Annual Report 2011 - Watercare

Watercare Services Limited
2011 ANNUAL REPORT
sound financial management
8A. Performance against Statement of Corporate Intent target: FFO ratio.
Funds generated from operations (FFO) as ratio of interest cost
2.05 2.10 2.15 2.20 2.25 2.30 2.35 2.40 2.45 2.50
The extent to which Watercare covers its interest costs is a vital measure of its financial performance. Under the SCI, Watercare undertakes to maintain
the ratio of funds generated from the business at a level of at least 2.5 times the cost of interest. The company achieved this target in 2010/11 with
an FFO ratio of 3.3.
Target ≥2.5
2011
100% 7/10
2007 2008 2009 2010
100 40 100 100
% % % %
8B. Percentage performance:
savings through efficient procurement.
2011
Establish spend
categories for
benchmarking
and reporting
Develop and
implement a
category
review plan
Develop
procurement
systems for
market review
Implement
process for
reviewing and
monitoring
preferred
suppliers
Achieve savings
of 0.5% of
operating
expenditure
Adopt a
procurement
policy for use
of preferred
suppliers
Achieve
savings of 1%
of operating
expenditure
Achieve savings
of 1.5% of
operating
expenditure
Achieve
savings of 2%
of operating
expenditure
Implement
procurement
planning process
95%
2007 2008 2009 2010
55 65 90 95
% % % %
On integration, 367 supply contracts transferred to Watercare. Considerable consolidation of suppliers has been achieved resulting in immediate savings.
Other significant savings were achieved in IT and chemical categories. In total, savings of $3.6 million were realised in 2010/11.
8C. Performance against target:
interest rate percentage.
8.1 7.9 7.7 7.5 7.3 7.1 6.9 6.7 6.5 6.3
Treasury Benchmark = 6.29%
Interest on debt is a significant cost for Watercare and is closely monitored. The company sets an annual target to achieve a lower average
interest rate than the Treasury Benchmark rate. For 2010/11, Watercare achieved an average interest rate of 5.95% which was less than the
Treasury Benchmark of 6.29%.
2011
100% 7/10
2007 2008 2009 2010
100 100 90 50
% % % %
8D. Performance: actual operating expense.
Percentage against budget
4 3 2 1 0 -1 -2 -3 -4 -5
2011
100% 7/10
Watercare is required to minimise operating costs and seeks to achieve actual operating expenses of at least 5% below budget. For 2010/11,
the company achieved an actual operating expense that was 6% below budget as a result of labour cost savings, reprioritised maintenance
and lower other costs including professional fees.
Target
2007 2008 2009 2010
85 75 75 95
% % % %
Sound financial management
PAGE 56
2011
Overall percentage score: Sound financial management
Contact: bmonk@water.co.nz 99%
Weblinks
Major suppliers and contractors Fig. 55
Suppliers by spend and industry Fig. 56
Interest rate performance Fig. 57
Ethics and business integrity Fig. 58
Product information disclosure Fig. 59
Product life cycle, health and safety impact assessment Fig. 60
Financial implications of climate change Fig. 61
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