Affinity Water has got back on track with leakage in final year of AMP6, according to its newly-published Annual Report and Financial Statements for the year ended 31 March 2020, the fifth and final year of the AMP6 2015-20 price control period.
The water company said it had closed AMP6 with a strong operational finish, although operating costs had increased due to the impact of some large one-off costs.
However the start of the COVID-19 pandemic towards the end of the financial year has affected Affinity’s full year profits. The company expects this to continue and to further affect the results of 2020/21 and possibly beyond.
At £45.6 million, operating profit was down on the previous year’s figure of £58.6 million, while revenue fell from £311.6 million in 2019 to £307.2 million. Investment in enhancing and maintaining infrastructure and assets was up at £147.1 million compared £124.5 million in 2019. In March 2020, the company obtained an additional investment grade credit rating from ratings agency Fitch.
In a turnaround from the last two years’ performance for 2017/18 and 2018/19, when Affinity failed to achieve its leakage targets for, by the end of this financial year the utility achieved its lowest ever levels of leakage, as well as meeting the water industry’s largest percentage leakage reduction target (14%) for AMP6. Affinity is now targeting a further 20% leakage reduction by 2025.
Operational performance highlights included:
- 42.1 megalitres per day reduction in abstraction as at 31 March 2020, achieving sustainability reductions in line with Affinity’s AMP6 Business Plan.
- lowest ever levels of leakage for the company achieved by transforming processes in the way that it manages and controls leakage
- average water use (per person, per day) increased by 0.8 litres from 152.2 litres to 153.0 litres - incurring a penalty of £1.75m
- achieved target of fewer than 3,100 mains bursts, recording the lowest number this year.
- 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 the target was not met, Affinity has not incurred a penalty for this performance.
During the year the firm revised its dividend policy to ensure that any group debt above Affinity Water Litd can be serviced from the non-appointed business before a distribution to shareholders is considered.
No equity dividends were paid during the year (2019: £6.6m, none of which related to the regulated business). Higher dividends in 2017/18 were attributed to proceeds from the disposal of the company’s non-household retail business.
Commenting on the upcoming AMP7 2020-25 investment period, Chief Executive Officer Pauline Walsh said:
“At the start of this new regulatory period, we are facing a significant cut in allowed wholesale returns to around 2.4% real in cash terms, compared with 3.6% in AMP6, as well as challenging performance targets.“
“Ofwat's final determination has reduced our exposure to the risk of cost overruns, but not eliminated the risk of performance penalties.”
Click here to view Affinity Water’s Annual Report and Financial Statements for the year ended 31 March 2020
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