Anglian Water aspires to improve as it issues full-year results

As Anglian Water reported full-year results to March 31 2025, it pledged to improve its performance and not to pay dividends to its shareholders, and accepted Ofwat’s ban on a bonus for the previous chief executive.

Operating profit increased by 15.2% from higher cost control, despite higher deprecation, ahead of allowed revenues rising only 7.5%. Anglian invested £1.080bn over the 12 month period, up 12.2%. Regulatory gearing increased from 69% to 71% reflecting the ramp up in investment.

For the last year of the AMP, Anglian had incurred £33.4m of Outcome Delivery Incentive (ODI) penalties, of which around £16m related to leakage targets. The remainder were for pollution incidents, interruptions to supply and internal and external sewer flooding. Although in 2024 serious pollutions incidents fell by 36%, total pollutions increased. A Category 1 pollution incident in the year triggered the bonus ban under the Water (Special Measures) Act which came into force on 6th June.

Anglian earned only £3.3m of ODI rewards in AMP7. Management stated its disappointment that, despite having one of the lowest levels of leakage in the industry, a three-year rolling average of 186.5 megalitres a day and a 3.9% reduction from the three-year 2019/20 baseline period, it still received an ODI penalty.

Despite its ‘lagging behind’ status in Ofwat’s performance categorisation for 2024, Anglian shareholders have committed to inject £500m into the Group, “reflecting confidence in the business and sector”. £300m will be provided by early September 2025 to repay a £240m mid bond maturing in March 2026. The remaining £200m will be provided by early June 2026 to repay £200m of bank loans at holding company level. In July 2024, shareholders injected £100m to improve asset health and reduce hydraulic overloading and blockages.

Despite its poor track recored for AMP7, management aspires to be an upper-quartile performer by 2030. Management said the group has not slowed down its AMP8 programme despite appealing to the Competition and Markets Authority. It hopes for a redetermination that provides a better balance between risk and reward and adequately funds its resilience investment. Management intriguingly said that the unconditional equity commitment from its shareholders to finance growth and improve performance is part of plans to strengthen the capital structure “ahead of regulatory reforms”. The Anglian Water Group shareholders and board are clearly expecting a brighter future for UK water post Cunliffe. They are looking for “long-term strategic direction, improved regulatory coordination, and investment in infrastructure resilience”. Management is presenting its full-year results in person and online on 24 June.