BWML—numbers laid bare

INVEST in marinas or spend the money on maintenance? Explains Philip Ridal, British Waterways Finance Director:

It is important to make clear the distinction between the capital that British Waterways has and uses to invest in assets (such as property and marinas) and the day-to-day income that these assets generate that goes towards looking after the network.

Reinvested

British Waterways does not generally use capital funds (e.g. the proceeds from selling property) to subsidise expenditure on the waterways. Instead this capital is reinvested into other income generating assets. We could sell off property and other capital investments and spend the proceeds on maintenance, but it would be a very short term benefit and once all the properties and investments were sold - there would be nothing left to generate annual income for essential waterway repairs. This approach could be labelled ‘selling off the family silver'.

The funds invested into British Waterways Marinas Ltd (BWML) are capital funds that are therefore not available for spending on waterway maintenance.

Invested £millions into BWML

Of the 20 marinas owned and operated by BWML, 14 are leased from British Waterways on arm's length terms—BWML pays rent to British Waterways—four are leased from third parties and two are owned outright. The net value of these assets in the 2011 BWML accounts was £9.6m.

Returning a profit to British Waterways

BWML's has reported pre-tax profits as follows, 2005:£nil, £2006:£202k, 2007:£452k, 2008:£768k, 2009:£804k, 2010:£979k, 2011:£852k. These pre-tax profits have been fully taken into account in assessing the break even between income and expenditure that British Waterways targets from year to year.

This is made clear in the Financial Review section of British Waterways' Annual Reports where the profits from BWML are included in the British Waterways Group Income Statement and identified separately.

Is BWML a sound investment?

BWML makes a good return on its capital employed. In the year to March 2011 the pre-tax return on capital invested was 9% and has averaged 10%pa over the last five years. In common with all UK marinas, the occupancy of BWML's berths has been adversely affected by the recession, but is now increasing again due to the high standards of customer service and excellent quality of BWML's marina facilities. The average level of occupancy for the last five years has been 84%.

The business of BWML is well managed and successful, and British Waterways has supported it with a further £4m of equity for the purpose of acquiring marinas from third parties at a time when marinas are available to purchase at reasonable valuations, and offer an attractive return on capital. BWML is looking to acquire more marinas.