SOUTH STAFFORDSHIRE PLC NEWS ARTICLE
12/07/13 - South Staffordshire Plc 2012/13 Group Results
A main strength of the Group is its resilience to economic difficulties due to it operating in regulated markets and providing services that are underpinned by legislation. This strength was evident again last year with the Group once again performing strongly despite the obvious weaknesses in the economy.
Regulated Water Supply
Following the Competition Commission's clearance in May 2012 of the Group's acquisition of Cambridge Water, the two regulated water supply businesses of South Staffs Water and Cambridge Water merged on 1 April 2013.
The 2012/13 average water charges of the South Staffs (£140) and Cambridge (£127) regions were the third and second lowest in the industry and 23% and 30% below the industry average respectively with service levels and therefore value for money for customers remaining high.
This commitment to customer service is reflected in the South Staffs region being ranked joint first in the industry by Ofwat in respect of the qualitative measure of the Service Incentive Mechanism (SIM) score for 2012/13.
The two regions invested £39.0m in capital assets (net of contributions) in the year to 31 March 2013. This included further replacement of mains to keep burst rates low.
The weather across the UK last year was unusually wet and this has had a positive impact on water resources in both regions which remain very healthy. However, the very wet weather and continuing weakness in the economy, which are both outside of the Group's control, adversely impacted the demand for water and therefore turnover. Both regions responded quickly and effectively and operating costs were tightly controlled to offset the financial impact of lower demand.
SSI Services works in regulated markets and provides services that are driven by legislation, maintaining demand for its core services despite the lack of growth in the economy. However, discretionary expenditure by some of its customers was limited in the year. The division has responded positively by further developing technology and other initiatives to improve both operational efficiency and client service and such initiatives are continuing in 2013/14. SSI Services has also been awarded some encouraging new business, has renewed some important contracts and has made two small acquisitions, all of which mean it has entered 2013/14 with a positive outlook.
Echo had an excellent year, continuing to perform well on its existing contracts with strong operational performance for its clients. Also, Echo was successful in being awarded an 11-year contract to supply its RapidXtra billing and customer care system to Dŵr Cymru (Welsh Water) with implementation of the system commencing in 2012/13 and continuing this year. Echo also acquired a Bristol-based customer service centre business, expanding the range of services Echo provides and the sectors it operates in.
Despite the UK economy remaining weak with disappointing growth, the Group's turnover and profitability were ahead of our expectations and have grown organically in the year to 31 March 2013 illustrating the resilience of the Group to economic difficulties, one of its key strengths. Despite the limited prospects for the national economy in the short-term, the Board is confident that the Group's businesses are much better placed than the majority of UK businesses and expects further growth in the year to March 2014.
Group turnover increased by £16.5m (8.7%) to £205.0m (2012: £188.6m). After adjusting for the acquisitions made in the year and the full year effect of acquisitions made in the previous year this represents encouraging like-for-like organic growth of £3.5m.
The Group's total operating profit (before goodwill amortisation) of £46.3m was ahead of our expectations and ahead of the previous year (£38.3m), despite the difficulties outside of our control, which represents very encouraging organic growth of £1.8m (4.1%) after taking into account the impact of acquisitions.
Group cash flow from operating activities was better than expected at the start of the year and increased by £4.9m to £66.0m, mainly as a result of the increase to EBITDA (£10.9m), partly offset by an expected increase in working capital requirements in the year of £5.6m partly required to fund the Group's growth in trading activities, turnover and profits and partly due to the short-term timing of operating cash receipts and payments. The Group remains committed to maintaining strong cash flow performance and to keeping working capital at efficient levels, although this remains even more of a challenge in difficult economic conditions.
Management and Employees
In a challenging business environment the Group relies on its employees to respond quickly to challenges and use their initiative. The Group has seen these qualities during the year with its strong performance largely due to the quality of its people and their work. In return, the Group continues to invest in its people, their safety and wellbeing and strives to make the Group an enjoyable and safe Group to work for.
There remain some significant challenges ahead for the Group both in the current year and beyond, most notably preparing for the 2014 Periodic Review (PR14) in the regulated water business where there remain some significant uncertainties, driving through the technological and efficiency initiatives across the Group and continuing to deliver our high class service to all of our customers at competitive prices. However, the Board believes it is well placed to meet these challenges and is looking forward to another year of success and development of the Group in 2013/14.
For further information read theGroup Annual Report 2013