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Manukau Water Limited’s Results Improve


Manukau Water Limited’s Results Improve


Manukau City (10 March, 2008) – Manukau Water Limited has recorded a substantial improvement in its latest financial half-year results.

For the six months to the end of December 2008 the company recorded a loss of just $607,000. This is significantly lower than the $2.5 million loss recorded for the same period a year earlier.

The much-improved result means Manukau Water Limited expects to be able largely to absorb an expected rise in wholesale water and wastewater charges. Therefore it will keep changes in its overall prices for its 2009/10 financial year in line with any movement in the consumers' price index.

James Hill, chair of Manukau Water Limited, said this will be a major benefit to customers, who already enjoy on average the lowest water and wastewater prices in the Auckland region.

At the same time as containing prices, the company is maintaining its investment in water and wastewater infrastructure. Projects like the installation of the Kawakawa Bay wastewater treatment plant and continued upgrades of existing water and wastewater infrastructure will not only ensure Manukau has a world class water and wastewater service, but this investment will provide much needed infrastructure spending at a time when contraction is occurring elsewhere in the economy.

Mr Hill noted that, while the half-year performance was good, there is considerable evidence that the economy is continuing to constrict.

“The company’s network growth charge and new meter connections were below budget for the half year and this indicates an ongoing downturn in land development and new connections,”Mr Hill noted.

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Mr Hill said that, although economic conditions are forecast to continue to be difficult over the remainder of the financial year, the company has taken a prudent approach to cost management and ultimately this will minimise any pricing impact for the company’s customers.

Manukau Water’s earnings before interest and tax were $3.91 million for the half year. This was $1.48 million more than forecast and $1.77 million more than the company earned in the same period of the 2007/08 financial year.

Total revenues for the six months were $46.19 million, which was up from $42.5 million a year earlier.

Raveen Jaduram, chief executive of Manukau Water Limited, said it was particularly pleasing to be able to improve the financial result while encouraging customers to use less water.

Water sales for the half year were $17.27 million, which was down on the $17.80 million budgeted for the period.

“We continue to believe that transparency of our pricing means our customers are responding by reducing wastage of water. While this results in lower-than-forecast revenue for the company it has a positive impact on the environment and allows us to defer capital investment while maximising the use of our existing assets,” Mr Jaduram said.

Manukau Water Limited has a variable water tariff, meaning the less water people use, the less they pay.

“Therefore there is an incentive for people to use less water and in difficult economic times this can make a difference to household and business costs,” he said.

Mr Jaduram noted that Manukau Water Limited’s finances are healthy, with strong cashflow and a secure balance sheet.

“In particular, we have contained our costs and managed our debts to improve cashflow and reduce the need to pass on large increases in our wholesale costs to our customers,” he said. “The work we have done over the past couple of years to streamline our business means we are prepared to cope with these difficult and turbulent times.”

About Manukau Water

Manukau Water Limited is responsible for the management of the public water distribution and wastewater collection systems for the people of Manukau. The company serves approximately 338,000 people living in an area covering 552 square kilometres. It manages infrastructure assets worth nearly $1 billion.

The company was established by its owner, Manukau City Council, as a Council Controlled Organisation (CCO).

The Company continues to be fully accountable to its shareholder through ongoing performance measures and targets.


Statement of Financial Performance


Year to Date Actual Year to Date Actual
2008 2007
$000 $000
REVENUE
Water Sales 17,269 16,000
Wastewater Sales 24,812 22,667
Development and Connections 2,539 2,323
Miscellaneous Revenue 1,013 959
MCC - Stormwater SLA 555 555

TOTAL REVENUE 46,187 42,503

EXPENSES
Controllable Expenses
Operations 3,213 2,678
Staff & Temp Costs 3,058 2,854
Legal,Consultants & Specialist Services 378 335
Doubtful &Bad Debts 234 564
Other Expenses 1,302 1,298

Total Controllable Expenses 8,282 7,827

Uncontrollable Expenses
Bulk Water 8,539 7,711
Bulk Wastewater 13,308 12,481
ARC Rates &Fees 168 164
MCC - Rates 1,096 1,047
MCC - SLA 994 994

Total Uncontrollable Expenses 24,105 22,397

TOTAL EXPENSES 32,387 30,224

EBITDA 13,799 12,280

Depreciation & Amortisation 9,886 10,138

EBIT 3,914 2,142

Interest 4,520 4,395

PROFIT/(LOSS) before Tax (607) (2,254)

Statement of Financial Position


Balance as at Balance as at
31 December 2008 31 December 2007
$000 $000
Current Assets
Operating Cash Balance 5,025 1,827
Asset Replacement & Renewal Fund¹ 9,728
Trade Receivables 8,131 9,506
Unbilled Water & Wastewater Accruals 9,773 7,490
Provision for Doubtful Debt (1,282) (1,640)
Prepayments 114 82

Total Current Assets 31,490 17,264

Non-Current Assets
Operational Assets 383 535
Infrastructure Fixed Assets 916,702 931,485
Work In Progress 23,274 18,005
Forestry 1,355 1,295
Intangibles 1,657 1,499

Total Non-Current Assets 943,371 952,820

TOTAL ASSETS 974,860 970,084


Current Liabilities
Trade Creditors & Accruals 9,947 7,966
HolidayPay Provisions 512 461
Contract Retention 477 383
Other Provisions 410 188
Provision for Tax (GST) 837 556

Total Current Liabilities 12,183 9,554
Non-current Liabilities
Shareholder's Loan 538,407 535,904

Total Non-current Liabilities 538,407 535,904
TOTAL LIABILITIES 550,590 545,457

NET ASSETS 424,271 424,627
Shareholder Funds
Share Capital 433,436 433,436
Retained Earnings (deficit) (9,165) (8,808)

Total Shareholder Funds 424,271 424,627


ends

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