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Financial performance and expenditure of the water companies in England and Wales 2009-10
Our financial performance and expenditure report examines the operating profits, cash flows and balance sheets of the regulated water and sewerage companies and water only companies in England and Wales for the financial year 2009-10.
Financial performance
- The companies’ operating profits rose to £3.5 billion in 2009-10, an increase of 7%. This is because of higher revenues, which were only partly offset by increased operating costs and capital maintenance charges. This has caused the interest cover ratios to rise slightly.
- The companies’ overall return on capital for 2009-10 was slightly higher (7.2%) than in 2008-09 (6.8%), but lower than the 7.5% assumed when we set price limits in 2004.
- The companies’ pre-tax profits increased significantly from £1.8 billion to £2.8 billion in 2009-10. The financing adjustment contributed about £0.8 billion of this increase in profits. This adjustment was atypically low (only £12 million) in 2008-09, because the RPI in March 2009 was lower than in March 2008.
Operating expenditure
- Total operating expenditure for the sectors in 2009-10 was £3.7 billion (excluding exceptional items). This was £61 million more than in 2008-09 and represents a 1.7% increase in real terms. It is £60 million (1.6%) more than we assumed in price limits for 2009-10.
- There has been continued upward pressure from energy costs, despite recent falls in unit prices. This is because some companies locked into forward contracts in 2007 and 2008, when prices were higher than they are now.
Investment
- Overall, the companies invested £4.0 billion in 2009-10. This is 11% more than we assumed in the 2004 price limits, although it is 14.9% lower than in 2008-09. Of this total, maintenance spend fell by 13% to £2.1 billion and expenditure on improvements fell by 16.9% to £1.9 billion.
Financial performance and expenditure report
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