2024/25 Group Annual Report
and Financial Statements
Our Business
*
We supply top quality drinking water to 2.3 million customers in the south east of England. Through our
network of 9,000 miles of pipes, we deliver around 543 million litres of water every day. The skill and expertise
of our colleagues ensure our customers’ water meets the highest of standards.
2024/25 Group Annual Report and Financial Statements
2 South East Water Limited
Our Area
We operate our supply system across three operational regions:
South East Water is made up of three operating areas – the Western region, Sussex and Kent.
Each of our regions has specific characteristics, determined by different river catchments, geology,
topography, ecology, land use and, importantly, history. The investment needed to maintain a resilient
supply system will therefore be different in each region.
Western
Sussex
Kent
* The values quoted are for the year ended 31 March 2025
Find out more
southeastwater.co.uk/investors
We supply around
543 million litres
of water a day
that’s how much water
we supply to around
2.3 million people
9,000 miles of
underground pipes
that’s how we get
fresh drinking water
direct to your tap
1,173 employees
that’s how we make
sure your water supply
runs 24 hours a day,
365 days a year
198 kgCO
2
e/Ml
that’s the level of
Greenhouse gas
emissions we emit
across the company,
to supply water to
your tap
Contents
Key facts
Our performance 4
How we invest in your water 4
Strategic Report 5-129
Chair and CEO joint report 6
Our purpose 14
Our culture 15
Our business model 16
Our strategy 22
Our business environment 48
Risk management and principal risks 50
Business performance 66
Group structure and financing 72
Financial performance 74
Responsible business 80
Non-financial and sustainability
information statement 96
Long-term viability statement 118
Going concern statement 128
Governance 130-189
Corporate governance statement 132
Remuneration report 164
Financial Statements 200-283
Directors’ report 202
Independent auditors’ report 206
Group income statement 216
Group statement of other
comprehensive income 216
Company income statement 217
Company statement of other
comprehensive income 217
Group statement of financial position 218
Company statement of financial position 219
Group statement of changes in equity 220
Company statement of changes in equity 221
Group statement of cash flows 222
Company statement of cash flows 223
Notes to the financial statements 224
Our Vision
Our vision is to be the water company people want to be supplied by and want to work for. Everything we do
is underpinned by technical excellence.
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Financial StatementsGovernanceStrategic Report
4 South East Water Limited
2024/25 Group Annual Report and Financial Statements
Drinking water
supplied
543 million
Litres each day
(2023/24: 544.3 million)
Revenue
£285.5 million
Increase of 1.7 per cent
on last year
Greenhouse gas
emissions
198
kgCO
2
e/MI
(2023/24:203 kgCO
2
e/MI)
Loss
before tax
£19.8 million
Last year loss before tax
of £36.7 million
Operational highlights
Financial highlights
Our performance
How we invest in your water
Customer
services
Interest
and tax
Water
treatment
Water
extraction
Dividends
allocated
*
41%
7%
29%
13%
10%
0%
Number of
employees
1,173
(2023/24: 1,106)
Capital
expenditure
£157.3 million
Increase of 27.1 per cent
on last year
Cash generated
from operations
£128.4 million
Increase of 8.1 per cent
on last year
2023/24: 0%2023/24: 17%
2023/24: 24%
2023/24: 7%
2023/24: 42%
2023/24: 10%
Getting
water to you
* Dividends allocated to the appointed business
southeastwater.co.uk 5
Financial StatementsGovernanceStrategic Report
Strategic Report
Contents
Chair and CEO joint report 6
Our purpose 14
Our culture 15
Our business model 16
Our strategy 22
Implementation of our strategy 44
Our business environment 48
Risk management and principal risks 50
Business performance 66
Group structure and financing 72
Financial performance 74
Responsible business 80
Non-financial and sustainability
information statement 96
Climate-related disclosures 98
Long-term viability statement 118
Going concern statement 128
6 South East Water Limited
2024/25 Group Annual Report and Financial Statements
We have continued to invest significantly in new
and existing infrastructure and environmental
projects while dealing with the day-to-day
operational challenges associated with providing a
first-class drinking water service to our 2.3 million
customers. We have brought forward and prioritised
investment in important engineering projects to
restore resilience and boost flexibility in the parts of
our supply system that are most under stress. We’re
doing more than ever to support our customers,
especially those in our society who are vulnerable, and
to protect and enhance the environment through
our proactive, industry-leading environmental
programme. More information about this can be
found later in our report. However, we know we need
to go further and faster to tackle the challenges we
face now and those that lie ahead, most notably the
accelerated impact of climate change.
Competition and Markets Authority
– Review of Final Determination
That’s why we submitted our boldest and most
ambitious business plan ever to Ofwat for the new
2025 to 2030 business plan period (AMP 8). This
proposed a headline investment of £2.1 billion
over the next five years to improve customer
service, reduce customer supply interruptions and
strengthen network resilience through investment
in critical infrastructure (including the acceleration
of the new Broad Oak reservoir). Ofwat’s Final
Determination on our plan was published in
December. This was 13 per cent or £0.3 billion less
than we proposed in our business plan and that is
one of the reasons why we have asked Ofwat to
refer its Final Determination to the Competition and
Markets Authority (CMA) for a new, independent
review in the best interest of customers.
Chair and CEO joint report
Welcome to our group annual report and the audited financial statements for the
year ended 31 March 2025.
David Hinton
CEO
Chris Train OBE
CHAIR
This joint Chair/CEO statement reflects on our performance over the final year of our 2020 to 2025
business plan period (AMP 7) and looks ahead to the new 2025 to 2030 business period (AMP 8). Our
team has made considerable progress on delivering on the commitments we set out in our five-year
plan but we have been severely stretched by unprecedented operational challenges along the way.
The impact of these is ongoing and further challenges lie ahead. However, we remain determined
to do everything we can to secure the future of water resources in the South East while protecting
and improving the environment.
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Financial StatementsGovernanceStrategic Report
This was not a decision we took lightly but is
absolutely necessary if we are to meet the resilience
and investment challenges facing the South East.
We provided a Statement of Case in March for
this review and we hope for a decision by the end
of 2025 to enable us to reflect any changes to our
investment plans and customer charging in Year
2 of AMP 8 (2026/27). In our view, in its current
form, the Final Determination does not adequately
address our company-specific circumstances and
external challenges and undermines our plans
to improve operational resilience now and in the
future. We do not consider that the AMP 8 Final
Determination provides the right foundations for
the long-term investability of the water sector.
Therefore, it threatens water security in the South
East in the short and longer term. See below for
more information about our new business plan.
Challenges ahead
The biggest challenge we face remains the
accelerated impact of climate change and how we
tackle this. It is causing more frequent and severe
weather events, such as prolonged hot periods
and heatwaves that cause sudden and substantial
increases in peak demand. Climate change is also
causing unpredictable rainfall, flooding and storms
as well as rapidly fluctuating temperatures. These
impact raw water quality and availability, and the
operation of our assets. For example, freeze-thaw
events lead to widespread leaks and bursts of water
mains whereas severe storms cause power cuts,
which can impair operations.
In the past year, we’ve continued to experience
weather extremes. We had the disruptive Storm
Bert in November and, in the south-east of England,
the first six months of 2025 have been unusually
warm, sunny and dry, including the driest March
since 1961, with only 12 per cent of the long-term
average rainfall recorded. The trend has continued
with England experiencing its warmest June on
record, with heatwaves continuing into July. As a
result, we started our operational readiness as well
as water efficiency communications earlier than
usual to ask customers to use water wisely as we
prepare for the summer ahead.
As this report is being published, record breaking
demand for drinking water is putting significant
strain on water resources, which impacts the
company’s ability to provide the public water service.
With a prolonged dry period (recognised by the Met
Office as the driest Spring in the region since 1893),
and an approaching third heatwave of the summer,
we have moved to implement a Temporary Use Ban
for our household customers in Kent and Sussex from
11 July and we are closely monitoring the situation in
our Western Region, to ensure that we can protect
the environment and keep everyone supplied.
Despite these challenges, we have taken positive
action during AMP 7 to strengthen resilience, boost
the flexibility of our network and protect water
supplies for customers We have invested £567
million in the water infrastructure of the South East
of England, compared to an allowance in comparable
prices of £513 million in the Ofwat determination
for 2020 to 2025. You can read more about what
we’ve done, below.
Weather-related events cause millions of pounds of
impact and they demonstrate the real hurdles we
face in providing a public water supply in the South
East – a designated area of severe water stress. We
would like to thank everyone in our business for
tackling head-on every challenge we’ve faced over
the last five years. Our contractors and partners
have also played their part in ensuring we’ve been
able to keep taps flowing for the vast majority of our
customers, even during extreme weather events.
Of course, we know there have been times when
supplies have been interrupted, and we apologise
unreservedly to customers who’ve been without
running water for any length of time. We always do
our best to resolve issues as quickly as possible and
to keep customers informed during incidents. Our
new AquAlerter messaging system helps us to do
that, and has been well received by customers.
The biggest challenge we face remains the accelerated impact of
climate change and how we tackle this
“
8 South East Water Limited
2024/25 Group Annual Report and Financial Statements
Our customers want, and rightly expect, better
service and lasting environmental improvements
and we need to improve resilience, adapt to climate
change, and work towards net zero emissions. We
don’t shy away from any of these obligations as a
responsible company. While planning for AMP 8,
we continued to make solid progress across our six
priority business areas this year:
Chair and CEO joint report continued
Ofwat investigation into supply resilience
Ofwat launched an investigation into our supply resilience in November 2023. This came on the back
of four extreme weather events in 2022 combined with the hottest June on record in 2023, which
led to a record demand for water. We’ve taken significant action to improve our short-term supply
resilience, our operational response to supply events, to the information and support we provide
to our customers, learning lessons from previous events and collaborating closely with regulators,
stakeholders and the communities we serve. We’re continuing to do everything we can to improve
our operational response. For instance, at the start of this year we took delivery of the first of 10 new
water tankers which will enable us to increase our flexibility so we can get water to where it’s needed,
faster. Some of these have already been deployed during supply incidents and reduced the need to
rely on bottled water during interruptions. Our new five-year business plan (for AMP 8) addresses the
root causes of our supply resilience issues but it is vital we secure the necessary level of funding for
the next five years to deliver this longer-term investment programme. The investigation is ongoing at
the time of publication of this report and no formal decisions have been made by Ofwat.
▶ Flexible, resilient infrastructure and service
▶ Securing the future of water
▶ A trusted and affordable service supporting
customers and society
▶ Thriving environment
▶ Low carbon sustainable business
▶ Future-ready business
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Financial StatementsGovernanceStrategic Report
Improving infrastructure and service
Strengthening our resilience remains critical to
maintaining supplies. Over the past year, work has
continued to strengthen our network resilience
and protect and improve water supplies for our
customers. We’ve invested £80 million into our
infrastructure in East Sussex, including a critical
upgrade to Barcombe WTW (water treatment
works) and Bewl WTW. A pipeline project at Bewl
will also increase the amount of water we can treat
and supply to the area. Work on a state-of-the-art
WTW on the site of the old Aylesford Newsprint in
Maidstone is nearing completion too. This is the first
new WTW to be built in Kent for 18 years. Across
East Kent, we’re investing £12 million in targeted
infrastructure improvements in areas which have
experienced supply interruptions in recent years
during the record-breaking summers. That said, we
recognise that there is more to do, as reflected in
our plans for the period ahead.
Surveys and assessments are continuing for the new
Broad Oak Reservoir scheme near Canterbury. This
major investment will not only help meet the future
demand for drinking water in East Kent, but the
major investment creates new habitats, increases
biodiversity and provides social benefits for the
local community. A new Broad Oak Reservoir
Stakeholder Advisory Group will help us shape
the project. However, the review of our Final
Determination – described above – remains critical
to secure the funding necessary to accelerate
this scheme successfully through Ofwat’s RAPID
gated process (Regulators’ Alliance for Progressing
Infrastructure Development).
Whatever we’re working on, health and safety remains
our top priority. We take a proactive approach.
Building resilience in our teams is also important and
our Mental Health First Aiders are always available to
help colleagues with wellbeing issues.
Cyber threats are on the rise but so is our
determination to help protect our country’s critical
national infrastructure by strengthening our security
and safeguarding our cyber security resilience.
We are using industry-leading cyber security tools
and other means, to comply with the Network and
Information Systems regulations (NIS).
Securing future water supplies
In October we published our Water Resources
Management Plan 2024 (WRMP24). This explains
how we’ll provide a reliable and resilient supply of
top-quality drinking water over the next 50 years.
We know we need to balance this with the challenge
of protecting and enhancing the environment
around us for generations to come. We aim to do
this by investing in new infrastructure (including
the new Broad Oak reservoir), reducing leakage
and encouraging water efficiency. However, we
await the outcome of a review of our Final
Determination by the CMA to know if we’ll have the
funding we need to achieve the stretching targets
set out in WRMP24. See below for more information
about PR24.
We share our customers’ frustrations in seeing
drinking water lost to leaks and reducing leakage
remains a high priority for us. Although we are
still playing catch-up from the impact of extreme
weather events in recent years, we’ve repaired 12
per cent more leaks in the last year, compared to
the three-year average, and have a leakage recovery
plan in place. We spend around £40 million a year on
finding and fixing leaks across our network and our
planned investment in a smart network programme
will help us to run a more efficient leakage reduction
programme in the future.
As a company, we’re participating in The Cunliffe
Review, which is the Independent Water Commission
review into England’s water industry. Through this,
we’ll be making the case that we need to balance the
need for growth with the challenge of securing the
water resources to cope with that growth, without
detrimentally impacting the environment.
We’ve invested £80 million
into our infrastructure in
East Sussex
“
10 South East Water Limited
2024/25 Group Annual Report and Financial Statements
Financial performance
The economic environment remains difficult with
the inflationary effect of continued high energy
prices, driving costs of power, services and supplies,
such as chemicals. Additionally, staff costs, increased
by £4.9 million due to wage inflation and increased
headcount as the business prepared for a step up in
activity within AMP 8 in order to enhance network
resilience. Operating profit was, therefore, lower
than the previous year at £54.5 million compared
to £63.8 million, despite an increase in revenue of
£4.9 million to £285.5 million. Although operating
conditions remain challenging, investment in our
assets in the year increased by over 27 per cent
compared to the previous year. Our investment
programme is discussed in more detail in our
strategic report on page 44 to 47.
However, the financial performance of the group
has improved in the year, with the loss before tax
reducing to £19.8 million compared to £36.7 million
in the previous year. This is due to decreased finance
costs with lower inflation reducing the charges on
our index linked borrowing.
The group has improved its liquidity position in the
last year. £50 million of index linked debt was raised
in August 2024 and in December 2024 the maturity
date of the £120 million loan was extended to June
2026, from December 2025. Also in December, our
shareholders invested £75 million of equity, bringing
gearing to c.75 per cent at March 2025. In May 2025,
our shareholders invested a further £200 million of
equity, bringing gearing to c.65 per cent and further
reinforcing the liquidity and financial stability of
South East Water. The investment by shareholders
in the company reflects the desire to maintain an
investment grade credit rating, but does not alter
our conclusion as set out in our Statement of Case
presented to the CMA that we do not consider that
the AMP 8 Final Determination provides the right
foundations for the long-term investability of the
water sector.
We are currently in discussions with lenders
regarding the renewal of our revolving credit
facility that matures in September 2026. Further
information on this and the impact on going
concern is on pages 128 to 129, including the related
material uncertainty.
Supporting customers and society
We aim to provide a trusted and affordable service
that meets the needs of all our customers including
the most vulnerable in our society. We are proud
of our industry-leading approach to supporting
vulnerable customers, which has been recognised
with the gold-standard BSI Kitemark certification
in March. We have surpassed our target for our
Priority Services Register with more than 29,500
more customers joining this year. This represents
14.12 per cent of all customers and is nearly 1.5 per
cent above target. It’s encouraging that 2025/26
has also started strongly, and we expect to have a
Chair and CEO joint report continued
