REG - Northumbrian Water - Financial Statements and Annual Performance Report

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15/07/2022 19:00

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RNS Number : 7147S  Northumbrian Water Limited  15 July 2022

NORTHUMBRIAN WATER LIMITED

 

FINANCIAL STATEMENTS AND ANNUAL PERFORMANCE REPORT 2021/22

Northumbrian Water Limited (NWL) has today published its Annual Performance
Report (APR) and its Annual Report and Financial Statements (AR&FS) for
the year ended 31 March 2022.

Chief Executive Officer, Heidi Mottram, said "I would like to take this
opportunity to thank our teams across the business for their flexibility and
adaptability as we've continued to provide essential services while the
COVID-19 pandemic continued to affect us. Thankfully, we have begun the
process of returning to more normal working arrangements and I am delighted we
remain one of the leaders in our industry under these challenging
circumstances."

"I am particularly delighted that we have excelled in our customers' eyes. Our
people work hard to get it right 'first time, fast time, every time', so we
can deliver an unrivalled customer experience and I was thrilled to see the
results of our effort putting us in the top two in the industry for C-MeX,
Ofwat's measure of customer experience."

Performance review

Our APR 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 PR19
Business Plan, reflecting the feedback from our customers. This has been the
second year of delivering against those goals and the tough performance
commitments we have made.

We take our responsibility towards the environment very seriously and were
especially pleased to retain a 4* Environmental Performance Assessment from
the Environment Agency. We remain committed to pursuing our goals to reduce
carbon emissions and waste and are on track to deliver our Net Zero target by
2027 having already reduced our carbon emissions by over 68% since 2019. In
April 2022 we published 'A Vision for Our Coasts and Rivers' which includes
nine pledges we believe will be effective for our unique water environment and
make a real difference to our communities.

We're committed to eradicating water poverty in our regions by 2030 and have
now reduced that to less than 10%. Despite the recent increase, our bills in
our Northumbrian operating region are still the lowest water and sewerage
bills in England. As well as being top two for C-MeX, we were top scoring
English water company in the UK Customer Service Index, a national barometer
of customer satisfaction published by The Institute of Customer Service.

We continue to meet the challenges of a changing climate, including facing one
of the most powerful winter storms on record in our northern operating area,
Storm Arwen. We were proud of the response of our teams to battle through
extreme conditions to return supply for customers as quickly as possible.
Taking into account the exceptional impacts of Storm Arwen, our performance to
keep the water flowing for our customers remains at the forefront of the
industry.

We've been named on the World's Most Ethical Companies list, compiled by the
Ethisphere Institute, for the eleventh time, the only water company
recognised. This reflects our work supporting our people and embedding an
ethical approach and a strong sense of purpose in our culture. We were
absolutely delighted to be the first and only water company to achieve the
Good Business Charter accreditation, recognising us for responsible business
practices. We have also reached our ambitious local spending goal, ensuring
that 60p in every £1 we spend is spent locally, changing lives for the better
in the regions we serve.

Financial performance

The Annual Report and Financial Statements, published on our website today,
reports our financial performance in the year. Operating profits fell slightly
from £191.1m to £188.3m. Revenue increased by £21.7m to £780.1m,
reflecting a small increase in allowed revenue and a recovery in non-household
demand following the COVID-19 lockdowns in the prior year. However, operating
costs rose by £24.5m to £591.8m, due entirely to a £27.2m increase in
energy costs as a result of the unprecedented increase in global prices. The
adjustment to our revenue allowance following the redetermination by the
Competition and Markets Authority in March 2021 will come into effect in the
2022/23 charging year.

Profit after tax has been materially impacted by two external factors:
increased inflation and the future increase in corporation tax rate.

Net finance charges increased by £58.2m to £170.1m due to significantly
higher accretion on index-linked bonds as a result of increases in inflation
during the year and adverse movements on the market valuation of
inflation-linked derivatives. Both of these items are non-cash in nature.

While current tax was a credit of £9.7m, reflecting the lower profit before
tax due to higher interest charges and higher tax reliefs available for
capital expenditure under the temporary 'super deduction' rules, deferred tax
was a charge of £167.5m compared to £1.6m last year. The significant
increase is due to a restatement of deferred tax from 19% to 25% in the year,
reflecting the decision by government to increase rate of corporation tax with
effect from April 2023 which was enacted during the year. This is also a
non-cash charge.

We invested £282.2m in our assets in the year, including around £187m
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.
In addition, as well as supporting growth from developers in our areas, we
continued to deliver 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 had £283m undrawn at
31 March 2022. The Board has approved an updated Treasury strategy setting out
a framework for raising c.£1.3bn of funding over the next four years, and the
implementation of this strategy is being progressed.

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 that 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 are making further progress towards the ambitious goals we set in our PR19
Business Plan and will continue to drive this forward over the coming year. We
are building on strong foundations in areas such as customer service and
environmental performance. Equally we must improve our performance across
water quality, leakage and sewer flooding, investing in the resilience of our
assets.

We have already begun talking to customers and stakeholders about our next
regulatory Business Plan which will set out our objectives and commitments for
the five years from 2025-2030, in the longer-term context of our plan to 2050.
We are focusing on understanding and planning for long-term challenges around
climate change, economic and population changes, changes to customer
behaviours and expectations and developing investment priorities.

We are proud of our achievements to date, but we are never complacent and will
continue to make further service improvements.

 

For more information, our reports can be found on our website via the
following link:

https://www.nwg.co.uk/about-us/nwl/how-we-are-performing/annual-performance-report/
(https://www.nwg.co.uk/about-us/nwl/how-we-are-performing/annual-performance-report/)

 

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