Financial performance
NWG and its subsidiaries use a range of indicators to monitor performance. For NWG, the key performance indicators (KPIs) are all financial. The non-financial KPIs relating to NWL are summarised here. The definition, purpose and source of each KPI are shown here.
Performance against the financial KPIs is set out below:
| Performance | ||||||
|---|---|---|---|---|---|---|
| Target | Current year | Previous year | ||||
| KPI | NWG | NWL | NWG | NWL | NWG | NWL |
| Gearing to RCV (%) | <75 | <701 | 673 | 612 | 65 | 59 |
| Cash interest cover (times) | >2.5 | >3.0 | 3.1 | 3.8 | 3.1 | 3.9 |
| Cash flow to net debt (%) | >13 | >13 | 15 | 18 | 16 | 17 |
Notes:
- Less than 65% for the regulated business of NWL.
- NWL’s Regulatory Capital Value (RCV), as advised by Ofwat, at 31 March 2009 was £2,998 million (2008: £2,976 million).
- NWG’s pro forma RCV at 31 March 2009 was £3,324.4 million (2008: £3,300.6 million) (see below).
As a consequence of the current economic climate, there has been an increased focus on gearing across many sectors. The Group’s gearing has previously been expressed as a percentage of NWL’s RCV. However, this overstates gearing as it ignores any value attributable to the Kielder securitisation and the two PFI contracts. The level of associated debt included in the Group’s net debt relating to those assets amounts to £215.6 million (2008: £214.9 million) and £110.8 million (2008: £109.7 million) for the Kielder securitisation and PFI contracts respectively. Adding these amounts to NWL’s RCV of £2,998.0 million (2008: £2,976.0 million) results in a pro forma Group RCV of £3,324.4 million (2008: £3,300.6 million). This change results in gearing being restated from 72% to 65% at 31 March 2008.
The Group’s gearing on this pro forma basis has increased from 65% to 67%, with net debt increasing by £79.3 million to £2,229.7 million over the year. The increase in the Group’s gearing is principally due to the impact on the RCV of negative inflation of 0.4% at 31 March 2009.
At NWL, gearing has also been reviewed and net debt has been restated to include £159.0 million (2008: £159.0 million) in respect of an intra-group loan, repayable on demand, as the Company believes this is a better reflection of NWL’s net debt. This change results in gearing being restated from 64% to 59% at 31 March 2008.
NWL’s gearing has increased from 59% to 61%. For the regulated business within NWL, gearing increased by 2% to 60%.
Cash interest cover has remained stable for the year.
The Group also prepares detailed medium term business plans and annual budgets, which are reviewed and submitted to the Board for approval. Targets are set to measure performance and regular financial forecasts are made. Business plans and budgets include an assessment of the key risks and success factors facing each business unit. On a monthly basis, management compares the actual operational and financial performance of each business with plan and budget and this is reported to the Board.