Hike in operating costs hits pre-tax profits at Portsmouth Water

Portsmouth Water has reported a 33% fall in interim profit before tax from the previous half year stage due largely to increased operating costs.

Portsmouth’s operating costs increased £1.4m to £13.8m to offset a £0.5m improvement in sales to £19.9m leaving an operating income down £1.2m to £3.3m for the six months to 30 September 2016.

Turnover growth was fuelled primarily by tariffs increases to household and non-household customers. The operating expense increase was down to a £0.9m hike in mains renewal costs for the half year following low activity in the same period in 2015. A £0.2m charge for retail operations under the outs sourced non-household agreement with Castle Water added to Portsmouth’s operating costs.

Portsmouth decided to exit the non-household retail market, It entered a deal with Castle Water.that included an operating agreement for retail services from April 2016 until the sale of Portsmouth’s non-household retail operations to Castle on market opening.

The increased costs reduced profit before tax by £0.7m compared to the same period last year to £1.4m.

The company reported that it remained on track in its performance against all but one of its 13 outcome delivery incentives which was in customer contacts over water quality. The firm said its introduction of a new customer management system had improved the accuracy of its reporting in this area and so upped the number of water quality customer contacts. This increase, the company has forecast, means it is "likely to fail this ODI over the five-year period".

Written complaints were “marginally higher” than at the half year stage in 2015 at 6 per 10,000 customers. The company put this down to greater activity in its works programme and the transition a new enterprise resource planning system.