Affinity half-year results: CEO’s departure a significant challenge

(by Verity Mitchell)

Revenue for the half-year at Affinity Water increased by 20.9%, primarily due to AMP8 tariff rises and a rise in consumption due to the hot weather over the summer. Operating profit increased by 62.5% to £42m, driven by the increase in revenue and energy price reduction, and offset by a rise in inflation and increased operational costs due to the hot weather's impact.

Shareholders have committed to inject £150m of equity into the company by 31 March 2026. Debt/RCV remained high at 76.8% despite capex remaining flat at £86.9m compared to the prior period, which the company described as a fast start to the AMP8 investment programme. The board committed to maintain gearing at around 70% during AMP8 following the equity injection.

Affinity has lost its chief executive Keith Haslett to Pennon, despite a £503,000 retention fee. Explaining the fee in its 2024-2025 Annual Report, the Affinity board said that “leadership stability is critical to the delivery of an ambitious programme for AMP8 and that loss of the CEO at this time would pose a very significant risk to this.” The retention payment accelerated 80% of both the forecast AMP7 year five bonus outturn and the forecast outturns of the 2022/23 and 2023/24 LTIP schemes, subject to a clawback and end of AMP8 review. This may explain why Haslett will not move to Pennon until 30 June 2026.

For Pennon, this leaves a six-month gap, as its current chief executive Susan Davy is stepping down on 31 December. In the meantime, David Sproul, chair of Pennon Group, will assume the role of executive chair, supported by an Operating Committee comprising the group chief financial officer; group chief strategy officer; regulatory affairs & investor relations officer; and group general counsel and company secretary. During this period, Susan Davy will remain available to provide handover support.

Pennon needs to maintain investment momentum in the interim. It is becoming clear even at the half-year results that some companies are much more on track with their programmes than others.