Financing the private water and sewerage Companies of England and Wales

South West Water "profit and loss"

Last update Wednesday 15th July 2010

The following "profit and loss" accounts are extracted from the "Annual report and financial statements" which are presented to Ofwat by the company. As can be seen, the water companies are permitted to present their financial reports in terms of "turnover" and "profit" just as if they were real commercial operations, who could actually make a loss, rather than publicly funded low risk monopolies. This might be acceptable if that were as far as it goes. However, under the Ofwat policy of "arm's length regulation", the pretence is carried forward to the point that companies are permitted to dispose of the revenue surplus just as if it were a real hard-earned commercial profit. There is some pretence of promoting economy and efficiency (as required by statute), apart from where payments to Pennon are concerned, but obviously no thought at all of protecting customer interests regarding activities that are not attributable to the licensed business. The huge dividends taken by the sole shareholder - the Pennon Group Plc - speak for themselves. These dividends are excessive (about 20% of total revenue) even without taking into account the massive £200 million special dividends taken by Pennon in 2006.

South West Water profit and loss accounts from regulatory financial reports for years ending 31 March 2007/8/9/10

2009-10
2008-09
2007-08
2006-07
£M
£M
£M
£M
Turnover 446.0  432.0  421.0  381.3 
Operating costs (185.1) (164.4) (175.9) (167.2)
Depreciation (72.9) (89.6) (67.9) (62.4)
Operating profit 189.0  186.8  177.1  154.2 
Net interest payable (64.1) (69.9) (64.9) (58.2)
Profit on ordinary activities
      before taxation
125.7  116.9  113.0  96.8 
Tax on profit on ordinary activities (18.9) (51.3) (14.0) (23.0)
Profit on ordinary activities
      after taxation
106.8  65.6  99.0  73.8 
Dividends * (54.4) (103.8) (68.7) (75.0)
* does not include £200 million special dividends
taken by Pennon in 2006