SOUTH STAFFORDSHIRE PLC NEWS ARTICLE
29/06/12 - South Staffordshire Plc 2011/12 Group Results
The Group has experienced another positive year with successful operational delivery in the regulated water supply businesses of South Staffs Water and Cambridge Water (which was acquired in October 2011). In addition, the year has also seen the continuing successful development of opportunities arising in our non-regulated service divisions, SSI Services and Echo, which have experienced sales and profit growth despite the continuing difficulties in the UK economy.
Despite the challenging economic and commercial environment, the Group has once again exceeded its financial targets for the year to 31 March 2012, through a combination of making the most of its opportunities and by continuing with tight cost and cash flow control. The Board is confident that the Group remains well positioned for further growth in 2012/13.
Group turnover increased by £29.3m (18.4%) to £188.8m (2011: £159.5m). After adjusting for the acquisitions made in the year and the full year effect of acquisitions made in the previous year this represents like-for-like growth of £7.6m (4.6%), representing an encouraging performance in a difficult economic environment.
The Group's operating profit (before goodwill amortisation) of £38.3m was ahead of our expectations and £8.7m ahead of last year with increased profits arising from the acquisitions made in the year (£5.5m), the full year effect of those made last year (£1.1m) and encouraging organic growth (£2.1m). High levels of inflation experienced throughout most of the year have put pressure on our cost base and profit margins, although tight control of costs where possible have mitigated the impact.
Cash flow from operating activities was better than expected at the start of the year and increased to £61.0m from £56.4m mainly as a result of higher operating profits, partly offset by lower working capital reductions than last year due to growth in trading activities, although this was better than expected and reflects the Group’s ongoing commitment to keep working capital at efficient levels.
South Staffs Water
Domestic water charges remain 25% below the industry average with the business continuing to offer high levels of service to its customers.
Despite the very dry weather conditions experienced during the year, which resulted in a drought in much of the country including the Midlands, the business's water resource position remained healthy with no water use restrictions being imposed. A relatively wet spring and start to the 2012 summer have also increased resources further. However, continual close management of the resource position remains a priority for the business.
South Staffs Water has successfully delivered capital investment (net of contributions) of £26.3m in the year including the replacement of 63km of mains that are susceptible to bursts and leaks.
In October 2011 the Group acquired Cambridge Water, a water only company supplying approximately 310,000 people in the city of Cambridge and the surrounding area. The business has many similarities with South Staffs Water in that both businesses have low charges to customers, supply high quality drinking water and offer excellent service, whilst having an efficient operation.
As the Group already owned one water company there was an automatic referral of the acquisition to the Competition Commission which, on 31 May 2012, cleared the acquisition without the need for remedies. The Competition Commission recognised the potential for positive benefits from the sharing of best practice and increased resilience to improve further the performance of both businesses.
SSI Services, the Group's specialist infrastructure contracting division, provides a broad range of specialist added value services working in regulated environments serving the public and private sectors, including water utilities, government agencies, as well as major contractors and facility management companies serving these sectors.
The division has operated in a challenging environment, with a reduction in public sector budgets impacting demand for our specialist services. However, despite these challenges, the division has continued to grow and improve the levels of operational efficiency. A number of businesses have performed very well, with the water industry entering the second year of AMP5 and demand in this sector increasing with further growth expected in the current year.
Echo is a leading provider of customer process management services focusing on regulated markets. The business remains committed to developments that continue to support its clients with the major challenges they face including, in the UK water sector, their focus on further improving their levels of customer satisfaction. This support has included further development of Echo's RapidXtra system, resulting in innovations in business process management, meter data management and web self-service.
The business remains committed to building on its position in Northern Ireland where it is already established as one of the leading public sector service providers. Inter-Credit, Echo's debt collection business, has performed well during the year securing new clients in the water industry.
Management and Employees
The success of the Group could not be achieved without the hard work, dedication and innovation of our main asset, our management and employees. The Group continues to encourage our people to develop their skills and knowledge to the benefit of both themselves and our businesses.
Despite continuing uncertainty over the prospects for growth in the UK economy and the challenges this uncertainty brings, the Board remains confident that our businesses are efficient and are well positioned to deliver another successful year of growth for the Group.