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30 June 20

Financial Results For Year Ended 31 March 2020

We have today published our Annual Report and Financial Statements for the year ended 31 March 2020, the fifth and final year of the 2015-20 price control period (Asset Management Plan 6; ‘AMP6’) on our website here.

We have closed AMP6 with a strong operational finish, hitting stretching targets and delivering for Affinity Water and our stakeholders, although operating costs have increased due to the impact of some large one-off costs.

We reported last year on our failure to achieve our leakage targets for 2017/18 and 2018/19. We are pleased to report that we have turned this round and at the end of this financial year have achieved the lowest ever levels of leakage for our company, as well as meeting the water industry’s largest percentage leakage reduction target (14%) for AMP6.

Towards the end of the financial year the COVID-19 pandemic commenced and this has affected our full year profits. We expect this to continue and to further affect the results of 2020/21 and possibly beyond. However, during the year we have seen more stability in our underlying base costs. This is the start of the transformation of our cost base as we deliver the efficiencies to meet the challenging allowances set for the 2020-25 price control period (‘AMP7’).

AMP7 Final Determination summary

  • Average bills to fall by 5.5% in real terms in the 2020-25 period
  • Total expenditure of £1,441.4 million, including:
    • £121.0 million to improve the environment by efficiently delivering our obligations as set out in the Water Industry National Environment Programme (‘WINEP’)
    • £146.0 million for supply and demand balance schemes and strategic water resource development, including long-term drought resilience; and
    • £57.3 million for new meter installations
  • 20% leakage reduction on a three-year average basis
  • 12.5% reduction in PCC by 2024/25.

We have also taken action to enhance our corporate responsibility. We are pleased to announce that we have been re-accredited with the Fair Tax Mark for the second year, recognising that we pay the right amount of corporation tax, at the right time and in the right place, and have renewed our two revolving credit facilities using SONIA as the reference rate and have included sustainability performance measures for the first time.

Business highlights:

Financial performance

  • Revenue – £307.2 million (2019: £311.6 million).
  • Operating profit – £45.6 million (2019: £58.6 million).
  • £147.1 million (2019: £124.5 million) invested in enhancing and maintaining infrastructure and assets.

We transacted a CPI linked inflation swap in March 2020, and followed this up with further CPI swaps post-year end, bringing the total nominal value up to £250 million. This will transfer 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.

In March 2020, we obtained an additional investment grade credit rating from Fitch.

Operational performance

We continued to provide high quality water for the 2019 calendar year, with mean zonal compliance of 99.97%.

We delivered a 42.1 megalitres per day reduction in abstraction as at 31 March 2020, achieving our sustainability reductions in line with our AMP6 Business Plan.

We achieved our lowest ever levels of leakage for our company, after failing our leakage target in the previous year for 2018/19. This was achieved by transforming our processes in the way that we manage and control leakage, which yielded positive results throughout 2019/20.

Our average water use (per person, per day) increased by 0.8 litres from 152.2 litres to 153.0 litres, and we have incurred a penalty of £1.75m for this performance.

We achieved our target of fewer than 3,100 mains bursts, as we have done in every year of AMP6, recording our lowest number this year.

We experienced 499 unplanned interruptions to supply over 12 hours compared to a target of 320 and actual performance of 309 in 2018/19. 312 of the properties affected arose from a single burst incident in a difficult town-centre location. Although we have not met our target, we have not incurred a penalty for this performance.

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 0.20 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 was revised during the year to ensure that any group debt above Affinity Water Limited can be serviced from the non-appointed business before a distribution to shareholders is considered. Our shareholders are re-investing dividends to enable the substantial investments to improve resilience and protect the environment. In determining the level of dividend, the financial performance of the appointed and non-appointed businesses is considered separately.

No equity dividends were paid during the year (2019: £6.6m, none of which related to the regulated business). Higher dividends in 2017/18 can be attributed to proceeds from the disposal of the company’s non-household retail business.

In 2019/20, Affinity Water Limited spent 80p of every £1 of customers’ money on our suppliers for services, our assets, and our people, ensuring customers receive the highest quality water and service. None of our customers’ money was spent on dividends or interest on shareholder debt.

 

Click here to view Affinity Water Limited’s Annual Report and Financial Statements for the year ended 31 March 2020 on our website.

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Our Communications team handles all media enquiries on behalf of Affinity Water and its employees.

Contact us on 01707 277 110 or email news@affinitywater.co.uk.

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