Annual Report 2011 - Watercare

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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 Return to Contents page
Watercare Services Limited 2011 ANNUAL REPORT Watercare at work Significant upgrades to information systems software Last year marked two important milestones in Watercare’s journey to supporting more effective and secure information systems, with the successful roll-out of new Hansen and SAP Enterprise Asset Management Solution software. The November roll-out of Hansen involved building the technology and information base for Watercare to run its new customer business. It included transferring all of the local network operators’ (LNO) data to Watercare, as Chief Information Officer Jim Swanson explains: “This data covered everything from the two-million-odd assets we inherited – pipes, manholes, vehicles – to all customer billing information.” SAP supports a number of major business functions for Watercare, including finance and management accounting, CAPEX and OPEX and project management. Jim says SAP has many benefits, including a more integrated process – capturing data once and making it available to all relevant people and processes, and improved reporting and tracking of performance: “This puts us in a strong position for moving forward as it provides us with systems which can grow with the business to meet our current and future needs.” The Hansen project was challenging as the new platform has to support six different LNO business models, with each LNO having different billing cycles, tariffs and maintenance service levels. In June, the new SAP Enterprise Asset Management Solution also went live, replacing the old Mozaic, Avantis and PRS systems. “The upgrade was vital as it enabled us to retire superseded software and eliminate the associated risk of our reliance on an old, inadequately supported system.” “This data covered everything from the two-million-odd assets we inherited – pipes, manholes, vehicles – to all customer billing information.” Sound financial management Chief Information Officer Jim Swanson (left) discusses the impact of the SAP Enterprise Asset Management Solution software on the procurement process with Procurement Manager Stuart Bird. PAGE 57 Return to Contents page
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Annual Report 2011 - Watercare

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