Business Stream slides as public sector deal loss bites and margins tighten

Publicly owned Scottish Water reported an 11% drop in pre tax profit year on year to £94m in the year to 31 March 2017. Its business retail arm, Business Stream ,posted a particularly heavy fall with its pre tax surplus down to one third of the previous year’s tally at £6.5m following the first full year impact of its loss of an important public sector deal.

Revenue at Business Stream for the year was down 35% from the previous year at £184m with operating surplus 69% lower at £5.7m. Scottish Water attributed the slide to “ the combined impacts of margin compression from increased competition; the full year impact of the loss of the public sector framework contract; and one-off costs associated with English market readiness preparations.” The last item including the transfer of customers from Southern Water whose non-household customer base Business Stream acquired in April 2017.

Business Stream, in summer 2015, lost to Anglian Water Business a three-year public sector framework contract which makes up about 25% of the Scottish market.

Scottish Water said Business Stream’s performance for 2016-17 was “in line with expectations”

and it expected the market in Scotland ”to remain challenging, placing continued pressure on margins.”

Scottish Water group reported sales up £16m to £1.21bn. Revenue from household services was up £19m reflecting a 1.6% hike in tariff and increased numbers connected to the network, the company said.

Operating profits were down £17m to £267m. Net finance costs fell nearly £7m to £174m including fair value gains on financial instruments of £300,000 – down from £1.2m in the previous year.