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Sydney Water Annual Report 2009
At a glance: Financial summary
 
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In this section:

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  • Reduced revenue against budget from continuing water restrictions and demand management plus removal of regulated developer charges on water, wastewater and stormwater.
  • Operating expenses below budget due to productivity gains and operating efficiencies.
  • Record high capital expenditure driven by desalination plant construction and increase in recycling projects.
  • Increasing debt, but gearing will stabilise at the level needed for normal growth and asset replacement from 2009–10.

Total income 2008-09 ($1,958 million)

Total income increased by 11% over 2007–08. Regulated price increases partly offset lower income from water sales and the removal of regulated developer charges.

Total operating expenditure 2008-09 ($1,027 million)

Total operating expenditure increased by five per cent over 2007–08, driven mostly by higher labour and bulk water costs.

Total capital expenditure 2008-09 ($1,731million)

Construction of the desalination plant and pipeline was almost half of the 2008–09 capital expenditure. Expenditure also continued in asset renewals and servicing growth.

Profit before tax

Despite continuing operating efficiencies and higher income from regulated price increases, profit before tax decreased by $35 million. This was mainly driven by $152 million in asset impairments, reflecting adoption of a new methodology to value system assets.

Capital expenditure

Record high capital expenditure was driven by building of desalination plant and pipeline and increased recycling.

Debt

Gearing (debt to debt plus equity) continues to rise, as new borrowing occurs to cover the large increase in capital expenditure including the desalination project.

Summary profit and loss

 

2008–09
$M

2007–08
$M

2006–07
$M

2005–06
$M

2004–05
$M

Total revenue

1,958

1,766

1,693

1,541

1,422

Operating expenses

1,027

975

969

887

797

Earnings before interest, tax, depreciation and amortisation (EBITDA)

931

791

724

654

624

Depreciation, amortisation and impairments

343

193

184

225

201

Interest expense

235

210

180

172

153

Profit before tax

353

388

360

257

270

Taxation expense

176

109

103

135

55

Profit after tax

178

279

257

122

215

In 2008–09, total income was $1,958 million, an increase of $192 million on the previous year. This increase was largely due to regulated price increases.

Total core operating expenses for the year were $1,027 million, an increase of five per cent over 2007–08. The increase includes a 10% increase in costs of bulk water purchases, increased maintenance and chemical expenses and higher general labour costs from award wage increases.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was $931 million, an increase of 17% over the previous year.

Depreciation and amortisation expenses of $343 million included an asset impairment cost of $152 million due to changes in the estimates of future revenues used under Australian Accounting Standards to test the carrying value of assets.

After allowing for interest, depreciation and amortisation expenses, the profit before tax was $353 million. Taxation expense was $176 million and profit after tax was $178 million.

Summary balance sheet

 

2008–09
$M

2007–08
$M

2006–07
$M

2005–06
$M

2004–05
$M

Property, plant and equipment

12,315

12,355

11,909

10,528

11,328

Other assets

398

318

387

291

246

Total assets

12,713

12,673

12,296

10,819

11,574

Total debt

5,558

4,218

3,276

2,875

2,639

Other liabilities

1,774

1,714

1,780

1,460

1,707

Total liabilities

7,332

5,932

5,056

4,335

4,346

Net assets/
shareholder funds

5,381

6,741

7,240

6,484

7,228

Return on shareholder funds (%)

3.3

4.1

3.6

1.9

3.0

Capital expenditure

1,731

1,311

618

500

405

Total assets at the end of 2008–09 were $12,713 million, an increase of $40 million over the year. Assets were revalued this year due to changes to the revenue estimates used under Australian Accounting Standards to test their carrying value. This resulted in an asset impairment of $1.7 billion at year end. Total liabilities increased by $1,400 million, mainly as a result of new borrowings of $1,331 million to fund capital expenditure and an increase in liabilities under defined benefit superannuation schemes of $327 million. Net assets declined by $1,360 million during the year to $5,381 million.

The after-tax profit represented a 3.3% return on equity, which was lower than last year’s result, reflecting the large asset impairment in 2008–09.

Sydney Water’s capital expenditure was $1,731 million in 2008–09 and net new borrowings to fund this were $1,331 million.

Total debt outstanding at the end of the year increased to $5,558 million.

Summary cash flow

 

2008–09
$M

2007–08
$M

2006–07
$M

2005–06
$M

2004–05
$M

Sources

 

 

 

 

 

Receipts from operations

1,891

1,618

1,534

1,392

1,303

Grants, interest, CSO and other operational receipts

138

119

106

98

87

Borrowings

1,331

1,100

420

254

173

Other

26

270

121

68

80

Total sources

3,386

3,107

2,180

1,812

1,643

 

 

 

 

 

 

Uses

 

 

 

 

 

Operational expenses

1,244

1,172

1,052

924

905

Capital expenditure

1,475

1,182

568

433

379

Dividends paid

190

140

193

120

115

Income tax paid

71

105

63

41

40

Interest paid

266

245

206

196

176

Other

162

257

95

87

46

Total uses

3,408

3,101

2,176

1,801

1,661

 

 

 

 

 

 

Increase (Decrease) in cash balances

-22

6

5

11

-18

Cash receipts from operations in 2008–09 were $1,891 million, an increase of 17% over the previous year. Borrowings also increased by $1,339 million in response to the very large capital expenditure program.

Cash used for operational purposes increased by six per cent, compared to 2007–08. A total of $1,566 million was used to finance capital expenditure, the largest capital outlay in Sydney Water’s history.

Overall, Sydney Water achieved a solid result during 2008–09, despite lower than budgeted income from water sales due to continuing water restrictions and the removal of charges on property developers for new water, wastewater and stormwater assets. On the cost side, there were increases in bulk water charges, labour costs and financing costs. While the financial returns do not yet meet normal commercial standards, results continue to improve once one-off asset adjustments are excluded.