Annual Report 2011 - Watercare

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Watercare Services Limited 2011 ANNUAL REPORT FINANCIAL COMMENTARY (continued) Water revenue was $131.44 million for the year, 2.2% lower than the budget of $134.34 million due to lower than expected water sales volumes. Wastewater revenue was $203.77 million for the year, 1.2% lower than the budget of $206.29 million due to lower than expected volumes. Trade waste revenue was $14.0 million for the year and was higher than the budget by 2.4% due to higher than expected production for some customers. Other revenue was $23.8 million for the year and was 20.4% above budget due to higher miscellaneous revenue. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Price adjustment Water - - - - - Wastewater - - - - - Trade waste - - - - - - - - - - Price adjustments are unbudgeted discretionary payments. The Directors determine the amount, and the distribution between customer groups, after having regard to the financial position of the company and future expenditure requirements. The Directors decided that no price adjustment would be made for 2011 (2010 – $Nil). 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Operating expenses Water Asset operating costs 19,577 21,909 10.6% 13,019 24,878 Maintenance 18,361 21,987 16.5% 7,660 19,846 Other expenses 25,591 23,769 (7.7%) 17,628 27,372 63,529 67,665 6.1% 38,307 72,095 Wastewater Asset operating costs 36,493 38,882 6.1% 22,467 41,110 Maintenance 20,651 21,314 3.1% 11,615 24,349 Other expenses 35,867 38,782 7.5% 16,345 44,659 93,011 98,977 6.0% 50,427 110,118 Total Asset operating costs 56,070 60,791 7.8% 35,486 65,987 Maintenance 39,012 43,301 9.9% 19,275 44,195 Other expenses 61,458 62,551 1.7% 33,973 72,031 156,540 166,642 6.1% 88,734 182,213 Asset operating costs for the year were 7.8% below budget. The main driver for the favourable variance was due to the savings in chemical and energy costs due to lower flows in the summer months. Savings in other asset costs were due to biosolids production volume being down and lower information systems operating costs than budgeted following integration. Maintenance costs were 9.9% lower than budget. The favourable variance was primarily due to deferral of the primary sedimentation tank at the Rosedale Wastewater Treatment Plant and savings across the water treatment plants and network maintenance programme. 2011 Financial Report Other expenses for the year were 1.7% lower than budget due primarily to professional services and net labour costs being lower than budget. Professional services savings were achieved across the company due primarily to reprioritisation of spend in this area and staff focus on integration. The savings in net labour was mainly due to lower headcount than budgeted especially in the infrastructure and information systems groups. Other overhead savings were also achieved in training and travel due to staff focus on the integration of the retail business. PAGE 62 Return to Contents page
Watercare Services Limited 2011 ANNUAL REPORT FINANCIAL COMMENTARY (continued) 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Depreciation and Amortisation Water 71,106 54,510 (30.4%) 34,680 82,730 Wastewater 72,520 87,906 17.5% 34,075 100,950 143,626 142,416 (0.8%) 68,755 183,680 Depreciation for 2011 was 0.8% over budget primarily due to the acceleration of depreciation on various water assets due for replacement. The budget for water depreciation was understated and wastewater depreciation overstated due to incorrect budget assumptions being used for the useful lives of the retail assets integrated from the local network operators on 1 November 2010. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Finance costs Water Paid and payable 27,899 31,045 10.1% 10,846 39,161 Capitalised on asset construction (1,998) (4,143) 51.8% (1,060) (3,022) 25,901 26,902 3.7% 9,786 36,139 Wastewater Paid and payable 37,922 39,512 4.0% 26,502 49,841 Capitalised on asset construction (2,716) (5,274) 48.5% (4,775) (3,846) 35,206 34,238 (2.8%) 21,727 45,995 Total Paid and payable 65,821 70,557 6.7% 37,348 89,002 Capitalised on asset construction (4,714) (9,417) 49.9% (5,835) (6,868) 61,107 61,140 0.1% 31,513 82,134 Total finance costs of $61.1 million were 0.1% below budget. The lower interest costs were due to lower interest rates and lower debt due to lower capital expenditure than budgeted. This was partially offset by the amount of interest capitalised to assets under construction being lower than budget by $4.7 million due to less qualifying projects being integrated from the local network operators than was assumed. 2011 2011 2011 2010 2012 actual budget Variance to Budget Actual Budget $000 $000 $000 $000 Tax Current tax - - - - - Deferred tax 4,438 (250) N/A 11,311 (1,236) 4,438 (250) N/A 11,311 (1,236) The deferred tax balance reflects the change in deferred tax due to the reduction of the tax depreciation rates to zero on buildings with useful lives greater than 50 years which were integrated from the local network operators on 1 November 2010. No tax was payable on the trading result for the year. PAGE 63 2011 Financial Report Return to Contents page
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