Annual Report 2016 | Page 36

Annual Report 2016
“ The Group once again demonstrated its financial stability .”
Annual Report 2016

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 increased by 7.2 % to

£ 47.5m

“ The Group once again demonstrated its financial stability .”
Overview The 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 profit As 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 interdivisional 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
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