Both profits and revenues have risen at SES Water, according to its interim results for the six months ended 30 September 2021 published today.

The six months ended 30 September 2021 saw revenue increase by 3% (£1.0m) to £32.3m (2020: £31.2m) and operating profit increase by 5.1% to £7.8m (2020: £7.7m).

The increase in revenue was driven by the partial recovery post COVID-19 and associated lockdown restrictions increasing the volume of wholesale water, while the rise in profits was due to the partial recovery of revenue and one-off insurance monies.

However, this was offset by increased by a 4% increase (£1.1m) operating costs to £26.8m (2020: £25.7m) mainly due to higher run rates of network maintenance spend and increased volumes of electricity consumption.

Net financing costs remained at a similar level of £5.5m (2020: £5.4m) however the company said increasing inflation (RPI) costs will increase financing costs for the year ending 31 March 2022.

SES Water said it had begun a series of financing-related activities during the last 6 months to both continue to enhance its financial resilience and address its funding requirements for the rest of the AMP7 2020-25 period. This included removing certain pre-funding requirements associated with its long-dated bond ahead of required repayments commencing 2027.

According to SES Water Chairman Jeremy Pelczer, this had been economically beneficial for the company and also improved its ability to access further debt funding if required. The company is also in the process of raising the remaining AMP 7 debt to fund its capital programme activity through to 2025.

Commenting on operational performance, the company said the launch of its new Aptumo customer billing system represented the largest change made to this area of business in more than 20 years, and the largest technology investment in SES Water’s history.

According to the utility, the new system will enable it to provide customers with a more timely and accurate service, as well as reducing complexity in the systems. It will also modernise and improve the billing and revenue processes which are important to ensure the ongoing financial resilience for the company.

In terms of overall customer service performance across a broad range of measures, the company said while it had continued to make improvements, it acknowledged “there is much more work we need to do.”

In the Quarter 2 C-MeX report (Ofwat’s sector-wide indicator of customer satisfaction) SES ranked 11th, up from 16th in the previous quarter, and is currently in 15th position for the year to date , commenting “ this is not where we want to be.”

For D-MeX (Ofwat’s Developer Services measure of experience) its Quarter 1 overall score was 77.16. While Ofwat does not publish a quarterly table, using Water UK dashboards the company said its position is shown to be 14th, improved from 16th.

SES Water said:

“As with C-MeX, we know there is much more work to be done in this area and we are taking action to respond more quickly to developer applications, keep them updated on progress and better tailor our service to meet their individual needs.”

Other operational highlights include:

• Recently completion of a project to refurbish much of the water softening process at Elmer Treatment Works.
• Start in September of the next phase of the universal metering programme with the installation of meters to the remaining 3,500 of customers in the Ewell area.
• Expansion of the fleet of electric vehicles, which now stands at 30. The company has already installed charging points at all of its operational sites and continues to install home charging kits for employees to use the electric and plug-in hybrid vans and company cars.

Transforming performance through being more digitally focused

Jeremy Pelczer said that SES Water sees data as the key enabler for its digital transformation and is investing in improving data skills and capabilities across the company. The utility has now established a centralised data team, which is helping to build awareness around the value of data as well providing practical help in data management techniques and gaining insights from integrating data from multiple sources. “Businesses like SES Water, intent on digital transformation, must first look at our data and how we can quickly cleanse, review and blend business-critical data from different systems across the company,” he commented.

Investing in innovative technology to make further cuts in leakage

At the half-year point during the current year, reported leakage for SES Water, which has one of the lowest levels in the industry was slightly behind the target.

Chairman Jeremy Pelczer commented:

“This still represents a very good achievement following a very challenging 18 months dealing with the impacts of COVID-19, which has resulted in us needing to effectively achieve two years’ worth of leakage savings in one year.”

“ We know we have a very stretching regulatory target to reach for the 2021/22 report year, which will require us to achieve a reduction in leakage significantly ahead of the cumulative reduction of the last five years. At the half year mark we are on track to achieve this.”

The company is investing in innovative technology and real-time data solutions with key partners such as Vodafone and Royal HaskoningDHV. According to SES, it will soon be the first UK water company with a totally ‘smart’ network which will be able to recognise and highlight issues in real-time.

Using newly implemented software, data is sent from sensors on the pipes in its network directly to operational teams and speeds up their response time to prevent leaks and bursts.

Targeted investment to ensure operational resilience

In the past six months the company has invested in several important mains replacement schemes across its supply area, including in Redhill where more than 1.5 kilometres of new water main to have been laid to support significant new building development in the town.

The company said it is now making good headway towards completing a resilience programme it has been progressing since 2010, to enable the transfer of water from Bough Beech Treatment Works in Kent to the north of its area, which was previously completely reliant on groundwater supplies.

Work commenced in late September to begin laying the last new strategic main to connect areas of supply that were previously separate, alongside the commencement of the third and final phase of work to upgrade the capacity of its Bough Beech site and a number of strategic pumping stations. This means that by 2025 every property can be supplied by more than one treatment works if needed, such as during periods of low rainfall or operational outages. SES is hoping to complete the programme nearly two years early in mid-2023.

The Board has declared a final interim dividend related to the year-ended 31 March 2021.

SES Chairman Jeremy Pelczer commented:

“The Board considered that a final interim dividend related to the year-ended 31 March 2021 could be declared and paid after its consideration of our performance across a number of factors including service to customers, compliance with statutory obligations, as well as financial performance against regulatory assumptions and internal targets.”