Southern half-year results: restoring customer trust some way off

(by Verity Mitchell)

Operating profit in Southern Water’s half-year results rebounded from a loss to £186.9m, benefitting from a 47% regulated revenue increase from the new price controls. Its capital expenditure was up only 5% to 483.6m, a significantly slower start compared to peers that recorded double digit growth. Management admitted that the balance sheet remained under pressure. The outcome of the Competition and Markets Authority’s provisional redetermination has allowed Southern an extra £180m of revenue.

Its shareholders committed in July 2025 to invest £655m of additional equity, £505m of which was received in November and £150m of which will be paid by March 2026. An update on an additional equity commitment, being a minimum of £245m, is expected before the end of December 2025. 

Southern remained in a debt covenant trigger event under its Common Terms Agreement which restricts the payment of dividends.

The company had improved performance in pollution incidents, reduced supply interruptions, leakage, water quality treatment works compliance, and sewer collapses.

However, it was forced to pay back £49m to customers for underperformance in a recent assessment. Its customer experience remains poor, and it has suffered further significant reputational damage from the failure of operations at Eastbourne Treatment Works in October, where up to ten tonnes of plastic beads, used in wastewater treatment, escaped and entered the sea via a 3.4km long outfall pipe.

Management is undertaking a two-year turnaround plan to improve both efficiency and responsibility among staff. This is expected to be completed by the end of 2025. Ofwat placed Southern Water in the ‘lagging’ category, along with four other companies in its assessment published in October. It maintained a two-star Environmental Performance Assessment rating from the Environment Agency.