Financial performance and expenditure of the water companies in England and Wales 2006-07 report

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Ofwat home > Publications > Reports on water companies

Financial performance and expenditure of the water
companies in England and Wales 2006-07 report

September 2007

This report examines the operating profits, cash flows and balance sheets of the regulated water and sewerage companies and the water only companies in England and Wales for the financial year 2006-07. It also provides information about each company's day-to-day running costs (operating expenditure) and the investment they undertake to maintain and upgrade the pipes, sewers and treatment works (capital investment).

During this financial year, the headline developments were:

The rate of return fell slightly, from 6.6% to 6.4%, as companies experienced lower than expected revenues and higher operating costs.
Although pre-tax profits have risen as a result of favourable interest conditions, which has reduced the companies' borrowing costs, operating profits were at a similar level to 2005-06.
Six companies have paid special dividends totalling £1.9 billion between them. These one-off payments increase the level of debt in the companies and may lead to lower tax charges.
Companies have spent 30% more on maintenance this year. They are now almost exactly in line with where we expected them to be at this stage of the five-year period to 2009-10.
However, they have spent 15% less overall on capital investment than we assumed when we set price limits in 2004. Of this, 4% is due to efficiencies, which we welcome. However, most of the remaining shortfall is because of planning delays.
Drinking water quality continues to be very good, with compliance at 99.96%.
We have looked at the performance of companies' assets and are concerned that six companies have reported increases in sewer collapses and pollution incidents. These companies have work to do to achieve a stable sewerage network.
We fined United Utilities £8.5 million for breaking the rules that govern transfer pricing rules (trade with associated companies within the group and with the parent company).

Financial performance and expenditure in the water companies in England and Wales – overview (PDF – 2.5Mb)

Supporting information

1. Indexation
2. Current cost profit and loss account
3. Operating expenditure by service (water and sewerage companies only)
4. Operating profit by service (water and sewerage companies only)
5. Cash flow statement
6. Financial Indicators
7. Net MEA values and regulatory capital values
8. Reconciliation of current cost and historic cost profit before tax 2006-07
9. Property development and land disposal
10. Serviceability indicators and trends
11. Enhancements to sewerage treatment
12. Sustainable procurement

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