Interim results 2021

Strong performance and roadmap for the future.

Overview

Wessex Water maintained a strong performance in the first six months of this year despite the continued impact of COVID19 on customers, communities and businesses across our region. This ongoing success is thanks to the hard work and dedication of all of our staff who always do a great job in challenging circumstances.

There has been much media coverage of storm overflows and the impact on rivers and beaches. Storm overflows are not new, they have always been part of the UK sewerage network because the majority of the system was built with combined sewers to carry both foul sewage and surface drainage. Overflows were part of the design to prevent flooding of properties and gardens during times of very heavy rainfall.

Across the Wessex Water region there are only eight water bodies (stretches of river) out of a total of 444, where failure to meet environmental standards is in part due to the impact of storm overflows.

A leader environmental leadership

This is part of a wider approach to minimise our carbon footprint. In advance of COP26, Wessex Water published its routemap to net zero with a commitment and plan to achieve net zero operational carbon emissions by 2030 and full net zero total emissions by 2040.

Our vision is to be recognised as a leader in environmental stewardship, but to do this we need our regulators to help us unlock solutions that will enable society to pay less for more environmental improvements. Working with Frontier Economics we have set out proposals for a move to outcome based environmental regulation, which we hope government and regulators will embrace as part of the next periodic review.

Innovation is a key part of driving even better customer service and improved environmental outcomes. We have recently launched a range of initiatives, including the roll out of artificial intelligence across our sewer network, the use of shading balls to prevent algal growth at Didmarton Recycling Centre and the creation of a wetland at Cromhall works, which avoids the use of expensive and carbon intense chemical treatment in removing phosphorus from sewage effluent.

Our people are the key to our success, so we are delighted by the continued growth of our apprenticeship and trainee programmes. This year we have over 100 young people taking part in our apprenticeship, graduate, work experience and work placement programmes; and for the first time, we have also created 45 new work placements targeted at young people at risk of long term unemployment, in support of the government’s Kickstart Initiative.

Our continued successful delivery during these challenging times gives me confidence that we will be able to meet the even greater challenges that lie ahead.

Performance for customers and the environment

In the first six months of the year we continue to be on track to meet the great majority of our 2021-22 regulatory targets and performance indicators, despite some on-going effects of COVID-19 and supply chain constraints. The table shows our key measures for customers and the environment and whether performance to date is consistent with meeting the full year target.

Financial performance

Results for the half year show operating profit decreased by £4.7m from £84.3m to £79.6m, while profit after taxation fell from £33.0m to a loss after taxation of £67.8m.

Total turnover increased by £5.6m from £254.3m to £259.9m. Regulated tariff turnover increased by £7.6m, mainly due to price rises allowed by Ofwat combined with a return to normal operating patterns for Household and Non Household revenues as Covid-19 impacts reduce. Operational costs (excluding depreciation and amortisation) increased by £5.7m from £108.3m to £114.0m. There were upward pressures on costs due to general inflation, new obligations, power costs and Covid -19, all partially offset by on-going efficiency programmes. Depreciation and amortisation increased by £4.6m from £61.7m to £66.3m as a result of assets being depreciated for the first time.

Net interest payable reduced by £1.3m from £42.1m to £40.8m. Interest payable fell by £1.8m because of reduced interest rates on new loans. There was a £0.4m increase in the interest costs relating to IAS 19 pension accounting whilst interest receivable was £0.1m less than last year.Total taxation, including deferred tax, increased substantially from £9.2m last year to £106.6m this year. This mainly reflects the UK Budget announcement on 3 March 2021 increasing the statutory rate of corporation tax from 19% to 25% effective from 1 April 2023 which was substantially enacted on 24 May 2021. This resulted in a £96.9m charge to the income statement for deferred tax and £38.4m charged in Other Comprehensive Income. Tax paid reduced by £6.1m from £8.9m to £2.8m due to the availability of the super deduction for capital expenditure.

Dividends declared for the six months to 30 September 2021 were £35.5m, an increase from £25.0m for the same period last year.

Gross capital investment for the six months was £126.0m, an increase on £115.9m last year which is consistent with the timing of the construction programme for the current regulatory period.

Cash and cash equivalents reduced by £57.7m from £68.9m to £11.2m in the six months to 30 September 2021. The net cash inflow from operating activities was £126.1m plus cash inflows from investment activities of £168.3m less net cash outflows from financing of £352.1m.

Document download

For previous interim results, please visit our document library.

Interim results