Kelda Holdings Limited Annual Report and Financial Statements for the Year Ended 31 March 2018
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Kelda Holdings Limited Annual report and financial statements Registered number 99329 For the year ended 31 March 2018 Kelda Holdings Limited Annual report and financial statements for the year ended 31 March 2018 Contents Strategic Report 1 Corporate Governance Report for the year ended 31 March 2018 67 Directors' Report for the year ended 31 March 2018 75 Statement of Directors' Responsibilities for the year ended 31 March 2018 81 Independent Auditor’s Report to the Members of Kelda Holdings Limited 82 Financial Statements 84 Consolidated statement of profit or loss 84 Consolidated statement of comprehensive income 85 Consolidated statement of financial position 86 Consolidated statement of changes in equity 88 Consolidated statement of cash flows 89 Notes to the consolidated financial statements 90 Company balance sheet 161 Company statement of changes in equity 162 Notes to the company financial statements 163 Kelda Holdings Limited Strategic Report for the year ended 31 March 2018 Strategic Report Our Business Kelda Holdings Limited (the company) and its subsidiaries, joint ventures and associates (the group) is made up of several businesses: Yorkshire Water Services Limited (Yorkshire Water) Yorkshire Water is the principal UK subsidiary of the Group, providing water and waste water services to more than five million people and 140,000 businesses. Every day, Yorkshire Water supplies around 1.3 billion litres of drinking water to homes and businesses in Yorkshire. Through the efficient operation of its extensive wastewater network and treatment facilities, it also ensures that the region’s domestic and industrial waste is returned safely to the environment. Yorkshire Water results are largely presented as the ‘UK Regulated Water Services’ segment. Business strategy: Yorkshire Water’s vision is ‘Taking responsibility for the water environment for good’. There are seven Customer Outcomes that shape everything the business does: • We provide you with the level of customer service you expect and value • We provide you with water that is clean and safe to drink • We make sure that you always have enough water • We take care of your waste water and protect you and the environment from sewer flooding • We protect and improve the water environment • We understand our impact on the wider environment and act responsibly • We keep your bills as low as possible Kelda Water Services Limited (KWS) Following a strategic decision by the Company's parent company to seek to dispose of the non- regulated businesses owned by the Company, the sale of eight of the KWS businesses was completed in the reporting period. The respective sale completion dates were; • Kelda Water Services (Alpha) Limited and Dalriada Water Limited, 20 November 2017; • Kelda Organic Energy Limited and Kelda Organic Energy (Cardiff) Limited, 19 December 2017; • Alauna Renewable Energy Limited and Kelda Organic Energy (Edinburgh) Limited, 16 January 2018; and • Kelda Water Services (Defence) Limited and Kelda Water Service (Estates) Limited, 15 March 2018. The remaining KWS subsidiaries continue to be actively marketed, and therefore are presented as held for sale, consistent with the prior period. Loop Customer Management Limited (Loop) Loop specialises in cost effective customer relationship management. Loop’s main contract is to provide customer service support to Yorkshire Water. Business strategy: Focus on the key competency of providing customer service solutions to water and similar industries. 1 Kelda Holdings Limited Strategic Report for the year ended 31 March 2018 Keyland Developments Limited (Keyland) Keyland adds value to the Group’s surplus property assets, usually by obtaining planning permission for the most beneficial use and selling into the market or undertaking development in partnership with others. The results of Keyland include the Group’s share of its associates and joint ventures. Business strategy: To add value to land with development potential and to maximise proceeds from the sale of that land. Three Sixty Water Limited (TSW) and its subsidiaries (collectively TSWG) TSWG specialises in services to the Non-Household Retail (NHHR) sector either by directly providing NHHR water and wastewater services or providing support services to entities which in turn NHHR water and wastewater services. Business strategy: Achieve a withdrawal from the NHHR market, either as direct provider or as a support service provider. As part of the Group’s strategy to focus on wholesale and household retail activities the Group is working to withdraw from the NHHR market. As we are actively marketing the Three Sixty companies for sale, Three Sixty Water, its subsidiaries, and the NHHR element of Yorkshire Water Services Limited, are presented as held for sale in the Group accounts as at 31 March 2018. Kelda Transport Management Kelda Transport Management Limited was incorporated on 18 November 2016 and has been operational since March 2017. The principal activity of the Company is to comply with the Goods Vehicles (licencing of operators) Act 1995, to demonstrate continuous and effective management of two operating licences (Yorkshire and North-West England) for Large Goods Vehicles (LGV) allowing Yorkshire Water Services Limited ("YWS") to operate LGV whilst promoting operating efficiencies. As per the requirement of the company's operating licence, all legal and statutory documentation have transferred from YWS. The Company can demonstrate independence of YWS. Three appointed transport managers are in place with two appointed board directors supported by a company secretary. 2 Kelda Holdings Limited Strategic Report for the year ended 31 March 2018 Business Strategy To achieve the vision, the group has developed a plan, named Blueprint. Blueprint is something everyone can contribute towards to make a difference. Our strategic objectives take the form of seven Customer Outcomes, as follows: • We provide you with the level of customer service you expect and value • We provide you with water that is clean and safe to drink • We make sure that you always have enough water • We take care of your waste water and protect you and the environment from sewer flooding • We protect and improve the water environment • We understand our impact on the wider environment and act responsibly • We keep your bills as low as possible The above Customer Outcomes apply to all businesses within the group. Yorkshire Water Services Limited is principal subsidiary of the group’s operation. Over the following pages we provide an overview of our performance by examining progress towards each of our Customer Outcomes, alongside other important measures. Yorkshire Water Business Strategy As a water and waste water company we provide some of society’s most essential services and we are a custodian of the natural environment and critical infrastructure. Our vision is “taking responsibility for the water environment for good”, which captures our ambition to go beyond regulatory requirements and our commitment to long-term sustainability. The essence of our vision is doing what is right for customers, colleagues, partners, the environment and investors, both in the short and long-term. This holistic and integrated approach is critical to the resilience of our essential water and waste water services, and of our business. Central to our strategy is the delivery of our customers’ priorities, defined in seven Customer Outcomes and 26 Performance Commitments, summarised in the diagram on the following page. These were shaped and agreed through engagement with over 30,000 of our customers, and with our stakeholders and regulators. The Performance Commitments set the levels of service we are working to achieve up to 2020, across a range of activities which customers and regulators confirm are a priority, such as further reducing pollution incidents and leakage. The regulatory regime in which we operate includes financial and reputational outcome delivery incentives (ODIs) if we under or over perform against some of the Performance Commitments. Where financial incentives have been agreed, they become applicable only when we reach defined levels of service either side of the Performance Commitment. You can find more detail about the Customer Outcomes, Performance Commitments and ODIs in our Annual Performance Report (APR) at: www.yorkshirewater.com/ourperformance. 3 Kelda Holdings Limited Strategic Report for the year ended 31 March 2018 Our Customer Outcomes and Performance Commitments Our new long-term strategy We have recently consulted with customers and stakeholders over our new long-term strategy: #notjustwater. We have, so far, talked to over 26,000 customers and stakeholders to ensure that our plans are closely aligned to their long-term aspirations for Yorkshire to help develop this new approach. We’ve set out to find out more about our impact on Yorkshire and its people, and to better understand the diverse customer base we have and the part that water plays in their lives. We’ve also looked carefully at wider trends such as the impact of the growing population and changes to the climate. Our long-term strategy sets the context for our detailed business plan for the next five-year investment cycle from 2020 to 2025, known as Asset Management Period 7 (AMP7). At the time of this publication in July 2018 we are currently finalising our AMP7 business plan for publication in September 2018. Our new strategy includes Five Big Goals that will shape everything we do in the future. To measure our