Operational performance

Measuring performance is critical to NWL and it uses a range of KPIs throughout the business to monitor how it is doing. The financial KPIs are shown here and the operational KPIs are detailed below. These indicators are reviewed by the management team each month and their definition, purpose and source is shown here.

The level of customers being satisfied or very satisfied remains high

Customer satisfaction

NWL measures its performance for domestic customers in two key ways, customer research and performance against standards.

Customer research is carried out each quarter in the regions served and the table below shows the key results for overall satisfaction with service and value for money.

Although the performance is slightly below the target, the level of customers being satisfied or very satisfied remains high. This is backed up by the survey carried out by CCWater for the fourth consecutive year, which shows similar high levels of satisfaction, and also concluded, once again, that our customers are the most satisfied in the country in terms of water and sewerage services and also fairness of charges.

The performance against standards of service is shown below:

Domestic customers

For 2010/11, Ofwat has introduced the Service Incentive Mechanism (SIM) and, amongst other things, this will monitor the quality of our service rather than the quantitative results.

This year, improvements to customer service include a reduction in written complaint numbers by 22%, from 13,050 to 10,185. Our complaint handling and billing query service has been subject to audit by CCWater and they have commented favourably on how we performed; 96% of the 50 cases reviewed in both areas being classed as ‘good’.

Debt recovery remains an important area, especially in the current economic climate, where, despite having some of the lowest charges in England and Wales, affordability is becoming an increasing concern for some customers. We continue to be mindful of their circumstances ensuring our recovery techniques are appropriate and effective. Customers who deliberately avoid paying charges are actively pursued and we continue to work with Ofwat and Defra to seek changes to legislation to assist the industry to impose and collect charges.

Business customers

The economic situation has had a significant impact on some business sectors which are important in our operating regions and NWL has been working closely with major customers in those sectors to mitigate the impact where possible. The closures at Corus and Artenius in the Tees Valley have been well publicised. Details of a contract with the new owner of the Artenius site and of a contract extension by one Corus business are given here. Furthermore, with the regional economic agencies, NWL has secured existing and encouraged new business.

Leisure customers

NWL is one of the founding members of Kielder Water & Forest Park Development Trust, which has been accepted by the Charity Commission for registration as a charity. This will replace the existing Kielder Partnership and will seek to promote sustainable development, recreation, access and leisure, education, infrastructure and a range of other charitable purposes at Kielder and in the surrounding area.

Kielder Water & Forest Park’s Lakeside Way

The development of Kielder Water & Forest Park is supported by the Northumberland Strategic Partnership, Government Office for the North East and One North East. This year has seen the completion of a 26 mile lakeside multi-user track and water access points as well as the opening of an award winning observatory and a range of mountain biking tracks. The website at www.visitkielder.com provides further details of all facilities.

NWL continues to develop its leisure facilities at all strategic sites, investing in fishing facilities, holiday accommodation and supporting ‘Access for All’.

Water

The quality of water is critical to our customers and samples are taken on a daily basis for analysis under regulations monitored by the DWI. The quality in all areas served remained high.

The DWI will investigate any incidents which could compromise quality and the number of such incidents fell during the year. NWL has appointed catchment management officers to work with farmers and regulators in Essex to help reduce the level of pesticides in the environment and their impact on raw water quality. This work is progressing well and has produced encouraging results.

A long running formal programme, which began just after privatisation, to rehabilitate older parts of the water distribution network has come to an end, contributing to improved water quality results over recent years. Work using new cleaning techniques to refurbish more than 150 kilometres of the large diameter pipe network is well advanced. The network supplies drinking water to over half a million customers in south east Northumberland and parts of Tyneside. More than half of the programme has been completed successfully and work will be completed in 2011, significantly reducing customer complaints of discoloured water.

Water resources

Work started in January 2010 on increasing the capacity of Abberton Reservoir near Colchester by 58%. The one remaining part of the overall Abberton Scheme that requires permissions is the variation of abstraction licences at Denver and Blackdyke in Norfolk. We are working closely with the EA on progressing this. Once this scheme is operating in 2014, we do not expect to have to develop further major resources in Essex for the next 25 years.

We believe it is important to manage the demand for water so that it does not exceed levels that can be supplied in a sustainable way. Metering has an important role to play in this regard. For several years we have been installing water meters upon change of occupier in properties in the Essex area. This is in addition to the optional metering scheme available to all customers. Around 45% of domestic households in Essex and 58% in Suffolk are now metered. In the north east, where supplies are more plentiful, 22% of households are metered.

In addition, Essex & Suffolk Water have run an award winning water efficiency campaign which, together with the good response from customers, has helped control demand for water. New water efficiency targets have been introduced in 2010/11 to reduce per capita consumption across the company and a number of initiatives have been piloted during the year. A new campaign will also be launched across the company to promote water efficiency ranging from water saving kits to activity in schools and development of our website.

Our assets proved very resilient during the harshest winter for 30 years and we were able to maintain supplies to customers during the period, thanks to the efforts of our employees. The severe freeze, followed by the thaw, did result in a significant increase in burst pipes and leakage which meant we, along with other companies, did not meet our annual targets this year although our three year rolling targets have again been met.

Work begins at Abberton Reservoir

Environment

NWL’s exceptional performance for sewage treatment works continued with all consented works remaining compliant over the year. Two major schemes, to further improve performance at Sunderland and Darlington sewage treatment works, were completed.

The advanced anaerobic digestion plant at Bran Sands is now fully operational and generating the expected volumes of biogas and electricity. The re-organisation, to operate the plant at much lower manning levels than previously, has been successfully implemented. Plans to provide a similar plant on Tyneside to process the remainder of the company’s sludge, and also replace older technology, are progressing well.

All 34 bathing waters in the north east again passed the required Mandatory Standard and 30 of these met the more demanding Guideline Standard.

Intense summer storms again caused extensive property flooding. Incidents of internal property flooding were the highest ever reported, many due to a single storm over two days in July which affected the whole north east region. Capital schemes to remove 277 properties from flooding registers were successfully completed. Planning to identify schemes for coming years forms a key part of our investment programme and is well advanced, with a further 250 properties to be addressed in 2010/11. The five year programme to improve the visual appearance of discharges from nearly 500 combined sewer overflows was successfully completed, with engineering works taking place at 106 locations in the year.

Climate change

The water industry is one of the largest users of energy in the UK and we aim to play a full part in support of Government’s plans to reduce emissions. We have been working hard over recent years to reduce our carbon footprint while preparing ourselves for the future challenges of a change in climate and the weather events we may face as a consequence. NWL agreed, last year, a plan to reduce emissions by 35% by 2020, when compared with a 2008 baseline. If the emissions associated with electricity production also fall, in line with Government predictions, this should mean that our emissions will be halved by the 2020 milestone date.

Quality

NWL has maintained its certification to the international quality standard ISO 9001:2000 and to the international environmental standard ISO 14001:2004 across all areas of the business, including operational sites and office based teams.

The company also achieved companywide certification to the international occupational health and safety management standard OHSAS 18001 in 2007.

Employees

Throughout the Group we have 3,105 employees, as set out below:

NWG ensures its terms and conditions both attract and retain the best employees in the areas it serves. NWL employee turnover is relatively low at 6.4%, below the UK water industry average of 9.2%.

NWG places great emphasis on health and safety and employees are actively encouraged to be involved in identifying and eliminating hazards in the workplace. This has resulted in a significant reduction in accidents over recent years.

NWL’s current level of sickness absence is 3.18%, which is the lowest ever achieved and well below the norm for the sector.

The active involvement and engagement of everyone across the business is an important part of delivering performance and NWL continues to formally seek the views of employees through an annual employee engagement survey. This year’s survey had the largest response rate ever at 71% and the feedback covered working life, training, communications, managers and the company. All employees were invited to workshops to consider the results and identify areas for improvement in their working practices and environment; the outputs contributed to the development of departmental action plans. Overall, employee satisfaction levels remain very high with the company achieving its Engagement & Satisfaction Index targets this year. In addition, 80% of respondents told us they are proud to work for the company, 82% would recommend working for the company and 77% believe that NWL is a great organisation to work for.

NWL employees also have access to a scheme which provides a wide range of benefits including tax efficient benefits such as childcare vouchers, water services, cars for personal use and discounted store vouchers. Currently 72% of employees participate in the scheme, up from 62% last year.

Training and development

Our people are the key to our business success.NWL continues to implement its Management Development Framework which is structured (see diagram below) to cover the training needs of those who show the potential for management right through to development at director level. As part of this framework we are working in partnership with Newcastle Business School to provide qualifications from a Diploma to a Masters degree in leadership and management. In 2010, we are planning to roll out a new step in our Management Development Framework to some of our operational departments. This development programme for supervisors, team leaders and works managers includes assessment against NQF Levels 2, 3 and 4 management standards, as appropriate, supported by formal development and coaching. Further information on developing our people can be found here.

Sir Derek Wanless presents Sandra Williams with her health and safety award

Health and safety

Our emphasis on the importance of health and safety within NWL has resulted in major improvements to our safety record in recent years. This year we experienced 10 reportable accidents and incidents per 1,000 employees, which is a continual decline over the previous six years.

We have established a medium term plan for taking health and safety forward in the company to 2015. We aim to further reduce the number of accidents by 10% each year and to reinforce the safety culture in the company.

NWL proactively supports and encourages employees to strive for high standards of health and wellbeing by providing a wide range of services, support and resources relating to occupational health, with the Group’s medical advisor providing comprehensive occupational health services, general health promotion and stress management. NWL employees also have on and offsite access to specialist advice and treatment to support recovery from musculoskeletal disorders (MSD). We have reduced sickness absence due to MSD by 22%.

We continue to promote healthy eating, hydration and to discourage smoking in our workforce and offer excellent health screening and medical insurance schemes. Around 2,200 employees have been through our health screening and fitness standards programmes, both of which now include lifestyle advice elements.

Research and development

NWL run a programme of research and development linked to its operations, which includes the development of technical solutions for water and waste water management, collaborative research within the sector and partnerships with academic and research organisations. This has supported the invention, development, trial and/or implementation of:

• a device for reducing flooding and pollution;
• energy efficiency of waste water aeration systems to determine optimum design and best practice cleaning and replacement cycles;
• microbial fuel cells or electrochemical cells, which generate electricity or hydrogen from waste water respectively;
• beneficial re-uses for water treatment sludge;
• reed-bed based solution for thickening iron rich water treatment sludge and aluminium rich sludge;
• de-watering and thickening water treatment works sludge;
• leak detection technology;
• early warning system for leaks and bursts; and
• remote pipeline condition assessment.

During the year, the Group invested £2.1 million (2009: £1.8 million) in research and development.

Water and waste water contracts

Revenue for the Group’s water and waste water contracts was £38.3 million for the year to 31 March 2010 (2009: £39.8 million) and profit on ordinary activities before interest was £10.2 million (2009: £9.1 million). The increase is principally due to decreased power costs and the settlement of outstanding claims offset slightly by a reduction in respect of gas indexation on revenue tariffs at Caledonian Environmental Services. All contracts are performing well and are in line with expectations.

The Group is involved in two projects to deliver long term private finance initiative contracts with Scottish Water for waste water treatment. At Levenmouth, the Group now has a 100% shareholding in both project and operating companies and the benefit of a 40 year contract. Funding was provided through a 37 year fixed interest rate corporate bond with the principal amortising from 2008.

On 12 April 2010, the Group settled the outstanding claim against Caledonian Environmental Services plc with the Design and Construction Consortium, with the costs being capitalised in the year. The Group also, on this date, purchased the remaining 25% minority stake and the outstanding subordinated loan stock in Caledonian Environmental Services for a consideration of £0.4 million.

In Ayrshire, the Group has a 75% shareholding in the project company and a 100% shareholding in the company that operates the three effluent treatment plants that comprise this 30 year contract. Finance was provided through a 27 year loan on a fixed interest basis with the principal amortising from 2003.

In Ireland, the Group is part of a contractual consortium that designed and built a waste water treatment plant for Cork City Council. Under the consortium agreement, the Group has responsibility for a 20 year contract for the operation and maintenance of the plant.

AquaGib Limited, two thirds owned by the Group in a joint venture with the Government of Gibraltar, operates Gibraltar’s dual drinking water and sea water distribution systems under its 30 year contract with the Government of Gibraltar.

Other

Agrer

Revenue for the year to 31 March 2010 was £8.5 million (2009: £7.2 million). During the year, Agrer has signed new contracts with a gross margin of €2.16 million, an increase of around 40% over the previous year.

The most significant new contracts signed during the year include: economic studies and statistical surveys in Algeria (€1.9 million – 18 months); consolidation of conflict affected populations in Congo, Brazzaville (€0.9 million – 24 months); information systems for rural development and country planning in Chad (€2.5 million – 42 months); water management and irrigation component of the agricultural development programme in Burkina Faso (€3.2 million – 60 months) and a new Framework Contract for Lot 1: Rural Development (48 months).

Corporate responsibility

NWL supports the communities we serve in a number of different ways. As well as providing financial support and facilities, we encourage employees to volunteer their time, skills and expertise through our ‘Just an hour’ scheme. These activities generally support projects that make the areas we serve better places in which to live, work or invest. The programme focuses on key themes throughout these communities but, increasingly, we are developing initiatives designed to tackle lasting and sustainable change in specific areas.

In April 2009, NWL received the Queen’s Award for Enterprise in the category of Sustainable Development. Additionally, we were:

• members of the FTSE4GoodIndex;
• one of only seven companies nationally to achieve the new highest platinum plus ranking in the Business in the Community (BITC) Corporate Responsibility Index. The new platinum plus process evaluated the extent to which our business strategy is underpinned by a focus on long term sustainability. This improves on our platinum status in 2008 as one of the top 100 ‘Companies for corporate responsibility’;
• awarded BITC Big Tick award for its impact on society, power in partnership and for being a healthy workplace;
• the employee engagement winner at North East of England Chartered Institute of Personnel Development HR&D 2009 awards;
• the category winner of Culture for Success Large Employer Award for employee development, customer service, business growth and the contribution we have made to the community;
• holders of the Payroll Giving Quality Mark Gold Award;
• Beyond Sport Award finalist – best corporate responsibility in sport; and
• winners of the Waterways Renaissance Awards natural environment category for the Trinity Broads Restoration Project.

Over many years, we have contributed resources with a value equivalent to at least 1% of our annual pre-tax profits (through cash, employee time and expertise, or use of our facilities) to projects which benefit the communities we serve. The Group made charitable donations totalling £156,517.

Community support

Employees and volunteering

'Just an hour' employees at Sunningdale School to give the sensory garden a makeover

Currently 26% of employees participate in the ‘Just an hour’ volunteering scheme and last year gave over 7,890 hours to the community. Over 600 different organisations were given financial and in-kind support during the year.

The 'Care for safety' scheme, which encourages employees to reduce accidents and associated lost time, has triggered payments totalling £49,605 for our nominated charities (Great North Air Ambulance Service, RNLI, Essex Air Ambulance, Myelin Project, Zoe’s Place, Macmillan Cancer Support and St Cuthbert’s Hospice). Since it began almost £310,000 has been raised for charity.

Education

Further to the launch of the ‘Northumbrian Water GLOBE’ programme, which saw us link up with the international environmental education initiative set up by Al Gore in 1996, we donated 85 fully automated weather stations and associated training to schools throughout the northern region, to collect weather data in areas where Meteorological Office coverage is poor. This data is now helping to increase understanding of the impact of climate change and is a valuable curriculum tool.

The ‘Northumbrian Water Schools Awards’, now in their fourth year in the northern region, are designed to recognise and celebrate the achievements being made by our schools. They cover both community and curriculum based projects and honour whole schools, classes and individuals.

In our southern operating area, we support ‘Cash for Schools’ along with the Essex Chronicle. This recognises excellence, with a focus on environmental projects from primary and secondary schools within the newspaper’s distribution area.

Work with Colchester Borough Council, Essex County Council, Essex University and the Essex Wildlife Trust is ongoing to use Abberton Reservoir and the enlargement project to further education. A study will look at the need for further education facilities in the vicinity of Abberton Reservoir. Depending on the study’s findings, NWL will provide accommodation for use as an education centre.

A wide range of educational materials are available on our websites for children and teachers.

Partnerships

Water for health

NWL continues to promote the health benefits of drinking tap water. To date, over £306,000 has been provided for mains-fed water coolers in schools and around 675 have been supplied in nearly 350 schools. We also continue to promote bottle-free water coolers as a sustainable alternative to bottle-fed coolers.

Environmental

Key partnerships have been developed with NWL to help the conservation of biodiversity on our sites. Our contribution includes funding project officers and current partnerships include:

— Northumberland Wildlife Trust (Kielder and Bakethin);

— Durham Wildlife Trust;

— Essex Wildlife Trust (Hanningfield);

— Broads Authority (Lound and Trinity Broads); and

— Davy Down Trust (North Stifford, Essex).

Sustainable communities

NWL has developed some longer term projects to help build sustainable communities in the areas it serves. These projects are developed with partners to help bring about lasting change and some examples are given below.

Healthworks

NWL granted a 99 year lease to County Durham Primary Care Trust (PCT) on a redundant building at our Easington waterworks and worked in partnership with the PCT, the District of Easington Council, the Neighbourhood Management Pathfinder and other stakeholders to develop services for the local community in an area where census records show one of the worst health records in the country.

Sir Derek Wanless at Healthworks phase two launch

Beyond providing the building, we contributed research, marketing and communications support to improve awareness of the centre and helped with events to promote healthy living, targeted at primary and secondary schools and day centres, and linked to our ‘Water for health’ campaign.

We sit on the steering group for Healthworks which achieved almost 10,000 visitors in its first year alone and now provides over 45 health and community support services. It acts as a community focal point where service providers and community groups can come together to address issues that affect the quality of life in the local community. Facilities range from a juice bar to a gym and information kiosks, some of which can be used in a privacy setting with many more planned. Healthworks has been so successful that the plans for phase two were brought forward and this was opened in November by the Chairman, Sir Derek Wanless. Healthworks now includes a GP led walk-in health centre open from 8am to 8pm, 365 days a year, thus securing the future of Healthworks for the community, which is a unique approach to tackling the poor long term health of the residents in Easington.

Sporting partnerships

NWL prides itself on being immersed in the community and working with a wide and diverse range of sporting partners is a natural extension of our ‘Water for health’ campaign, which encourages people to lead a healthy lifestyle. Working with our sporting partners we support a diverse range of sports to get people active as well as educating them on healthy eating and good hydration.

Through our partnerships we have reached over 60,000 children and adults. We provide:

• links and networks to enable sporting partners to get together to share ideas and resources;
• financial support of over £56,000 per annum which then levered over £2.0 million (£1.3 million of this was due to the phase two extension of Healthworks which is on our former site) from other sources;
• advice and marketing support on programme development;
• bottled tap water, sports bottles or mains-fed bottle-free coolers to reinforce the importance of drinking tap water to re-hydrate during sporting activities; and
• help with fundraising and raising the profile to attract additional investment.

We can generate wider support for projects by adding our name and commitment to them and by encouraging others to get involved thus generating additional funding sources for projects. Our involvement acts as a key catalyst to raise confidence that projects present real opportunities for the private sector.

Education

NWL is lead sponsor of Castle View Enterprise Academy, a new and exciting independent school for 11-16 year olds serving the areas of Castletown, Town End Farm and Hylton Castle in Sunderland. The area contains some of the most deprived wards in the region and 61-80% of the school catchment population is categorised as ‘struggling families’.

Castle View Academy, Sunderland

The Academy opened in September 2009 and offers a new approach to education. It is one of three academies created in Sunderland with the City Council as co-sponsor using a unique model under the ‘Building Schools for the Future’ programme. Our aim as lead sponsor is to create a centre of excellence with a clear focus on raising standards of academic performance and enabling every student to achieve their personal best in all areas of academy life within a safe, secure and stable environment. The project has been almost four years from planning to opening and our employees have helped in the design, build and management arrangements. The company will use its business networks to complement the Academy’s specialism which is business and enterprise.

Economy

North East Enterprise Bond

Our investment in the bond is a five year interest free loan, which helped fund the purchase and running of a number of ‘Launch Pads’ – mobile vehicles that tour the region to help trigger and encourage enterprise start-ups. Working with creative enterprise promoters such as Big Ideas, People into Enterprise and Newcastle Education Business Partnership, the bond serves as a catalyst to encourage people to set up their own business or social enterprise.

NEL Growth Fund

Our investment in the fund is to provide start up capital in eligible high growth businesses based in the north east of England. The fund is managed by NEL Capital the specialist venture capital division of NEL Fund Managers.

Affordable housing

NWL has been working for the last five years with Hastoe housing on an affordable rural housing project as part of our ‘Good Moves’ programme. Planning permission has been granted for 12 affordable rural houses on a piece of land that is no longer required by NWL close to the company’s Hanningfield water treatment works in Essex. The homes will be located in a rural area where a significant need for affordable housing has been identified.

WaterAid

NWL has continued to raise funds and awareness for the work of WaterAid which brings sustainable water and sanitation solutions as well as hygiene education to the poorest parts of Africa and Asia. The employee fundraising committee has raised more than £3.0 million, since 1997, with the help of the company and last year focused its fundraising support on specific projects in Tanzania.

Community Foundations

Community Foundations covering our areas of supply hold endowment funds totalling nearly £1 million contributed by NWL over the last 18 years. These are long term investments with the income from the funds used to support community initiatives. Recipients are chosen by committees of our own employees (39 groups this year).