Half-yearly results for the six months ended 30 September 2021
07 December 2021
Anglian Water Services Limited (AWS) is a private limited company and regulated monopoly provider of water and water recycling services, serving almost 7 million customers in the East of England. It is the principal subsidiary of Anglian Water Group Limited (AWG).
Delivering robust results while focusing on long-term resilience
Anglian Water led UK water sector at COP26 with key role on water resilience and focus on comprehensive 2030 net zero routemap
Rated by Ofwat as ‘sector-leading’ in regulator’s 2020/21 Service and Delivery Report; Anglian secured top three status on Outcome Delivery Incentive (ODI) performance rewards in water and water recycling in 2020/21 and is on track for net reward in 2021/22 based on delivery of customer outcomes
On track for completion of largest ever programme of capital investment in 2021/22
Company financial restructure completed, with shareholders injecting over £1 billion into Anglian Water, reducing gearing to 68 per cent (31 March 2021: 82 per cent) and driving resilience for the East of England
First response to Ofwat and Environment Agency review of water recycling compliance reports no evidence of environmental impact from storm tank spills, and 2020–2025 Water Industry National Environment programme delivery ahead of schedule, targeting ecological benefit across 250km of rivers
EBITDA up £13.2 million (3.5 per cent) with revenue up as a result of higher developer activity following last year’s lockdowns. In addition, household revenue is down on last year but still higher than pre-Covid-19 levels, while the opposite is true for non-household revenue. Revenue movements have been offset in part by the impact of inflation on our costs, increased power consumption at our water recycling sites and tankering due to winter 2020 wet weather and our work to drive leakage reduction performance
Operating profit up £8.9 million (4.3 per cent) as a result of strong EBITDA, offset in part by higher depreciation as our asset base grows as we invest in our assets for the long term
Adjusted PBT down £64.7 million (75.9 per cent), primarily driven through higher interest costs on inflation-linked debt due to higher inflation year on year
Fair value loss on derivatives down £9.0 million (8.9 per cent), driven by an increase to the average levels of forward inflation curves versus the September 2020 period end, partially offset by an average increase in interest rates, increasing the discount rate on future derivative liabilities. These fair value losses are non-cash in nature and have no material effect on the underlying commercial operations of the business
Tax charge for the period has increased by £326.5 million due to the increase in deferred tax provisions ahead of the corporation tax rate rise from 19 per cent to 25 per cent which will take effect from April 2023
Statutory loss after tax has increased by £382.2 million, primarily due to the tax charge in the period and higher interest due to higher inflation
Net capital injection of £1,068.7 million from shareholders reflects the completion of our restructure which saw £1,165 million invested in the business net of our March 2021 final dividend of £96.3m
Operating cash flow up £30.1 million (8.7 per cent) following positive working capital movements
Net debt down £1,101.8 million (16.6 per cent) following the financial restructuring completion which has reduced gearing to 68 per cent
Commenting on Anglian Water’s results for the half year to 30 September 2021, Chief Executive Peter Simpson said:
“These results demonstrate again that Anglian Water is a business with solid finances, which is delivering for customers, communities and the environment in the East of England.
“We are providing long-term solutions to the impact of climate change, population growth and the need to protect and enhance the environment. We’re particularly proud to have led the UK water sector’s presence at COP26, championing effective climate adaptation as co-lead of the Water theme in the first ever COP Resilience Hub and sharing best practice through our industry-leading 2030 net zero route map.
“As we look forward to the second half of the year, we continue with our largest ever capital investment programme with its strong focus on environmental programmes. We remain confident of being able to deliver again successfully for all our stakeholders.”
Delivery and operational highlights
Anglian Water’s capital investment programme for 2021/22 – our biggest ever for a single year – is underway and on track for completion by year end. Our total capital investment in the region for the first half of the year was £230 million. Programme highlights for the full year include:
£59 million for the Strategic Pipeline Alliance, the biggest water infrastructure project for a generation. This ambitious project will see us install up to 500km of large diameter pipeline by 2025 to enable water to be moved around our water-scarce region, from areas where supplies are more abundant to areas with a shortfall. Teams are laying up to 84 metres per day. The first 8.5km of pipeline will be complete by mid-December, with a total of 14km complete by the end of March 2022. The entire scheme is supported by a digital twin which will mirror the physical infrastructure, giving us real-time data to monitor the network and insights that will help us optimise the delivery of our service to customers. The scheme was awarded Digital Initiative of the Year at this year’s British Construction Industry Awards.
£30 million on the roll out of smart water meters across the region helping reduce demand for water by giving customers access to daily updates on their usage and enabling us to pinpoint and address leaks. We have installed a total of 240,672 meters (as at end September 2021), taking the total of reporting smart meters to 261,000 (with c.20,000 meters having been installed in early trials in AMP6). Despite current supply chain issues, we are on track to deliver 1.1 million meters by 2025 as the programme ramps up post-lockdown.
£19 million to drive down leakage using the latest innovative techniques including using satellite imagery and fibre-optic technology to find and fix leaks; we have created 200 additional leakage roles since the start of the year and are on track to meet our stretching performance commitment at year end.
On track for net outcome delivery incentive (ODI) rewards. Ofwat’s assessment of 2020/21 outcomes in its Service and Delivery Report places us in the top two performers among water and water recycling companies. Our strong performance in the first half of 2021/22 on areas including customer service, flooding and environmental investments through the Water Industry National Environment Programme, indicates a net reward position at year end. We have achieved this despite the ongoing impact of wet weather in early 2021, supply chain challenges, including shortages of HGV drivers and difficulty in securing supplies of chemicals, and financial constraints.
Cambridge Waste Water Treatment Plant relocation phase 2 consultation complete. Plans are ongoing for the proposed relocation of Cambridge’s Waste Water Treatment Plant. We have consulted residents and stakeholders and environmental surveys are underway ahead of phase 3 consultation beginning in February 2022. The relocation will facilitate the delivery of a cutting-edge carbon positive water recycling centre for Cambridge and free up land for up to 5,600 homes. One of the largest water recycling projects in the UK, the scheme has secured a £227 million grant from Homes England.
Progression of new reservoirs proposed for the East of England. We have secured Gateway funding through RAPID (the Regulators’ Alliance for Progressing Infrastructure Delivery) to progress our ambitious plans for the proposed South Lincolnshire Reservoir and Fens Reservoir, addressing long-term water resilience for our region’s growing population. The two new multi-sector reservoirs are set to supply 250 million litres of water a day by the mid to late 2030s, serving at least 750,000 people and meeting the needs of homes, businesses and agriculture.
Supporting customers in vulnerable circumstances. We are providing targeted support to a record number of customers (237,000) through our Priority Services Register. Since the start of the year, 285,000 customers have benefited from our affordability schemes, and we are on target to support 350,000 customers by year end.
Safeguarding and enhancing the environment
Water recycling compliance. We welcome the recently announced reviews by the Environment Agency and Ofwat in light of growing public concern about river water quality. It is a concern we share, and one we’ve been working for years to address. We were delighted to report in our first response to the regulator that we found no evidence of environmental impacts from storm tank spills, and we are confident our proactive investigations in AMP6 have ensured sufficient investment where necessary for AMP7. Investment will continue into AMP8, guided by our Strategic Direction Statement (published in 2017) that identified working with others to achieve significant improvement in ecological quality across our catchments as one of four long-term ambitions we set for ourselves.
Investment in environmental programmes. We hear and understand the public’s unease about river water quality. In response, we have already accelerated the £800 million of AMP7 Water Industry National Environment Programme (WINEP) investment we have planned, such that the majority of the schemes will be completed earlier than scheduled. This is the largest WINEP of any water company for 2020–2025. £300 million of investment has been fast-tracked through the government’s Green Recovery plan, with no additional cost to customers.
We are investing £133 million in 2021/22 alone to protect and enhance the natural environment by removing chemicals such as phosphates and ammonia from used water, and restoring our rivers. The programme is proceeding at pace and on track to secure an ODI outperformance payment. It includes schemes on targeted stretches of riverbed which will bring wider ecological benefit across up to 250km of river catchment. These schemes are being delivered in partnership with Catchment-Based Approach partnerships, local Rivers Trusts, environmental groups and landowners. Target areas include tributaries of our region’s most iconic chalk streams, including south-western tributaries of the River Lark (Kennett-Lee, Tuddenham, Cavenham, Linnet), southern tributaries of the River Little Ouse (Sapiston and Black Bourn) in Suffolk, and the northern tributaries of the River Wissey (Old Carr, Gadder, Stringside), and the Rivers Heacham and Gaywood in Norfolk.
Commitment to increased monitoring of combined sewer overflows (CSOs). We understand and entirely support the desire to prevent untreated water from entering our region’s watercourses. We have publicly voiced our support for both the Environment Bill and the Duke of Wellington’s amendment. We continue to invest in our infrastructure and will increase the rate of installation of Event Duration Monitors (EDMs) to achieve 100 per cent coverage of CSOs by December 2023. This will further improve our understanding of how our networks are performing and create a sound platform on which to plan investment. This investment builds on the recent hydraulic modelling risk assessment for all CSOs and the installation of 794 EDMs to date.
Tackling pollution. Our continuous programme of investment and strategic delivery has seen the number of category 1-3 pollutions in our region reduced by more than half in 10 years, with our ongoing Pollution Incident Reduction Plan supporting this downward trajectory. This was recognised with 3* performance in the Environmental Performance Assessment, judging us as a good company. Our performance this calendar year has been impacted by exceptional rainfall and subsequent flooding in the first three months of 2021; however, the position has recovered significantly, dropping below historical average in the second half of the year. Pollutions remain a very significant area of focus for us.
Catchment management. Our successful metaldehyde reduction campaign Slug it Out will come to a close in March 2022 after seven years when the ban on the pesticide comes into force. By working with more than 225 farmers, our catchment management team have eliminated the operational risk posed by metaldehyde in the natural catchments of every Anglian Water reservoir.
Biodiversity and habitat restoration. We are proud that 99 per cent of the sites of special scientific interest we manage are in favourable condition (compared with a national average of 38.9 per cent). We are committed to delivering a 10 per cent gain in biodiversity resulting from construction and management of land we own. In October, we were pleased to be highly commended at the Chartered Institute of Ecology and Environment Management Awards, in recognition of wetland restoration work at Tetney Blow Wells in Lincolnshire, carried out over several years by our Biodiversity team.
A leading voice on climate action
Anglian Water led the UK water sector at COP26. We were the only UK water company to secure a formal role at COP26. Our strong track record on climate adaptation saw us invited to co-lead the Water theme in the first ever COP26 Resilience Hub in the Blue Zone, official home to the UN Framework Convention on Climate Change Race to Resilience. We hosted an international event on landscape-scale adaptation, attracting speakers including cabinet minister the Rt Hon Steve Barclay MP and the chairs of the Environment Agency and Natural England. Our long-standing and industry-leading action on mitigation via capital and operational carbon reduction saw our CEO Peter Simpson invited to speak at several Blue Zone events, including the formal launch of the Water Pavilion.
Comprehensive 2030 net zero routemap published. In July, we published a detailed routemap setting out how we will reach net zero by 2030 by reducing emissions, decarbonising our electricity supply and removing or offsetting our residual emissions, estimated at 26 per cent by 2030. Where we do need to offset, we are committed to doing so within our region. We chaired the Water UK working group which led to the development of the water industry’s shared routemap, described by UN High Level Climate Action Champion Nigel Topping as one of the most significant steps taken by any sector anywhere in the world.
Ambitious multi-agency climate adaptation Fens taskforce launched in partnership with the Environment Agency, Water Resources East, Cambridgeshire and Peterborough Combined Authority, and many regional partners. As featured at our COP event, the Future Fens: Integrated Adaptation Taskforce seeks to bring renewed prosperity to the Fens through a radical new approach to managing land and water resources; its members have committed to apply to join the UN Race to Resilience by the end of February 2022.
Delivering in the public interest for customers, communities and colleagues
Company financial restructure concluded in July. The restructure of our Group, together with the injection by our shareholders of more than £1 billion of capital, was the final stage in a process which began in 2018 to simplify our financial structures to improve transparency, trust and customer confidence and solidify our commitment to put wider public purpose at the heart of our business. The process saw us announce fundamental changes to our Articles of Association which enshrined a commitment for directors to consider the needs of the environment and communities alongside the need for shareholders to make a fair return on their investment.
Commitments to customers outlined in Social Contract. Our longstanding commitment to operating in the public interest was cemented with the publication of our Social Contract in June 2021. The contract, developed in partnership with customers, is framed around 10 outcomes, driving towards the delivery of our purpose: to bring environmental and social prosperity to the region we serve.
Five-point plan for Community Recovery published in June 2021. The plan outlines our purpose-led support for communities, focused on supporting vulnerable customers, being an inclusive business and increasing social mobility, investing in communities, supporting health and fostering wellbeing, and acting with integrity.
£1 million Positive Difference Fund fully dispensed. The second tranche of our £1 million Positive Difference Fund, set up at the start of the pandemic, was dispensed through 15 Community Foundations, providing grants of up to £20,000. Through the fund we have supported more than 100,000 people through 160 community groups.
Support for colleagues throughout Covid-19 pandemic recognised. In October, we were awarded the Royal Society for Public Health’s Health and Wellbeing in Workplaces Award 2021.
Commitment to purpose recognised through the award of Best Use of Purpose as a Business Driver at the Strategic Comms awards in November; judges said: “the clarity of Anglian Water’s vision was really apparent; purpose shines through in all of their actions”.
Pushing boundaries on innovation
Ofwat Breakthrough Challenge Funding. We secured more than £11 million of innovation funding through Ofwat’s Water Breakthrough Challenge in September, with two winning bids, securing close to a third of the total amount awarded (£36 million).
Our Safe Smart Systems project, awarded £7.5 million, is focused on achieving autonomous control in water systems across the UK. Triple Carbon Reduction (awarded £3.8 million), will use novel technologies to target a step change reduction in greenhouse gas emissions and electricity use in used water treatment and provide a new renewable energy source through green hydrogen production.
CReDo Climate Resilience Demonstrator launched. October saw the announcement of our ground-breaking resilience initiative with the National Digital Twin Programme and the Centre for Digital Built Britain, with funding from the Department for Business, Energy and Industrial Strategy. The digital twin project involves unprecedented collaboration between Anglian Water, telecoms provider BT and energy company UK Power Networks, sharing data to identify interdependencies in the event of severe weather scenarios; it was presented at COP26.
Ground-breaking leakage technology deployed. We have become the first water company in the UK to deploy leakage technology in live water mains, enabling us to identify leaks without interrupting our customers’ supply. The technology uses multi-sensor, low voltage conductivity and acoustic technology, as well as high-resolution closed-circuit television (CCTV), to listen for and find leaks from inside the water pipes.
Investors and analysts:
Jane Pilcher, Group Treasurer +44 (00) 7702 089 703
Regan Harris, PR and Media Lead +44 (00) 7900 210 450
Anglian Water press office: +44 (00) 0871 677 0123
Andy Rivett-Carnac, Headland +44 (00) 7968 997 365