Economic sustainability
As well as delivering strong operational performance, in 2010/11 South West Water delivered a robust set of financial results. Profit before tax was broadly stable at £128.9m compared with £129.5m in 2009/10. As well as achieving this level of profit the company invested £125.1 in capital expenditure and improved its gearing ratio (relationship of net debt to the regulatory asset value) from 59% to 57% as a result of strong cashflow performance.
Underlying this financial performance for the current year are a range of strategies and procedures, considered in this section of the report, covering economic sustainability that give assurance that strong results achieved in a particular year are not at the expense of longer-term sustainability.
In achieving the profit before tax for the year, operating cost efficiencies of £8.4m (equal to 5.8% per annum) were achieved, representing a step change. A significant element of the efficiency arises from ongoing restructuring programmes and continuing implementation of the systems and processes supporting remote site operation and control of the networks. We have used innovative approaches to save costs, for example, working with our sludge contractors, we have optimised efficiency savings of almost £100,000 by maintaining a low cost of fuel at a time of escalating prices, and deploying night shifts.
The company has a wide range of contacts with our environmental and regulatory stakeholders involving many different functions within the company. We also have central processes in place so that we can be confident that stakeholders are being dealt with by the people most able to assist them when they contact us and that consultations and information requests are being handled in the most efficient manner and that information given to stakeholders is both of high quality and consistant.