note that if the transfer to capital reserves of £17.6m is
ignored the actual trading loss is £32.6m (£15m + £17.6m) which compares with £32.2m
shown in the management accounts statement. The difference is due to IFRS
accounting requirements.
Operational activities £m
2009/10
2008/09
Operating profit / (loss)
(4.6)
5.6
Share of results of joint ventures (after tax)
(20.3)
(33.3)
Transfer permanent losses in joint ventures
17.6
31.2
Interest receivable
0.6
2.4
Interest payable
(8.3)
(5.8)
Loss on operational activities before taxation
(15.0)
0.1
Attributable corporation tax
0.0
0.6
Net (loss) / profit retained
(15.0)
0.7
Possible allocation of loss:
Profit and Loss reserve
(8.0)
0.7
Capital reserve
(7.0)
-
Non-operational property activities
2009/10
2008/09
Profit on disposal of investment properties
4.4
4.7
Unrealised losses/gains on revaluation of investment properties
7.8
(66.4)
Impairment of investments in joint ventures
(17.6)
(31.2)
Profit on non-operational property activities before taxation
(5.4)
(92.9)
Capital gains tax credit / (charge) on disposal profits
0.0
0.3
Deferred tax credit on unrealised gains
0.0
19.0
Profit on non-operational property activities after taxation
(5.4)
(73.6)
Transfer from / (to) realised capital reserves
5.4
73.6
Net profit retained
0.0
0.0
7.
MILESTONES
7.1
The revised chart of Business Plan milestones for the year ending March 2010 is
attached to this report. The colour coding signifies:
Green -
Completed on target or in progress or expected to complete on target
Yellow -
Not on target but capable of remedy during the year
Red
-
Not on target and not capable of remedy during the year
8.
GROUP PLAN
8.1
The revised Group Plan is attached. It has previously been circulated by email and takes
account of the comments made at the March 2010 Board meeting. A copy of the detailed
Plan financial schedules is available if required. An England and Wales version is also
being prepared specifically for Defra and publication on the BW website. It will follow the
format used last year which had a different emphasis and content from the Group Plan.
P M Ridal
March 2010
Trading Account BW1 - 5 Day Moving Average Balance
25.00
Millions
20.00
15.00
t
n
u
5-day average
mo
adjusted
A
10.00
5.00
0.00
2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010
03/
03/
03/
03/
03/
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04/
04/
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04/
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04/
04/
04/
04/
04/
04/
04/
05/
05/
05/
10/
12/
14/
16/
18/
20/
22/
24/
26/
28/
30/
01/
03/
05/
07/
09/
11/
13/
15/
17/
19/
21/
23/
25/
27/
29/
01/
03/
05/
Date
Trading Account BW1 Moving Average Balances
25.00
Millions
20.00
15.00
t
n
u
30-day average
mo
90-day average
A
10.00
5.00
0.00
2007
2007
2007
2007
2007
2007
2008
2008
2008
2008
2008
2008
2009
2009
2009
2009
2009
2009
2010
2010
2010
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03/
05/
07/
09/
11/
01/
03/
05/
07/
09/
11/
01/
03/
05/
07/
09/
11/
01/
03/
05/
02/
02/
02/
02/
02/
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Date