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05 July 21

Affinity Water Limited – Financial Results For Year Ended 31 March 2021

We have today published our Annual Report and Financial Statements for the year ended 31 March 2021, the first year of the 2020-25 price control period (Asset Management Plan 7; ‘AMP7’) on our website: www.affinitywater.co.uk/library

We have been financially impacted by COVID-19 throughout 2020/21, and we expect this to continue into 2021/22. Our non-household revenue decreased significantly due to businesses temporarily closing as a result of the pandemic. Household revenue only increased slightly despite consumption significantly increasing as households followed the UK Government’s advice to stay at home, due to a bill reduction and a significant number of customers being on unmetered tariffs.

We experienced unprecedented high demand during the hot summer period, whilst more people stayed at home and within our supply area under COVID-19 travel restrictions. Our engineers and technicians worked around the clock to treat and pump more water into the network. As a result, our operational costs, particularly bulk water imports and electricity costs, also increased significantly. Within our capital programme, we have invested £3.0m to manage issues with customers experiencing low pressure as a result of the high demand.

Our underlying base costs have however shown some stability as we aim to deliver the efficiencies to meet the challenging allowances set for AMP7.

We continue to align our operational KPIs and targets to the key performance commitments made in our AMP7 Business Plan in response to our customer outcomes:

  • Supplying high quality water everyone can trust;
  • Making sure everyone has enough water while leaving more water in the environment;
  • Providing a great service that creates value for all our stakeholders; and
  • Minimising disruption to everyone.

We maintain necessary stretching targets that respond to the significant social and environmental challenges we face – a rising population and increased demand for water, as well as a reduction in the availability of water in the years ahead.

We have not met our leakage target for 2020/21, though we are still committed to reducing leakage from water pipes by 20% over AMP7, following a 15% reduction achieved in Asset Management Plan 6 (‘AMP6’), the industry’s largest percentage reduction target for AMP6.

Leakage is really important to us and we are very disappointed to have missed our target. We understand that it is a critical customer priority and one that raises significant emotion. We need to change our approach if we are to succeed in meeting our stretching leakage targets and are making significant changes to how we manage leakage. This includes bringing in new methods and technologies and targeting our approach to maximise the benefit delivered both in amount of water saved and in managing visible leaks. We have set up an internal taskforce to manage this critically important work.

In April 2021, we won two entries in Ofwat’s Innovation in Water Challenge. Our winning initiatives – Seagrass Seeds of Recovery and Smarter Tanks – were produced in collaboration with other water companies, UK universities and government agencies with the aim to improve the efficiency and resilience of our water supplies.

Business highlights:

Financial performance

Revenue – £286.8 million (2020: £307.2 million).

Operating profit – £13.6 million (2020: £45.6 million).

£155.9 million (2020: £147.1 million) invested in enhancing and maintaining infrastructure and assets.

We transacted £225 million of CPI linked inflation swaps and £75 million of RPI linked inflation swaps during 2020/21. This transfers 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.

All of our credit ratings were confirmed in April 2021 and remain investment grade.

In March 2021, we issued shares totalling £4.0m, increasing our ordinary share capital to £30.5m, reflecting the commitment and long-term investment of our shareholders.

We have also been re-accredited with the Fair Tax Mark for the third year, recognising that we pay the right amount of corporation tax, at the right time and in the right place.

Operational performance

We recorded a Compliance Risk Index (‘CRI’) score of 1.31 for the 2020 calendar year, within the deadband of 2.00 and improving upon our 2019 performance of 1.73, where a lower score is a better position.

We recorded leakage of 171.4 Megalitres per day (‘Ml/d’), a reduction of 9.7 Ml/d compared to the prior year, although not achieving our target of less than 157.8 Ml/d for 2020/21.

We recorded Per Capita Consumption (‘PCC’) of 169.3 litres per person per day (‘l/p/d’), an increase of 14.3 l/p/d compared to the prior year and above our target of less than 147.4 l/p/d for 2020/21.

The number of repairs due to bursts per 1,000km of mains during 2020/21 was 155.8 compared to our target of less than 150.7 and prior year performance of 125.4.

The number of minutes per property where interruptions to supply exceeded 3 hours during 2020/21 was 5 minutes and 49 seconds compared to our target of 6 minutes and 30 seconds and prior year performance of 13 minutes and 36 seconds.

Our Customer Measure of Experience (‘C-MeX’) score for 2020/21 was 77.88 compared to an industry mean average of 81.62. This score is not comparable to the prior year score due to a change in Ofwat’s methodology for this metric. We ranked 15th out of 17 companies, compared to our target of 14th and prior year ranking of 15th. Written complaints have fallen 19.2%, and escalations have fallen 55.2%, compared with 2019/20.

Our Developer Measure of Experience (‘D-MeX’) score during the year ended 31 March 2021 was 84.39 compared to an industry mean average of 82.44. We were placed 10th out of 17 companies in the industry league table, up from 16th in the shadow year 2019/20, with consistent improvement in position quarter-on-quarter during 2020/21.

We saw a marked improvement in the number of lost time injuries per 100,000 hours worked throughout AMP6 as we revised our strategy and improvement plan to focus on a number of safety and health initiatives. This trend has continued in 2020/21, as we recorded 0.12 injuries per 100,000 hours worked, compared to a target of 0.20 injuries and 0.20 injuries in 2019/20.

Dividends

Our dividend policy was revised during the previous financial year to ensure that any group debt above Affinity Water Limited could 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 from our regulated business (2020: £nil). A dividend of £1.0m was paid in February 2021 from the non-appointed business to service group debt.

In 2020/21, Affinity Water Limited spent 79p 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 2021 on our Stakeholder website: www.affinitywater.co.uk/library

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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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