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South West Water’s owner, Pennon, has reported a 9 per cent rise in full-year pre-tax profit to £207.3 million due to the strong financial performance of the water company.
The water company’s profit before tax rose 10.8 per cent to £162.5 million, while its sister waste management company Viridor, posted a 19.5 per cent fall to £27.6 million.
The water company’s operating profit increased by 5.7 per cent to £227 million, while revenue increased 4.3 per cent to £520 million as a result of tariff increases, new connections and “higher other sales”.
Ken Harvey, Pennon’s chairman, said South West Water was “well placed to outperform its assumptions” in its preliminary financial results for the year ended 31 March 2014.
Capital expenditure in the year increased to £141.6 million from £116.5m in 2012/13.
This was offset by an overall reduction in demand and the effects of customers switching to a metered tariff.
“The company continues to deliver robust operational performance and improving standards of customer service, notwithstanding the dry summer of 2013 and then the extreme weather and resultant flooding of last winter,” said Harvey.
Customer demand fell by one per cent from last year, a lower reduction than previous years, which reflects the dry summer experienced in 2013, according to South West Water.
This reduced revenue by £2.8 million, with 78 per cent of South West Water’s domestic customers metered.
As part of the 2014 price review, South West Water was the only water and sewerage company to receive an ‘enhanced’ status in April, from regulator Ofwat for an “excellent” business plan.
As a result the company received a fast tracked draft determination for 2015-2020 and has benefited from an initial financial award of £11 million.
Investment bank, RBC Capital Markets, said it expects South West Water “to continue delivering stable cash flow and steady RCV growth”.
The water company currently has the highest bills in the UK and will freeze tariffs in 2014/15. It says it will also keep bills below inflation until 2020.
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