Where does the money go?

CONCERNING the matter of rental income paid by British Waterways Marinas Ltd (BWML) to British Waterways, that was aired in narrowboatworld, this was 657k in marina rents in the last financial year, writes Philip Ridal, British Waterways Finance Director.

The annual accounts for BWML since it started trading are all on the British Waterways website—put there so you can see the full picture for BWML if you wish.

Taken into account

When looking at the money available for waterway maintenance and repair, we look at the overall British Waterways group position, including BWML's profits. So as I said in my previous article, all the profits in BWML have been taken into account in providing income for waterway maintenance and repair.

Since 2009/10 BWML has paid a dividend that has consumed the greater majority of its after tax profits. The dividend in respect of the profits earned in the year ended 31st March 2010 was paid in arrears and recorded in the accounts for the 2010/11 year. In the period from incorporation up to 2008/09 BWML retained its after tax profits and didn't pay dividends to British Waterways.

Grow its business

The purpose of that was to provide cash funds for BWML to grow its business. The consequence of that policy was that less funds were needed for BWML as injections of new equity, but it caused some distortion between the cash funds in British Waterways that are retained for capital investment and the cash funds that are used for waterway maintenance.

Those distortions were adjusted periodically so that the correct cash positions were maintained. Since 2009/10 we decided to adopt a different policy whereby BWML pays out virtually all of its after tax profits as a dividend. The consequence of this policy is that BWML needs higher injections of new equity when it wishes to make new investments because none of its profits are retained for reinvestment. The overall net effect in cash term is the same except that the distortions in the British Waterways bank accounts don't now occur.

Where did the £4m come from?

The £4m used for the recent equity injection into BWML came from the capital bank account—i.e from the investment funds, not from spending money' used for waterway maintenance and repair.

Yes, 'real' family silver produces no income. My point was that our investment funds are for retaining and reinvesting. In our case, the investments that British Waterways makes are focussed on generating a regular cash income stream to add to the money available for maintaining and repairing the waterways.