Annual review summary 2023-24

Introduction and overview

At a time when the water industry faces a crisis of public confidence, we are judged by our regulators on our performance as one of the leading group of water and sewerage companies in England and Wales.

We are committed to playing a critical role that goes beyond providing an essential public service. We aim to support the communities we serve, help tackle the climate and environment emergency, and contribute to the growth of the UK economy. These aims form the core of our long-term commitment to build a sustainable future with the support of our customers, communities, employees and stakeholders.

Our long-term plan for delivery is set out in our Strategic Direction Statement. The statement, which was developed in partnership with customers, businesses, employees and stakeholders, sets out our vision and ambitions through to 2050. It is structured around ‘outcomes’ – eight fundamental results we plan to achieve through our actions. These are:

• safe and reliable water supply
• an effective sewerage system
• affordable bills
• excellent customer experience
• sustainable abstraction
• excellent river and coastal water quality
• net zero carbon
• increased biodiversity.

These outcomes are underpinned by six enabling competences:

• individual safety, wellbeing and engagement: our colleagues will be safe at work, proud to work for us and fully engaged in their roles
• skills, knowledge and opportunity: our colleagues will have the skills and knowledge they need and be empowered to carry out their roles
• culture, inclusion and diversity: we will have an inclusive workforce that reflects the cultures and diversity of the region we serve
• well managed, open, ethical and transparent: we will prove that we are honest and ethical in the way we conduct our business
• resilient financial stewardship: we will demonstrate long-term financial stability
• market-led outcomes: we will harness the power of markets to drive the most efficient solutions.

Our ‘strategy wheel’ brings everything together. It shows how the eight outcomes we are targeting are underpinned by the six enablers. The wheel is also divided into quarters to group the factors by area:

• serving people and places
• enhancing the environment
• empowering our people
• financing the future.

These form the basis of the four main chapters in this document. At the centre of the wheel is our purpose, which is at the heart of everything we do.

Continue to provide leading levels of service

Though there remain some critical areas to work on, it is rewarding to see the hard work reflected in this year’s data.

In common with 2022, our customers continued to feel the impact of high living costs on their household budgets in 2023 and affordability remained a priority for us. But weather-wise, it was a very different year. Issues arising from the drought and heatwaves of 2022 were replaced by challenges from exceptional levels of rainfall. The 12 months between March 2023 and February 2024 were the wettest on record (since 1871) in our region, with an average accumulation of 1,310mm, equating to 155% of the long-term average rainfall. High rainfall levels persisted throughout this period, with nine of these 12 months individually above the long-term average, some by around 250%. Meanwhile, mild temperatures made the year the second warmest on record. The reality of climate change is with us, as are the growing challenges that come with it.

Against this backdrop, in three of the four areas that fall within the ‘Serving people and places’ area, we continued to provide leading levels of service: safe and reliable water supply, affordable bills and great customer experience.

Some highlights included:

• our Compliance Risk Index score looks set to be industry-leading and our Event Risk Index score will be a significant improvement on last year; these are the two key measures of drinking water quality
• on affordability, we remain committed to our pledge to end water poverty by 2030 despite the increasingly difficult economic context. This year we have focused on boosting access to the wide range of financial support we provide under our tailored assistance programme (tap) to ensure even more customers get the help they need. We have also continued to provide support and grants through our charitable Wessex Water Foundation
• our ongoing focus on delivering great customer service resulted in us remaining a leading performer in the range of relevant customer service metrics, including being the top water and sewerage company on Ofwat’s measure of customer experience, C-MeX.

However, our wastewater network struggled under the persistent heavy rain and the number of sewer floods that happened both inside and outside of people’s properties regrettably increased. With more extreme weather likely to be a feature of the future, we are now using AI technology to detect defects, such as collapses and obstructions caused by wet wipes, along our many miles of sewer network. This will help us to speed up our response times.

A single, but significant, trunk mains burst in Chippenham in February 2024 also hit our supply interruptions performance this year. However, amongst water companies, we expect to remain in the leading pack.

Our journey

Our long-term ambitions for serving people and places are set out in our Strategic Direction Statement. We are targeting:

• 100% water quality compliance
• zero water supply interruptions of longer than three hours
• halving the impact of sewer flooding
• zero water poverty – no one will spend more than 5% of their disposable income on water
• being a top 10 customer service provider across all companies in the UK.

Improving the environment in the widest sense

We are playing a key role in shaping thinking on how to ensure that investment targeted at improving the environment in the widest sense represents optimal value for money in future. We have formed a coalition with environmental groups and stakeholders that interact with or otherwise have an interest in the water environment, to champion catchment level solutions to deliver better outcomes for nature. This promises to be an important and exciting strand of work.

In terms of our performance, in contrast to 2022, we performed highly on environmental and leakage reduction in 2023. We anticipate a four-star Environmental Performance Assessment rating from the Environment Agency, having responded with urgency to every potential pollution incident to do our utmost to prevent it becoming serious, and on leakage, we reduced our annual average level by 1.4Ml/d.

We head into summer 2024 with our reservoirs and aquifers in very healthy condition and do not anticipate any supply challenges in the year ahead. However, our storm overflow discharge performance deteriorated significantly and we registered a rise in minor pollutions. All our storm overflows are now monitored and the data will inform how we work to eliminate spills. Our immediate priority is to tackle the most frequent spillers, as in the case of one near Bath RFC’s ground.

Looking to the longer term, we published a revised Water Resources Management Plan to 2050, featuring ambitious plans to abstract less by cutting demand. We further reduced our annual gross greenhouse gas emissions and stand by our commitment to be carbon neutral in our operations by 2030. We exceeded our target to boost biodiversity on Sites of Special Scientific Interest (SSSI).

Our journey

In our Strategic Direction Statement, which sets out our aims for 2050, we are targeting:

• never harming the health of the water environment through our abstraction
• restoring the quality of our rivers and coastal waters
• being a net zero carbon business (by 2040)
• doubling our contribution to the region’s biodiversity.

Building a diverse workforce

We could achieve nothing without our people and we do everything in our power to ensure everyone feels valued, welcomed, respected and rewarded. Along with our most important imperative, to ensure our people are safe at work, we are also committed to and are focused on ensuring a Wessex Water culture that supports the diversity and inclusion of all who work at the company.

Along with the wider industry, we have a long way to go to be able to say our team truly reflects the communities we serve, but we are making progress. To supplement our existing programmes on gender, race, sexuality and disability, in 2023 we started measuring how well we are championing social mobility and took steps to support and welcome neurodiversity in the business.

Our executive sponsorship programme for diversity and inclusion has been well received and we are taking simple, practical measures to advance the agenda where we can. One good example is that we changed how we advertise our jobs, to boost accessibility and inclusivity.

More broadly, we significantly expanded our careers team in 2023 and offered more places on more schemes to more people than in 2022. This spanned early careers and career progression. We are acutely aware of the negative public narrative about the wider water sector and recognise the risk this poses for recruitment. We are working to reach out wherever possible to build our workforce as we head towards the next regulatory period.

Three years after the tragic incident at Avonmouth, we continue to develop our process safety capability across all our sites and ensure it is intrinsic to everything we do. We are reassured by evidence that indicates we are building an increasingly mature culture of engagement on safety issues. We recorded a 44% increase in safety observations compared to 2022 and employee engagement increased by 19%. This is producing tangible benefits for us as well as our teams; we had 65% fewer days related to lost time incidents in the year. We also invested in training and systems to support process safety.

Our journey

Empowering our people to bring their whole selves to work and excel is an ongoing priority. We achieve this by:

• keeping everyone informed of our achievements and top priorities through newsletter communications
• delivering a quarterly leadership forum to cascade messages from the top and work together on our challenges and priorities
• ensuring everyone receives regular ‘check-ins’, where we discuss wellbeing, communicate objectives and provide guidance and support for all
• developing everyone through a range of mandatory and optional training solutions; providing coaching and mentoring; and offering a vast range of apprenticeship opportunities and professional development.

Maintaining strong financial foundations

Although inflation has fallen throughout the year, we continued to feel its impact through higher energy and payroll costs and raised interest rates. This affected our financial performance in the year. However, our liquidity remains healthy and combined with YTL Group’s continued investment, our financial foundations remain strong, allowing us to invest for the future. In fact, we boosted our capital investment by over 40% in 2023.

Seeking alternative approaches to traditional capital investment will be more important than ever as we transition into the next price review period. We are proposing to double our current level of investment and will have new obligations to deliver, including ambitious phosphorus reduction targets. The step change in investment brings with it delivery challenges. We are now planning the scale-up of our delivery capability. These changes take place against a backdrop of growing risk and in part contribute to it. We remain vigilant and responsive to identifying, communicating and managing material business risks.

The Wessex Water Marketplace – a platform through which we share our challenges and data with the open market and invite others to compete to help us deliver solutions – celebrated its fifth anniversary in the year. We have seen some real benefits from the approach, including this year implementing an AI-enabled CCTV solution that means we can survey twice as much sewer length in any given time. The Marketplace and our other ongoing activities such as our expanding use of nutrient markets, demonstrates our commitment to competition, facilitating new ideas and working collaboratively on innovative solutions.

In this way, we seek to drive down costs, protect our assets, reduce our carbon footprint and ensure business resilience. We were awarded strong scores on our environmental, social and governance practices from two external assessors this year: Sustainalytics and Sustainable Fitch.

We also published our first Sustainable Finance Allocation and Impact Report, which provides information for investors on the allocation of our inaugural £300m sustainability bond which was issued in March 2023.

Our journey

We always aim to exhibit exemplary governance, transparency, accountability, efficiency and financial resilience. YTL has now owned Wessex Water for over 20 years, making it one of the longest single owners of a UK water and sewerage company. We have a simple financial structure and do not engage in any aggressive or artificial tax planning.

YTL stands ready to invest into Wessex Water, for a fair return, to help finance the much enlarged investment programme. Building on this, in our strategic direction statement to 2050 we have committed to:

• being the most efficient water company in the industry – harnessing the power of markets and real competition and championing an outcomes-based approach to regulation where efficiency can be maximised through flexibility and choice
• maintaining a solid investment grade credit rating and being well-regarded by financial stakeholders
• delivering for wider society and the environment through sustainable financing, measured using ESG metrics.