Affinity Water has published its Annual Report and Financial Statements for the year ended 31 March 2021 – the utility said it had been financially impacted by COVID-19 throughout 2020/21, and expects this to continue into 2021/22.

The water company’s 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.

Affinity Water said it had experienced “unprecedented high demand” during the hot summer period, whilst more people stayed at home and within its supply area under COVID-19 travel restrictions. 

According to the report, COVID-19 has also impacted Affinity Water operationally, especially in terms of Per Capita Consumption performance and properties at risk of low pressure. Operating costs for the year increased by £10.8 million(3.9%) to £290.9 millon (2020: £280.1 million). 

Engineers and technicians had worked around the clock to treat and pump more water into the network, the company said. As a result, operational costs, particularly bulk water imports and electricity costs, also increased significantly. Within the AMP7 2020-25 capital programme, the utility has invested £3.0m to manage issues with customers experiencing low pressure as a result of the high demand.

The company received penalties totalling £5.231 million for its performance on leakage, per capita consumption, mains repairs, properties at risk of receiving low pressure, unplanned interruptions to supply over 12 hours and customer contacts per 1,000 population and for water quality (taste, odour & appearance).

However, underlying base costs had shown some stability as Affinity aims to deliver efficiencies to meet the challenging allowances set for AMP7.

Financial performance

Revenue during 2020/21 was £286.8 million, down from £307.2 million in 2020, while operating profit –fell from £45.6 million in 2019/20 to £13.6 million.

The company transacted £225 million of CPI linked inflation swaps and £75 million of RPI linked inflation swaps during 2020/21. This transferred some of Affinity’s interest payments from fixed to index-linked in order to mitigate its interest rate exposure and increase the headroom above its covenant limits in view of planned expenditure for AMP7. All of its credit ratings were confirmed in April 2021 and remain investment grade.

Operational performance - leakage target missed

Although Affinity Water failed to meet its leakage target for 2020/21, the company said it is still committed to reducing leakage from water pipes by 20% over AMP7, following a 15% reduction achieved in AMP6, the industry’s largest percentage reduction target for AMP6.

The company 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 its target of less than 157.8 Ml/d for 2020/21.

The company commented:

“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.”

Affinity said it has set up an internal taskforce to manage the critically important work on leakage.

During AMP7 the company is planning to spend approximately £100 million to tackle leaks – plans include:

• fix 50% of visible leaks in 24 hours, 70% within 48 hours and 90% within five days;
• use quantum technologies to detect and fix leaks;
• use new techniques to monitor flows and fast logging and pressure reduction schemes to locate leaks in order to target them more effectively and maximise the amount of water saved:
• offer more free repairs to customers where there are leaks on the pipe supplying their home.

Other operational metrics for the period included:

• 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 a 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 a 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 a target of 6 minutes and 30 seconds and prior year performance of 13 minutes and 36 seconds.
• Customer Measure of Experience (C-MeX) score for 2020/21 was 77.88 compared to an industry mean average of 81.62. Affinity ranked 15th out of 17 companies, compared to its target of 14th and prior year ranking of 15th. The score is not comparable to the prior year score due to a change in Ofwat’s methodology for this metric.
• 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. The water company was 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.
• Marked improvement in the number of lost time injuries per 100,000 hours worked throughout AMP6 as the utility revised its strategy and improvement plan to focus on a number of safety and health initiatives. This trend has continued in 2020/21, recording 0.12 injuries per 100,000 hours worked, compared to a target of 0.20 injuries and 0.20 injuries in 2019/20.

No equity dividends were paid to shareholders during the year from regulated business (2020: £nil). A dividend of £1.0m was paid in February 2021 from the non-appointed business to service group debt.

Affinity is planning to invest £1.44 billion totex during AMP7 and has spent £286.6m in 2020/21.

Click here to download Affinity Water’s Annual Report and Financial Statements 2020-21

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