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Registered number: 04617059
ANCALA WATER SERVICES (DEFENCE) LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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ANCALA WATER SERVICES (DEFENCE) LIMITED
CONTENTS
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Independent auditors' report
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Statement of comprehensive income
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Statement of changes in equity
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Notes to the financial statements
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ANCALA WATER SERVICES (DEFENCE) LIMITED
COMPANY INFORMATION
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Unit 1B Redbrook Business Park
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National Westminster Bank PLC
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ANCALA WATER SERVICES (DEFENCE) LIMITED
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.
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 wastewater 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
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Turnover for the year was £67,009k (2024 - £64,434k). Operating profit was £10,216k (2024 - £7,686k). Net assets at the conclusion of the financial year were £22,134k (2024 - £16,744k). Profit for the year was £7,680k (2024 - £5,259k). Dividend payments were £2,700k (2024 - £10,454k).
The company 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.
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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2025
Key performance indicators
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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 delivered strong operational performance, achieving 99.96% compliance with water and wastewater quality standards. The group 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 company 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 £10,216k (2024 - £7,686k).
The business 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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2025
Principal risks and uncertainties
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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 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 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
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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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
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 company 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 company
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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.
AWSD 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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
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.
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N Hussain
Director
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ANCALA WATER SERVICES (DEFENCE) 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
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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 2006. They 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.
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.
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ANCALA WATER SERVICES (DEFENCE) 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):
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.
The profit for the year, after taxation, amounted to £7,680k (2024 - £5,259k).
Interim dividends of £2,700k (2024 - £10,454k) were paid during the year. The Directors do not recommend the payment of a final dividend.
After due consideration of all relevant factors, including the current economic environment, the directors have a reasonable expectation that the company has 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 who served during the year were:
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ANCALA WATER SERVICES (DEFENCE) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2025
Important adjusting events after the financial period
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There have been no significant events affecting the company since the year end.
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
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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.
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.
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N Hussain
Director
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ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) 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 2025 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 (Defence) Limited (“the Company”) for the year ended 31 March 2025 which comprise the Statement of comprehensive income, the Balance sheet, the 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 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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) 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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) 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 an understanding of the Company’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 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. 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 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 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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ANCALA WATER SERVICES (DEFENCE) 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 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
13 August 2025
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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ANCALA WATER SERVICES (DEFENCE) LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2025
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Interest receivable and similar income
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Interest payable and similar expenses
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Profit for the financial year
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There was no other comprehensive income for 2025 (2024:£NIL).
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The notes on pages 17 to 30 form part of these financial statements.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
REGISTERED NUMBER: 04617059
BALANCE SHEET
AS AT 31 MARCH 2025
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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The financial statements were approved and authorised for issue by the board and were signed on its behalf on 12 August 2025.
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N Hussain
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The notes on pages 17 to 30 form part of these financial statements.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2025
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Total comprehensive income for the year
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The notes on pages 17 to 30 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
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Total comprehensive income for the year
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The notes on pages 17 to 30 form part of these financial statements.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
1.Accounting policies
Ancala Water Services (Defence) Limited is a private company, limited by shares, incorporated in England and Wales, company number 04617059. The registered office is at Unit 1B Redbrook Business Park, Wilthorpe Road, Barnsley, S75 1JN.
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Summary of significant accounting policies and key accounting estimates
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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.
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Basis of preparation of financial statements
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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).
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Financial Reporting Standard 102 - reduced disclosure exemptions
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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 2025 and these financial statements may be obtained from Companies House.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
1.Accounting policies (continued)
After due consideration of all relevant factors, including the current economic environment, the directors have a reasonable expectation that the company has 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.
Turnover is recognised in line with the service agreement between AWSD and AWSE in the period in which the services are provided. The company maintains and upgrades 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, which is based upon agreed milestones.
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.
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.
Interest income is recognised in profit or loss using the effective interest method.
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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
1.Accounting policies (continued)
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.
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.
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Current and deferred taxation
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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.
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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
1.Accounting policies (continued)
Defined contribution pension plan
The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company 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 company in independently administered funds.
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 equity-settled because the subsidiary does not have an obligation to settle the award. An expense is recognised in the income statement over the vesting period, and a credit is recognised in equity as a capital contribution from Ancala Water Service Topco1 Limited.
The fair value of the management incentive programme is calculated at inception of the awards 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.
The company 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 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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
1.Accounting policies (continued)
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Financial instruments (continued)
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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 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.
All borrowing costs are recognised in profit or loss in the year in which they are incurred.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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Judgements in applying accounting policies and key sources of estimation uncertainty
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In preparing these financial statements, the directors have made the following judgements and estimates:
- 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.
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 contracts between AWSD and AWSE, and AWSE and the MOD for the provision of water and waste water services in the area covering Wales and the South West of England.
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All turnover arose within the United Kingdom.
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The analysis of the company's operating costs for the year is as follows:
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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The operating profit is stated after charging:
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Other operating lease rentals
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Staff costs, including directors' remuneration, were as follows:
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Cost of defined contribution scheme
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The average monthly number of employees, including the directors, during the year was as follows:
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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Amounts receivable under long-term incentive schemes
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Company contributions to defined contribution pension schemes
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The highest paid director received remuneration of £290k (2024 - £559k).
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The value of the company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £24k (2024 - £23k).
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During the year NIL directors received shares under the long-term incentive schemes (2024 -NIL)
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Auditor's remuneration of £26k (2024 - £24k) was incurred for the period.
Fees payable to the auditors in relation to all other services amounted to £27k (2024 - £21k).
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Interest from group undertakings
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Interest payable and similar expenses
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Interest payable to group undertakings
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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Current tax on profits for the year
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Adjustments in respect of previous periods
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Origination and reversal of timing differences
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Taxation on profit on ordinary activities
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Factors affecting tax charge for the year
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The tax assessed for the year is lower than (2024 - higher than) the standard rate of corporation tax in the UK of 25% (2024 - 25%). The differences are explained below:
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Profit on ordinary activities before tax
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Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (2024 - 25%)
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Expenses not deductible for tax purposes
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Adjustments to tax charge in respect of prior periods
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Total tax charge for the year
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Factors that may affect future tax charges
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There were no factors that may affect future tax charges.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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Charged to profit or loss
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The deferred tax asset is made up as follows:
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Short term timing differences
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Amounts owed by group undertakings
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Prepayments and accrued income
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Amounts owed by group undertakings relate to intercompany trading and are unsecured and repayable on demand.
Included within trade debtors is a bad debt provision of £304k (2024 - £280k).
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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Cash and cash equivalents
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Creditors: Amounts falling due within one year
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Amounts owed to group undertakings
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Other taxation and social security
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Accruals and deferred income
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Amounts owed to group undertakings that relate to intercompany trading are unsecured and repayable on demand.
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Creditors: Amounts falling due after more than one year
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Amounts owed to group undertakings
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Accruals and deferred income
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Following the refinancing of the group loans in September 2023, the amounts owed to group undertakings due after more than one year represents £5.067m (2024 - £6.208m) of loans payable to Ancala Water Services Bidco Limited which is unsecured, bears interest at 10% and are repayable 30 November 2028.
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.
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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Pension and other schemes
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The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund 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.
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Commitments under operating leases
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At 31 March 2025 the company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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The amount of non-cancellable operating lease payments recognised as an expense during the year was
£539k (2024 - £481k).
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Interim dividend of £2,700 (2024 - £10,454) per each Ordinary share
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Allotted, called up and fully paid
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500 (2024 - 500) Ordinary A shares of £1 each
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500 (2024 - 500) Ordinary B shares of £1 each
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
21.Share capital (continued)
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, 500 of each are held by Ancala Water Services Bidco Limited. These shares rank pari passu in all respects and have the same rights.
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.
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Scheme details and movements
The management incentive plan is treated as an equity settled scheme for these financial statements.
The amounts recorded in profit and loss are being spread across the life of the scheme, adjusting for
expected attrition, with a corresponding entry in equity as a capital contribution.
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Weighted average exercise price (pence)
2025
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Weighted average exercise price
(pence)
2024
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Outstanding at the beginning of the year
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Outstanding at the end of the year
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Weighted average share price (pence)
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ANCALA WATER SERVICES (DEFENCE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2025
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 new loan at year end was £21.452m (2024 - £23.702m).
The company has also provided a cross guarantee in relation to the above parent company bank loan.
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Related party transactions
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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 (2024 - £Nil).
The company has taken advantage of the FRS102 exemption in relation to balances with other group companies.
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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.
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