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Financial Results for year ended 31 March 2019

03 July 19

Financial Results for year ended 31 March 2019

We have today published our Annual Report and Financial Statements for the year ended 31 March 2019, the fourth year of the 2015-2020 price control period (Asset Management Plan 6; ‘AMP6’)

Throughout the year we further continued to make progress towards our ambitious performance commitments that we included within our AMP6 Business Plan. We are pleased to say that we are achieving most of our targets and are taking mitigating action in those few cases where we have fallen behind.

We had a period of exceptionally hot, dry weather over the 2018 summer months and as a result had 36 consecutive days where demand exceeded 1,000 Megalitres per day (‘Ml/d’) including 12 days where demand exceeded 1,100 Ml/d, challenging our production plants and our network, and leading to additional expenditure being incurred to ensure a continuous supply of high quality water to our customers was maintained.

We attach a high priority to meeting our leakage reduction targets, as we want to demonstrate that we are playing our part when we are asking customers to save water. In November 2018, we identified a large burst on the outlet pipe of one of our key water treatment works, which contributed to a deterioration in our leakage performance for 2018/19 and, because we found that the burst started in 2017/18, has resulted in us restating our leakage figure and failing our target for that year.

We have incurred regulatory penalties for not achieving this performance commitment in 2017/18 and 2018/19, but we remain fully committed to meeting our industry leading target by 2020.

We are keen to recognise the huge effort from different teams across the business, and our partners, that have delivered improved levels of performance to help us meet the commitments we have made to customers. However, we recognise that we need to improve our performance going forward if we are to deliver on all our performance commitments for the last year of AMP6 and going forward into AMP7.

Business highlights

Financial performance:

Revenue - £311.6 million (2018: £308.0 million)

£124.5 million invested in enhancing and maintaining infrastructure and assets

We transacted our first ever RPI linked inflation swap in August 2018, transferring some of our interest payments from fixed to index-linked in order to mitigate our interest rate exposure and increase the headroom above our covenant limits in view of planned expenditure for AMP7

The latest actuarial valuation of our Pension Plan was completed in the year and concluded that it was fully funded on a self-sufficiency basis

We have taken action to enhance our corporate responsibility. In March 2019, we were awarded the UK Fair Tax Mark, becoming only the 50th company to receive this certification, which recognises that we pay the right amount of corporation tax, at the right time and in the right place. In January 2019, we completed the substitution of our Cayman Islands financing entity with a UK entity as part of simplifying our group structure.

Operational performance

Reduced our average water use (per person, per day) by 1.8 litres to 149.2 litres, compared to our restated 2017/18 performance, despite the increased demand experienced during the hot, dry summer weather period

Continued to provide high quality water for the 2018 calendar year, mean zonal compliance of 99.96%

We experienced 309 unplanned interruptions to supply over 12 hours compared to a target of 320 and actual performance of 7,890 in 2017/18. This is the first year in this AMP period that the performance commitment has been achieved, with the improvement in performance being a result of both a reduction in the number of large diameter mains bursts as well as greater focus on innovative solutions to restoring supplies

Reduced the amount of water taken from the environment (abstraction) in the year by 42.1 megalitres per day, achieving our sustainability reductions in line with our AMP6 Business Plan

Continually improving and enhancing our digital self-serve experience for our customers, developing new journeys and functionality, enabling our customers to do more than ever online, with positive trends in our customer service metrics, including an 18% reduction in unwanted contact, a 22% reduction in complaints and 41% reduction in escalated complaints compared to 2017/18

Achieved our target of fewer than 3,100 mains bursts in the year, and experienced fewer bursts than each of the two previous years

Since the beginning of AMP6 we have revised our strategy and improvement plan to focus on a number of safety and health initiatives. We recorded an accident frequency rate of 0.23 lost time injuries per 100,000 hours worked, compared to actual performance of 1.02 in 2014/15 (final year of AMP5)

 

Dividends

Our dividend policy is to pay a dividend commensurate with the long-term returns and performance of the business whilst not impairing its longer term financeability. In determining the level of the dividend, the financial performance of the appointed and non-appointed businesses is considered separately.

Equity dividends of £6.6m were paid during the year (2018: £58.5m), none of which related to the regulated business (2018: £50.5m) reflecting the anticipated regulatory penalties in relation to not achieving our leakage reduction target for 2017/18 and 2018/19. Higher dividends in 2017/18 can also be attributed to proceeds from the disposal of the company’s non-household retail business.

In 2018/19, Affinity Water spent 79p of every £1 of customers’ money on our assets, people and suppliers for services, ensuring customers receive the highest quality water and service. None of customers’ money was spent on dividends or interest on shareholder debt.

View Affinity Water Limited’s Annual Report and Financial Statements for the year ended 31 March 2019 >

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