Delivering financial stability
We are acutely aware of the media and public concern around the financial stability of a small number of water companies. However, our financial position remains very stable, and our investors are committed to maintaining simple financial structures and robust credit metrics.
Results for the half year show operating profit increased by £10.8m from £67.2m to £78.0m, whilst the position after taxation eroded from a profit of £3.8m in 2022 to a loss after taxation of £8.0m. Total revenues increased by £20.2m from £266.8m to £287.0m. Regulated tariff revenue increased by £17.5m, mainly due to price rises allowed by Ofwat. Operating costs increased by £9.4m from £199.6m to £209.0m.
There were significant upward pressures on costs due to continuing high energy market prices, general high inflation within the economy and new obligations such as phosphorus removal, partially offset by on‐going efficiency programmes.
Net financing expenses increased by £29.8m from £61.3m to £91.1m. Financial expenses increased by £35.0m as a result of high inflation impacting on our index linked bond portfolio against which there was a £0.2m reduction in the interest costs relating to IAS 19 pension accounting.
Financial income rose by £5.0m as a result of higher interest rates on short and medium term deposits. Net capital investment for the six months was £161.9m, a significant increase on £100.7m last year and remains consistent with the timing of the construction programme for the current regulatory period.
The increased level of spend meant Regulatory gearing eroded by 0.4%. The regulatory capital value increased by £406.1m to £4,184.3m primarily as a result of the high levels of inflation applied as part of the calculation. Since privatisation the regulatory capital value has continued to reflect the growth of the size of the business and the investment programme.
Total taxation, including deferred tax, reduced from a charge of £2.1m last year to a credit of £5.1m this year. There was no tax paid in either period due to the availability of the super deduction for capital expenditure.
Dividends declared for the six months to 30 September 2023 were £37.0m, a reduction from £41.1m for the same period last year. Cash and cash equivalents ended the period at £27.2m, reducing by £137.3m from an opening cash reserve of £164.5m. The net cash inflow from operating activities was £87.2m less cash outflows from investment activities of £27.0m less net cash outflows from financing of £197.5m.