South East Water Limited

Condensed group financial statements

for the six months ended 30 September 2021

Chair's statement

I am pleased to present our interim report for the six months ended 30 September 2021.

Although the Covid-19 pandemic has continued to impact all aspects of society, I am pleased   to be able to report that we have made a strong operational start to the year with significant progress being made against many of our performance commitments and in line with our company purpose; “to provide today’s public water service and create tomorrow’s water supply solutions, fairly and responsibly, working with others to help society and the environment to thrive.”

We are, of course, one of the six water only companies amongst 13 water and waste water  companies.

As a business, our focus has been very much on supporting our colleagues and customers and adapting quickly to the imposition and easing of Covid restrictions. This has seen us ensure that our colleagues who did not work from home had the necessary training and equipment to work safely in all environments, including streetworks and inside customers' houses and we have continued to be sympathetic to our customers in our approach to debt management where they are struggling to pay.

High levels of household demand continue and are consistently above the levels seen before the start of the Covid-19 pandemic. This is due to many customers in our region continuing to work from home and therefore consuming water from home rather than in their workplaces. Whilst this phenomenon is easing as customers return to more normal working patterns it is not clear whether or not our customer base will eventually return to pre-Covid patterns. In light of these changing demand patterns, Ofwat has agreed to assess our performance on our PCC (per capita consumption) and non-household void property performance commitments at the end of this regulatory cycle in 2025, when the long-term effect of Covid-19 on these measures should be better understood.

Whilst we did not experience a summer as hot as the last year, the lessons learned in 2020 ensured that this year's summer demand was managed well and passed without incident. Our efforts over the last 12 months have been on delivering key projects to provide extra resilience to our network. This has included building a new water treatment works in Aylesford, Kent, which was just eight months in  construction   and delivered extra capacity quickly to cover the loss of a key strategic service reservoir in  Kent which was damaged by a sinkhole which appeared in September 2020. In addition we have now completed the extension to the Bray Keleher water treatment works in the western region adding an additional 23ML of new water to the area.

We have continued to work on improving our operational response times to unplanned interruptions using a variety of approaches, this has included the implementation of new leakage detection software WaterNet which helps us identify and respond to leaks faster. Furthermore, we have continued a programme of calm valve and network optimisation training for our operational teams and supply chain partners which includes modules on network hydraulics and transient pressures.

This is all alongside the provision of additional resources, plant and machinery available to deal with complex repairs.

This is the second year of the 2020 to 2025 investment period known as AMP7 in which we are focused on delivering our purpose-led plan including capital expenditure of £433.0 million (2017/18 prices) in improvements across the region. We are tracking our progress against more than 30 challenging performance commitments together with an additional 10 responsible business commitments.

Looking ahead and in conjunction with Water Resources South East we are developing a draft regional resilience plan which will be consulted upon between 10 January and 7 March 2022. The revised regional plan will then form the basis of our own draft Water Resources Management Plan 2024 which we will consult on in the autumn of 2022, with publication due in 2023.

To support our customers we have ensured we are sympathetic to those who may have suffered financial challenges over the last year. This includes re-writing our credit management customer communications to ensure they are clear, supportive and engaging.

We have also continued to promote our payment holiday and affordability schemes. We are working with key stakeholders to offer mutual support including our work with Kent County Council to distribute £150k of Government Covid funding direct to our customers who were impacted financially and struggling to pay    bills.

In addition we have a scheme to auto enrol lower income households onto our affordability schemes through collaborative working with local councils, the first initiative of its kind in the industry.  We have  also worked with independent organisations such as National Energy Action to ensure our support meets customer needs in our region.

Covid-19 restrictions and the swift change to work from home has however provided us with an opportunity to       review our wider working practices across the business.

Now that colleagues are returning to sites and offices we have adopted a hybrid working model with a combination of home working and on site attendance to give greater flexibility. Of course, many roles cannot be carried out from home, but for those colleagues we are also looking at ways where we can provide greater flexibility.

Thriving together as a fair and responsible business

Our responsible business strategy is an intrinsic part of our corporate plan and we have four strategic   themes across the organisation. Some of the highlights and challenges in the first six months include:

Trusted and reliable service

How we build trust in what we do and deliver a high quality service to our customers

• 99.97% of our water quality samples have met DWI standards.
• A new, state-of-the-art water treatment works started pumping additional water to homes in Kent in August after just eight months of construction.
• With the increased focus on optimising our distribution network and pressure reducing valves (PRV) as part of leakage strategy to 2025, the PRV operational field colleagues are undergoing a technical training enhancement programme supported by many of our framework suppliers of the equipment / technology. This takes the form of field demonstrations and competency assessments in how to operate, set up and maintain our PRVs alongside general pressure and network hydraulic awareness.
• We received a five star rating from global ESG benchmarking organisation, GRESB. Increasing our score to 92 out of 100 versus a peer group average of 81, putting us in the top five companies in our sector globally.
• We have now completed the extension to the Bray Keleher water treatment works in the western region adding an additional 23ML of new water to the area.
• All operational colleagues are undertaking calm valve training. Practical exercises are undertaken specifically designed to simulate a water network and demonstrate the surges that can occur through incorrect valve operations. It also includes theory modules on network hydraulics and transients to improve technical competence.

Thriving people

How we help the people who work with us to thrive

•  A mobile app, called PikaVoid, which aims to help the company identify void properties has been shortlisted for the employee engagement award at the Customer Services Institute Awards. PikaVoid offers incentives to colleagues to identify voids in their local area or while working in the field.
•    A new Wellbeing strategy is in operation. It has four pillars: Mental Wellbeing, Physical Wellbeing, Financial Wellbeing and Social Wellbeing. This builds on previous work undertaken to promote a greater understanding of mental health within the workplace.
•    Our employee survey in September had a high overall response rate of 79%. Of those responding, 93% felt their manager was considerate of their wellbeing which is 8% higher than external benchmarking. In response to wellbeing, 81% stated they were either thriving or coping.
•    91% said they were proud to work for South East Water.
•    94% said they believe that the company is committed to being ethical and responsible and 96% said South East Water responds to the individual needs of our different customers.
•    90% believed that they could be their authentic self at work.

Community and society focused

How we understand and respond to the needs of society

·   We have concentrated on providing customers with full details of partner organisations offering support in a   variety of areas including disability, ill-health, wellbeing and financial.

·   Following a public consultation, where we received 21 responses, we published our revised dry weather plan 

   in September 2021. This outlines our actions in preparation for, and during drought. We are now waiting for Defra to approve publication of the final plan.

·   An industry leading innovative data sharing project with Maidstone Borough Council has been helping identify

   householders on low income who are eligible for our affordability tariffs. This project has since provided a framework for roll out with other local authorities.

·    Customer complaints in the last six months are down 15% compared to 2020/21.

·   We were shortlisted in the Utility Week Awards for our work to support vulnerable customers. Keeping   communities informed while we carry out our work has also led to being shortlisted in the Communications Leadership category in the Street Works UK Awards 2021

Flourishing environment

How we contribute to an environment that flourishes today and tomorrow

·  We published our route map to net zero operational carbon by 2030. We will achieve this through energy efficiency, renewable sources, avoiding direct emissions, water efficiency and investing in nature-based solutions.

·   Work has started with a third party using high definition aerial imagery to identify land use and nutrient   pollution sources within the North Kent and Stockbury catchments.

• There has been a high level of interest in this year’s capital grants funding in Woodgarston, Boxalls Lane, Hartlake and Pembury catchments. Farmers are working with us collaboratively to improve raw water quality and quantity. The capital grants encourage farmers to farm in a way which is less environmentally damaging – helping to protect current and future water supplies as well as the wider environment too.

·   More than 20 different stakeholder groups and colleagues took part in online workshops to help us develop   our draft 25 year environment plan.

·   Our "let's save this summer" campaign led to 51,734 water saving devices being ordered by customers in the first six months and we have updated our online customer portal, My Account, to include a neighbourhood comparison for water use to encourage behaviour change. We have developed ongoing communications to customers relevant to their specific water usage and specific circumstances.