Annual Report 2016
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 management
The 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 nonregulated 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.
Analysis of average
number of Group
employees
South Staffs Water 430
Non-regulated 2,065
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:
• Health and Safety - the risks to
the health, safety and wellbeing
of the Group’s employees,
contractors and members of the
public that may be impacted by
the Group’s operations
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