Operating cost hike cuts pre tax profits at Sutton and East Surrey.

Operating cost increases of 9.4% and little change in revenue left Sutton and East Surrey Water's profit before tax down from 3.4% the previous year at £14.3m for the year to 31 March 2016.

A £3.7m hike in operating profit to £42.9 m reduced operating income by 15.5%. It was largely down to investment in "new capabilities to deliver on commitments made to customers." wrote managing director, Anthony Ferrar (pictured) in the annual report. He added: "Externally driven costs, including the cost of making changes needed to compete in a future competitive market, plus essential works we need to undertake on the highway, adversely affect our performance and profitability."

The blow from rising costs was softened by a £2 m tumble in indexed interest charges to £7.9 m on the back of falling inflation.

Performance outcomes included:

• 99.95% compliance with water quality regulations

• supply interruptions lasting over three hours were 60% fewer than target

• There were 25% fewer burst mains than forecast

• beating its leakage target at just over 24 Ml a day

• Installing 6,333 water meters to help customers manage their water use while moving over 30,000 customers to paperless billing, and signing up 5,686 customers struggling to pay their water bills to its Water Support scheme.