South East Water
Limited
Preliminary
results
for the year to 31 March
2024
Chair
and CEO joint report
Our joint Chair/CEO statement
reflects on our performance during a year where we have made
significant progress by investing in key engineering projects that
will improve resilience across our network. We have also continued
our industry-leading work to protect and enhance the environment,
whilst helping customers to use less water at home. We understand
it is important to reach and support all customers, including those
in our society who are vulnerable. Positive progress has been made
in many areas during the year, but some severe weather events have
affected our overall performance. However, we were much better prepared to deal with incidents in the financial year, learning lessons from previous weather events, with better planning and
collaboration as well as our ongoing investment to boost the
resilience and flexibility of our network. This meant that many
events had no impact on our customers while others experienced a
reduced impact due to the proactive work we had done. You can read
more about this work later in our report.
Climate change remains a huge
challenge but we must adapt to it and mitigate against the risk to
our purpose, operations and resilience. Higher temperatures and
lower rainfall levels continue to compete with rising demand for
water due to population and economic growth. The way we adapt to
more volatile weather, which brings more flooding, sinkholes and
burst pipes, will affect how we serve our customers in the future
and how we protect and improve the environment. Whatever the
weather, customers rightly expect a reliable supply of drinking
water.
We are proud to supply around 544
million litres of top-quality drinking water to 2.3 million
customers in south east England every day through 9,000 miles of
pipes. It takes an army of dedicated people to maintain this
critical service, especially during the record-breaking hot weather
and the severe storms that we saw during the financial year. That
is why we begin our report with a thank you to everyone in our
business for responding to the challenges we faced. Our colleagues,
contractors, partners and stakeholders have all played a vital role
in ensuring we kept the taps flowing for as many customers as
possible, even during the extreme weather which impacted on our
operations and overall performance in 2023/24. Despite all our
efforts, there were still some issues during the year and we'd like
to apologise to customers who experienced any supply
interruptions.
Impact of extreme weather
events
June 2023 was officially the
hottest June on record according to the Met Office. High
temperatures and a prolonged dry period led to customer demand for
water rising so quickly that we could not treat and pump water fast
enough into our network. This resulted in some customers
experiencing low water pressure, intermittent supply or no water at
all as drinking water stocks fell very low. Our teams worked around
the clock to ensure facilities worked at maximum output to meet
demand. Despite producing an extra 138 million litres of water a
day - equivalent to supplying four towns like Maidstone or
Eastbourne - demand for water broke all previous records. The
situation developed much quicker than in 2022 and on 26 June we
introduced a Temporary Use Ban (TUB) or 'hosepipe' ban to bring
down demand and protect customers' water supplies across Kent and
Sussex. This remained in place until 4 August. We would like to
thank our customers for their understanding and co-operation during
this period.
Severe storms then punctuated the
autumn and winter with Storm Ciarán (November 2023) and Storm Isha
(January 2024) affecting power supplies. Power cuts and an increase
in burst water mains affected the amount of water stored within our
drinking water storage tanks in Kent and Sussex. Our 24-hour
incident teams worked hard to find and repair bursts and move water
around our underground pipe network but several areas still
experienced intermittent water supplies. We used generators at some
key sites to keep treating and pumping water to properties. Then we
had one of the wettest winters on record, with numerous flood
alerts and warnings, and groundwater flooding too. Ensuring our
sites can still operate during weather extremes is vital for a
resilient water supply. That is why we have continued to invest in
protecting our assets from future flooding.
The financial cost of
weather-related events has been considerable again this year. In
total, we incurred more than £3.1 million of costs through incident
activity. This includes the provision of alternate water,
compensation to customers and other operational costs such as
increased repairs, overtime and materials. An incident in Wadhurst
accounted for more than 60 per cent of this expenditure during the
year.
Weather-related factors also
affected our business performance as measured through Outcome
Delivery Incentives (ODIs). A net penalty of £7.9 million was
incurred (2022/23: £5.2 million). We outperformed our ODI target on
both the taste and appearance of water, and a reduction in the
number of household voids. Despite this, weather-related factors
caused us to miss our supply interruptions target, which coupled
with an increase in leakage led to a reduction in customer
satisfaction. This penalty will be returned to customers through
reduced bills in future years.
Ofwat investigation into supply
resilience
Ofwat launched an investigation
into our supply resilience in November 2023 following the high
demand incidents the company experienced in 2022 and 2023. Since
the investigation was launched, we have entered into a constructive
and transparent dialogue with Ofwat. This has allowed us to further
demonstrate the challenges we face in providing today's public
water supply in Kent and Sussex, whilst awaiting the outcome of the
draft determination in July.
In response to the investigation,
we have developed a detailed action plan with a number of
short-term responses that already improve our supply resilience and
will provide additional resilience in the coming year. However,
these short-term responses are no substitute to the proposals in
our business plan for 2025 to 2030 addressing the root causes of
our supply resilience issues, and which by their nature, scale, the
time required for design, planning and delivery, must be included
in our multi-year investment programme for the next AMP.
We are currently in discussions
with lenders and shareholders regarding additional liquidity.
Further information on the funding position and the impact on going
concern, including the related material uncertainty is included in
our going concern statement in note 1.
Despite these challenges and
pressures, we have still made positive progress in many areas. We
are pleased to present our group annual report and the audited
financial statements for the year ended 31 March 2024.
As already mentioned, the results
for the year have again been impacted by the additional costs
associated with the high temperatures in June 2023 and continuing
costs resulting from other weather events in previous years. Energy
prices also remain high, which has a significant effect on several
other costs we incur as part of our operations. Despite these
notable cost pressures, operating profit for the year increased to
£63.8 million (2023: £41.3 million). After taking into account the
net finance costs for the year, the company's loss before tax
showed a significant improvement at £36.7 million compared to the
prior year's loss before tax of £74.2 million.
Positive progress
Progress across our six strategic
priorities has been considerable during 2023/24. Some key
engineering projects have been completed which will deliver
improved resilience and flexibility across our network. We are also
proud to lead the industry with our award-winning support for
vulnerable customers. In January we achieved recertification to the
Inclusive Service Kitemark in recognition of this commitment. We
distributed more than 180,000 free water saving devices and
introduced an audit programme for household and non- household
customers to measure water usage and offer water efficiency advice
and free devices. The environment remains integral to everything we
do too. We have gone above and beyond our statutory obligations to
actively protect and enhance the environment by successfully
engaging with landowners and forging strong partnerships with
conservation groups, communities and charities. This year we have
collaborated on an exciting venture to create a new super National
Nature Reserve in the South Downs, supported a pioneering project
to tackle road run-off pollution, and planted almost 8,000 trees.
You can read more about these projects later in our
report.
We are already among the top five
UK water companies for our leakage performance, but we want to do
more. Tackling leaks is a long-term challenge and we continue to
invest millions each year to meet our targets. We are committed to
reducing the amount of water lost to leaks by 15 per cent between
2020 and 2025 and to halve it by 2050. Before the 2022 heatwave,
leakage was at an all-time low, and we had met the target set by
our regulator for 13 consecutive years. Since then, extreme weather
events have affected our performance, but we have still reduced
leakage this year. We have helped customers reduce their water use
through a proactive water efficiency programme, reducing the Per
Capita Consumption (PCC) of water during 2023/24. Each customer
used an average of 143.4 litres of water a day, 4.6 per cent less
than in 2022/23. Free water-saving devices, awareness campaigns and
a programme of household visits to offer water audits and advice
will help us reduce the PCC further.
Improving infrastructure and
service
Our business can never stand still
and we have continued to deliver on our commitment to invest £489
million between 2020 and 2025 on replacing underground pipes and
leakage control, developing new water resources, introducing new
treatment processes and installing the latest water testing
technology. In January we showed the former Minister for Water,
Robbie Moore MP, how we have restored our drinking water storage
reservoir at Aylesford (Kent) after sinkholes opened up in 2020.
These sinkholes resulted in the loss of millions of litres of water
in just a few hours. We completed the three-year restoration in
autumn 2023 and received industry recognition for it at the Utility
Week Awards (December 2023) with the Infrastructure Delivery Award.
We also discussed progress with building a new, state-of-the-art
water treatment works (WTW) on a section of the old Aylesford
Newsprint site, near Maidstone. The £39 million project is the
first WTW to be built in Kent for 18 years and will provide around
18 million litres of treated drinking water a day to the area once
it is operational in 2025. This will ensure we can continue to
supply the area with tap water as the population grows.
Other progress has included a £6
million network reconfiguration project at Barcombe WTW (Sussex)
including the installation of additional booster pumping, and a
major upgrade at Tilford Meads WTW to deal with naturally occurring
contaminants at source. In April 2023 we completed a two-year £11
million project to lay 11km of new pipe to protect future water
supplies in Fleet, Hampshire. We are also investing
£12.1 million to create a more
resilient water supply network within Wealden - a direct response
to recent incidents. In May 2023 we undertook emergency repairs to
a slipped bank alongside Ardingly Reservoir, earning us recognition
at the Ground Engineering Awards 2023 for the project's technical
excellence.
Planning ahead and investing in
important projects enables us to continue delivering a reliable
supply of top-quality drinking water to customers. We are pleased
with our strong performance against water quality targets and
industry averages and also to be in the top five water companies
for the DWI's Compliance Risk Index performance measure. We have
outperformed our targets for customer contacts about water quality
issues this year too.
We always aim to provide an
excellent customer experience, but when there is a service
interruption, it is even more important to communicate efficiently
to minimise customer frustration and effort. Our new AquAlerter
text messaging system has improved our proactive communication and
has been well-received by customers. Data, insight, technology and
collaborations help us to prepare for severe weather events. We
have worked with the Met Office to trial a new weather forecasting
system to predict temperature changes and other weather events more
accurately. We also value our collaborations with local resilience
forums (LRF) during incidents. This year we have invested in flood
prevention measures at our company sites, undertaken more catchment
management initiatives and arranged alternative provision for
water, which will make us more resilient. We have also appointed a
permanent Alternative Water Manager to manage the deployment of
bottled water stations and work with local authorities and LRFs to
develop alternative water plans.
Even during major events, the
health and safety of colleagues remains our number one priority. We
had one reportable (RIDDOR) accident during 2023/24, compared to
four in 2022/23. In April 2023 we launched a new online reporting
tool to make it easier and quicker for colleagues to report
potential safety issues and for us to act on concerns. We have also
rolled out e-learning training on workplace slips, trips and
falls.
Serving and supporting customers
and society
We aim to provide a trusted and
affordable service that supports all our customers' needs.
Customers and communities are front and centre of our approach to
service delivery. Priority Service Register (PSR) numbers have
risen by 38.6 per cent during the year which means 11.03 per cent
of customers are on the PSR. This is testament to the work being
done to reach more customers who may need extra support. Our new
Community Partnership Leads have had a successful first year,
forging relationships with local organisations and stakeholders to
ensure we reach customers needing support. We are very pleased to
have received Inclusive Service Kitemark reaccreditation with zero
non-conformities highlighted and we are proud to lead the industry
with our support for vulnerable customers. More than 50
stakeholders and experts attended our annual vulnerability event in
January to help inform and shape a revised strategy for submission
to the regulator this summer.
We continue to develop
partnerships with key organisations and charities (Age Concern,
SCOPE and Kidney Care UK) to provide better support to our older
customers and those with specific disabilities or other
needs.
We are working with primary
schools to teach children to look after water through pilots of our
AquaSmart initiative before a wider educational roll-out. Schools
and other community and charitable groups have benefitted from our
annual £20,000 Community Chest scheme. We always try to support the
communities we serve, and this includes areas severely impacted by
service interruptions. In June 2023 we distributed a £50,000 fund
between 21 charities in Crowborough and surrounding areas to thank
the community for their patience when a rapid freeze-thaw event
(December 2022) caused widespread supply interruptions.
My Account online customer
registrations continue to increase. More than 50 per cent of
customers have now registered, enabling them to easily access
accounts, compare water use to neighbours, submit meter readings
and request free water-saving devices. During 2023/24 we have given
away 180,495 water-saving devices, surpassing our target of
130,000. Thank you to everyone committed to helping us save
water.
Ensuring our environment
thrives
We have a responsibility to ensure
water supplies remain plentiful, reliable and sustainable while
helping the environment to thrive. Our achievements reflect our
commitment to do everything possible to protect and enhance the
environment, as outlined in our 25 Year Environment Plan, launched
on 14 May 2024. We work closely with farmers and landowners to
improve water quality through catchment management initiatives and
by conducting cover crop trials. Our work to reduce nitrates in the
Hampshire chalk catchment resulted in a special paper being issued
in a prestigious publication, while our catchment management team
has collaborated to develop a pioneering new tool to tackle road
run-off pollution. We continue to support landowners to increase
sustainability and resilience by providing water efficiency advice,
funding towards rain harvesting systems and free events and
workshops throughout the year.
We have outperformed our year four
biodiversity ODI (outcome delivery incentive) target and now manage
76 per cent of our company-owned land for biodiversity. Our work
has supported many species, including water voles, beavers,
wart-biter bush crickets, bumblebees and butterflies. With
colleagues and communities, we have also planted nearly 8,000
trees. A second environmental apprentice has joined the team and we
have developed successful partnerships with many environmental and
wildlife organisations, including Natural England, Buglife, the
Zoological Society of London, Butterfly Conservation, the Wild
Cookham project and Bumblebee Conservation Trust.
We are collaborating on a
ground-breaking Nature recovery project with Natural England to
create a new super National Nature Reserve in the South Downs,
which we showcased to former Secretary of State for the
Environment, Therese Coffey MP, in August. This is part of the
King's Series of National Nature Reserves to enhance biodiversity
and climate resilience through well-connected and wildlife-rich
habitats. Technology is helping us protect the environment too. We
use drones to identify leaks on our own infrastructure, on
customers' supplies, and to pinpoint water features on land that
may pose a pollution risk. We are using cutting-edge eDNA survey
techniques to monitor invasive non-native species at our reservoirs
too.
Building a future-ready
business
People remain at the heart of our
business. Our five-year People Plan drives our approach so we can
provide the best service and ensure we are future-ready. We are
proud of our progress in extending our apprenticeships and offering
more upskilling and career development opportunities through our
Aspire, Inspire and Lead programmes. This year we have joined The
5% Club, recognising how we encourage colleagues to earn and learn
at the same time. We continue to outperform our industry on gender
diversity, but we recognise there is more to do to address the
gender imbalance on the operational side of the business. We have launched a major review to see how we can attract and retain more women in operational roles. A new human resources IT system is
in the pipeline which will connect all business areas and further
professionalise services, including recruitment, on-boarding and
payroll.
Our company remains committed to
transitioning to become a low carbon sustainable business. We are
trialling the latest EV technologies for our company vehicle fleet
and researching home charging options which will allow us to remain
responsive. We have already installed more charging points at
company sites and we are looking at green power purchase
agreements. We are also exploring on-site solar projects and
battery storage technology options. Our suppliers and contractors
share our environmental ambitions and we are working together to
reduce plastic packaging. We hope to reduce the number of plastic
water bottles used during incidents through our investment in 10
more water tankers this year. Our tankering fleet can directly
inject water into networks during supply interruptions.
Securing the future of
water
Resilience is important in a
water-stressed area with a growing population and economy. In
August we published our revised draft Water Resources Management
Plan 2024 (rWRMP24) and consultation Statement of Response. This
details how we will provide a reliable and resilient drinking water
supply over the next 50 years, while delivering schemes that
promote sustainability and protect the environment. We collaborate
closely with other water companies across the south east, through
the Water Resources South East (WRSE) alliance, to develop a
regional resilience plan. This sets out how, together, we can
secure water for years to come for our region and has fed directly
into our company rWRMP24. Our plan explains how we will invest £1.2
billion between 2025 and 2075 to build new infrastructure and a
further £1.1 billion to reduce
leakage and
help customers
reduce their
water use.
Developing new
sources of
water, like
the Broad Oak
reservoir scheme (east Kent), is vital to increase
resilience.
Even with significant investment,
we cannot meet the challenges of the future without help from our
customers, stakeholders and regulators. Customer satisfaction is
rooted in a resilient infrastructure and we know we must improve
our performance and service quality. However, we all have important
roles to play to maintain a top-quality, resilient, affordable
drinking water supply, while also protecting and enhancing the
natural environment for years to come.
Looking ahead
We submitted our latest business
plan, Price Review 24 (PR24), in October. This is the most
ambitious five-year plan we have ever produced, involving extensive
consultation and engagement with a wide range of customers and
stakeholders to ensure our priorities reflect customers'
expectations. Hundreds joined us virtually for two 'Your Water,
Your Say' customer sessions in June and October which helped to
shape the plan.
Our Strategic Direction Statement
(SDS) forms the cornerstone of PR24. It explains our aims for the
next 25 years, and the challenges we expect to face to meet
customers' expectations, secure future water resources, and reduce
leaks and demand:
A trusted and affordable service
supporting customers and society. Flexible, resilient
infrastructure and service.
Thriving environment.
Low carbon sustainable business.
Securing the future of water.
Future-ready business.
We will continue to invest
significantly into our network to improve customer service, reduce
supply interruptions and strengthen network resilience. Over the
next five years we will invest nearly £1.9 billion into the network
as previously mentioned. We are also increasing reservoir storage
capacity and improving network connections. Alongside this, we will
invest in reducing leakage further and supporting customers and
businesses to use water wisely. A £14 million upgrade of our WTW in
Maidenhead is ongoing and we are constructing the first new WTW to
be built in Kent for 18 years in Maidstone. When fully operational
next year, this state-of-the-art WTW will produce an extra 18
million litres of water per day for the growing community.
We are introducing a new
structured social tariff system to replace the current capped
approach following feedback from customers and stakeholders. We are
also reviewing how we can further reduce water poverty with more
support.
We have faced significant
challenges, which have impacted on our financial performance, but
we remain committed to improving how we deliver a reliable and
resilient supply of top-quality drinking water, while helping the
environment to thrive.
Group income statement
for the year ended 31 March
2024
|
|
Note
|
2024
£000
|
2023
£000
|
|
Revenue
|
2
|
281,775
|
257,482
|
|
Bad debts
|
|
(5,714)
|
(4,770)
|
|
Net operating costs
|
3
|
(225,711)
|
(228,412)
|
|
Other income
|
2
|
13,427
|
16,999
|
|
Profit from operations
|
|
63,777
|
41,299
|
|
Finance income
|
5
|
1,711
|
1,925
|
|
Finance expense
|
5
|
(102,151)
|
(117,459)
|
|
Loss before taxation
|
|
(36,663)
|
(74,235)
|
|
Taxation
|
6
|
8,620
|
18,798
|
|
Loss for the year
|
(28,043)
|
(55,437)
|
|
Loss per share attributable to the ordinary equity holders of
the parent
|
Note
|
2024
Pence
|
2023
Pence
|
|
Basic and diluted
|
8
|
(56.87)
|
(112.42)
|
The group activities above are
derived from continuing operations.
Group statement of other
comprehensive income
for the year ended 31 March
2024
|
|
Note
|
2024
£000
|
2023
£000
|
|
Loss for the year
|
(28,043)
|
(55,437)
|
|
Other comprehensive (loss)/income:
|
|
|
|
|
Items that will not be reclassified to the income
statement:
|
|
|
|
Net actuarial loss on pension
schemes
|
|
(8,015)
|
(39,449)
|
|
Deferred tax credit on net
actuarial loss
|
6
|
2,004
|
9,862
|
|
Other comprehensive loss for the year
|
(6,011)
|
(29,587)
|
|
Total comprehensive
loss
|
(34,054)
|
(85,024)
|
Group statement of financial
position
Registered number: 02679874
as at 31 March 2024
|
|
Note
|
31 March
2024
£000
|
31
March
2023
£000
Restated*
|
1 April
2022
£000
Restated*
|
|
Assets
Non-current assets
|
|
|
|
|
|
Property, plant and equipment
|
|
1,777,640
|
1,718,604
|
1,678,147
|
|
Right of use assets
|
|
3,804
|
4,917
|
4,744
|
|
Intangible assets
|
|
10,066
|
7,768
|
8,294
|
|
Defined benefit pension
surplus
|
|
23,014
|
23,842
|
57,346
|
|
|
1,814,524
|
1,755,131
|
1,748,531
|
|
Current assets
|
|
|
|
|
|
Inventories
|
|
1,343
|
1,132
|
851
|
|
Trade and other receivables
|
|
97,477
|
92,375
|
84,037
|
|
Cash and cash equivalents
|
|
4,986
|
4,002
|
14,539
|
|
|
103,806
|
97,509
|
99,427
|
|
Total assets
|
1,918,330
|
1,852,640
|
1,847,958
|
|
Liabilities
Non-current liabilities
|
|
|
|
|
|
Trade and other payables
|
|
3,864
|
4,104
|
4,154
|
|
Loans and borrowings
|
|
1,250,980
|
1,198,501
|
1,120,478
|
|
Deferred income
|
|
3,646
|
4,876
|
4,315
|
|
Defined benefit pension
liability
|
|
2,493
|
2,482
|
2,869
|
|
Deferred tax liability
|
6
|
189,665
|
200,205
|
228,790
|
|
|
1,450,648
|
1,410,168
|
1,360,606
|
|
Current liabilities
|
|
|
|
|
|
Trade and other payables
|
|
114,849
|
120,271
|
99,851
|
|
Loans and borrowings
|
|
97,436
|
30,520
|
339
|
|
Deferred income
|
|
5,651
|
5,312
|
5,740
|
|
Provisions
|
|
6,966
|
7,285
|
8,314
|
|
|
224,902
|
163,388
|
114,244
|
|
Total liabilities
|
1,675,550
|
1,573,556
|
1,474,850
|
|
Net assets
|
242,780
|
279,084
|
373,108
|
|
Issued capital and reserves attributable to owners of the
parent
|
|
|
|
|
Share capital
|
|
49,312
|
49,312
|
49,312
|
|
Revaluation reserve
|
|
208,657
|
213,254
|
217,906
|
|
Retained (losses)/earnings
|
|
(15,189)
|
16,518
|
105,890
|
|
Total equity
|
242,780
|
279,084
|
373,108
|
The financial statements were
approved and authorised for issue by the board of directors and
were signed on its behalf by:
David Hinton
Andrew Farmer
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
9 JULY 2024
9 JULY 2024
Group statement of changes in
equity
for the year ended 31 March
2024
|
|
Note
|
Issued share capital
£000
|
Revaluation
reserve
£000
|
Retained (losses)/
earnings
£000
|
Total equity
£000
|
|
At 1 April 2022
|
|
49,312
|
217,906
|
112,126
|
379,344
|
|
Correction on historic depreciation
|
|
-
|
-
|
(6,236)
|
(6,236)
|
|
Restated* At 1 April 2022
|
|
49,312
|
217,906
|
105,890
|
373,108
|
|
Comprehensive loss for the year
|
|
|
|
|
|
|
Loss for the year
|
|
-
|
-
|
(55,437)
|
(55,437)
|
|
Other comprehensive loss
|
|
-
|
-
|
(29,587)
|
(29,587)
|
|
Total comprehensive
loss for
the year
|
|
-
|
-
|
(85,024)
|
(85,024)
|
|
Dividends
|
7
|
-
|
-
|
(9,000)
|
(9,000)
|
|
Amortisation of revaluation
reserve
|
|
-
|
(6,112)
|
6,112
|
-
|
|
Release revaluation reserve on
disposals
|
|
-
|
(91)
|
91
|
-
|
|
Deferred tax on revaluation and
retained earnings transfer1
|
|
-
|
1,551
|
(1,551)
|
-
|
|
|
|
-
|
(4,652)
|
(4,348)
|
(9,000)
|
|
At 31 March 2023
|
|
49,312
|
213,254
|
16,518
|
279,084
|
|
At 1 April 2023
Comprehensive loss for the year
|
|
49,312
|
213,254
|
16,518
|
279,084
|
|
Loss for the year
|
|
-
|
-
|
(28,043)
|
(28,043)
|
|
Other comprehensive loss
|
|
-
|
-
|
(6,011)
|
(6,011)
|
|
Total comprehensive
loss for
the year
|
|
-
|
-
|
(34,054)
|
(34,054)
|
|
Dividends
|
7
|
-
|
-
|
(2,250)
|
(2,250)
|
|
Amortisation of revaluation
reserve
|
|
-
|
(6,110)
|
6,110
|
-
|
|
Release revaluation reserve on
disposals
|
|
-
|
(19)
|
19
|
-
|
|
Deferred tax on revaluation and
retained earnings transfer1
|
|
-
|
1,532
|
(1,532)
|
-
|
|
|
|
-
|
(4,597)
|
2,347
|
(2,250)
|
|
At 31 March 2024
|
|
49,312
|
208,657
|
(15,189)
|
242,780
|
|
|
|
|
Group statement of cash
flows
for the year ended 31 March
2024
|
|
Note
|
2024
£000
|
2023
£000
|
|
Cash flows from operating activities
|
|
|
|
|
Loss for the year
Adjustments for
|
|
(28,043)
|
(55,437)
|
|
Depreciation and impairment of
property, plant and equipment
|
|
61,054
|
58,541
|
|
Amortisation of intangible assets
including impairment
|
|
2,315
|
2,934
|
|
Finance income
|
5
|
(1,711)
|
(1,925)
|
|
Finance expense
|
5
|
102,151
|
117,459
|
|
(Profit)/loss on sale of property,
plant and equipment
|
|
(69)
|
244
|
|
Difference between pension
contributions paid and amounts recognised
in the income statement
|
(5,996)
|
(4,796)
|
|
Income tax credit
|
6
|
(8,620)
|
(18,798)
|
|
Movements in working capital
|
|
121,081
|
98,222
|
|
Increase in trade and other
receivables
|
|
(5,196)
|
(8,538)
|
|
Increase in inventories
|
|
(211)
|
(281)
|
|
Increase in trade and other
payables
|
|
3,160
|
15,592
|
|
Cash generated from operations
|
|
118,834
|
104,995
|
|
Income taxes paid
|
|
(8,464)
|
(1,332)
|
|
Interest element on lease
liability payments
|
|
(121)
|
(153)
|
|
Interest received
|
|
526
|
387
|
|
Interest paid
|
|
(46,294)
|
(39,800)
|
|
Net cash generated from operating activities
|
64,481
|
64,097
|
|
Cash flows from investing activities
|
|
|
|
|
Purchase of property, plant and
equipment
|
|
(123,342)
|
(92,976)
|
|
Proceeds from disposal of
property, plant and equipment
|
|
256
|
201
|
|
Purchase of intangible
assets
|
|
(4,613)
|
(2,431)
|
|
Net cash outflow from investing activities
|
(127,699)
|
(95,206)
|
|
Cash flows from financing activities
|
|
|
|
|
Credit facility drawdowns
|
|
67,000
|
30,000
|
|
Debenture redemption
|
|
-
|
(4)
|
|
Payment of lease liabilities
|
|
(548)
|
(376)
|
|
Issue costs of debt
|
|
-
|
(48)
|
|
Dividends paid to shareholders
|
7
|
(2,250)
|
(9,000)
|
|
Net cash generated from financing activities
|
64,202
|
20,572
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
984
|
(10,537)
|
|
Cash and cash equivalents at the
beginning of year
|
|
4,002
|
14,539
|
|
Cash and cash equivalents at the end of the year
|
|
4,986
|
4,002
|
|
|
Notes to the group financial
statements
for the year ended 31 March
2024
1. Basis of preparation and authorisation of financial
statements
The financial statements of South
East Water Limited and its subsidiary (the "group") for the year
ended 31 March 2024 were authorised for issue by the board of
directors on 9 July 2024 and the Statement of Financial Position
was signed on the board's behalf by David Hinton and Andrew Farmer.
South East Water Limited is a private company that has limited
liability by shares and is incorporated in the United Kingdom and
registered in England and Wales.
These consolidated and company
only financial statements have been prepared in accordance with UK-
adopted international accounting standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
Details of the group's accounting
policies, including changes during the year.
The group financial statements are
presented in Sterling and all values are rounded to the nearest
thousand pounds (£000) except where otherwise indicated.
1.1 Basis of measurement
The financial statements have been
prepared on the historical cost basis except for the following
items, which are measured on an alternative basis on each reporting
date.
Items
Measurement basis
Pension assets
Fair value
Certain assets in property,
Measured at deemed cost by reference to fair
plant and equipment
value on adoption of IFRS on 1 April 2014
1.2 Going concern
The
directors have undertaken a detailed review of the group's and
company's liquidity requirements compared with the cash and
facilities available, which includes cash at hand, cash on deposit,
and committed bank facilities of which £28.0 million remained
undrawn at 31 March 2024. The directors have also considered the
financial covenant position including cashflow projections based on
2024/25 forecasts and the PR 24 business plan, the current credit
ratings and financial risk.
The group has a significant level
of planned expenditure over the remainder of this year and into
AMP8 to continue to improve resilience and operational performance
and to enhance its assets. The group continues to face the effect
of higher operating costs as a result of the direct and indirect
impact of higher power prices, higher demand for water leading to
additional costs, and the impact of climate change including
recovering from a number of extreme weather events over the last
few years.
In order to provide additional
liquidity and finance our plans we have engaged with lenders and
shareholders. Although discussions with external lenders to provide
funds to meet budgetary projections and provide sufficient headroom
are at an advanced stage, at the date of approval of these
financial statements the financing has not been completed. If it is
not possible to raise the additional liquidity, the group and
therefore company would not have sufficient liquidity for the going
concern period but in this event, the ultimate shareholders have
confirmed that they are minded in principle to support the group if
the need arises.
The directors expect to raise
sufficient additional liquidity to cover the going concern period
as required, but as this has not been committed at the date of
approval of these financial statements and the commitment is not
within the control of the directors, the risk that the funding will
not be received constitutes a material uncertainty that may cast
significant doubt on the ability of the group and company to
continue as a going concern.
Notwithstanding the material
uncertainty described above, and on the basis of their assessment
of the group's overall financial position and the latest cash flow
forecast shared with the board, the directors have a reasonable
expectation that the group and therefore the company have adequate
resources to continue in operational existence for the foreseeable
future, being a period of at least 12 months from the date of
approval of these financial statements. This assessment includes
the group's ability to raise new finance to repay existing debt and
the management of operational cash flows along with the
availability of committed and undrawn facilities. For this reason,
the directors continue to adopt the going concern basis of
accounting in preparing the financial statements. Further details
can be found in the strategic report. The financial statements do
not include the adjustments that would result if the group and
company were unable to continue as a going concern.
1.3 Basis of consolidation
These financial statements
incorporate the financial information of South East Water Limited
and its subsidiary, South East Water (Finance) Limited (together
the "group").
Transactions and balances between
the company and its subsidiary have been eliminated fully on
consolidation. Subsidiaries are consolidated from the date on which
control is transferred to the group and cease to be consolidated
from the date on which control is transferred out of the
group.
2. Revenue and other income
The following is an analysis of
the group and company's revenue and other income for the year from
continuing operations:
|
Group
|
2024
£000
|
2023
£000
|
|
Revenue
|
|
|
|
Unmetered water income
|
22,273
|
20,480
|
|
Metered water income
|
248,418
|
226,812
|
|
Other revenue
|
11,084
|
10,190
|
|
Total revenue
Other
income
|
281,775
|
257,482
|
|
Rental income
|
1,172
|
1,228
|
|
Other income
|
12,255
|
15,771
|
|
Total other income
|
13,427
|
16,999
|
|
|
295,202
|
274,481
|
All revenue is from customers
within the United Kingdom.
Other revenue comprises a number
of income streams, including those associated with activities
typically performed for property developers, which impact the
group's infrastructure network assets, including diversions works
to relocate water assets, and activities that facilitate the
creation of an authorised connection through which properties can
obtain water services. Other revenue includes new connections
income of £3.9 million (2023: £4.1 million), infrastructure income
of £1.0 million (2023: £1.6 million) and capital contributions of
£3.5 million (2023: £2.2 million).
Other income includes charges for
billing and cash collection services amounting to £7.2 million
(2023:
£7.1 million), and laboratory
income of £3.8 million (2023: £3.0 million). Other income in 2023
also included final insurance proceeds in respect of an insurance
claim relating to the Aylesford sinkholes of £4.6
million.
|
Group
|
Note
|
2024
£000
|
2023
£000
|
|
Employee benefits expense
|
4
|
38,643
|
36,165
|
|
Asset expense:
|
|
|
|
|
Depreciation - owned assets
|
|
59,874
|
57,361
|
|
Depreciation - right-of-use
assets
|
|
1,180
|
1,180
|
|
Amortisation of intangible
assets
|
|
2,315
|
2,934
|
|
(Profit)/loss on disposal of
property, plant and equipment
|
|
(69)
|
244
|
|
|
63,300
|
61,719
|
|
Other operating expenses: Operating
lease rentals:
|
|
|
|
|
Vehicles and office equipment
|
|
324
|
481
|
|
Land and buildings
|
|
(7)
|
(23)
|
|
Energy costs
|
|
27,674
|
29,300
|
|
Rates
|
|
16,640
|
18,467
|
|
Contractors
|
|
41,484
|
41,831
|
|
Bulk water supplies and
abstraction licences
|
|
10,294
|
11,831
|
|
Chemicals
|
|
6,758
|
6,492
|
|
Insurance and related costs
|
|
4,161
|
4,008
|
|
Compensation and donations
|
|
2,152
|
6,875
|
|
Other
|
|
20,010
|
15,842
|
|
Other operating expenses charged
to capital projects
|
|
(5,722)
|
(4,576)
|
|
|
123,768
|
130,528
|
|
Total operating costs
|
225,711
|
228,412
|
|
Group
|
2024
£000
|
2023
£000
|
|
Fees payable to the group's auditors in respect of:
Audit of the group and company
financial statements
|
564
|
347
|
|
Audit of subsidiary
|
1
|
1
|
|
Total audit
|
565
|
348
|
|
Regulatory accounts
|
76
|
71
|
|
Other assurance services
|
17
|
16
|
|
Total non-audit services
|
93
|
87
|
|
Total fees payable to the group's auditors
|
658
|
435
|
4.Employees and directors
|
Group
|
2024
£000
|
2023
£000
|
|
Employee benefit expenses (including directors) comprise:
|
|
|
|
Wages and salaries
|
41,467
|
37,448
|
|
Social security costs
|
4,181
|
3,933
|
|
Defined contribution pension
cost
|
3,114
|
2,749
|
|
Defined benefit scheme
charge
|
957
|
1,340
|
|
Labour costs capitalised
|
(11,076)
|
(9,305)
|
|
|
38,643
|
36,165
|
Key management personnel
compensation
Emoluments of the directors, who
are the group's key management, were:
|
|
2024
£000
|
2023
£000
|
|
Aggregate emoluments including
bonuses (short-term employee benefits)
|
1,016
|
974
|
|
Pension scheme costs - defined
contribution plans
|
20
|
16
|
|
|
1,036
|
990
|
Emoluments of the highest paid
director including bonuses were: £430,000 (2023: £405,000).
One director (2023: one) has a
deferred pension from the defined benefit pension schemes which
closed to future accrual in 2015. There are currently two directors
(2023: two) under a defined contribution scheme.
Further disclosures in respect of
directors' emoluments are set out in the remuneration report on
page 148.
The monthly average number of
persons, including the directors, employed by the group during the
year was as follows:
|
|
2024
No.
|
2023
No.
|
|
Operations
|
443
|
427
|
|
Management and Administration
|
628
|
584
|
|
|
1,071
|
1,011
|
5. Finance income and expense
|
Group
|
2024
£000
|
2023
£000
|
|
Finance income
|
|
|
|
Interest receivable on bank
balances and short-term deposits
|
530
|
389
|
|
Net interest income on defined
benefit asset
|
1,181
|
1,536
|
|
Total finance income
|
1,711
|
1,925
|
|
Finance expense
|
|
|
|
Debenture interest
|
42
|
42
|
|
Effective interest on listed
debt
|
15,003
|
14,582
|
|
Interest on lease liabilities
|
121
|
153
|
|
Financing guarantee fees
|
1,188
|
1,237
|
|
Bank interest and other finance
charges
|
18,151
|
11,552
|
|
Amortisation of loan issue
costs
|
652
|
652
|
|
Indexation on index linked
bonds
|
12,349
|
25,107
|
|
Interest payable on index linked
loans
|
16,044
|
14,441
|
|
Indexation on index linked
loans
|
39,942
|
51,512
|
|
Interest capitalised
|
(1,341)
|
(1,819)
|
|
Total finance expense
|
102,151
|
117,459
|
Interest is capitalised at the
weighted average rate of interest on the group senior long-term
debt of 5.0 per cent (2023: 4.7 per cent).
Indexation on index linked bonds
and loans are lower due to the decreased inflation and lower RPI
compared to prior year.
6. Taxation
6.1 Income tax recognised in profit or loss
|
Group
|
2024
£000
|
2023
£000
|
|
Current tax
|
|
|
|
Current tax on profits for the
year
|
9
|
7
|
|
Adjustments in respect of prior
years
|
(92)
|
(82)
|
|
Total current tax credit
|
(83)
|
(75)
|
|
Deferred tax credit
|
|
|
|
Origination and reversal of timing
differences
|
(9,054)
|
(13,467)
|
|
Adjustments in respect of prior
years
|
517
|
(5,256)
|
|
Total deferred tax credit
|
(8,537)
|
(18,723)
|
|
Total tax credit
|
(8,620)
|
(18,798)
|
The reasons for the difference
between the actual tax credit for the year and the standard rate of
corporation tax in the United Kingdom applied to losses before
income tax for the year are as follows:
|
Group
|
2024
£000
|
2023
£000
|
|
Loss for the year
|
(28,043)
(8,620)
|
(55,437)
(18,798)
|
|
Income tax credit (including income
tax on associate, joint venture and discontinued
operations)
|
|
Loss before income taxes
|
(36,663)
|
(74,235)
|
|
Tax using the company's domestic
tax rate of 25% (2023: 19%)
|
(9,166)
|
(14,105)
|
|
Expenses not deductible for tax
purposes, other than goodwill,
amortisation and impairment
|
138
|
645
|
|
Adjustments to current tax charge
in respect of prior periods
|
(92)
|
(82)
|
|
Adjustments to deferred tax charge
in respect of prior periods
|
517
|
(5,256)
|
|
Tax effect of income not taxable
in determining taxable profit
|
(17)
|
-
|
|
Total tax credit
|
(8,620)
|
(18,798)
|
As enacted by the Finance Act
2021, the main rate of UK corporation tax is 25 per cent (2023: 19
per cent).
6.2 Income tax recognised in
profit or loss continued
The deferred tax on temporary
differences as at 31 March 2024 have been calculated using 25 per
cent (2023: 25 per cent), the enacted corporation tax rate for the
periods during which the temporary differences are expected to
unwind.
The adjustments to current and
deferred tax charge in respect of previous years represent the
changes between the prior year financial statements and the prior
year tax computations submitted. The expenses not deductible for
tax purposes are primarily driven by the movement on general
provisions, non- deductible entertainment expenditure, and
depreciation on non-qualifying capital expenditure.
Changes in tax rates and factors
affecting the future tax charges
Capital investment is expected to
remain at similar or higher levels and the group expects to be able
to claim capital allowances in excess of depreciation in future
years. There are losses of £58.6 million available within the
company to mitigate future profits. The enacted enhanced 100 per
cent first year full expensing capital allowance for qualifying
plant and machinery and 50 per cent allowance for special rate
assets expenditure have been made permanent.
6.3 Income tax recognised in other
comprehensive income
|
Group
|
2024
£000
|
2023
£000
|
|
Deferred tax
|
2,004
|
9,862
|
|
Deferred tax on defined benefit
pension schemes
|
The net credit recognised in other
comprehensive income for the year ended 31 March 2024 is £2.0
million (2023: £9.9 million).
6.4 Deferred tax balances
The following is the analysis of
deferred tax liabilities presented in the consolidated statement of
financial position:
|
Group
|
2024
£000
|
2023
£000
|
|
Deferred tax liabilities
|
(189,665)
|
(200,205)
|
|
Group
|
Opening
balance
£000
|
Recognised
in profit
or
loss
£000
|
Recognised
directly
in
equity
£000
|
Closing
balance
£000
|
|
2024 Deferred tax (liabilities)/assets in relation
to:
|
|
|
|
|
|
Property, plant and equipment
|
(206,514)
|
7,317
|
-
|
(199,197)
|
|
Losses carried forward
|
11,649
|
3,013
|
-
|
14,662
|
|
Defined benefit obligations
|
(5,340)
|
(1,794)
|
2,004
|
(5,130)
|
|
|
(200,205)
|
8,536
|
2,004
|
(189,665)
|
|
Group
|
Opening
balance
£000
|
Recognised in profit or
loss
£000
|
Recognised
directly
in
equity
£000
|
Closing
balance
£000
|
|
2023 Deferred tax (liabilities)/assets in relation
to:
|
|
Property, plant and equipment
|
(215,171)
|
8,657
|
-
|
(206,514)
|
|
Losses carried forward
|
-
|
11,649
|
-
|
11,649
|
|
Defined benefit obligations
|
(13,619)
|
(1,583)
|
9,862
|
(5,340)
|
|
|
(228,790)
|
18,723
|
9,862
|
(200,205)
|
Deferred tax assets and
liabilities are only offset where there is a legally enforceable
right of offset and there is an intention to settle the balances
net. All of the deferred tax assets were available for offset
against deferred tax liabilities and hence the net deferred tax
liability at 31 March 2024 was £189.7 million (2023: £200.2
million).
Temporary timing differences
All temporary timing differences
are recognised in the deferred tax calculation.
The total amount of qualifying
tangible fixed assets for R&D claims recognised in the deferred
tax liability as at 31 March 2024 is £144,000 (2023:
£174,000).
7. Dividends
|
Group
|
2024
£000
|
2023
£000
|
|
Interim dividend of 4.56 pence
(2023: 4.56 pence) per Ordinary share paid during the year
|
2,250
|
2,250
|
|
Interim dividend of 0.00 pence
(2023: 4.56 pence) per Ordinary share paid during the year
|
-
|
2,250
|
|
Interim dividend of 0.00 pence
(2023: 4.56 pence) per Ordinary share paid during the year
|
-
|
2,250
|
|
Final dividend of 0.00 pence
(2023: 4.56 pence) per Ordinary share paid during the year
|
-
|
2,250
|
|
|
2,250
|
9,000
|
There were no dividends proposed
for approval as at 31 March 2024 and 31 March 2023.
8. Earnings per share
|
Group
|
2024
£000
|
2023
£000
|
|
Loss for the year from continuing
operations
|
(28,043)
|
(55,437)
|
|
|
2024
Number
|
2023
Number
|
|
Basic and diluted weighted average
number of shares
|
49,312,354
|
49,312,354
|
|
|
2024
Pence
|
2023
Pence
|
|
Basic and diluted loss per share
from continuing operations
|
(56.87)
|
(112.42)
|