REG - Northumbrian Water - Financial Statements and Annual Performance Report

EquifaxAnnouncement

15/07/2021 18:00

RNS Number : 4259F
  
Northumbrian Water Limited
  
15 July 2021
  
 

NORTHUMBRIAN WATER LIMITED
 
FINANCIAL STATEMENTS AND ANNUAL PERFORMANCE REPORT 2020/21
 
Northumbrian Water Limited (NWL) has today published its Annual Performance Report (APR) and its Annual Report and Financial Statements for the year ended 31 March 2021.
Chief Executive Officer, Heidi Mottram, said "Our vision is to be the national leader in the provision of sustainable water and wastewater services. I am delighted that we have made further progress towards this vision during 2020/21, under incredibly challenging circumstances, and remain one of the leaders in our industry. This has been a unique year with much of it spent in lockdown and under COVID-19 restrictions. We provide vital services, but the importance of these has never been more apparent than during the pandemic. I am extremely proud of the way our teams have responded to the challenge and kept our essential services running for our customers and the communities we serve. This has been a fantastic effort and shown the resilience of both our people and our operations."
 
COVID-19 resilience
During the course of the COVID-19 pandemic, our first concern has been for the safety of our employees and customers and we have taken every precaution to ensure that we carried out our operations securely. We took appropriate steps to ensure that our operational and field workers could carry on their work in a COVID-safe way, with social distancing and protective equipment as required. Around half of our staff, in customer and support roles, have worked from home throughout the year and our significant investment in technology in recent years has made this transition very smooth, allowing teams to continue working productively and collaboratively.
We have worked with the government and local authorities to support testing and vaccine roll out. We were the first water company in the country to launch a rapid testing programme with employees and piloted a scheme for asymptomatic testing to be carried out across our workforce. Working with Newcastle University, we played a leading role in analysing wastewater to track the presence of COVID-19 in localities. We supported the set-up of the Nightingale Hospital in Sunderland, which is now being used as a vaccination centre, and made our head office available to the NHS for use as a vaccination centre for Durham.
 
Performance review
Our APR, which is published on our websites today, describes our performance in the year against a wide range of measures. We set out our ambitious goals for the 2020-25 period in Our Plan, reflecting feedback from our customers. This has been the first year of delivering against those goals and the tough performance commitments we have made.
We have exceeded our targets in many areas and remain one of the top companies for customer service, we are leading on pollution and have regained our 4* status in the Environmental Performance Assessment from the Environment Agency. However, we are always striving to do better and were disappointed to fall short on leakage and water quality.
Ofwat introduced a new Customer Measure of Experience (C-MeX) in the year to measure customer service performance and we were pleased to come in the top three. We have set an ambitious goal to eradicate water poverty in the regions we serve by 2030, and the importance of this was brought into even more focus during the pandemic. We took an early decision to offer payment breaks to many of our customers to give them breathing space and have been able to extend the scope of our social tariffs to allow us to make support available to more of our customers who need it.
In our water business we remain industry leading on minimising interruptions to supply and have made great progress on the taste and appearance of water delivered to our customers' taps. We have also continued to focus on ways to reduce leakage from our networks and were on track to achieve our targets until we experienced some extreme cold weather over the winter. The water we deliver to our customers is of high quality and this is always one of our top priorities, though a small number of issues in the year caused us to miss our target on the Compliance Risk Index measure. We are working actively with the Drinking Water Inspectorate to identify ways in which we can improve across the whole end to end water process.
Our environmental performance has remained strong this year and we were delighted to achieve a 4* Environmental Performance Assessment from the Environment Agency. We continued to be at the forefront of the industry in minimising pollution incidents, an area of particular public interest at present. We have made significant progress in tackling sewer flooding with further reductions in both internal and repeat sewer flooding incidents. Another of our ambitious goals is to achieve net zero carbon emissions by 2027 and it was a great achievement to reduce emissions by more than three times our regulatory commitment in the year.
Our focus is to deliver unrivalled service to our customers and benefit the communities we serve, but it is always heartening to gain external recognition. We were named Water Company of the Year at the 2020 Water Industry Awards, which recognised all-round excellence in customer service, innovation, operational resilience and workforce best practice. In addition we were named on the World's Most Ethical Companies list, compiled by the Ethisphere Institute, for the tenth time, and were the only water company recognised. This reflected our work in our communities, supporting our people, and embedding an ethical approach and a strong sense of purpose in our culture.
 
Financial performance
The Annual Report and Financial Statements, published on our websites today, report our financial performance in the year. This was the first year following the PR19 price review which saw a sharp reduction in allowed revenue. We asked Ofwat to refer its Final Determination to the Competition and Markets Authority and received a redetermination in March 2021. The adjusted revenue allowance will come into effect in the 2022/23 charging year.
Revenue reduced by £142m to £758.4m, principally as a result of a reduction in allowed revenue from the PR19 price review.  This was exacerbated by the impact of the COVID-19 pandemic which had a particular impact on non-household revenue with reduced activity resulting in revenue being £25.6m lower than expectations. In contrast, household revenue was £19.5m higher than expected as a result of the change in working patterns during the year, with more of our customers working from home.
Operating costs increased by £21.8m to £563.4m, which was largely due to a step change in abstraction charges following a consultation by the Environment Agency. Other cost increases, including depreciation on new assets, were mostly offset by cost efficiencies.
Net finance charges were relatively stable at £111m, a fall of £1.4m. The current tax charge fell by £26.9m due to the reduction in pre-tax profit as a result of the reduced revenues. Profit for the year was £70.1m.
No dividends were paid during the year ended 31 March 2021.
Capital investment was £264.5m in the year, including around £174m invested in maintaining the health of our asset base to ensure the continued provision of sustainable water and wastewater services in the areas we serve. We commenced our AMP7 enhancement programme which will deliver environmental improvements through the Water Industry Environmental Programme, improved resilience of our water and wastewater assets, as well as cyber resilience, and smart metering.
No new debt was issued during the year. Our committed bank facility of £450m is for the purpose of maintaining general liquidity and was undrawn at 31 March 2021.  The maturity date of the facility was extended to December 2025 during the year.
Cash interest cover and gearing are measured per the financial covenant for the committed facility and remain well within target. The Company retains investment grade credit ratings of Baa1 (stable outlook) from Moody's and BBB+ (negative outlook) from Standard & Poor's.
 
Assurance and Governance
We have robust governance and assurance arrangements in place to ensure that the data we publish is accurate, clear and transparent in order to give Ofwat and our customers a high level of trust and confidence in our reporting. We have produced a separate Data Assurance Summary, published on our websites today, which sets out the assurance we have carried out on our APR, Financial Statements and other areas of risk over the past year, and the outcomes of these assurance activities.
 
Outlook
We have taken the first steps towards the ambitious goals we set ourselves in Our Plan and will continue to drive these forward over the coming year. We are building on strong foundations in areas such as customer service and environmental performance and in many aspects of our water business. Equally, we know we have to improve our performance across areas such as leakage and water quality and must continue to address sewer flooding in order to meet our stretching Performance Commitments and achieve our vision to be the national leader in our industry. We will also progress our longer-term goals, investing in the resilience of our assets and pursuing our goals to reduce carbon emissions and waste.
As the world hopefully moves on from the global pandemic, we are conscious of the financial consequences that some of our customers will face and will continue to provide support to those with affordability challenges. We also believe that the way we have managed through the restrictions, and the resilience we have shown, has created some new opportunities and we will embrace the prospect of a more flexible and adaptable business and workforce in the future.
We are proud of our achievements to date, but we are never complacent and will continue to make further service improvements in 2021/22 and beyond.
 

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