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Anglian Water Services Limited Preliminary results for the year ended 31 March 2019

29 May 2019

News

Delivering another year of very strong performance for customers, communities, and the environment.

 

Financial highlights

- Revenue (excluding grants and contributions) of £1,280.3 million, an increase of £31.4 million (2.5 per cent) on 2018 - consistent with the regulatory pricing mechanism, the impact of the hot, dry summer on demand and customer growth.
- Operating costs up by £38.4 million (6.5 per cent), reflecting the impact of the exceptional 2018 summer period, inflationary pressure on costs and providing more effective solutions through operational maintenance, rather than capital investment, partially offset by savings from efficiency initiatives.
- Underlying profit before tax up by 14.4 per cent to £60.5 million, reflecting increased revenues, lower underlying finance charges partially offset by increased operating costs. (Note that on a statutory basis, the loss before tax was £37.9 million).
- Cash generated from operations of £700.7 million, up 1.4 per cent on last year.
- Gross capital investment in the year of £440.0 million (2018: £467.2 million) - includes £55.7 million of reinvestment spend out of the £165 million of additional investment of delivered efficiencies as previously announced.
- A successful second round of green bonds raised amounting to £580.0 million.
- Proposed final dividend of £67.8 million (2018: £68.0 million), substantially lower than funds available for distribution, and a £22.0 million equity injection received in the year from the Group, all consistent with the board's commitment to reduce gearing through to 2025.

1 The gross capital investment comparative has been restated to reflect the impact of IFRS 15 - previously contributions received for diversions of £6.3 million in 2017/18 were offset against capital expenditure and now they are classified as revenue.

 


Business performance highlights


Unrivalled support for the communities we serve

- Named number one water company for customer service in Ofwat's Customer Experience Survey for the second year running.
- Almost two decades of consistent upper-quartile service performance.
- All customers protected from any impact during record-breaking period of hot and dry weather in summer of 2018, following no customer service impact during ‘Beast from the East' in the preceding winter.
- Instrumental in the creation of the water industry's Public Interest Commitment, setting new standards for a social contract with customers and stakeholders.
 

Planning for the future

- £6.5 billion investment plan for 2020-25 submitted to Ofwat, supported by more than 80 per cent of customers based on an extensive acceptability and affordability survey, and online community research.
- Proposes a 30 per cent increase in the investment programme on the current five year period to 2020. The ambition of the plan matches the scale of the challenge faced in the region, and by using the latest innovative technology and working more efficiently, customer bills will stay low.
- Includes an investment programme to dramatically reduce leakage from our already industry leading position, protect our region from the risks of drought and flooding, enhance the environment, and meet growth through sustainable improvements to our network.
- Plan shaped by half a million customer interactions, drawing on 38 channels of communication and contact: ten times more than in the current Asset Management Plan period (AMP6).
- Fifth supply chain alliance being set up to deliver a Water Resources Management Plan which totals £630 million, nearly eight times larger than the last period, delivering resilience to drought and flooding.
- Initial Assessment received from Ofwat; customer engagement given ‘A' grade, underlining that the plan delivers on customers' priorities.
- Ofwat is now reviewing our plan, along with our feedback on their initial assessment of it, in which we reiterated our belief that it is the right plan for our customers and the environment.
- Actively seeking to manage downside risks associated with exiting the EU. Working across the industry and with Defra to manage these risks by securing alternative sources of chemicals and increasing the resilience of supplies where possible.
- Monitoring Labour Party policy to return water companies to public ownership.


Innovation continues to deliver

- The innovation test-bed 'Shop Window' in Newmarket has seen 114 partners trialing and delivering 110 projects applying cutting-edge technology right across the business. In Newmarket, this approach has already delivered an 8 per cent reduction in consumption in the town.
- Best Use of ‘Technology for Carbon Reduction' awarded by New Civil Engineer for the Great Dunmow Water Recycling centre project.
- Applying naval and NASA originating-technology to enhance operational performance


Pushing leakage performance even further

- Prioritising the reduction of leakage during a challenging period, including first use in the UK of world-leading technology.
- Regulatory leakage target beaten for the 8th year running.
- Interruptions to supply and customer contacts regarding drinking water quality both at best ever levels.


Recognition for excellent all-round performance

- Named Utility of the Year at the Utility Week Awards in December 2018.
- Named Water Company of the Year at this year's Water Industry Awards.  
- Two awards received at this year's prestigious International Water Association Awards, held in Tokyo, in recognition of our ambitious innovation and leakage strategies.
- Invited to join Leading Utilities of the World, the gold standard of utility performance.
- Awarded Glassdoor Employee's Choice Best Place to Work in the UK.
- Retained ROSPA Gold Award for Safety for 15th consecutive year.
- Cumulative Outcome Delivery Incentive reward of £40 million over first four years of AMP6.


Protecting and enhancing our environment

  • Second Sterling Green Bond issued, available to finance selected investment programmes.
    - £783 million allocated to environmental protection and enhancement in Business Planning for 2020-25, through the delivery of our Water Industry National Environment Programme (WINEP), expenditure that is more than double the last period.  
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Earlier this year, the Board of AWS announced that Scott Longhurst, Managing Director of Finance and Non-Regulated Business, will step down as an Executive Director of the Company during the current financial year, at a date to be determined. He will be replaced by Steve Buck, who will join the Group as Chief Financial Officer designate on 31 May 2019. Steve will be formally appointed to the Board following a thorough induction and handover.
 

Commenting on the Company's financial results and operational performance for the year ended 31 March 2019, Peter Simpson, Anglian Water Group's Chief Executive, said:

"This has been a very significant year for water companies, with the sector under the spotlight like never before. We are operating in an environment where a growing set of complex social, political and environmental challenges are increasingly top of mind. It is also the year when water companies proposed their business plans for 2020-2025 to the industry's regulator, Ofwat, while at the same time coming together to examine the purpose of the sector, outlined in the industry's recently published Public Interest Commitments.

 

"There have also been numerous operational challenges during the year, not least the severe weather posed by the ‘Beast from the East', followed by the record-breaking and prolonged hot, dry summer.

 

"It is against that backdrop that I am delighted to report another year of exceptional performance, delivering for customers, for the communities they live in, and for the environment we all rely on.

 

"This year's achievements build on more than a decade of industry leading performance, most notably in leakage and customer service. Our approach - to innovate, learn and share - has again seen us pushing the frontier for the whole industry, while enabling the continued growth and prosperity of the region.

 

"By ensuring customers are at the heart of our business, a responsible and sustainable approach can deliver for our customers, employees, stakeholders and crucially, the environment. This is nowhere better illustrated than in our plan for 2020-25, submitted to the regulator earlier this year, which sets out how we will tackle these challenges to ensure the region is resilient to the risks of drought and flood, while continuing to make environmental improvements and support sustainable growth in what is one the UK's driest yet fastest growing regions. Our proposals build on customer engagement that indicate a clear desire for us to take action to increase resilience to these challenges now, rather than to wait.

 

"Crucially, our plan was written following the most extensive engagement we have ever had with customers - not less than half a million customer interactions, ten times more than for our previous business plan. This engagement shaped our plan like never before, eschewing traditional consultations for ongoing dialogue, ensuring rapid response to changing customer expectations.

 

"It proposes a record £6.5 billion investment programme to drive down leakage a further 22 per cent, going from industry-leading to world-leading levels; a Water Resources Management Plan totalling £630 million, nearly eight times larger than the last period which will reduce the risk of water restrictions for all customers; £783 million to support the environment, more than double the last period; £650 million to enable sustainable growth; and plans to support more than 475,000 customers each year who need help with affordability or vulnerability issues.

 

"Given we are proposing to increase our total investment by one third, it is absolutely right that Ofwat provides strong scrutiny and challenge. Both we and our customers expect nothing less, and we were delighted to see Ofwat recognised Anglian Water as the best in the industry on engaging with customers. This gives us further confidence that we are accurately reflecting the needs and priorities of the customers and communities we serve.

 

"The business plan is built on robust foundations, too. Our long-term proposals for 2020-2045, set out in our Strategic Direction Statement, and on the suite of changes we announced this past year to strengthen transparency and remove complexity within our Corporate Structure, show a proactive approach to both current and future challenges.

 

"Our plan is also, we believe, the appropriate response to the clear direction the Government has set out in its various policy statements, to the National Infrastructure Commission's conclusions in its 2018 ‘Preparing for a Drier Future' report, and to the recent warnings from Sir James Bevan, Chief Executive of the Environment Agency, about the urgency of addressing the growing problem of water scarcity.

 

"Taking all these factors into account, we feel it is essential that we move ahead with this plan. Much of the company's focus this year has been about building on the strong foundations underpinning the plan to create the required flight path to a sustainable and resilient future. The combination of our track record delivering leading performance, and our people, mean we are well placed to deliver the sustainable future our region needs."

 

You can read the full report here.