SES Water has reported an increase in revenue of 4% (£1.4m) to £33.7m (2021: £32.3m) and a reduction in operating profit of 49% to £4.0m (2021: £7.8m) in its latest results for the six months ended 30 September 2022.

The increase in revenue was driven by higher summer demand from household customers, and continued recovery of non-household revenue post pandemic restrictions lifting, although this has not fully recovered to pre-COVID levels.

Operating profit reduced by 49% to £4.0m (2021: £7.8m) with the partial recovery of revenue offset by the one-off insurance monies received in 2021 and increased operating costs in the six months to 30 September 2022.

Operating costs increased by 7% (£1.8m) in the period to £28.6m (2021: £26.8m) mainly due to higher run rates of network maintenance spend, increased volumes of electricity consumption and increased chemical spend.

Other operating income fell by £2.0m (2021: £2.0m) due to one off monies received in 2021 for insurance receipts relating to a chemical spill at Elmer water treatment works that occurred in 2017.

The water company said that financing costs have increased significantly to £14.3m (2021: £5.5m) due to “unprecedented increases in inflation (RPI).”

SES Water has reported a loss after tax of (£7.8m) (2021 loss: £10.6m).

Net cash spent on operating activities of £1.5m increased from the previous year (2021: £7.2m) due to increased operating and financing costs. Net cash spent on investing activities of £11.2m increased from prior period (2021: £9.7m) due to increased spend on the capital programme.

Commenting on current economic issues, the water company said there continues to be “significant disruption to global supply chains” due to an imbalance in supply and demand which is being felt in both the cost and availability of everything from construction materials to vehicles.

Dave Shemmans, Chair of SES Water said:

“We are working closely with our colleagues from across the sector via our trade body Water UK to understand and mitigate impacts, along with lobbying Government departments to ensure the importance of maintaining supplies to the water sector is appropriately prioritised, with varying degrees of success.”

The water company said it has already mitigated the impact of electricity cost increases through early purchasing, and is focusing on mitigation strategies to counter cost increases now being seen in chemicals and other materials.

Dave Shemmans continued:

“At present, the duration of this disruption, and the associated cost challenges, is unknown.

“However, we have kept Ofwat informed about these issues and their impact on the delivery of our Business Plan.”

Commenting on the current sewage discharge investigation, he added:

“During the past six months the water industry has rightly been under scrutiny by Government and our regulator due to the ongoing sewage discharge investigation. While we are a water-only company, the issue affects the reputation of the whole sector.”

Moody’s ratings agency has affirmed the water company’s credit rating and outlook (Baa2 stable) in October 2022.

The dividend payable by SES Water for the year-ending 31 March 2023 comprises of an interim dividend to be paid in December 2022 and a final dividend payable in May 2023.

An interim ordinary appointed dividend of £1.5m was declared for the period and will be paid in December 2022.

Operational highlights during the period included:

Leakage - currently just above target leakage level over the last six months, driven by very dry weather conditions. By the end of the regulatory year, SES Water hopes to have reduced leakage by around 11% since March 2020 and is aiming to more than halve water lost from its network and customers’ pipes by 2045. Measures to reduce leakage include the use of a fully smart network to detect leaks in real-time using newly implemented software to send data from sensors on the pipes in the network directly to operational teams and speed up the response time to mitigate the impact of leaks and bursts.

Metering - progress in a universal metering programme, which aims to ensure 90% of customers are connected to a metered supply by 2025. Currently SES has installed meters for more than two thirds of customers and will be trialling smart meters within the next year to allow customers to better understand their water usage and help identify customer-side leaks far quicker.

Mains replacement -significant progress and investment on several important mains replacement schemes In the past six months across its supply area, including in Redhill where the company has completed the laying of more than 1.5 kilometres of new water main to support significant redevelopment and regeneration of the town centre

Resilience - nearing completion of a 15-year resilience programme the company has been progressing since 2010. By 2025 every property across its region can be supplied by more than one treatment works if this is needed due to operational challenges. This work included the expansion of our treatment works at Bough Beech Reservoir and capacity increases at a number of strategic pumping stations.