Annual Report & Financial Statements 2017–18

129
Customers' water usage per head, per day (litres) – one of the UK's lowest

Our year at a glance

Committed to our customers

Our year at a glance

We’re proud to provide high-quality water and sewerage services to more than 4.6 million customers in Sussex, Kent, Hampshire and the Isle of Wight.

Some of our highlights for the past year include:

  • We not only cut written complaints by 21% but we have become faster at managing them so that three quarters of written complaints are now resolved within three days.
  • Although we’re still at the lower end of the league tables for customer satisfaction, we’re getting better all the time and at one point in 2017–18, we were the fastest improving water and sewerage company.
  • We have helped more than 229,843 of our customers in vulnerable circumstances with financial support and advice since 2015.
  • The Royal Society for the Prevention of Accidents awarded us its Order of Distinction in recognition of our commitment to maintaining excellent health and safety standards for the last 19 years.
  • We increased the number of ‘excellent’ bathing waters in our region to 53 from last year’s total of 51 while every one of our 83 bathing waters met the required minimum quality standards.
  • No waste from our works or offices was sent to landfill in 2017–18, putting us among the industry leaders in this area.
  • In 2017 we marked the 25th anniversary of our Learn to Swim programme which has taught this life-saving skill to more than 750,000 in the South East.

About us (PDF 650KB)

£1.15
Cost of combined water and sewerage services per household, per day

Working for customers

Working for our customers

Responsive customer service

We recorded our best ever customer satisfaction scores this year, by driving down complaints, more proactively managing customers’ accounts and resolving more problems for customers the first time they call us. We know we still have a long way to go to meet the standards our customers expect but the changes we’ve introduced this year have started us on a journey to provide them with a refreshingly easy experience.

Affordable bills

This year our dedicated teams have helped more than 32,500 customers in vulnerable circumstances to avoid debt or manage their payments better. A new Reach & Support initiative, in partnership with organisations and local councils, has also been set up to better engage with customers in need of extra support so that we can predict when they might need help from us, and what that looks like.

Better information and advice

We like to keep our customers informed, and they’ve told us that we could do more to help them understand what we do. This is why we make a point of having up-to-date advice available on a number of issues, such as how to save water, avoid blockages in the home, understand changes to charges and payment schemes, manage hard water or just find out more about how we’re spending customers’ money.

Working for our customers (PDF 692KB)

229k
Customers helped with debt prevention advice and financial support

Chairman and Chief Executive statements

Chairman and Chief Executive statements

Bill Tame, Chairman

Chairman’s introduction

In his introduction to this year’s annual report, our chairman Bill Tame talks about the importance of building trust with our customers so they can be sure that we work with their best interests at heart.

Among the other themes in the chairman’s introduction are:

  • How we are becoming more open and transparent in all our business processes for example; closing down our financing company in the Cayman Islands
  • Southern Water’s aim to close the gender pay gap
  • making changes to our Board to ensure its members provide the best oversight and guidance it can to the business
  • renewing our commitment to work with our regulators to provide high-quality services to customers
  • how we’ve sought the views of all our stakeholders – including customers – to set out an ambitious programme of improvement for our company in the next five-year planning cycle (2020–25)
  • how we are addressing legacy issues regarding the accuracy of our reporting by embedding a modern and transparent compliance framework.

Chairman's introduction (PDF 96KB)



Ian McAulay, CEO 

Chief Executive's summary

Our Chief Executive Officer (CEO) Ian McAulay, focuses his summary of the year on what we’ve done to lay the foundations to improve all aspects of our business and build a resilient water future for the South East.

The CEO’s summary includes:

  • an acknowledgement that we need to keep getting better at customer service while noting that we were the fastest improving company in our sector for customer satisfaction at one point in 2017–18
  • our commitment to be brilliant at the basics, providing excellent core services of water supply and wastewater removal
  • how we propose to transform our company culture to be more transparent and accountable
  • what we’re doing to promote and maximise the potential of what we call the utility of water (for example, its value to the region’s economy in attracting tourists to our beaches and helping businesses to flourish)
  • an overview of our ambitious plans to:
    – help customers reduce their water use to 100 litres a day from 129 with our Target 100 programme
    – build better relationships with stakeholders such as farmers and local authorities to take joint action in protecting our local environment
    – invest in innovations and new technologies to make our network more resilient in the face of extreme weather and longer-term climate change
    – get better at recording and reporting our data to be more transparent and compliant with regulatory standards
    – work more closely with our regulators.

Chief Executive Officer's summary (PDF 240KB)

53
Bathing waters in our region rated as 'excellent' – and all 83 at minimum standard

Our services

Safe, clean drinking water and wastewater removal

Our services

We're making a capital investment for 2015–20 of £1.8 billion to improve our water and wastewater services.

This has helped us to maintain the highest water quality standards, find and fix more leaks on our network, and drive down the number of flooding and pollution incidents experienced by our customers. It is also helping us protect our natural resources and find new ways to enhance our environment while delivering the essential services our customers need every day.

An additional £80 million was committed during 2017–18 to make sure we deliver on the commitments we made to customers in our last business plan.

Delivering reliable services (PDF 470KB)

17.2%
The amount of renewable energy used in our operations

The environment

The environment

Our two core functions – to take and treat water from natural sources to provide a high-quality supply for customers and to safely dispose of wastewater – require a delicate balance between operational efficiency and respect for the environment.

You can read all about our work to help protect our bathing waters, reduce the amount of water we take from the environment, our plans to protect these precious water sources in the future, and our recycling, renewable energy and carbon reduction performance in the following section.

Protecting our natural resources (PDF 436KB)

£147.7k
The amount raised by employees for charitable causes in 2017–18

Our Southern Water

Our Southern Water

We want Southern Water to be a great place to work, and this means looking after our employees’ health, safety and wellbeing as well as their learning and development needs.

It also means creating a fair and equal pay structure and clear career paths. We also want to make sure there are plenty of volunteering and community-focused projects for teams to get involved in at work, and in their spare time – our teams raised more than £147,700 for good causes during 2017–18.

Our Southern Water (PDF 338KB)

The numbers

It’s been a year of significant change and challenge for Southern Water. This is reflected in our operating profit for the year, which fell by £22.3 million to £236.6 million, largely driven by an increase in our operating costs this year.

We’ve spent an additional £3.9 million setting up the Compliance and Asset Resilience directorate and Data Team. These teams were established to improve the processes and assurance of our non-financial reporting so that customers and stakeholders can trust its integrity. In addition, we’ve spent £3.6 million to improve the operation of our IT systems.

There was also some challenging weather conditions in 2017–18. Overall we paid an extra £4.3 million to mitigate the potential drought, for example pumping to refill our Bewl Water reservoir, and restoring water supplies to customers affected by the bursts following the freezing and rapid thawing of pipes in March 2018.

We have also been busy this year preparing to submit our business plan for 2020–25 to Ofwat in September 2018. This work, which included consultations with customers and stakeholders, increased our operating costs in the year by £2.9 million. Our focus over the next two years is to transform our business in readiness for the delivery of the next business plan objectives.

In 2017–18, we also saw a significant increase in our capital investment programme as we completed the third year of our current business plan. In total we spent over £440 million investing in our assets during the year. This included the completion of a scheme to replace 30 kilometres of water mains in Kent, the ongoing redevelopment of our Woolston wastewater treatment works and an upgrade to our wastewater treatment works at Eastbourne.

We are responding to criticism of the water industry’s financial structures by reviewing our own business and announcing our intention to close our Cayman Islands registered subsidiary.

Any changes we make to our financial structure, along with the continued capital investment in our assets and transformation activities, will be focused on ensuring that we have a stable financial base to deliver on the commitments made in our current and future business plans.

Financial Performance (PDF 809KB)

Financial Statements (PDF 296KB)

Annual Performance Report (PDF 580KB)