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Registered number: 04617130









ANCALA WATER SERVICES (ESTATES) LIMITED









ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2024

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 

CONTENTS



Page
Company information
1
Strategic report
2 - 5
Directors' report
6 - 9
Independent auditors' report
10 - 13
Statement of comprehensive income
14
Balance sheet
15
Statement of changes in equity
16
Notes to the financial statements
17 - 30


 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
COMPANY INFORMATION


Directors
A P R Hough 
D W Owens 
N Hussain 
M J Howarth 




Registered number
04617130



Registered office
Unit 1B Redbrook Business Park
Wilthorpe Road

Barnsley

South Yorkshire

S75 1JN




Independent auditors
BDO LLP

Central Square

29 Wellington Street

Leeds

LS1 4DL




Bankers
National Westminster Bank PLC
8 Park Row

Leeds

LS1 5HD




Page 1

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2024

The directors present their strategic report and the audited financial statements for the year ended 31 March 2024.

Principal activities
 
Ancala Water Services (Estates) Limited and Ancala Water Services (Defence) Limited
Ancala Water Services (Estates) Limited (AWSE) operates a Public Private Partnership Concession Contract with the Ministry of Defence (MOD) for water and waste water services covering the areas of Wales and the South West of England for a 25-year period which commenced on 1 December 2003.
Since commencement all operational activities required in delivering the contract as specified by the MOD on behalf of Ancala Water Services (Estates) Limited (AWSE) have been carried out under contract by Ancala Water Services (Defence) Limited (AWSD).

Financial performance and outlook
 
This year, the company delivered strong financial performance with turnover of £65,868k (2023 - £60,095k). The increased turnover and improved overall operational efficiency resulted in an operating profit of £4,999k (2023 - £3,571k). The net assets at the conclusion of the financial year were £4,465k (2023 - £4,886k).Profit for the year was £2,579k less a dividend payment of £3,000k.
Furthermore, the company continued to engage in employee training with an emphasis on efficiency to accomplish our main business targets, as we strive to "deliver water and wastewater asset management and optimisation for a sustainable future." AWSE remains well placed to achieve its vision of “delivering a sustainable future” and will continue to work together with the MOD to deliver an effective partnership. 

Regulatory performance

Health and safety of employees and contractors is of the highest importance to the group, with regular reporting and review of safety statistics, practices and risks at board level. 
The business fulfilled all its duties in reporting health and safety incidents and continued to provide health insurance for all employees as a further commitment to wellbeing. 
Environmental performance and water quality standards remain a key focus for the business and are subject to close monitoring and review, enabling proactive plans to be developed and implemented. There were no formal penalties by any of the regulatory bodies during the year. 

Page 2

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024

Key performance indicators

The company measures overall performance by monitoring activities against four key strategic priorities:
 
Deliver our customer and regulatory commitments.
Develop and engage our people.
Improve performance, efficiency and effectiveness.
Deliver sustainable growth

Deliver our customer and regulatory commitments
The company has delivered strong operational performance, achieving 99.98% compliance with water and wastewater quality standards. The company continues to focus on maintaining and investing in its assets though its targeted plan to achieve its required asset condition standards. Leakage performance was 2.10 Mm3 during the period which remains ahead of the industry average but finished just short of the challenging internal target of 1.94 Mm3. The company also demonstrated strong Health and Safety performance for the year, with an index score of 5.22 against an internal target of 5.00.
Develop and engage our people
The company continues to invest in our people, processes, training and development with employee wellbeing and engagement remaining a priority. The annual, independent employee engagement survey, conducted by Workbuzz, demonstrated further improved engagement with a score of 91% against a prior year score of 84%. This is 16%  higher than the industry average in annual employee surveys and resulted in the award of “Five Star Employer” status by WorkBuzz. Additionally, the company offers a variety of employee benefits, such as life assurance, critical illness insurance, a cash plan, enhanced pension contributions, and top-ups on all statutory payments for all permanent employees. Furthermore, the company car allowance scheme was reviewed and enhanced.
Improve performance, efficiency and effectiveness
Operating profit is a key indicator of performance throughout the year and was £4,999k (2023 - £3,571k).
The business will continue to focus on improving operational performance and making operational efficiencies  by fully utilising investment in new systems and by continuing to invest in developing the skills of staff. We will proactively seek opportunities to give something back to the community, by supporting charities and improving the communities that we work in. 
Deliver sustainable growth
We will continue to work in partnership with our current customers and actively seek new opportunities to grow the business. 

Principal risks and uncertainties

Strategic, financial, commercial, operational, social, environmental and ethical risks are all considered as part of the groups’ controls, which are designed to manage rather than eliminate the risk of failure to achieve business objectives. Therefore, they can only provide reasonable, not absolute, assurance against material misstatement or loss provided for in the contract. At present there are no immediate risks identified which are considered likely to have a significant impact on the short or long-term value of the group. 
The company has continued to assess the risks associated with inflation, numerous ongoing conflicts around the world, interest rate pressures, potential political changes, and cyber security. Inflation has been a more significant factor in the last 24 months, but its impact has been limited due to protection afforded by the contract with primary customers, as charge-out tariffs increase in line with inflation each year. The ongoing global
Page 3

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024

conflicts have not negatively impacted our performance, and we do not expect this to change in the next 12 months. Rising interest rates should have a limited impact, as the group has refinanced until 2028, and all interest-bearing debt is fully hedged with an interest rate swap. Management has noted that there is a new government in the UK, as well as a presidential election in the US; however, we do not believe any result will negatively affect the performance of the business. While cyber security remains a significant risk, the company has continued to take steps to strengthen systems and has provided quarterly training and updates to all employees to raise awareness.
The primary 25 year contract with MOD runs to 30 November 2028 and the strategic partnership and relationship with the customer, the Defence Infrastructure Organisation (DIO), remains positive. 
In the coming financial year 2024/25 DIO will be conducting its quinquennial review of the asset condition grading, and the risk of a negative review is assessed as low with Ancala Water Services remaining committed to fulfilling all of its obligations as set out in the Aquatrine contract. The company has invested substantially in the MOD assets over the past three years to the value of £18.5m. Capital spending of a further £6.0m is planned in the coming year.

Financial risk management

The company’s non-derivative financial instruments comprise bank balances, intercompany balances, trade debtors and trade creditors. The main purpose of these instruments is to finance the company’s operations. The liquidity risk of trade creditors is managed by ensuring sufficient funds are available to meet amounts due.
In respect of bank balances, the liquidity risk is managed by maintaining a balance between the continuity of funding and flexibility through the operation of intercompany cash management and forecasting.
Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits. The amounts presented in the balance sheet are net of allowances for doubtful debtors.
The company has in place a risk management programme that seeks to limit the adverse effects on the financial performance by monitoring levels of debt finance and the related finance costs.
Price risk
Due to the relatively small size of the group’s operations and the nature of its contracts with MOD, there is little exposure to commodity price risk. Given the rise in inflation, management has recognised this will need to be continually assessed, however, the costs of managing exposure to commodity price risk currently exceeds any potential benefits. The directors will revisit the appropriateness of this policy should the group’s operations change by monitoring levels of debt finance and the related finance costs.
Credit risk
The MOD is the primary customer of AWSE. AWSE is the primary customer of AWSD, and therefore credit risk is assessed as very low.
Liquidity risk
The group actively maintains a mixture of long-term and short-term debt finance that is designed to ensure the group has sufficient available funds for operations.
Interest rate cash flow risk
The group uses a derivative financial instrument in the form of an interest rate swap to reduce its exposure to interest rate fluctuations on its floating rate bank loan. Following the refinancing that took place in September 2023 the Interest rate swap was settled in full. AWS entered into a new Interest rate swap which is back-to-back with the new loan. This is inline with the company’s strategy to continue to reduce its exposure to interest rate fluctuations. 

Page 4

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024

Directors' statement of compliance with duty to promote the success of the company
 
The board of directors consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1) Companies Act 2006) in the decisions taken during the year ended 31 March 2024.
AWSE is committed to being a responsible business. Our mission is to own and manage water and waste water assets and optimise operations to create value for customers and shareholders. The core values that underpin the strategy and objectives are Integrity, Passion, Ambition and Inclusivity. This is demonstrated and actively encouraged in dealings with our employees, customers, suppliers and stakeholders in the wider community. Internal communications play a key part in keeping the company employees engaged and aligned to the overall strategy, the CEO provides regular updates to employees via the monthly business update, to ensure that timely and consistent messages are provided to all employees.
As the Board of Directors, our intention is to behave responsibly and ensure that management operate the business in a responsible manner, operating within the high standards of business conduct and good governance expected for a business such as ours and in doing so, will contribute to the delivery of our plan. The intention is to nurture our reputation, through both the construction and delivery of our plan, that reflects our responsible behaviour.
Our Governance structure through Board, Committee (for example: EMT, Ops Sub Group, H&S groups, Employee Forum, etc) and audit fosters a culture of openness, scrutiny and challenge. Good working relationships have been developed, with regular Board interactions and the opportunity for Board members to get involved in Group wide business.
As the Board of Directors, our intention is to behave responsibly toward our shareholders and treat them fairly and equally, so they too may benefit from the successful delivery of our plan.
These items are given as examples of the Directors’ application of the principles of s172 Companies Act across the year, and is not an exhaustive list.


This report was approved by the board on 29 August 2024 and signed on its behalf.



................................................
M J Howarth
Director

Page 5

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2024

The directors present their report and the financial statements for the year ended 31 March 2024.

Directors' responsibilities statement

The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
 
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

 In preparing these financial statements, the directors are required to:


select suitable accounting policies for the company's financial statements and then apply them consistently;

make judgements and accounting estimates that are reasonable and prudent;

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 2006They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Co2 emissions disclosure

Ancala Water Services (AWS) continue to measure scope 1 and 2 emissions in order to calculate the
carbon footprint. This includes the following:

Office electricity

Electricity used for the operation of the asset base

Fuel for the asset generators

Fuel used by the ‘grey fleet’ (business miles)

Fuel used by the ‘silver fleet’ (operational team vehicles)

AWS uses the government published conversion factors to convert energy units into tonnes of carbon dioxide equivalent (Co2e) which is a widely recognised indicator of an organisation’s performance.
FY2023/24 target was 1,924 tonnes CO2e which was achieved as follows (recorded at 17 May 2024, updates will be made when the final actual meter readings and invoices for the period ending 31 March 2024 are received):  

Page 6

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024



FY2023/24
FY2022/23
Category
Measure
Tonnes CO2e
TonnesCO2e
Transport
Grey fleet
55
69

Silver fleet
492
470
Electricity generation
Generator fuel
26
18

Asset electricity
932
1,005
Business consumption
Office electricity
19
20

Total
1,524
1,582

Since the introduction of this metric to the business scorecard (BSC) AWS have launched a Carbon Management Working Group (CMWG). The CMWG brings together key internal stakeholders who managed emissions data and team members with influence over emission reduction initiatives.

Results and dividends

The profit for the year, after taxation, amounted to £2,579k (2023 -  £310k).

Interim dividends of £3,000k (2023- £3,250k) were paid during the year. The directors do not recommend the payment of a final dividend.

Going concern

After due consideration of all relevant factors, including the current economic environment and the net current liability position of the group, the directors have a reasonable expectation that the company & group have adequate resources to continue in operational existence for the foreseeable future taking into account additional bank covenants that have arisen following the refinancing on 28th September 2023.
The directors have prepared forecasts for at least 12 months from the date of approval of these financial statements, which takes into account their trading forecasts. The directors have also taken into account the financing available to the company & group, including consideration of compliance with loan covenants. The directors have performed sensitivity analysis and concluded that the level of decline in revenues to result in a covenant breach is not plausible due to the nature of the contract with the MOD. Accordingly, the directors do not believe there are any material uncertainties which may cast significant doubt on the ability of the company & group to continue as a going concern, as such, they continue to adopt the going concern basis in preparing the annual report and accounts.
The directors acknowledge that the company has net current liabilities. This primarily consists of a balance payable to group company Ancala Water Services (Defence) Limited. The company has a letter of support stating that no funds will be recalled prior to 31 March 2026. 

Page 7

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024

Refinancing

On 28th September 2023 the Group entered into a new loan facility with AIB and Santander. The new loan facilities are for a total of £30m until 30 June 2028. 
The key components of the refinancing were:
• New £25m term loan facility and a £5m revolving facility.
• The repayment of previous term loan of £11.4m.
• New cash flow hedge at 4.92%, until 30 June 2028.
• Settlement of the previous cash flow hedge.

Directors

The directors who served during the year were:

A P R Hough 
D W Owens 
N Hussain 
M J Howarth 

Important adjusting events after the financial period

There have been no significant events affecting the company since the year end.

Directors indemnity

As permitted by the Articles of Association, the directors have the benefit of an indemnity which is a qualifying third-party indemnity provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force.
The Company also purchased and maintained Directors’ and Officers' liability insurance in respect of itself and its Directors throughout the financial year.

Disclosure of information to auditors

Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
 
so far as the director is aware, there is no relevant audit information of which the company's auditors are unaware, and

the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the company's auditors are aware of that information.

Page 8

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024


Auditors

The auditorsBDO LLPwill be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

This report was approved by the board on 29 August 2024 and signed on its behalf.
 





................................................
M J Howarth
Director

Page 9

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (ESTATES) LIMITED
 

Opinion on the financial statements

In our opinion, the financial statements:

give a true and fair view of the state of the Company’s affairs as at 31 March 2024 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Ancala Water Services (Estates) Limited (“the Company”) for the year ended 31 March 2024 which comprise Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Directors report and financial statements, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Page 10

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (ESTATES) LIMITED
 

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Other Companies Act 2006 reporting

In our opinion, based on the work undertaken in the course of the audit:

the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Page 11

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (ESTATES) LIMITED
 

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Non-compliance with laws and regulations
Based on:
Our understanding of the Company and the industry in which it operates;
Discussion with management and those charged with governance; and
Obtaining and understanding of the Company’s/Group’s policies and procedures regarding compliance with laws and regulations.

we considered the significant laws and regulations to be, including but not limited to, Financial Reporting Standard 102, UK company law and UK tax legislation.

The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. 

Our procedures in respect of the above included:
Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations;
Review of financial statement disclosures and agreeing to supporting documentation;Involvement of tax specialists in the audit; and
Review of legal expenditure accounts to understand the nature of expenditure incurred.

Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;
Obtaining an understanding of the Company’s policies and procedures relating to:
°Detecting and responding to the risks of fraud; and 
°Internal controls established to mitigate risks related to fraud. 
Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these.

Based on our risk assessment, we considered the areas most susceptible to fraud to be the override of controls through posting of inappropriate journals, including those relating to revenue.
Page 12

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (ESTATES) LIMITED
 

Our procedures in respect of the above included:
Testing a sample of journal entries throughout the year, including revenue, which met a defined risk criteria, by agreeing to supporting documentation; and
Assessing significant estimates made by management for bias, such as the useful economic life of fixed assets.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: 
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.



Neil Ebdon (Senior statutory auditor)

  
for and on behalf of

BDO LLP, Statutory Auditor
Leeds, UK
30 August 2024

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Page 13

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2024

2024
2023
Note
£000
£000

  

Turnover
 3 
65,868
60,095

Operating costs
  
(60,869)
(56,524)

Operating profit
 5 
4,999
3,571

Interest receivable and similar income
 8 
121
33

Interest payable and similar expenses
 9 
(1,587)
(2,115)

Profit before tax
  
3,533
1,489

Tax on profit
 10 
(954)
(1,179)

Profit for the financial year
  
2,579
310

There was no other comprehensive income for 2024 (2023:£NIL).

The notes on pages 17 to 30 form part of these financial statements.

Page 14

 
ANCALA WATER SERVICES (ESTATES) LIMITED
REGISTERED NUMBER: 04617130

BALANCE SHEET
AS AT 31 MARCH 2024

2024
2024
2023
2023
Note
£000
£000
£000
£000

Fixed assets
  

Intangible assets
 12 
2,218
2,693

Tangible assets
 13 
45,165
45,788

  
47,383
48,481

Current assets
  

Debtors
 14 
29,699
29,526

Cash at bank and in hand
 15 
5,911
8,983

  
35,610
38,509

Creditors: amounts falling due within one year
 16 
(65,588)
(68,262)

Net current liabilities
  
 
 
(29,978)
 
 
(29,753)

Total assets less current liabilities
  
17,405
18,728

Creditors: amounts falling due after more than one year
 17 
(11,384)
(13,015)

Provisions for liabilities
  

Deferred tax
 11 
(1,556)
(827)

  
 
 
(1,556)
 
 
(827)

Net assets
  
4,465
4,886


Capital and reserves
  

Called up share capital 
 19 
50
50

Profit and loss account
 20 
4,415
4,836

  
4,465
4,886


The financial statements were approved and authorised for issue by the board and were signed on its behalf on 29 August 2024.




................................................
M J Howarth
Director

The notes on pages 17 to 30 form part of these financial statements.

Page 15

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024


Called up share capital
Profit and loss account
Total equity

£000
£000
£000

At 1 April 2023
50
4,836
4,886



Profit for the year
-
2,579
2,579
Total comprehensive income for the year
-
2,579
2,579


Contributions by and distributions to owners

Dividends
-
(3,000)
(3,000)


Total transactions with owners
-
(3,000)
(3,000)


At 31 March 2024
50
4,415
4,465



STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023


Called up share capital
Profit and loss account
Total equity

£000
£000
£000

At 1 April 2022
50
7,776
7,826



Profit for the year
-
310
310
Total comprehensive income for the year
-
310
310


Contributions by and distributions to owners

Dividends
-
(3,250)
(3,250)


Total transactions with owners
-
(3,250)
(3,250)


At 31 March 2023
50
4,836
4,886


The notes on pages 17 to 30 form part of these financial statements.

Page 16

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

1.Accounting policies

  
1.1

Statutory information

Ancala Water Services (Estates) Limited is a private company, limited by shares, incorporated in England and Wales under the Companies Act 2006, company number 04617130. The registered office is at Unit 1B Redbrook Business Park, Wilthorpe Road, Barnsley, S75 1JN.

  
1.2

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 
1.3

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The financial statements are presented in pounds sterling and rounded to thousands.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the company's accounting policies (see note 2).

 
1.4

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
the requirements of Section 7 Statement of Cash Flows;
the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
the requirements of Section 33 Related Party Disclosures paragraph 33.7.

This information is included in the consolidated financial statements of Ancala Water Services Midco2 Limited as at 31 March 2024 and these financial statements may be obtained from Companies House.

Page 17

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

1.Accounting policies (continued)

 
1.5

Going concern

After due consideration of all relevant factors, including the current economic environment and the net current liability position of the group, the directors have a reasonable expectation that the company & group have adequate resources to continue in operational existence for the foreseeable future taking into account additional bank covenants that have arisen following the refinancing on 28th September 2023.
The directors have prepared forecasts for at least 12 months from the date of approval of these financial statements, which takes into account their trading forecasts. The directors have also taken into account the financing available to the company & group, including consideration of compliance with loan covenants. The directors have performed sensitivity analysis and concluded that the level of decline in revenues to result in a covenant breach is not plausible due to the nature of the contract with the MOD. Accordingly, the directors do not believe there are any material uncertainties which may cast significant doubt on the ability of the company & group to continue as a going concern, as such, they continue to adopt the going concern basis in preparing the annual report and accounts.
The directors acknowledge that the company has net current liabilities. This primarily consists of a balance payable to group company Ancala Water Services (Defence) Limited. The company has a letter of support stating that no funds will be recalled prior to 31 March 2025. 

 
1.6

Revenue recognition

Turnover for the Aquatrine contract is recognised in the period in which the services are provided. The group maintains and upgrades the MOD infrastructure assets and provides operating services for water and waste water. Both the maintenance and upgrade services, and the operating services are charged under a volumetric tariff, along with standing charges, which are adjusted with inflation as agreed in the contract. 
Additional business development contract work is recognised in accordance with the stage of completion.
Turnover is only recognised when all of the following conditions are satisfied:
- The amount of turnover can be measured reliably;
- It is probable that the group will receive the consideration due under the contract;
- The stage of completion of the contract at the end of the reporting period can be measured reliably;
and
- The costs incurred and the costs to complete the contract can be measured reliably.

 
1.7

Interest income

Interest income is recognised in profit or loss using the effective interest method.

 
1.8

Finance costs

Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

Page 18

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

1.Accounting policies (continued)

 
1.9

Current and deferred taxation

The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the company operates and generates income.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

 
1.10

Tangible fixed assets

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.

The estimated useful lives range as follows:

Plant and machinery
-
3-25 years
Fixtures and fittings
-
3-15 years

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

Page 19

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

1.Accounting policies (continued)

 
1.11

Intangible assets

Costs incurred to obtain the right to undertake the Public Private Partnership Concession Contract with the Ministry of Defence for water and waste water services covering the areas of Wales and the South West of England have been classified as an intangible asset on the Balance Sheet and will be amortised on a straight line basis over the period of the contract of 25 years. Such costs were only recognised when it was virtually certain that the contract had been awarded to the Company.
The carrying value of intangible assets is reviewed for impairment at the end of the first full year following acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be recoverable.

 The estimated useful lives range as follows:

Contract costs
-
25 years
Software
-
3-15 years

 
1.12

Dividends

Dividend distribution to the company’s shareholders is recognised as a liability in the financial statements in the reporting period in which the dividends are declared.

 
1.13

Financial instruments

The company has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.

The company has elected to apply the recognition and measurement provisions of IFRS 9 Financial Instruments (as adopted by the UK Endorsement Board) with the disclosure requirements of Sections 11 and 12 and the other presentation requirements of FRS 102.

Financial instruments are recognised in the company's Balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

Discounting is omitted where the effect of discounting is immaterial. The company's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each reporting date. 
Page 20

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

1.Accounting policies (continued)


1.13
Financial instruments (continued)


Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.

If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.

Financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the company after the deduction of all its liabilities.

Basic financial liabilities, which include trade and other payables, bank loans and other loans are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.

Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.

 
1.14

Provisions for liabilities

Provisions are recognised when an event has taken place that gives rise to a legal or constructive obligation, a transfer of economic benefits is probable and a reliable estimate can be made.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
 
Increases in provisions are generally charged as an expense to profit or loss.

Page 21

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

2.


Judgements in applying accounting policies and key sources of estimation uncertainty

In preparing these financial statements, the directors have made the following judgements and estimates:
- Determine whether there are indicators of impairment of the group's tangible and intangible assets, including intangible contract value. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset and where it is a component of a larger cash-generating unit, the viability and expected future performance of that unit. 
- Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. Where the usefull live extends past the contract end date, assets are depreciated evenly up to November 2028. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal. Further, the Directors have concluded that it is appropriate to recognise fixed assets in relation to the infrastructure asset as tangible fixed assets.
Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made.


3.


Turnover

Turnover, which is stated net of Value Added Tax, represents the value of goods and services supplied to third parties. Turnover is attributable primarily to one continuing activity, the contract between AWSE and the MOD for the provision of water and waste water services in the area covering Wales and the South West of England.


4.


Operating costs

2024
2023
£000
£000



Cost of sales
59,497
55,167

Administrative expenses
1,372
1,357

60,869
56,524


5.


Operating profit

Arrived at after charging:

2024
2023
£000
£000

Depreciation of tangible assets
8,086
7,210

Amortisation of intangible assets
475
512

Page 22

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

6.


Employees




The Company has no employees other than the directors, who did not receive any remuneration (2023 - £NIL).

The company's Directors are remunerated via their Directorships of Ancala Water Services (Defence) Limited, it is not practicable to ascertain the proportion of the Director's emoluments that relate to this company.


7.


Auditors' remuneration

Auditor's remuneration of £23,500 (2023 - £22,000) has been borne by other group companies for the period.
Fees payable to the auditors in relation to all other services amounted to £21k (2023 - £21k).





8.


Interest receivable

2024
2023
£000
£000


Interest income on bank deposits
121
33

121
33


9.


Interest payable and similar expenses

2024
2023
£000
£000


Interest from group undertakings
1,587
2,115

1,587
2,115

Page 23

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

10.


Taxation


2024
2023
£000
£000

Corporation tax


Current tax on profits for the year
225
-


225
-


Total current tax
225
-

Deferred tax


Origination and reversal of timing differences
754
937

Adjustments in respect of previous periods
(25)
242

Total deferred tax
729
1,179


Taxation on profit on ordinary activities
954
1,179

Factors affecting tax charge for the year

The tax assessed for the year is higher than (2023 - higher than) the standard rate of corporation tax in the UK of 25% (2023 - 19%). The differences are explained below:

2024
2023
£000
£000


Profit on ordinary activities before tax
3,533
1,489


Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (2023 - 19%)
883
283

Effects of:


Expenses not deductible for tax purposes
-
62

Adjustments to tax charge in respect of prior periods
(26)
242

Group relief
-
645

Fixed asset differences
97
(278)

Remeasurement of deferred tax for changes in tax rates
-
225

Total tax charge for the year
954
1,179

Page 24

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
 
10.Taxation (continued)


Factors that may affect future tax charges

The UK Government announced an increase in the corporation tax rate from 19% to 25%, with an effective date of 1 April 2023. Temporary differences have been remeasured using the enacted tax rates that are expected to apply when the liability is settled or the asset realised.


11.


Deferred taxation




2024


£000






At beginning of year
(827)


Charged to profit or loss
(729)



At end of year
(1,556)

The provision for deferred taxation is made up as follows:

2024
2023
£000
£000


Accelerated capital allowances
(1,556)
(959)

Tax losses carried forward
-
132

(1,556)
(827)

Page 25

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

12.


Intangible assets




Contract costs
Computer software
Total

£000
£000
£000



Cost


At 1 April 2023
11,880
2,177
14,057



At 31 March 2024

11,880
2,177
14,057



Amortisation


At 1 April 2023
9,187
2,177
11,364


Charge for the year on owned assets
475
-
475



At 31 March 2024

9,662
2,177
11,839



Net book value



At 31 March 2024
2,218
-
2,218



At 31 March 2023
2,693
-
2,693

The contract costs, which have been capitalised as a cost of acquiring the right to undertake the contract, are being amortised on a straight line basis over the life of the contract starting from operational commencement on 1 December 2003. The remaining amortisation period is 4 years.
The amortisation charge is recorded in administrative expenses in the profit and loss account.



Page 26

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

13.


Tangible fixed assets





Plant and machinery
Fixtures and fittings
Assets under construction
Total

£000
£000
£000
£000



Cost or valuation


At 1 April 2023
100,096
5,320
8,729
114,145


Additions
-
-
7,463
7,463


Transfers between classes
7,659
350
(8,009)
-



At 31 March 2024

107,755
5,670
8,183
121,608



Depreciation


At 1 April 2023
65,379
2,978
-
68,357


Charge for the year on owned assets
7,412
674
-
8,086



At 31 March 2024

72,791
3,652
-
76,443



Net book value



At 31 March 2024
34,964
2,018
8,183
45,165



At 31 March 2023
34,717
2,342
8,729
45,788

Page 27

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

14.


Debtors

2024
2023
£000
£000

  

Trade debtors
  
-
178

Amounts owed by group undertakings
  
22,436
22,562

Corporation tax
  
66
-

Other debtors
  
1,111
912

Prepayments and accrued income
  
6,086
5,874

  
29,699
29,526


Amounts owed by group undertakings relate to intercompany trading and are unsecured, and are repayable on demand.


15.


Cash and cash equivalents

2024
2023
£000
£000

Cash at bank and in hand
5,911
8,983

5,911
8,983



16.


Creditors: Amounts falling due within one year

2024
2023
£000
£000

Trade creditors
1
3

Amounts owed to group undertakings
65,587
68,259

65,588
68,262


The amounts owed to group undertakings due within one year relate to intercompany trading that are unsecured and repayable on demand.

Page 28

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

17.


Creditors: Amounts falling due after more than one year

2024
2023
£000
£000

Amounts owed to group undertakings
11,384
13,015

11,384
13,015


The amounts owed to group undertakings due after more than one year represents £11.384m (2023: £13.015m) of loans payable to Ancala Water Services Bidco Limited which is unsecured, bears interest at 10% and are repayable 30 November 2028.


18.


Dividends

2024
2023
£000
£000


Interim dividend of £60 (2023 - £65) per each Ordinary share
3,000
3,250

3,000
3,250


19.


Share capital

2024
2023
£000
£000
Allotted, called up and fully paid



25,000 (2023 - 25,000) Ordinary A shares of £1 each
25
25
25,000 (2023 - 25,000) Ordinary B shares of £1 each
25
25

50

50


The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. There are two classes of shares, Ordinary A and Ordinary B, 25,000 of each held by Ancala Water Services Bidco Limited. These shares rank pari passu in all respects and have the same rights.


20.


Reserves

Called up share capital

This reserve represents the nominal value of equity shares issued.

Profit and loss account

This reserve represents the cumulative profits or losses, net of dividends and other adjustments.

Page 29

 
ANCALA WATER SERVICES (ESTATES) LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024

21.


Contingent liabilities

The company has provided a fixed and floating charge over its assets to the group’s bankers AIB (UK) Plc (as security agent) in relation to the Parent company's term loan, with AIB Group (UK) Plc and Santander UK Plc. 
On 28th September 2023 the Group entered into a new loan facility with AIB and Santander.
The balance of the old loan at the prior year end was £11.443m.  The balance of the new loan at year end was £23.702m.
The company has also provided a cross guarantee in relation to the above parent company bank loan.


22.


Related party transactions

The company has taken advantage of the FRS102 exemption in relation to balances with other group companies.


23.


Controlling party

The company's immediate parent is Ancala Water Services Bidco Limited, registered in England and Wales.
The results of the company are consolidated into the financial statements of Ancala Water Services Midco2 Limited, a company registered in England and Wales.
The largest parent is Ancala Water Services Investco Limited, registered in England and Wales. This company prepares consolidated accounts which include the Company and are available from Companies House.
Whilst Ancala Water Services Investco Limited has no single ultimate controlling party, funds managed by Ancala Partners LLP collectively control the entity.

Page 30