Annual Report 2011 - Watercare

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Watercare Services Limited 2011 ANNUAL REPORT FINANCIAL COMMENTARY (continued) Statement of Financial Position AS AT 30 JUNE 2011 The company is in a strong financial position with net equity of $5.58 billion at year-end. The net equity increased by $4.13 billion from 30 June 2010 primarily due to the capital contribution on 1 November 2010 of $3.78 billion resulting from the integration of the net assets and liabilities of the previous local network operators. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Property, plant and equipment Water 3,188,117 3,139,907 1.5% 1,366,844 3,234,411 Wastewater 4,500,079 4,285,998 5.0% 1,046,269 4,519,687 7,688,196 7,425,554 3.5% 2,413,113 7,754,098 Water Wastewater Total $000 $000 $000 The analysis by business group for the movements in property, plant and equipment for 2011 is: Net additions, integration and other movements 1,698,148 3,211,411 4,909,559 Asset revaluation (before tax) 190,988 311,612 502,600 Depreciation (67,863) (69,213) (137,076) 1,821,273 3,453,810 5,275,083 The increase for property, plant and equipment during the year was primarily due to the integration on 1 November 2010 of the property, plant and equipment of the local network operators. Additionally, all of the property, plant and equipment was revalued at 30 June 2011. Significant capital expenditure projects in the year included work on the new Hunua Number 4 trunk watermain and the South Western interceptor extension. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Intangible assets Water 14,207 16,634 (14.6%) 6,552 7,614 Wastewater 16,022 18,759 (14.6%) 7,822 8,586 30,229 35,393 (14.6%) 14,374 16,200 The increase in intangible assets during the year reflects both the assets integrated from the local network operators and the completion of the new information systems required for the company to operate in the retail environment from 1 November 2010. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Borrowings 1,228,899 1,270,717 3.3% 525,725 1,295,314 Borrowings at year-end were 3.3% lower than budget, primarily due to lower than budgeted capital expenditure and lower opening debt than was assumed for the budget. Borrowings include commercial paper of $124.1 million, $11.5 million drawn under a revolving credit facility, related party loans of $543.2 million, medium term notes of $450 million and a bank loan of $100 million. 2011 Financial Report PAGE 64 Return to Contents page
Watercare Services Limited 2011 ANNUAL REPORT FINANCIAL COMMENTARY (continued) 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Deferred tax liability 848,828 775,362 9.5% 402,049 849,704 The deferred tax liability primarily comprises temporary differences between the revalued property, plant and equipment and the values recognised for tax purposes plus differences in the company’s depreciation rates and those permitted by the Inland Revenue Department. At 30 June 2011, deferred taxation was higher than budget, principally due to the revaluation of property, plant and equipment for accounting purposes being greater than budgeted. The increase in deferred tax liability compared to last year primarily reflects the integration of the deferred tax balances of Metrowater and Manukau Water of $301.6 million on 1 November 2010 and the tax effect of the revaluation of the property, plant and equipment for accounting purposes of $140.7 million. Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2011 No price adjustment was paid to customers during the financial year to 30 June 2011. As such, all of the company’s cash flow from operations was available for either capital expenditure or debt repayment. Borrowings increased as a result of the shortfall between operating cash flows and capital expenditure. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Net cash flows from operating activities 176,035 169,468 3.9% 74,624 182,237 Net operating cash flows at $176.04 million were 3.9% higher than budget for 2011, predominantly due to lower operating costs than expected. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Net cash flows from investing activities (192,231) (220,859) 13.0% (126,245) (240,907) The net cash flows from investing activities were 13% lower than budget due to delays in some capital expenditure projects. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Net cash flows from financing activities 16,116 51,391 (68.6%) 50,965 58,670 The net cash flows from financing activities show a net increase in borrowings in 2011 from the prior year. The increase in debt resulted from the higher level of capital expenditure relative to the operating cash flows. The audited financial statements are set out on pages 68 to 105. PAGE 65 2011 Financial Report Return to Contents page
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