Financial

We use a wide variety of other information to assess risks to customers – and decide whether we need to take action on your behalf. This is part of our approach for holding water companies to account.

Below we highlight the overall performance of the monopoly water and sewerage and water only companies in England and Wales in 2012-13 – and any action we are taking to protect customers’ interests.

Financial indicators

It is important that companies are financially sustainable so they can continue to deliver services to customers. It is also important that we check they are making the investment in services they promised they would deliver.

We summarise companies’ financial performance in 2012-13 below.

  • Companies charges to customers (‘revenue’) totalled £11 billion. In real terms – after inflation is removed – revenue was 1.2% higher than in 2011-12. This is slightly lower than our average price limit of 1.6% for 2012-13, which we set in 2009.
  • Companies invested about £5 billion in 2012-13, which was broadly the same as in 2011-12.
  • Companies’ total pre-tax profits increased by £77 million to £1.9 billion. They paid £1.8 billion in dividends to shareholders, which was £471 million (or 21%) lower than in 2011-12.
  • Lower dividend payments and lower interest charges meant that the financial returns that companies paid to providers of finance (measured as dividends and interest as a proportion of companies’ regulatory capital value) fell from 7.9% to 6.4%. The regulatory capital value is our valuation of the capital base of the companies.
  • Companies’ average post-tax return on their regulatory capital value was 5.0%, which was in line with our 2009 final determinations of the prices companies could charge customers between 2010-15. Companies’ returns ranged from 4.2% (Anglian Water and Portsmouth Water) to 7.8% (Sembcorp Bournemouth Water).
  • Companies’ average level of debt measured as a proportion of their RCV (‘gearing’) was virtually unchanged at 71%.
  • Companies paid £237million in corporation tax in 2012-13. This is virtually unchanged from the previous year. The effective tax rate was 11.5% on average. Dŵr Cymru, Severn Trent Water, Thames Water and Yorkshire Water all benefitted from corporation tax credits in the year.

The companies have now invested about £116 billion in services since privatisation.

You can also read your company’s regulatory accounts to find out more about their performance.

Find out more about why water companies need to make profits.

Our glossary of terms can help you understand what some of the financial terms mean.

Action we are taking

No companies have identified any problems in this area.

In August 2013, Thames Water made an application to us to change its price limits for 2010-15 (an ‘interim determination’). The requested increase would have added a further 8% – or around £29 – to an annual average household bill. We carefully considered Thames’ application and ound that the evidence it submitted did not justify its proposed increase in customers’ bills. So we turned down their application Final determination of Thames Water’s IDoK application.

In recent years water companies have benefited from the high level of inflation in the UK economy. The prices they can charge customers are currently linked to the retail price index. Our Chairman has called on companies to recognise the hard times customers are facing, and share unexpected gains with them. Since then some companies have committed more than £800 million, from  their own pockets, to additional investment to further improve services.

Data

We have collated below the performance data companies have published.

Return on regulatory capital valueCredit ratingGearingInterest cover
Anglian4.20%Baa179.50%1.47
Dŵr Cymru5.20%A363.00%2.10
Northumbrian5.20%BBB+62.00%1.90
Northumbrian (Essex & Suffolk)
Severn Trent6.70%BBB+61.30%3.60
South West5.00%55.00%2.30
Southern4.00%Baa279.00%1.50
Thames4.31%Baa177.40%1.70
United Utilities4.80%BBB+64.40%2.00
Wessex6.00%BBB+64.00%3.20
Yorkshire4.90%Baa379.80%1.42
Affinity Water5.54%A377.00%2.50
 – Central area
 – East area
 – Southeast area
Bristol4.90%Baa161.30%1.50
Dee Valley6.10%73.00%2.20
Portsmouth4.57%77.90%1.80
Sembcorp Bournemouth6.30%60.50%4.60
South East5.09%BBB78.70%3.99
South Staffs6.03%Baa273.00%2.80
South Staffs (Cambridge)6.21%33.50%2.70
Sutton & East Surrey5.70%BBB76.00%1.30

Additional data