Annual Report & Financial Statements 2016–17

Full Annual Report & Financial Statements 2016–17
£1.8bn
Capital investment between 2015–20

Our year at a glance

Committed to our customers

Our year at a glance

We're proud to deliver water and wastewater services to more than 4.6 million customers across the South East.

By protecting future water resources, embracing technology and working with community organisations and stakeholders to provide a more tailored service to customers, we aim to become a leader in our sector.

Some of our other highlights for the past year:

  • Written complaints fell by 47%, and escalated complaints fell by 71%.
  • For the 18th consecutive year we have achieved the Royal Society for the Prevention of Accidents’ gold award for health and safety.
  • Customer satisfaction levels improved (our Service Incentive Mechanism score increased to 78 from 73 in 2015–16).
  • The Institute of Customer Service ranked us as the ninth most improved company in terms of customer satisfaction out of 244 organisations. 
  • Identifying problems before they become a concern, our proactive contact team spoke to more than 100,000 customers throughout the year.
  • We increased the number of ‘excellent’ bathing waters in our region to 51 from last year’s total of 43.
  • We have set a new 100% record for recycling – none of the sludge waste produced at our wastewater sites has been sent to landfill since 2014.
  • We have launched a new community grant scheme, to help those directly affected by our activities.

About us (PDF 1.6MB)

51
Bathing waters in our region rated 'excellent'

Working for customers

Responsive service, affordable bills and better information

Working for our customers

Perhaps the most important commitment we made to customers was to provide value for money while helping those experiencing financial difficulties when paying their water bills.

Responsive customer service

By adopting a proactive, insight-led approach we have improved customer satisfaction levels over the past year. We launched online services and more than 80,000 customers registered for a self-serve account by year end. We also made improvements to our billing process to ensure every customer is paying the right amount.

Affordable bills

Our affordability teams have delivered some great results over the past year, getting the message out to customers that we are here to listen and support them through the payment process. We also began to put into place our new Community Engagement Programme to support those customers most in need.

Better information and advice

We've spoken to customers through targeted campaigns, addressing a number of key issues they told us were important to them, including saving water, energy and money, transparent and fair charges for services and how to prevent flooding and damage to properties and possessions.

Working for our customers (PDF 4.0MB)

£1.13
Cost of combined water and sewerage services per household, per day

Chairman and Chief Executive statements

Chairman and Chief Executive statements

Bill Tame, Chairman

Chairman’s introduction

As we enter the third year of the current business plan period of 2015 to 2020 Southern Water has seen some significant improvements in both its operational and customer service performance.

At the same time we have been working hard to make improvements in more challenging areas such as data quality and customer service.

Bill Tame
Chairman

Chairman's introduction (PDF 00.4MB)



Ian McAulay, Chief Executive Officer

Chief Executive's summary

As the new chief executive of Southern Water, first of all I would like to say how delighted I am to have joined the business. 

Our Strategic Report, in the following pages, will focus on our collective performance over the past year. While it is pleasing to report that we have achieved a number of successes, I will also be highlighting some of the key challenges we face as a business and some of our opportunities for transformation in the future.

Ian McAulay
Chief Executive Officer

Chief Executive's summary (PDF 00.4MB)

100%
The amount of waste sludge we recycled in 2016–17

Our services

Safe, clean drinking water and wastewater removal

Our services

Providing safe, clean drinking water is undoubtedly the most important aspect of our service in the eyes of our customers.

This year we exceeded our target for compliance against the Drinking Water Inspectorate’s (DWI) quality measures, achieving 99.96%.

We have committed £1.8 billion to maintain, enhance and extend our wastewater and water operations between 2015 and 2020.

This investment, combined with a programme to educate our customers about how to Keep It Clear and reduce sewer blockages, is having a positive effect on the way we deliver our service.

We reached or exceeded targets in several areas to deliver on the promises we made to our customers. For example, we have maintained water pressure in customers' homes and reduced the number of complaints about discolouration of drinking water.

In fact, one of our initiatives which is indirectly helping to tackle discolouration has helped emergency crews to save lives, and could even become a template for other water companies. See our 'Water to the rescue' case study.

Meanwhile, our wastewater performance has been good this year. The number of sewer blockages and external flooding events are down, fewer customers are bothered by smells from our operational sites.

Delivering reliable services (PDF 3.3MB)

194k
Customers helped with debt prevention advice and financial assistance

The environment

Protecting our region

The environment

We always aim to operate our business in a way that respects the environment and protects resources into the future.

The number of excellent bathing waters in our region currently stands at 51, a big improvement on last year’s 43.

We are also ahead of our promise commitment of 15% to increase the amount of renewable energy we use across our operations, recording a figure of 17% during 2016–17. We are pleased to report that the greenhouse gases produced by our operations have also gone down again this year.

During 2016–17 we became the first water company to meet a tough new international environmental standard. The ISO14001 International Standard for Environmental Management Systems was changed in 2015, when companies were given three years to bring their systems up to the new level.

It has taken us less than a year, with the audit report praising our high level of management leadership and commitment and our engagement with our stakeholders and employees.

Looking after the environment (PDF 1.2MB)

25
Years of our Learn to Swim scheme

Looking ahead

Sustainability and environmental responsibility

Looking ahead

As a provider of water and wastewater services to an ever-increasing population, we need to continue to improve our service offering, providing innovative solutions to ongoing challenges such as climate change, population growth and water scarcity.

We are already developing these solutions in a number of areas:

  • Looking at the opportunity to purchase abstraction licences, which are currently owned but not used by farmers and industries.
  • Developing water re-use schemes that allow us to take highly treated wastewater and put it back into the natural water cycle, before abstracting it again and treating it to drinking water quality standards.
  • We are fitting monitors to our sewer overflows, which help track flows and prioritise areas for investment and improvement to protect the natural environment.
  • We are investing in the development of new drainage systems that manage the impact of development and increasing amounts of rainfall entering sewers and drains.
  • We are also trialling new technologies that allow us to extract energy from our water and wastewater treatment processes. This includes looking at new nutrient extraction technology to protect our water supply and potentially using extracted materials to generate products that have value elsewhere.

We also continued to participate in the government's Carbon Reduction Commitment Energy Efficiency Scheme, and we made our key sites more energy efficient. Our operational emissions for 2016–17 were 8% below those of the previous year.

Sustainability and environmental responsibility (PDF 0.9MB)

The numbers

During 2016–17 our operating profit was £258.9 million, a reduction of 9.0% from the previous year.

The 2015–16 operating profit included a one-off benefit from the refund of historical business rates charges of £13.3 million. Taking this into consideration, our underlying operating profit reduced by £12.3 million and was principally the result of increased depreciation charges, which result from the continued significant investment in our assets.

In total our revenue increased by £6.0 million to £809.7 million reflecting increased customer numbers from new connections and higher levels of billed consumption in part offset by an overall reduction in our tariffs. This increase in revenue was offset by a similar increase in underlying operating costs.

During the year we have undertaken a number of initiatives specifically targeted at improving our customer service performance. These increased our operating costs by £4.0 million and have focused on reducing complaints, assisting customers in financial hardship and improving our future bad debt performance.

The costs associated with these initiatives together with inflation on our cost base were, in part, offset by the delivery of operating efficiencies totalling £8.6 million. These efficiencies were delivered through a focus on reducing our power consumption, in particular minimising usage at peak times and making improvements to operational processes, for example reducing chemical usage and waste disposal costs.

Financial Performance (PDF 0.9MB)

Financial Statements (PDF 0.4MB)

Annual Performance Report (PDF 3.6MB)