Caseware UK (AP4) 2024.0.164 2024.0.164 2025-03-31 2025-03-31 2025-03-31 0 0 2024-04-01 false The company was incorporated on 9 November 2017 and the principal activity is that of a holdingcompany to the below companies.Holding Companies:Ancala Water Services Holdco LimitedAncala Water Services Bidco LimitedTrading Companies:Ancala Water Services (Estates) Limited andAncala Water Services (Defence) Limited 0 0 false false false 11079841 2024-04-01 2025-03-31 11079841 2023-04-01 2024-03-31 11079841 2025-03-31 11079841 2024-03-31 11079841 2023-04-01 11079841 c:Director1 2024-04-01 2025-03-31 11079841 c:Director2 2024-04-01 2025-03-31 11079841 c:Director3 2024-04-01 2025-03-31 11079841 c:RegisteredOffice 2024-04-01 2025-03-31 11079841 c:Agent1 2024-04-01 2025-03-31 11079841 d:PlantMachinery 2024-04-01 2025-03-31 11079841 d:FurnitureFittings 2024-04-01 2025-03-31 11079841 d:PatentsTrademarksLicencesConcessionsSimilar 2024-04-01 2025-03-31 11079841 d:DevelopmentCostsCapitalisedDevelopmentExpenditure 2024-04-01 2025-03-31 11079841 d:CurrentFinancialInstruments 2025-03-31 11079841 d:CurrentFinancialInstruments 2024-03-31 11079841 d:CurrentFinancialInstruments 6 2025-03-31 11079841 d:CurrentFinancialInstruments 6 2024-03-31 11079841 d:Non-currentFinancialInstruments 2025-03-31 11079841 d:Non-currentFinancialInstruments 2024-03-31 11079841 d:CurrentFinancialInstruments d:WithinOneYear 2025-03-31 11079841 d:CurrentFinancialInstruments d:WithinOneYear 2024-03-31 11079841 d:Non-currentFinancialInstruments d:BetweenOneTwoYears 2025-03-31 11079841 d:Non-currentFinancialInstruments d:BetweenOneTwoYears 2024-03-31 11079841 d:ShareCapital 2024-04-01 2025-03-31 11079841 d:ShareCapital 2025-03-31 11079841 d:ShareCapital 2023-04-01 2024-03-31 11079841 d:ShareCapital 2024-03-31 11079841 d:ShareCapital 2023-04-01 11079841 d:SharePremium 2024-04-01 2025-03-31 11079841 d:SharePremium 2025-03-31 11079841 d:SharePremium 2023-04-01 2024-03-31 11079841 d:SharePremium 2024-03-31 11079841 d:SharePremium 2023-04-01 11079841 d:RevaluationReserve 2024-04-01 2025-03-31 11079841 d:OtherMiscellaneousReserve 2024-04-01 2025-03-31 11079841 d:RetainedEarningsAccumulatedLosses 2024-04-01 2025-03-31 11079841 d:RetainedEarningsAccumulatedLosses 2025-03-31 11079841 d:RetainedEarningsAccumulatedLosses 2023-04-01 2024-03-31 11079841 d:RetainedEarningsAccumulatedLosses 2024-03-31 11079841 d:RetainedEarningsAccumulatedLosses 2023-04-01 11079841 c:OrdinaryShareClass1 2024-04-01 2025-03-31 11079841 c:OrdinaryShareClass1 2025-03-31 11079841 c:OrdinaryShareClass1 2024-03-31 11079841 c:FRS102 2024-04-01 2025-03-31 11079841 c:Audited 2024-04-01 2025-03-31 11079841 c:FullAccounts 2024-04-01 2025-03-31 11079841 c:PrivateLimitedCompanyLtd 2024-04-01 2025-03-31 11079841 d:Subsidiary1 2024-04-01 2025-03-31 11079841 d:Subsidiary1 1 2024-04-01 2025-03-31 11079841 d:Subsidiary2 2024-04-01 2025-03-31 11079841 d:Subsidiary2 1 2024-04-01 2025-03-31 11079841 d:Subsidiary3 2024-04-01 2025-03-31 11079841 d:Subsidiary3 1 2024-04-01 2025-03-31 11079841 d:Subsidiary4 2024-04-01 2025-03-31 11079841 d:Subsidiary4 1 2024-04-01 2025-03-31 11079841 d:Subsidiary5 2024-04-01 2025-03-31 11079841 d:Subsidiary5 1 2024-04-01 2025-03-31 11079841 d:Subsidiary6 2024-04-01 2025-03-31 11079841 d:Subsidiary6 1 2024-04-01 2025-03-31 11079841 d:Subsidiary7 2024-04-01 2025-03-31 11079841 d:Subsidiary7 1 2024-04-01 2025-03-31 11079841 d:Subsidiary8 2024-04-01 2025-03-31 11079841 d:Subsidiary8 1 2024-04-01 2025-03-31 11079841 c:Consolidated 2025-03-31 11079841 c:ConsolidatedGroupCompanyAccounts 2024-04-01 2025-03-31 11079841 2 2024-04-01 2025-03-31 11079841 6 2024-04-01 2025-03-31 11079841 f:PoundSterling 2024-04-01 2025-03-31 iso4217:GBP xbrli:shares xbrli:pure

Registered number: 11079841 ANCALA WATER SERVICES INVESTCO LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
ANCALA WATER SERVICES INVESTCO LIMITED COMPANY INFORMATION
Directors | S M Clunie
| A P R Hough
| D W Owens
Registered number | 11079841
Registered office | 20 Gracechurch Street
| London
| EC3V 0AF
Independent auditors | BDO LLP
| Central Square
| 29 Wellington Street
| Leeds
| LS1 4DL
Bankers | Royal Bank of Scotland
| PO Box 39952
| 2 1/2 Devonshire Square
| London
| EC2M 4XJ
ANCALA WATER SERVICES INVESTCO LIMITED CONTENTS
| Page
Group strategic report | 1 - 6
Directors' report | 7 - 9
Independent auditors' report | 10 - 13
Consolidated statement of comprehensive income | 14
Consolidated balance sheet | 15 - 16
Company balance sheet | 17
Consolidated statement of changes in equity | 18 - 19
Company statement of changes in equity | 20
Consolidated statement of cash flows | 21
Notes to the financial statements | 22 - 45
ANCALA WATER SERVICES INVESTCO LIMITED GROUP STRATEGIC REPORT FOR THE YEAR ENDED 31 MARCH 2025 The directors present their strategic report and the audited financial statements for the year ended 31 March 2025.
Principal activities
The company was incorporated on 23 November 2017 and the principal activity is that of a holding company to the below companies. Holding Companies: Ancala Water Services Topco 1 Limited Ancala Water Services Topco Limited Ancala Water Services Midco 1 Limited Ancala Water Services Midco 2 Limited Ancala Water Services Holdco Limited Ancala Water Services Bidco Limited Trading Companies: Ancala Water Services (Estates) Limited Ancala Water Services (Defence) Limited As Ancala Water Services Investco Limited is a holding company the following reports refer to the group rather than the company. 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 group delivered consistent financial performance with turnover of £73,057k (2024 - £71,302k). The increased turnover and improved overall operational efficiency resulted in an operating profit of £13,861k (2024 - £11,817k). Net assets at the conclusion of the financial year were £21,741k (2024 - £15,473k). Profit for the year was £9,158k (2024 - £7,798k). Dividend payments were £3,000k (2024 - £20,454k). The group continued to invest in systems, equipment, technology and employee training, with a strong focus on improving operational efficiency to support our goal of delivering sustainable water and wastewater asset management. AWSD remains well-positioned to achieve its vision of “delivering a sustainable future” and will continue to strengthen its partnership with the MOD to ensure effective and resilient service delivery.
Regulatory performance
The health and safety of employees and contractors remains a top priority for the company, with regular board level oversight of safety performance, risks, and practices. All statutory reporting requirements were met, with investment in training, simulated health and safety exercises, and comprehensive health surveillance and health insurance provided for all employees, reinforcing our commitment to wellbeing. Environmental performance and water quality standards are closely monitored, enabling proactive risk management and compliance. No formal penalties or enforcement actions were issued by regulatory bodies during the year, reflecting strong environmental governance and operational discipline. Page 1
ANCALA WATER SERVICES INVESTCO LIMITED GROUP STRATEGIC REPORT (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2025
Key performance indicators
The group 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 group delivered strong operational performance, achieving 99.96% compliance with water and wastewater quality standards. It remains focused on maintaining and enhancing its infrastructure through a targeted asset investment plan aimed at meeting required condition standards. Leakage performance reached 1.71 Mm³, outperforming both the industry average and the company’s internal target of 1.94 Mm³. In addition, Health and Safety performance was robust, achieving an internal Health and Safety Index score of 5.54 against an internal benchmark of 5.50. Develop and engage our people The group remains committed to investing in its people, processes, training, and development, with employee wellbeing and engagement continuing to be strategic priorities. A range of development initiatives and process improvements are in place to ensure the workforce is skilled, motivated, and aligned with organisational goals. The annual independent employee engagement survey, conducted independently by Workbuzz, achieved an engagement score of 83% with a 92% response rate, exceeding the internal target of 80%, maintaining upper quartile performance and outperforming national and industry benchmarks. These results reflect strong levels of employee satisfaction, alignment, and organisational trust. To further support employee wellbeing, the company offers a robust benefits package, including life assurance, critical illness cover, a health cash plan, enhanced pension contributions, and full top-ups on statutory payments for all permanent employees. In addition, the company car allowance scheme was reviewed and enhanced with the introduction of a new salary sacrifice scheme to deliver additional financial benefits to employees. These efforts reflect the company’s ongoing commitment to fostering an inclusive, supportive, and high-performing workplace. Improve performance, efficiency and effectiveness Operating profit is a key indicator of performance throughout the year and was £13,861k (2024 - £11,817k). The group will continue to prioritise improvements in operational performance and efficiency, leveraging recent investments in advanced systems and technologies. These will be complemented by sustained investment in upskilling and developing our workforce to ensure we remain agile, capable, and future-ready. In addition to operational excellence, we are committed to creating lasting value beyond our core services. We will proactively seek opportunities to give back to society by supporting charitable causes, engaging with local initiatives, and contributing to the wellbeing and development of the communities in which we operate. Deliver sustainable growth We will continue to work in partnership with our current customers and actively seek new opportunities to grow the business. Page 2
ANCALA WATER SERVICES INVESTCO LIMITED GROUP STRATEGIC REPORT (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2025 Page 3
ANCALA WATER SERVICES INVESTCO LIMITED GROUP STRATEGIC REPORT (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2025
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 group continues to monitor risks associated with inflation, global geopolitical tensions, interest rate pressures, potential political changes, and cybersecurity. Inflation has been a more prominent factor over the past 24 months, however, its impact has been limited due to contractual protections with primary customers, whereby charge-out tariffs are adjusted annually in line with inflation. Ongoing global conflicts have not negatively impacted performance to date, and no material change is anticipated in the next 12 months. Any rise in interest rates is expected to have limited impact, as the group has successfully refinanced in September 2023 through to 2028, and all interest-bearing debt is fully hedged via interest rate swaps. Management notes the change in UK government and resultant changes in policy and no material adverse effects on business performance are expected. While cybersecurity remains a key risk, the company has continued to enhance its systems and provides quarterly training and awareness updates to all employees. 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 2025/26 financial year, the Defence Infrastructure Organisation (DIO) will conclude its quinquennial review of asset condition grading. The risk of an adverse outcome is assessed as very low, with Ancala Water Services fully committed to meeting all obligations under the Aquatrine contract. Over the past three years, the company has invested £25.9 million in Ministry of Defence (MOD) assets, demonstrating a sustained focus on asset quality and service delivery. A further £4.2 million of capital investment is planned for the coming year to continue supporting infrastructure improvements and contractual commitments.
Financial risk management
The groups’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 group 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. Page 4
ANCALA WATER SERVICES INVESTCO LIMITED GROUP STRATEGIC REPORT (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2025 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. The group does have some exposure to the recent price review by the water companies (PR24) which is in part set off by the indexation mechanism in the principal contract. Management has undertaken a sensitivity analysis and assessment of the risk and impact of PR24 price review OFWAT determination which has been modelled and included in future financial plans through to the end of the principal contract. 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 Holdco Limited entered into a new Interest rate swap which is back-to-back with the new loan. This is inline with the group’s strategy to continue to reduce its exposure to interest rate fluctuations.
Directors' statement of compliance with duty to promote the success of the Group
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 2025. The group 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. Page 5
ANCALA WATER SERVICES INVESTCO LIMITED GROUP STRATEGIC REPORT (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2025 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 12 August 2025 and signed on its behalf.
................................................ A P R Hough Director
Page 6
ANCALA WATER SERVICES INVESTCO LIMITED DIRECTORS' REPORT FOR THE YEAR ENDED 31 MARCH 2025 The directors present their report and the financial statements for the year ended 31 March 2025.
Directors' responsibilities statement
The directors are responsible for preparing the Group 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 Group and company 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 the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: ∙select suitable accounting policies 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 Group and 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 the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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 use 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. Page 7
ANCALA WATER SERVICES INVESTCO LIMITED DIRECTORS' REPORT (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2025 FY2024/25 target was 1,924 tonnes CO2e which was achieved as follows (recorded at 15 May 2025, updates will be made when the final actual meter readings and invoices for the period ending 31 March 2025 are received):
|  | FY2024/25 | FY2023/24
Category | Measure | Tonnes CO2e | Tonnes CO2e
Transport | Grey fleet | 49 | 55
| Silver fleet | 452 | 492
Electricity generation | Generator fuel | 8 | 26
| Asset electricity | 955 | 932
Business consumption | Office electricity | 21 | 19
| Total | 1,485 | 1,524
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 group's profit for the year, after taxation, amounted to £9,158 k (2024 - £7,798 k). Interim dividends of £3,000k (2024 - £20,454k) 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.
Directors
The directors who served during the year were:
S M Clunie
A P R Hough
D W Owens
Page 8
ANCALA WATER SERVICES INVESTCO LIMITED DIRECTORS' REPORT (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2025
Important adjusting events after the financial period
There have been no significant events affecting the Group 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 and the Group'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 and the Group's auditors are aware of that information.
Auditors
The auditors, BDO LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006. This report was approved by the board on 12 August 2025 and signed on its behalf.
................................................ A P R Hough Director
Page 9
ANCALA WATER SERVICES INVESTCO LIMITED INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES INVESTCO LIMITED Opinion on the financial statements In our opinion: ∙the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2025 and of the Group’s profit for the year then ended; ∙the financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and ∙the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Ancala Water Services Investco Limited (“the Parent Company”) and its subsidiaries (“the Group”) for the year ended 31 March 2025 which comprise the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Company balance sheet, the Consolidated statement of changes in equity, the Company statement of changes in equity, the Consolidated statement of cash flows 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 Group and the Parent 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 Group or Parent 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 Annual 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 INVESTCO LIMITED INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES INVESTCO 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 Group and the Parent 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 by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or ∙the Parent Company 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 Group’s and the Parent 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 Group or the Parent 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 INVESTCO LIMITED INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES INVESTCO 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 Group and the industry in which it operates; ∙Discussion with management and those charged with governance; and ∙Obtaining an understanding of the 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, the applicable accounting framework, UK company law and UK tax legislation. The Group 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. We identified such laws and regulations to include compliance with Environment Agency permits, health and safety regulations and GDPR regulations, among others. Our procedures in respect of the above included: ∙Review of minutes of meetings 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; ∙Review of legal expenditure accounts to understand the nature of expenditure incurred; and ∙Review correspondence with relevant parties including the Environment Agency. 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 Group’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 meetings 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. Page 12
ANCALA WATER SERVICES INVESTCO LIMITED INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES INVESTCO LIMITED Based on our risk assessment, we considered the areas most susceptible to fraud to be the override of controls through posting of inappropriate journals and bias in judgements and estimates. We also consider the fraud risk in revenue to arise in relation to the posting of inappropriate revenue journals. 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 judgements and estimates made by management for bias, including those related to impairment, depreciation, accounting for the statutory undertaking accruals and the fair value calculation of the management incentive programme. 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 Parent 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 Parent 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 Parent Company and the Parent 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 13 August 2025 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Page 13
ANCALA WATER SERVICES INVESTCO LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2025
| 2025 | 2024
Note | £000 | £000
Turnover | 3 | 73,057 | 71,302
Operating costs | 4 | (59,580) | (59,869)
Other operating income | 5 | 384 | 384
Operating profit | 6 | 13,861 | 11,817
Interest receivable and similar income | 10 | 327 | 181
Interest payable and similar expenses | 11 | (1,796) | (1,081)
Profit before taxation |  | 12,392 | 10,917
Tax on profit | 12 | (3,234) | (3,119)
Profit for the financial year |  | 9,158 | 7,798
Change in fair value of cashflow hedge |  | 147 | (1,033)
Tax on change in fair value of cashflow hedge |  | (37) | 258
Other comprehensive income/ (loss) for the year |  | 110 | (775)
Total comprehensive income for the year |  | 9,268 | 7,023
Profit for the year attributable to: |  |  |
Owners of the parent company |  | 9,158 | 7,798
|  | 9,158 | 7,798
Total comprehensive income for the year attributable to: |  |  |
Owners of the parent company |  | 9,268 | 7,023
|  | 9,268 | 7,023
There were no recognised gains and losses for 2025 or 2024 other than those included in the consolidated statement of comprehensive income.
The notes on pages 22 to 45 form part of these financial statements.
Page 14
ANCALA WATER SERVICES INVESTCO LIMITED REGISTERED NUMBER: 11079841 CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2025
| 2025 | 2025 | 2024 | 2024
Note | £000 | £000 | £000 | £000
Fixed assets |  |  |  |  |
Intangible assets | 14 |  | 3,365 |  | 4,282
Tangible assets | 15 |  | 39,666 |  | 40,526
|  |  | 43,031 |  | 44,808
Current assets |  |  |  |  |
Debtors | 17 | 14,013 |  | 8,283 |
Cash at bank and in hand | 18 | 8,830 |  | 11,030 |
|  | 22,843 |  | 19,313 |
Creditors: amounts falling due within one year | 19 | (24,148) |  | (23,302) |
Net current liabilities |  |  | (1,305) |  | (3,989)
Total assets less current liabilities |  |  | 41,726 |  | 40,819
Creditors: amounts falling due after more than one year | 20 |  | (19,400) |  | (24,572)
Provisions for liabilities |  |  |  |  |
Deferred taxation | 13 | (585) |  | (774) |
|  |  | (585) |  | (774)
Net assets excluding pension asset |  |  | 21,741 |  | 15,473
Net assets |  |  | 21,741 |  | 15,473
Capital and reserves |  |  |  |  |
Called up share capital | 25 |  | - |  | -
Share premium account | 26 |  | 15,536 |  | 15,536
Other reserves | 26 |  | (285) |  | (395)
Profit and loss account | 26 |  | 6,490 |  | 332
Equity attributable to owners of the parent company |  |  | 21,741 |  | 15,473
Total equity |  |  | 21,741 |  | 15,473
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 12 August 2025. Page 15
ANCALA WATER SERVICES INVESTCO LIMITED REGISTERED NUMBER: 11079841 CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 MARCH 2025
................................................ A P R Hough
Director
The notes on pages 22 to 45 form part of these financial statements. Page 16
ANCALA WATER SERVICES INVESTCO LIMITED REGISTERED NUMBER: 11079841 COMPANY BALANCE SHEET AS AT 31 MARCH 2025
| 2025 | 2024
Note | £000 | £000
Fixed assets |  |  |
Investments | 16 | 15,536 | 15,536
Net assets |  | 15,536 | 15,536
Called up share capital | 25 | - | -
Share premium account | 26 | 15,536 | 15,536
Profit for the year | 26 | - | -
Total equity |  | 15,536 | 15,536
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 12 August 2025.
................................................ A P R Hough
Director
The notes on pages 22 to 45 form part of these financial statements. Page 17
ANCALA WATER SERVICES INVESTCO LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2025
| Called up share capital | Share premium account | Cash flow hedge reserve | Profit and loss account | Total equity
| £000 | £000 | £000 | £000 | £000
At 1 April 2024 | - | 15,536 | (395) | 332 | 15,473
Comprehensive income for the year |  |  |  |  |
Profit for the year | - | - | - | 9,158 | 9,158
Other comprehensive income | - | - | 110 | - | 110
Total comprehensive income for the year | - | - | 110 | 9,158 | 9,268
Contributions by and distributions to owners |  |  |  |  |
Dividends: Equity capital | - | - | - | (3,000) | (3,000)
Total transactions with owners | - | - | - | (3,000) | (3,000)
At 31 March 2025 | - | 15,536 | (285) | 6,490 | 21,741
| The notes on pages 22 to 45 form part of these financial statements.
Page 18
ANCALA WATER SERVICES INVESTCO LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2024
| Called up share capital | Share premium account | Cash flow hedge reserve | Profit and loss account | Total equity
| £000 | £000 | £000 | £000 | £000
At 1 April 2023 | - | 15,536 | 380 | 12,988 | 28,904
Comprehensive income for the year |  |  |  |  |
Profit for the year | - | - | - | 7,798 | 7,798
Other comprehensive loss | - | - | (775) | - | (775)
Other comprehensive loss for the year | - | - | (775) | - | (775)
Total comprehensive (loss)/ income for the year | - | - | (775) | 7,798 | 7,023
Contributions by and distributions to owners |  |  |  |  |
Dividends: Equity capital | - | - | - | (20,454) | (20,454)
Total transactions with owners | - | - | - | (20,454) | (20,454)
At 31 March 2024 | - | 15,536 | (395) | 332 | 15,473
| The notes on pages 22 to 45 form part of these financial statements.
Page 19
ANCALA WATER SERVICES INVESTCO LIMITED COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2025
| Called up share capital | Share premium account | Profit and loss account | Total equity
| £000 | £000 | £000 | £000
At 1 April 2024 | - | 15,536 | - | 15,536
Comprehensive income for the year |  |  |  |
Profit for the year | - | - | 3,000 | 3,000
Total comprehensive income for the year | - | - | 3,000 | 3,000
Contributions by and distributions to owners |  |  |  |
Dividends: Equity capital | - | - | (3,000) | (3,000)
Total transactions with owners | - | - | (3,000) | (3,000)
At 31 March 2025 | - | 15,536 | - | 15,536
| The notes on pages 22 to 45 form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2024
| Called up share capital | Share premium account | Profit and loss account | Total equity
| £000 | £000 | £000 | £000
At 1 April 2023 | - | 15,536 | - | 15,536
Comprehensive income for the year |  |  |  |
Profit for the year | - | - | 20,454 | 20,454
Total comprehensive income for the year | - | - | 20,454 | 20,454
Contributions by and distributions to owners |  |  |  |
Dividends: Equity capital | - | - | (20,454) | (20,454)
Total transactions with owners | - | - | (20,454) | (20,454)
At 31 March 2024 | - | 15,536 | - | 15,536
| The notes on pages 22 to 45 form part of these financial statements.
Page 20
ANCALA WATER SERVICES INVESTCO LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2025
|  |  | 2025 | 2024
|  |  | £000 | £000
Cash flows from operating activities |  |
Profit for the financial year | 9,158 | 7,798
Adjustments for: |  |
Amortisation of intangible assets | 917 | 823
Depreciation of tangible assets | 8,137 | 7,223
Interest paid | 1,796 | 1,081
Interest received | (327) | (181)
Taxation charge | 3,234 | 3,119
(Increase)/decrease in debtors | (5,583) | 6
(Decrease) in creditors | (3,057) | (900)
Share based payments | 870 | 1,654
Corporation tax (paid) | (3,349) | (3,765)
Net cash generated from operating activities | 11,796 | 16,858
Cash flows from investing activities |  |
Purchase of tangible fixed assets | (7,277) | (6,785)
Interest received | 327 | 181
Net cash used in investing activities | (6,950) | (6,604)
Cash flows from financing activities |  |
Repayment of bank loans | (2,250) | (12,741)
Other new bank loans | - | 25,000
Dividends paid | (3,000) | (20,454)
Interest paid | (1,796) | (1,081)
Net cash used in financing activities | (7,046) | (9,276)
Net (decrease)/increase in cash and cash equivalents | (2,200) | 978
Cash and cash equivalents at beginning of year | 11,030 | 10,052
Cash and cash equivalents at the end of year | 8,830 | 11,030
Cash and cash equivalents at the end of year comprise: |  |
Cash at bank and in hand | 8,830 | 11,030
| 8,830 | 11,030
Page 21
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 1.Accounting policies
| 1.1 | Statutory information
Ancala Water Services Investco Limited is a private company, limited by shares, incorporated in England and Wales, company number 11079841. The registered office is at 20 Gracechurch Street, London, EC3V 0AF.
| 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 preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 2). The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of comprehensive income in these financial statements.
| 1.4 | Basis of consolidation
The consolidated financial statements present the results of the company and its own subsidiaries ("the group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases. Page 22
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 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.
| 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 | Other operating income
The other operating income relates to pre commencement change assets income of £10m received in 2005. This is being released evenly over the remaining term of the contract.
| 1.8 | Interest income
Interest income is recognised in profit or loss using the effective interest method.
| 1.9 | 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 23
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 1.Accounting policies (continued)
| 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. Assets under construction represent ongoing capital projects. On completion AUC projects are moved other fixed asset categories and depreciated in line with the depreciation policy. 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. Depreciation is provided on the following basis:
|  |  |  | 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.
| 1.11 | Business combinations
Business combinations are accounted for using the purchase method. The consideration for each acquisition is measured at the aggregate of the fair values at acquisition date of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquired, plus any costs directly attributable to the business combination. When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the group includes the estimated amount of that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured reliably.
| 1.12 | Intangible contract value
The intangible contract value was consideration paid by the group over and above the fair value of all assets and liabilities acquired for Kelda Water Services (Estates) Limited and Kelda Water Services (Defence) Limited. This was considered to relate to the fair value of the MOD contract acquired with the business and is being amortised over the remaining contract period. Page 24
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 1.Accounting policies (continued)
| 1.13 | 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 Statement of Financial Position 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
| 1.14 | Valuation of investments
Investments in subsidiaries are measured at cost less accumulated impairment.
| 1.15 | Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Consolidated statement of cash flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Group's cash management.
| 1.16 | Debtors
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
| 1.17 | Creditors
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
| 1.18 | Borrowing costs
All borrowing costs are recognised in profit or loss in the year in which they are incurred. Page 25
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 1.Accounting policies (continued)
| 1.19 | 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.
| 1.20 | 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 and the Group operate and generate 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; ∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and ∙Where they relate to timing differences in respect of interests in subsidiaries, associates, branches and joint ventures and the Group can control the reversal of the timing differences and such reversal is not considered probable in the foreseeable future. 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.
| 1.21 | 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. Page 26
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 1.Accounting policies (continued)
| 1.22 | Pensions
Defined contribution pension plan The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations. The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet. The assets of the plan are held separately from the Group in independently administered funds.
| 1.23 | Share-based payments
The group operates a management incentive programme through Ancala Water Services Topco1 Limited. This is a cash settled scheme which pays out at set crystallisation dates that is settled by the parent entity. Employees of the programme are employed by Ancala Water Services (Defence) Limited. In accordance with FRS102 the awards are treated as cash settled. An expense is recognised in the consolidated income statement over the vesting period, determined by reference to the fair value of the awards and the number of awards expected to be vested. A corresponding liability is recognised with the statement of financial position. The fair value of the management incentive programme is calculated at inception of the awards, and at each reporting date, based on expected returns for the group, using the group business plan which are forecasted figures, for the purpose of treating it as an equity settled scheme. The calculation also takes into account the expected attrition rate of the scheme, this is based on expectations of management retention for the scheme period.
| 1.24 | Financial instruments
The Group has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments. Financial instruments are recognised in the Group's Balance sheet when the Group 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 Group's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments. Page 27
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 1.Accounting policies (continued)
| 1.24 | Financial instruments (continued)
Impairment of financial assets Financial assets are assessed for indicators of impairment at each reporting date. 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 Group after the deduction of all its liabilities. Basic financial liabilities, which include trade and other payables, bank loans, other loans and loans due to fellow group companies 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. Other financial instruments The company used a derivative financial instrument in the form of an interest rate swap to reduce its exposure to interest rate fluctuations on the company's floating bank rate loan. The company has determined that it's interest rate swap qualifies for hedge accounting under FRS 102. Accordingly the effective portion of the gain ot loss on the interest rate swap is recognised directly in other comprehensive income in the cash flow hedge reserve, with the effective portion recognised in profit or loss. The hedging gain or loss accumulated in the cash flow hedge reserve is reclassified to the profit or loss when the hedged item is recognised in profit or loss or when the hedged future cash flows are no longer expected to occur. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re measured at their fair value. Derivatives are carried as assets when the fair value is positive and liabilities when the fair value is negative. The fair value of interest rate swaps is determined by calculating the present value of the estimated future cashflows Page 28
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025 1.Accounting policies (continued)
| 1.24 | Financial instruments (continued)
based on observable yield curves. In accordance with FRS102.22, financial instruments issued by the company are treated as equity only to the extent that they meet the following two conditions; (a) they include no contractual obligations upon the company to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the company; and (b) where the instrument will or may be settled In the company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company's own equity instruments or is a derivative that will be settled by the company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the company's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.
2. | Judgements in applying accounting policies and key sources of estimation uncertainty
In preparing these financial statements, the directors have made the following judgements; - 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. 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. - Accounting accruals in respect of statutory undertaker consumption are recognised using the best information available at the reporting date. Accruals include significant balances for Statutory Undertaker Consumption of water and waste water primarily as a result of invoicing delays from Statutory Undertakers. Furthermore, the incumbent is only legally obliged to provide one actual meter read per year as a result best estimates are made based on historical usage. - The movement in fair value of the management incentive programme is calculated based on expected returns for the group, using the group business plan which are forecasted figures. The calculation also takes into account the expected attrition rate of the scheme, this is based on expectations of management retention for the scheme period. Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made. Page 29
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
3. | Turnover
Turnover, which is stated net of Value Added Tax, represents the value of 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
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Cost of sales | 44,595 | 45,247
| Administrative expenses | 14,985 | 14,621
|  | 59,580 | 59,868
5. | Other operating income
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| PCCA Claim Release | 384 | 384
|  | 384 | 384
6. | Operating profit
| The operating profit is stated after charging:
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Depreciation expense | 8,137 | 7,223
| Amortisation expense | 917 | 823
| Other operating lease rentals | 64 | 92
| Share-based payment | 870 | 1,654
Page 30
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
7. | Employees
| Staff costs, including directors' remuneration, were as follows:
|  | Group | Group | Company | Company
|  | 2025 | 2024 | 2025 | 2024
|  | £000 | £000 | £000 | £000
| Wages and salaries | 7,334 | 7,512 | - | -
| Social security costs | 830 | 747 | - | -
| Cost of defined contribution scheme | 459 | 416 | - | -
|  | 8,623 | 8,675 | - | -
| The average monthly number of employees employed by the group, including the directors, during the year was as follows:
|  |  | 2025 | 2024
|  |  | No. | No.
|  | Operations & maintenance | 67 | 66
|  | Administration & support | 78 | 75
|  |  | 145 | 141
8. | Directors' remuneration
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Directors' emoluments | 496 | 551
| Amounts receivable under long-term incentive schemes | - | 289
| Group contributions to defined contribution pension schemes | 39 | 38
|  | 535 | 878
| The highest paid director received remuneration of £290 k (2024 - £559 k).
| The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £24 k (2024 - £23 k).
| During the year NIL directors received shares under the long-term incentive schemes (2024 -NIL)
Page 31
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
9. | Auditors' remuneration
| The fees payable to the Group's auditor and its associates for the audit of the Group's annual financial statements amounted to £13k (2024 - £12k). The fees payable to the Group's auditor and it's associates for the audit of the Company's subsidiaries amounted to £80k (2024 - £72k). Fees payable to the auditors in relation to all other services amounted to £27k (2024 - £21k).
10. | Interest receivable
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Bank interest receivable | 327 | 181
|  | 327 | 181
11. | Interest payable and similar expenses
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Bank interest payable | 1,796 | 1,081
|  | 1,796 | 1,081
Page 32
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
12. | Taxation
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Corporation tax |  |
| Current tax on profits for the year | 3,195 | 2,345
| Adjustments in respect of previous periods | 264 | 89
|  | 3,459 | 2,434
| Total current tax | 3,459 | 2,434
| Deferred tax |  |
| Origination and reversal of timing differences | 132 | 710
| Adjustments in respect of previous periods | (357) | (25)
| Total deferred tax | (225) | 685
| Taxation on profit on ordinary activities | 3,234 | 3,119
| Factors affecting tax charge for the year
| The tax assessed for the year is higher than (2024 - higher than) the standard rate of corporation tax in the UK of 25% (2024 - 25%). The differences are explained below:
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Profit on ordinary activities before tax | 12,391 | 10,917
| Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (2024 - 25%) | 3,098 | 2,807
| Effects of: |  |
| Expenses not deductible for tax purposes | 107 | 151
| Adjustments to tax charge in respect of prior periods | (93) | 64
| Fixed asset differences | 122 | 97
| Total tax charge for the year | 3,234 | 3,119
| Factors that may affect future tax charges
There were no factors that may affect future tax charges. Page 33
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
13. | Deferred taxation
| Group
|  | 2025 | 2024
|  | £000 | £000
| At beginning of year | (773) | (346)
| Charged/ (credited) to profit or loss | 225 | (685)
| Deferred tax charged to OCI | (37) | 257
| At end of year | (585) | (774)
| Company
|  | 2025 | 2024
| At end of year | - | -
| The provision for deferred taxation is made up as follows:
|  | Group | Group
|  | 2025 | 2024
|  | £000 | £000
| Short term timing differences | 111 | 147
| Fixed asset timing differences | (696) | (920)
|  | (585) | (773)
Page 34
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
14. | Intangible assets
| Group and Company
|  | Contract cost | Intangible contract value | Computer software | Total
|  | £000 | £000 | £000 | £000
| Cost |  |  |  |
| At 1 April 2024 | 5,090 | 4,169 | 1,954 | 11,213
| At 31 March 2025 | 5,090 | 4,169 | 1,954 | 11,213
| Amortisation |  |  |  |
| At 1 April 2024 | 2,871 | 2,106 | 1,954 | 6,931
| Charge for the year on owned assets | 475 | 442 | - | 917
| At 31 March 2025 | 3,346 | 2,548 | 1,954 | 7,848
| Net book value |  |  |  |
| At 31 March 2025 | 1,744 | 1,621 | - | 3,365
| At 31 March 2024 | 2,219 | 2,063 | - | 4,282
| 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 from operational commencement on 1 December 2003. The intangible contract value was consideration paid by the group over and above the fair value of all assets and liabilities acquired for Kelda Water Services (Estates) Limited and Kelda Water Services (Defence) Limited. This was considered to relate to the fair value of the MOD contract acquired with the business and is being amortised over the remaining contract period. The amortisation charge is recorded in administrative expenses in the profit and loss account. The remaining period of amortisation for both contract costs and intangible contract value is 3.7 years.
Page 35
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
15. | Tangible fixed assets
| Group
|  | Plant and machinery | Fixtures and fittings | Assets under construction | Total
|  | £000 | £000 | £000 | £000
| Cost or valuation |  |  |  |
| At 1 April 2024 | 63,488 | 3,865 | 7,409 | 74,762
| Additions | - | - | 7,277 | 7,277
| Transfers between classes | 3,022 | 419 | (3,441) | -
| At 31 March 2025 | 66,510 | 4,284 | 11,245 | 82,039
| Depreciation |  |  |  |
| At 1 April 2024 | 31,217 | 3,019 | - | 34,236
| Charge for the year on owned assets | 7,587 | 550 | - | 8,137
| At 31 March 2025 | 38,804 | 3,569 | - | 42,373
| Net book value |  |  |  |
| At 31 March 2025 | 27,706 | 715 | 11,245 | 39,666
| At 31 March 2024 | 32,271 | 846 | 7,409 | 40,526
Page 36
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
16. | Fixed asset investments
| Subsidiary undertakings
| The following were subsidiary undertakings of the company:
| Name | Registered office | Principal activity | Class of shares | Holding
| Ancala Water Services Topco 1 Limited | 20 Gracechurch Street, London, EC3V 0AF | Holding company | Ordinary | 100%
| Ancala Water Services Topco Limited* | 20 Gracechurch Street, London, EC3V 0AF | Holding company | Ordinary | 100%
| Ancala Water Services Midco 1 Limited* | 20 Gracechurch Street, London, EC3V 0AF | Holding company | Ordinary | 100%
| Ancala Water Services Midco 2 Limited* | 20 Gracechurch Street, London, EC3V 0AF | Holding company | Ordinary | 100%
| Ancala Water Services Holdco Limited* | 20 Gracechurch Street, London, EC3V 0AF | Holding company | Ordinary | 100%
| Ancala Water Services Bidco Limited* | Unit 1b Redbrook Business Park, Wilthorpe Road, Barnsley, South Yorkshire, S75 1JN | Holding company | Ordinary | 100%
| Ancala Water Services (Estates) Limited* | Unit 1b Redbrook Business Park, Wilthorpe Road, Barnsley, South Yorkshire, S75 1JN | Water and waste water services | Ordinary | 100%
| Ancala Water Services (Defence) Limited* | Unit 1b Redbrook Business Park, Wilthorpe Road, Barnsley, South Yorkshire, S75 1JN | Water and waste water services | Ordinary | 100%
| * Held indirectly
17. | Debtors
|  | Group | Group | Company | Company
|  | 2025 | 2024 | 2025 | 2024
|  | £000 | £000 | £000 | £000
| Trade debtors | 5,782 | 121 | - | -
| Corporation tax | 691 | 801 | - | -
| Other debtors | 183 | 356 | - | -
| Prepayments and accrued income | 7,357 | 7,005 | - | -
|  | 14,013 | 8,283 | - | -
Page 37
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
18. | Cash and cash equivalents
|  | Group | Group
|  | 2025 | 2024
|  | £000 | £000
| Cash at bank and in hand | 8,830 | 11,030
|  | 8,830 | 11,030
19. | Creditors: Amounts falling due within one year
|  | Group | Group | Company | Company
|  | 2025 | 2024 | 2025 | 2024
|  | £000 | £000 | £000 | £000
| Bank loans | 4,513 | 2,134 | - | -
| Trade creditors | 2,782 | 2,912 | - | -
| Share based payment liability | 1,138 | - | - | -
| Other taxation and social security | 473 | 848 | - | -
| Other creditors | 1,033 | 1,028 | - | -
| Accruals and deferred income | 13,829 | 15,853 | - | -
| Financial instruments | 380 | 527 | - | -
|  | 24,148 | 23,302 | - | -
Page 38
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
20. | Creditors: Amounts falling due after more than one year
|  | Group | Group | Company | Company
|  | 2025 | 2024 | 2025 | 2024
|  | £000 | £000 | £000 | £000
| Bank loans | 16,371 | 20,937 | - | -
| Share based payment liability | 1,958 | 2,227 | - | -
| Accruals and deferred income | 1,071 | 1,408 | - | -
|  | 19,400 | 24,572 | - | -
The deferred income relates to pre-commencement change assets income of £10m received in 2005, the amount is being released over the term remaining of the contract. The bank loan is secured, by way of first fixed charge, over all of the assigned rights which the group now has, its present and future interest in the securities and all other stocks, shares, debentures, bonds and other securities, all account monies, all benefits in respect of insurances, all book and other debts and other monies due, its present and future goodwill and its present and future uncalled capital. They are also secured by way of a floating charge over the whole of the charged assets being the whole of the property (including uncalled capital) which is or may be from time to time comprised in the property and undertaking of the charger Page 39
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
21. | Loans
| Analysis of the maturity of loans is given below:
|  | Group | Group | Company | Company
|  | 2025 | 2024 | 2025 | 2024
|  | £000 | £000 | £000 | £000
| Amounts falling due within one year |  |  |  |
| Bank loans | 4,513 | 2,134 | - | -
|  | 4,513 | 2,134 | - | -
| Amounts falling due after one year |  |  |  |
| Bank loans | 16,371 | 20,937 | - | -
|  | 16,371 | 20,937 | - | -
|  | 20,884 | 23,071 | - | -
| Bank borrowings relate to long term loan facilities granted by AIB and Santander. 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 comprising £25m term loan facility and a £5m revolving facility. The balance of the revolving facility at the year end was £Nil. The term loan is repayable in six-monthly instalments ending on 30 June 2028. Interest is charged on amounts drawn under the facilities based on SONIA. The group has entered into an interest hedging agreement to be applied to the expected future borrowings under the facilities. The hedging agreements in respect of these loans fixed the interest rate at 4.916% until 30 June 2028 using a cash flow hedge.
22. | Pension commitments
The group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the group to the scheme and amounted to £459k (2024 - £416k). Contributions totalling £69k (2024 - £64k) were payable to the fund at the reporting date and are included in creditors. Page 40
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
23. | Commitments under operating leases
| At 31 March 2025 the Group and the company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
|  | Group | Group
|  | 2025 | 2024
|  | £000 | £000
| Not later than 1 year | 480 | 200
| Later than 1 year and not later than 5 years | 1,239 | 230
|  | 1,719 | 430
| The amount of non-cancellable operating lease payments recognised as an expense during the year was £580k (2024 - £481k).
24. | Dividends
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Interim dividend of £1,500 per each Ordinary share, (£10,227 in 2024) | 3,000 | 20,454
|  | 3,000 | 20,454
25. | Share capital
|  |  |  |  | 2025 | 2024
|  |  |  |  | £ | £
|  | Allotted, called up and fully paid |  |
|  | 2,000 (2024 - 2,000) Ordinary shares of £0.01 each | 20 | 20
| 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.
Page 41
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
26. | Reserves
Called up share capital This reserve represents the nominal value of equity shares issued. Share premium account This reserve represents the premium on issue of equity shares, net of any issue costs. Cash flow hedge reserve This reserve comprises the effective portion of the cumulative net change in the fair value if cash flow hedging instruments related to the hedging transactions that have not yet occurred, stated net of tax. Profit and loss account This reserve represents the cumulative profits or losses, net of dividends and other adjustments.
27. | Financial instrument - Swap arrangement
|  | Group 2025 | Group 2024
|  | £000 | £000
| Balance brought forward | (527) | 506
| Change in fair value of cash flow hedge | 147 | (1,033)
| Balance carried forward | (380) | (527)
| Interest rate swaps are valued at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates. The interest rate swap settles on a bi-annual basis. The floating rate on the interest rate swap is SONIA. The company will settle the difference between the fixed and floating interest rate on a net basis. On 28th September 2023 the Group entered into a new loan facility with AIB and Santander. This included a new interest rate swap. The previous interest rate swap was settled with a gain of £435k in excess of the fair value of the hedging instrument over the change in the fair value of expected cash flows was recognised in profit or loss. The fair value of the financial instrument at 31 March 2025 was a liability of £380k (2024 - £527k). Gains of £147k (2024 - losses of £1,033k) were recognised in other comprehensive income for the year. Gains of £nil in excess of the fair value of the hedging instrument over the change in the fair value of expected cash flows were recognised in profit or loss and £nil was reclassified to profit or loss for the year.
Page 42
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
28. | Contingent liabilities
The group 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 group's term loan, with AIB Group (UK) Plc and Santander UK Plc. The balance of the loan at the year is £21.452m (2024 - £23.702m). The company has also provided a cross guarantee in relation to the above group bank loan.
29. | Financial instruments
|  | Group | Group
|  | 2025 | 2024
|  | £000 | £000
| Financial liabilities |  |
| Financial instruments measured at fair value through profit or loss | (380) | (527)
| Fnancial instruments measured at fair value through profit or loss comprise interest swaps relating to a cashflow hedge liability.
Page 43
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
30. | Share-based payments
| Scheme details and movements The management incentive plan is a cash settled scheme with crystallisation event as set out in the company articles of association, the first of these being 31 March 2023. The liability is measured at fair value, the charge to profit and loss being spread across the life of the scheme, adjusting for expected attrition.
|  | Weighted average exercise price (pence) 2025 | Number 2025 | Weighted average exercise price (pence) 2024 | Number 2024
| Outstanding at the beginning of the year | 689,919 | 594 | 656,743 | 594
| Outstanding at the end of the year | 689,919 | 594 | 656,743 | 594
|  |  |  |  | 2025 | 2024
| Weighted average share price (pence) | 689,919 | 656,743
|  |  |  |  | 2025 | 2024
|  |  |  |  | £000 | £000
| Cash-settled schemes | 3,096 | 2,227
|  | 3,096 | 2,227
31. | Related party transactions
| Key management personnel include all directors across the group who together have authority and responsibility for planning, directing and controlling the activities of the group. The total compensation paid to directors in the group for services provided was £535k (2024 - £589k). AWS Defence was supplied by Portsmouth Water Limited. Both companies are controlled by Ancala Partners LLP. All transactions between AWS Defence and Portsmouth Water are conducted at arms length for the supply of water. The total spend with Portsmouth Water in the financial year was £262k (2024 - £248k). At 31 March 2025 the balance owing from AWS Defence to Portsmouth Water was £Nil (2023 - £Nil).
Page 44
ANCALA WATER SERVICES INVESTCO LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2025
32. | Controlling party
Ancala Water Services Investco Limited has no single ultimate controlling party. Funds managed by Ancala Partners LLP collectively control the entity.
33. | Analysis of net debt
|  | At 1 April 2024 | Cash flows | Other non-cash changes | At 31 March 2025
|  | £000 | £000 | £000 | £000
| Cash at bank and in hand | 11,030 | (2,200) | - | 8,830
| Debt due after 1 year | (20,937) | 53 | 4,513 | (16,371)
| Debt due within 1 year | (2,134) | 2,134 | (4,513) | (4,513)
|  | (12,041) | (13) | - | (12,054)
| Other non-cash changes are the reclassification of debt from greater than one year to less than one year.
Page 45