Southern Water makes progress on turnaround plan

(by Verity Mitchell)

Southern Water announced full-year results three years on from launching its turnaround plan in 2023. Revenues were £1,443.2m, up 45%. In 2025–26, Outcome Delivery Incentive penalties relating to performance in AMP7 of £47.5 million, together with £119m for the non-delivery of long-term supply demand schemes, decreased revenue by £139.1m. Operating profit returned, to £304.2m from a loss of £17.4m, but profit before tax (excluding fair value adjustments) was a loss of £1m reflecting finance costs of £306.9m, compared to a loss of £260m (on a like for like basis) in the prior year.

There was an increase in the provision made for bad debt which added £40.6m to operating costs. Clean-up, compensation and investigation costs for the spill of plastic bio-beads affecting the area around Camber Sands in East Sussex were £5.6m.

Southern invested £1,167.1m, up 19% compared to its AMP8 capex commitment of c.£6bn. Its debt/RCV fell from 74% to 67% and it paid no dividends. Its shareholder return – which it defines as combined performance on totex, customer ODIs and financing – was -4.7% compared to -17.8% in the prior year.

Management flagged a number of key improvement areas: supply interruptions fell to 5:01 minutes from two hours, 21 minutes and 50 seconds during 2024–25; 2,507 external sewer flooding incidents were recorded against a target of 3,636; bathing water quality targets were on track; it outperformed Ofwat's target for unplanned outages of 2.93, achieving 2.90 (2024–25: 5.48); and its leakage three-year rolling average of 101.1 Ml/d (2024–25: 109.9 Ml/d) was inside Ofwat’s target of 102.2. Per capita consumption, which is of major importance in the south east of England, fell almost to targeted levels and business demand to around the target level. 

However Southern remained below target for: total pollutions; serious pollution incidents (12 category 1-2, down from 15); internal sewer flooding; storm overflows; water use; water quality; treatment works compliance; greenhouse gas emissions; Compliance Risk Index; sewer collapses; and C-Mex. The company’s existing majority shareholder injected £0.9bn of equity during 2025–26 and has made a binding commitment, alongside new investor Asterion Industrial Partners, to inject a further £300m by 31 March 2027.