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Annual Report 2015
Annual Report
2015
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Annual Report 2015
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Contents2 Group Highlights4 Strategic Report: Executive Summary South Staffs Water SSI Services Echo Financial Review
32 Corporate Social Responsibility 38 Executive Team39 Corporate Information40 Directors’ Report 42 Corporate Governance 51 Directors’ Responsibilities Statement 52 Independent Auditor’s Report 54 Consolidated Profit & Loss Account 55 Consolidated Balance Sheet 56 Company Balance Sheet57 Consolidated Statement of Total Recognised Gains & Losses 57 Reconciliation of Movements in Consolidated Shareholders’ Funds58 Consolidated Cash Flow Statement 59 Notes to the Consolidated Cash Flow Statement61 Notes to the Financial Statements91 Group Five Year Summary 92 Contact Details
Group Highlights
South Staffs
Water bills reducing by
4% in real terms over the next
5 years
Echo successfully implement RapidXtra
into Dŵr Cymru (Welsh Water)
Growth in Group turnover, pre-tax profits
and free cash generation
South Staffs Water confirmed as top performing company
in Ofwat’s customer service SIM
ranking for the three years to 2013/14
SSI Services
establishes new Onsite Rail business
Group health and safety
targets achieved
with a significant
reduction in
RIDDOR
reportable incidents
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Group OverviewSouth Staffordshire Plc is a highly respected integrated services group of businesses with a regulated water supply company, South Staffs Water, comprising two operational regions, South Staffs and Cambridge, and two non-regulated service divisions, SSI Services and Echo.
Group StrategyThe Group’s strategy is to continue to grow by providing high levels of service quality while remaining price competitive and maintaining a safe working environment in all of the Group’s operations. Details of how the strategy is implemented across the Group are provided throughout the Strategic Report.
South Staffs WaterSouth Staffs Water has seen a year of change, partly resulting from the challenges arising from Ofwat’s Final Determination. Customers will see
water bills reduce by 4% in real terms over the five-year period to March 2020, meaning that customers will continue to see one of the lowest bills in the industry. The business has therefore had to make some difficult decisions to align its costs with this reduction in charges, including a reduction in manpower. It has become clear during the year that significant work is required at Seedy Mill Treatment Works to improve water quality performance. This is a priority for the business, which is working closely with the Drinking Water Inspectorate to enhance the site’s assets and performance.
During the year, it was confirmed that, for the three years to 2013/14, the business was ranked top out of the 18 companies in the England and Wales water industry for SIM, Ofwat’s measure of customer experience.
The business is now focussed on the challenges and opportunities that the AMP 6 investment period presents, including increased competition in the non-household sector, all of which will require the continued focus on operating efficiency and an excellent customer experience.
SSI ServicesSSI Services has seen a challenging year, being the last year of the AMP 5 investment period in the water industry when spending by some of its largest clients is typically lower than normal. Despite this, the division has managed to grow revenue through a combination of contract awards, successful new service offerings and one-off projects. However, profit margins have been impacted, due partly to start-up costs on some contracts and less emphasis by clients on planned work.
Strategic Report:Executive Summary
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In the Clean Water business, Hydrosave has continued to expand the interest in its proprietary valve release and maintenance system, and continues to develop its relationships with both Scottish Water and Thames Water. In the Wastewater Services business, the establishment of OnSite Rail promises to deliver future growth in the division. The Water Hygiene business secured a number of new clients and anticipates further growth in the current year.In this new year, SSI Services expects to see an upturn in water industry expenditure as well as an increase in profit margins following a series of efficiency and cost control measures that have been taken.
EchoEcho has had another successful year, with RapidXtra, its market leading customer information and billing system, going live in Dŵr Cymru (Welsh Water) and new contract awards and successful implementations to service Anglian Water Business and Severn Trent Services with their non-household
retail system requirements. Echo’s debt collection offering has been further strengthened with the acquisition of Grosvenor Services Group, which complements Echo’s office based collections expertise with Grosvenor’s field based skills. During the year Echo received recognition for its customer service excellence with nominations for three highly regarded awards. The introduction of increased non-household retail competition in the UK water industry is creating opportunities for Echo across all its service areas. The business is also working on a strategy to develop the Echo brand in sectors which offer opportunities for long term growth.
FinancialThe Group achieved year-on-year growth in turnover, pre-tax profits and free cash flows that were also ahead of the Group’s budget, despite some significant challenges being experienced in the year. However, operating profit and EBITDA both reduced, largely due to the impact of non-recurring charges.
EmployeesThe Group and its businesses continue to invest in its some 2,500 employees, with their safety and wellbeing of paramount importance. It has been a challenging year for many of our employees and we recognise and thank them for their hard work, innovation and commitment. All of our businesses have health and safety as a top focus, with health and safety targets met or exceeded during the year. All businesses are working towards the aim of a year-on-year reduction of workplace accidents.
OutlookWith many difficult decisions made last year in order to respond to changing environments, the focus in the Group is now very much on the present and the future which presents both further challenges and opportunity for development across all of the Group’s divisions. The Group will face these challenges head on and will look to maximise the impact of the opportunities that are apparent and which develop during this new year.
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Strategic Report:
South Staffs Water
Annual Report 2015
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South Staffs Water is a water only company, supplying around 1.6 million customers in the South Staffordshire and Cambridge regions. The business bills customers for sewerage services on behalf of both Severn Trent Water and Anglian Water Services.
A period of changeThis has been a year of challenge and change, during which the business has maintained its firm focus on delivering both high quality service and value for money.
In December the business received its Final Determination from Ofwat, representing the culmination of the regulatory price review process (PR14) for the period 2015-2020. This will see bills reduce by 4% in real terms over the five year period with customers continuing to enjoy the benefits of one of the lowest bills in the industry. Levels of service in a number of areas will also increase in
addition to the business’ commitment to the community and affordability assistance for customers in need. In order to provide these important benefits to customers the business has, during the course of the year, had to make a number of difficult decisions as we sought to align our costs and performance with the new benchmark. These changes have included a reduction in manpower, the closure of the defined benefit pension scheme to future accrual as well as a variety of other changes to improve efficiency.
We are especially grateful for the dedication of our staff as they have continued to seamlessly provide the vital 24/7 service to our 1.6 million customers in South Staffordshire and Cambridge throughout these challenging times.
During the year to 31 December 2014, the Cambridge region met the required drinking water quality standard on 100% of all tests carried out, with the South Staffs region achieving a compliance rate of 99.98%. It has though become clear that the water quality performance at Seedy Mill treatment works requires investment. The business is committed to responding to the Drinking Water Inspectorate’s (DWI) legitimate criticisms about Seedy Mill and has already put in place a number of tactical mitigating actions ahead of agreeing a more strategic investment with the DWI which will restore the asset’s performance to the expected level and remove any immediate risk of quality failures. Similar investment is being actively considered in relation to Hampton Loade treatment works. We will work tirelessly to ensure customer interests continue to be protected in this key area of our operation.
As the UK water industry’s landscape changes, South Staffs Water remains committed to driving the delivery of exceptional customer service, high quality water and affordable bills.
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The last 12 months has seen the completion of our new nitrate treatment works at Fleam Dyke in Cambridge. This new plant will provide compliance with the regulatory standards for nitrate concentration through to 2035.
During the year it was confirmed that, for the three years to 2013/2014, the business was top in the industry for SIM, Ofwat’s measure of customer experience. This ranking is especially important as it acknowledges South Staffs Water and Cambridge Water as delivering the best customer experience out of the 18 companies in the England and Wales water industry. Whilst we are delighted with this achievement, the work continues on customer service and we are determined to maintain the business’ leading position. 4% reduction
in bills over next 5 years
top in theindustry for SIMfor the 3 yearsto 2013/14
£
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• Weaimtoachieve100%waterquality compliance across both regions.
• Wearecommittedtoimprovinghow our customers perceive the quality of our water through its appearance, taste and odour, particularly in the South Staffs region.
In addition to our regulatory commitments, we have set improving the quality of our water as the pre-eminent target for the business moving forward. The period ahead will likely see significant investment into key production assets both in the South Staffs and Cambridge areas of operation as we seek to improve the water quality for customers in the long-term.
Secure and reliable suppliesAn unusually dry autumn period brought some challenge to the water resource position but this was managed effectively and resulted in no customer impact. We are pleased to report that we have a healthy resource position for the 25-year planning horizon with no new resource development required,
A plan for our futureThe last 12 months has brought about the completion of the PR14 regulatory process. The resulting plan has been founded on one of the largest pieces of customer engagement we have undertaken to date. This direction is expressed through 5 Outcomes and 15 specific Outcome Delivery Incentives, covering all aspects of our operations from excellent water quality and customer service to fair customer bills and environmentally sustainable operations, as well as the provision of secure and reliable water supplies. In addition, we have also developed further targets which will create sustained focus on employee satisfaction, health and safety and readiness for business retail competition.
Continued commitmentExcellent water quality now and in the futureThe quality of water we deliver to customers daily is ultimately the most important thing we do. Our commitment is to invest more in our treatment works and networks over the next five years and beyond.
Planning is at an advanced stage on the UK’s largest rainwater recycling system at the North West Cambridge development. The innovative development, in partnership with the University of Cambridge, has two water supplies installed on the 150 hectare site – one which recycles rain and surface water to use for flushing toilets, clothes washing and garden watering, and another supplying high quality treated water for drinking, cooking and bathing. Both are designed to minimise potable water consumption at the £1 billion development which will include 3,000 homes, 2,000 student rooms, a supermarket, hotel and school, as well as other community facilities.
We have finished the AMP 5 investment period having delivered our plans and commitments yet remain mindful of the challenge and opportunity that AMP 6 presents. The next five years will undoubtedly require increased innovation and greater customer engagement alongside our traditional focus on operating efficiency, long-term asset stewardship and excellent customer experience.
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although we have increased our long-term focus on water resource planning in the Cambridge region as this area is more constrained than the South Staffs region. Water efficiency will continue to be a key focus and we are committed to helping all of our customers change the way they value and use water every day. We need to protect our water supplies as our communities grow and demand increases. We are anticipating significant population growth in the Cambridge region over the coming years accompanied by increased pressure on water resources. We will work closely with the Environment Agency to balance the needs of customers with the environment.
We will continue to:• Ensuresupplyinterruptionsareless
than 10 minutes when supply is affected.
• Ensureourpipesandnetworksarewell maintained.
• Investinefficientpumpingstationsacross our regions to make sure supplies are secure and reliable.
• Increaseeducationalengagementconcerning water efficiency.
Excellent service to customers and the communityWe remain committed to exceeding our customers’ expectations. With the introduction of new SIM measures, we will continue to target being in the industry upper quartile. We will continue to invest in the training and
development of all of our front line staff both in our contact centre and out in the field to ensure we deliver a seamless experience with first time resolution of customer issues where possible.
As communication channels grow and expectations change, our investment in a new website and multi-channel contact system will provide greater choice and flexibility for our customers – making it simple, flexible and accessible whatever the channel of choice.
We will deliver at least 400 days of employee volunteering within our communities per year. From help with events, education programmes and
UK’s largest rainwater recycling system at the North West Cambridge development will supply
3000homes
2000student homes
school andsupermarket
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Over the next five years, we will engage each year with 30,000 customers in debt, helping them manage their water accounts and take control of their water consumption through metering. Many customers are better off on a meter, particularly if they combine this with water efficiencies in the home and in the garden. We will continue working to support customers switching to a meter where they choose to or it is in their interests.
Our people are our businessWe recognise the outstanding commitment of our employees. There has been an even greater focus on employee safety and this is endorsed by our target to reduce accidents within the workplace by a further 10% over the next 12 months.
We are also committed to making South Staffs Water a great place to work. Our employee survey has played an important role in us understanding the feelings and motivations of our people and we will continue to use
school visits to biodiversity projects that will enhance the environment, we will raise our profile and develop strong and lasting partnerships.
Operations that are environmentally sustainableOur long term track record on leakage is good and we will aim to maintain this high level of performance. The average level of leakage during 2014/15 was below the target set by Ofwat although higher than 2013/14, primarily due to an increase in burst mains.
Our commitment to the environment will see us deliver innovative biodiversity projects across our regions, and at the same time, we are committed to reducing our carbon emissions from the power we use to pump water around our networks.
We will continue to invite our communities to visit our sites that are open to the public and continue to promote an active education programme to support local
school children in growing their knowledge of the water cycle and the environment we live in.
Fair customer billsWe are committed to making sure our bills remain affordable. Our customer bills have been 24% lower than the national average and, over the next five years, we are committed to ensuring our bills will fall by 4% in real terms and will continue to support our most vulnerable customers with help when they need it most. During 2014/2015, we provided debt support to 17,866 customers across both regions.
For customers that struggle with bills, we have a range of solutions including our Charitable Trust, Water Direct and WaterSure. The year ahead will see us develop our strategy on affordability and shape our approach to offering a social tariff for customers that need additional financial support, which is expected to launch in April 2016.
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this measure to develop training programmes that will enable people to develop new skills.
Retail readinessAs the blueprint for competition within the non-household sector is now almost complete, we are preparing systems, processes and organisational structures to accommodate this shifting landscape. We fully understand the proposed direction and welcome the prospects that retail will bring to our industry and how it will shape and transform our business.
The year aheadThe business remains focused on delivering its primary objective of supplying excellent water quality consistently to customers as well as achieving our broad range of other performance commitments. We see our commitment to stakeholder engagement, customer challenge and transparency increasing still further. We will continue to provide our people with a safe and rewarding working environment.
As we begin the next five year regulatory cycle we are focused on ensuring that the predicted benefits of investing £480 million are realised to their full extent.
£480millionplanned AMP 6investment
Strategic Report:
SSI Services
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SSI Services is made up of three business areas: Clean Water, comprising IWS and Hydrosave; Wastewater, made up of OnSite, OnSite Specialist Maintenance and Perco Engineering Services; and Water Hygiene which also trades as IWS. In addition Omega Red, which provides lightning protection and electrical earthing services, also trades as part of SSI Services.
Review of last yearLast year was a challenge for SSI Services, being the last year of the water industry five-year AMP cycle when spending by some of our largest clients is typically lower than normal. In spite of this, the division has managed to grow revenue through a combination of new contract awards, new service offerings that have been developed and one off projects. However profit margins have been impacted, partly
services through a number of specialist operating companies using a nationwide mobile operation and maintaining long-term relationships with our customers, providing a quality service at competitive prices.
The division has around 1,500 employees, all of whom are key to us being successful, with the majority operating remotely and in often challenging environments. Health and safety is therefore very important to us and we continue to focus on developing a strong health and safety based culture across all of our businesses. We have seen frequency and severity rates of accidents reduce further in the year, as well as achieving a number of awards and maintaining our existing accreditations.
SSI Services is the Group’s specialist infrastructure contracting division. We provide a broad range of specialist infrastructure based services from design through to installation, testing and repair to long-term maintenance. Our focus is on regulated environments and legislative needs, managing client risk and using specialist technologies to provide added value.
We have developed a broad customer base across both the public and private sectors from all major water utilities, government agencies and local authorities through to major contractors and facilities management (FM) companies. Whilst we historically mainly worked in the water and wastewater sector, we are now increasingly operating in the water hygiene, rail, power generation, industrial and construction markets. Our strategy is to deliver these
SSI Services is focusing on enhancing productivity, including investment in technology, to fully benefit from opportunities that are arising.
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due to the mix of work available with less emphasis by our clients on planned work, and start-up costs on some contracts. In response to changes in activity and margin, SSI Services has sought to drive productivity and to reduce overhead, putting itself in a good position to benefit from an anticipated increased expenditure from our clients in this new year and new AMP cycle.
Clean Water ServicesThe Clean Water business includes three operating units – IWS Mechanical and Electrical (M&E) Services, IWS Pipeline Services and Hydrosave, which provides water management services; with a number of common clients across the three businesses.
Busi
ness
are
as:
cleanwater
waterhygienewastewater
1500employees
lightningprotection
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The business continued to provide its specialist services to a number of the Water and Sewerage companies, together with government agencies, which also includes the provision of versatile temporary and environmentally friendly dams (branded as Portadam). The new contract secured in Canada to provide CCTV and sonar surveys was mobilised during the year and represents a step up in the scale of work by OnSite in that country. A key development has been the successful establishment of OnSite Rail which provides OnSite’s wastewater services to the rail sector, focussing on drains, culverts and water courses on and under the tracks and stations, thereby reducing the impact on OnSite of the AMP cycle in the water industry.
During the year, OnSite’s sewer lining business continued to work closely with our key customers, including a number of the Water and Sewerage companies, providing CIPP and UV lining services.
its work with Thames Water. In addition, Hydrosave has continued to expand the interest in its proprietary valve release system and the offering of a complete valve maintenance service, as well as building on its track record of non-destructive testing of pipes and other specialist technical services which are used across the water utility industry.
Wastewater ServicesOnSite, which offers specialist wastewater services, including flow monitoring, sewer rehabilitation and CCTV surveys, had a difficult year due to the expected cyclical reduction in demand associated with the end of the water industry’s AMP period being more significant than had been expected. Although lower margin reactive work continued at higher levels in the year, OnSite has now terminated this reactive work following the year end to focus on its higher margin activities.
The M&E business has continued to see revenue growth in the year with its key clients and has a number of important long-term framework contracts that it is tendering for which provide good opportunities for further growth and will replace the loss of work with the Coal Authority with whom the business had worked for a number of years.
Pipeline Services has also grown its revenue in the year. In addition to work carried out for South Staffs Water, the business has increased work for a range of other water industry customers and the current year should see margins on this new work improve.
Hydrosave specialises in leak detection and water management services. Hydrosave will continue to focus on providing leading leakage detection services to framework customers across the UK from Scotland to the South coast. During the year Hydrosave became sole supplier to Scottish Water and since the year end has significantly grown
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The specialist repair services of Perco, which offers no-dig technology services, and OnSite Specialist Maintenance, our specialist structural repairs and waterproofing business, both undertook a number of successful projects for a range of customers across different sectors during the year.
Water HygieneIWS Water Hygiene is a market leading provider of legionella control services and water hygiene risk assessment, maintenance and remedial works, together with a comprehensive water treatment service, to a wide range of customers including local authorities, housing associations and FM
companies. The business offers a 24 hours a day, 365 days a year national mobile service supported by the use of technology, which we continue to invest in.
IWS Water Hygiene secured a number of new clients during the year and continued to enhance operating efficiency following the investment in business development resources as well as operational initiatives. Further growth is anticipated reflecting the full year benefit of contracts already secured and the pipeline of opportunities being pursued.
Looking to the futureLooking ahead, SSI Services is well placed to see further growth as it pursues a number of opportunities and expects to start seeing the upturn in water industry expenditure during the year, coupled with a reversal of the decline in profit margins following a series of initiatives to improve efficiency and control cost. A number of new activities such as Onsite Rail are also looking promising to support this future growth.
Nationwide mobile
operation
Strategic Report:
Echo
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The expansion of non-household retail competition in 2017 is a significant priority for UK water companies. Acknowledging this, we have been heavily engaged with water companies on the potential for RapidXtra to service their commercial customer retail system requirements.
This engagement, combined with the significant investment made in product development, has already resulted in contracts being secured for Anglian Water Business and Severn Trent Services. These successes should provide the foundation for RapidXtra to be the water billing system of choice within the new ‘competition’ based market.
2014/15 was a year of growth for Echo with some significant contract wins, strategically important contract renewals and an array of ongoing implementations. Over achieving against both profit and cash targets, Echo also launched a new corporate website and created a vision, mission statement and a set of values that outline the company’s core purpose, ethos and culture, which will underpin the business strategy moving forward.
Market leading customer billingEcho’s billing and customer information system, RapidXtra, continues to hold a market leading position within the UK water sector. With nine client implementations already delivered, RapidXtra’s single largest client, Dŵr Cymru (Welsh Water), serving approximately 1.5 million homes and businesses, went live successfully with the system in 2015.
Echo Managed Services (Echo) is a specialist outsourced provider of complex multi-channel customer contact services, comprehensive debt management solutions and the developer of the market leading water billing and customer information system, RapidXtra.
Echo’s key focus is to help its customers deliver a high quality end-to-end customer journey. Combining best practice specialist services and solutions with highly skilled and knowledgeable people, our three core services help our customers to improve their billing, debt recovery and customer contact processes to enhance their customers’ experience, build loyalty and enhance profitability.
Echo works closely with its customers in all areas of its core services, demonstrating a total commitment to quality customer experiences.
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Strengthening our collections divisionThe market for debt collection services remains buoyant and the demand for services is strong. The challenges of universal credit, protection for vulnerable customers, innovative methods of collections and ways of ascertaining customers’ ability to pay are key issues affecting the sector. Quality data, efficient systems and positive customer engagement are at the forefront of debt recovery strategies.
Our position in the sector has been further strengthened with the acquisition of utilities market specialist, Grosvenor Services Group in February 2015. Combining Grosvenor’s field based skills with our existing office based collections expertise and
888,246ceramic poppies
£30mEcho’s turnovergrew to over
for the first time £30m
93,000 calls handled for
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comprehensive multi-site contact centre resource further strengthens the end-to-end customer contact proposition. The acquisition of Grosvenor follows our 2011 purchase of Inter-Credit International, which continues to demonstrate a consistent ability to outperform competitors on the contracts in which it operates.
Customer contact service excellenceOur Bristol operation continues to provide specialist outsourced, managed and insourced multi-channel customer contact services to leading public and private sector organisations, offering end-to-end contact management capabilities, from entry level bureau services through to comprehensive, analytics-enabled multi-channel programmes.
We were particularly proud to be chosen, due to our agile and flexible approach, to provide the customer contact service for the high profile Tower of London Remembers
campaign, an installation of 888,246 ceramic poppies to commemorate the fallen in World War I. In addition, Echo Bristol developed its 24/7 and out of hours services during the year with contract awards to deliver incident management services for Mouchel and Anglian Water.
In the water sector, SIM continues to shape companies’ approaches to improving the service provided to customers, including a focus on first contact resolution and reducing repeat and unwanted contacts. Echo works closely with its clients to improve their SIM performance, demonstrating a total commitment to quality customer experiences.
Since the new Northern Ireland Water contract was signed last July, Echo has been busy delivering service whilst implementing the structure and updated technology set to support the new contract. The new service combines innovative new functionality within RapidXtra including knowledge management
and multi-channel capabilities. The contract transition went smoothly and phase one of new technology deployment was successfully deployed in May 2015, with further software releases planned in September 2015 and in early 2016.
Our expertise in managing multi-channel customer contact programmes has assisted South Staffs Water in delivering their Digital Programme, providing enhanced Intelligent Voice Recognition (IVR) capability, a new website with extended “My Account” functionality and a richer, more flexible approach to handling multi-channel customer enquiries, designed to make it easy for customers to engage with their water company and resolve queries.
During the year, Echo’s customer service excellence received external recognition, as we were named as finalists for two European Contact Centre and Customer Service awards
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and one UK National Contact Centre award. We also joined the Institute of Customer Service, the UK’s independent professional body for customer service, a further indication of our ongoing commitment to deliver exceptional customer experiences on behalf of our clients.
Looking to the futureThis new year promises to be a year rich in opportunities for growth. In particular, it is anticipated that the expansion of non-household retail competition in the UK water industry in 2017 will create opportunities for Echo across all service areas.
Proud to be a member of the Institute of Customer Service
Through our focus on pursuing opportunities to add new clients, continuing to expand the services provided to existing clients and the ongoing process of identifying and acquiring businesses aligned with our strategy and which add value to our client base, we expect to see a period of sustained growth across our three core business areas.
To support this, Echo has strengthened the sales and marketing team and put in place a renewed strategy to establish our brand in sectors which offer opportunities for long-term growth.
Strategic Report:
Financial Review
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OverviewIn the year ended 31 March 2015, the Group achieved year-on-year growth in turnover, pre-tax profits and free cash flows that were also ahead of the Group’s budget, despite some significant challenges being experienced in the year.
The Group monitors its financial performance through its success in achieving or outperforming certain targeted Key Performance Indicators which include but are not limited to EBITDA, operating and pre-tax profits, free cash flow, net debt and trade debtor days.
Turnover & ProfitGroup turnover increased by £14.2m (6.3%) to £238.9m (2014: £224.7m) in the year, with growth experienced in all of the Group’s divisions. Turnover in South Staffs Water increased by £4.4m to £125.9m, largely due to the price increase on water bills allowed by Ofwat of 2.0%, being an increase in the Retail Price Index of 2.6% and a “k” factor for the year
of -0.6%, and also an increase in water consumption compared to the previous year. Turnover from the Group’s non-regulated service businesses increased by £9.9m (9.6%) to £113.0m, with another very successful year for Echo, including the positive impact of the completion in the year of significant projects and sales growth from new contracts awarded in the year. SSI Services also experienced sales growth particularly in the Clean Water operations although, as explained below, due partly to a change in the mix of work delivered compared to the previous 12 months this has not led to higher levels of profitability in the division.
The Group’s operating profit of £46.1m (2013: £47.5m) represents, a reduction of £1.4m from 2013/14 due largely to the impact of non-recurring costs in 2014/15 including restructuring charges that were necessary in all three divisions. However, the level of profitability was ahead of expectations at the start of the year.
Operating profit from South Staffs Water of £36.0m was marginally higher than 2013/14 and reflects the turnover growth detailed above, further operating cost efficiencies achieved in the business during the year, but partly offset by some specific cost increases, including energy related costs and non-recurring charges including those related to the necessary restructuring of the business in preparation for the new 5-year AMP 6 period which commenced in April 2015. Operating profit from our non-regulated businesses reduced to £10.1m (2014: £11.6m). This was despite higher turnover with the growth in sales more than offset by the impact of the change in the mix of work carried out in the SSI Services division, which saw a reduction in sales in more specialist higher margin activities, particularly in the water sector in the final year of the AMP 5 expenditure cycle, where customer budgets were tightened significantly and more than had been anticipated. The sales growth came in lower margin work and also there
The Group remains deeply committed to its focus on cash generation and to keeping working capital at efficient levels.
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were some non-recurring charges, again including restructuring costs in both Echo and SSI Services. Group EBITDA amounted to £78.0m (2014: £80.2m).
Group finance charges (net of interest receivable) reduced significantly to £10.1m (2014: £12.4) in the year mainly representing the full year impact of the refinancing of bank debt in 2013/14 at lower interest rates. Overall, profit before tax increased from £35.1m to £36.0m.
Tax The Group’s current tax charge increased by £0.7m to £4.9m, partly reflecting higher Group pre-tax profits. The total corporation tax charge for the year increased to £8.3m (2014; £1.3m) largely due to the charge in 2013/14 being reduced by a non-cash credit to deferred tax in respect of a reduction to future tax rates (£3.2m) and also the non-cash deferred tax impact of a reduction in discount rates at 31 March 2015
Group turnover increased by£14.2m to
£238.9m
compared to the previous year, which have increased the Group’s discounted deferred tax liabilities. Total corporation tax payments in the year amounted to £3.3m (2014: £2.4m).
Cash Flow Group cash flow from operating activities was well ahead of the target for the year and increased by £7.8m to £82.8m (2014: £75.0m) mainly as a result of favourable working capital movements compared to the previous year which is encouraging, especially given the sales growth achieved, which required working
2011 2012 2013 2014 2015
£66.0m£61.0m£56.4m£75.0m
£82.8mOperating cash flows
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capital investment and that collection of trade debtors remains challenging. The Group remains deeply committed to its focus on cash generation and to keeping working capital at efficient levels.
The Group’s net cash interest payments of £6.0m reduced from the previous year by £1.9m again largely reflecting, as with the profit and loss charge, the full year effect of lower interest payments being made in the year due to lower rates achieved on bank debt that was refinanced in quarter 4 of 2013/14.
Group capital investment (net of disposals and capital contributions) was £34.1m compared to £35.6m in 2013/14. In total, South Staffs Water invested £32.0m (2014: £32.5m) in capital assets, (net of contributions), resulting in the overall 5-year cumulative AMP 5 expenditure (for the two regions of South Staffs and Cambridge) of £168.1m being in line with Ofwat’s Final Determination.
Overall, due to higher operating cash flows, lower interest payments and the planned reduction in capital expenditure in the year, free cash flow increased by £10.3m to £39.3m.
DividendsTotal dividends paid and proposed in the year to 31 March 2015 were £27.1m. This includes final dividends of £12.9m paid in the year but being in respect of the 2013/14 year and £14.2m interim dividends in respect of 2014/15.
Net Debt and LiquidityThe book value of Group net debt at 31 March 2015 amounted to £349.7m, largely the same as that at 31 March 2014 (£349.8m).This book value differs from the value used for borrowing covenant reporting purposes of £335.5m (2014: £337.7m) which excludes unamortised premium and issue costs and uses actual inflation at the relevant dates as opposed to the long-term inflation assumption used in the book value of index-linked debt. The reduction in the covenant value of net debt from March 2014 of £2.2m largely reflects overall cash generation of £5.6m, after acquisition payments and payment of dividends, partly offset by the impact of higher values for index-linked debt of £4.1m, representing indexation of these borrowings during the year.
In South Staffs Water, net debt for covenant reporting purposes was £217.0m (2014: £220.6m) being 63.3% (2014: 64.4%) of its Regulated Asset Value (RAV) of £342.8m (2014: £342.5) representing the PR09 Final Determination RAV uplifted for inflation. This ratio reflects the net impact of better than expected free cash generation in the year and inflation (RPI) at March 2015 of 0.9% (March 2014: 2.5%), which is used to inflate RAV, whereas the majority of index-linked debt was inflated using RPI at July 2014 which was higher at 2.5% (July 2013: 3.1%). While the dividend policy for South Staffs Water allows dividends to be paid up to 77% of net debt/RAV, the expectation for this ratio is in the region of 66%. The Group and South Staffs Water have maintained, and continue to forecast to maintain, significant headroom in respect of all borrowing covenants. Standard and Poor’s continues to rate South Staffs Water as BBB+ and South Staffordshire Plc continues to be investment grade rated.
At 31 March 2015, the Group had available £42.7m of undrawn bank borrowing facilities (2014: £37.4m) and surplus cash of £4.7m (2014: £8.1m), providing significant liquidity headroom.
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PensionsThe Group’s contribution to all of its occupational pension schemes in the year was a significant £6.1m (2014: £5.3m). During the year, the Group enrolled over 1,300 employees into a new Group Personal Pension Plan under the government’s Automatic Enrolment initiative. In order to reduce operating costs and cash flow uncertainty and increase pension benefit consistency across the Group, on 1 April 2015, the South Staffordshire section of the final salary Water Companies Pension Scheme (WCPS) was closed to future accrual with active member benefits accrued up to that date being preserved and increasing by inflation each year to retirement with contributions now being paid into an alternative defined contribution Group Personal Pension Plan to provide additional benefits.
The Cambridge Water section of WCPS was closed to future accrual in 2010. The Group’s current funding deficit contributions in respect of both of its sections of WCPS of £2.2m per annum plus inflation will continue to be paid. As at 31 March 2015 the actuarial valuation of the Group’s final salary pension schemes (prepared in accordance with FRS 17 for accounting as opposed to funding purposes) showed a post-tax surplus of £12.5m (2014: £12.2m).
Principal Risks and UncertaintiesThe Group has an established risk management framework which aims to ensure that all significant business and financial risks and uncertainties that the Group is exposed to are identified and appropriately managed. Significant risks and uncertainties of the Group that are
required to be managed include, but are not limited to, health and safety, water resources and quality, market reform in addition to product and service quality. The main financial risk the Group is exposed to is credit risk. Further details of financial risks and the way they are managed are provided in note 28 to the Financial Statements. The Board of Directors believe these risks are appropriately managed by the Group.
The Strategic Report on pages 4 to 31 is approved on behalf of the Board of Directors.
A PageGroup Chief Executive30 July 2015
1,300+employeesauto-enrolled into a new pension plan
South Staffs Water AMP 5 capital target of
£168 million invested
Corporate Social Responsibility
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The Group recognises the obligations that come with Corporate Social Responsibility (CSR) and aims to be responsible and accountable in the way that we operate. In 2014/15, our CSR focus has remained on our employees, the environment, the communities in which we operate, and of course our customers.
EmployeesThe Group has around 2,500 employees, all of whom are critical to our continued success and development. All of our businesses continue to invest in their people, their health, safety and wellbeing and we aim to ensure South Staffordshire Plc remains a safe Group to work for and to provide a good working environment for everyone. -Health and safetyThe effective management of health, safety and wellbeing of our employees is of paramount importance to the Group.
Each business takes responsibility for the health and safety of all of its
employees. A Group level Health and Safety Strategy Forum, led by the Group Chief Executive and supported by the Group Health and Safety Manager, continues to oversee activities in this area of the business.
During the year, the Group established a long term Health and Safety Strategy, aimed at a year-on-year reduction in workplace accidents. The strategy covers five elements: Leadership, Management Reporting, Workforce Involvement, Risk Reduction and Accident Reduction.
Several initiatives were highlighted during the year, including:• Theimplementationofonline
driver licence checking within the Group’s fleet;
• Thedesignanddevelopmentofa Group Accident Database for the collation and reporting of all accident data, which should improve our response to accidents and help reduce them in future;
• Wellbeingweekswererunatvarious Group businesses;
• InOnSite,employeeswereengagedthrough a health and safety poster competition for their children;
• TheintroductionofHydrosave’sone minute safety check for van drivers provided a good visual communications safety campaign.
The majority of our businesses have external accreditation for their health, safety and environmental management systems. For example, IWS has been awarded five consecutive RoSPA Gold Medal Awards for Occupational Health and Safety, and in 2014 was a winner of the British Safety Council International Safety Awards. Many Group companies also hold ISO 9001 quality management and OHSAS 18001 Occupational Health and Safety management accreditations, and are part of the Safe Contractor schemes.
All employees have access to specialist health advisors who can provide proactive health surveillance and advice.
The Group carried out a range of CSR activities during the year, with specific focus on health and safety, biodiversity and charity involvement.
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Effective leadership, commitment, employee engagement and a consistent message has all helped return a much improved performance, which saw the 2014/15 health and safety targets either achieved or exceeded. This is typified by the Group’s performance regarding the number of RIDDOR reportable accidents in 2014/15. The final number was 8, which was a significant improvement when compared to the previous year’s 15. The RIDDOR Incident Rate for 2014/15 finished at 2.90, a 44% improvement on the previous year’s rate (5.22) and the best year yet.
In order to maintain the momentum going forward, annual milestones have been set for the current year at a minimum of 10% improvement on 2014/15’s performance.
- Training and developmentThe Aspire Graduate Development Programme continues to offer the chance to make a flying start to careers in the Group with the
WaterAid/Eliza Deacon
44% reductionin RIDDOR incident rate
£206,000total charitable donations with over raised for WaterAid £30,000
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opportunity for development in varied, challenging and fulfilling careers. Areas covered include project management, engineering, customer services, planning, people management, commercial and financial management.
During the year Echo started to create and develop a programme where each individual employee’s learning and development journey becomes a personalised experience, where the information that employees need is always within easy reach. The first stage of the project has been to create Echo’s new e-pod platform, where employees can access new articles and industry websites, call recordings demonstrating best practice, and e-learning modules, classroom sessions and open coaching sessions. Echo will also offer access to external development sites such as Future Learn and the Open University.
Our subsidiaries, Echo and Perco hold Investors In People (IIP) accreditations which recognise talent and reward success at every opportunity.
- Equality and fair treatmentThe Group has a policy of equal opportunities and non-discrimination in all forms of employment. All businesses are committed to a positive working environment, free from any discrimination or unfair treatment. Every reasonable effort is made to provide disabled people with equal opportunities for employment, training and promotion, having regard to their particular aptitudes and abilities.
EnvironmentMuch of the Group’s energy use is related to the essential water treatment and pumping activities of South Staffs Water. The Group continues to identify opportunities to reduce its energy consumption, by improving efficiency of operations and to investigate opportunities for generating renewable energy. This is key in managing and reducing carbon emissions and energy use for environmental benefit and the associated cost savings. The Group also works on a number of biodiversity, water efficiency and community education programmes.
The South Staffs Water Employee Volunteer Scheme presents staff with the opportunity to work in the community on various projects. The partnership with the Black Country and Birmingham Wildlife Trust, which began in March 2014, has continued throughout the year with a range of activities to increase biodiversity at an area of land owned by South Staffs Water with public access at Sedgley Beacon.
South Staffs Water also actively took part in Water Saving Week. Activities included visiting key accounts, local Citizens Advice Bureaux and community groups to encourage customers and businesses to become more water efficient.
SSI Services also makes environmental matters a priority. Each of the businesses within the division has a QUENSH manager who coordinates their business’ environmental activities. These range from working to reduce site waste to promoting safe and efficient driving and procuring materials and equipment with consideration to reducing the environmental impact of our operations.
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As a result of their activities in this area, a number of businesses have achieved and maintained ISO14001 Environmental Management status.
CommunitiesOur CSR programme is focused on giving something back, at a grass roots level, to the communities we serve and operate in, as well as further afield.
The Group made charitable donations of £206,000 during 2014/15, in addition to the Group’s coordination of WaterAid fundraising activities continuing in force. South Staffs Water was able to raise its highest ever sum of £12,000 at its annual dinner dance, which included a talk from our education co-ordinator, who spent a week in Uganda seeing first-hand the services WaterAid is able to provide. Over £30,000 was raised for the charity during the year.
During the year, South Staffordshire Plc employees took part in a Wolf Run 10km obstacle course and Hydrosave employees organised a cake bake, raising a total of over £4,000 for Acorns Children’s Hospice, a Midlands-based charity offering a network of care for life limited and life threatened children and young people, and their families.
Echo Managed Services were proud to be involved with planting poppies at the Tower of London, through their contract with Historic Royal Palaces to handle public orders for the ceramic works of art. Downing Street beckoned for one South Staffs Water employee as a thank you for his awareness raising and fundraising activities for the Liam Fairhurst Foundation.
Education also plays a vital role in all our community engagement activity. Throughout recent years we have continued to develop our portfolio of education support to enable us to offer benefits to the wider community. We work closely with a range of schools and education partners to offer children and adults opportunities to enhance their understanding of the world of work and the water industry, as well as
more global subjects such as water and the environment.
For example, to help raise awareness of Water Saving Week, South Staffs Water invited pupils from a local primary school to design a water saving advert, with the winning design reading “Let’s all save water because we have some and some don’t” being featured in the Express and Star.
CustomersPutting customer satisfaction at the top of the Group’s agenda, building and further developing relationships with our customers, whether household or business customers, and innovation are all key to the future of the Group.
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3. Dave TaylorManaging Director of SSI ServicesAppointed Managing Director of SSI Services in May 2015, having been the Managing Director and founder of OnSite Specialist Maintenance, formerly Data Contracts, for several years before moving into a divisional role at SSI Services as Commercial Director in January 2015.
4. Nigel BakerManaging Director of EchoAppointed as Managing Director of Echo in April 2014 having been Operations Director since October 2005. Prior to working with Echo, Nigel worked with Barclays Stockbrokers and Charles Schwab Europe.
1. Adrian PageGroup Chief ExecutiveAppointed as Group Chief Executive in January 2013, having been Group Finance Director since April 2004. Previously Group Finance Director of South Staffordshire Group Plc from 1998 to 2002. Prior to this Adrian was with ACT Group and KPMG. Adrian is also a Board member for the Water Companies Pension Scheme Trustee Company.
2. Phil NewlandManaging Director of South Staffs Water Appointed Managing Director of South Staffs Water in April 2014 having previously been Managing Director of Echo. Prior to joining Echo, Phil was a Management Consultant with Automatic Data Processing (ADP) and Terence Chapman Associates.
The Executive Team
5. Jason GoodwinDirector of Finance and Company SecretaryAppointed as Director of Finance in October 2007 having joined the Group as Group Financial Controller in March 2004 prior to its demerger from Homeserve Plc. Prior to this Jason spent over six years with Deloitte. Jason is also Company Secretary and a Trustee of the South Staffordshire Money Plan Pension Scheme.
1. 3. 4. 5.2.
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Directors Jesús Olmos - Chairman
Adrian Page
Ram Kumar
Roger Ammoun
Secretary Jason Goodwin
Registered Office Green Lane, Walsall, West Midlands, WS2 7PD
Telephone: 01922 638282 Registered in England, Number 4295398
Auditor Deloitte LLP
Four Brindleyplace, Birmingham, B1 2HZ
Corporate Information
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Directors’ Report
Appointed
Mr A Page (Group Chief Executive) 4 December 2003
Mr J Olmos* (Chairman) 30 July 2013
Mr R Kumar* 30 July 2013
Mr R Ammoun* 30 July 2013
* Denotes a Non-Executive Director
The Directors have pleasure in presenting their Annual Report for the year ended 31 March 2015.
Major Corporate TransactionsThere were no major corporate transactions occurring in the year ended 31 March 2015.
Except for any matters referred to elsewhere in this Annual Report, there have been no other significant events affecting the Group since 1 April 2015.
Financial ResultsThe Group’s turnover increased to £238.9m (2014: £224.7m) with operating profit of £46.1m (2014: £47.5m) and profit before tax of £36.0m (2014: £35.1m). The Group’s financial results and position are explained in more detail in the Financial Review section of the Strategic Report on pages 26 to 31 and shown in the consolidated profit and loss account, consolidated balance sheet and consolidated cash flow statement on pages 54, 55 and 58.
Financial and Treasury RiskDetails of the Group’s policy in respect of financial and treasury risk are provided in note 28 to the financial statements.
Fixed AssetsCapital expenditure before contributions from third parties, including infrastructure renewals, amounted to £40.3m (2014: £42.1m) during the year.
DirectorsNo Director had any material interest in any contract of significance with the Company or Group during the year under review.
Details of the Directors who held office during the year and subsequently are provided in the table below:
Indemnities have been given to all of the Directors to the extent permitted by the Companies Act. Directors and Officers insurance has been established for all Directors, executives and senior management to provide cover against any actions bought against them as Officers of the South Staffordshire Plc group of companies.
Retirement and Re-Election of DirectorsIn accordance with the Companies Act 2006 and the Articles of Association, Mr Page and Mr Ammoun will retire by rotation and being eligible will offer themselves for re-election.
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Corporate Social ResponsibilitySouth Staffordshire Plc regards compliance with relevant environmental laws, the adoption of responsible social and ethical standards and the health, safety, wellbeing and development of its employees, including disabled persons, as integral to its businesses. A summary of the Group’s practices and activities in this regard is provided on pages 32 to 37.
Corporate GovernanceA report on corporate governance is set out on pages 42 to 50.
Payment of Suppliers and Commercial ArrangementsThe Group’s policy is to pay suppliers in line with the terms of payment agreed with each of them when contracting for their products or services. Group trade creditors at 31 March 2015 represent 59 days of purchases during the year (2014: 50 days). The increase over the previous year is as a result of the high level of capital expenditure in March 2015 compared to March 2014. The Group is not reliant on any single commercial arrangement.
Going ConcernThe Directors consider each year the appropriateness of the assumption of preparing the financial statements on a going concern basis. This is based upon a review of the Company’s and the Group’s business plan, budget, financial forecasts, investment programme, and the forecast compliance with borrowing covenants, availability of undrawn borrowing facilities and surplus cash to provide liquidity and also based on the Group’s strong track record of renewing or replacing the Group’s borrowing facilities when they mature to provide liquidity.
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report from pages 4 to 31. The financial performance and position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 26 to 31. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the accounts.
Independent AuditorIn accordance with the Companies Act 2006, the Directors confirm that as far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware and that the Board has taken all reasonable steps to make itself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
A resolution proposing the reappointment of Deloitte LLP as auditor will be put to the Annual General Meeting.
By Order of the Board
J GoodwinCompany Secretary30 July 2015
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The Group seeks to apply the principles of the UK Corporate Governance Code (“the UK Code”), where considered applicable to a private, unlisted group. The Group also applies the Walker Guidelines on transparency and disclosure and regularly monitors corporate governance best practice and the applicability of any developments to the Group. Any changes to the Group’s governance arrangements considered appropriate are implemented within agreed timescales.
South Staffordshire Water PLC Corporate GovernanceSouth Staffordshire Water PLC continues to apply the principles of its own Corporate Governance Code (the “SSW Code”) which it implemented in response to Ofwat’s published principles on board leadership, transparency and governance. Although South Staffordshire Water PLC is not a public listed company, its Board of Directors recognises that they should act, where applicable, as if it were
and therefore the SSW Code has also specifically drawn on certain principles of the UK Code that may be applicable to a privately owned regulated company. A copy of the SSW Code can be found on South Staffs Water’s website (www.south-staffs-water.co.uk).
As the immediate parent company of South Staffordshire Water PLC, South Staffordshire Plc and its Board of Directors recognise the responsibilities that come from providing a public service and the Company is therefore fully committed to maintaining high standards of leadership, transparency and governance as a parent of a regulated business. The Company maintains an open dialogue with all of its subsidiaries and fully supports South Staffordshire Water PLC in complying with its statutory and regulatory obligations, including but not limited to Condition P of its licence and the SSW Code and ensuring that it can make strategic and sustainable decisions that are in the long-term interests of the
regulated business. Details of how South Staffordshire Water PLC follows the principles in the SSW Code are provided separately in its own Report and Accounts for the year ended 31 March 2015. Details of how South Staffordshire Plc, as the immediate parent of South Staffordshire Water PLC, follows Ofwat’s Holding Company Principles are detailed in this Corporate Governance report.
The Board can also confirm, on behalf of KKR Infrastructure Limited, that it, as the ultimate controlling party of the Group, also fully supports these Holding Company Principles from Ofwat and it will continue to apply high standards of board leadership and governance.
There have been no material changes to Corporate Governance arrangements in the Group during the year. The Board confirms that, to the best of its knowledge, there are no issues or risks at the Group level which may negatively impact on South Staffordshire Water PLC.
Corporate Governance
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Group StructureThe Group is owned by the Global Infrastructure Fund of the investment business Kohlberg Kravis Roberts & Co. L.P. (KKR), which is quoted on the New York Stock Exchange, and which holds a majority interest in the Group, together with infrastructure funds of certain co-investors of KKR. The KKR Infrastructure Fund is controlled and managed by KKR Infrastructure Limited, a company registered in the Cayman Islands (the “Holding Company”).
South Staffordshire Plc, as the immediate parent company of South Staffordshire Water PLC, ensures through its detailed knowledge of all of its subsidiaries and the water industry that it understands the duties and obligations of a regulated company including Condition P of its licence and, although some Directors sit on both Boards, South Staffordshire Water PLC acts, where applicable, with the support of the Company, as if it were a separate listed company. South Staffordshire Plc has processes in place to provide
South Staffordshire Water PLC with information that it requires about the wider Group. South Staffordshire Plc provides management, professional and administrative support services to South Staffordshire Water PLC and other of its subsidiaries on a cost basis. There is no direct interaction between South Staffordshire Water PLC and the Holding Company.
There are a number of UK registered intermediate holding companies above South Staffordshire Plc in the Group structure, headed by Hydriades IV Limited, the ultimate holding company registered in the UK. There are also intermediate holding companies above Hydriades IV Limited which are registered in Jersey but which are resident in the UK for tax purposes. In line with other KKR investments in Europe, the parent of the Jersey resident companies is a company registered in Luxembourg (Selena Luxco S.à.r.l.), which is the company in which the long-term infrastructure funds of KKR and their co-investors invest. The KKR fund investing in this company is controlled
and managed by the Holding Company. Two of the UK holding companies have loans payable to South Staffordshire Water PLC, both of which bear interest which is paid in full each year. Any UK tax losses surrendered to South Staffordshire Water PLC are paid for at face value.
Details of the borrowings of the Group are provided in the financial statements including the analysis of net debt and the notes to the financial statements. Similarly, details of the borrowings of South Staffordshire Water PLC are provided in its own Report and Accounts.
The Board of DirectorsThe Board is collectively responsible for the long-term success of the Group’s businesses. The Board comprises one Executive Director and three Non-Executive Directors.
Directors may be appointed by the Company by Ordinary Resolution or by the Board. As set out in the Company’s Articles of Association, a Director appointed by the Board
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businesses and those prepared at a Group level. The Non–Executive Directors, headed by the Chairman, have a duty to oversee this work, and to scrutinise management performance. They constructively challenge and help develop proposals on strategy.
In conjunction with the Audit Committee, the Board is also responsible for the Group’s systems of internal control, evaluating and managing significant risks to the Company and the Group.
On joining the Board, Directors receive induction material appropriate to their needs. This may include information on the Group structure, the financing structure, the regulatory framework of the operating businesses within the Group and strategic and financial plans. The Board carries out site visits to maintain familiarity with the Group’s operations and to refresh their skills and knowledge. The Board also keeps up to date with
and all of the UK registered holding companies in the Group structure.
Functions of the BoardUnder the UK Code, a company should be headed by an effective Board, with duties aligned to the success and interests of the company, setting strategic goals and ensuring that company strategy is fulfilled.
In compliance with the UK Code, all Board members are provided with sufficient information prior to any Board meeting to allow appropriate preparation to ensure that they can properly discharge their duties.
The Board sets standards of conduct to promote the success of the Company and the Group, provides leadership, and reviews the Group’s internal controls, risk management policies and governance structure. It approves major financial and investment decisions over senior management thresholds and evaluates the performance of the individual businesses and the Group as a whole by monitoring reports received directly from the subsidiary
will hold office until the next Annual General Meeting (AGM). At each AGM one third of the Directors will retire by rotation and will submit themselves for re-election at least once every three years.
All Directors and senior management are covered by a Directors & Officers Insurance policy against any actions taken against them as Officers of the Group.
Senior Executives of KKR or its affiliates and its co-investors who hold positions on the Board of the Company are Jesús Olmos and Ram Kumar, both of whom are also Non-Executive Directors of South Staffordshire Water PLC and Directors of holding companies above South Staffordshire Plc in the Group structure, and Roger Ammoun. Adrian Page, Group Chief Executive of South Staffordshire Plc, is also the Chairman of South Staffordshire Water PLC and is a Director of all of South Staffordshire Plc’s subsidiaries
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• Reviewandapprovalofmajorcontracts
• Powerstodelegateauthority
Whilst South Staffordshire Water PLC acts, where applicable, as though it were a separate public listed company, a limited number of matters in respect of this subsidiary company also need the approval of the Board of South Staffordshire Plc. These include:
• MaterialsubmissionstoOfwat,particularly in respect of Price Reviews and major structural reform
• AppointmentandremovalofanyDirector, in its role as shareholder
• Prosecution,defenceorsettlement of litigation above £1 million; and
• Materialchangestopensionarrangements where operated on a Group basis
The Board carries out an informal evaluation of its own performance, the performance of the individual Directors and various Committees.
All Directors are aware of the procedure for those wishing to seek independent legal and other professional advice. The Board also has access to the advice and services of the Company Secretary.
Matters Reserved for the BoardA schedule of matters specifically reserved for the Board’s decision has been adopted based on Institute of Chartered Secretaries and Administrators (ICSA) best practice.
The matters include, but are not limited to:• Reviewingandapprovingthe
Group’s strategy• Approvalofcapitalandoperating
budgets• Reviewingandapprovingany
material changes to the Group’s capital structure
• Reviewandapprovaloffinancialreports
legal and regulatory changes and developments by receiving written updates from both internal and external advisers.
The Board maintains a flexible approach to Board matters with the delegation of power to a Committee, with precise terms of reference, being used for specific routine purposes. Both the terms of reference and composition of the Committees are regularly reviewed to ensure their ongoing effectiveness.
The Directors are supported by an executive team and by other senior managers who have responsibility for assisting them in the development and achievement of the Group’s strategy and reviewing the financial and operational performance of the Group and its individual businesses. Senior management is responsible, along with the Board, for monitoring policies and procedures and other matters that are not reserved for the Board. There are written procedures containing a regime of authorisation levels for key decision-making.
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and associated guidance and to obtain reliable, up-to-date information about remuneration in other companies
• Approvethedesignof,and determine targets for, any performance related remuneration packages operated within the Group
• Ensurethatcontractualtermson termination are fair and that failure is not rewarded
• Overseeanymaterialchangesin employee benefits structures throughout the Group.
– Nomination CommitteeIn addition to conducting a rigorous process when making appointments to the Board, the Nomination Committee is responsible for reviewing the balance of skills and knowledge on the Board. It also keeps under review the possibility of any actual or potential conflicts of interest.
The Nomination Committee is formed on an ad hoc basis, when the need for an appointment to the
Board Committees– Remuneration CommitteeThe Remuneration Committee is responsible for the Group’s remuneration policy and the setting of the remuneration packages of the Board, executive team and other senior management. No Director is involved in determining his or her own remuneration. During the year the Remuneration Committee comprised of Jesús Olmos, Ram Kumar and Adrian Page.
The key terms of reference for the Committee are to:• Agreeremunerationthatwill
ensure that the Executive Director, the executive team and other senior management are provided with appropriate incentives to achieve high standards of performance and reward them for their individual contributions to the success of the Group
• Determinesuchpackagesandarrangements with regard to any relevant legal requirements
RemunerationRemuneration packages are designed to attract, retain and motivate high-calibre senior executives. The Remuneration Committee has overall responsibility for determining the Executive Director’s remuneration package and those of the executive team and other senior management. Non-Executive Directors do not receive any remuneration or fee from the Company.
The total remuneration package of the Executive Director, executive team and other senior management includes basic salary, benefits and an annual bonus that is linked to individual business and Group targets and personal performance related objectives. Performance related objectives are designed to encourage and reward continuing improvement in the Group’s performance and value.
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The members of the Audit Committee are Ram Kumar and Adrian Page, who receive written reports from Internal Audit and the external auditor twice a year.
Deloitte LLP (the Group’s external independent auditor), the Company Secretary, the Group Internal Audit Manager and, where appropriate, other financial management also receive this information and are invited to Audit Committee meetings. The Board is satisfied that the members of the Audit Committee have recent and relevant financial experience and are able to approach matters with a level of independent judgement.
The work of the Audit Committee specifically covers group business risks, and the work of Internal Audit and the external auditor.
In order to facilitate the Group’s risk management process, key risks facing each business within the Group and the Group as a whole are regularly reviewed, documented and
Board is identified or as otherwise considered appropriate by the Board.
– Audit CommitteeThe main role and responsibilities of the Audit Committee are set out in written terms of reference and include:• Monitoringtheintegrityof
financial statements and reviewing significant financial reporting judgements contained therein
• ReviewingtheGroup’sinternalfinancial controls
• Monitoringandreviewingtheeffectiveness of the Group’s Internal Audit function
• RecommendingtotheBoardthe appointment of the external auditor and monitoring the auditor’s independence, performance and effectiveness and approving the nature and scope of material external audits and approving the auditor’s remuneration.
summarised by senior management. Every six months the management teams of each business formally discuss, review, approve and document the relevant business risks. The objective of this process is to ensure that each management team is identifying, prioritising and rating all key business risks, and implementing and amending, where necessary, appropriate procedures and controls as required to mitigate these risks. It also allows management to highlight, document and prioritise as appropriate any outstanding actions with respect to the implementation of these procedures and controls. The Internal Audit function also critically assesses the risks, controls and procedures identified and the rating assigned to them. This information is reviewed by the Audit Committee.
Every year the Audit Committee receives an Internal Audit report on the results of internal audit work together with agreed management actions in relation to audit recommendations.
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The internal audit work covers financial and operational risk assurance, regulatory assurance, testing of legal compliance and financial controls and other business commercial support work.
The Group’s external auditors, Deloitte LLP, attend Audit Committee meetings and provide detailed reports regarding audit planning and the results of their external independent audit.
The responsibilities of the external independent auditor in the area of financial reporting are set out in their report in each year’s Annual Report.
Accountability and Audit– Financial Reporting and SystemsThe Board of Directors recognises the need to present a balanced, understandable and clearly defined assessment of the Group’s operational and financial performance and position including its future
prospects. This is provided by a review of the Group’s performance as set out in the Strategic Report of each year’s Annual Report.
Business plans, annual budgets and investment proposals for each business, and for the Group, have been formally prepared, reviewed and approved by the Board. These include profit and loss and cash flow forecasts. Actual financial results and cash flows, including a comparison with budgets and forecasts, are regularly reported to the Board with variances being identified and used to initiate any action deemed appropriate. Forecasts of the Group’s compliance with its borrowing covenants are also prepared on a regular basis, and forecasts of the Group’s level of its undrawn and available borrowing facilities for liquidity purposes are also prepared and reported to the Board.
– Internal ControlThe Board attaches considerable importance to its system of internal control and for reviewing its effectiveness, including its responsibility for taking reasonable steps for the safeguarding of the assets of the Company and the Group and for preventing and detecting fraud and other irregularities. Such a system is designed to manage rather than eliminate the risk, and can nonetheless provide only reasonable and not absolute assurance against misstatement or loss. There is an established internal control framework within the Group that is continually reviewed and updated taking into account the nature of the Group’s operations.
– Internal AuditSpecific topics covered by Internal Audit during the year included but were not limited to: • Accountingandfinancial
management• Reviewofbusinessrisks
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• CompliancewithSeniorAccounting Officer Regulations
• Compliancewithlegislation• ReviewofSouthStaffordshire
Water PLC’s proposed customer tariffs for the 2015/16 year
• ReviewofGroupTreasuryandpayment controls
A formal Business Risk Assurance Paper and Internal Audit Plan for South Staffordshire Water PLC, which seeks to examine and evaluate the effectiveness of the control environment and test specific areas that are considered a priority by the business, were presented to, and approved by, the Audit Committee and the Audit Committee of South Staffordshire Water PLC.
Progress against this Plan is monitored by the Audit Committee and also the Audit Committee of South Staffordshire Water PLC. Findings and recommendations arising from the work performed are reported to the Audit Committee at the appropriate time.
The Internal Audit arrangements in operation are considered appropriate to the size and complexity of the Group but the Audit Committee will continue to review these arrangements on a regular basis. – Organisational StructureA defined organisation structure for the Group exists with clear lines of responsibility, accountability and appropriate division of duties.
The Board sets overall policy and has delegated the necessary authority to management and business departments in order to fulfil that policy. This is communicated to employees by way of published policies and procedures.
The Group’s extensive financial regulations specify authorisation limits for individual managers, with all material transactions being approved by a member of the executive team, the Board or by the Board collectively. In addition, formal
treasury policies are in place. Where appropriate, commercial and financial responsibility is clearly delegated to individual business units and supported by the Board.
– Risk ManagementThe Group’s approach to risk balances the need to manage exposure to risk whilst at the same time aiming to improve the Group’s operational and financial performance.
South Staffordshire Water PLC’s approach to risk reflects its status as a regulated and licenced water undertaking providing an essential public service. As detailed above, a strong risk management and control framework is in place to understand and manage identified risks.
The non-regulated businesses operate principally in regulated environments and, as such, must also have strong risk control management.
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Risk management is discussed at Board level both in terms of the Group and its businesses on a regular basis. As detailed above, the Group’s individual businesses are required to monitor risk and its management with any significant changes in business risk and any subsequent procedures or controls to mitigate the risk being reported to the Audit Committee.
A description of the Group’s principal risks and uncertainties can be found in the Financial Review section of the Strategic Report on page 31.
– External Independent AuditorThe Board, assisted by the Audit Committee, reviews each year the external independent auditor’s performance, independence, effectiveness and fees including the level of non-audit services and fees.
In evaluating the external independent auditor, the Audit Committee assesses the calibre of the external audit firm, the audit scope and plan which is agreed in advance with the Audit Committee and the level and nature of audit communications, including the reporting to the Audit Committee of the audit results.
Going ConcernThe Directors consider each year the appropriateness of the assumption of preparing the financial statements on a going concern basis. This is based upon a review of the Company’s and the Group’s business plan, budget, financial forecasts, investment programme, forecast compliance with borrowing covenants, availability
of undrawn borrowing facilities and surplus cash to provide liquidity and also based on the Group’s strong track record of renewing or replacing the Group’s borrowing facilities when they mature.
Relations with ShareholdersThe Board ensures that a regular and detailed dialogue with shareholders takes place. This is achieved through regular management and Board meetings that shareholders attend and through other less formal communication.
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Annual Report 2015
51
The following statement, which should be read in conjunction with the independent auditor’s statement of its responsibilities set out on the following pages, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the independent auditor in relation to the accounts.
The Directors are responsible for preparing the Annual Report and Accounts, including 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 Group and the Company and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:• properlyselectandapply
accounting policies;• makejudgmentsand
accounting estimates that are reasonable and prudent;
• statewhetherapplicableUKAccounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• preparethefinancialstatementsonthe going concern basis unless it is inappropriate to presume that the company will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the accounts.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the
Company and 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.
The Directors, having prepared the accounts, are required to provide the independent auditor with such information and explanation as the auditor thinks necessary for the performance of its duty.
The Directors have responsibility for the maintenance and integrity of the Company’s website. Information published on the internet is accessible in many countries with different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.
The Directors of the Company and their functions are listed on page 40 of the Annual Report and Accounts.
Directors’ Responsibilities Statement
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We have audited the financial statements of South Staffordshire Plc for the year ended 31 March 2015 which comprise the consolidated profit and loss account, the consolidated and individual Company balance sheets, the consolidated statement of total recognised gains and losses, the reconciliation of movements in consolidated shareholders’ funds, the consolidated cash flow statement, notes to the consolidated cash flow statement, and the related notes 1 to 32. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
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.
Respective responsibilities of Directors and auditorAs 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. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the
Independent Auditor’s Report
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Annual Report 2015
53
Independent Auditor’s Report
David Hall FCA(Senior Statutory Auditor)for and on behalf of Deloitte LLPChartered Accountants and Statutory AuditorBirmingham, UK4 August 2015
Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where 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.
audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statementsIn 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 2015 and of the Group’s 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.
Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
54
Consolidated Profit & Loss AccountFor the year ended 31 March 2015
2015 2014 Note £’000 £’000
Group turnover 2 238,918 224,701
Operating costs 3 (192,817) (177,196)
Group operating profit 2 46,101 47,505
Finance charges (net) 7 (10,115) (12,420)
Profit on ordinary activities before taxation 35,986 35,085
Taxation on profit on ordinary activities 8 (8,281) (1,346)
Profit on ordinary activities after taxation 27,705 33,739
Less profit after tax of minority interests 26 (22) (18)
Profit for the financial year 27,683 33,721
Earnings per share Basic and diluted 10 215.9p 263.0p
A statement of movements in reserves is given in note 24 to the financial statements.
The results above are all derived from continuing operations.
The accompanying notes are an integral part of these financial statements.
55
Consolidated Balance SheetAs at 31 March 2015
2015 2014 Note £’000 £’000
Fixed assets Intangible assets - goodwill 11 26,841 27,152 Tangible assets 12 315,073 309,028
341,914 336,180Current assets Stocks 16 2,313 2,386 Debtors - amounts recoverable within one year 17 60,399 53,724 Debtors - amounts recoverable in more than one year 17 99,563 100,833 Cash at bank and in hand 4,651 8,147
166,926 165,090Creditors – amounts falling due within one year Borrowings 18 (27,000) (10,044) Other creditors 19 (79,415) (66,060)
(106,415) (76,104)
Net current assets 60,511 88,986
Total assets less current liabilities 402,425 425,166
Creditors – amounts falling due in more than one year Borrowings 18 (327,347) (347,859) Other creditors 19 (12,805) (12,648) Accruals and deferred income 14 (8,657) (8,854) Provisions for liabilities - deferred tax 20 (13,017) (10,830)
(361,826) (380,191)
Retirement benefit surplus 21 12,546 12,167
Net assets 53,145 57,142
Capital and reserves Share capital 23 5,449 5,449 Share premium account 24 10,882 10,882
Capital redemption reserve 24 1 1Merger reserve 24 (253) (253)Currency translation reserve 24 (2) (7)Hedging reserve 24 (5,866) (4,942)Profit and loss account 24 42,852 45,952
Shareholders’ funds 53,063 57,082Minority interests 26 82 60
Total capital employed 53,145 57,142
The accompanying notes are an integral part of these financial statements. The financial statements of South Staffordshire Plc, registered number 4295398, were approved by the Board of Directors and authorised for issue on 30 July 2015.
A P PageGroup Chief Executive
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2015 2014 Note £’000 £’000
Fixed assets Investments 15 100,738 100,738 Tangible assets 12 549 437
101,287 101,175
Current assets Debtors - amounts recoverable within one year 17 9,191 10,214 Debtors - amounts recoverable in more than one year 17 78,845 79,995 Cash at bank and in hand — 4,240
88,036 94,449Creditors – amounts falling due within one year Borrowings 18 (6,837) (14,207) Other creditors 19 (9,788) (8,520)
(16,625) (22,727)
Net current assets 71,411 71,722
Total assets less current liabilities 172,698 172,897
Creditors – amounts falling due in more than one year Borrowings 18 (119,672) (119,338) Other creditors 19 (1,989) (538)
Net assets 51,037 53,021
Capital and reserves Share capital 23 5,449 5,449 Share premium account 24 10,882 10,882 Capital redemption reserve 24 1 1 Hedging reserve 24 (1,266) 40 Profit and loss account 24 35,971 36,649
Shareholders’ funds 51,037 53,021
The accompanying notes are an integral part of these financial statements. The financial statements of South Staffordshire Plc, registered number 4295398, were approved by the Board of Directors and authorised for issue on 30 July 2015.
A P PageGroup Chief Executive
Company Balance SheetAs at 31 March 2015
57
Consolidated Statement of Total Recognised Gains & LossesFor the year ended 31 March 2015
Reconciliation of Movements in Consolidated Shareholders’ FundsFor the year ended 31 March 2015
2015 2014 £’000 £’000 Profit on ordinary activities after taxation 27,705 33,739Actuarial loss relating to retirement benefit surplus Actuarial gain/(loss) on assets 28,064 (6,047) Gain due to experience adjustments on liabilities 204 316 Loss due to changes in actuarial assumptions underlying the value of liabilities (30,303) —(Loss)/gain due to movement in the pension asset limit (2,521) 576Deferred tax on actuarial loss and movement on the pension asset limit 911 1,031Impact of the change in future tax rates on the retirement benefit surplus brought forward — 487Movement on hedging reserve (net of deferred tax) (924) 2,068Exchange movement on translation of overseas operations 5 (4)
Total recognised gains and losses relating to the year 23,141 32,166
2015 2014 £’000 £’000
Profit for the financial year 27,683 33,721Actuarial loss and movement on asset limit relating to retirement benefit surplus (net of deferred tax) (3,645) (3,637)Movement on hedging reserve (net of deferred tax) (924) 2,068Exchange movement on translation of overseas operations 5 (4)Dividends paid and proposed (note 9) (27,138) (15,168)
Net (reduction)/addition to shareholders’ funds (4,019) 16,980
Opening consolidated shareholders' funds 57,082 40,102
Closing consolidated shareholders’ funds 53,063 57,082
The accompanying notes are an integral part of these financial statements.
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2015 2014 Note £’000 £’000 £’000 £’000
Net cash inflow from operating activities (a) 82,773 75,035
Returns on investments and servicing of finance: Interest paid (net of interest received) (5,997) (7,856) Interest element of finance lease and hire-purchase rental payments (33) (84)
Net cash outflow from returns on investments and servicing of finance (6,030) (7,940)
Taxation: Corporation tax paid (3,321) (2,425)
Capital expenditure and financial investment: Purchase of tangible fixed assets (40,349) (42,071) Proceeds from sale of tangible fixed assets 359 212 Capital contributions received 5,889 6,237
Net cash outflow from capital expenditure and financial investment (34,101) (35,622)
Free cash flow 39,321 29,048
Acquisitions and disposals: Cash consideration for businesses acquired (including costs) (6,375) (4,122) Cash balances acquired (net) 475 399
Net cash outflow from acquisitions and disposals (5,900) (3,723)
Equity dividends paid (27,138) (15,168)
Financing: Repayment of bank term loans — (45,000) Additions to bank term loans — 59,763 Bank term loan issue costs paid — (487) Repayment of private placement loan notes — (15,763) Repayment of irredeemable debenture stock (27) (146) Capital element of finance lease and hire-purchase rental payments (643) (781)
Net cash outflow from financing (670) (2,414)
Increase in cash (net of short-term bank loans) 5,613 7,743
The accompanying notes are an integral part of these financial statements.
Consolidated Cash Flow StatementFor the year ended 31 March 2015
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(a) Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities 2015 2014 £’000 £’000 £’000 £’000
Total operating profit 46,101 47,505Depreciation (non-infrastructure assets) 20,160 18,696 Depreciation (infrastructure assets) 8,722 10,917Amortisation of goodwill 3,729 3,753Amortisation of capital contributions (717) (692) Defined benefit pension scheme current service cost (employer) 1,723 1,794 Defined benefit pension scheme contributions (employer) (4,556) (4,142)Profit on disposal of tangible fixed assets (262) (112)
28,799 30,214
Decrease/(increase) in stocks 86 (114)Increase in debtors (6,094) (1,201)Increase/(decrease) in creditors 13,881 (1,369)
7,873 (2,684)
Net cash inflow from operating activities 82,773 75,035
(b) Reconciliation of Movement in Net Debt 2015 2014 £’000 £’000
(Decrease)/increase in cash (3,496) 458Decrease in drawings on short-term bank loans 9,109 7,285
5,613 7,743Finance lease repayments (cash) 643 781Assets purchased under finance leases (net of disposals, non-cash) — (18)Finance lease obligations acquired from acquisitions in the year (non-cash) — (6)Issue of bank term loans (net of issue costs-cash) — (14,276)Bank term loan issue cost amortisation (non-cash) (253) (239)Repayment of private placement loan notes (net of issue costs-cash) — 15,763Private placement loan note issue cost amortisation (non-cash) (95) (92)Repayment of irredeemable debenture stock (cash) 27 146Movement on index-linked debt (non-cash) (5,875) (5,691)
Reduction in net debt in the year 60 4,111Net debt brought forward (349,756) (353,867)
Net debt carried forward (349,696) (349,756)
Notes to the Consolidated Cash Flow StatementFor the year ended 31 March 2015
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(c) Analysis of Net Debt Balance at Balance at 1 April Acquisitions Non-Cash 31 March 2014 and Disposals Cash Flow Movements 2015 £’000 £’000 £'000 £'000 £’000
Cash at bank and in hand 8,147 475 (3,971) — 4,651Drawings on short-term bank loans (9,109) — 9,109 — —
(962) 475 5,138 — 4,651Irredeemable debenture stock (1,679) — 27 — (1,652)Index-linked debt (net of issue costs) (200,103) — — (5,875) (205,978)Bank term loans (net of issue costs) (105,185) — — (253) (105,438)Private placement loan notes (net of issue costs) (40,559) — — (95) (40,654)Obligations under finance leases and hire-purchase contracts (1,268) — 643 — (625)
Net debt (349,756) 475 5,808 (6,223) (349,696)
Non-cash movements represent indexation, amortisation of issue costs, amortisation of the discount/premium on index-linked debt. The book value of net debt detailed above differs from the value used for covenant reporting purposes of £335,529,000 (2014: £337,689,000). Index-linked debt used for covenant reporting purposes is the indexed principal whereas, in accordance with applicable accounting standards, the book value represents amortised cost. Also, bank loans and private placement loan notes for covenant reporting purposes are reported at principal value before costs whereas the book value above includes un-amortised costs.
Notes to the Consolidated Cash Flow StatementFor the year ended 31 March 2015
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Notes to the Financial Statements1 Statement of Accounting Policies
The principal accounting policies are summarised below, which have all been applied consistently throughout the year and the preceding year.
(a) Basis of AccountingThe accounts have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. In order to show a true and fair view, the Company has departed from the requirements of the Companies Act 2006 in respect of merger accounting for group reconstructions and in respect of accounting for capital contributions. Further details are provided in (b) and (g) below respectively.
The Directors have considered the assumptions for preparing the accounts on a going concern basis. These are set out in the Corporate Governance report.
(b) Basis of ConsolidationThe Group accounts consolidate the accounts of the Company and its subsidiary undertakings made up to 31 March each year.
In accordance with Financial Reporting Standard Number 6, certain group reorganisations which took place in previous years have been accounted for using merger accounting principles, in order to meet the overriding requirement under section 393 of the Companies Act 2006 for financial statements to present a true and fair view. The transactions accounted for using these principles did not meet all of the conditions for merger accounting under the Companies Act 2006, namely that the fair value of any non-equity consideration must not exceed 10 per cent of the nominal value of equity shares issued as consideration. However, the Directors consider that in substance the consideration for these transactions comprised equity share capital with no net cash impact and that the alternative approach of acquisition accounting, with the
restatement of separable assets and liabilities to fair values, the creation of goodwill, and the inclusion of post reorganisation results only would not give a true and fair view of the Group's results and financial position. The substance of the transactions was not the acquisition of businesses but rather a group reconstruction under which the ultimate shareholders of the businesses transferred and their rights relative to the others remained unchanged. The Directors consider that it is not practicable to quantify the effect of this departure from the Companies Act 2006 requirements.
Other business combinations have been accounted for under the acquisition method.
(c) TurnoverSouth Staffs Water turnover includes amounts billed together with an estimation of amounts for water supply services provided but remaining unbilled at the year-end.
Software licence income is recognised within turnover once software implementation and customer acceptance are complete unless there is an agreement to pay a rental charge for the product, in which case, turnover is recognised based on the value of the rental charge each month. Income from separate software maintenance contracts is recognised evenly over the contract period to which it relates. Income generated through the performance of software development and consultancy services is included within turnover on the basis that turnover is matched with the delivery of the service.
Contract accounting is applied to certain contracts the Group is a party to. Where the outcome of the contract can be assessed with reasonable certainty, attributable turnover and profit are calculated on an appropriate and prudent basis and included in the accounts for the period under review. Where a contract loss is anticipated, the entire anticipated loss is recognised immediately.
Turnover of other non-regulated activities represents amounts receivable excluding VAT, from the sale of goods and services.
(d) DividendsDividends are recognised if they have been paid or if they have been approved by the shareholders before the year-end.
(e) GoodwillGoodwill arising on acquisitions represents the excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired. Goodwill is amortised over its estimated useful life of 10 to 20 years.
(f ) Tangible Fixed Assets and DepreciationTangible fixed assets comprise infrastructure assets (including water mains, impounding and pumped raw water storage reservoirs and dams), specialist operational assets (including pumping stations, treatment stations, boreholes and service reservoirs), land and buildings and other assets including fixed plant and equipment.
Infrastructure AssetsInfrastructure assets comprise networks of systems that, as a whole, are intended to be maintained in perpetuity at a specified level of service by the continuing replacement and refurbishment of their components. Expenditure on infrastructure assets relating to increases in capacity or enhancements of the networks and on maintaining the operating capability of the networks in accordance with defined standards of service are treated as additions which are included at cost.
The depreciation charge for infrastructure assets is the level of annual expenditure required to maintain the operating capability of the network which is based on the relevant company’s independently certified asset management plan.
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Other AssetsOther assets are stated at cost less accumulated depreciation and any provision for impairment. Depreciation is provided on a straight line basis to write off the cost less estimated residual value over the estimated useful lives of the assets, with the exception of land which is not depreciated. The estimated useful lives of assets are as follows:
Boreholes 100 yearsBuildings and Service Reservoirs Up to 80 yearsFixed Plant Up to 30 years Water Meters Up to 20 yearsOffice Equipment Up to 20 yearsMobile Plant Up to 20 yearsMotor Vehicles 3–7 years
(g) Capital ContributionsCapital contributions are treated as deferred income and amortised over the estimated useful lives of the assets concerned, except in the case of contributions towards the cost of infrastructure assets, which are not amortised. This departure from the requirements of the Companies Act 2006 is, in the opinion of the Directors consistent with industry accounting practice and is necessary for the financial statements to show a true and fair view as it is not possible to amortise contributions to the profit and loss account over the lives of the fixed assets concerned, as infrastructure assets do not have determinable finite lives as they are maintained in perpetuity.
(h) Leased AssetsAssets financed by leasing and hire-purchase arrangements which transfer substantially all the risks and rewards of ownership to the Group are included in tangible fixed assets, and the net obligation to pay future rentals is included as borrowings within creditors. Rentals are apportioned between finance charges and a reduction of the outstanding liability for future rentals so as to produce a constant charge to the profit and loss account
based upon the capital outstanding. Operating lease rentals are charged to the profit and loss account on a straight line basis.
(i) InvestmentsInvestments held as fixed assets are stated at cost less amounts written off and any provision for impairment. In accordance with Section 611 of the Companies Act 2006, the cost of shares acquired from a fellow group undertaking by way of a share for share exchange are recorded at the higher of the nominal value of the shares issued as consideration and the carrying value of the investment in the transferring company.
(j) StocksStocks are valued at the lower of cost and net realisable value. Cost includes an appropriate element of overheads. Provision is made for obsolete, slow moving or defective items where appropriate.
(k) Foreign CurrencyTransactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date.
The results of overseas operations are translated at the average rates of exchange during the year and their balance sheets at the rates prevailing at the balance sheet date. Exchange differences arising on translation of the opening net assets and results of overseas operations and on foreign currency borrowings, to the extent that they hedge the Group’s investment in such operations, are reported in the consolidated statement of total recognised gains and losses. All other exchange differences are included in the profit and loss account.
(l) PensionsThe profit and loss charge in respect of defined benefit pension schemes represents:
- the increase in the present value of scheme liabilities expected to arise from employee service in the year. This is charged against operating profit.
- the difference between the unwinding of the discount on scheme liabilities and the expected return on scheme assets. This is charged or credited within finance charges (net).
Actuarial gains and losses are charged or credited directly to the consolidated statement of total recognised gains and losses net of deferred tax. The defined benefit schemes’ liabilities, valued using the projected unit method and the fair value of schemes’ assets, are recognised in the consolidated balance sheet (net of deferred tax) as a net retirement benefit obligation or surplus. In the case of a surplus, this is recognised in the consolidated balance sheet to the extent that the Group is legally entitled to recover the surplus in the future either through reduced contributions to schemes, or refunds from schemes.
In respect of the Group defined contribution schemes the amounts charged to the profit and loss account are the contributions payable in the year.
(m) Research and DevelopmentResearch and development expenditure is charged to the profit and loss account in the year in which it is incurred.
Notes to the Financial Statements
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(n) TaxationCorporation tax payable is provided on taxable profits at the current rate. Deferred tax is provided in respect of capital allowances in excess of depreciation and all other timing differences that have originated but not reversed at the balance sheet date using future tax rates that have been enacted at the balance sheet date. The balance is discounted, using the yield to maturity on government gilts, to reflect the time value of money over the period between the balance sheet date and the date on which the timing differences are expected to reverse. A deferred tax asset is recognised only when, on the basis of all available evidence, it is regarded as more likely than not that there will be suitable taxable profits from which the reversal in the future can be deducted.
(o) Financial Instruments Financial Assets All financial assets, being cash and cash
equivalents, debtors and loans receivable, are categorised as “loans and receivables” which are measured at amortised cost. Cash and cash equivalents comprise cash at bank and in hand and short-term deposits.
Financial LiabilitiesFinancial liabilities other than derivative financial liabilities (see Hedge Accounting below) are initially measured at fair value and subsequently measured at amortised cost. The premium/discount and costs of issue are amortised over the life of the instrument, with the amortisation being included in the effective interest rate of the instrument which is included in finance charges (net) in the profit and loss account.
(p) Hedge AccountingThe Group designates certain hedging instruments, including derivatives, as cash flow hedges. At inception of the hedge relationships, the Group documents the relationships between the hedging instruments and the hedged items along with the Group’s risk management strategy and objectives in relation to each hedge. At the inception of the hedges, and on an ongoing basis, the Group documents whether the hedging instruments are highly effective in offsetting changes in cash flows of hedged items.
The effective proportion of changes in fair value of hedging instruments that are designated and qualify as cash flow hedges are deferred in equity (net of tax) in a hedging reserve. The gain or loss relating to the ineffective proportion is recognised immediately in the profit and loss account. The amounts deferred in the hedging reserve are recycled to the profit and loss account in the periods when the hedged items are recognised in the profit and loss account.
Hedge accounting is discontinued when the Group de-designates the hedging relationships, the hedging instruments expire, are terminated or are sold or they no longer qualify for hedge accounting. Any cumulative gain or loss that remains in the hedging reserve at that time is recognised when hedged forecast transactions are ultimately recognised in the profit and loss account. When forecast transactions are no longer expected to occur, the cumulative gains or losses are recognised immediately in the profit and loss account.
(q) Related Party TransactionsAs at 31 March 2015, the Company was an indirectly wholly owned subsidiary undertaking of Hydriades IV Limited, the ultimate parent company in the United Kingdom. As such, the Company has taken advantage of the exemption in FRS 8 “Related Party Disclosures” from disclosing transactions with other members of the group headed by Hydriades IV Limited, as consolidated financial statements for this company in which the accounts of the Company and its subsidiaries are included, are publicly available. The Group has no other related party transactions requiring disclosure other than those disclosed in note 30.
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2 Segmental Information
Turnover 2015 2014 £’000 £’000
South Staffs Water 126,930 122,504Inter-divisional (1,042) (978)
South Staffs Water (external) 125,888 121,526
Non-regulated service businesses 136,547 129,534Inter-divisional (23,517) (26,359)
Non-regulated service businesses (external) 113,030 103,175
Group turnover 238,918 224,701
Operating Profit 2015 2014 £’000 £’000
South Staffs Water 36,034 35,858
Non-regulated service businesses 10,067 11,647
Total operating profit 46,101 47,505
The Directors do not consider the turnover and operating profit of acquisitions in the year or the previous year to be material to the Group and as such these have not been separately disclosed.
Notes to the Financial Statements
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Net Operating Assets 2015 2014 £’000 £’000
South Staffs Water 253,276 258,751Non-regulated service businesses 42,180 38,384
Net operating assets 295,456 297,135
Net debt (book value) (349,696) (349,756)Goodwill 26,841 27,152Loans receivable from parent undertakings in more than one year 95,657 96,671Other non-operating net liabilities (9,877) (11,290)Corporation tax payable (4,765) (4,107)Retirement benefit surplus 12,546 12,167Provisions for liabilities - deferred tax (13,017) (10,830)
Net assets 53,145 57,142
The Directors do not consider the turnover, operating profit and net operating assets arising outside of the United Kingdom to be material to the Group and as such these have not been separately disclosed.
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3 Operating Costs 2015 2014 £’000 £’000
Other operating income (note 6) (1,038) (1,028)Raw materials and consumables 24,204 22,366Staff costs (note 4) 78,385 74,665Depreciation (non-infrastructure assets) 20,160 18,696Depreciation (infrastructure assets) 8,722 10,917Amortisation of goodwill (note 11) 3,729 3,753Amortisation of capital contributions (717) (692)Operating lease rentals: plant and machinery 195 185 other 3,086 3,118Other operating costs 56,091 45,216
192,817 177,196
The Group auditor’s remuneration is analysed as follows: 2015 2014 £'000 £'000
Fees payable to the Company's auditor for the audit of the Company's annual accounts 20 20
The audit of other Group undertakings pursuant to legislation 155 151
Total audit fees 175 171
Other services pursuant to legislation 14 12 Other services 20 — Tax services 26 50
Total non-audit fees 60 62
Notes to the Financial Statements
67
4 Staff Costs 2015 2014 £’000 £’000
Wages, salaries and bonuses 68,949 65,625Social security costs 6,205 6,047Pension costs 3,231 2,993
78,385 74,665
2015 2014 Number Number
Average number of employees South Staffs Water 478 511 Non-regulated service companies 2,015 1,859
2,493 2,370
5 Directors’ Remuneration
The remuneration of the Directors of the Company, is set out below.
2015 2014 £’000 £’000
Emoluments 336 621
There was 1 Director holding office at 31 March 2015 accruing benefits under a Group defined benefit pension scheme (2014: 1 Director) and no Directors were contributing members of a Group money purchase pension scheme (2014: No Directors). There were no contributions paid by the Group to money purchase pension schemes in respect of Directors during the year (2014: £Nil).
The highest paid Director received emoluments of £336,000 (2014: £621,000) during the year. As at 31 March 2015 he was a member of a Group defined benefit pension scheme which provided for an accrued pension of £65,000 (2014: £60,000) and an accrued lump sum of £196,000 at 31 March 2015 (2014: £179,000). There were no Group contributions to a money purchase pension scheme in respect of the highest paid Director (2014: £Nil).
None of the Directors had a material interest in any contract to which the Group was party during the year or the preceding year.
68
6 Other Operating Income
2015 2014 £'000 £’000
Profit on disposal of tangible fixed assets 262 112Rental income 776 916
1,038 1,028
7 Finance Charges (net)
2015 2014 £’000 £’000
Interest payable and similar charges Index-linked debt (cash) 6,900 6,734 Index-linked debt (non-cash) 5,875 5,691 Bank term loan, drawings on short-term bank loans and other interest payable (net) 3,621 5,511 Private placement loan notes 1,808 2,159 Finance leases and hire-purchase contracts 33 85 Irredeemable debenture stock 68 72
18,305 20,252
Interest receivable Interest on loans to parent undertakings (6,179) (6,228)
12,126 14,024
Other finance income (net) Defined benefit pension scheme interest cost 9,137 9,069 Expected return on defined benefit pension scheme assets (restricted) (11,334) (10,863) Amounts recycled from hedging reserve 186 190
10,115 12,420
Notes to the Financial Statements
69
8 Taxation on Profit on Ordinary Activities
The tax charge for the year comprises: 2015 2014 £’000 £’000
Current tax Current year 5,161 4,765 Adjustment in respect of prior years (304) (563)
Total current tax charge 4,857 4,202
Deferred tax Pension cost timing differences 1,006 828 Origination and reversal of other timing differences 178 (543) Impact of changes in future tax rates (before discount) — (3,240) Decrease in discount 2,181 404 Adjustment in respect of prior years 59 (305)
Total deferred tax charge/(credit) 3,424 (2,856)
Total tax charge 8,281 1,346
The overall rate of tax for the Group, including deferred tax based on the profit before tax was 23.0% (2014: 3.8%).
The principal differences between the current corporation tax rate for the Group of 13.5% (2014: 12.0%), based on the profit before tax and the standard rate of corporation tax of 21.0% (2014: 23.0%) are as follows:
2015 2014 % %
Standard rate of corporation tax 21.0 23.0Expenses not deductible for tax purposes (net) 1.4 2.1Pension cost timing differences (2.9) (2.7)Depreciation in excess of capital allowances (net) 1.4 0.8Group relief received and not paid for (8.1) (10.6)Adjustments in respect of prior years (0.8) (1.6)Other timing differences 1.5 1.0
Current corporation tax rate for the year 13.5 12.0
70
9 Dividends Paid or Proposed 2015 2014 £’000 £’000
Equity interests Ordinary final dividend paid in respect of the previous financial year of 101.0p (2014: 51.5p) per share 12,947 6,600 Ordinary interim dividend paid of 110.7p (2014: 66.8p) per share 14,191 8,568
27,138 15,168
10 Earnings per Share
The calculation of earnings per share is based on profit for the financial year divided by the weighted average number of shares in issue during the year. The calculations of earnings per share are based on the following profits and number of shares:
2015 2014 £’000 £'000
Profit for the financial year and profit for earnings per share 27,683 33,721
2015 2014 Number of Number of Shares Shares
Weighted average number of sharesfor basic and diluted earnings per share 12,819,856 12,819,856
Notes to the Financial Statements
71
11 Goodwill
Group £’000
Cost At 1 April 2014 42,482 Aquisitions in the year 3,418
At 31 March 2015 45,900
Amortisation At 1 April 2014 15,330 Charge for the year 3,729
At 31 March 2015 19,059
Net Book ValueAt 31 March 2015 26,841
At 31 March 2014 27,152
Details of acquisitions made during the year and the resulting goodwill acquired are provided in note 27.
72
12 Tangible Fixed Assets Group Infra- Specialised Land and structure Fixed Plant & Operational Buildings Assets Equipment Assets Total £’000 £’000 £’000 £’000 £’000
Cost At 1 April 2014 27,001 266,108 181,026 177,911 652,046 Additions 22 15,622 5,018 19,687 40,349 Capital contributions received — (5,369) — — (5,369) Disposals (16) (1,064) (1,211) (627) (2,918) Acquisitions — — 44 — 44
At 31 March 2015 27,007 275,297 184,877 196,971 684,152
Depreciation At 1 April 2014 6,580 160,032 98,309 78,097 343,018 Charge for the year 509 8,722 8,796 10,855 28,882 Disposals (16) (1,064) (1,211) (530) (2,821)
At 31 March 2015 7,073 167,690 105,894 88,422 369,079
Net Book ValueAt 31 March 2015 Owned 19,934 103,380 78,414 107,388 309,116 Leased — 4,227 569 1,161 5,957
19,934 107,607 78,983 108,549 315,073
At 31 March 2014 Owned 20,421 101,851 81,363 98,691 302,326 Leased — 4,227 1,352 1,123 6,702
20,421 106,078 82,715 99,814 309,028
Infrastructure renewals expenditure and the charge to the profit and loss account have been included within infrastructure assets cost and accumulated
depreciation respectively. The net book value of infrastructure assets is stated net of capital contributions. The balance of capital contributions at 31 March 2015 and movements in the year are set out in note 14.
Freehold land of £2,461,000 (2014: £2,461,000) included above is not subject to depreciation.
Notes to the Financial Statements
73
Company Land & Plant & Total Buildings Equipment £’000 £’000 £'000Cost At 1 April 2014 80 547 627 Additions — 236 236
At 31 March 2015 80 783 863
Depreciation At 1 April 2014 — 190 190 Charge for the year — 124 124
At 31 March 2015 — 314 314
Net Book Value
At 31 March 2015 80 469 549
Net Book Value
At 31 March 2014 80 357 437
Freehold land of £80,000 (2014: £80,000) held at 31 March 2015 was not subject to depreciation.
None of the tangible fixed assets of the Company were financed by finance leases or hire purchase agreements.
13 Capital Commitments
Group capital commitments outstanding at 31 March 2015 were £1,971,000 (2014: £2,731,000).
The Company had no capital commitments at either year-end.
74
14 Capital Contributions Group Infrastructure Other
Assets Assets £’000 £’000
Balance at 1 April 2014 136,075 8,854Capital contributions received 5,369 520Disposals (488) —Amortised in the year — (717)
Balance at 31 March 2015 140,956 8,657
Capital contributions in respect of other assets are included in the consolidated balance sheet in accruals and deferred income. Capital contributions in respect of infrastructure assets are netted against tangible fixed assets in the consolidated balance sheet (note 12).
The Company had no capital contributions at either year-end.
15 Fixed Asset Investments Company
Shares in Subsidiary Undertakings £’000
At 1 April 2014 and 31 March 2015 100,738
Shares in subsidiary undertakings are stated at their cost which is equal to net book value.
Notes to the Financial Statements
75
As at 31 March 2015, the Company’s principal subsidiary undertakings, all of which are incorporated in the United Kingdom with the exception of Echo India Private Limited, which is incorporated in India and Onsite Utility Services Canada Limited, which is incorporated in Canada, and all of which have only ordinary shares in issue, were as follows:
Direct Indirect Ordinary OrdinaryCompany Name Shareholding Shareholding Nature of Principal Business
South Staffordshire Water PLC 100% Regulated water supply
Aqua Direct Limited 100% Supply of spring and mineral water
Office Watercoolers Limited 90% Rental of water cooling units and sale of spring water
Echo Managed Services Limited 100% Customer management
Echo Northern Ireland Limited 100% Customer management
Inter-Credit International Limited 100% Customer credit management
Grosvenor Services Group Limited 100% Customer credit management
Echo India Private Limited 100% Software development support services to UK parent company
SSI Services (UK) Limited 100% Holding company for those companies listed below
Onsite Central Limited 100% Sewer and wastewater asset inspection, relining, surveying, cleaning and flow monitoring
Onsite Utility Services Canada Limited 100% Sewer and wastewater asset inspection, surveying and cleaning
Perco Engineering Services Limited 100% Trenchless installation and refurbishment of pipeline networks
Onsite Specialist Maintenance Limited 100% Specialist infrastructure maintenance
Integrated Water Services Limited 100% Clean water asset installation, repair, maintenance and refurbishment, mechanical and electrical and water hygiene services
Hydrosave UK Limited 100% Water main leak detection services and clean water network management services
Hydrosave Pipeline Technologies Limited 100% Non-destructive testing of clean water pipelines
Other subsidiaries of the Company as at 31 March 2015, which were all non-trading companies as at that date, were as follows:
365 Environmental Services Limited Ion Water and Environmental Management Limited Rapid Systems Limited
Aquaven Limited IWS M&E Services Limited Recoup Revenue Management Limited
Brocol Consultants Limited IWS Pipeline Services Limited South Staffordshire Infrastructure Services Limited
Cambridge Water Plc IWS Water Hygiene Services Limited South Staffordshire Water Holdings Limited
Data Contracts Specialist Maintenance Limited Lingard Limited Subaqua Solutions Limited
Debt Action Limited Onsite Water & Wastewater Services WLL Wells Water Treatment Services Limited
Greenacre Pumping Systems Limited Portadam Limited Woodside Environmental Services Limited
Grosvenor Legal Services Limited Pump Services Limited
76
16 Stocks
Group 2015 2014 £’000 £’000
Stores and raw materials 2,313 2,386
The Company had no stocks at either year-end.
17 Debtors Group Company
2015 2014 2015 2014 £’000 £’000 £’000 £’000
Amounts recoverable within one year Trade debtors 40,170 35,551 — — Other debtors 2,368 2,514 923 639 Amounts owed by Group undertakings — — 6,312 7,184 Amounts owed by parent undertakings 364 364 — — Prepayments and accrued income 17,497 15,295 1,956 2,391
60,399 53,724 9,191 10,214 Amounts recoverable in more than one year Loans receivable from parent undertakings 95,657 96,671 55,657 56,671 Amounts owed by Group undertakings — — 23,188 23,188 Derivative financial assets — 136 — 136 Other amounts owed by parent undertakings 3,906 4,026 — —
99,563 100,833 78,845 79,995
159,962 154,557 88,036 90,209
Derivative financial assets in 2014 only, represent the market value of floating to fixed rate interest swaps designated as cash flow hedges.
Other debtors in the Company include a deferred tax asset of £647,000 (2014: £352,000). The movement in the deferred tax asset of the Company is analysed below:
£’000
At 1 April 2014 352Charge to profit and loss account (31)Credit to statement of total recognised gains and losses 326
At 31 March 2015 647
Deferred tax assets for the Group as a whole are set-off against deferred tax liabilities (note 22).
Notes to the Financial Statements
77
18 Borrowings Group Company
2015 2014 2015 2014 £’000 £’000 £’000 £’000
Amounts falling due within one year Short-term bank loans — 9,109 6,837 14,207 Bank term loans 26,420 — — — Obligations under finance leases and
hire purchase contracts 580 935 — —
27,000 10,044 6,837 14,207
Amounts falling due in more than one year Bank term loans 79,018 105,185 79,018 78,779 Index-linked debt 205,978 200,103 — — Private placement loan notes 40,654 40,559 40,654 40,559 Irredeemable debenture stock 1,652 1,679 — — Obligations under finance leases and hire-purchase contracts:
Payable between one and two years 45 257 — — Payable between two and five years — 76 — —
327,347 347,859 119,672 119,338
Total borrowings 354,347 357,903 126,509 133,545
The book value of the Group’s index-linked debt of £205,978,000 (2014: £200,103,000) is stated above at amortised cost in accordance with FRS26. The indexed principal of £190,638,000 (2014: £186,517,000) is used for borrowing covenant reporting purposes. Similarly, Group gross bank term loans of £106,263,000 (2014: £106,263,000) and gross private placement loan notes of £41,000,000 (2014: £41,000,000) are used for covenant reporting purposes but, in accordance with FRS26, are stated above net of unamortised issue costs.
78
19 Other Creditors Group Company 2015 2014 2015 2014 £’000 £’000 £’000 £’000
Amounts falling due within one year Trade creditors 38,009 30,517 3,806 3,263 Payments received in advance 20,832 17,254 — — Other creditors 13,954 12,597 4,481 4,109 Corporation tax payable 4,765 4,107 1,374 994 Other taxation and social security 1,530 1,585 127 154 Derivitive financial liabilities 325 — — —
79,415 66,060 9,788 8,520
Amounts falling due in more than one year Derivative financial liabilities 1,583 702 1,583 86 Other creditors 11,222 11,946 406 452
12,805 12,648 1,989 538
Derivative financial liabilities represent the market value of floating to fixed rate interest rate swaps.
20 Provisions for Liabilities
Group Deferred Tax
£’000
At 1 April 2014 10,830Profit and loss account charge (excluding pension cost timing differences) 2,418Credit to consolidated statement of total recognised gains and losses (231)
At 31 March 2015 13,017
An analysis of deferred tax is set out in note 22.
The Company had no provisions for liabilities at either year-end.
Notes to the Financial Statements
79
21 Retirement Benefit Surplus
Surplus of defined benefit pension scheme (net of deferred tax) £'000
Surplus at 1 April 2014 12,167 Current service cost (employer) (1,723) Current service cost (employee) (639) Contributions (employer) 4,556 Contributions (employee) 639 Net finance income (restricted) 2,197 Actuarial loss (net) (2,035) Loss due to movement on asset limit (excluding restricted finance income) (2,521) Movement on deferred tax (95)
Surplus at 31 March 2015 12,546
Further disclosures relating to the above surplus are provided in note 29.
22 Deferred Tax Group Company
2015 2014 2015 2014 £’000 £’000 £’000 £’000
Deferred tax liabilities/(assets) are provided as follows: Accelerated capital allowances 21,311 20,539 (3) (1) Timing differences in respect of finance charges 328 873 — — Timing differences in respect of hedging reserves (1,640) (1,409) (318) 10 Other timing differences (340) (350) (326) (361)
Undiscounted provision for deferred tax 19,659 19,653 (647) (352) Discount (6,642) (8,823) — —
Discounted provision for deferred tax 13,017 10,830 (647) (352)
The decrease in the discount of £2,181,000 represents the debit to profit and loss for the year. There is an unprovided deferred tax liability of £3,408,000 (2014: £3,378,000) on capital gains rolled over into other assets of the Group. This will crystallise if the Group sells the assets into which the gain has been rolled into. Deferred tax relating to the retirement benefit surplus (2014: surplus) is excluded from the above and included in the net surplus (2014: surplus) stated in the consolidated balance sheet.
The deferred tax asset of the Company at 31 March 2015 of £647,000 (2014: £352,000) is presented within other debtors (note 17).
80
23 Share Capital
Group and Company 2015 2014 £’000 £’000
Authorised47,058,824 ordinary shares of 42.5p each 20,000 20,000
Issued and fully paid12,819,856 ordinary shares of 42.5p each 5,449 5,449
24 Reserves
Group Share Capital Currency Premium Redemption Merger Translation Hedging Profit and Account Reserve Reserve Reserve Reserve Loss Account £’000 £’000 £’000 £’000 £’000 £’000
At 1 April 2014 10,882 1 (253) (7) (4,942) 45,952Profit for the financial year — — — — — 27,683Dividends paid or proposed (note 9) — — — — — (27,138)Other recognised losses (net of deferred tax) — — — — — (3,645)Exchange movements on translation of overseas operations — — — 5 — —Change in value of hedging instruments - cash flow hedges (net of deferred tax) — — — — (1,073) —Amounts recycled to profit and loss (net of deferred tax) — — — — 149 —
At 31 March 2015 10,882 1 (253) (2) (5,866) 42,852
Included within the Group profit and loss account balance is the surplus (net of deferred tax) of the defined benefit pension scheme of £12,546,000 (2014: £12,167,000).
Company Share Capital Premium Redemption Hedging Profit and Account Reserve Reserve Loss Account £’000 £’000 £’000 £’000
At 1 April 2014 10,882 1 40 36,649Profit for the financial year — — — 26,460Dividends paid or proposed (note 9) — — — (27,138)Change in value of hedging instruments - cash flow hedges (net of deferred tax) — — (1,306) —
At 31 March 2015 10,882 1 (1,266) 35,971
As provided by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account. The Company’s profit after tax for the financial year was £26,460,000 (2014: £41,665,000).
Notes to the Financial Statements
81
25 Operating Lease Commitments
At 31 March 2015 the Group and the Company had the following annual commitments under non-cancellable operating leases:
Group 2015 2014 2015 2014 Buildings Buildings Other Other £’000 £’000 £’000 £’000Operating leases which expire: within one year 327 330 649 352 between two and five years 203 511 1,848 1,969 after five years 69 — — —
599 841 2,497 2,321
Company 2015 2014 Motor Motor Vehicles Vehicles £’000 £’000Operating leases which expire: within one year 26 — between two and five years 86 102
112 102
26 Minority Interests
£'000
At 1 April 2014 60Profit on ordinary activities after taxation 22
At 31 March 2015 82
82
27 Acquisitions
On 2 July 2014, Hydrosave UK Limited acquired the trade and certain assets of Global Water Conservation Limited, a water treatment business based in the South of England.
On 27 February 2015, Echo Managed Services Limited acquired the entire issued ordinary share capital of Grosvenor Services Group Limited, a specialist utility debt recovery services company based in Sheffield.
The acquisition method of accounting has been adopted.
A summary of the acquisitions, including the consideration, the assets and liabilites acquired (both based on the provisional fair values), the related goodwill and the impact of the transactions on group cash flow and net debt are set out below:
Total £’000
Consideration: Cash consideration 3,755 Deferred consideration 75 Acquistion costs 19
3,849
Book value of net assets acquired: Tangible fixed assets 44 Stocks 13 Debtors 581 Cash at bank and in hand (net) 475 Creditors and provisions (net) (682)
Net assets (book value and fair value) 431
Goodwill on acquisition 3,418
Cash consideration paid in the year (including acquisition expenses) 3,774Cash acquired (net) (475)
Net cash outflow and increase in net debt in the year 3,299
There was no material difference between the book value of the net assets acquired and their provisional fair value.
The cash consideration reported above differs to that reported in the Consolidated Cash Flow Statement for the year ended 31 March 2015, due to additional cash payments including deferred and contingent consideration, made in the year by the Group in respect of prior year acquisitions.
The above goodwill is being amortised over an estimated useful economic life of 10 years.
Notes to the Financial Statements
83
28 Financial Assets and Liabilities
The Group’s financial assets and liabilities include cash, loans receivable, borrowings, derivative financial assets and liabilities, trade creditors and trade debtors. Borrowings as at 31 March 2015 represent bank term loans, private placement loan notes, finance lease obligations, index-linked debt and irredeemable debenture stock. The purpose of the Group's borrowings is to finance the Group’s operations. It is, and has been throughout the year and the previous year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The Group’s policy in respect of cash, loans receivable and borrowings is to maintain flexibility with both fixed and floating interest rates and long and short-term debt while not exposing the Group to significant risk of market movements (see below). As at 31 March 2015, derivative financial liabilities represent floating to fixed interest rate swaps used as cash flow hedges to reduce the Group’s risk to changes in LIBOR.
Interest Rate Risk Profile
Borrowings (book value) 2015 2014 £’000 £’000
Retail Price Index-linked debt 205,978 200,103 Fixed rate financial liabilities 104,933 105,498 Floating rate financial liabilities 43,436 52,302
354,347 357,903
The floating rate borrowings comprise sterling denominated short-term bank loans (revolving credit facilities) that bear interest at rates based on LIBOR. These include £35,000,000 (2014: £35,000,000) of loans that are floating rate but floating to fixed interest rate swaps have been entered into as at 31 March 2015 in respect of these loans that commence cash flows in October 2015 when these loans will therefore become fixed rate when combined with these swaps. Fixed rate financial liabilities include fixed rate bank term loans of £15,763,000 (2014: £15,763,000) and floating rate bank term loans of £46,500,000 (2014: £46,500,000) that are effectively swapped to fixed rate by cash flow hedges using floating to fixed interest rate swaps where cash flows under the swaps have commenced. The Group's trade debtors and trade creditors are not subject to interest unless considered to be overdue.
For all financial assets and liabilities, the book values and fair values are not materially different, except for the £111,400,000 (2014: £111,400,000) Retail Price Index-linked loan which had a book value at 31 March 2015 of £162,718,000 (2014: £158,235,000), and a fair value of £287,735,000 (2014: £224,750,000) and the £35,000,000 (2014: £35,000,000) Retail Price Index-linked bond which had a book value at 31 March 2015 of £43,260,000 (2014: £41,868,000) and a fair value of £47,642,000 (2014: £38,416,000).
Fixed Rate Borrowings Weighted Weighted average average period for which interest rate rate is fixed
% Years
2015 Sterling 3.9 3.1
2014Sterling 4.0 4.1
84
Borrowing Facilities
The Group has various borrowing facilities available to it. The undrawn committed facilities available at 31 March 2015 were as follows:
2015 2014 £’000 £’000
Expiring in one year or less 13,500 — Expiring in more than one year but not more than two years — 8,200 Expiring in more than two years but not more than five years 29,237 29,237
42,737 37,437
Financial Risks
The Group’s activities result in it being subject to a limited number of financial risks, principally credit risk as the Group has financial assets receivable from third parties. Management of financial risks focuses on reducing the likely impact of risks to a level that is considered acceptable. The Group has formal principles for overall risk management as well as specific procedures to manage individual risks.
1) Interest rate risk
Interest rate risk arises from borrowings issued at floating rates, including those linked to LIBOR and the Retail Price Index (RPI), that expose the Group’s cash flows to changes in LIBOR and RPI. Risks of increases in LIBOR are managed by limiting the value and proportion of Group borrowings that are linked to this variable rate and by entering into an appropriate value of floating to fixed interest rate swap contracts. Risks associated with increases in RPI are effectively managed by hedging against the revenues and the Regulatory Asset Value of South Staffs Water, both of which are also linked to RPI.
2) Credit risk
As is market practice, the Group grants certain customers credit on amounts due for the services it supplies, leading to limited risk over the recovery of amounts receivable from these customers. Full details of the way this risk is managed are provided below. Credit risk also includes the risk over recovery of loans receivable. This risk is managed by ensuring that loans are only made to entities with sufficient financial resources to service the interest due on the loans. The total carrying value of financial assets subject to credit risk, net of provisions, at 31 March 2015 was £142,465,000 (2014: £139,262,000).
3) Liquidity risk
Liquidity risk represents the risk of the Group having insufficient liquid resources to meet its obligations as they fall due. The Group manages this risk by regularly monitoring the maturity of credit facilities, actual and forecast cash flows and ensuring that the payment of its obligations are matched with cash inflows and availability of free cash and adequate credit facilities. The table above details the undrawn committed borrowing facilities available to the Group to manage this risk.
Notes to the Financial Statements
85
Security Over Assets
Obligations under finance leases and hire purchase contracts are secured on the assets to which they relate. Index-linked debt, debenture stock and bank debt issued by South Staffordshire Water PLC, is not secured on any assets. The Company’s bank loans and its private placement loan notes are secured against the shares of the Company and certain subsidiaries.
Sensitivity Analysis
The following analysis, required by Financial Reporting Standard 29, is intended to illustrate the sensitivity to reasonably possible movements during the year, in variables affecting financial liabilities, being LIBOR and the long-term forecast for the UK Retail Price Index (RPI) on the pre-tax profit and loss account of the Group. There is no impact on reserves other than the impact on the profit and loss account after tax.
2015 2014 £’000 £’000
RPI + 0.25% (476) (461)RPI - 0.25% 476 461LIBOR +1.00% (531) (239)LIBOR -1.00% 531 239
The impact on the pre-tax profit and loss account for the year to 31 March 2015 detailed above has been calculated by assuming that the illustrated changes to the variables occurred on 1 April 2014 and remained different to the actual variables recorded by the stated amount during the year with all other variables remaining at the actual amounts. The comparative figures have been calculated using the same methodology assuming the stated change to the variables occurred on 1 April 2013.
86
Maturity of Financial Assets and Liabilities
The maturity profile of the Group’s financial liabilities recorded at repayment value, not book value, was as follows:
2015 2014 £’000 £’000
BorrowingsIn one year or less, or on demand 27,080 10,044In more than one year, but not more than two 45 26,757In more than two years, but not more than five 120,765 92,458In more than five years, but not more than twenty — 28,381In more than twenty years 192,290 188,196
340,180 345,836Other financial liabilitiesIn one year or less, or on demand 79,415 66,060In more than one year but not more than two 679 1,658In more than two years but not more than five 3,155 1,596In more than five years but not more than twenty 8,971 9,394
Total 432,400 424,544
The table above excludes future interest payments and future indexation on financial liabilities. Index-linked borrowings of £190,638,000 (2014: £186,517,000) included in the table above are stated at the principal amount indexed by the appropriate RPI value to the balance sheet date. The estimated redemption value of index-linked borrowings at redemption in 2045 is £399,467,000 (2014: £399,467,000) and at redemption in 2051 is £139,996,000 (2014: £139,996,000).
Group debtors recoverable in more than one year of £99,563,000 (2014: £100,833,000) principally represent loans receivable from the Company's parent undertakings of £95,657,000 (2014: £96,671,000) with £Nil (2014: £Nil) due to be repaid within a year, £15,000,000 (2014: £15,000,000) due to be repaid between five and twenty years and £80,657,000 (2014: £81,671,000) having no fixed repayment date.
Trade Debtors
Before accepting orders from customers and offering credit terms, the Group undertakes appropriate credit assessments and uses this information to determine if the order is accepted and the credit terms that will be offered. Provision is made within the trade debtor values detailed below, based on judgement by senior management, for amounts considered to be unrecoverable due either to their nature or age. Due to the varying nature of the Group’s businesses there is no single method that is applied to all trade debtors. This would not be considered appropriate with the methods applied being considered appropriate to each business. The total amount charged to the profit and loss account in the year ended 31 March 2015 in respect of such provisions was £4,417,000 (2014: £3,703,000). Total Group trade debtors (net of provisions) as at 31 March 2015 were £40,170,000 (2014: £35,551,000). The total amount of the provision included in the above, as at 31 March 2015 was £29,151,000 (2014: £24,805,000). The Group does not hold collateral over its trade debtors.
Notes to the Financial Statements
87
The Directors consider that debtors that are neither past due nor impaired are of a high quality and were considered, at the balance sheet date, to be fully recoverable at their gross book value. The Directors consider that the concentration of credit risk across the Group is limited due to the Group’s customer base being significant. The largest balance outstanding from any single third party at 31 March 2015 was £2,054,000 (2014: £883,000), representing 5% of the above Group net trade debtor total (2014: 2%). Individually significant debtors are principally due from customers with investment grade credit ratings including utilities, government agencies and local authorities.
An ageing analysis of invoiced trade debtors that are past due but not impaired is provided below:
South Staffs Water <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total £’000 £’000 £’000 £’000 £’000 £’000 £’000
2015 8,803 2,030 1,171 679 393 — 13,0762014 8,159 1,991 1,210 788 445 154 12,747
Non-regulated service businesses <1 month 1-2 months >2 months Total £’000 £’000 £’000 £’000
2015 4,859 1,090 1,720 7,6692014 2,674 1,061 2,274 6,009
Non-regulated service business’ debtors that are considered to be impaired of £1,480,000 (2014: £1,328,000) were all more than 2 months past due. An ageing analysis of debtors of South Staffs Water that are considered to be impaired is provided below:
<1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total £’000 £’000 £’000 £’000 £’000 £’000 £’000
2015 3,985 3,406 3,259 3,064 2,895 11,062 27,6712014 3,635 3,230 2,935 2,766 2,623 8,261 23,450
The Directors consider that the carrying value of trade and other debtors including loans receivable, net of provisions, detailed in note 17 approximates to their fair value.
29 Pension Retirement Benefits
The Group operates a number of funded pension schemes for the benefit of its employees. The Group participates in the Water Companies Pension Scheme, by way of two separate sections, which provide benefits based on pensionable pay at certain points in time indexed as appropriate. The Group also operates a number of defined contribution pension schemes. The assets of these schemes are held separately from those of the Group, being invested by professional fund managers.
The Group accounts for pension schemes in accordance with Financial Reporting Standard 17, "Retirement Benefits" (FRS 17). Further details are provided in note 1. In accordance with the recommendations of the actuary, the employers’ current service cost charged to the Group's profit and loss account for the defined benefit scheme in the year ended 31 March 2015 was £1,723,000 (2014: £1,794,000). For the defined benefit scheme section which was not closed to future accrual at 31 March 2015, the employer’s contribution rate in the year ended 31 March 2015 was 26.2% (2014: 26.2%) plus a fixed contribution of £1,724,00 (2014: £1,672,000) with the employee contribution rates being 9.5% (2014: 9.5%). On 1 April 2015 this section was also closed to future accrual (note 31), with contributions in the year ending 31 March 2016 limited to a fixed deficit contribution of £1,764,000. Total deficit contributions in respect of both sections of this scheme for the year ending 31 March 2016 are £2,194,000 (2015: £2,144,000). The amount charged to the profit and loss account for the defined contribution schemes in the year was £1,508,000 (2014: £1,199,000). There were no overdue contributions at either year-end.
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Financial Reporting Standard 17
Additional disclosures regarding the Group’s defined benefit pension scheme are required under the provisions of FRS 17. The FRS 17 valuations each year are undertaken by a qualified actuary using assumptions that are consistent with the requirements of FRS 17. The market value of investments has been calculated using the bid price.
The major assumptions used were as follows:
31 March 31 March 31 March 2015 2014 2013 % % %
Rate of increase in salaries 3.2 3.6 3.6 Rate of increase in pensions 2.2 2.6 2.6 Discount rate 3.2 4.4 4.4 Annual inflation RPI 3.2 3.6 3.6 Annual inflation CPI 2.2 2.6 2.6
31 March 31 March 31 March 2015 2014 2013 No. of Years No. of Years No. of Years
Life expectancy of male aged 60 at accounting date 27.7 27.5 27.4
The market value of the assets in the Group’s sub-funds of the scheme and the present value of these sub-funds’ liabilities at the balance sheet date were:
Valuation 2015 2015 2014 2014 2013 2013 % £’000 % £’000 % £’000
Equities 30 80,609 34 77,831 32 74,692High yield bonds/gilts and debt instruments 53 142,937 48 113,506 49 114,809Diversified growth funds 11 30,972 12 27,757 12 27,202Emerging markets multi asset funds 6 15,590 6 14,331 7 16,233(Overdraft)/cash — (43) — 206 — (68)
Market value of scheme assets 270,065 233,631 232,868Present value of scheme liabilities (243,213) (211,257) (209,653)
Surplus in the scheme 26,852 22,374 23,215Amount not recognised due to asset limit (11,169) (7,165) (6,993)
Surplus before deferred tax 15,683 15,209 16,222Related deferred tax liability (3,137) (3,042) (3,731)
Surplus after deferred tax 12,546 12,167 12,491
Notes to the Financial Statements
89
Changes in the present value of the liabilities of the Group’s sub-funds of the scheme are as follows:
2015 2014 £’000 £’000
Opening present value of scheme liabilities 211,257 209,653Current service cost (employer) 1,723 1,794Current service cost (employee) 639 717Interest cost 9,137 9,069Actuarial loss/(gain) 30,099 (316)Benefits paid (9,642) (9,660)
Closing present value of scheme liabilities 243,213 211,257
Changes in the market value of the assets of the Group’s sub-funds of the scheme are as follows:
2015 2014 £’000 £’000
Opening market value of scheme assets 233,631 232,868Expected return on scheme assets (not restricted) 12,817 11,611Actuarial gain/(loss) 28,064 (6,047)Contributions (employer) 4,556 4,142Contributions (employee) 639 717Benefits paid (9,642) (9,660)
Closing market value of the scheme assets 270,065 233,631
The actual return on assets of the Group’s sub-funds of the scheme over the year to 31 March 2015 was a gain of £40,881,000 (2014: £5,564,000).
An analysis of the movement in the surplus of the Group’s sub-funds of the scheme during the year ended 31 March 2015 is provided in note 21. The following disclosures represent the analysis of the scheme surplus and the amounts that have been recorded in the consolidated statement of total recognised gains and losses over a five year history.
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2015 2014 2013 2012 2011 £’000 £’000 £’000 £’000 £’000
Market value of scheme assets 270,065 233,631 232,868 212,012 164,991Present value of scheme liabilities (243,213) (211,257) (209,653) (195,201) (146,365)
Surplus in the scheme 26,852 22,374 23,215 16,811 18,626
Gain/(loss) due to experience adjustments on liabilities 204 316 947 (467) 2,078% of scheme liabilities — — — — 1%
Acturial gain/(loss) on assets 28,064 (6,047) 14,173 4,002 3,071% of scheme assets 11% (3%) 6% 2% 2%
(Loss)/gain due to changes in actuarial assumptions underlying the value of liabilities (30,303) — (12,666) (13,755) 17,098 % of scheme liabilities (12%) — 6% 7% 12%
Actuarial (loss)/gain (2,035) (5,731) 2,454 (10,220) 22,247% of scheme liabilities (1%) (3%) 1% 5% 15%
30 Related Party Transactions
During the year ended 31 March 2009, South Staffordshire Water PLC entered into a series of agreements with a parent undertaking, Hydriades I LP. The agreements were put in place to offset the impact on South Staffordshire Water PLC of certain hedging relationships entered into with a third party bank, on both cash flow and the profit and loss account. During the year ended 31 March 2014 the balance in Hydriades I LP was transferred to Selena Bidco Limited, which is a parent undertaking of the Company. The balance due from Selena Bidco Limited in respect of these transactions at 31 March 2015 was £4,270,000 (2014: £4,389,000). This amount has been recognised within debtors in the Group Consolidated Balance Sheet. In accordance with applicable accounting standards, the impact of both arrangements on the profit and loss account of South Staffordshire Water PLC and the Group have been netted off with no overall impact.
31 Post Balance Sheet Event
On 1 April 2015, the South Staffordshire section of the Water Companies Pension Scheme was closed to future accrual following consultation with its members and the Trustees of the scheme. Pension benefits under the scheme will be based on pensionable pay and accrued service to 1 April 2015 with the Group and members contributing to a new defined contribution pension scheme from 1 April 2015 which will provide additional pension benefits.
32 Ultimate Controlling Party
The Company's immediate parent undertaking is Aquainvest Acquisitions Limited. The ultimate controlling party in the United Kingdom is Hydriades IV Limited which prepares the largest and smallest set of accounts in which the Group is consolidated within. The results of the Company and the Group for the year ended 31 March 2015 are consolidated in the accounts of Hydriades IV Limited. The ultimate controlling party is KKR Infrastructure Limited.
Notes to the Financial Statements
91
Group Five Year SummaryGroup 2015 2014 2013 2012 2011 £’000 £’000 £’000 £’000 £’000
Turnover South Staffs Water 126,930 122,504 117,314 102,100 87,843 Non-regulated service businesses 139,657 129,534 113,609 112,277 92,740 Inter-divisional (27,669) (27,337) (25,896) (25,581) (21,131)
238,918 224,701 205,027 188,796 159,452
Operating profit South Staffs Water 36,043 35,858 33,313 25,623 21,658 Non-regulated service businesses 10,058 11,647 9,477 9,682 6,424
46,101 47,505 42,790 35,305 28,082 Exceptional profit on sale of tangible fixed assets — — — — 1,465Finance charges (net) (10,115) (12,420) (13,127) (12,209) (8,744)
Profit before tax 35,986 35,085 29,663 23,096 20,803
EBITDA 77,995 80,179 74,083 63,223 51,986Profit for the financial year 27,683 33,721 28,683 22,216 20,506Net cash inflow from operating activities 82,773 75,035 65,957 61,023 56,424Average number of employees 2,493 2,370 2,193 2,083 1,857Capital investment (before contributions) 40,349 42,089 46,833 40,730 34,918Net assets 53,145 57,142 40,144 28,488 32,429Net debt (book value) 349,696 349,756 353,867 338,914 281,733Net debt (covenant value) 335,529 337,689 341,800 326,158 266,467
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South Staffs Water
South Staffordshire PlcGroup Chief Executive: Adrian Page
Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 01922 638282
www.south-staffordshire.com
South Staffordshire Water PLCManaging Director: Phil Newland
South Staffs WaterGreen Lane, Walsall, West Midlands, WS2 7PDTelephone: 01922 638282
www.south-staffs-water.co.uk
Cambridge Water90, Fulbourn Road, Cambridge, CB1 9JNTelephone: 01223 706050
www.cambridge-water.co.uk
Contact Details
93
SSI Services (UK) LtdManaging Director: Dave Taylor
Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 01922 638282
www.ssi-services.co.uk
Integrated Water Services LtdMechanical & Electrical ServicesManaging Director: Steve Suffolk
Water Hygiene Managing Director: Chris Brown
Pipeline ServicesManaging Director: Dave Taylor
Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 01543 445700
www.integrated-water.co.uk
SSI Services
W a t e r N e t w o r k E f f i c i e n c y
Hydrosave UK LtdManaging Director: Simon Dray
Swallow Court, Kettering Venture Park, Kettering, NN15 6XXTelephone: 01536 515110
www.hydrosave.co.uk
94
S p e c i a l i s t M a i n t e n a n c e
OnSite Specialist Maintenance Ltd Perco Engineering Services LtdManaging Director: Kelly Taylor
The Old Nurseries, Nottingham Road,Radcliffe-on-Trent, Nottingham, NG12 2DUTelephone: 0115 933 5010
www.onsite-sm.co.ukwww.perco.co.uk
OnSite Central LtdUtility Services Managing Director: Alan Plante
89 Blackpole West, Blackpole, Worcester, WR3 8TJTelephone: 01905 340054
Pipe LiningManaging Director: Simon Baylis
Unit 14, W & G Estate, Farringdon Road, East Challow, Wantage, OX12 9TFTelephone: 01235 772882
www.onsite.co.uk
95
Echo Managed Services LtdManaging Director: Nigel Baker
Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 0845 12 12 122
www.echo-ms.com
Inter-Credit International LtdManaging Director: Nigel Baker
Innova House, Innova Science Park, 4 Kinetic Crescent, Enfield, Middlesex, EN3 7XHTelephone: 01992 807 200
www.intercred.com
Echo
Grosvenor Services Group LtdManaging Director: Lloyd Birkhead
4 Rotherside Court, Rotherside Road, Eckington Business Park, Sheffield, S21 4HLTelephone: 0333 1231471
www.grosvenorservices.co.uk
96
Office Watercoolers LtdManaging Director: Ken Skelton
Waterloo House, 112-116 Anglesey CourtTowers Business Park, Rugeley, Staffordshire, WS15 1ULTelephone: 0845 60 90 902
www.office-coolers.com
Aqua Direct LtdGeneral Manager: Helene James
Elmhurst Spring, Lichfield Road,Elmhurst, Lichfield,Staffordshire, WS13 8HQTelephone: 01543 493 613
www.aqua-direct.co.uk
Office Watercoolers
Aqua Direct
South Staffordshire PlcGreen LaneWalsallWS2 7PD
Tel: +44 (0)1922 638282
www.south-staffordshire.com
