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TVE: Results of operations for the 4th quarter of 2010 (EUR)

Spekuliantai.lt | 2011-01-28 | NASDAQ OMX biržų naujienos | perskaitė: 1645
Raktiniai žodžiai: Tallinna Vesi, TVE
TVE: Results of operations for the 4th quarter of 2010 (EUR)

Tallinna Vesi Quarterly report 28.01.2011

Results of operations for the 4th quarter of 2010 (EUR)



MANAGEMENT REPORT

RESULTS OF OPERATIONS - FOR THE 4th QUARTER 2010





Overview



During 2010 the Company's total sales increased, year on year, by 0.6% to 49.7
mln EUR. The Company's underlying operating profit from water and wastewater
related activities decreased by 10.1% to 24.2 mln EUR in 2010 compared to 2009.
Profits from other activities (mainly construction and developments) increased
by 25.2% to 3.3 mln EUR compared to the 2009. The Company's profit before taxes
was 24.9 mln EUR, which is a decrease of 2.9% or 0.73 mln EUR, compared to
2009.





--------------------------------------------------------------------------------
mln EUR 4 Q 4 Q Change 12 months 12 months Change
2010 2009 2010 2009
Sales 12,5 12,9 -3,3% 49,7 49,4 0,6%
Gross profit 6,8 7,8 -12,6% 29,0 31,2 -7,1%
Gross profit margin % 54,8 60,7 -9,6% 58,4 63,2 -7,7%
Operating profit 7,1 8,6 -17,3% 27,5 29,5 -7,0%
Operating profit - 5,4 6,7 -19,4% 24,2 26,9 -10,1%
main business
Operating profit 56,9 66,5 -14,5% 55,3 59,8 -7,6%
margin %
Profit before taxes 7,9 8,0 -1,2% 24,9 25,6 -2,9%
Net profit 7,9 8,0 -1,2% 16,4 21,7 -24,5%
Net profit margin % 63,6 62,2 2,2% 33,0 44,0 -25,0%
ROA % 4,3 4,5 -5,0% 8,9 12,3 -27,4%
Debt to total capital 60,1 49,7 20,9% 60,1 49,7 20,9%
employed
--------------------------------------------------------------------------------


Gross profit margin - Gross profit / Net sales

Operating profit margin - Operating profit / Net sales

Net Profit margin - Net Profit / Net sales

ROA - Net profit /Total Assets

Debt to Total capital employed - Total Liabilities / Total capital employed

Main business - water and wastewater activities, excl. connections profit and
government grants





Profit and Loss Statement

4th quarter 2010



Sales



In the 4th quarter of 2010 the Company's total sales decreased, year on year,
by 3.3% to 12.5 mln EUR. Sales in the main operating activity principally
comprise of sales of water and treatment of wastewater to domestic and
commercial customers within and outside of the service area, and fees received
from the City of Tallinn for operating and maintaining the storm water system.



Sales of water and wastewater services were 11.4 mln EUR, a 2.5% decrease
compared to the 4th quarter of 2009, resulting from the slight fall in sales
volumes as described below in addition to the 0.9% decrease in tariffs from 1
January 2010 for the Company's residential and commercial customers.



Within the service area, sales to residential customers decreased by 2.1% to
6.0 mln EUR. Sales to commercial customers decreased by 1.1% to 4.3 mln EUR.
Sales to customers outside of the service area decreased by 10.9% to 0.82 mln
EUR in the 4th quarter of 2010. Over pollution fees received were 0.18 mln EUR,
a 6.5% decrease compared to the 4th quarter of 2009.



In the 4th quarter of 2010, the volumes sold to residential customers decreased
by 1.2% year on year, which is still lower decrease than we faced in first two
quarters of 2010 compared to 2009.



The volumes sold to commercial customers inside the service area were broadly
on the same level as in 2009 reflecting only a minor 0.3% decrease compared to
the same period in 2009. Total selling volumes to the industrial sector are
decreasing due to Coca-Cola's leave from our service area, eliminating the fall
in its consumption some increase can be noticed from the industrial sector.
Better economic conditions are contributing also to leisure sector volumes
starting to pick up.



Outside service area sales volumes were 22.5% lower than in the 4th quarter of
2009. The main factor in this decrease was lower storm water volumes in the 4th
quarter of 2010 compared to 2009.



The sales from the operation and maintenance of the storm water and
fire-hydrant system decreased by 17.8% to 0.80 mln EUR in the 4th quarter of
2010 compared to the same period in 2009. This is in accordance with the terms
and conditions of the contract whereby the storm water and fire hydrant costs
are invoiced based on actual costs and volumes treated.





Cost of Goods Sold and Gross Margin



The cost of goods sold for the main operating activity was 5.6 mln EUR in the
4th quarter of 2010, an increase of 0.56 mln EUR or 11.0% from the equivalent
period in 2009.



In the 4th quarter of 2010 the Company did not achieve the beneficial 0.5
coefficient for pollution tax due to the combination of the nitrogen
concentration, low volumes and low temperature in the beginning of the quarter,
and thereby the amount of pollution tax payable was 0.74 mln EUR compared to
0.20 mln EUR in the 4th quarter of 2009. In addition to the coefficient
increase the higher pollution tax payable in 2010 is generated by the increase
in tax rates year on year by 19%. To mitigate the nitrogen treatment and tax
risk we have started with the investment into an additional stage of waste
water treatment and according to the construction schedule the works should be
completed in the beginning of the 3rd quarter of 2011.



Chemical costs were 0.38 mln EUR, representing a 12.1% increase compared to the
corresponding period in 2009. Although lower volumes were treated the main
contributor to higher chemical costs are dosed methanol and other chemicals
quantities related to the need to treat the increased pollution concentration
in incoming sewerage. Also the increase in prices added some unfavorable impact
to the cost of chemicals.



Electricity costs increased by 0.14 mln EUR or 23.3% in the 4th quarter of 2010
compared to the 4th quarter of 2009 due to higher electricity prices as a
result of three sites buying electricity from the open market.



Salary expenses within costs of goods sold decreased in the 4th quarter of
2010, year on year, by 0.26 mln EUR or 18.0% mainly due to the reduced
operating headcount.



Transport costs decreased by 0.04 mln EUR, or 13.9% year on year, having
adverse impact from the increase in fuel prices that was more than compensated
by decrease in usage of rented machinery and staff cars.



Other cost of goods sold in the main operating activity increased 0.12 mln EUR,
or 16.1% year on year, mainly due to the additional costs of repair services
resulting from new city act related to the asphalting costs.



As a result of all of the above the Company's gross profit for the 4th quarter
of 2010 was 6.8 mln EUR, which is a decrease of 0.99 mln EUR, or 12.6%,
compared to the gross profit of 7.8 mln EUR for the 4th quarter of 2009.





Operating Costs and Operating Margin



Marketing expenses increased by 0.04 mln EUR to 0.22 mln EUR during the 4th
quarter of 2010 compared to the corresponding period in 2009. This is mainly
the result of a slight increase in expenses due to OÜ Watercom start-up costs
in the second half-year of 2010.



In the 4th quarter of 2010 the General administration expenses increased by
0.09 mln EUR year on year to 1.0 mln EUR mainly due to the need for the
consultancies related to the implication of the Anti Monopoly Bill and attempts
to improve the image of the company insisting on the quality aspects.





Other net income/expenses



The majority of the income in Other net income/expenses relates to
constructions and government grants. The driver for this income stream is the
connections activity in Tallinn. Income and expenses from constructions and
government grants totaled a net income of 1.7 mln EUR in the 4th quarter of
2010 compared to a net income of 1.9 mln EUR in the 4th quarter of 2009, this
line varies throughout the year depending on construction volumes and estimates
to the profit margins on projects completed.



The rest of the other income/expenses totaled an expense of 0.23 mln EUR in the
4th quarter of 2010 compared to an expense of 0.06 mln EUR in the 4th quarter
of 2009. This line was mainly impacted by the change in accounting principles
as described in the financial accounts and notes to the accounts. In addition
it should be noted that more than 99% of debt is collected in a timely manner.



As a result the Company's underlying operating profit from sales of water and
wastewater for the 4th quarter of 2010 totaled 5.4 mln EUR compared to 6.7 mln
EUR in the corresponding quarter in 2009. In total the Company's operating
profit for all activities for the 4th quarter of 2010 was 7.1 mln EUR, a
decrease of 1.5 mln EUR compared to an operating profit of 8.6 mln EUR achieved
in the 4th quarter of 2009. Year on year the operating profit for the 4th
quarter has decreased by 17.3%.





Financial expenses



Net Financial revenues/expenses were 0.84 mln EUR in the 4th quarter of 2010,
which is a variance of 1.4 mln EUR or 250.3% compared to the net expenses in
the 4th quarter of 2009. The movement in net financial costs is mainly due to
the increase in the fair value of swap agreements as result of increased
interest rates and forecasts for the future.



The Company has mitigated partly the long term floating interest risk with 5
interest swap agreements, each with a principal value of 15 mln EUR. At this
point in time the estimated fair value of these swap contracts is still
negative, totaling 2.3 mln EUR, with a revaluation in the 4th quarter 2010 in
the amount of 1.1 mln EUR which offsets the interest costs increase and the
financial income decrease during the 4th quarter of 2010 thus contributing to a
net financial income.





Profit Before Tax



The Company's profit before taxes for the 4th quarter of 2010 was 7.9 mln EUR,
which is 0.09 mln EUR lower than the profit before taxes of 8.0 mln EUR for the
4th quarter of 2009.



Results for the twelve months of 2010



During the twelve months of 2010 the Company's total sales increased, year on
year, by 0.6% to 49.7 mln EUR. Sales of water and wastewater treatment were
45.2 mln EUR, a 0.1% decrease compared to the twelve months of 2009.



The underlying operating profit from the Company's main business activity,
sales of water and wastewater, for the twelve months of 2010 decreased by 10.1%
to 24.2 mln EUR compared to the twelve months of 2009.



The Company's profit before taxes for the twelve months of 2010 was 24.9 mln
EUR, which is a 2.9% decrease compared to the profit before taxes in the
relevant period in 2009.



The Company's net profit for the twelve months of 2010 was 16.4 mln EUR, which
is 5.3 mln EUR lower than the net profit of 21.7 mln EUR in the equivalent
period in 2009.





Balance sheet



During the twelve months of 2010 the Company invested 17.5 mln EUR into fixed
assets. Non-current assets were 150.2 mln EUR at 31 December 2010. Current
assets increased by 2.5 mln EUR to 33.7 mln EUR in the twelve months of the
year, with customer receivables increasing by 7.9 mln EUR and cash at bank
decreasing by 5.5 mln EUR.



Current liabilities increased by 8.5 mln EUR to 15.9 mln EUR in the twelve
months of the year. This was mainly due to a 1.1 mln EUR increase in Trade
payables and also due to 7.5 mln EUR increase in Current portion of long-term
borrowings.



The Company has a leverage level as expected of 60.1% with the future target
range within 60%. Long-term liabilities stood at 94.6 mln EUR at the end of
December 2010, consisting almost entirely of the outstanding balance of three
long-term bank loans. During 2nd quarter of 2010 we drew down an additional 20
mln EUR, and at the end of the 4th quarter of 2010 the total loan balance is 95
mln EUR, which is the total available loan facility. The weighted average
interest margin for the total available facility is 0.67%.



Cash flow



During the twelve months of 2010, the Company generated 27.0 mln EUR of cash
flows from operating activities, an increase of 0.33 mln EUR compared to the
corresponding period in 2009. 2010 operating cash flows were above 2009 cash
flows mainly due to the payment of unwinding costs in 2009. Underlying
operating profit still continues to be the main contributor to operating cash
flows.



In the twelve months of 2010 net cash outflows from investing activities were
12.0 mln EUR, which is 8.0 mln EUR more than in 2009. This is mainly due to
reduced inflow due to timing of compensations received for construction of
pipelines. At the end of 2010 the cash outflows in relation to fixed asset
investments were 17.1 mln EUR.



The cash outflows from financing activities were 20.5 mln EUR during the twelve
months of 2010 compared to a cash outflow of 18.6 mln EUR during the same
twelve months of 2009, representing the payouts of the dividends and income tax
on dividends and received loans following the loan drawdown.



As a result of all of the above factors, the total cash outflow in the twelve
months of 2010 was 5.5 mln EUR compared to a cash inflow of 4.0 mln EUR in the
twelve months of 2009. Cash and cash equivalents stood at 13.2 mln EUR as at 31
December 2010 which is 5.5 mln EUR lower than at the corresponding period of
2009.



Employees



At the end of the 4th quarter of 2010, the total number of employees was 319
compared to 336 at the end of the 4th quarter of 2009. The full time equivalent
(FTE) was respectively 305 in 2010 compared to the 322 in 2009. The decrease in
FTE is primarily due to reorganization in various departments at the end of
2009.





Corporate structure



At the end of the quarter, 31 December 2010, the Group consisted of 2
companies. The subsidiary Watercom OÜ is wholly owned by AS Tallinna Vesi and
consolidated to the results of the Company.



Dividends and share performance



Based on the results of the 2009 financial year, the Company paid 31,956,463
EUR of dividends. Of this 639 EUR was paid to the owner of the B-share and
31,955,824 EUR, i.e. 1.60 EUR per share to the owners of the A-shares. The
dividends were paid out on 11 June 2010, based on the list of shareholders,
which was fixed on 01 June 2010.



AS Tallinna Vesi is listed on OMX Main Baltic Market with trading code TVEAT
and ISIN EE3100026436.





As of 31 December 2010 AS Tallinna Vesi shareholders, with a direct holding
over 5%, were:



United Utilities (Tallinn) BV 35.3%
------------------------------------
City of Tallinn 34.7%
------------------------------------


We have seen the next two biggest shareholders Parvus AM and AKO Capital
reducing their holdings in the Company in the second half-year of 2010. Parvus
AM has declared that their shareholding in the clients' accounts fell below 10%
of the share capital and AKO Capital has declared selling their entire holding
in the Company.



At the end of the quarter, 31 December 2010, the closing price of the AS
Tallinna Vesi share was 7.89 EUR, which is an 11.13% increase compared to the
closing price of 7.10 EUR at the beginning of the quarter. During the same
period the OMX Tallinn index rose by 15.80%.





Operational highlights in 2010



· Company's overall operating performance is continuously good, most of
the quality aspects exceeding the level of 2009 as described in TSE notice on
24 January 2011.

· Baltic Corporate Governance Institute awarded the Company as the best
Corporate Governance in Estonia and OMX Nasdaq awarded the Company as the best
Investor Relations in Tallinn Stock Exchange. Ministry of Environment awarded
the Company with the title of “Environmental Player of the Year” in the
environmental management category.

· In the 3rd quarter the Anti Monopoly Bill (AMB) was passed by the
Parliament and approved by the President. The key impact for the Company will
be related to the fact that from 1 November onwards the tariff approval process
of the Company was transferred from the City of Tallinn to the Competition
Authority (CA). The main aim of the AMB is to control the profits of the water
companies. The CA has issued their recommendations how to calculate the allowed
return and revenues for the water companies. The Company finds it regrettable
that the regulator-to-be has yet only considered the price sensitivity of the
customers and ignored fully their expectations regarding the product and
service quality.

Another major issue arising from the proposed draft methodology for calculating
water and wastewater tariffs concerns one of the primary objectives of any
regulator - to guarantee an acceptable return on invested capital for
investors. Within the current methodology it appears that the Competition
Authority is excluding the privatisation value of the Company from the
calculation of justified profitability, which since 2001 has been included in
the calculation of justified profitability of the Company under current
regulation within the Services Agreement signed with the City of Tallinn.

· On 9 November the Company submitted its tariff application in
accordance with best practice regulation for privatized utilities, such as that
favoured by Ofwat in the UK. In its tariff application the Company has
requested that the Competition Authority should expand the definition of
regulated asset base to include the privatisation value of the utility. This
would ensure the privatisation contract was not unilaterally broken and would
respect the investments made in good faith into Estonia by our investors on the
basis of that contract. The Company has published its tariff application on its
website and to the Tallinn Stock Exchange and will keep its investors informed
of all future developments regarding the further key developments regarding the
processing of the tariff application. Still, at this point in time the Company
is unable to say what next year's tariffs will be as it is unclear at the
moment how the CA intends to analyze and proceed with the tariff applications.









Additional information:

Siiri Lahe

Chief Financial Officer

+372 6262 262

[email protected]







STATEMENT OF COMPREHENSIVE INCOME IV quarter IV quarter 12 months 12 months
(thousand EUR) 2010 2009 2010 2009

Revenue 12 465 12 895 49 680 49 368
Costs of goods sold -5 631 -5 072 -20 684 -18 155

GROSS PROFIT 6 834 7 823 28 996 31 213

Marketing expenses -214 -178 -787 -717
General administration expenses -1 017 -928 -3 651 -3 419
Other income/ expenses (--) 1 490 1 863 2 906 2 446

OPERATING PROFIT 7 093 8 580 27 464 29 523

Financial income 387 580 1 059 1 615
Financial expenses 450 -1 137 -3 624 -5 505

PROFIT BEFORE TAXES 7 930 8 023 24 900 25 633

Income tax on dividends 0 0 -8 495 -3 908

NET PROFIT FOR THE PERIOD 7 930 8 023 16 405 21 726
COMPREHENSIVE INCOME FOR THE 7 930 8 023 16 405 21 726
PERIOD
Attributable to:
Equity holders of A-shares 7 929 8 023 16 404 21 725
B-share holder 0,64 0,64 0,64 0,64

Earnings per A share (in euros) 0,40 0,40 0,82 1,09
Earnings per B share (in euros) 639 639 639 639






STATEMENT OF FINANCIAL POSITION
(thousand EUR) 31.12.2010 31.12.2009 31.12.2008

ASSETS
CURRENT ASSETS
Cash and equivalents 13 235 18 692 14 691
Customer receivables, accrued income and 20 088 12 227 7 199
prepaid expenses
Inventories 306 244 240
Non-current assets held for sale 76 77 73
TOTAL CURRENT ASSETS 33 705 31 241 22 203

NON-CURRENT ASSETS
Property, plant and equipment 148 179 142 964 141 800
Intangible assets 1 972 2 577 2 776
TOTAL NON-CURRENT ASSETS 150 151 145 541 144 575
TOTAL ASSETS 183 856 176 782 166 778

LIABILITIES

CURRENT LIABILITIES
Current portion of long-term borrowings 7 606 124 5 295
Trade and other payables 7 331 6 255 5 578
Short-term provisions 117 228 159
Prepayments and deferred income 810 747 1 265
TOTAL CURRENT LIABILITIES 15 864 7 354 12 296

NON-CURRENT LIABILITIES
Prepayment of single and developing areas 5 765 5 365 3 225
Borrowings 87 446 75 034 69 321
Other payables 1 419 115 47
TOTAL NON-CURRENT LIABILITIES 94 630 80 514 72 593
TOTAL LIABILITIES 110 494 87 868 84 890

EQUITY CAPITAL
Share capital 12 782 12 782 12 782
Share premium 24 734 24 734 24 734
Statutory legal reserve 1 278 1 278 1 278
Retained earnings 34 568 50 120 43 094
TOTAL EQUITY CAPITAL 73 363 88 914 81 889
TOTAL LIABILITIES AND EQUITY CAPITAL 183 856 176 782 166 778






CASH FLOW STATEMENT 12 12
months months
(thousand EUR) 2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit 27 464 29 523
Adjustment for depreciation/amortisation 5 620 5 698
Adjustment for profit from government grants and connection -3 312 -3 037
fees
Other finance expenses -14 -1 866
Profit from sale of property, plant and equipment, and -3 -10
intangible assets
Expensed property, plant and equipment 70 0
Change in current assets involved in operating activities -9 628 -1 580
Change in liabilities involved in operating activities 9 223 394
Interest paid -2 443 -2 479
Total cash flow from operating activities 26 978 26 643

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment, and intangible -17 055 -15 588
assets
Compensations received for construction of pipelines 3 945 9 956
Proceeds from sale of property, plant and equipment, and 16 15
intangible assets
Interest received 1 109 1 606
Total cash flow from investing activities -11 984 -4 012

CASH FLOWS FROM FINANCING ACTIVITIES
Received loans 20 000 44 800
Repayment of loans 0 -44 821
Dividends paid -31 956 -14 700
Income tax on dividends -8 495 -3 908
Total cash flow from financing activities -20 451 -18 629

Change in cash and bank accounts -5 458 4 002

CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD 18 692 14 691

CASH AND EQUIVALENTS AT THE END OF THE PERIOD 13 235 18 692


1. ASTV 12 months EUR.pdf
(https://newsclient.omxgroup.com/cds/DisclosureAttachmentServlet?messageAttachmentId=333297)

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