Interim results 2020

Interim results 2020

December 2020

Overview

The last six months have been turbulent for us all but one constant throughout the Covid-19 crisis has been the level of service received by our customers and stakeholders. 

At Wessex Water, we understand the public value we deliver to our communities and wider society. We have worked hard over the last six months to ensure we keep delivering our base services excellently and go the extra mile to provide the support people need when they need it most.

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. This hasn’t changed as a result of Covid-19 but the way we deliver it has changed fundamentally. 

We have introduced several innovative measures to help our local communities in line with our social purpose. For example:

  • Our NHS discount covered the costs of extra uniform washing for thousands of front-line NHS workers.
  • The Wessex Water Foundation, providing over £500,000 of funding, has turned its focus to provide immediate support to local community groups impacted by COVID-19, alongside a recovery fund to support groups rebuilding our communities in the months and years to come.
  • And for customers who are facing financial difficulty as a result of the pandemic, we have made it easier to get short-term help with their bill so that nobody has to worry about paying for this essential service.

At the same time we are delighted to have been awarded the highest rank possible by the Environment Agency for our environmental performance over the last year. We are one of just two companies in the country who achieved ‘leading’ status.

We want to do even more to help tackle the climate crisis and support the environment and see the economy recover from the pandemic, so we are working with government and regulators to make a tangible contribution to a green economic recovery using nature-based solutions.

Some of our targets have become unachievable. For example, we have a target to help educate children in schools, which only counts if we are physically in the school. We can’t do that now but that hasn’t stopped us from doing the right thing, and our education advisors have worked harder than ever to make their materials work online, providing a valuable service to children around our region.

It is thanks to all our great people, like the education advisors, that we have managed to do so much more than just the basics despite Covid-19. Their care for the people, environment, and wider community in our area has been outstanding and we are truly grateful.

We wish everyone well as Covid-19 continues to impact our world and, for our part, we will continue to deliver our excellent services, our community support and the environmental improvements that define our public value.

 

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 2020-21 regulatory targets and performance indicators, despite the challenges of Covid-19. 

There are clearly some targets that are significantly impacted by the pandemic and we continue to work hard to do the right thing by our customers and stakeholders to deliver the best public value we can. 

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 versus last year
Providing excellent service to customers Customer satisfaction score (C-MeX) Upper quartile Ahead of target Stable
Developer satisfaction score (D-MeX) Upper quartile Ahead of target Stable;
Customers rating good value for money 75% Ahead of target Stable
Providing excellent drinking water quality Compliance with drinking water standards (CRI) 0 Behind target - see below Stable
Using water efficiently Volume of water leaked <73.2 Ml/day Ahead of target Improving
Volume of water used per person (litres per day) <135 Behind target - see below Improving
 Minimising sewer flooding Internal sewer flooding incidents (nr/per 10,000 properties) <1.68  Ahead of target Improving
 Resilient services Restrictions on water use (eg hosepipe bans) None On target Stable
Water supply interruptions >3 hours (minutes per property) <6 min 30s Ahead of target Stable
 Protecting and enhancing the environment Environmental performance assessment (EA assessment) Leading  On target Stable
Treatment works compliance 99%  Ahead of target Stable
Satisfactory sludge disposal 100% On target Stable
Greenhouse gas emissions (tCO2) <111,000 Ahead of target Improving

Our drinking water compliance is measured against an index called the Compliance risk index (CRI), with zero being perfect. While we always target 0 against CRI, results up to 2 are considered acceptable and do not incur any penalty. We are currently expecting to stay below 2 at the end of the year.

Water consumption is measured as the volume of water used per person in the home. With lockdown keeping most people in their homes at a time of hot and dry weather, personal consumption increased dramatically as expected and is currently at 154 litres/person/day against a target of 135. This target will almost certainly not be achieved this year.

The most important consideration should be the volume of water abstracted from the environment and, whilst personal consumption at home has increased considerably, the important outcome of water abstracted has, in fact, reduced over the same period as non-household consumption has reduced.

Personal consumption is an important lever to influence, in order to protect the environment. The changes in consumption patterns are dynamic at the moment and we will keep working with customers and stakeholders to help them reduce their consumption as part of our ambition to reduce overall abstraction.

We know that when customers have a meter, their consumption reduces and so we continue to install meters when properties change hands. Two thirds of households are now charged based on 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.

Since the end of September and the period covered by these interim results, the dynamic nature of the risk we face has been evident with exceptional weather and the Covid-19 pandemic. This has led to an increase in pollution incidents and water quality incidents over recent months, to which we have responded well and expect to see future improvements.

However, these challenges won’t stop with a Covid-19 vaccine as we continue to see extremes of weather and climate on an increasingly frequent basis. Our plans are also evolving to ensure we remain agile and resilient in the face of the changing climate.

 

Financial performance

Our financial results for the half year show that operating profit decreased by £29.2m from £113.5m to £84.3m, while profit after taxation fell from £54.9m to £33.0m.

Total turnover reduced by £28.4m from £282.7m to £254.3m. Regulated tariff turnover fell by £27.8m, a £22.2m reduction due to the price cut at the most recent regulatory review combined with the decrease from customers switching to meters, with a further £5.6m resulting from the impact of Covid-19 on household and non household revenues.

Operational costs (excluding depreciation and amortisation) reduced by £1.9m from £99.6m to £97.7m. There were upward pressures on costs due to general inflation, new obligations, power costs and Covid-19, all offset by an ongoing efficiency programme. Depreciation and amortisation increased by £2.7m from £69.6m to £72.3m as a result of assets being depreciated for the first time.

Net interest payable reduced by £4.4m from £46.5m to £42.1m. Interest payable reduced by £3.7m, because of reductions in interest rates and lower inflation. There was a £0.6m reduction in the interest costs relating to IAS19 pension accounting whilst interest receivable was £0.1m more than last year.

Total taxation, including deferred tax, reduced from £12.1m last year to a £9.2m this year generally reflecting the reduced level of profits.

Dividends declared for the six months to 30 September 2020 were £25.0m, a decrease from £44.0m for the same period last year.

Gross capital investment for the six months was £115.9m, a slight reduction on £119.1m last year, but this is mostly as a result of construction delays caused by Covid-19 which will be caught up in time, aligned with deferred delivery dates for some of our regulatory outputs.

Our operational and construction colleagues continued their on-site work using safe distancing and specialist PPE where appropriate. Whilst teams have been refocused to ensure our high operational standards are met, we have benefitted from having an in-house engineering and sustainable delivery team who deliver a significant proportion of our capital programme, and repair and maintain our infrastructure. This has enabled us to respond with agility and removed the risk of specialist contractor availability and associated cost increases.

Net debt increased by £134.0m from £2,141.1m to £2,275.1m in the six months to 30 September 2020. The net cash inflow from operating activities was £125.7m less net capital investment of £113.3m plus net cash inflow from financing of £49.4m.

Company performance

View our past performance

View our past annual and interim reports

News

Customers continue to receive excellent services

Read how we continued to provide excellent standards of services for customers throughout the Covid-19 crisis.