Interim results

Interim results 2019

Overview

At Wessex Water, our aim is to give all customers excellent standards of service by providing high quality water and environmental services that protect health, improve the environment and give customers good value for money. We work hard to deliver the best levels of service and continually challenge ourselves to find better, cheaper ways of achieving this.  

Ofwat has recently recognised us as a top performer in both the efficiency and effectiveness of our service delivery.  In the first six months of this year we have continued to perform well and have shown further improvement across a broad range of performance measures.  We have set ourselves some tough targets to meet in future years and are already preparing and investing so we can achieve further step changes to the benefit of our customers and the environment.

None of this would be possible without the continued dedication of a great team of people at Wessex Water who treat our customers, the wider community and the environment with the respect that each deserves.

In July, Ofwat published its draft determination of the service levels expected of us and the allowed revenues to achieve this between 2020 and 2025.  This was largely consistent with our own plan in terms of the forward-looking targets we want to achieve, but we differ substantially on the efficient costs of delivering them.  We have been working with Ofwat with a clear need to reduce those differences and Ofwat will be publishing its final determination on 16 December.

Performance for customers and the environment

In the first six-months of the year we are on track to meet the great majority of our 2019-20 regulatory targets and performance indicators.  Our regulatory performance commitments are measured over a period of 12 months and in many cases, there is seasonal variation.  The table below shows our key measures for customers and the environment and whether performance to date is consistent with meeting the full year target.

Outcome Key measures Performance commitment target Status in current reporting year Trend in performance versus last year 
Providing excellent service to customers Customer satisfaction score (SIM)  >85 Ahead of target Stable
Customers rating service good/v good  >95% Ahead of target Improving
Customers rating good value for money  75% Ahead of target Improving
 Providing excellent drinking water quality  Compliance with drinking water standards 100% Behind target - see below Stable
 DWIs compliance risk index n/a Ahead of target Improving
 Using water efficiently  Volume of water leaked <66.5 Ml/day  Ahead of target Improving
 Volume of water used per person (litres per day) 131 Behind target - see below Improving
  Volume of water saved from water efficiency promotion 3.26 Ml/day Ahead of target Improving
Minimising sewer flooding Internal sewer flooding incidents (nr/per 10,000 properties) <1.66 Ahead of target Improving
Sewer flooding risk from capacity Index score Ahead of target Improving
Resilient services  Restrictions on water use (eg hosepipe bans) None Ahead of target  Stable
 Water supply interruptions > 3 hours (minutes per property) <12 Ahead of target Deteriorating
Protecting and enhancing the environment Environmental performance assessment (EA assessment) Leading Ahead of target Improving
Agreed environmental improvements delivered 100% Ahead of target Stable
Greenhouse gas emissions (KtCO2) <119 Ahead of target Improving
Beaches in our region passing EU standards 100% Behind target - see below Stable

Mean zonal compliance (MZC) with drinking water standards for January to June 2019 was 99.97% which is in line with our 2018 performance.  While we always target 100% against the MZC, the Drinking Water Inspectorate now considers the Compliance Risk Index (CRI) to be the primary measure of water quality exceedances at water treatment works, service reservoirs and customer taps. In 2018 our performance against this measure was the best of any water and sewerage company.  Our predicted score for January to June 2019 is a further improvement.

Of the designated bathing waters in our region, 96% are passing EU standards; this is below our aspirational target of 100%.  The two failing bathing waters (Burnham Jetty and Weston Main) are both on the Severn Estuary.  While much of this is outside our control, we have been delivering a £38m programme to contribute towards improving Burnham’s bathing water quality. Nineteen schemes have now been completed and the remaining one is on track for completion before the end of the year.

Water-use per person in our region continues to be higher than our target.  Measured on a like-for-like basis, in our region it is amongst the lowest in the country, but we are targeting further reductions.  Price signals are an important first step and we continue to install meters when properties change hands.  Two thirds of households are now charged on the basis of the water that they use.  We have also actively helped people to use less water, including through our homecheck service, where we will install water saving devices in people’s homes.  We are working alongside regulators, government and NGOs to promote wider action to help householders use less water to deliver greater long-term resilience in supplies.

Our water resource position is currently strong with both groundwater and surface water source levels now above average for the time of year.  It is now 43 years since we last imposed a hosepipe ban.
In June, Ofwat published the findings from its investigation into Southern Water which identified serious problems of deliberate misreporting of waste water compliance data.  We have subsequently reviewed our own processes and systems in this area.  The review found no evidence whatsoever of any similar problems within Wessex Water.  

Financial performance

Our results for the half year show that operating profit decreased by £1.3m from £114.8m to £113.5m, while profit after taxation remained constant at approximately £55m. 

Total turnover increased by £4.6m from £278.1m to £282.7m. Regulated tariff turnover rose by £4.0m, an increase due to the price rise allowed by Ofwat, combined with the decrease from customers switching to meters. Operational costs (excluding depreciation and amortisation) increased by £5.3m from £108.4m to £113.7m. There were upward pressures on costs due to general inflation, new obligations, power costs and environmental charges. Depreciation and amortisation increased by £0.6m from £54.9m to £55.5m as a result of assets being depreciated for the first time. 

Net interest payable increased by £0.2m from £46.3m to £46.5m. Interest payable increased by £0.6m, because of an increase in net debt between the half years. There was a £0.3m reduction in the interest costs relating to IAS 19 pension accounting while interest receivable was £0.1m more than last year. 

Corporation taxation, including deferred tax, reduced from £13.5m last year to £12.1m this year, generally reflecting the reduced level of profits made. 

Dividends declared for the six months to 30 September 2019 were £44.0m, a decrease from £47.0m for the same period last year which included a final dividend relating to the previous year of £3.0m.

Gross capital investment for the six months was £119.1m, a reduction on £127.4m last year, but this is mostly down to timing as the final year of AMP6 will continue to be a period of significant investment. 

Net debt increased by £48.7m from £2,091.4m to £2,140.1m in the six months to 30 September 2019. The net cash inflow from operating activities was £149.3m less net capital investment of £114.9m less net cash outflow from financing of £83.1m.