ANNUAL REPORT 2016

CONTENTS2 Group Highlights

4 Strategic Report: Executive Summary South Staffs Water SSI Services Echo Corporate Social Responsibility Financial Review

40 Executive Team41 Corporate Information42 Directors’ Report 44 Corporate Governance 50 Directors’ Responsibilities Statement 51 Independent Auditor’s Report 52 Consolidated Profit & Loss Account 53 Consolidated Balance Sheet 54 Company Balance Sheet55 Consolidated Statement of Changes in Equity 56 Company Statement of Changes in Equity56 Consolidated Statement of Comprehensive Income57 Consolidated Cash Flow Statement 58 Notes to the Consolidated Cash Flow Statement59 Notes to the Financial Statements80 Contact Details

Annual Report 2016

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First phaseof one of the UK’s largest UV water treatment processes complete

Very strong SIM performance for South Staffs Water

All Group Health and Safety targets met or exceeded

GROUP HIGHLIGHTS

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Successful operational delivery by SSI Services on key contracts

Key financial

targets

outperformed

Development

of a new end-to-end

customer centric debt

proposition

by Echo

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STRATEGIC REPORT

EXECUTIVE SUMMARY

Group overview, strategy and business modelSouth Staffordshire Plc is a highly respected integrated services group of businesses with a regulated water supply company, South Staffs Water, comprising two operational regions, South Staffs and Cambridge, and two non-regulated service divisions, SSI Services and Echo.

The Group’s strategy is to continue to grow by providing high levels of service quality while remaining price competitive in all of its operations, through driving continuing efficiency and maintaining a safe and enjoyable working environment. Details of how this strategy is implemented across the Group and the individual divisional strategies, business models and business plans are provided throughout the Strategic Report.

South Staffs WaterIn the first year of delivery of the new AMP6 period, South Staffs Water achieved good performance against most of its Outcome Delivery Incentives including the business’ best result in customer supply interruptions in the last 15 years and seeing strong results in Ofwat’s measure of customer service performance (SIM).

Through a multimillion pound investment in UV technology at the business’ Seedy Mill treatment works, which is due for completion in this new year, and investment planned for the Hampton Loade treatment works, the business is responding positively to the requirement to improve its water quality performance.

As the shape of the water industry is set to change significantly, South Staffs Water is preparing its systems, processes and organisational structures in preparation for the non-household retail business opening up fully for competition in April 2017.

SSI ServicesSSI Services had a very positive year, with encouraging operational performance on some key contracts, important new contract awards and achieving growth in both its turnover and profitability.

The IWS business has seen a positive year having performed well on some of its most important contracts. The OnSite business had a slow start to the year, due to the start of the new AMP period, however the newly formed Rail

division gained momentum with some significant contract awards, with the second half of the year much busier for the business.

SSI Services is now in a strong position to continue to grow its revenue with enhancement of existing product and service offerings and new disciplines being offered.

EchoEcho is helping its water company customers to deliver service excellence to customers through the deployment of RapidXtra, its market leading billing software, with this part of the business having another excellent year.

The business holds a strong position in the debt collection services market, has achieved new contract awards and is now able to offer end-to-end debt recovery services focusing on the importance of the customer experience and early intervention.

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FinancialIn the year ended 31 March 2016, the Group outperformed key financial targets including challenging budgets set for profitability, cash flow and net debt. This, along with year-on-year growth in all key measures of profitability, once again demonstrates the Group’s financial solidity.

EmployeesThe success of the Group and its businesses is due principally to its employees and we thank them for their continued support, dedication and their ability and willingness to adapt and respond to continuing change.

The health and safety of our people is of paramount importance and it is pleasing to report that strong leadership, commitment, worker engagement and a constant message in this important area of the business all helped to ensure that all of the Group Health and Safety milestones

were met or exceeded. All of our divisions have invested in training and development of their employees, with a particular emphasis on both Apprenticeships and employee development.

OutlookThe Group is in a strong position to continue to respond to the changing regulatory and commercial environment, maximise its opportunities and to continue to deliver its strategic objectives both in the short and longer terms.

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South Staffs WaterBest performance in Interruptions to Supply measure in 15 years

First phase of one of the largest UV clean water treatment plants in the UK at Seedy Mill complete

Very strong customer service performance for the first year of the new AMP

Preparation of systems and processes for non-household competition

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OverviewSouth Staffs Water is a water only company, supplying around 1.6 million customers in the South Staffordshire and Cambridge regions.

As the shape of the water industry is set to change significantly, the business is developing a new flexibility in how it operates that means it can respond quickly and adapt as necessary to take full advantage of the new environment.

A year of challenge and changeThis has been the first year of delivery in the new AMP6 period. The new Outcome Delivery Incentive (ODI) targets represent our commitment to deliver what our customers said was important to them. The five Outcomes and 15 specific ODIs, covering all aspects of operations from water quality, secure and reliable supplies, customer services and environmentally sustainable operations to fair customer bills, provide real focus for delivery. Alongside these, we have defined our own seven business targets, including a focus on readiness for non-household retail competition and employee satisfaction, safety and wellbeing.

A strong business plan, based on one of the largest pieces of customer engagement we have taken to date, is in place to deliver these targets and meet the challenges and opportunities this five year period will present.

The business has maintained a clear focus on delivering both high quality service and value for money throughout the year while it responds to the shifting landscape of the UK water industry.

Our household customers continue to enjoy some of the lowest bills in England and Wales. In 2016/17, the average household bill has reduced from £144 to £142, and from £129 to £127 in the South Staffs and Cambridge regions respectively.

Water quality has been the most notable challenge of the year, with results falling short of our target in some areas. We have worked transparently with the Drinking Water Inspectorate and have taken steps to restore performance and, as a result, are already seeing real improvements in this vital area.

We have maintained our strong track record on leakage and are pleased to have delivered our best result in the customer supply interruptions measure in 15 years.

Achieving a reduction in our retail costs without impacting the quality of customer service is a key area of focus. Savings have been made this year through transferring some non-voice back office functions offshore, the merging of the Cambridge customer contact centre operations with those in the South Staffs region and further changes to metering operations.

Ensuring every one of its customers experiences excellent service, alongside a reliable, high quality water supply and affordable bills, is at the heart of everything South Staffs Water does.

average household bills

reduced in 2015/16

“The business has maintained a clear focus on delivering both high quality service and value for money throughout the year while it responds to the shifting landscape of the UK water industry.”

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We have successfully transferred all Cambridge region customers to the same billing system as the South Staffs region, providing a platform for further long-term sustainable efficiencies and improvements in customer service. This change also supports the business’ digital shift strategy to change how we communicate with and provide more choice to customers now and in the future, underpinned by the new South Staffs Water website launched during the year.

We have worked hard to deliver an improved performance against the new SIM measures, Ofwat’s score of customer experience. We aspire to be in the upper quartile for the period and are pleased to report that our first year’s results are consistent with this aspiration; a performance which we feel recognises the importance the business places on this measure.

A slow start in the year meant that we didn’t meet our community engagement target of 400 days of employee volunteering. However, momentum gathered throughout the year with activities ranging from charity fundraising and helping out with a community garden to clearing a brook and painting of community facilities, totalling over 250 days of support in our communities.

Overall, we have ended the year in a strong position with good performance against most ODIs and the business on track to deliver against our commitments for the AMP6 period.

The highest quality water, today and tomorrowThe quality of the water we supply to customers every day is the single most important thing we do and we are committed to ensuring customer interests in this key area of our operation are protected. We have identified improving the quality of our water beyond just meeting our regulatory commitments as the number one target for the business.

Installation of the UV water treatment plant at Seedy Mill.

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A multimillion pound investment in our Seedy Mill treatment works is due for completion this year. The project will create one of the largest clean water UV treatment plants in the UK, delivering enhanced performance and compliance in this area. This year will also see the commencement of significant investment in our Hampton Loade treatment works.

Additional improvement activities around bore holes and the network, combined with ongoing training of operational employees and work to educate and inform our customers, will all contribute towards our aim to achieve 100% water quality compliance and an improved customer perception of water through appearance, taste and odour.

Secure and reliable supplies, now and in the futureBalancing the needs of customers with those of the environment demands considerable resource planning and we recognise the need to protect water supplies as our communities grow and demand increases as a result.

We will continue to focus on minimising supply interruptions, ensuring our pipes and networks are well maintained and investing in our infrastructure to provide secure and reliable supplies.

We will continue to work closely with the Environment Agency to maintain practices that are environmentally responsible as well as develop appropriate partnerships that will provide innovative solutions. Successful collaboration with the University of Cambridge will facilitate the UK’s largest rainwater recycling scheme at the £1 billion North West

Cambridge development. Phase 1 of the award winning project is due for completion in 2017. We see this as an exciting template for future strategic developments in a water scarce area which is also seeing continued and significant population growth.

Water efficiency is fundamental to safeguarding supplies and we are committed to helping our customers change the way they value and use water every day through an ongoing programme of educational engagement.

Excellent customer service, every timeGood customer engagement to provide in-depth insight into our customers’ needs and experiences is vital to delivering excellent customer service. We are continually working to be better enabled to listen to customers and act in response to what we hear from them.

During the year we undertook research which identified our customers’ willingness to support the introduction of a social tariff that has subsequently been implemented with their endorsement. We now look forward to helping many more customers who are struggling to pay their water bill.

Further research was undertaken to help shape our offering in line with business customers’ current and future needs and views of our services ahead of the non-household retail market opening to competition. We plan to listen and develop services which our customers have told us they value.

“We are continually working to be better enabled to respond to what we hear from our customers.”

STRATEGIC REPORT

24/7accountmanagement via new website

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We have also now established an independent Water Customer Panel to monitor and actively challenge how we perform. The Panel has an independent Chair, Simon Sperryn, who has proceeded to recruit further members and together they comprise a strong and balanced team. We are confident they will challenge the robustness of our customer engagement activity and our performance as a business in the communities we serve.

Greater choice and flexibility will be met by continued development of our digital offering to customers. Our new website now offers online account management 24 hours a day to respond to changes in lifestyles. This has been underpinned with planned improvements in our use of technology in our customer contact centre and live visibility of operational activity and supply issues.

We remain committed to investing in the training and development of all of our front line staff, in the contact centre and out in the field, to ensure we deliver a seamless experience of first time resolution of customer issues wherever possible.

Connecting with our communitiesWe want to make a positive difference and develop strong and lasting partnerships with the communities we live and work in through education about water usage and efficiency, enhancing biodiversity and charitable support.

Active community engagement initiatives, including an education programme, biodiversity projects and our employee volunteering scheme, will aim to deliver at least 400 days of support in our communities.

South Staffs Water is working in partnership with the University of Cambridge to install two water supplies on the 150-hectare site, which will include 3,000 homes, 2,000 post-graduate student rooms, a supermarket, hotel and primary school, as well as other community facilities.

Rainfall will be harvested from across the site and stored in a series of specially designed lakes, where it will then be naturally filtered through reed beds. The water will then be

re-filtered, sterilised by UV and dosed with chlorine, before being used for toilet flushing, clothes washing and outdoor use. A second supply is also being installed to deliver high quality potable water for drinking, cooking and bathing. The average potable water consumption on the site should be around 80 litres per person per day - almost half of the UK average.

The site has already been highly commended in the Built Environment Category of Waterwise’s UK Water Efficiency Award.

“We are committed to investing in the training and development of all of our front line staff to ensure a seamless experience for the customer.”

North West Cambridge Development

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Environmentally sustainable operationsWe hold a good long-term track record on leakage and work is ongoing to ensure we continue to meet our targets. This includes fitting many more additional flow meters in the Cambridge distribution network to automatically monitor consumption and support leak detection performance improvements.

Reducing the carbon emissions from the power we use to pump water around our networks is a key target and activities include the installation of solar panels to a number of operating sites during the year.

We will continue to encourage our communities to access our sites that are open to the public as well as to provide opportunities to support increased knowledge of the water cycle and the environment we live in. A particular highlight was the opening of the new nitrate treatment plant at Fleam Dyke in Cambridge which involved a local school and the Mayor. This asset will improve the quality of the water we supply to the local community for many years to come.

Fair customer bills for allOur household customers have some of the lowest bills in England and Wales and we are working to make sure they remain affordable. We are committed to reducing customer bills over the five year AMP period and will continue to support our most vulnerable customers with a range of help when they need it most. We will engage with 30,000 customers in debt each year to help them manage their water accounts and take control of their consumption.

We have a range of solutions for customers that struggle with bills including our Charitable Trust, Water Direct and WaterSure and the current year will see the implementation of a renewed strategy on affordability including a new social tariff.

Consultation with customers showed strong support for the introduction of a cross subsidy for the tariff to support those customers in need of additional support. Available to all customers, it will provide a significant discount on bills subject to eligibility based on income and expenditure. We aim to help 7,000 customers this year with targeted support through the new social tariff.

“We will engage with 30,000 customers in debt each year to help them manage their water accounts and consumption.”

20%reductionin workplace accidents

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Valuing our peopleWe are committed to making South Staffs Water a great place to work with a safe, positive and rewarding working environment. We reduced accidents in the workplace by 20% last year and we will continue to place focus on ensuring the highest employee safety standards in the year ahead.

Our annual employee survey will continue to play an important role in helping us to understand the feelings and motivations of our people and we will work to use the results to act in areas such as training and development.

Employees are encouraged to support the water industry’s charity, WaterAid, and are provided with opportunities to get involved. Over £35,000 was raised in 2015/16 with activities including a group cycling 95 miles along the Shropshire Union Canal, a fly fishing competition and a dinner dance.

The year aheadAs we progress through this five year regulatory cycle, much of our activity is mapped out. Our primary business objective of consistently supplying excellent quality water to customers as well as achieving our other performance commitments remains and we must focus on ensuring that the predicted benefits of investing £480m to achieve these outcomes are fully realised.

We will continue to develop our systems, processes and organisational structures in preparation for the non-household retail business opening up for competition in April 2017, with significant change expected in a number of areas. This new era presents both risks and opportunities for the business and we will continue to ensure we have identified and planned accordingly for both.

With the recent publication of Ofwat’s ‘Water 2020: Our Regulatory Approach for Water and Wastewater Services in England and Wales’, the direction of future regulation is becoming clear. Whilst the full implications are yet to be fully evaluated, early indications are that the broad objectives align with the direction of travel within our business. Key components of this are understanding our customers’ needs, adapting to change in a positive way and ensuring that we look after our resources and environment whilst continuing to provide excellent value for money. We look forward to meeting these new challenges.

Local school children participate in the opening of the new nitrate treatment plant at Fleam Dyke.

Annual Report 2016

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STRATEGIC REPORT

SSI Services

Important contract awards in all areas of the division

First phase of one of UK’s largest UV clean water treatment processes complete

Expansion of customer base across a number of industry sectors

Year-on-year reduction in accident frequency and severity rates

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STRATEGIC REPORT

OverviewSSI Services is the Group’s specialist infrastructure contracting division. We provide a broad range of specialist infrastructure based services from design through to installation, testing and repair to long-term maintenance. Our focus is on regulated environments and legislative needs, managing client risk and using specialist technologies to provide added value.

SSI Services is made up of three business areas: Clean Water, comprising IWS Mechanical and Electrical Services (IWS M&E) and Hydrosave; OnSite; and Water Hygiene which also trades as IWS. In addition Omega Red, which provides lightning protection and electrical earthing services, also trades as part of SSI Services.

We have developed a broad customer base across both the public and private sectors from major water utilities, infrastructure providers, government agencies and local authorities through to major contractors and facilities management (FM) companies. Whilst we historically mainly worked in the water and wastewater sector, we are now increasingly operating in the water hygiene, rail, power generation, industrial and

construction markets, reducing the division’s reliance on the water and wastewater sector. Our strategy is to deliver these services through a number of specialist operating companies using a nationwide mobile operation and maintaining long-term relationships with our customers, providing a quality service at competitive prices.

The division has over 1,700 employees, all of whom are key to the division’s success, with the majority operating remotely and in often challenging environments. Health and Safety is therefore very important to us and we continue to focus on developing a strong Health and Safety based culture across all of our businesses. We have achieved our safety targets through the year, resulting in a year-on-year reduction in both the frequency rates and severity of accidents.

Review of last yearThe division had a very positive year, despite a challenging first five months of the year due to a slow start to customer activity. However, tight cost control initiatives were implemented and these measures largely mitigated the negative impact of initial difficult trading conditions. Subsequently, as revenue levels started to increase during the year and net margins improved due to the lower operational cost base, the division

SSI Services is in a strong position to continue to grow due to the strategic decisions that have been taken throughout the year.

Over 1,700SSI Servicesemployees

“We continue to focus on developing a strong Health and Safety based culture.”

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was able to deliver 4% increases in turnover and 7% increases in profits from levels achieved in 2014/15.

The division is now less reliant on the water industry five-year AMP cycle, with increased revenue now being generated outside of this sector, making the division even more resilient.

Clean Water ServicesThe Clean Water business includes two operating units – IWS M&E and Hydrosave, with a number of common clients across the two businesses.

The M&E business has secured a major framework contract with Northumbrian Water in the Essex & Suffolk region, which is very positive. Throughout the year the business has also secured the Wessex Water framework and delivered the first phase of one of the UK’s largest UV clean water treatment processes for a regulated water company. The business is now targeting more technical projects that, in turn, demand high levels of technical input that are expected to generate higher profit margins than traditional work streams.

Hydrosave had a very positive year and, more importantly, its best year within the ownership of SSI Services. The highlights of the year include the successful delivery of the Thames Water leakage contract that is set to continue, and the establishment of the Test Inspect Consult (TIC√) offering. This offering is a trading division within Hydrosave with a main focus to offer more technical services that

“Hydrosave had its best year within the ownership of SSI Services.”

Hydrosave carrying out maintenance at Heathrow Airport.

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STRATEGIC REPORT

are likely to attract higher profit margins than traditional leakage contracts.

OnSiteOnSite Utility Services, which offers specialist wastewater services, including flow monitoring, sewer rehabilitation and CCTV surveys, experienced a slow start to the year as water companies finalised their spend profile for the first year of the new AMP cycle. With the second half of the year seeing an increase in activity, OnSite continues to focus upon growing its service capabilities outside of the traditional water sector, thereby reducing the impact of the AMP cycle, with a new Wastewater sales team now in place to deliver this plan. Our newly formed Rail division gained momentum throughout the year. This continues to perform very well and has recently secured a major framework with a Network Rail delivery partner.

The Sewer Lining division has continued to perform well, achieving good levels of client satisfaction and further developing strong relationships to become the preferred partner of choice to many clients.

Pipeline Services has been restructured, involving the formation of a new management team and the closure of the Warrington depot to reduce the cost base. Further tightening of commercial control measures has seen the business grow its revenue and deliver more profit than the previous year. The business was also successful in securing a long-term framework with South Staffs Water, which will create a stable platform to trade off. The business continues

to grow its customer base outside of the Group, which is an area that we continue to target.

Both OnSite Specialist Maintenance (OSM) and Perco traded strongly, whilst embedding new management teams so as to allow for professional delivery of larger, more complex projects in future years.

The Pipeline Services, OSM and Perco businesses have now been integrated into OnSite in this new year.

Water HygieneIWS Water Hygiene is a market leading provider of legionella control services and water hygiene risk assessment, maintenance and remedial works, together with a comprehensive water treatment service, to a wide range of customers including local authorities, housing associations and FM companies. The business offers a 24 hours a day, 365 days a year national mobile service supported by the increasing use of technology, which we continue to invest in.

Throughout the year the business has implemented a new ERP business management system, which, along with the mobile solution implemented in this new year, will significantly enhance operational efficiency going forward. It is encouraging to see that the business improved on last year’s profit whilst implementing this system.

“Our newly formed Rail division gained real momentum during the year.”

24/7national Water Hygiene service offering

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Pipe Jacking at Acton Town StationOnSite was asked to carry out remedial repairs to a brick drainage culvert at Acton Town Station platform.

Due to the size of the deformation, Cured-In-Place Pipe lining was not considered suitable. Since the Heathrow Rail Line station is extremely busy, and due to the extremely tight timescales to complete the works, excavation was not an option.

OnSite’s Head of Rail Services attended site and established that the no-dig structural lining solution, known as Pipe Jacking, would be the most viable solution and this option was presented to the client. Following works approval, OnSite were officially engaged to provide the Pipe Jacking solution to the failing drainage beneath the station.

The works were completed safely and efficiently and therefore the Piccadilly-Heathrow line was closed for only 24 hours.

“The Pipeline Services, OSM and Perco businesses have now been integrated into OnSite.”

Looking to the futureSSI Services is in a strong position to continue to grow its revenue and enhance underlying profitability due to the strategic decisions that have been taken throughout the year and in this new financial year. The customer base has been expanded with new disciplines being offered across a number of industry sectors which, in turn, will provide a more stable revenue stream so as to achieve the planned growth without compromising safety, quality and client satisfaction.

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STRATEGIC REPORT

EchoImplementation of RapidXtra completed for two major clients

Managing customer contact services on behalf of 28 clients in a variety of industry sectors

Grosvenor Services Group integrated into Echo

Development of a new end-to-end customer-centric debt proposition

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STRATEGIC REPORT

OverviewEcho Managed Services (Echo) is a specialist outsourced provider of complex multi-channel customer contact services, comprehensive debt management solutions and the developer of the market leading water billing and customer information software, RapidXtra.

Echo’s strength, and a cornerstone of our sustained success and growth in recent years, has been our ability to combine best practice specialist services and solutions with highly skilled and knowledgeable people, to provide public and private sector organisations with end-to-end customer contact capabilities.

The past year has been characterised by both changing and challenging market conditions. In water, the Ofwat price determination has further compounded cost to serve pressures throughout the sector. In addition the necessity to achieve compliance for non-household retail competition (known as the Open Water programme) has been equally pressing. We have continued to support water companies, providing innovative and cost effective solutions to meet these challenges, which has in turn presented opportunities. Tightening regulations within the debt services sector has added yet

further challenge, however we are in a strong position, being able to provide both debt management expertise and customer service excellence, strengthening our proposition in this space.

Despite the market challenges, Echo has both won new business and extended relationships with existing clients, within and outside of the water sector. We have also remained at the forefront of the strategically important Open Water programme and have been recognised once again with several prestigious award nominations.

Our people, our greatest assetThe launch and subsequent embedding of Echo’s new vision, mission and values over the last year has re-focused the business and our people on a common purpose and set of beliefs; enabling the sharing of best practice and expertise between the 600 employees across our six sites and providing an effective framework for growth. In addition, Echo has successfully maintained its accreditation as an Investors in People organisation - a standard that reflects the very best in people management excellence. Of particular note, the assessor commented that the mission, vision and values were noticeably embedded across the whole organisation and had given employees a real sense of pride and belonging.

Echo has won new business and extended relationships with existing clients, both within and outside the water sector.

600employeesacross 6 sites

“Echo is at the forefront of the strategically important Open Water programme.”

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Market leading and retail ready customer billingEcho’s billing and customer information solution, RapidXtra, continues to hold a market leading position within the UK water sector. Ten client implementations have already been completed, two further implementations successfully went live in 2015 and a further implementation is in progress and is due to go live in September 2016.

The introduction of non-household retail competition in April 2017 continues to be a significant priority for UK water companies. Acknowledging this, Echo continues to be heavily engaged in the Open Water programme. With vast experience in the deployment and delivery of retail billing programmes, and a deep understanding of the water sector and its regulatory requirements, RapidXtra is perfectly placed to be the solution of choice to service commercial customer retail system requirements once the market opens. RapidXtra Retail remains on course to be delivered on time and in line with the industry requirements.

Consolidated end-to-end customer-centric debt collections servicesThe market for debt collection services remains buoyant as debt levels continue to rise across the UK. The challenges of supporting customers in circumstances of vulnerability, ascertaining customers’ ability to pay and ensuring fair outcomes for all are key concerns affecting the sector. Strong data, tailored strategies and positive customer engagement are at the forefront of debt recovery strategies.

Echo’s position in the sector was further strengthened with the 2015 acquisition of utilities market specialist, Grosvenor Services Group. Echo is now able to offer an end-to-end debt recovery service from early arrears collections right through to litigation, delivered via field and office based strategies and expertise. Recognising that debt is just another part of the customer journey, we have differentiated our offering by leveraging the importance of customer experience and a customer service mind-set throughout the debt recovery process; championing the importance of early intervention and a joined up approach between in-house teams and external providers across the complete debt cycle.

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Echo holds a strong position in the debt collection services marketplace as a trusted and proven utilities specialist. Over the past year we have continued to extend our footprint in what is our core market, as well as diversifying and growing across wider markets.

Customer contact service excellenceEcho Bristol continues to provide specialist outsourced, managed and insourced multi-channel customer contact services to leading public and private sector organisations, offering end-to-end capabilities, from entry level bureau services through to comprehensive, analytics-enabled multi-channel programmes. Despite a competitive landscape, the last year was characterised by a number of new client wins across public sector and healthcare contracts. Operating 26 separate customer contact campaigns on behalf of a wide variety of clients, the operation continues to focus not only on service excellence but also on using insight, experience and expertise to add further value; evolving and improving customer experience and exceeding clients’ operational delivery expectations.

In the water sector, SIM continues to shape companies’ approaches to improving the service provided to customers. Recognising the recent changes towards more qualitative measures, Echo is working closely with our clients to continue to improve their SIM performance, demonstrating a total commitment to quality customer experiences.Echo has continued to assist South Staffs Water to embed and promote their digital service offering to customers, and has also extended this to the Cambridge Water customer base following a

full migration to a single RapidXtra platform. This will not only deliver significant reductions for South Staffs Water in cost to serve measures, but also enable the transition to compliance for non-household retail competition.

Supporting Northern Ireland Water, Echo has successfully delivered two of three key contract project milestones; delivering new enabling technologies, business applications and functionality across the operation. The third and final phase of the contract implementation will be delivered within this new financial year.

In addition, our customer service expertise has once again received external recognition in 2015/16. Echo is proud to have been named as a finalist for an Institute of Customer Service UK Customer Satisfaction Award, two UK National Contact Centre Awards and five South West Contact Centre Forum awards, winning the highly sought-after Outsourced Contact Centre of the Year title, which was announced in the current year.

Looking to the futureEcho’s mission in the year ahead is that by staying true to our values, we will provide customer led solutions for clients whose principles and beliefs we share. Through the expertise, knowledge and understanding of our people, we will collaborate to deliver an enriched customer experience; protecting clients’ brands as if they were our own.

As such, Echo remains focused on achieving sustainable growth and this new financial year promises to be a year rich in opportunities across all three of Echo’s core divisions.

“Echo will continue to develop and invest in its people and focus on succession planning.”

Finalistin eightcustomer service

awards

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A new customer-centric approach to debt collection Northern Ireland Water (NIW), the sole provider of water and sewerage services in Northern Ireland, needed to reduce the amount of debt owed by its customer base, however a proportion of customers were not engaging with traditional office-based communication channels and collection strategies.

Echo, which has provided end-to-end customer contact management for NIW since 2006, helped the company turn its traditional collections model on its head by creating a new approach and strategy to re-engage with the customer base.

New field based Customer Liaison Officers (CLOs) were employed to travel to customer premises to discuss debt issues in person. With an appreciation that every case is different, Echo’s CLOs treat customers as individuals, taking into account their personal circumstances, listening and understanding in order to support the customer and reach an appropriate agreement. The success of this new

“Echo is supporting its clients to deliver customer service excellence.”

Echo will continue with the RapidXtra retail ready programme in order to successfully hit the Open Water go live dates for both shadow and full market opening. In addition, we remain committed to the continued investment in and development of RapidXtra in line with evolving markets and client needs.

As the water market opens up to competition within the non-household sector, Echo is well positioned to further expand and evolve its end-to-end retail managed service in line with the Open Water vision; supporting water companies to deliver customer service excellence to non-household customers through the deployment

of market leading billing software and supporting customer contact services.

For wider markets and with regard to debt management services, Echo will continue to grow its end-to-end proposition and target deeper market penetration across a range of key industry sectors. For contact centre services, the focus continues to be on developing and delivering multi-channel value driven propositions for customers. Echo will therefore continue to pursue opportunities to add new clients, expand the services provided to existing clients and identify and acquire businesses aligned with our strategy and which add value to our client base.

customer-centric approach has led to the CLO team size being increased by 60%. The new approach has led to a 25% reduction in aged debt and 98.1% of billed revenue being collected. Customers are also more satisfied and CLO insight has helped inform and improve policy.

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Corporate SocialResponsibility

All Group Health and Safety milestones met or exceeded

Emphasis on Apprenticeships and employee development across the Group

Increase in biodiversity activities at South Staffs Water

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EmployeesThe Group considers the health, safety and wellbeing of its nearly 2,800 employees as central to our growth. We continue to invest in our people and aim to ensure that South Staffordshire Plc remains a safe and enjoyable Group to work for and to provide a good, inclusive, working environment for everyone.

- Health and SafetyThe effective management of health, safety and wellbeing of our employees remains of paramount importance to the Group.

Each business takes responsibility for the health and safety of all of its employees. A Group level Health and Safety Strategy Forum, led by the Group Chief Executive and supported by the Head of Health and Safety, continues to oversee activities in this important area of the business.

Health and Safety monitoring and culture were two key themes that were reinforced during the year. These will be taken forward into 2016/17 by focusing on leadership, management reporting, workforce involvement, risk reduction and accident reduction.

Several initiatives were undertaken during the year:• ManagementofRoadRisks

Committee established• Accident/incidentdatabase

has been live for a year and has standardised the recording and reporting of accident and incident data across the whole Group.During 2016/17, hazard reporting will be included

• Areviewoftrafficmanagementat the Group’s Green Lane head office

• ReinforcementoftheHealthandSafety competent advice resource across the Group

Effective leadership, commitment, worker engagement and a constant message have all helped return an excellent performance which saw all the 2015/16 Health and Safety milestones met or exceeded for the second year in succession. This is typified by the Group’s performance regarding the number of RIDDOR reportable accidents during the year. The result was 7 which is an improvement when compared to the previous year’s 8. The RIDDOR Incident Rate for 2015/16 finished at 2.59, an 11% improvement on the previous year’s rate (2.90) and the best year to date.

In order to maintain the momentum going forward, annual milestones have been set for 2016/17 at a minimum of 10% improvement on this year’s performance.

“Training and development of our people continues to be at the forefront of all of our businesses.”

STRATEGIC REPORT

The Group carried out a range of CSR activities during the year, with specific focus on Health and Safety, biodiversity and charitable involvement.

11% reductionin RIDDOR incident rate

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Annual Report 2016

The majority of our businesses have external accreditation for their health, safety and environmental management systems. Many Group companies also hold ISO 9001 quality management and OHSAS 18001 Occupational Health and Safety management accreditations, and are part of the Safe Contractor schemes.

Employees have access to specialist occupational health advisors, who can provide proactive health surveillance and advice in order to keep our employees fit and healthy. Employee assistance programmes are also made available to employees across the Group, where employees can get free advice and counselling on any issues, whether work related or personal.

- Training and developmentDuring the year the Group introduced an Executive Development Programme. Selection days were held for candidates and a number of Managers across the Group commenced the Programme that delivers modules of training, supported by Executive coaching, over a period of two years. In addition, the South Staffs Water Executive has spent time reviewing talent in the business and developing plans to manage future senior management succession. Latterly in the year the business has engaged with local colleges in Cambridge and Staffordshire to enable a structured programme of training and qualifications for Apprenticeships.

In addition to the development and roll out of an SSI Services Supervisors’ Development Programme in 2015/16, which is continuing in the current year, SSI Services also delivered its Non Stop Training developmental managerial and supervisory training programme to 160 employees during the year. Emphasis continues to be placed on Apprenticeships, with Apprentices in most of the SSI Services division’s businesses.

Echo continues to support development opportunities for employees by offering secondments across departments, on projects and in different sites, including seconding colleagues in India to the Walsall site to learn more about the Rapid software and then share that learning with the wider team in India. During the year, Echo also continued with the development of their internal online learning platform, with over 50 additional courses being added. This enables team members to select courses that they feel will benefit them both professionally and personally.

Male 13

Female 3

Directors

Senior Management

Male 37

Female 10

Other employees

Male 1903

Female 572

Analysis of Group employees by gender

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Annual Report 2016

- Equality and fair treatmentAll businesses are committed to a positive working environment, free from any discrimination or unfair treatment. Every reasonable effort is made to provide equal opportunities for employment, training and promotion, having regard to employees’ particular aptitudes and abilities and regardless of their gender, race, age or disability. If an employee becomes disabled, we endeavour to keep them in the workforce by making reasonable adjustments to their role, or looking for redeployment opportunities within the Group if necessary.

EnvironmentWherever possible, the Group aims to have a positive effect on the environment, both through activities carried out and a policy of responsible sourcing.

South Staffs Water has installed a nesting raft to encourage common terns to nest and breed at the 1,313 acre Blithfield Reservoir Estate. With 1,076 acres designated as SSSI (Site of Special Scientific Interest), the reservoir provides valuable habitat for wildlife, including many different bird species. The raft is situated in public view to help inspire and educate. Additionally, projects undertaken as part of South Staffs Water’s ongoing partnership with the Wildlife Trust include wildlife meadow planting and support for an environmentally friendly fun day.

SSI Services is developing a responsible sourcing policy, where particular consideration will be given to the sustainable procurement of goods and materials that may be utilised throughout the division. This includes the division’s fleet, where a new contract was secured for the

provision of newly-launched Caddy and Transporter vehicles which feature BlueMotion Technology as standard.

Car sharing and video conferencing are encouraged by Echo to reduce their carbon emissions. During the year, Echo’s digital programme went live, with the aim of switching from paper billing to digital where possible, thus reducing the amount of paper and postage used. Echo also began a programme of delivering used newspapers to Crosskennan Lane Animal Sanctuary (Northern Ireland’s only Equine Sanctuary) to be used for bedding for the animals in their care.

CommunitiesThe Group’s charitable support programme focuses on giving something back to the community, both locally and further afield.

The Group made charitable donations of £238,000 during 2015/16. In addition, South Staffs Water continued its support for WaterAid, raising over £35,000 during the year. Activities supported by the South Staffs Water Employee Volunteer Scheme included restoration of a chalk stream at Cherry Hinton, Cambridgeshire, a day of painting and decorating with the Albion Foundation, and manning water efficiency stalls at community events to raise awareness and educate the public around the topic.

SSI Services currently supports numerous community initiatives by providing financial and practical support including, during the year, fundraising and donations to St Giles Hospice, via family fun days, sponsorship of local sporting teams including rugby, football and cricket, and financial support for staff associated with community fund raising activities.

“South Staffs Water raised over £35,000 for WaterAid during the year.”

1,076acres at Blithfield

designated for biodiversity

STRATEGIC REPORT

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Annual Report 2016

Caldmore Community Garden transformedVolunteers from South Staffs Water have helped transform a derelict house and garden into a thriving community centre in the heart of Caldmore, Walsall.

Caldmore Village Festival Group was working with a number of organisations to make over the land and a former caretaker’s house when South Staffs Water was contacted for help with getting a new water supply to the house. In addition to this, our

volunteers were able to help with laying a new disabled-friendly path, painting the inside of the property and supplying some spare furniture, as well as donating items for use in the kitchen.

Chris Watson, who runs South Staffs Water’s volunteering scheme, said: “This is a fantastic example of what can be achieved when people pull together for the benefit of the whole community. It’s a lovely little oasis right in the middle of Walsall.”

“SSI Services encourages its people to actively participate in their local communities and is keen to expand the activities carried out.”

SSI Services encourages its people to actively participate in their local communities by giving them work time to volunteer in projects of their choice. The division is keen to expand the activities currently carried out, with the support and guidance of their clients to promote and encourage opportunities in this area.

Echo raised money for several charities during the year, including the World’s Biggest Coffee Morning in aid of Macmillan, Wear It Pink Day in support of Breast Cancer Awareness and donating over £700 worth of toys to the annual Family Christmas Appeal which is a joint initiative between The Salvation Army and St Vincent DePaul. Echo also supports two Northern Ireland-based animal charities; Crosskennan Lane Animal Sanctuary and Mid-Antrim Animal Sanctuary.

CustomersInnovation, customer satisfaction, providing a quality service and building and developing relationships with our customers, whether household or business customers, are all key to the future success of the Group.

South Staffs Water has established a new Customer Panel – an independent and impartial board of customers, stakeholders and experts whose remit it is to provide a rigorous, customer-focused assessment and challenge of the business and its plans.

Several of our businesses have also implemented new quality management processes and customer satisfaction surveys to enable them to either understand areas for improvement or, in some cases, suggest improvements or changes, strengthening our relationship with them.

32

Annual Report 2016

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Annual Report 2016

STRATEGIC REPORT

Financial ReviewChallenging budgets for profitability, cash flow and net debt outperformed

Growth in all measures of profitability

£40m of bank facilities successfully refinanced

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Annual Report 2016

OverviewThe Group monitors its financial performance through its success in achieving or outperforming certain targeted Key Performance Indicators. In the year ended 31 March 2016, the Group outperformed key financial targets including challenging budgets for profitability, cash flow and net debt with this performance once again demonstrating the Group’s financial solidity. Group EBITDA (excluding infrastructure renewals), operating profit, profit before tax and free cash generation were all ahead of the budget for the year with year-on-year growth achieved in all of the above measures of profitability.

The Group has adopted Financial Reporting Standard 102 (FRS 102) for the first time in the year ended 31 March 2016 with the accounting changes from the previous UK GAAP mainly being in respect of infrastructure assets and the related capital contributions, deferred tax and defined benefit pension schemes. The figures presented for the year to 31 March 2015 have been restated in accordance with FRS 102. Full details of the changes and their impact are provided in note 31 to the financial statements.

Turnover and profitAs budgeted, there was a reduction in Group turnover with this being £234.9m in the year (2015: £238.9m), with the reduction due partly to the real reduction in the appointed wholesale turnover of South Staffs Water following the PR14 Final Determination. Turnover generated by South Staffs Water was £123.9m (2015: £125.9m). Total turnover from the non-regulated service businesses grew by £5.2m to £141.8m (including inter-divisional turnover), with successful operational delivery on a number of important contracts including those with South Staffs Water. As expected, external non-regulated turnover (excluding sales to South Staffs Water) reduced by £2.0m to £111.0m mainly reflecting the completion of some large contracts in the previous year.

Despite the expected reduction in turnover, Group operating profit (before exceptional items) grew by 7.2% to £47.5m (2015 as restated: £44.3m). Operating profit growth of £2.9m was achieved in South Staffs Water (2016: £37.1m, 2015 as restated: £34.2m) including the full year impact of the significant reductions in its cost base made during the previous year. There was also profit growth achieved in the non-regulated businesses which generated operating profits of £10.4m (2015: £10.1m) with

“The Group once again demonstrated its financial stability.”

STRATEGIC REPORT

The Group achieved year-on-year growth in all measures of profitability despite lower turnover arising from a real reduction in allowed revenue in South Staffs Water.

Operating profit

increasedby 7.2% to £47.5m

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Annual Report 2016

the benefit of higher total sales being partly offset by the non-recurrence of some significant projects completed last year. Also, Group EBITDA (before infrastructure renewals expenditure and exceptional items), an important financial KPI of the Group, increased by £4.0m (5.1%) to £82.0m in the year, demonstrating the strength of the Group’s financial performance in the year.

As expected, there was an increase in net finance charges in the year (£0.7m) to £12.3m largely due to the part year effect of interest rate swaps put in place on debt refinanced in previous years with cash flows on these swaps commencing from October 2015 and non-cash indexation on index-linked debt in South Staffs Water. However, these charges were lower than had been budgeted reflecting stronger than planned cash flows generated and therefore lower than budgeted net debt throughout the year.

Overall, Group profit before tax and exceptional items (see below) grew by an encouraging 7.6% to £35.1m (2015 as restated: £32.7m).

TaxThe Group’s current corporation tax charge increased by £0.8m to £5.7m, mainly reflecting higher Group taxable profits. The total tax charge for the year (after deferred tax) reduced to £2.5m largely due to a non-cash reduction to deferred tax liabilities arising from a reduction to future corporation tax rates (£4.3m) partly offset by the higher current taxes.

Exceptional itemsIncluded within the total Group operating profit for the year is a non-cash exceptional operating credit of £3.6m relating to a reduction in the year in the book value of liabilities relating to the South Staffordshire Section of the Water Companies Pension Scheme. This one-off reduction in the liabilities has arisen as a result of the cessation of future accrual of the defined benefits within the section during the year. The item has been disclosed separately as exceptional due to its non-recurring and significant nature.

Non-regulated 22%

South Staffs Water 78%

Analysis of Group operating profit

3636

Annual Report 2016

STRATEGIC REPORT

Also, during the year South Staffs Water sold the contractual rights to future rental income relating to a number of its sites. This sale has generated proceeds and a profit of £4.6m which has also been disclosed in the profit and loss account as exceptional due to the non-recurring nature of the sale and the significance of the proceeds and the profit generated. It is considered that the disposal and the related profit are not of an operating nature and as such it has been reported after operating profit in the profit and loss account.

Cash flow and dividendsGroup cash flows from operating activities reduced to £66.0m (2015 as restated: £74.1m) including the budgeted impact of changes in year-on-year working capital due in part to the phasing of capital expenditure over the two-year period which increased related supplier payments made in the year compared to the previous year. However, cash flow was well ahead of the budget set at the start of the year reflecting the continuing importance the Group places on cash generation. Capital expenditure (excluding infrastructure renewals, net of contributions and disposals) increased to £29.3m (2015 as restated: £25.4m) due mainly to increased capital investment by South Staffs Water in the first year of the new AMP6 investment period. Overall, free cash flow (cash flow from operations less net interest, tax and capital expenditure) of £30.3m (2015: £39.3m) was well ahead of our target. Total dividends paid and proposed in the year were £33.2m

(2015: £27.1m) with the year-on-year increase largely reflecting the distribution of the exceptional proceeds on disposal of rental income rights received during the year (£4.6m).

Financing, net debt and liquidityDuring the year South Staffs Water successfully refinanced £40m of maturing bank facilities with a number of new five-year bank facilities demonstrating this long-term business’ ability to attract longer-term bank finance.

The book value of Group net debt at 31 March 2016 amounted to £358.3m with the increase from 31 March 2015 (£349.7m) mainly reflecting the increase in the book value of index-linked debt in South Staffs Water due to indexation for the year of £6.1m. This book value differs from the value used for borrowing covenant reporting purposes of £339.9m (2015: £335.5m) which excludes unamortised premium and issue costs and uses actual inflation (RPI) at the relevant dates as opposed to the long-term inflation assumption used in the book value of index-linked debt.

In South Staffs Water, net debt for covenant reporting purposes was £213.4m (2015: £217.0m) being 64.3% (2015: 63.3%) of its Regulated Asset Value (RAV) of £332.0m (2015: £342.8m) representing the PR14 Final Determination RAV uplifted for inflation. This ratio reflects the

“Capital investment at South Staffs Water increased in the first year of AMP 6.”

Free cashflow of£30m

3737

Annual Report 2016

Non-regulated 2,065

South Staffs Water 430

impact of better than expected free cash generation in the year. While the dividend policy for South Staffs Water allows dividends to be paid up to 77% of net debt/RAV the expectation for this ratio is in the region of 66%. The Group and South Staffs Water have maintained, and continue to forecast to maintain, significant headroom in respect of all borrowing covenants. Standard and Poor’s continues to rate South Staffs Water as BBB+, well within investment grade.

At 31 March 2016, the Group had available £31.0m of undrawn bank facilities (2014: £42.7m), in addition to its cash balances of £13.8m (2015: £4.7m) providing significant liquidity headroom of £44.8m (2015: £47.4m).

Risk managementThe Directors acknowledge that risks exist in all businesses with the Group’s approach to risk reflecting its status as a Group comprising a regulated business with a long-term water supply license and also non-regulated activities operating in regulated markets.

As part of its normal activities, the Board of Directors, assisted by the senior management team, regularly carry out robust assessments of the principal risks facing the Group, including those risks that have the potential to threaten individual business models, future operational or financial performance, solvency and liquidity. There is regular monitoring of the Group’s risk management and material internal control systems to review their continuing relevance to the Group’s businesses and their effectiveness

and to ensure that appropriate risk management activities are in place or are planned to mitigate the risks identified. It is accepted that risks can emerge and change quickly and therefore that risk identification and mitigation activities will need to be able to respond to this and that at any given point in time enhancements to mitigating actions may be required in response to changes.

Risks are assessed both on a gross basis (likelihood and consequence before mitigating controls) and a net basis (likelihood and consequence after mitigating controls) so that the Directors and the senior management team can properly assess the overall significance of the risk and the estimated effectiveness of mitigating actions and therefore if further actions are required.

The Directors accept that not all risks can be mitigated entirely and aim to ensure that risk management activities reduce the overall estimated impact of risks, on a net basis, to a level that is considered to be acceptable and that do not impact on the long-term viability of the Group. The Directors believe that the most significant risk areas currently faced by the Group include:

• HealthandSafety-theriskstothe health, safety and wellbeing of the Group’s employees, contractors and members of the public that may be impacted by the Group’s operations

Analysis of average number of Group employees

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Annual Report 2016

STRATEGIC REPORT

“The financial results were supported by continuing tight cost control and focus on cash flow.”

Liquidity headroom of

£44.8m

• Waterquality-theriskthatSouthStaffs Water is unable to meet its legal and regulatory obligations for the supply of clean, safe drinking water or that water quality is not of an acceptable standard

• Marketandregulatoryreform-the risk of non-compliance within a regulatory environment which is complex and changing and the risk of these changes having a detrimental impact on the success and financial position of the Group

• Assetqualityandmaintenance- the risk of failure of key infrastructure and other assets or processes which may result in South Staffs Water’s inability to provide a continuous supply of clean, safe drinking water

• Availabilityofadequatewaterresources - the risk that, due to inadequate water resources, South Staffs Water is unable to meet its legal and regulatory obligations for the secure and resilient supply of water

• Customerservice-theriskoffailure to maintain industry leading customer service levels to ensure that the Group is delivering what customers require

• Securityandavailabilityofinformation and systems - the risk that the security over the Group’s information and assets is breached and the risk to the Group of the loss of key systems

• Economicuncertainty-theriskto the Group of uncertain future economic conditions, including inflation, interest rates, availability of capital markets and customer creditworthiness

Long term viability and financial resilienceThe Group has prepared a detailed business plan which states its long-term strategic objectives and operational plans and the key business issues that the Group faces both now and those anticipated in the future and how the Group proposes to address these issues.

As part of this business planning process, the Group has assessed its future prospects and, as part of this assessment, has prepared operational forecasts including expectations of its performance in important operational matters. The Group has also prepared consolidated financial forecasts for the three-year period to 31 March 2019, which reflect the stated strategic objectives and operational plans, and include but are not limited to trading forecasts with turnover, operating and capital maintenance costs along with cash flow projections including operating cash flows, the planned investment programme, tax and finance related cash flows. The level of net debt is also projected through the period and is compared to the level of gearing as permitted in the Group’s borrowing covenants as is its interest cover.

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Annual Report 2016

In order to assess the long-term viability and financial resilience of the Group to possible changing circumstances, sensitivity analysis has been applied to these financial forecasts to assess the impact on profitability, cash flows, liquidity, borrowing capacity and compliance with borrowing covenants of severe but plausible adverse changes to important assumptions made within these base projections, including those that are outside of the control of the Group. They include an increase in the required level of capital investment and operating costs (including those arising from principal risk events occurring - see principal risks above) and the level of inflation. The Directors have selected these assumptions as they believe it is these that could most significantly impact on the longer term viability of the Group and that could most materially deviate from the Group’s base assumptions over the longer-term.

The period to 31 March 2019 covered by the assessment is considered to be appropriate for a Group of this size, complexity and structure.

Based on the business plan, the related long-term financial projections and associated sensitivity analysis detailed above the Board of Directors has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of assessment to 31 March 2019. This expectation is based on the assumption that the Group continues to maintain its existing access to capital markets to fund its required investment programme and provide sufficient liquidity and, as such, have prepared the financial statements on a going concern basis. The Strategic Report on pages 4 to 39 is approved on behalf of the Board of Directors.

A PageGroup Chief Executive22 August 2016

40

Annual Report 2016

THE EXECUTIVE TEAM

1. Adrian Page Group Chief Executive

Appointed as Group Chief Executive in January 2013, having been Group Finance Director since April 2004. Previously Group Finance Director of South Staffordshire Group Plc from 1998 to 2002. Prior to this Adrian was with ACT Group and KPMG. Adrian is also a Board member for the Water Companies Pension Scheme Trustee Company.

2. Phil NewlandManaging Director of South Staffs Water

Appointed Managing Director of South Staffs Water in April 2014 having previously been Managing Director of Echo since April 2006. Prior to joining Echo, Phil was a Management Consultant with Automatic Data Processing (ADP) and Terence Chapman Associates.

3. Dave TaylorManaging Director of SSI Services

Appointed Managing Director of SSI Services in May 2015, having been the Managing Director and founder of Onsite Specialist Maintenance, formerly Data Contracts, for several years before moving into a divisional role at SSI Services as Commercial Director in January 2015.

4. Nigel BakerManaging Director of Echo

Appointed as Managing Director of Echo in April 2014 having been Operations Director since October 2005. Prior to working with Echo, Nigel worked with Barclays Stockbrokers and Charles Schwab Europe.

5. Jason GoodwinGroup Chief Financial Officer

Appointed in October 2007 having joined the Group as Group Financial Controller in March 2004. Prior to this Jason spent over six years with Deloitte. Jason is also Company Secretary and a member of the Governance Committee for the South Staffordshire Group Pension Plan.

1.

3.

4.

5.

2.

41

Annual Report 2016

CORPORATE INFORMATION

Directors Jesús Olmos - Chairman

Adrian Page

Ram Kumar

Roger Ammoun

Satoru Tamiya

Secretary Jason Goodwin

Registered Office Green Lane, Walsall, West Midlands, WS2 7PD

Telephone: 01922 638282 Registered in England, Number 4295398

Auditor Deloitte LLP

2 New Street Square, London, EC4A 3BZ

42

Annual Report 2016

DIRECTORS’ REPORT

Appointed

Mr A Page (Group Chief Executive) 4 December 2003

Mr J Olmos* (Chairman) 30 July 2013

Mr R Kumar* 30 July 2013

Mr R Ammoun* 30 July 2013

Mr S Tamiya* 28 April 2016

* Denotes a Non-Executive Director

The Directors have pleasure in presenting their Annual Report, together with the audited Group financial statements, for the year ended 31 March 2016.

Major corporate transactionsThere were no major corporate transactions occurring in the year ended 31 March 2016. Details of an acquisition made during the year are provided in note 26 to the financial statements.

There have been no significant events affecting the Group since 1 April 2016.

Business reviewThe Strategic Report on pages 4 to 39 provides detailed information relating to the Group, its strategy and the operations of its businesses, future developments and the financial results and position for the year ended 31 March 2016.

Details of the principal risks and uncertainties facing the Group are set out on pages 37 and 38.

Financial resultsThe Group’s turnover was £234.9m (2015: £238.9m) with operating profit before exceptional items of £47.5m (2015 as restated: £44.3m) and profit before tax of £43.3m (2015 as restated: £32.7m). The Group’s financial results and position are explained in more detail in the Financial Review section of the Strategic Report on pages 32 to 39 and shown in the consolidated profit and loss account, consolidated balance sheet and consolidated cash flow statement on pages 52, 53 and 57.

DirectorsDetails of the Directors who held office during the year and subsequently are provided in the table below.

No Director had any material interest in any contract of significance with the Company or Group during the year under review.

The Company maintain a Directors’ and officers’ liability insurance policy in respect of legal action that might be brought against its Directors and officers. To the extent permitted by law, the Company indemnifies each of its Directors and other officers of the Group against certain liabilities that may be incurred as a result of their positions within the Group.

Retirement and re-election of directorsIn accordance with the Companies Act 2006 and the Articles of Association, Mr Olmos and Mr Kumar will retire by rotation and being eligible will offer themselves for re-election. Mr Tamiya, having been appointed by the Board after the last Annual General Meeting, will stand for election.

Corporate Social ResponsibilitySouth Staffordshire Plc regards compliance with relevant environmental laws, the adoption of responsible social and ethical standards and the health, safety, wellbeing and development of its employees, including disabled persons, as integral to its businesses. A report of the Group’s practices and activities in this regard is provided on pages 26 to 31.

Corporate governanceA detailed report on corporate governance is set out on pages 44 to 49.

Financial and treasury riskDetails of the Group’s policy in respect of financial and treasury risk are provided in note 28 to the financial statements.

Fixed assetsCapital expenditure before contributions from third parties and excluding infrastructure renewals during the year amounted to £35.9m (2015: £33.9m).

43

Payment of suppliers and commercial arrangementsThe Group’s policy is to pay suppliers in line with the terms of payment agreed with each of them when contracting for their products or services. Group trade creditors at 31 March 2016 represent 53 days of purchases during the year (2015: 59 days). The Group is not reliant on any single commercial arrangement.

Going concernThe Directors consider each year the appropriateness of the assumption of preparing the financial statements on a going concern basis. This is based upon a review of the Company’s and the Group’s business plan, budget, financial forecasts to 31 March 2019 (and the related sensitivity analysis performed on these forecasts), the investment programme, the forecast compliance with borrowing covenants, the availability of undrawn borrowing facilities and surplus cash to provide liquidity and the Group’s strong track record of renewing or replacing its borrowing facilities when they mature.

The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report from pages 4 to 39. The financial performance and position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review of the Strategic Report on pages 32 to 39. After making enquiries, the Directors have a reasonable

expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the accounts. Additional details in respect of the long-term viability and financial resilience of the Group are provided in the Financial Review section of the Strategic Report on pages 32 to 39.

Independent auditorIn accordance with the Companies Act 2006, the Directors confirm that, as far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware and that the Board has taken all reasonable steps to make itself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

A resolution proposing the reappointment of Deloitte LLP as auditor will be put to the Annual General Meeting.

By Order of the Board

J R GoodwinCompany Secretary22 August 2016

Annual Report 2016

44

Annual Report 2016

CORPORATE GOVERNANCE

The Group seeks to apply the principles of the UK Corporate Governance Code (“the UK Code”), where considered applicable to a private, unlisted group. The Group also applies the Walker Guidelines on transparency and disclosure and regularly monitors corporate governance best practice and the applicability of any developments to the Group. Any changes to the Group’s governance arrangements considered appropriate are implemented within agreed timescales.

South Staffordshire Water PLC corporate governanceSouth Staffordshire Water PLC continues to apply the principles of its own Corporate Governance Code (the “SSW Code”) which supports Ofwat’s published principles on board leadership, transparency and governance. Although South Staffordshire Water PLC is not a public listed company, its Board of Directors recognises that they should act, where applicable, as if it were and therefore the SSW Code has also specifically drawn on certain principles of the UK Code that may be applicable to a privately owned regulated company. A copy of the SSW Code can be found on South Staffs Water’s website (www.south-staffs-water.co.uk).

As the immediate parent company of South Staffordshire Water PLC, South Staffordshire Plc and its Board of Directors recognise the responsibilities that come from providing a public service and the Company is therefore fully committed to maintaining high standards of leadership, transparency and governance as a parent of a regulated business. The Company maintains an

open dialogue with all of its subsidiaries and fully supports South Staffordshire Water PLC in complying with its statutory and regulatory obligations, including but not limited to the SSW Code and ensuring that it can make strategic and sustainable decisions that are in the long-term interests of the regulated business. Details of how South Staffordshire Water PLC follows the principles in the SSW Code are provided separately in its own Report and Accounts for the year ended 31 March 2016. Details of how South Staffordshire Plc, as the immediate parent of South Staffordshire Water PLC, follows Ofwat’s Holding Company Principles are detailed in this Corporate Governance report.

The Board can also confirm, on behalf of KKR Infrastructure Limited, that it, as the ultimate controlling party of the Group, also fully supports these Holding Company Principles from Ofwat and it will continue to apply high standards of board leadership and governance.

There have been no material changes to Corporate Governance arrangements in the Group during the year, although additional disclosure has been made in respect of risk management procedures and the long term viability of the Company in the Strategic Report on pages 37 to 39. The Board confirms that, to the best of its knowledge, there are no issues or risks at the Group level which may negatively impact on South Staffordshire Water PLC.

Group structureThe Group is controlled by the Global Infrastructure Fund of the investment business Kohlberg Kravis Roberts & Co. L.P. (KKR), which is quoted on the New York Stock Exchange, and which holds a majority controlling interest in the Group, together with certain co-investors of KKR. The KKR Infrastructure Fund is controlled and managed by KKR Infrastructure Limited, a company registered in the Cayman Islands (the “Holding Company”).

South Staffordshire Plc, as the immediate parent company of South Staffordshire Water PLC, ensures through its detailed knowledge of all of its subsidiaries and the water industry that it understands the duties and obligations of a regulated company including Condition P of its licence and, although some Directors sit on both Boards, South Staffordshire Water PLC acts, where applicable, with the support of the Company, as if it were a separate listed company. South Staffordshire Plc has processes in place to provide South Staffordshire Water PLC with information that it requires about the wider Group. South Staffordshire Plc provides management, professional and administrative support services to South Staffordshire Water PLC and other of its subsidiaries on a cost basis. There is no direct interaction between South Staffordshire Water PLC and the Holding Company.

There are a number of UK registered intermediate holding companies above South Staffordshire Plc in the Group structure, headed by Hydriades IV Limited, the ultimate holding company registered in the UK. There are also intermediate holding companies above Hydriades IV Limited which are registered in

45

Jersey but which are resident in the UK for tax purposes. In line with other KKR investments in Europe, the parent of the Jersey resident companies is a company registered in Luxembourg (Selena Luxco S.a.r.l.). The KKR fund investing in this company is controlled and managed by the Holding Company. Two of the UK holding companies have loans payable to South Staffordshire Water PLC, both of which bear interest and are paid in full each year. Any UK tax losses surrendered to South Staffordshire Water PLC are paid for at face value.

Details of the borrowings of the Group are provided in the financial statements including the analysis of net debt and the notes to the financial statements. Similarly, details of the borrowings of South Staffordshire Water PLC are provided in its own Report and Accounts.

The Board of DirectorsThe Board is collectively responsible for the long-term success of the Group’s businesses. The Board comprises one Executive Director and four Non-Executive Directors.

Directors may be appointed by the Company by Ordinary Resolution or by the Board. As set out in the Company’s Articles of Association, a Director appointed by the Board will hold office until the next Annual General Meeting (AGM). At each AGM one third of the Directors will retire by rotation and will submit themselves for re-election at least once every three years.

All Directors and senior management are covered by a directors and officers insurance policy against any actions taken against them as officers of the Group.

Senior Executives of KKR or its affiliates and its co-investors who hold positions on the Board of the Company are Jesús Olmos and Ram Kumar (both of whom are Directors of holding companies above South Staffordshire Plc in the Group structure), Roger Ammoun and Satoru Tamiya. Ram Kumar is also a Non-Executive Director of South Staffordshire Water PLC. Adrian Page, Group Chief Executive of South Staffordshire Plc, is also the Chairman of South Staffordshire Water PLC and is a Director of all of South Staffordshire Plc’s subsidiaries and all of the UK registered holding companies in the Group structure.

Functions of the BoardUnder the UK Code, a company should be headed by an effective Board, with duties aligned to the success and interests of the company, setting strategic goals and ensuring that company strategy is fulfilled.

In compliance with the UK Code, all Board members are provided with sufficient information prior to any Board meeting to allow appropriate preparation to ensure that they can properly discharge their duties.

The Board sets standards of conduct to promote the success of the Company and the Group, provides leadership, and reviews the Group’s internal controls, risk management policies and governance structure. It approves major financial and investment decisions over senior management thresholds and evaluates the performance of the individual businesses and the Group as a whole by monitoring reports received directly from the subsidiary businesses and those prepared at a Group level. The Non–Executive

Directors, headed by the Chairman, have a duty to oversee this work, and to scrutinise management performance. They constructively challenge and help develop proposals on strategy.

In conjunction with the Audit Committee, the Board is also responsible for the Group’s systems of internal control, evaluating and managing significant risks to the Company and the Group.

On joining the Board, Directors receive induction material appropriate to their needs. This may include information on the Group structure, the financing structure, the regulatory framework of the operating businesses within the Group and strategic and financial plans. The Board carries out site visits to maintain familiarity with the Group’s operations and to refresh their skills and knowledge. The Board also keeps up to date with legal and regulatory changes and developments by receiving written updates from both internal and external advisers.

The Board maintains a flexible approach to Board matters with the delegation of power to a Committee, with precise terms of reference, being used for specific routine purposes. Both the terms of reference and composition of the Committees are regularly reviewed to ensure their ongoing effectiveness.

The Directors are supported by an executive team and by other senior managers who have responsibility for assisting them in the development and achievement of the Group’s strategy and reviewing the financial and operational

Annual Report 2016

46

Annual Report 2016

CORPORATE GOVERNANCE

performance of the Group and its individual businesses. Senior management is responsible, along with the Board, for monitoring policies and procedures and other matters that are not reserved for the Board. There are written procedures containing a regime of authorisation levels for key decision-making.

The Board carries out an informal evaluation of its own performance, the performance of the individual Directors and various Committees.

All Directors are aware of the procedure for those wishing to seek independent legal and other professional advice. The Board also has access to the advice and services of the Company Secretary.

Matters reserved for the BoardA schedule of matters specifically reserved for the Board’s decision has been adopted based on Institute of Chartered Secretaries and Administrators (ICSA) best practice.

The matters include, but are not limited to:• Reviewingandapprovingthe

Group’s strategy• Approvalofcapitalandoperating

budgets• Reviewingandapprovingany

material changes to the Group’s capital structure

• Reviewandapprovaloffinancialreports

• Reviewandapprovalofmajorcontracts

• Powerstodelegateauthority

Whilst South Staffordshire Water PLC acts, where applicable, as though it were a separate public listed company, a limited number of matters in respect of this subsidiary company also need the approval of the Board of South Staffordshire Plc.

These include:• MaterialsubmissionstoOfwat,

particularly in respect of Price Reviews and major structural reform

• Contractsthatarematerialeitherstrategically or by reason of size, according to specified limits

• AppointmentandremovalofanyDirector, in its role as shareholder

• Prosecution,defenceorsettlement of litigation above £1 million or being otherwise material

• Materialchangestopensionarrangements where operated on a Group basis

RemunerationRemuneration packages are designed to attract, retain and motivate high-calibre senior executives. The Remuneration Committee has overall responsibility for determining the Executive Director’s remuneration package and those of the executive team and other senior management. Non-Executive Directors do not receive any remuneration or fee from the Company.

The total remuneration package of the Executive Director, executive team and other senior management includes basic salary, benefits and an annual bonus that is linked to individual business and Group targets and personal performance related objectives. Performance related objectives are designed to encourage and reward continuing improvement in the Group’s performance and value.

Board CommitteesRemuneration CommitteeThe Remuneration Committee is responsible for the Group’s remuneration policy and the setting of the remuneration packages of the Board, executive team and other senior management. No Director is involved in determining his or her own remuneration. During the year the Remuneration Committee comprised of Jesús Olmos, Ram Kumar and Adrian Page.

The key terms of reference for the Committee are to: • Agreeremunerationthatwill

ensure that the Executive Director, the executive team and other senior management are provided with appropriate incentives to achieve high standards of performance and reward them for their individual contributions to the success of the Group

• Determinesuchpackagesandarrangements with regard to any relevant legal requirements and associated guidance and to obtain reliable, up-to-date information about remuneration in other companies

• Approvethedesignof,and determine targets for, any performance related remuneration packages operated within the Group

• Ensurethatcontractualtermson termination are fair and that failure is not rewarded

• Overseeanymaterialchangesin employee benefits structures throughout the Group

47

Nomination CommitteeIn addition to conducting a rigorous process when making appointments to the Board, the Nomination Committee is responsible for reviewing the balance of skills and knowledge on the Board. It also keeps under review the possibility of any actual or potential conflicts of interest.

The Nomination Committee is formed on an ad hoc basis, when the need for an appointment to the Board is identified or as otherwise considered appropriate by the Board.

Audit CommitteeThe main role and responsibilities of the Audit Committee are set out in written terms of reference and include:• Monitoringtheintegrityof

financial statements and reviewing significant financial reporting judgements contained therein

• ReviewingtheGroup’sinternalfinancial controls

• Monitoringandreviewingtheeffectiveness of the Group’s Internal Audit function

• RecommendingtotheBoardthe appointment of the external auditor and monitoring the auditor’s independence, performance and effectiveness and approving the nature and scope of material external audits and approving the auditor’s remuneration

The members of the Audit Committee are Ram Kumar and Adrian Page, who receive written reports from Internal Audit and the external auditor at least once a year.

Deloitte LLP (the Group’s external independent auditor), the Company Secretary, the Group Internal Audit Manager and, where appropriate, other financial management also receive this information and are invited to Audit Committee meetings. The Board is satisfied that the members of the Audit Committee have recent and relevant financial experience and are able to approach matters with a level of independent judgement.

The work of the Audit Committee specifically covers group business risks, and the work of Internal Audit and the external auditor.

In order to facilitate the Group’s risk management process, key risks facing each business within the Group and the Group as a whole are regularly reviewed, documented and summarised by senior management. Every six months the management teams of each business formally discuss, review, approve and document the relevant business risks. The objective of this process is to ensure that each management team is identifying, prioritising and rating all key business risks, and implementing and amending, where necessary, appropriate procedures and controls as required to mitigate these risks. It also allows management to highlight, document and prioritise as appropriate any outstanding actions with respect to the implementation of these procedures and controls. The Internal Audit function also critically assesses the risks, controls and procedures identified and the rating assigned to them. This information is reviewed by the Audit Committee.

Every year the Audit Committee receives an Internal Audit report on the results of internal audit work together with agreed management actions in relation to audit recommendations.

The internal audit work covers financial and operational risk assurance, regulatory assurance, testing of legal compliance and financial controls and other business commercial support work.

The Group’s external auditor, Deloitte LLP, attend Audit Committee meetings and provide detailed reports regarding audit planning and the results of its external independent audit.

The responsibilities of the external independent auditor in the area of financial reporting are set out in its report in each year’s Annual Report.

Accountability and auditFinancial reporting and systemsThe Board of Directors recognises the need to present a balanced, understandable and clearly defined assessment of the Group’s operational and financial performance and position including its future prospects. This is provided by a review of the Group’s operations and performance as set out in the Strategic Report of each year’s Annual Report.

Annual Report 2016

48

Annual Report 2016

CORPORATE GOVERNANCE

Business plans, annual budgets and investment proposals for each business, and for the Group, have been formally prepared, reviewed and approved by the Board. These include profit and loss and cash flow forecasts. Actual financial results and cash flows, including a comparison with budgets and forecasts, are regularly reported to the Board with variances being identified and used to initiate any action deemed appropriate. Forecasts of the Group’s compliance with its borrowing covenants are also prepared on a regular basis, and forecasts of the Group’s level of its undrawn and available borrowing facilities for liquidity purposes are also prepared and reported to the Board.

Internal controlThe Board attaches considerable importance to its system of internal control and for reviewing its effectiveness, including its responsibility for taking reasonable steps for the safeguarding of the assets of the Company and the Group and for preventing and detecting fraud and other irregularities. Such a system is designed to manage rather than eliminate the risk, and can nonetheless provide only reasonable and not absolute assurance against misstatement or loss. There is an established internal control framework within the Group that is continually reviewed and updated taking into account the nature of the Group’s operations.

Internal AuditSpecific topics covered by Internal Audit during the year included but were not limited to: • Reviewoftheevidenceand

assumptions that support the planning Assurance Statement to Market Operator Services Limited and Ofwat in respect of the opening of non-household competition in the water industry

• Reviewofbusinessrisksandcontrols

• ReviewofCyberRisks• ReviewofSouthStaffordshire

Water PLC’s customer tariffs for the 2016/17 year

• ReviewofchangeofAccountingStandards to FRS 102

A formal Business Risk Assurance Paper and Internal Audit Plan for South Staffordshire Water PLC, which seeks to examine and evaluate the effectiveness of the control environment and test specific areas that are considered a priority by the business, were presented to, and approved by, the Audit Committee and the Audit Committee of South Staffordshire Water PLC.

Progress against this Plan is monitored by the Audit Committee and also the Audit Committee of South Staffordshire Water PLC. Findings and recommendations arising from the work performed are reported to the Audit Committee at the appropriate time.

The Internal Audit arrangements in operation are considered appropriate to the size and complexity of the Group but the Audit Committee will continue to review these arrangements on a regular basis.

Organisational structureA defined organisation structure for the Group exists with clear lines of responsibility, accountability and appropriate division of duties.

The Board sets overall policy and has delegated the necessary authority to management and business departments in order to fulfil that policy. This is communicated to employees by way of published policies and procedures.

The Group’s extensive financial regulations specify authorisation limits for individual managers, with all material transactions being approved by a member of the executive team, a member of the Board or by the Board collectively. In addition, formal treasury policies are in place. Where appropriate, commercial and financial responsibility is clearly delegated to individual business units and supported by the Board.

Risk managementThe Group’s approach to risk balances the need to manage exposure to risk whilst at the same time aiming to improve the Group’s operational and financial performance.

49

South Staffordshire Water PLC’s approach to risk reflects its status as a regulated and licensed water undertaking providing an essential public service. As detailed above and in the Strategic Report, a strong risk management and control framework is in place to understand and manage identified risks.

The non-regulated businesses operate principally in regulated environments and, as such, must also have strong risk control management.

Risk management is discussed at Board level both in terms of the Group and its businesses on a regular basis. As detailed above, the Group’s individual businesses are required to monitor risk and its management with any significant changes in business risk and any subsequent procedures or controls to mitigate the risk being reported to the Audit Committee.

Further details in respect of the Company’s risk management can be found in the Financial Review section of the Strategic Report on pages 37 and 38.

Details in respect of the Company’s going concern can be found in the Long Term Viability statement presented on pages 38 and 39, and in the Directors’ Report on page 42.

External independent auditorThe Board, assisted by the Audit Committee, reviews each year the external independent auditor’s performance, independence, effectiveness and fees including the level of non-audit services and fees.

In evaluating the external independent auditor, the Audit Committee assesses the calibre of the external audit firm, the audit scope and plan which is agreed in advance with the Audit Committee and the level and nature of audit communications, including the reporting to the Audit Committee of the audit results.

The responsibilities of the external independent auditor in the area of financial reporting are set out in their report in each year’s financial statements.

Relations with shareholdersThe Board ensures that a regular and detailed dialogue with shareholders takes place. This is achieved through regular management and Board meetings that shareholders attend and through other less formal communication.

Annual Report 2016

50

Annual Report 2016

DIRECTORS’ RESPONSIBILITIES STATEMENT

The following statement, which should be read in conjunction with the independent auditor’s statement of its responsibilities set out on the following pages, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the independent auditor in relation to the accounts.

The Directors are responsible for preparing the Annual Report and Accounts, including the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 102 “The Financial Reporting Standard applicable in the UK”. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period.

In preparing these financial statements, the Directors are required to:• selectsuitableaccountingpolicies

and then apply them consistently;• makejudgmentsandaccounting

estimates that are reasonable and prudent;

• statewhetherapplicableUKAccounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• preparethefinancialstatementson the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors of the Company and their functions are listed on page 42 of the Annual Report and Accounts.

51

Annual Report 2016

INDEPENDENT AUDITOR’S REPORT

We have audited the financial statements of South Staffordshire Plc for the year ended 31 March 2016 which comprise the consolidated profit and loss account, consolidated and individual Company balance sheets, the consolidated statement of comprehensive income, the consolidated and individual company statements of changes in equity, the consolidated cash flow statement, notes to the consolidated cash flow statement and the notes 1 to 32. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorAs explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in

accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:• give a true and fair view of the

state of the company’s affairs as at 31 March 2016 and of its profit for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:• adequate accounting records

have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Jacqueline Holdenfor and on behalf of Deloitte LLPChartered Accountants and Statutory AuditorLondon, UK30 August 2016

52

Annual Report 2016

Consolidated Profit & Loss AccountFor the year ended 31 March 2016

2016 2015 (as restated) Note £’000 £’000

Group turnover 2 234,904 238,918

Operating costs before exceptional operating item (net) 3 (187,449) (194,665)

Group operating profit before exceptional operating item 47,455 44,253

Exceptional operating item - pension curtailment gain 7 3,581 —

Total group operating profit 51,036 44,253

Exceptional profit on disposal of rental income rights 7 4,590 —

Finance charges (net) 8 (12,313) (11,583)

Profit on ordinary activities before taxation 43,313 32,670

Taxation on profit on ordinary activities 9 (2,517) (4,656)

Profit on ordinary activities after taxation 40,796 28,014

Less profit after tax of non-controlling interests 27 (86) (22)

Profit for the financial year 40,710 27,992

Earnings per share Basic and diluted 11 317.6p 218.3p

The results above are all derived from continuing operations.

The comparative financial statements have been restated following transition to FRS 102. See note 31 for further detail.

The accompanying notes are an integral part of these financial statements.

53

Annual Report 2016

Consolidated Balance SheetAs at 31 March 2016

2016 2015 (as restated) Note £’000 £’000

Fixed assets Intangible assets - goodwill 12 26,541 26,841 Tangible assets 13 488,963 477,735

515,504 504,576Current assets Stocks 17 2,272 2,313 Debtors - amounts recoverable within one year 18 64,988 60,399 Debtors - amounts recoverable in more than one year 18 97,526 99,563 Retirement benefit surplus 22 37,788 26,852 Cash at bank and in hand 13,811 4,651

216,385 193,778Creditors – amounts falling due within one year Borrowings 19 (8,592) (27,000) Other creditors 20 (83,654) (79,799)

(92,246) (106,799)

Net current assets 124,139 86,979

Total assets less current liabilities 639,643 591,555

Creditors – amounts falling due in more than one year Borrowings 19 (363,529) (327,347) Other creditors 20 (14,909) (12,805) Accruals and deferred income 15 (134,353) (131,223) Provisions for liabilities - deferred tax 21 (41,715) (45,080)

(554,506) (516,455)

Retirement benefit surplus 21 12,546 12,167

Net assets 85,137 75,100

Capital and reserves Share capital 24 5,449 5,449 Share premium account 10,882 10,882 Revaluation reserve 18,330 18,565

Capital redemption reserve 1 1Merger reserve (253) (253)Currency translation reserve (7) (2)Hedging reserve (7,680) (5,866)Profit and loss account 58,284 46,242

Shareholders’ funds 85,006 75,018Non-controlling interests 27 131 82

Total capital employed 85,137 75,100

A statement of movement of reserves is given in the Consolidated Statement of Changes in Equity.

The accompanying notes are an integral part of these financial statements.

The financial statements of South Staffordshire Plc, registered number 4295398, were approved by the Board of Directors and authorised for issue on 22 August 2016.

A P PageGroup Chief Executive

54

Annual Report 2016

2016 2015 (as restated) Note £’000 £’000

Fixed assets Investments 16 100,738 100,738 Tangible assets 13 449 549

101,187 101,287

Current assets Debtors - amounts recoverable within one year 18 9,233 8,544 Debtors - amounts recoverable in more than one year 18 70,754 78,845 Retirement benefit surplus 22 28,093 19,172

108,080 106,561Creditors – amounts falling due within one year Borrowings 19 (8,702) (6,837) Other creditors 20 (9,247) (9,788)

(17,949) (16,625)

Net current assets 90,131 89,936

Total assets less current liabilities 191,318 191,223

Creditors – amounts falling due in more than one year Borrowings 19 (119,997) (119,672) Other creditors 20 (2,152) (1,989) Provisions for liabilities - deferred tax 21 (4,514) (3,187)

(126,663) (124,848)

Retirement benefit surplus 21 12,546 12,167

Net assets 64,655 66,375

Capital and reserves Share capital 24 5,449 5,449 Share premium account 10,882 10,882 Capital redemption reserve 1 1 Hedging reserve (1,443) (1,266) Profit and loss account 49,766 51,309

Shareholders’ funds 64,655 66,375

A statement of movement of reserves is given in the Company Statement of Changes in Equity.

The accompanying notes are an integral part of these financial statements.

The financial statements of South Staffordshire Plc, registered number 4295398, were approved by the Board of Directors and authorised for issue on 22 August 2016.

A P PageGroup Chief Executive

Company Balance SheetAs at 31 March 2016

55

Annual Report 2016

Consolidated Statement of Changes in EquityAs at 31 March 2016

Called-up Share Capital Merger Revaluation Profit Currency Hedging Shareholders’ Non- Total Share Premium Redemption Reserve Reserve & Loss Translation Reserve Funds controlling Capital Capital Account Reserve Account Reserve Interests Employed £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 April 2014 (as previously reported) 5,449 10,882 1 (253) — 45,952 (7) (4,942) 57,082 60 57,142FRS 102 transitional adjustments — — — — 18,800 (1,532) — — 17,268 — 17,268

Balance at 1 April 2014 (as restated) 5,449 10,882 1 (253) 18,800 44,420 (7) (4,942) 74,350 60 74,410Profit for the financial year — — — — — 27,992 — — 27,992 22 28,014Exchange movements on translation of overseas operations — — — — — — 5 — 5 — 5Change in value of hedging instruments- cash flow hedges (net of deferred tax) — — — — — — — (1,073) (1,073) — (1,073)Actuarial gain relating to retirement benefit surplus (net of deferred tax) — — — — — 733 — — 733 — 733Amounts transferred / recycled to profit and loss — — — — (235) 235 — 149 149 — 149

5,449 10,882 1 (253) 18,565 73,380 (2) (5,866) 102,156 82 102,238Dividends (note 10) — — — — — (27,138) — — (27,138) — (27,138)

Balance at 31 March 2015 (as restated) 5,449 10,882 1 (253) 18,565 46,242 (2) (5,866) 75,018 82 75,100

Profit for the financial year — — — — — 40,710 — — 40,710 86 40,796Exchange movements on translation of overseas operations — — — — — — (5) — (5) — (5)Change in value of hedging instruments- cash flow hedges (net of deferred tax) — — — — — — — (1,965) (1,965) — (1,965)Actuarial gain relating to retirement benefit surplus (net of deferred tax) — — — — — 4,302 — — 4,302 — 4,302Amounts transferred / recycled to profit and loss — — — — (235) 235 — 151 151 — 151

5,449 10,882 1 (253) 18,330 91,489 (7) (7,680) 118,211 168 118,379Acquisitions in the year — — — — — — — — — (37) (37)Dividends (note 10) — — — — — (33,205) — — (33,205) — (33,205)

Balance at 31 March 2016 5,449 10,882 1 (253) 18,330 58,284 (7) (7,680) 85,006 131 85,137

The accompanying notes are an integral part of the financial statements.

56

Annual Report 2016

Company Statement of Changes in EquityAs at 31 March 2016

Called-up Share Capital Profit Hedging Shareholders’ Share Premium Redemption & Loss Reserve Funds Capital Account Reserve Account £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 April 2014 (as previously reported) 5,449 10,882 1 36,649 40 53,021FRS 102 transitional adjustments — — — 14,750 — 14,750

Balance at 1 April 2014(as restated) 5,449 10,882 1 51,399 40 67,771Profit for the financial year — — — 28,872 — 28,872Change in value of hedging instruments- cash flow hedges (net of deferred tax) — — — — (1,306) (1,306)Actuarial loss relating to retirement benefit surplus (net of deferred tax) — — — (1,824) — (1,824)

5,449 10,882 1 78,447 (1,266) 93,513Dividends (note 10) — — — (27,138) — (27,138)

Balance at 31 March 2015 (as restated) 5,449 10,882 1 51,309 (1,266) 66,375

Profit for the financial year — — — 28,652 — 28,652Change in value of hedging instruments- cash flow hedges (net of deferred tax) — — — — (177) (177)Actuarial gain relating to retirement benefit surplus (net of deferred tax) — — — 3,010 — 3,010

5,449 10,882 1 82,971 (1,443) 97,860Dividends (note 10) — — — (33,205) — (33,205)

Balance at 31 March 2016 5,449 10,882 1 49,766 (1,443) 64,655

2016 2015 (as restated) £’000 £’000

Profit for financial year 40,710 27,992Movement on hedging reserve (net of deferred tax) (1,814) (924)Actuarial gain relating to retirement benefit surplus (net of deferred tax) 4,302 733Exchange movements on translation of overseas operations (5) 5

Total consolidated comprehensive income for the year 43,193 27,806

Consolidated Statement of Comprehensive IncomeFor the year ended 31 March 2016

57

Annual Report 2016

2016 2015 (as restated) Note £’000 £’000 £’000 £’000

Net cash inflow from operating activities (a) 66,018 74,080

Corporation tax paid (48) (3,321)

Cash flows from investing activities:Purchase of tangible fixed assets (35,869) (30,892)Proceeds from sale of tangible fixed assets 1,190 359 Capital contributions received 5,413 5,125Interest received 6,108 6,179 Cash consideration for subsidiaries acquired (including costs) (4,120) (6,375)Cash balances of subsidiaries acquired (net) 226 475Proceeds from exceptional disposal of rental income rights 4,590 —

Net cash outflow from investing activities (22,462) (25,129)

Cash flows from financing activities:Interest paid (12,465) (12,209) Equity dividends paid (33,205) (27,138)Repayment of bank term loans (26,500) —Additions to bank term loans 30,000 —Bank term loan issue costs paid (145) — Repayment of irredeemable debenture stock — (27)Capital element of finance lease and hire-purchase rental payments (233) (643)

Net cash outflow from financing activities (42,548) (40,017)

Increase in cash and cash equivalents (net of short-term bank loans) 960 5,613

Consolidated Cash Flow StatementFor the year ended 31 March 2016

58

Annual Report 2016

(a) Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities 2016 2015 (as restated) £’000 £’000 £’000 £’000

Total operating profit 51,036 44,253Depreciation 24,991 23,527 Amortisation of goodwill 4,328 3,729Amortisation of capital contributions (2,283) (2,207) Defined benefit pension scheme current service cost (employer) — 1,723 Defined benefit pension scheme contributions (employer) (2,194) (4,556)Exceptional operating item - pension curtailment gain (3,581) —Profit on disposal of tangible fixed assets (1,117) (262)

20,144 21,954

Decrease in stocks 104 86Increase in debtors (4,000) (6,094)(Decrease) / increase in creditors (1,266) 13,881

(5,162) 7,873

Net cash inflow from operating activities 66,018 74,080

(b) Reconciliation of Movement in Net Debt 2016 2015 £’000 £’000

Increase / (decrease) in cash 9,160 (3,496)(Increase) / decrease in drawings on short-term bank loans (8,200) 9,109

960 5,613

Finance lease repayments (cash) 233 643Repayment of bank term loans 26,500 —Issue of bank term loans (30,000) —Payment of bank term loan issue costs 145 —Bank term loan issue cost amortisation (non-cash) (289) (253)Private placement issue cost amortisation (non-cash) (95) (95)Repayment of irredeemable debenture stock (cash) — 27Movement on index-linked debt (non-cash) (6,068) (5,875)

(Increase) / reduction in net debt in the year (8,614) 60Net debt brought forward (349,696) (349,756)

Net debt carried forward (358,310) (349,696)

Notes to the Consolidated Cash Flow StatementFor the year ended 31 March 2016

(c) Analysis of Net Debt Balance at Balance at 1 April Acquisitions Non-Cash 31 March 2015 and Disposals Cash Flow Movements 2016 £’000 £’000 £'000 £'000 £’000

Cash at bank and in hand 4,651 226 8,934 — 13,811Drawings on short-term bank loans — — (8,200) — (8,200)

4,651 226 734 — 5,611Irredeemable debenture stock (1,652) — — — (1,652)Index-linked debt (net of issue costs) (205,978) — — (6,068) (212,046)Bank term loans (net of issue costs) (105,438) — (3,355) (289) (109,082)Private placement loan notes (net of issue costs) (40,654) — — (95) (40,749)Obligations under finance leases and hire-purchase contracts (625) — 233 — (392)

Net debt (349,696) 226 (2,388) (6,452) (358,310)

Non-cash movements represent indexation, amortisation of issue costs, amortisation of the discount/premium on index-linked debt. The book value of net debt detailed above differs from the value used for covenant reporting purposes of £339,903,000 (2015: £335,529,000). Index-linked debt used for covenant reporting purposes is the indexed principal whereas, in accordance with applicable accounting standards, the book value represents amortised cost. Also, bank loans and private placement loan notes for covenant reporting purposes are reported at principal value before costs whereas the book value above includes un-amortised costs.

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Notes to the Financial Statements1 Statement of Accounting Policies

The principal accounting policies are summarised below, which have all been applied consistently throughout the year.

(a) Basis of AccountingThe Company and Group have adopted the accounting standards of FRS 102 for the first time in the year ended 31 March 2016. The impact of the change has been detailed in note 31. For comparative purposes, the figures for the year ended 31 March 2015 have been restated as if FRS 102 was adopted for that period also and as such the transition date is 1 April 2014. The Company and Group meet the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available to it in respect of the remuneration of key management personnel.

(b) Basis of ConsolidationThe Group accounts consolidate the accounts of the Company and its subsidiary undertakings made up to 31 March each year.

Certain group reorganisations which took place in previous years have been accounted for using merger accounting principles, in order to meet the overriding requirement under section 393 of the Companies Act 2006 for financial statements to present a true and fair view. The transactions accounted for using these principles did not meet all of the conditions for merger accounting under the Companies Act 2006, namely that the fair value of any non-equity consideration must not exceed 10 per cent of the nominal value of equity shares issued as consideration. However, the Directors consider that in substance the consideration for these transactions comprised equity share capital with no net cash impact and that the alternative approach of acquisition accounting, with the restatement of separable assets and liabilities to fair values, the creation of goodwill, and the inclusion of post reorganisation results only would not give a true and fair view of the Group’s results and financial position. The substance of the transactions was not the acquisition of businesses but rather a group reconstruction under which the ultimate shareholders of the businesses transferred and their rights relative to the others remained unchanged. The Directors consider that it is not practicable to quantify the effect of this departure from the Companies Act 2006 requirements.

Other business combinations have been accounted for under the acquisition method.

(c) TurnoverSouth Staffs Water turnover includes amounts billed together with an estimation of amounts for water supply services provided but remaining unbilled at the year-end.

Software licence income is recognised within turnover once software implementation and customer acceptance are complete unless

there is an agreement to pay a rental charge for the product, in which case, turnover is recognised based on the value of the rental charge each month. Income from separate software maintenance contracts is recognised evenly over the contract period to which it relates. Income generated through the performance of software development and consultancy services is included within turnover on the basis that turnover is matched with the delivery of the service.

Contract accounting is applied to certain contracts the Group is a party to. Where the outcome of the contract can be assessed with reasonable certainty, attributable turnover and profit are calculated on an appropriate and prudent basis and included in the accounts for the period under review. Where a contract loss is anticipated, the entire anticipated loss is recognised immediately.

Turnover of other non-regulated activities represents amounts receivable excluding VAT, from the sale of goods and services.

(d) DividendsDividends are recognised if they have been paid or if they have been approved by the shareholders before the year-end.

(e) GoodwillGoodwill arising on acquisitions represents the excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired. Goodwill is amortised over its estimated useful life of 10 to 20 years.

(f ) Tangible Fixed Assets and DepreciationTangible fixed assets comprise infrastructure assets (including water mains, impounding and pumped raw water storage reservoirs and dams), specialist operational assets (including pumping stations, treatment stations, boreholes and service reservoirs), land and buildings and other assets including fixed plant and equipment.

Infrastructure AssetsInfrastructure assets principally comprise two separate regional networks of systems that are intended to be maintained in perpetuity at a specified level of serviceability by the continuing replacement and refurbishment of their components. Expenditure on infrastructure assets relating to increases in capacity or enhancements of the networks is treated as an addition which is included at cost. Infrastructure renewals expenditure which is the annual expenditure required to maintain the operating capability of the network is not considered to represent an increase in capacity or network enhancement and is therefore not capitalised within tangible fixed assets but is expensed within operating costs for the year. In accordance with FRS 102, new infrastructure assets are depreciated on a straight line basis over their useful economic life of 100 years. The deemed cost of existing infrastructure assets determined as part of

the transition to FRS 102 is being depreciated over the estimated remaining economic life of 80 years.

Other AssetsOther assets are stated at cost less accumulated depreciation and any provision for impairment. Depreciation is provided on a straight line basis to write off the cost less estimated residual value over the estimated useful lives of the assets, with the exception of land which is not depreciated. The estimated useful lives of assets are as follows:

Boreholes 100 yearsBuildings and Service Reservoirs Up to 80 yearsFixed Plant Up to 30 years Water Meters Up to 15 yearsOffice Equipment Up to 10 yearsMobile Plant Up to 20 yearsMotor Vehicles 3–7 years

(g) Capital ContributionsCapital contributions, including those in respect of infrastructure assets, are treated as deferred income and released as a credit to operating costs over the estimated useful lives of the assets concerned.

(h) Leased AssetsAssets financed by leasing and hire-purchase arrangements which transfer substantially all the risks and rewards of ownership to the Group are included in tangible fixed assets, and the net obligation to pay future rentals is included as borrowings within creditors. Rentals are apportioned between finance charges and a reduction of the outstanding liability for future rentals so as to produce a constant charge to the profit and loss account based upon the capital outstanding. Operating lease rentals are charged to the profit and loss account on a straight line basis.

(i) InvestmentsInvestments held as fixed assets are stated at cost less amounts written off and any provision for impairment. In accordance with Section 611 of the Companies Act 2006, the cost of shares acquired from a fellow group undertaking by way of a share for share exchange are recorded at the higher of the nominal value of the shares issued as consideration and the carrying value of the investment in the transferring company.

(j) StocksStocks are valued at the lower of cost and net realisable value. Cost includes an appropriate element of overheads. Provision is made for obsolete, slow moving or defective items where appropriate.

(k) Foreign CurrencyTransactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date or the rate of the relevant forward exchange contracts.

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The results of overseas operations are translated at the average rates of exchange during the year and their balance sheets at the rates prevailing at the balance sheet date. Exchange differences arising on translation of the opening net assets and results of overseas operations and on foreign currency borrowings, to the extent that they hedge the Group’s investment in such operations, are reported in the consolidated statement of comprehensive income. All other exchange differences are included in the profit and loss account.

(l) PensionsThe profit and loss charge or credit in respect of defined benefit pension schemes represent:

- The current service costs arising from active member employee services rendered during the year and the cost or credits associated with benefit changes, settlements and curtailments. These are charged or credited against operating profit.

- The net interest charge or credit on the net defined benefit deficit or surplus. This is charged or credited within finance charges (net).

Actuarial gains and losses are charged or credited directly to the consolidated statement of comprehensive income net of deferred tax. The defined benefit scheme liabilities, valued using the projected unit method and the fair value of scheme assets, are recognised in the relevant balance sheet as a net retirement benefit surplus or obligation before the related deferred tax which is reported separately.

In accordance with the agreed policy in the Group, as the South Staffordshire section of the defined benefit Water Companies Pension Scheme is a multi-employer scheme with deferred members of the scheme being employees of a number of companies in the Group, this section is accounted for in the individual company accounts of South Staffordshire Plc, the holding company of the participating companies in the Group. The Cambridge Water section of the defined benefit Water Companies Pension Scheme is accounted for in the accounts of Cambridge Water Plc.

In respect of the Group defined contribution schemes the amounts charged to the profit and loss account are the contributions payable in respect of the year.

(m) Research and DevelopmentResearch and development expenditure is charged to the profit and loss account in the year in which it is incurred, unless the specific criteria under FRS 102 for capitalisation of development costs have been met, in which case, the costs are capitalised and depreciated over the estimated useful life of the subsequent revenue streams.

(n) TaxationCurrent corporation tax payable is provided on taxable profits at the current rate. Deferred tax is provided in respect of capital allowances in excess of depreciation and all other timing differences that have originated but not reversed at the balance sheet date using future tax rates anticipated at the time of reversal that have been enacted at the balance sheet date.

(o) Financial Instruments Financial Assets All financial assets, being cash and cash

equivalents, debtors and loans receivable are measured at amortised cost. Cash and cash equivalents comprise cash at bank and in hand and short-term deposits.

Financial LiabilitiesFinancial liabilities other than derivative financial liabilities (see Hedge Accounting below) are initially measured at fair value and subsequently measured at amortised cost. The premium/discount and costs of issue are amortised over the life of the instrument, with the amortisation being included in the effective interest rate of the instrument which is included in finance charges (net) in the profit and loss account.

(p) Hedge AccountingThe Group designates certain hedging instruments, including derivatives, as cash flow hedges. At inception of the hedge relationships, the Group documents the relationships between the hedging instruments and the hedged items along with the Group’s risk management strategy and objectives in relation to each hedge. At the inception of the hedges, and on an ongoing basis, the Group documents whether the hedging instruments are highly effective in offsetting changes in cash flows of hedged items.

The effective proportion of changes in fair value of hedging instruments that are designated and qualify as cash flow hedges are deferred in equity (net of tax) in a hedging reserve. The gain or loss relating to the ineffective proportion is recognised immediately in the profit and loss account. The amounts deferred in the hedging reserve are recycled to the profit and loss account in the periods when the hedged items are recognised in the profit and loss account.

Hedge accounting is discontinued when the Group de-designates the hedging relationships, the hedging instruments expire, are terminated or are sold or they no longer qualify for hedge accounting. Any cumulative gain or loss that remains in the hedging reserve at that time is recognised when hedged forecast transactions are ultimately recognised in the profit and loss account. When forecast transactions are no longer expected to occur, the cumulative gains or losses are recognised immediately in the profit and loss account.

(q) Related Party TransactionsAs at 31 March 2016, the Company was an indirectly wholly owned subsidiary undertaking of Hydriades IV Limited, the ultimate parent company in the United Kingdom. As such, the Company has taken advantage of the exemption from disclosing transactions with other members of the group headed by Hydriades IV Limited, as consolidated financial statements for this company in which the accounts of the Company and its subsidiaries are included, are publicly available. The Group has no other related party transactions requiring disclosure other than those disclosed in note 30.

(r) Exceptional ItemsThe Group separately presents certain items on the face of the profit and loss account as exceptional. Exceptional items are material items of income, gain, profit or expense that, because of their size or incidence, are presented separately to allow an understanding of the Group’s financial performance and comparison to the prior year. They are not expected to be incurred on a recurring basis. Additional details of exceptional items in the year ended 31 March 2016 are set out in note 7.

Notes to the Financial Statements

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Annual Report 2016

Notes to the Financial StatementsPrincipal accounting judgements, estimates and assumptionsIn the application of the accounting policies, which are described above, the Directors are required to make judgements, estimates and assumptions in respect of the carrying amounts of assets and liabilities recognised in the financial statements. These are based on historical experience, future forecasts and other factors that are considered to be relevant. It is recognised that historical experience and forecasts change over time and these judgements, estimates and assumptions are therefore reviewed and amended where necessary on a regular basis. However, it is also recognised that the actual outcomes may still differ to the judgements, estimates and assumptions made. Provided below are details of the principal accounting judgements, estimates and assumptions that the Directors have made when applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Accrued incomeAn estimate of water consumption by metered customers of South Staffs Water since the date of the last water bill and the corresponding income that remains unbilled at the end of the year (accrued income) is required to be made each year. This estimate uses a historical water consumption rate for each customer from South Staffs Water’s billing system and applies this consumption rate to the unbilled period and the related tariff to estimate unbilled income for that period. The accrued income for metered customers as at 31 March 2016 was £14,600,000 (2015: £11,900,000).

Amortised cost of index-linked borrowingsIn order to record the Group’s index-linked borrowings at amortised cost an estimate of the long-term average inflation rate (Retail Price Index - RPI) per annum to the maturity of the instrument is required to be made. In forming this estimate, financial market data such as the long-term yields for fixed rate and index-linked (RPI) gilts is obtained and considered with the difference between these yields being the market implied long-term inflation assumption. The net book value of index-linked borrowings as at 31 March 2016 was £212,046,000 (2015: £205,978,000).

Bad and doubtful debt provisionThe recoverability of trade debtors, and therefore the amount of bad and doubtful debt provision held against trade debtors in the balance sheet at each year-end, requires judgement. For South Staffs Water this judgement requires consideration of the historical and forecast debt collection rates in respect of different categories of customers and trade debt, usually calculated as a percentage of the total amount billed in each year. This information is used in order to estimate the level of debt outstanding at the end of the year which is expected to be irrecoverable after following the processes of collection that South Staffs Water adopts. This estimate represents the year-end bad and doubtful debt provision of South Staffs Water which was £29,790,000 as at 31 March 2016 (2015: £27,671,000).

Defined benefit pension schemesJudgements, assumptions and estimates are required to appropriately record the assets and liabilities of defined benefit pension schemes in the balance sheet at each period end. The Directors use the services of professional actuaries to advise on the most appropriate valuations for these assets and liabilities in accordance with the relevant accounting standard. The net accounting surplus for these assets and liabilities as at 31 March 2016 in the consolidated balance sheet is £37,788,000 (2015 as restated: £26,852,000).

Hedge accountingIn applying the Group’s interest rate hedging strategy and the corresponding hedge accounting applied in the financial statements a judgement has been made that there will be highly probable floating interest rate payments over the term of the interest rate derivatives. Underlying this judgement is the assessment that the future refinancing of bank facilities is highly probable. The basis for this judgement includes South Staffs Water’s long-term 25-year water supply licence, its related long-term business model and regulated asset base, its ability to access capital markets including the bank debt market, its strong investment grade credit rating and also the stability and predictability of the regulated UK water sector as a whole.

Intangible Assets - GoodwillThe outcome of the Group’s annual impairment test for goodwill is dependent on the forecast cash flows of each cash-generating unit together with key management assumptions, which are subject to inherent estimation and uncertainty including future profit growth. The total net book value of Group intangible assets as at 31 March 2016 is £26,541,000 (2015: £26,841,000).

Tangible fixed assets – Assessment of useful economic livesThere is a requirement to estimate the useful economic lives of tangible fixed assets in order to depreciate the cost or deemed cost of these assets and make an appropriate charge to the profit and loss account over that period for each asset. This estimate is based on a combination of engineering data, experience of similar assets and on the businesses forecast replacement or rehabilitation cycle and its investment plan. Industry practice is also considered as part of the overall estimate of assets lives. The total net book value of Group tangible fixed assets as at 31 March 2016 is £488,963,000 (2015 as restated: £477,735,000).

Tangible fixed assets – Deemed cost on transition to FRS 102 In order to record a deemed cost of infrastructure assets on transition to FRS 102, there was a requirement to estimate the fair value of these assets as at the transition date (1 April 2014). In line with market practice, in forming this estimate of fair value, South Staffs Water’s Regulated Asset Value as at that date was used, making deductions for net debt and the net book value of other assets and liabilities. The difference of £23,500,000 between the fair value of infrastructure assets calculated in this way and their net book value under previous UK GAAP at 1 April 2014 has been recorded in the consolidated balance sheets as an increase to the book value of infrastructure assets to estimate deemed cost on transition.

Tangible fixed assets – Determining costs which are capital in natureJudgement is required to determine whether costs incurred when work is carried out on assets of South Staffs Water are capital or revenue in nature. This work includes repairs, like-for-like replacement, new assets or replacement of assets with an element of asset enhancement or increased capacity. Identifying which element of expenditure represents capital expenditure rather than revenue expenditure may include judgement that the South Staffs Water’s two regional infrastructure networks each represent single infrastructure assets. In order to apply the appropriate accounting, a judgement is made as to whether it is probable that the expenditure will generate future economic benefits and also if the costs can be measured reliably.

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Annual Report 2016

2 Segmental Information

Turnover 2016 2015 £’000 £’000

South Staffs Water 123,876 126,930Inter-divisional — (1,042)

South Staffs Water (external) 123,876 125,888

Non-regulated service businesses 141,787 136,547Inter-divisional (30,759) (23,517)

Non-regulated service businesses (external) 111,028 113,030

Group turnover 234,904 238,918

Operating Profit 2016 2015 (as restated) £’000 £’000

South Staffs Water (before exceptional operating item) 37,062 34,186

Exceptional operating item - pension curtailment gain 3,581 —

South Staffs Water 40,643 34,186

Non-regulated service businesses 10,393 10,067

Total operating profit 51,036 44,253

The Directors do not consider the turnover and operating profit of acquisitions in the year or the previous year to be material to the Group and as such these have not been separately disclosed.

Notes to the Financial Statements

Net Operating Assets 2016 2015 (as restated) £’000 £’000

South Staffs Water 306,058 293,300Non-regulated service businesses 41,244 41,868

Net operating assets 347,302 335,168

Net debt (book value) (358,310) (349,696)Goodwill 26,541 26,841Loans receivable from parent undertakings in more than one year 93,740 95,657Other non-operating net liabilities (11,811) (9,877)Corporation tax payable (8,398) (4,765)Retirement benefit surplus 37,788 26,852Provisions for liabilities - deferred tax (41,715) (45,080)

Net assets 85,137 75,100

The Directors do not consider the turnover, operating profit and net operating assets arising outside of the United Kingdom to be material to the Group and as such these have not been separately disclosed.

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3 Operating Costs before exceptional operating item (net) 2016 2015 (as restated) £’000 £’000

Other operating income (note 6) (1,683) (1,038)Raw materials and consumables 26,225 24,204Staff costs (note 4) 77,374 78,385Depreciation (non-infrastructure assets) 21,552 20,189Depreciation (infrastructure assets) 3,439 3,338Infrastructure renewals expenditure 7,510 8,693Amortisation of goodwill 4,328 3,729Amortisation of capital contributions (2,283) (2,207)Operating lease rentals: plant and machinery 133 195 other 3,296 3,086Other operating costs 47,558 56,091

187,449 194,665

The Group auditor’s remuneration is analysed as follows: 2016 2015 £'000 £'000

Fees payable to the Company's auditor for the audit of the Company's annual accounts 35 20

The audit of other Group undertakings pursuant to legislation 172 155

Total audit fees 207 175

Other services pursuant to legislation 15 14 Other services 18 20 Tax services 20 26

Total non-audit fees 53 60

Notes to the Financial Statements

The increase in audit fees in year ended 31 March 2016 mainly relates to work in connection with the transition to FRS 102.

4 Staff Costs 2016 2015 £’000 £’000

Wages, salaries and bonuses 68,724 68,949Social security costs 6,344 6,205Pension costs 2,306 3,231

77,374 78,385

2016 2015 Number Number

Average number of employees South Staffs Water 430 478 Non-regulated service companies 2,065 2,015

2,495 2,493

5 Directors’ Remuneration

The remuneration of the Directors of the Company, is set out below.

2016 2015 £’000 £’000

Emoluments 362 336

No Directors holding office at 31 March 2016 accrued benefits in respect of service in the year under a Group defined benefit pension scheme during the year (2015: 1 Director) and 1 Director was a member of a Group money purchase pension scheme during the year (2015: No Directors). There were £61,000 of contributions paid by the Group to money purchase pension schemes in respect of Directors during the year (2015: £Nil).

The highest paid Director received emoluments of £362,000 (2015: £336,000) during the year. There were £61,000 of Group contributions to a money purchase pension scheme in respect of the highest paid Director (2015: £Nil).

None of the Directors had a material interest in any contract to which the Group was party during the year or the preceding year.

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Annual Report 2016

6 Other Operating Income

2016 2015 £'000 £’000

Profit on disposal of tangible fixed assets 1,117 262Rental income 566 776

1,683 1,038

7 Exceptional Items

Included within Group operating profit for the year ended 31 March 2016 is a non-cash exceptional operating item of £3,581,000 (credit) relating to a reduction in the year in the book value of liabilities relating to a Group defined benefit pension scheme. This non-recurring item has arisen as a result of the cessation of future accrual of benefits within the scheme during the year. The item has been disclosed separately as exceptional due to its non-recurring and significant nature.

Also, during the year, the Group has sold the contractual rights to future rental income relating to a number of its sites. This sale has generated a profit of £4,590,000 which has also been disclosed in the profit and loss account as exceptional due to the non-recurring nature of the sale and the significance of the proceeds and the profit generated. It is considered that the disposal and the related profit is not of an operating nature and as such it has been recorded after operating profit.

8 Finance Charges (net)

2016 2015 (as restated) £’000 £’000

Interest payable and similar charges Index-linked debt (cash) 7,049 6,900 Index-linked debt (non-cash) 6,068 5,875 Bank term loan, drawings on short-term bank loans and other interest payable (net) 3,810 3,621 Private placement loan notes 1,808 1,808 Finance leases and hire-purchase contracts 4 33 Irredeemable debenture stock 68 68

18,807 18,305

Interest receivable Interest on loans to parent undertakings (6,108) (6,179)

12,699 12,126

Other finance income (net) Defined benefit pension scheme interest cost (570) (729) Amounts recycled from hedging reserve 184 186

12,313 11,583

Notes to the Financial Statements

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Annual Report 2016

9 Taxation on Profit on Ordinary Activities

The tax charge for the year comprises: 2016 2015 (as restated)

£’000 £’000

Current tax Current year corporation tax 5,927 5,149 Adjustment in respect of prior years (272) (304) Foreign tax 34 12

Total current tax charge 5,689 4,857

Deferred tax Origination and reversal of other timing differences 867 (260) Impact of changes in future tax rates (4,322) — Adjustment in respect of prior years 283 59

Total deferred tax credit (3,172) (201)

Total tax charge 2,517 4,656

Tax included in the consolidated statement of comprehensive income 2016 2015 (as restated) £’000 £’000

Deferred tax Actuarial gain on pension scheme 826 267 Movement in hedging reserve (362) (230) Effect of change in deferred tax rate (373) —

Total tax charge 91 37

The tax assessed on the profit on ordinary activities for the year is lower than the standard rate of corporation tax in the UK of 20% (2015 - 21%). The differences are reconciled below: 2016 2015 (as restated) £’000 £’000

Profit on ordinary activities before tax 43,313 32,670

Profit on ordinary activities multiplied by standard UK corporation tax rate of 20% (2015: 21%) 8,663 6,861Expenses not deductible for tax purposes including goodwill (net) 951 933Deferred tax provided at lower rate (88) 11Impact of changes in future tax rates (4,322) —Adjustments in respect of prior years 11 (245)Group relief received not paid for (2,709) (2,904)Difference in foreign tax rates 11 —

Total tax charge 2,517 4,656

Reductions in the future UK corporation tax rates from 20% to 19% and then 18% were substantively enacted in July 2015 and will take effect in April 2017 and April 2020 respectively. A further reduction to 17% from April 2020 has been announced but has not been substantively enacted. Deferred tax has been recognised at 18% or 19% depending on the expected reversal period.

Applying the proposed future tax rate of 17% to the deferred tax balance would have resulted in a reduction of the deferred tax liability and an additional profit and loss account reserve credit of £2,816,000.

No deferred tax has been recognised on capital gains rolled over against the cost of acquisition of certain property and structures owned by South Staffordshire Water PLC. The gains will only come into charge if the assets are sold and not replaced by suitable qualifying assets. As the properties are essential assets of the water supply business it is regarded as unlikely that the gains will come into charge. The potential unprovided deferred tax amounts to £1,879,000 (2015: £2,087,000).

The tax impact of exceptional items reported in the year ended 31 March 2016 is an increase in the current tax charge of £918,000 and a reduction in the deferred tax credit of £645,000.

Notes to the Financial Statements

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Annual Report 2016

10 Dividends Paid or Proposed 2016 2015 £’000 £’000

Ordinary interim dividend paid of 259.0p (2015: 211.7p) per share 33,205 27,138

11 Earnings per Share

The calculation of earnings per share is based on profit for the financial year divided by the weighted average number of shares in issue during the year. The calculations of earnings per share are based on the following profits and number of shares:

2016 2015 (as restated) £’000 £'000

Profit for the financial year and profit for earnings per share 40,710 27,992

2016 2015 Number of Number of Shares Shares

Weighted average number of shares for basic and diluted earnings per share 12,819,856 12,819,856

12 Intangible Assets - Goodwill

Group £’000

Cost At 1 April 2015 45,900 Acquisitions in the year 4,000 Adjustments in respect of prior year acquisitions 28

At 31 March 2016 49,928

Amortisation At 1 April 2015 19,059 Charge for the year 4,328

At 31 March 2016 23,387

Net Book ValueAt 31 March 2016 26,541

At 31 March 2015 26,841

During the year ended 31 March 2016 adjustments were made in respect of goodwill on prior year acquisitions of £28,000 reflecting adjustments made in the year to the provisional fair values of consideration and the acquired assets and liabilities as reported last year.

Notes to the Financial Statements

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Annual Report 2016

13 Tangible Fixed Assets Group Infra- Specialised Land and structure Fixed Plant & Operational Buildings Assets Equipment Assets Total £’000 £’000 £’000 £’000 £’000

Cost At 1 April 2015 (as previously reported) 27,007 275,297 184,877 196,971 684,152 FRS 102 transitional adjustments 1,543 164,457 — — 166,000

At 1 April 2015 (as restated) 28,550 439,754 184,877 196,971 850,152 Additions 43 7,647 16,822 11,357 35,869 Disposals (60) — (1,983) (13) (2,056) Acquisitions — — 1,280 — 1,280

At 31 March 2016 28,533 447,401 200,996 208,315 885,245

Depreciation At 1 April 2015 (as previously reported) 7,073 167,690 105,894 88,422 369,079 FRS 102 transitional adjustments — 3,338 — — 3,338

At 1 April 2015 (as restated) 7,073 171,028 105,894 88,422 372,417 Charge for the year 541 3,439 14,717 6,294 24,991 Disposals — — (1,983) — (1,983) Acquisitions — — 857 — 857

At 31 March 2016 7,614 174,467 119,485 94,716 396,282

Net Book ValueAt 31 March 2016 Owned 20,919 268,707 81,094 112,636 483,356 Leased — 4,227 417 963 5,607

20,919 272,934 81,511 113,599 488,963

Net Book ValueAt 31 March 2015 (as restated) Owned 21,477 264,499 78,414 107,388 471,778 Leased — 4,227 569 1,161 5,957

21,477 268,726 78,983 108,549 477,735

Freehold land of £2,461,000 (2015: £2,461,000) included above is not subject to depreciation.

Company Land & Plant & Total Buildings Equipment £’000 £’000 £'000Cost At 1 April 2015 80 783 863 Additions — 75 75

At 31 March 2016 80 858 938

Depreciation At 1 April 2015 — 314 314 Charge for the year — 175 175

At 31 March 2016 — 489 489

Net Book Value

At 31 March 2016 80 369 449

Net Book Value

At 31 March 2015 80 469 549

Freehold land of £80,000 (2015: £80,000) included above is not subject to depreciation.

None of the tangible fixed assets of the Company were financed by finance leases or hire purchase agreements.

Notes to the Financial Statements

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Annual Report 2016

14 Capital Commitments

Group capital commitments outstanding at 31 March 2016 were £2,936,000 (2015: £1,971,000).

The Company had no capital commitments at either year-end.

15 Capital Contributions Group Infrastructure Other Total

Assets Assets £’000 £’000 £’000

Balance at 1 April 2015 (as previously reported) 140,956 8,657 149,613FRS 102 transitional adjustment (18,390) — (18,390)

Balance at 1 April 2015 (as restated) 122,566 8,657 131,223Capital contributions received in the year 4,852 561 5,413Amortised in the year (1,563) (720) (2,283)

Balance at 31 March 2016 125,855 8,498 134,353

All capital contributions are now shown in the balance sheet within accruals and deferred income. Prior to the adoption of FRS 102 only capital contributions relating to other assets were recorded in this balance sheet category with capital contributions related to infrastructure assets previously shown within net tangible fixed assets.

The Company had no capital contributions at either year-end.

Notes to the Financial Statements

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Annual Report 2016

16 Fixed Asset Investments Company

Shares in Subsidiary Undertakings £’000

At 1 April 2015 and 31 March 2016 100,738

Shares in subsidiary undertakings are stated at their cost which is equal to net book value.

As at 31 March 2016, the Company’s trading subsidiary undertakings, all of which are incorporated in the United Kingdom with the exception of Echo India Private Limited, which is incorporated in India and OnSite Utility Services Canada Limited, which is incorporated in Canada, and all of which have only ordinary shares in issue, were as follows:

Direct Indirect Ordinary OrdinaryCompany Name Shareholding Shareholding Nature of Business

South Staffordshire Water PLC 100% Regulated water supply

Aqua Direct Limited 100% Supply of spring and mineral water

Office Watercoolers Limited 90% Rental of water cooling units and sale of spring water

Echo Managed Services Limited 100% Customer management

Echo Northern Ireland Limited 100% Customer management

Inter-Credit International Limited 100% Customer credit management

Grosvenor Services Group Limited 100% Customer credit management

Echo India Private Limited 100% Software development support services to UK parent company

SSI Services (UK) Limited 100% Holding company for those companies listed below

OnSite Central Limited 100% Sewer and wastewater asset inspection, relining, surveying, cleaning and flow monitoring

OnSite Utility Services Canada Limited 100% Sewer and wastewater asset inspection, surveying and cleaning

Perco Engineering Services Limited 100% Trenchless installation and refurbishment of pipeline networks

OnSite Specialist Maintenance Limited 100% Specialist infrastructure maintenance

Integrated Water Services Limited 100% Clean water asset installation, repair, maintenance and refurbishment, mechanical and electrical and water hygiene services

Hydrosave UK Limited 100% Water main leak detection services and clean water network management services

Hydrosave Pipeline Technologies Limited 100% Non-destructive testing of clean water pipelines

Other subsidiaries of the Company as at 31 March 2016, which were all non-trading companies as at that date, were as follows:

365 Environmental Services Limited Grosvenor Legal Services Limited Pump Services Limited

Aquaven Limited Ion Water and Environmental Management Limited Rapid Systems Limited

Brocol Consultants Limited IWS M&E Services Limited Recoup Revenue Management Limited

Cambridge Water Plc IWS Pipeline Services Limited South Staffordshire Infrastructure Services Limited

Data Contracts Specialist Maintenance Limited IWS Water Hygiene Services Limited South Staffordshire Water Holdings Limited

Debt Action Limited Lingard Limited Subaqua Solutions Limited

Freshwater Coolers Plc OnSite Water & Wastewater Services WLL Wells Water Treatment Services Limited

Greenacre Pumping Systems Limited Portadam Limited Woodside Environmental Services Limited

Notes to the Financial Statements

70

Annual Report 2016

17 Stocks

Group 2016 2015 £’000 £’000

Stores and raw materials 2,272 2,313

The Company had no stocks at either year-end.

18 Debtors Group Company

2016 2015 2016 2015 (as restated) £’000 £’000 £’000 £’000

Amounts recoverable within one year Trade debtors 41,092 40,170 — — Other debtors 250 2,368 33 276 Amounts owed by Group undertakings — — 6,717 6,312 Amounts owed by parent undertakings 364 364 — — Prepayments and accrued income 23,282 17,497 2,483 1,956

64,988 60,399 9,233 8,544 Amounts recoverable in more than one year Loans receivable from parent undertakings 93,740 95,657 53,740 55,657 Amounts owed by Group undertakings — — 17,014 23,188 Other amounts owed by parent undertakings 3,786 3,906 — —

97,526 99,563 70,754 78,845

162,514 159,962 79,987 87,389

19 Borrowings Group Company

2016 2015 2016 2015 £’000 £’000 £’000 £’000

Amounts falling due within one year Short-term bank loans 8,200 — 8,702 6,837 Bank term loans — 26,420 — — Obligations under finance leases and hire purchase contracts 392 580 — —

8,592 27,000 8,702 6,837

Amounts falling due in more than one year Bank term loans 109,082 79,018 79,248 79,018 Index-linked debt 212,046 205,978 — — Private placement loan notes 40,749 40,654 40,749 40,654 Irredeemable debenture stock 1,652 1,652 — — Obligations under finance leases and hire-purchase contracts:

Payable between one and two years — 45 — — Payable between two and five years — — — —

363,529 327,347 119,997 119,672

Total borrowings 372,121 354,347 128,699 126,509

The book value of the Group’s index-linked debt of £212,046,000 (2015: £205,978,000) is stated above at amortised cost in accordance with FRS 102. The indexed principal of £192,706,000 (2015: £190,638,000) is used for borrowing covenant reporting purposes. Similarly, Group gross bank loans of £109,763,000 (2015: £106,263,000) and gross private placement loan notes of £41,000,000 (2015: £41,000,000) are used for covenant reporting purposes but, in accordance with FRS 102, are stated above net of unamortised issue costs.

Notes to the Financial Statements

71

Annual Report 2016

20 Other Creditors Group Company 2016 2015 2016 2015 (as restated) £’000 £’000 £’000 £’000

Amounts falling due within one year Trade creditors 32,436 38,009 619 3,806 Payments received in advance 25,530 20,832 — — Other creditors 15,785 14,338 5,388 4,481 Corporation tax payable 8,398 4,765 3,134 1,374 Other taxation and social security 1,505 1,530 106 127 Derivative financial liabilities — 325 — —

83,654 79,799 9,247 9,788

Amounts falling due in more than one year Derivative financial liabilities 4,104 1,583 1,759 1,583 Other creditors 10,805 11,222 393 406

14,909 12,805 2,152 1,989

Derivative financial liabilities represent the market value of floating to fixed rate interest rate swaps.

21 Provisions for Liabilities

Group Deferred Tax

£’000

At 1 April 2015 (as previously reported) 13,017FRS 102 transitional adjustments 32,063

At 1 April 2015 (as restated) 45,080Profit and loss account credit (3,172)Amounts acquired with subsidiary undertakings (284)Charge to other comprehensive income 91

At 31 March 2016 41,715

Company Deferred Tax

£’000

At 1 April 2015 (as previously reported) —FRS 102 transitional adjustments 3,187

At 1 April 2015 (as restated) 3,187Profit and loss account charge 1,134Charge to other comprehensive income 193

At 31 March 2016 4,514

Further analysis of deferred tax is set out in note 23.

Notes to the Financial Statements

72

Annual Report 2016

22 Retirement Benefit Surplus

Group

Surplus of defined benefit pension scheme £’000

Surplus at 1 April 2015 (as previously reported) 12,546FRS 102 transitional adjustments 14,306

At 1 April 2015 (as restated) 26,852Contributions (employer) 2,194Net finance income 570Actuarial gain (net) 4,591Curtailment gain 3,581

Surplus at 31 March 2016 37,788

Further disclosures relating to the above surplus are provided in note 29.

Company Surplus of defined benefit pension scheme

£’000

Surplus at 1 April 2015 (as previously reported) —FRS 102 transitional adjustments 19,172

At 1 April 2015 (as restated) 19,172Contributions (employer) 1,764Net finance income 373Actuarial gain (net) 3,203Curtailment gain 3,581

Surplus at 31 March 2016 28,093

23 Deferred Tax Group Company

2016 2015 2016 2015 (as restated) (as restated)

£’000 £’000 £’000 £’000

Deferred tax liabilities / (assets) are provided as follows: Accelerated capital allowances 37,375 41,439 (13) (3) Tax losses (125) — — — Timing differences in respect of hedging reserves (1,838) (1,640) (317) (317) Timing differences in respect of retirement benefits 6,802 5,370 5,057 3,834 Other timing differences (499) (89) (213) (327)

41,715 45,080 4,514 3,187

24 Called up Share Capital

Group and Company 2016 2015 £’000 £’000

Authorised47,058,824 ordinary shares of 42.5p each 20,000 20,000

Issued and fully paid12,819,856 ordinary shares of 42.5p each 5,449 5,449

Notes to the Financial Statements

73

Annual Report 2016

25 Operating Lease Commitments

At 31 March 2016 the Group and the Company had the following annual commitments under non-cancellable operating leases:

Group 2016 2016 2015 2015 Buildings Other Buildings Other £’000 £’000 £’000 £’000Operating leases which expire: within one year 178 560 327 649 between two and five years 387 1,874 203 1,848 after five years — — 69 —

565 2,434 599 2,497

Company 2016 2015 Motor Motor Vehicles Vehicles £’000 £’000Operating leases which expire: within one year 24 26 between two and five years 48 86

72 112

26 Acquisitions

On 10 June 2015, Office Watercoolers Limited acquired the entire issued ordinary share capital of Freshwater Coolers Plc, a provider of water cooler units to commercial customers.

The acquisition method of accounting has been adopted.

A summary of the acquisition, including the consideration, the assets and liabilities acquired (both based on the provisional fair values), the related goodwill and the impact of the transaction on group cash flow and net debt are set out below:

Total £’000

Consideration: Cash consideration 3,977

Book value of net liabilities acquired: Tangible fixed assets 423 Stocks 63 Debtors 589 Cash at bank and in hand (net) 226 Creditors and provisions (net) (1,324)

Net liabilities (book value and provisional fair value) (23)

Goodwill on acquisition 4,000

Cash consideration paid in the year 3,977Cash acquired (net) (226)

Net cash outflow and increase in net debt from acquisition transaction in the year 3,751

There was no material difference between the book value of the net liabilities acquired and their provisional fair value.

The cash consideration reported above differs to that reported in the Consolidated Cash Flow Statement for the year ended 31 March 2016, due to additional cash payments including deferred and contingent consideration, made in the year to 31 March 2016 by the Group in respect of prior year acquisitions.

The above goodwill is being amortised over an estimated useful economic life of 10 years.

Notes to the Financial Statements

74

Annual Report 2016

27 Non-controlling Interests

2016 2015 £’000 £’000

At 1 April 82 60Profit on ordinary activities after taxation 86 22Acquisition in the year (37) —

At 31 March 131 82

28 Financial Assets and Liabilities

The Group’s financial assets and liabilities include cash, loans receivable, borrowings, derivative financial assets and liabilities, trade creditors and trade debtors. Borrowings as at 31 March 2016 represent bank term loans, private placement loan notes, finance lease obligations, index-linked debt and irredeemable debenture stock. The purpose of the Group's borrowings is to finance the Group’s operations. It is, and has been throughout the year and the previous year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The Group’s policy in respect of cash, loans receivable and borrowings is to maintain flexibility with both fixed and floating interest rates and long and short-term debt while not exposing the Group to significant risk of market movements (see below). As at 31 March 2016, derivative financial liabilities represent floating to fixed interest rate swaps used as cash flow hedges to reduce the Group’s risk to changes in LIBOR.

Interest Rate Risk Profile

Borrowings 2016 2015 £’000 £’000

Retail Price Index-linked debt 212,046 205,978 Fixed rate financial liabilities 142,875 104,933 Floating rate financial liabilities 17,200 43,436

372,121 354,347

The floating rate borrowings comprise sterling denominated short-term bank loans (revolving credit facilities) that bear interest at rates based on LIBOR. As at 31 March 2015, these included £35,000,000 of loans that are floating rate but floating to fixed interest rate swaps had been entered into in respect of these loans that commence cash flows in October 2015 when these loans effectively became fixed rate when combined with these swaps and have been reported above as fixed rate as at 31 March 2016. Fixed rate financial liabilities include fixed rate bank term loans of £15,763,000 (2015: £15,763,000) and floating rate bank term loans with principal values of £85,000,000 (2015: £46,500,000) that are effectively swapped to fixed rate by cash flow hedges using floating to fixed interest rate swaps where cash flows under the swaps have commenced. The Group's trade debtors and trade creditors are not subject to interest unless considered to be overdue.

For all financial assets and liabilities, the book values and fair values are not materially different, except for the £111,400,000 (2015: £111,400,000) Retail Price Index-linked loan which had a book value at 31 March 2016 of £167,350,000 (2015: £162,718,000), and a fair value of £267,360,000 (2015: £287,735,000) and the £35,000,000 (2015: £35,000,000) Retail Price Index-linked bond which had a book value at 31 March 2016 of £44,696,000 (2015: £43,260,000) and a fair value of £46,701,000 (2015: £47,642,000).

Fixed Rate Borrowings Weighted Weighted average average period for which interest rate rate is fixed

% Years

2016 Sterling 3.8 3.3

2015Sterling 3.9 3.1

Borrowing Facilities

The Group has various borrowing facilities available to it. The undrawn committed facilities available at 31 March 2016 were as follows:

2016 2015 £’000 £’000

Expiring in one year or less — 13,500 Expiring in more than one year but not more than two years 37 — Expiring in more than two years but not more than five years 31,000 29,237

31,037 42,737

Notes to the Financial Statements

75

Annual Report 2016

Financial Risks

The Group’s activities result in it being subject to a limited number of financial risks, principally credit risk as the Group has financial assets receivable from third parties. Management of financial risks focuses on reducing the likely impact of risks to a level that is considered acceptable. The Group has formal principles for overall risk management as well as specific procedures to manage individual risks.

1) Interest rate risk

Interest rate risk arises from borrowings issued at floating rates, including those linked to LIBOR and the Retail Price Index (RPI), that expose the Group’s cash flows to changes in LIBOR and RPI. Risks of increases in LIBOR are managed by limiting the value and proportion of Group borrowings that are linked to this variable rate and by entering into an appropriate value of floating to fixed interest rate swap contracts. Risks associated with increases in RPI are effectively managed by hedging against the revenues and the Regulatory Asset Value of South Staffs Water, both of which are also linked to RPI.

2) Credit risk

As is market practice, the Group grants certain customers credit on amounts due for the services it supplies, leading to limited risk over the recovery of amounts receivable from these customers. Full details of the way this risk is managed are provided below. Credit risk also includes the risk over recovery of loans receivable. This risk is managed by ensuring that loans are only made to entities with sufficient financial resources to service the interest due on the loans. The total carrying value of financial assets subject to credit risk, net of provisions, at 31 March 2016 was £139,262,000 (2015: £142,465,000).

3) Liquidity risk

Liquidity risk represents the risk of the Group having insufficient liquid resources to meet its obligations as they fall due. The Group manages this risk by regularly monitoring the maturity of credit facilities, actual and forecast cash flows and ensuring that the payment of its obligations are matched with cash inflows and availability of free cash and adequate credit facilities. The table above details the undrawn committed borrowing facilities available to the Group to manage this risk.

Security Over Assets

Obligations under finance leases and hire purchase contracts are secured on the assets to which they relate. Index-linked debt, debenture stock and bank debt issued by South Staffordshire Water PLC, is not secured on any assets. The Company’s bank loans and its private placement loan notes are secured against the shares of the Company and certain subsidiaries.

Sensitivity Analysis

The following analysis is intended to illustrate the sensitivity to reasonably possible movements in variables affecting financial liabilities being LIBOR and the long-term forecast for the UK Retail Price Index (RPI) on the pre-tax profit and loss account of the Group during the year. There is no impact on reserves other than the impact on the profit and loss account after tax.

2016 2015 £’000 £’000

RPI + 0.25% (494) (476)RPI - 0.25% 494 476LIBOR +1.00% (484) (531)LIBOR -1.00% 484 531

The impact on the pre-tax profit and loss account for the year to 31 March 2016 detailed above has been calculated by assuming that the illustrated changes to the variables occurred on 1 April 2015 and remained different to the actual variables recorded by the stated amount during the year with all other variables remaining at the actual amounts. The comparative figures have been calculated using the same methodology assuming the stated change to the variables occurred on 1 April 2014.

Maturity of Financial Assets and Liabilities

The maturity profile of the Group’s financial liabilities recorded at repayment value, not book value, was as follows:

2016 2015 (as restated) £’000 £’000

BorrowingsIn one year or less, or on demand 8,592 27,080In more than one year, but not more than two 20,000 45In more than two years, but not more than five 130,763 120,765In more than five years, but not more than twenty — —In more than twenty years 194,358 192,290

353,713 340,180Other financial liabilitiesIn one year or less, or on demand 83,654 79,799In more than one year but not more than two 702 679In more than two years but not more than five 3,318 3,155In more than five years but not more than twenty 10,889 8,971

Total 452,276 432,784

Notes to the Financial Statements

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Annual Report 2016

The table above excludes future interest payments and future indexation on financial liabilities. Index-linked borrowings of £192,706,000 (2015: £190,638,000) included in the table above are stated at the principal amount indexed by the appropriate RPI value to the balance sheet date. The estimated redemption value of index-linked borrowings at redemption in 2045 is £399,467,000 (2015: £399,467,000) and at redemption in 2051 is £139,996,000 (2015: £139,996,000).

Group debtors recoverable in more than one year of £97,526,000 (2015: £99,563,000) principally represent loans receivable from the Company's parent undertakings of £93,740,000 (2015: £95,657,000) with £15,000,000 (2015: £15,000,000) due to be repaid between two and five years and £78,740,000 (2015: £80,657,000) having no fixed repayment date.

Trade Debtors

Before accepting orders from certain customers and offering credit terms, the Group undertakes appropriate credit assessments and uses this information to determine if the order is accepted and the credit terms that will be offered. Provision is made within the trade debtor values detailed below, based on judgement by senior management, for amounts considered to be unrecoverable due either to their nature or age. Due to the varying nature of the Group’s businesses there is no single method that is applied to all trade debtors. This would not be considered appropriate with the methods applied being considered appropriate to each business. The total amount charged to the profit and loss account in the year ended 31 March 2016 in respect of such provisions was £2,868,000 (2015: £4,417,000). Total Group trade debtors (net of provisions) as at 31 March 2016 were £41,092,000 (2015: £40,170,000). The total amount of the provision included in the above, as at 31 March 2016 was £31,642,000 (2015: £29,151,000). The Group does not hold collateral over its trade debtors.

The Directors consider that debtors that are neither past due nor impaired are of a high quality and were considered, at the balance sheet date, to be fully recoverable at their gross book value. The Directors consider that the concentration of credit risk across the Group is limited due to the Group’s customer base being significant. The largest balance outstanding from any single third party at 31 March 2016 was £1,187,000 (2015: £2,054,000), representing 3% (2015: 5%) of the above Group net trade debtor total. Individually significant debtors are principally due from customers with investment grade credit ratings including utilities, government agencies and local authorities.

An ageing analysis of invoiced trade debtors that are past due but not impaired is provided below:

South Staffs Water <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total £’000 £’000 £’000 £’000 £’000 £’000 £’000

2016 7,980 2,149 1,033 692 392 — 12,2462015 8,803 2,030 1,171 679 393 — 13,076

Non-regulated service businesses <1 month 1-2 months >2 months Total £’000 £’000 £’000 £’000

2016 5,679 1,407 3,245 10,3312015 4,859 1,090 1,720 7,669

Non-regulated service business’ debtors that are considered to be impaired of £1,852,000 (2015: £1,480,000) were all more than 2 months past due. An ageing analysis of debtors of South Staffs Water that are considered to be impaired is provided below:

<1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total £’000 £’000 £’000 £’000 £’000 £’000 £’000

2016 3,964 3,475 3,299 3,181 2,949 12,922 29,7902015 3,985 3,406 3,259 3,064 2,895 11,062 27,671

The Directors consider that the carrying value of trade and other debtors including loans receivable, net of provisions, detailed in note 18 approximates to their fair value.

29 Pension Retirement Benefits

The Group operates a number of funded pension schemes for the benefit of its employees. The Group participates in the Water Companies Pension Scheme, by way of two separate sections, which provide benefits based on pensionable pay at certain points in time (indexed as appropriate). At 31 March 2016, both of these sections had ceased future accrual of benefits with the South Staffordshire section ceasing future accrual from 1 April 2015 and the Cambridge section from 31 December 2010. The Group also operates a number of defined contribution pension schemes. The assets of all of these schemes are held separately from those of the Group, being invested by professional fund managers.

Details of the accounting policy for pension schemes are provided in note 1. As both of the sections of the defined benefit scheme are closed to future benefit accrual, from 1 April 2015 only funding deficit contributions are now being paid into the Scheme (with these being £2,194,000 in the year ended 31 March 2016 and £2,144,000 in the year ended 31 March 2015) with these contributions paid increasing the assets of the sections. No current service contributions are now paid and with effect from 1 April 2015 there is no current service cost charge to the profit and loss account. The impact of the cessation of the future accrual of the South Staffordshire section of the scheme on 1 April 2015 included a non-recurring reduction in the liabilities of the section of £3,581,000 and this has been included as an exceptional operating credit item in the profit and loss account (note 7). The amount charged to the profit and loss account for the defined contribution schemes in the year was £2,306,000 (2015: £1,508,000). There were no overdue contributions at either year-end.

Notes to the Financial Statements

77

Annual Report 2016

Additional disclosures regarding the Group’s defined benefit pension scheme are required under provisions of FRS 102. Valuations each year are undertaken by a qualified actuary using assumptions that are consistent with the requirements of FRS 102. The market value of investments has been calculated using the bid price.

The major assumptions used were as follows:

31 March 31 March 2016 2015 % %

Rate of increase in salaries n/a 3.2 Rate of increase in pensions 2.2 2.2 Discount rate 3.4 3.2 Annual inflation RPI 3.1 3.2 Annual inflation CPI 2.1 2.2

31 March 31 March 2016 2015 No. of Years No. of Years

Life expectancy of male aged 60 at accounting date 27.8 27.7

The market value of the assets in the Group’s sub-funds of the scheme and the present value of these sub-funds’ liabilities at the balance sheet date were:

Valuation 2016 2016 2015 2015 (as restated) % £’000 % £’000

Equities 26 69,172 30 80,609High yield bonds/gilts and debt instruments 56 146,939 53 142,937Diversified growth funds 11 29,450 11 30,972Emerging markets multi asset funds 6 16,278 6 15,590(Overdraft)/cash — (346) — (43)

Market value of scheme assets 261,493 270,065Present value of scheme liabilities (223,705) (243,213)

Surplus before deferred tax 37,788 26,852Related deferred tax liability (6,802) (5,370)

Surplus after deferred tax 30,986 21,482

Changes in the present value of the liabilities of the Group’s sub-funds of the scheme are as follows:

2016 2015 (as restated) £’000 £’000

Opening present value of scheme liabilities 243,213 211,257Curtailment gain (3,581) —Current service cost (employer) — 1,723Current service cost (employee) — 639Interest cost 7,636 9,137Actuarial loss/(gain) (14,359) 30,099Benefits paid (9,204) (9,642)

Closing present value of scheme liabilities 223,705 243,213

Notes to the Financial Statements

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Annual Report 2016

Changes in the market value of the assets of the Group’s sub-funds of the scheme are as follows:

2016 2015 (as restated) £’000 £’000

Opening market value of scheme assets 270,065 233,631Interest on scheme assets 8,206 9,866Actuarial gain/(loss) (9,768) 31,015Contributions (employer) 2,194 4,556Contributions (employee) — 639Benefits paid (9,204) (9,642)

Closing market value of the scheme assets 261,493 270,065

The actual return on assets of the Group’s sub-funds of the scheme over the year to 31 March 2016 was a loss of £1,237,000 (2015: gain of £39,881,000).

An analysis of the movement in the surplus of the Group’s sub-funds of the scheme during the year ended 31 March 2016 is provided in note 22.

30 Related Party Transactions

During the year ended 31 March 2009, South Staffordshire Water PLC entered into a series of agreements with a parent undertaking, Hydriades I LP. The agreements were put in place to offset the impact on South Staffordshire Water PLC of certain hedging relationships entered into with a third party bank, on both cash flow and the profit and loss account. During the year ended 31 March 2014 the balance in Hydriades I LP was transferred to Selena Bidco Limited, which is a parent undertaking of the Company. The balance due from Selena Bidco Limited in respect of these transactions at 31 March 2016 was £4,150,000 (2015: £4,270,000). This amount has been recognised within debtors in the Group Consolidated Balance Sheet. In accordance with applicable accounting standards, the impact of both arrangements on the profit and loss account of South Staffordshire Water PLC and the Group have been netted off with no overall impact.

31 Explanation of transition to FRS 102

This is the first year that the Group has presented its financial statements under Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council. The last financial statements under previous UK GAAP were for the year ended 31 March 2015 and the date of transition to FRS 102 was therefore 1 April 2014. As a consequence of adopting FRS 102, a number of accounting policies have changed to comply with that standard. The following disclosures are required in the first year of adoption.

Reconciliation of Equity Group Company At 1 April 2014 At 31 March 2015 At 1 April 2014 At 31 March 2015

£’000 £’000 £’000 £’000

Equity reported under previous UK GAAP 57,142 53,145 53,021 51,037

Adjustments to equity on transition to FRS 102i - Accounting for infrastructure assets 14,436 11,767 — —ii - Amortisation of infrastructure contributions 13,521 14,712 — —iii - Removal of deferred tax discount (8,823) (6,642) — —iv - Recognition of deferred tax on infrastructure assets (7,291) (6,510) — —v - Acquisition accounting adjustments — — — —vi - Holiday pay accrual (307) (307) — —vii - Accounting for defined benefit pension schemes 5,732 8,935 14,750 15,338

Equity reported under FRS 102 74,410 75,100 67,771 66,375

Reconciliation of Profit and Loss Group Company Year ended 31 March Year ended 31 March 2015 2015

£’000 £’000

Profit on ordinary activities after tax reported under previous UK GAAP 27,705 26,460

Adjustments to equity on transition to FRS 102i - Accounting for infrastructure assets (2,671) —ii - Amortisation of infrastructure contributions 1,192 —iii - Removal of deferred tax discount 2,181 —iv - Recognition of deferred tax on infrastructure assets 781 —v - Acquisition accounting adjustments — —vi - Holiday pay accrual — —vii - Accounting for defined benefit pension schemes (1,174) 2,412

Profit on ordinary activities after tax reported under FRS 102 28,014 28,872

All figures provided above are after accounting for the relevant tax impact of the adjustments required.

Notes to the Financial Statements

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Annual Report 2016

Notes to the reconciliation of Equity and Profit and Loss on transition to FRS 102 i) Infrastructure assets were previously accounted for in accordance with the infrastructure renewals accounting provisions of FRS 15. The estimated

annual expenditure required to maintain the assets’ operating capability, the infrastructure renewals charge, was charged as depreciation with infrastructure renewals expenditure capitalised within tangible fixed assets. FRS 102 does not permit infrastructure renewals accounting. Under FRS 102, depreciation is now charged on the cost of these infrastructure assets (including the cost of new assets since transition and deemed cost of existing assets – see below) over the useful life of the assets and infrastructure renewals expenditure is charged to the profit and loss account as it arises and not through the previous annual infrastructure renewals charge.

The Group has elected to measure infrastructure assets at fair value on the date of transition and to apply that fair value as deemed cost which will be depreciated in subsequent periods over the infrastructure’s useful economic life. In line with industry practice, the fair value of the assets has been calculated by reference to South Staffordshire Water’s Regulatory Asset Value (further details are provided in note 1). The impact of the adjustment to equity at 1 April 2014 represents the difference between the previous book value of infrastructure assets and their fair value after accounting for the corresponding deferred tax liability.

ii) Infrastructure contributions receivable from third parties were previously netted against the book value of the infrastructure assets and renewals

accounting applied as described above, with no corresponding amortisation credit recorded in the profit and loss account for these contributions. In accordance with FRS 102 the contributions are now classified as deferred income in the balance sheet and amortised to the profit and loss account over the expected life of the relevant assets. On transition to FRS 102, there is a balance sheet reclassification between tangible fixed assets and deferred income with no impact on equity. There is also an adjustment to recognise cumulative amortisation from the date of receipt of the contributions to the date of transition with a related increase to deferred tax liabilities.

iii) In accordance with the relevant accounting standard (FRS 19), the Group previously elected to apply discounting to its net deferred tax liability over a

period of up to 80 years. FRS 102 does not permit discounting of deferred tax and so on transition the deferred tax liability is increased by the removal of the discount. Previously, the annual movement in the discount was a profit and loss account item each year. With no discount recognised in the balance sheet under FRS 102, this profit and loss account entry is no longer recognised.

iv) Deferred tax was not previously recognised in relation to certain infrastructure assets to which renewals accounting applied. Under FRS 102 a timing

difference and therefore a deferred tax liability is now recognised for these assets, based on the difference between the restated book value of the relevant assets and the amounts for which future tax relief is available.

v) Deferred tax was not previously recognised in relation to certain fixed assets acquired via a business combination where the assets did not qualify for tax relief at the date of the transaction. A deferred tax balance is required to be recognised under FRS 102. Therefore, on transition to FRS 102 an additional deferred tax liability is recognised in respect of the book value of these assets. A corresponding additional fair value adjustment has also been recognised for certain land and buildings, with the result that there is no overall increase or reduction in net assets and equity.

vi) FRS 102 requires short term employee benefits to be charged to the profit and loss account as the employee services are received. This has resulted in the Group recognising a liability for unused but accrued holiday pay on transition to FRS 102. Previously holiday pay accruals were not recognised as a balance sheet liability and holiday pay was charged to the profit and loss account as it was paid.

vii) The previous accounting standard (FRS 17) only permitted the Group to recognise a surplus on its defined benefit pension schemes to the extent that

it was able to recover the surplus through reduced future contributions or through refunds to the Group. Under FRS 17 this resulted in a restriction being applied to the surplus recognised in the accounts. No such restriction applies under FRS 102 and therefore the pension scheme surplus recognised on transition in the Group is higher than previously reported as is the related deferred tax liability. Also, under FRS 17, the pension surplus was recognised as a consolidation adjustment, but under FRS 102 the pension surplus must be recognised in a participating employer. As detailed in note 1, the South Staffordshire section of the Water Companies Pension Scheme is recognised in the accounts of South Staffordshire Plc as required by FRS 102.

32 Ultimate Controlling Party

The Company’s immediate parent undertaking is Aquainvest Acquisitions Limited. The ultimate controlling party in the United Kingdom is Hydriades IV Limited which is the largest and smallest set of accounts within which the Group is consolidated. The ultimate controlling party is KKR Infrastructure Limited.

Notes to the Financial Statements

80

Annual Report 2016

South Staffs Water

South Staffordshire PlcGroup Chief Executive: Adrian Page

Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 01922 638282

www.south-staffordshire.com

South Staffordshire Water PLCManaging Director: Phil Newland

South Staffs WaterGreen Lane, Walsall, West Midlands, WS2 7PDTelephone: 01922 638282

www.south-staffs-water.co.uk

Cambridge Water90, Fulbourn Road, Cambridge, CB1 9JNTelephone: 01223 706050

www.cambridge-water.co.uk

Contact Details

81

Annual Report 2016

SSI Services (UK) LtdManaging Director: Dave Taylor

Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 01922 638282

www.ssi-services.co.uk

Integrated Water Services LtdMechanical & Electrical ServicesManaging Director: Steve Suffolk

Water Hygiene Managing Director: Chris Brown

Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 01543 445700

www.integrated-water.co.uk

SSI Services

W a t e r N e t w o r k E f f i c i e n c y

Hydrosave UK LtdManaging Director: Simon Dray

Swallow Court, Kettering Venture Park, Kettering, NN15 6XXTelephone: 01536 515110

www.hydrosave.co.uk

OnSite Central LtdManaging Director: Alan Plante

89 Blackpole West, Blackpole, Worcester, WR3 8TJTelephone: 01905 340054

www.onsite.co.uk

Annual Report 2016

82

Echo Managed Services LtdManaging Director: Nigel Baker

Green Lane, Walsall, West Midlands, WS2 7PDTelephone: 0845 12 12 122

www.echo-ms.com

Inter-Credit International LtdManaging Director: Nigel Baker

Innova House, Innova Science Park, 4 Kinetic Crescent, Enfield, Middlesex, EN3 7XHTelephone: 01992 807 200

www.intercred.com

Echo

Grosvenor Services Group LtdManaging Director: Lloyd Birkhead

4 Rotherside Court, Rotherside Road, Eckington Business Park, Sheffield, S21 4HLTelephone: 0333 1231471

www.grosvenorservices.co.uk

Annual Report 2016

Annual Report 2016

83

Office Watercoolers LtdManaging Director: Ken Skelton

Waterloo House, 112-116 Anglesey CourtTowers Business Park, Rugeley, Staffordshire, WS15 1ULTelephone: 0845 60 90 902

www.office-coolers.com

Aqua Direct LtdGeneral Manager: Helene James

Elmhurst Spring, Lichfield Road,Elmhurst, Lichfield,Staffordshire, WS13 8HQTelephone: 01543 493 613

www.aqua-direct.co.uk

Office Watercoolers

Aqua Direct

Annual Report 2016

South Staffordshire PlcGreen LaneWalsallWS2 7PD

Tel: +44 (0)1922 638282

www.south-staffordshire.com