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| |  Reports on water companies |
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Financial performance and expenditure of the water companies
in England and Wales 2007-08
Financial performance- Pre-tax profits decreased by 12% to £2.2 billion in 2007-08.
- 5% increase in operating profits, which has been more than offset by increased interest costs. Operating profits were higher than in 2006-07 because higher revenues were only partly matched by increased costs for capital maintenance.
- Companies are able to access debt at rates lower than we assumed when we set price limits in 2004. We will review our assumptions about the interest rates the companies are likely to face when we next set price limits in 2009.
- The companies' overall return on capital for 2007-08 was slightly higher (6.5%) than 2006-07 (6.4%) and also lower than our expectations for the return of 7.1% assumed in price limits.
- Corporation tax charges increased by 32% to £503 million.
Operating expenditure - £125 million lower than in 2006-07 – a 4% decrease.
- £67 million (2%) less than we assumed in price limits for 2007-08 and £319 million (9%) less than the companies set out in their 2004 business plans.
- The most significant reduction compared with 2006-07 is for energy costs, which are 9% lower. There was a fall in energy costs in 2007-08 compared with 2006-07. Although there is a significant year-on-year reduction in power costs they are still 6% above what we assumed in our final determinations for the current period.
Investment- Overall investment increased by 8.1% to £4.9 billion in 2007-08. Of this, the amount spent on maintaining the network alone was steady at about £2.5 billion.
- 9% less spent overall than we expected over the first three years of the current price limit period. Of this, 4% was the result of efficiencies, which we welcome. Planning issues contribute to some of the delays in delivering some schemes.
Supporting information (PDF - 277Kb)
1. Indexation used in the 'Financial performance and expenditure' report
2. Current cost profit and loss account
3. Operating profit by service (water and sewerage companies only)
4. Cash flow statement
5. Financial indicators
6. Net MEA values and regulatory capital values
7. Reconciliation of current cost and historic cost profit before tax 2007-08
8. Property development and land disposal
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