Annual Report and Accounts 2015/16

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Annual Report and Accounts 2015/16 SW AR cover 2016_AW final NEW no guide 9/6/16 13:45 Page 1 For more information on Scottish Water and our services visit Annual Report and Accounts Scottish Water www.scottishwater.co.uk or contact our Customer Helpline on 0800 0778778*.Alternative formats of this document can be made available free of charge. For information on Braille, large print, audio and a variety of languages, please call our Customer Helpline. Annual Report * We record all calls for quality and training purposes. and Accounts 2015/16 2015/16 Putting customers first Working for the nation, every day of the year Held in trust Building resilient services for the future Our vital role Scottish Water provides vital water and waste water services, essential to daily life, to 2.49 million households and 152,000 business premises across Scotland. Every day we provide 1.37 billion litres of clear, fresh drinking Our average household charge remains among the lowest water and take away 921 million litres of waste water, which in Great Britain – £38 lower per year than the average we treat before returning to the environment. household charge in England and Wales. The quality of drinking water provided to customers has In 2015/16, we commenced a 6 year programme which reached an all-time high and our investment helps to will see £3.5 billion invested in maintenance and further support jobs and the economy of Scotland, while protecting improvements to drinking water quality, protecting the and enhancing the environment. environment and supporting the Scottish economy. Customer charges go towards maintaining and improving: 30,062 miles of water pipes 244 water treatment works 31,621 miles of sewer pipes 1,851 waste water treatment works Contents Overview Our vital role People 33 2015/16 Highlights 1 Innovation 37 Chair’s statement 2 Looking ahead – Our plan for 2015 to 2021 39 Our strategy 3 Our vision 4 Governance Board members 42 Strategic report Corporate governance 44 Chief Executive’s statement 6 Audit committee report 48 Our business model 7 Remuneration committee 52 Our approach to risk management 9 Members’ remuneration report 53 principal risks and uncertainties Members’ report 63 Scottish Water group 12 principal risks and uncertainties Financials Delivering ministerial objectives 2015–21 15 Independent auditors’ report 68 Performance – Household charges 16 Consolidated income statement 74 Performance – Customer service 17 Consolidated statement of comprehensive income 74 Performance – Investment overview 18 Consolidated statement of changes in equity 75 Performance – Financial summary – group 22 Company statement of changes in equity 75 Performance – Scottish Water regulated services 24 Balance sheets 76 www.freightdesign.co.uk Performance – Business customers 26 Statements of cash flow 77 Performance – Non-regulated businesses 28 Notes to the financial statements 78 Printed onto Cocoon 50 which contains 50% recycled waste and 50% virgin fibre. Performance – Environment 29 Direction by the Scottish Ministers 109 Designed by This paper is ISO14001 and FSC certified. Scottish Water Annual Report and Accounts 2015/2016 1 2015/16 Overview highlights Strategic report Strategic Highest ever Best ever customer drinking water satisfaction Institute of Customer Service 99.93% of all tests meet results show satisfaction stringent quality standards Governance reaches new high of 78.6 points Great value for Top employer customers accolade Financials Average household charge Scottish Water named remains below average in Scotland’s Best Large England and Wales Employer Major investment Health programme and safety kicks off excellence £3.5 billion to deliver improved Winner of prestigious UK services, resilience and Water Industry Sector Award environmental improvements for Health and Safety 2016 2 Scottish Water Annual Report and Accounts 2015/2016 Chair’s statement Susan Rice, Chair I’m delighted to report that Scottish Water overall has had another good year and laid the foundations for a strong 2015–21 regulatory period. We are a public utility. But far from taking our position for During the year, a formal review of performance was carried granted, we believe this unique status makes it even more out by the Board and Committees. The Board, meanwhile, important that we do all we can to earn trust. Which is why regularly reviews governance, risk and compliance. These our vision is to be trusted to care for the water on which reviews have confirmed that Scottish Water continues to be Scotland depends. well-focused on achieving our corporate objectives. That’s also why the Board’s priority is to ensure that Scottish Within the Scottish Water group, we are seeing the impact Water consistently focuses on delivering high-quality of increased competition in the retail market for water and services. Our customers expect us to provide excellent waste water services to business premises. Scotland moved service, ever higher levels of water quality, and strong to open up this market long before the rest of the UK, and environmental performance – all for an affordable price. Scottish Water, as wholesale supplier in Scotland, has supported all Licensed Providers since the introduction I came onto the Board last summer after Ronnie Mercer’s of competition in 2008. successful term as Chair. From the very start, I was genuinely impressed by the commitment and hard work of Scottish As anticipated, Business Stream, our licensed retail Water’s people, supply chain and business partners, subsidiary, has faced significantly increased competitive and their shared focus on delivering ever-improving activity and, with that, the loss of the water and waste water customer service. services framework contract for the public sector. Business Stream is therefore seeking to strengthen customer ties by I’d like to thank all our people, the Executive Leadership offering innovation, tailored solutions and value for money Team and the Board for their support and their contribution. and reshaping its strategy in anticipation of full opening of I’d also like to pay tribute to Donald Emslie, who recently the English retail market in 2017 for business customers, stood down after 8 years of valued service as a Board when there will be fresh opportunities to pursue. member and Chair of the Remuneration Committee. It’s been a busy year as well for Scottish Water Horizons, Scottish Water’s principal activity is the supply of water and one of our non-regulated subsidiaries. Horizons combines waste water services. In the last year, we started the 2015–21 innovative approaches with Scottish Water assets to regulatory period which has been shaped to meet encourage growth and use of sustainable technologies. Ministerial objectives, support Scotland’s economy and Horizons has continued to support the developing low communities, protect and enhance the environment, carbon economy with initiatives such as the UK’s first heat and ensure that all customers can enjoy the benefits from waste water scheme in Galashiels, and a growing of continuous, high-quality drinking water. renewables portfolio. I’m pleased to report that the quality of drinking water our Scottish Water International, our other non-regulated customers receive has reached a new high, at the same time subsidiary, meanwhile, continues to use skills and expertise as customer satisfaction has reached record levels. from within the business to offer specialist consultancy In 2015/16, we also commenced a 6 year, £3.5 billion services to international clients. In the last year, International investment programme which will see further improvements has participated in assignments as far afield as Canada to water and waste water infrastructure around Scotland, and Australia. improving drinking water quality, enhancing the Wherever I look in the company, I’ve been greatly impressed environment and supporting jobs in the Scottish economy. by the way customer benefit defines and drives the For example, we announced specific plans to build business. increased resilience into our water supply network so that With such a firm focus on providing all our customers our customers receive an even more reliable service into with a consistently high – and improving – standard of water the future. and waste water services, coupled with great value for Meanwhile, our average household charge continues to money, I’m confident that we will continue to demonstrate be lower than the average household charge in England that we are indeed ‘Trusted to care for the water on which and Wales. Scotland depends’. Scottish Water Annual Report and Accounts 2015/2016 3 Our strategy Overview Scottish Water delivers clear and fresh drinking water, treats waste water report Strategic and helps protect the environment across Scotland – every day of the year. We do this in an affordable and sustainable way. • We work to protect and enhance the environment of Scotland, and to achieve reductions in pollution • We aim to put customers at the heart of our plans. and flooding. Listening to customers’ views and building these into our planning is part of our ongoing customer • We support Scotland’s economy and communities, engagement. This allows us to ensure our customers’ delivering improved water and waste water needs are at the heart of our service delivery. infrastructure while supporting employment and meeting new demand for our services. • W e aim to improve our services for customers. We know from our research that customers do not wish to This annual report highlights our progress during 2015/16. Governance see us compromise existing service levels. Our Information on our plans for service improvement from strategies are geared to help us achieve these aims 2015–21 is included on page 39. and further improve our performance and efficiency. • We aim to provide continuous clear and fresh drinking water, ensuring all our customers – regardless of where they live – can turn on their taps to receive a safe and reliable supply. Financials 4 Scottish Water Annual Report and Accounts 2015/2016 Our vision Scottish Water’s vision is to be trusted to care for the water on which Scotland depends.
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