The twenty-fourth Annual General Meeting of Pennon Group Plc was held at Sandy Park Conference Centre, Sandy Park Way, Exeter, Devon EX2 7NN on Thursday 1 August 2013 at 11.00am.
The twenty-third Annual General Meeting of Pennon Group Plc was held at Sandy Park Conference Centre, Sandy Park Way, Exeter, Devon EX2 7NN on Thursday 26 July 2012 at 11.00am.
The twenty-second Annual General Meeting of Pennon Group Plc was held at Sandy Park Conference Centre, Sandy Park Way, Exeter, Devon EX2 7NN on Thursday 28 July 2011 at 11.00am.
Good morning everyone and welcome to Pennon’s 2013 Annual General Meeting.
I’m Ken Harvey and I’m Chairman of Pennon and with me today are all of the other Directors of the Company.
On my right, is Ken Woodier who is Company Secretary and Group General Counsel; Gerard Connell, our Senior Independent Non-executive Director who is Chairman of the Audit Committee; Gill Rider who is a Non- executive Director; and, on my far right, Colin Drummond, the Chief Executive of Viridor.
On my left is David Dupont, the Group Director of Finance; Dinah Nichols, who is a Non-executive Director, Chairman of the Sustainability Committee: and, next to Dinah, Martin Angle who is also a Non-executive Director. Martin is Chairman of the Remuneration Committee.
Finally, on my far left is Chris Loughlin, the Chief Executive of South West Water.
Dinah will not be standing for re-election as after 10 years as a Director she is due to retire from the Board at the conclusion of this Annual General Meeting. On behalf of the Board and all of our shareholders I would like to thank Dinah for her considerable contribution to the Board over the years and in particular her chairmanship of the Sustainability Committee which she has managed very successfully against a background of an increasingly complex environmental, social and governance agenda. Gill will succeed Dinah as Chairman of the Sustainability Committee.
The Board is planning to appoint a further Non-executive Director in due course who will succeed Gerard when he retires at the Annual General Meeting in 2014, also having served over 10 years as a Non-executive Director.
Now before I move to the formal business of the Meeting, perhaps I could highlight some key points in respect of the Company’s performance last year.
It was a mixed year for the Group. South West Water performed very well despite some appalling weather conditions. Viridor had a very challenging year but overall the Group profit before tax was around the same level as 2011/12.
The Board is pleased to recommend a final dividend of 19.70 pence per share, which will result in a total dividend for the full year of 28.46 pence. This means that the total dividend will be 7.3% higher than the previous year, which is in line with the Group’s policy to grow the dividend by 4 per cent above the rate of inflation per annum up to the end of 2014/15.
Turning first to South West Water, it has continued to deliver strong operational performance against the current regulatory contract and has made further improvements to customer service. During the year we were faced with extraordinary weather conditions and experienced widespread flooding on a number of occasions. Our staff dealt with these incidents in an exemplary way and I’d like to take this opportunity to thank everyone who was involved for their outstanding efforts on behalf of our customers.
The company’s revenues increased by 5.2% to 498.6 million pounds as a result of tariff increases and new connections, offset by an overall reduction in demand and the effects of customers switching to a metered tariff.
Customer demand for water fell by 2.9 per cent compared to the previous year, reducing revenues by 8.1 million pounds.
Operating profit increased by 10.5 million pounds to 215.2 million pounds over the year and profit before tax after exceptional items was 164.6 million pounds.
Capital expenditure during the year was 116.5 million pounds. Investments during the year included improvements at waste water works to achieve targeted compliance, investments to reduce flooding for those customers highlighted to be at risk, a programme of sewer rehabilitation, clean water network improvements, investment in water quality and security of supply and improvements to recently adopted private sewers.
The company remains ahead of target in delivering the required operating cost efficiencies over this current regulatory period. This targeted savings programme has delivered 3.5 million pounds of efficiencies during the year.
I’m pleased to say that the company has decided to share with its customers these efficiency savings. It’s doing this through a £20million investment programme to protect bathing water quality at key tourist beaches at Mothecombe, Combe Martin, Teignmouth, Looe, Lyme Regis and Torbay. Also 10 million pounds is to be invested in customer debt and assistance programmes and 30 million pounds in maintaining nearly six million metres of sewers. This special investment totals 60 million pounds and will not impact on average household bills.
The company published its 25 Year Outlook called “Water Future Our Vision”. This sets out the company’s strategy for dealing with population growth, climate change and new environmental legislation over the next 25 years and if you haven’t yet seen it, copies are available outside and I would certainly recommend it to you.
We support the general approach of the Government’s Water Bill which is now going through the Parliamentary process. It focuses on facilitating market reform and competition within the water industry. The initial reform will affect business customers and SWW has therefore established “Source for Business” which is a specialist advice and support service for business customers and includes water and energy audits, effluent management and laboratory services.
Finally on SWW, we are now engaged with OFWAT on the preparation for the next price review which will set the prices we charge our customers from 2015 to 2020.
Turning now to Viridor, you will know it is one of the leading recycling, renewable energy and waste management businesses in the UK.
It has been a mixed year for Viridor. Trading performance was significantly down compared with the previous year with reductions in recycling and landfill outweighing growth in our joint ventures. Viridor has responded to the challenges in recycling and landfill and this has resulted in site rationalisations, staff reductions and exceptional charges in relation to asset impairments and provisions.
Viridor’s revenues were down 7.5 per cent to 704 million pounds compared to the previous year. Earnings before interest, tax, depreciation and amortisation and before exceptional charges decreased by 32.4 million pounds to 77.9 million pounds.
Capital expenditure for the year was 323 million pounds of which 291 million pounds was for Viridor growth projects, largely Energy from Waste facilities with the balance being maintenance of existing assets.
Because of the ongoing reduction of waste going to landfill and the weakness in recyclate prices Viridor has reviewed the carrying values of some of its assets. It’s also reviewed its landfill aftercare and restoration provisioning costs to reflect revised final land forms and a re-assessment of aftercare periods increasing them from 30 to 60 years. The result of this review is an exceptional impairment charge of 78 million pounds which has been recognised to write-down the carrying values of fixed assets. The impairment charge has no cash impact. In addition 21 million pounds has been provided against onerous contracts and other items. A further exceptional charge of 90 million pounds has been recognised for environmental provisions, primarily landfill aftercare costs as a result of increasing the aftercare period to 60 years.
On a more positive side, Viridor has continued to make very strong progress with its strategic expansion into the Energy from Waste and Public Private Partnership markets. Energy from Waste will represent the low cost solution for disposing of residual waste which is currently landfilled when landfill taxes reach 80 pounds per tonne in April 2014.
During the year, major new contracts were signed with South London, Glasgow and Peterborough. Viridor was also appointed as the preferred bidder for the South East Wales Public Private Partnership. In addition Viridor achieved a widening of its planning consent for the proposed Dunbar Energy from Waste site.
Public Private Partnership and Energy from Waste projects already help boost Viridor’s profitability and the committed capital projects, particularly the construction of Energy from Waste plants, at Ardley in Oxfordshire, Exeter, Cardiff, Glasgow, Peterborough and Runcorn are expected to contribute more than 100 million pounds to Viridor’s earnings within the next few years.
The Board announced in March this year that Colin would be retiring as the Chief Executive of Viridor and as an Executive Director of Pennon Group Plc. However, he has agreed to take up the position of Non-executive Chairman of Viridor from 1st October. On behalf of the Board I would like to express its gratitude to Colin for his significant contribution to the success of Viridor and the Pennon Group following some 20 years as Chief Executive of Viridor and its predecessor company. Under Colin’s leadership Viridor has become one of the leading recycling, renewable energy and waste management businesses in the UK and the Board wishes him well for the future.
I’d now like to move to the formal business of the Meeting.
The following document summarises the votes cast in Forms of Proxy in respect of the Resolutions considered at the Company's Annual General Meeting on Thursday, 1 August 2013.