SOUTH STAFFORDSHIRE PLC NEWS ARTICLE
28/05/10 - South Staffordshire Plc 2009/10 Group Results
The outcome of the last 12 months' trading was unusually hard to predict at the start of the year as the continuing effects of the recession and economic uncertainty were exacerbated by the cyclical effect of the last year of the AMP4 capital investment period. However, despite these challenges, the Group performed well both operationally and financially in the year to 31 March 2010 and exceeded challenging targets set at the start of the year for both profitability and cash generation.
Group turnover reduced marginally by 2% to £142.5m principally due to lower non-regulated business activity as demand from our main Water and Sewerage Company (WASC) customers significantly reduced, due to both the economic conditions and to 2009/10 being the final year of AMP 4 when demand is typically low.
The Group's operating profit of £29.4m was ahead of our expectations but slightly lower than 2008/9, with the reduction principally representing the reduced turnover in the majority of the non-regulated businesses. Significant efforts have been made across all businesses to reduce costs and operate as efficiently as possible, while ensuring that all businesses are in a strong position to respond quickly to the expected increase in demand in 2010/11.
Despite the adverse external factors, Integrated Water Services and part of the Onsite business had a successful year with further organic growth being achieved.
South Staffs Water is recognised as a leading company in the water sector, based upon combining high levels of service and efficiency with low charges.
The business' Overall Performance Assessment, as measured by the industry regulator Ofwat, reflected excellent levels of service and is now the tenth consecutive year that South Staffs Water has been represented in the top five in the industry.
In addition the business is recognised as being one of the most efficient in the sector and is ranked in the top band for efficiency by Ofwat.
The business has continued excellent progress in delivering its capital programme to ensure its assets remain in good condition and to maintain good quality, reliable supplies to customers. Capital expenditure over the AMP4 period (2005/2010) of £114.1m is in line with the 2004 Ofwat Determination.
The five-year price review for the period 2010/15 was concluded with Ofwat's announcement of the Final Determination made on 26 November 2009. Customer bills are to rise by 2.8% plus inflation over the next five years. Capital expenditure allowed is close to that included in our Business Plan and should enable a continuation of our excellent service to our customers.
Water & Wastewater Services
The Group's Water & Wastewater Services division provides a broad range of specialist services to the UK water sector and other major infrastructure owners under long-term relationships.
The year saw a reduction in demand for the division's services, principally the result of the UK economic climate and the year being the final year of the AMP4 five year investment programme when activity is historically lower than other years in the cycle. To counteract this difficult environment some cuts in resources were inevitable to better match capacity with demand and when, in the last quarter, demand increased substantially the division was able to respond.
IWS had an excellent year, benefitting from the full impact of the UK-wide service and maintenance contract with the Coal Authority, won last year. The Water Hygiene division, now based throughout the UK, also did very well, winning a number of important local authority contracts.
Echo, which provides customer contact, billing and debt collection services for regulated organisations throughout the UK, had a good year. Service levels for its customer base were well maintained throughout the year and much effort was put into further developing and improving the RapidXtra billing software to ensure it remains a competitive product over the next ten years.
In Northern Ireland, Echo worked with Northern Ireland Water (NIW) to implement some significant contractual changes to the provision of its end-to-end customer services. These changes have included a new, direct contractual relationship between Echo and NIW and the expansion of the scope of Echo's service.
Across both of Echo's main customer service operations, for NIW and South Staffs Water, consistently impressive scores were delivered in the quarterly regulated customer satisfaction measures.
Overall the Group is well positioned for the coming year. Despite the obvious risks, we have reason to be confident that our businesses are able to take advantage of better conditions.