BWB3426
DECISION REPORT
MEMORANDUM TO THE BO ARD
F I N AN C E R E P O R T – J U L Y 2 0 1 1
Report by Finance Director
1.
PURPOSE
1.1
The report covers the following topics:
the latest cash position, bank loans in joint ventures, and cash flow forecast,
the final management accounts for the two months to 31st May 2011,
the KPIs report,
a proposal to amend the BW bank mandate, and
a draft presentation of the BW England and Wales published financial accounts in
charity format.
2.
RECOMMENDATION
2.1
Board Members are recommended to note and comment on the information in this report
and approved the proposal to amend the BW bank mandate.
3.
ACTUAL CASH AND DEBT POSITION
Cash balances summary £ms
As at:
07/07/11
30/06/11
31/05/11
30/04/11
31/03/11
July
June
May
April
March
Trading account BW no 1
21.2
15.1
4.1
4.0
7.8
Commercial account BW no 2
29.7
33.7
35.6
40.4
32.5
Overdraft, BWML, BWS and others
4.7
3.9
6.6
3.9
3.1
48.5
Total cash balances
55.6
52.7
46.3
48.3
43.4
Invested:
Rate
Maturity
NatWest
22.1
0.80%
Overnight
Bank of Scotland
5.0
1.28%
up to 3 months
Santander
5.0
1.26%
up to 3 months
Santander
5.0
1.70%
14/09/2011
Yorkshire Bank
19.0
0.85%
up to 3 months
Overdraft drawn
(0.5)
Total
55.6
Excludes BW Reinsurance balances.
3.1
The commercial capital balance has decreased as new investment property purchases
have completed. The trading account balance has increased in line with the normal
seasonal pattern of waterway expenditure. The low figures in April and May reflected the
very high level of expenditure that was concentrated into the final months of 2010/11.
There is a tendency for suppliers’ accounts to be brought “up to date” and an unusually
high level of suppliers invoices were processed in March.
3.2
The bank loan position in Joint ventures is as shown in the table below:
[confidential material removed]
3.6
[confidential material removed].
4.
COMMERCIAL CAPITAL FORECAST
4.1
The forecast has been updated and is based on the assumptions in the Business Plan. It
represents business as usual and no effect of NWC. Points to note are:
*
a minimum balance of £10m is targeted from 2012 onwards, in line with the Plan and the
reduced risk in JVs,
*
new property acquisitions are assumed to balance the forecast to £10m min balance,
*
the cash settlement with BWS is allowed for with the property acquisitions line, to avoid
disclosure,
*
no cash transfer to trading account is assumed in 2011/12 because it is estimated that
there will be sufficient cash in the trading account to fund the small losses planned for
2011/12,
*
a tax refund of £8.5m was received in April 2011 relating to the use of capital losses on
JV’s and the refund on capital gains tax paid in prior years,
*
the disposal of BW’s investment in 259 City Road Basin which completed on 5 May 2011
which realised equity of £[…] in cash and removed the off balance sheet JV debt, and,
*
An allowance of £5m has been made for the possible early repayment of the HMT
National Loans Fund (NLF) loans when BW exits the public sector notwithstanding that
we will be expecting Defra to underwrite this (Defra provides contributions to repay the
loans as the instalments fall due).
[confidential material removed]
5.
COMMENTARY ON RESULTS FOR THE TWO MONTHS ENDED 31ST MAY 2011
5.1
Summary – England and Wales only
Figures in £k
Year to Date
Ful Year
Actual
Original Plan
Variance
Original Plan
CBIT
Commercial Income
Outsourced Property
1,260
1,346
(86)
8,810
BW Managed Property
1,821
1,968
(147)
13,179
Leisure
3,952
3,650
303
22,567
Utilities
3,579
3,386
192
21,169
Olympic Games
(29)
(19)
(10)
(324)
British Waterways Marinas Limited
160
178
(19)
1,298
BW Share of Joint Ventures CBT
2,893
2,696
197
1,207
Net Interest
(76)
(280)
203
(1,890)
Net Commercial Income
13,561
12,926
635
66,017
Management Costs
Waterway Unit Management Costs
(330)
(383)
54
(2,349)
Headquarters (exc. Pension Deficit Funding)
(1,168)
(1,233)
65
(7,320)
Central Services
(3,109)
(3,568)
458
(20,448)
Management Costs
(4,607)
(5,184)
577
(30,118)
Contingency
-
-
-
(2,000)
Pension Deficit Funding
(772)
(797)
24
(4,780)
Civil Society
-
-
-
(2,635)
Net Commercial Performance
8,181
6,945
1,236
26,485
Grant
4,807
4,800
7
42,332
Total Net Income
12,988
11,744
1,243
68,817
Funds for Public Benefit Delivery
Core Waterway
(7,236)
(8,317)
1,080
(54,417)
Major Works
(1,061)
(1,075)
14
(15,232)
Regeneration
(296)
(423)
127
(2,168)
Funds for Public Benefit Delivery
(8,593)
(9,815)
1,222
(71,817)
Surplus/(Deficit)
4,395
1,930
2,465
(3,000)
Gains/(Losses) on Disposal (exc. Joint Ventures)
Property
271
(12)
283
4,439
Other
1
-
1
65
CBT - Capital
272
(12)
284
4,504
Unrealised Gains/(Losses)
-
-
-
1,603
CBT
4,667
1,918
2,749
3,107
5.2
The results for E&W for the first two months are shown above. We have now moved to
reporting E&W and Scotland separately, rather than the combined group figures used
before. At this stage of the year there is insufficient deviation from the Plan to make
preparing a full year forecast worth the time and effort. The finance teams have instead
invested the time saved in other matters that need to be moved forward. The next full
year forecast will be the F4 done from month 4 actuals.
5.3
Above the line there are few variances of significance to report. Most of the smaller items
are due to timing and phasing differences. The interest receivable variance is due to
higher cash balances than planned.
5.4
Below the line Core Waterway expenditure is behind Plan due to phasing delays with
maintenance plans and priority defect work.
5.5
A similar position is shown in the BW Scotland results (see end of this report) where there
are some minor income and management cost variances and below the line costs are
behind the Plan.
6.
KPIs
6.1
The KPIs schedule is under development and certain measures becoming more accurate
and useful as the data sources are developed. A schedule on headcount, gender, and
absenteeism is included by Directorate.
7.
AMENDMENT TO BW BANK MANDATE
7.1
BW’s main operational bank account, at Nat West Bank, has a signing mandate with
signatories structured as below. The role of the signatory is to authorise electronic
payments, telegraphic transfers and other payment methods, only after all proposed
payments have been approved in accordance with the Board’s delegation arrangements.
[confidential material removed]
Two signatories are required for all payments
Only one can be from Panel A. Whilst not being part of the SSC team, these are experienced
finance professionals based in the Leeds office and provide a degree of independence from
the SSC processes.
All members of Panel B are based in Watford and are experienced finance professionals.
One from panel C is needed for payments over £100k
7.2
It is proposed to change the mandate to:
add [confidential material removed], to the mandate Panel A to provide an
additional signatory in Leeds to cover the period whilst [….] is on maternity leave
and to provide additional cover longer term; and
remove […] from the mandate because he has left BW employment and to add
[….], Group Finance Analyst based at Watford, to the mandate Panel B in his
place.
8.
CHARITY FORMAT ACCOUNTS - SoFA
8.1
The published accounts for NWC for the year ending 2012/13 will be prepared under the
Charities SORP (Statement of Recommended Practice). The SORP is issued by the
Accounting Standards Board and is endorsed by the Charities Commission. The format of
charity accounts is somewhat different to the format BW used in recent years, namely
IFRS.
8.2
We have been developing the charity accounts format for many months with the help of
Grant Thornton. The pro forma Statement of Financial Activities (SoFA) opposite shows the
2010/11 accounts converted into charity SORP format. We have adapted the general
layout to suit NWC’s proposed businesses and charitable activities. Despite that the layout
is not particularly intuitive and takes some time to understand. The following notes explain
some of the salient points and identify the issues that are still under development. The
accounts will be group consolidated accounts and will include all subsidiaries, line by line,
and JVs on the equity accounting method. The pale yellow shading indicates places where
figures should appear when operating as a charity.
8.3
The most significant aspect of these accounts is the fact that the commercial income
(Activities for generating funds) yield sufficient income to pay for the al the “non-waterway”
operating costs, or overheads as these are sometimes loosely referred to. This may be an
unusual position for a charity in that it may be common for a portion of the voluntary income
and donations to be expended in the administration and management of the charity. In
BW, and in NWC, the Net Commercial Income, after deducting Management Costs, plus
the Government grant is used to fund the waterway expenditure – see the schedule at 5.1
above.
8.4
It will therefore be possible, if desired, to ring fence all voluntary income into the general (or
specific) restricted funds category. These can then be expended on the waterways without
the need for deduction to fund management costs. Such voluntary income would be
recorded in the middle column headed “Restricted”.
8.5
Other third party funds and maintenance income that are currently, and in the future,
provided to fund projects and to maintain specific assets have also been allocated to the
Restricted column on the basis that these funds are restricted to expenditure on the
specified purpose. This is a different type of restriction to voluntary income, which will fall in
general and specific pots of restricted funds.
8.6
The most difficult aspect of thee accounts is the requirement to allocated centrally incurred
costs to the related activities. The methodology for achieving this is still work in progress
but the schedule opposite includes a full re-allocation of central costs. Whilst this approach
endeavours to show the “true” cost of the various activities, including central service and
shared facility costs, it has the disadvantage of making it very difficult to follow the link
between the management accounts and the SoFA .
8.7
Briefly, the methodology fol owed is to create a separate heading cal ed “Regional and
National waterway technical team costs” which is accurately descriptive and includes all the
national teams and the central team (i.e. technical, engineering, asset management, water
management, heritage, environment, lock gate workshops, safety etc). Notwithstanding
that is generally regarded as a management cost it is included under the Charitable Activity
section as a cost of running the waterways.
8.8
All other central and shared services (e.g. ICT, HR, SSC, legal, finance, marketing,
Executive, pension fund deficit) are allocated fully to the other categories of cost and
activity with the result that there is no net cost shown for these cost areas. We are looking
for a methodology that keeps this as simple as possible whilst complying with the
accounting requirement. It is not proposed to perform this allocation in the management
accounts for the purpose of preserving the transparency and accountability of financial
reporting that is currently provided by the existing system.
P M Ridal
July 2011
Full summary of BW E&W Income Statement for the two months ended 31st May 2011
British Waterways - England and Wales
Figures in £k
Income Statement
Year to Date
Ful Year
Actual
Original Plan
Variance
Original Plan
Income
Commercial Income
Outsourced Property
2,053
1,995
58
12,367
BW Managed Property
2,581
2,600
(19)
17,611
Leisure
5,273
5,182
91
30,550
Utilities
3,691
3,574
117
22,293
Olympic Games
0
-
0
-
British Waterways Marinas Limited
1,153
1,219
(67)
7,422
BW Share of Joint Ventures
9,889
9,153
737
18,905
Total Commercial Income
24,640
23,723
917
109,150
Management Costs
Waterway Unit Management Costs
1
-
1
-
Headquarters
17
15
2
118
Central Services
175
93
83
532
Management Costs
193
108
85
649
Commercial Performance
24,833
23,831
1,002
109,799
Public Benefit Delivery Income
Core Waterway
809
1,041
(232)
6,551
Major Works
65
219
(154)
1,021
Regeneration
2,355
3,902
(1,547)
10,867
Public Benefit Delivery Income
3,229
5,163
(1,933)
18,439
Total Income
28,063
28,994
(931)
128,238
Year to Date
Ful Year
Actual
Original Plan
Variance
Original Plan
CBIT
Commercial Income
Outsourced Property
1,260
1,346
(86)
8,810
BW Managed Property
1,821
1,968
(147)
13,179
Leisure
3,952
3,650
303
22,567
Utilities
3,579
3,386
192
21,169
Olympic Games
(29)
(19)
(10)
(324)
British Waterways Marinas Limited
160
178
(19)
1,298
BW Share of Joint Ventures CBT
2,893
2,696
197
1,207
Net Interest
(76)
(280)
203
(1,890)
Net Commercial Income
13,561
12,926
635
66,017
Management Costs
Waterway Unit Management Costs
(330)
(383)
54
(2,349)
Headquarters (exc. Pension Deficit Funding)
(1,168)
(1,233)
65
(7,320)
Central Services
(3,109)
(3,568)
458
(20,448)
Management Costs
(4,607)
(5,184)
577
(30,118)
Contingency
-
-
-
(2,000)
Pension Deficit Funding
(772)
(797)
24
(4,780)
Civil Society
-
-
-
(2,635)
Net Commercial Performance
8,181
6,945
1,236
26,485
Grant
4,807
4,800
7
42,332
Total Net Income
12,988
11,744
1,243
68,817
Funds for Public Benefit Delivery
Core Waterway
(7,236)
(8,317)
1,080
(54,417)
Major Works
(1,061)
(1,075)
14
(15,232)
Regeneration
(296)
(423)
127
(2,168)
Funds for Public Benefit Delivery
(8,593)
(9,815)
1,222
(71,817)
Surplus/(Deficit)
4,395
1,930
2,465
(3,000)
Gains/(Losses) on Disposal (exc. Joint Ventures)
Property
271
(12)
283
4,439
Other
1
-
1
65
CBT - Capital
272
(12)
284
4,504
Unrealised Gains/(Losses)
-
-
-
1,603
CBT
4,667
1,918
2,749
3,107
Full summary of BW Scotland Income Statement for the two months ended 31st May 2011
British Waterways - Scotland
Figures in £k
Income Statement
Year to Date
Ful Year
Actual
Original Plan
Variance
Original Plan
Income
Commercial Income
BW Managed Property
74
74
0
602
Leisure
462
492
(30)
2,673
Utilities
234
235
(1)
1,473
Commercial Performance
770
801
(31)
4,748
Public Benefit Delivery Income
Core Waterway
21
26
(5)
191
Regeneration
364
194
169
634
Public Benefit Delivery Income
385
221
164
825
Total Income
1,155
1,022
133
5,573
Year to Date
Ful Year
Actual
Original Plan
Variance
Original Plan
CBIT
Commercial Income
BW Managed Property
(65)
6
(70)
(69)
Leisure
214
203
10
1,164
Utilities
234
235
(1)
1,363
BW Share of Joint Ventures CBT
117
117
(0)
700
Net Commercial Income
500
561
(61)
3,158
Management Costs
Waterway Unit Management Costs
(348)
(325)
(23)
(2,035)
Central Services
(248)
(248)
-
(1,490)
Management Costs
(596)
(573)
(23)
(3,525)
Net Commercial Performance
(97)
(12)
(85)
(367)
Grant
1,823
1,823
-
10,523
Total Net Income
1,726
1,811
(85)
10,156
Funds for Public Benefit Delivery
Core Waterway
(1,076)
(1,281)
205
(7,203)
Major Works
(84)
(532)
448
(1,171)
Regeneration
(75)
(123)
48
(2,340)
Funds for Public Benefit Delivery
(1,235)
(1,936)
701
(10,715)
Surplus/(Deficit)
491
(125)
616
(559)
Gains/(Losses) on Disposal (exc. Joint Ventures)
Property
(2)
-
(2)
675
CBT - Capital
(2)
-
(2)
675
CBT
489
(125)
615
115
BW No.1 Trading Bank Account Balance
40.00
s
n
oilliM 35.00
£
30.00
25.00
30 day average
20.00
90 day average
15.00
10.00
5.00
0.00
Date
British Waterways
Group KPIs schedule
This time
Last time
Plan/
May-11
Year End 2010/11
Target 2011/12
Asset Condition
Actual
Actual
Plan
Principal assets in D&E condition
%
17.1%
17.9%
22%
Inspection progress (cumulative)
No
quarterly
629
Notification clearance (cumulative)
No
qarterly
2
0,775
New target
Waterway Condition Index
(Stewardship)
117
107
100
User Benefit Index
(Stewardship)
106
107
100
Regeneration
YTD Actual
Full year 2010/11
Plan
Third party contribution
£m
2.4
14
17.6
Improvements funded by 3rd
£m
0.3
6
7.5
parties not through BW's
books
Safety
YTD 2010/11
Full year 2010/11
Last Year
Lost Time Injuries
No
7
30
22
Customer Service Standards
Actual
Actual 2010/11
Plan %
People Standards
%
82%
82%
85%
Minimum Safety Standards
%
95%
100%
Performance Standards
%
87%
87%
80%
Propensity to recommend
Boat owners
%
No survey in 2010
50%
Towpath Users
%
40%
47%
70%
Green Plan
YTD
Actual 2010/11
Plan
Electricity usage
GWh
4.9
33.7
40
Business miles CO2 - Cars
Tonnes
200
1,614
1,530
Business miles CO2 - Train
Tonnes
8
60
57
Business miles CO2 - Air
Tonnes
7
50
47
People
Actual
Actual 2010/11
Plan
Headcount (spot)
FTE
1,556
1,675
1,816
Payroll (forecast full year)
£m
59
59.9
58.3
Volunteer days
Days
3,528
24,235
30,000
Absenteeism
quarterly
7.1
Female Gender
%
21.0%
20.9%
Employee Satisfaction
%
annually
39%
Boating
Actual
Actual 2010/11
Plan
Licence evasion
%
4.70%
4.9%
3%
Moorings evasion
%
4.65%
4.8%
4%
Licences issued on line
No
2,030
7,254
1
0,000
Licence number
No
33,986
35,241
3
4,756
Licence yield
£/Lic
493
474
478
Moorings length
Meters
61,734
61,734
6
9,459
Mooring yield
£/m
91
74
8
7.11
*Not so many short term at current time. Average yield rises
Property - Commercial
This Year Forecast
Actual 2010/11
Plan
Investment property return
%
6.3%
6.4%
Investment voids (% rental value)
%
7.4%
5.0%
Development property return
%
14.0%
8.1%
JV return
%
-1.8%
2.0%
Utilities - Commercial
This Year Forecast
Actual 2010/11
Plan
Income growth target
£m
1.7
0.6
Excludes £2m Olympic Park SWD payment 2010/11
0
-
-
0)
0
0)
0
0)
0)
-
-
2.
.0
.0)
.0)
(3.
4.
(6.
18
6.
(27
(6.
(6.
(12
hange
C
1
4
1
3
nt
11
14
13
19
94
130
958
114
158
221
72
87
81
/20
1,
1,
eadcou
/03
H
31
12
13
19
97
96
7
93
4
1
5
al
126
964
152
248
72
82
1,
1,
Tot
11
1%
.2%
7%
9%
0%
0%
7%
6%
7%
1%
3%
1%
/20
2.
10
5.
5.
8.
9.
2.
1.
5.
7.
6.
7.
/03
bsenteeism
A
31
.6%
.7%
.3%
.2%
.0%
9%
.7%
.3%
.1%
.2%
.3%
.2%
0%
.0%
ale
50
37
94
57
54
7.
35
26
20
20
38
29
0.
21
FTE
Fem
5
0)
2)
5)
4
6)
4
8)
3)
0)
-
0.
.6
.4)
.1)
(0.
(0.
(3.
3.
(3.
17
5.
(26
(6.
(5.
(0.
(12
hange
C
4
8
5
2
1
4
9
4
0
4
11
6.
.2
.4
.9
.1
12
17
89
6.
9.
8.
5.
6.
1.
73
3.
1.
9.
/20
12
93
10
15
21
67
74
FTE
1,
1,
/03
31
9
4
1
7
8
7
4
0
5
5.
.2
.6
.4
3.
3.
.6
9.
2.
8.
.4
3.
1.
1.
al
12
17
93
12
94
90
14
24
67
78
76
Tot
1,
1,
-
-
-
-
-
-
-
-
-
-
al
.9
.0
9
9
8.
8.
ary
97
71
16
16
Season
-
-
0
0
6
6
3
0
0
.4
.1
-
-
.6
ary
2.
4.
3.
7.
3.
1.
5.
26
10
36
umm
por
FTE
Tem
9
8
6
7
8
3
4
0
0
5.
.2
.6
.4
.4
.3
12
15
89
9.
7.
87
8.
6.
3.
68
3.
1.
6.
anent
11
83
14
16
48
55
ard S
1,
1,
Perm
Bo
ited
arinas Lim
rise (exc. isis)
011
ices
ays M
s
Enterp
y &
aterw
eadcount -
ate Serv
une 2
tion
por
eting
pert
land
al BW
A
H
or
ark
pera
BW
IN
al
Executive
C
HR
Finance
M
O
Pro
Technical
Scot
Tot
on
British W
isis
A
30 J
BW
N
Tot