Affinity Water has published its Annual Report and Financial Statements for the year ended 31 March 2019, the fourth year of the AMP6 2015-2020 price control period.

The water company said that throughout the year it had continued to make further progress towards ambitious performance commitments set out in its 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”, Affinity Water said.

Commenting in the report on its AMP7 Business Plan, Chairman Tony Cocker said:

“We were both surprised and disappointed by Ofwat’s initial assessment of our AMP7 Business Plan for the 2020-25 price control period and their rating of our information quality in their 2018 Company Monitoring Framework assessment.”

Stuart Ledger, Chief Financial Officer described the year as both operationally and financially challenging.

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

The utility said it attached a high priority to meeting leakage reduction targets. However, in November 2018, Affinity identified a large burst on the outlet pipe of one of its key water treatment works, which contributed to a deterioration in leakage performance for 2018/19. As the company found that the burst started in 2017/18, this resulted in a restatement of its leakage figure and failing its target for that year.

Affinity Water incurred regulatory penalties for not achieving this performance commitment in 2017/18 and 2018/19 – however, the firm said it remained “fully committed to meeting (its) industry leading target by 2020, saying:

“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.”

Revenue during the period rose to £311.6 million – up from £308 million in 2018. Profit before tax decreased by £22.2 million (61.8%) to £13.7 million (2018: £35.9 million. Operating profit was down to £58.6 million from £72.3 million in 2017/18, mainly due to higher operating costs, which was partially offset by £3.6 million higher revenue. Operating costs for the year increased by £17.8 million (7.0%) to £270.9 million (2018: £253.1 million).

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

In March 2019, the company was awarded the UK Fair Tax Mark, becoming only the 50th company to receive this certification, which recognises that it pays the right amount of corporation tax, at the right time and in the right place. In January 2019, it completed the substitution of its Cayman Islands financing entity with a UK entity as part of simplifying group structure.

Operational performance

Commenting on operational performance, the utility said it had reduced average water use (per person, per day) by 1.8 litres to 149.2 litres, compared to restated 2017/18 performance, despite the increased demand experience during the hot, dry summer weather period

Affinity 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 the AMP6 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.

Other operational performance achievements highlighted by the water company included:

• Reduced the amount of water taken from the environment (abstraction) in the year by 42.1 megalitres per day, achieving sustainability reductions in line with the AMP6 Business Plan
• Continually improving and enhancing digital self-serve experience for customers, developing new journeys and functionality, enabling customers to do more than ever online, with positive trends in 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 a target of fewer than 3,100 mains bursts in the year, and experienced fewer bursts than each of the two previous years

Click here to read the full report