Welsh Water reports significant delivery challenges

(by Verity Mitchell)

Welsh Water has announced annual results which management admitted have “not been good enough.”

Revenues increased by 28%, reflecting new price controls, to £1,174m. Operating profit increased to £172m from a loss of £9m in the prior period (including £23m of restructuring costs), but Welsh Water continued to report a loss after tax of £49m – albeit this was significantly lower than the £176m in the prior year (excluding fair value adjustments).

Despite plans to invest more than £4bn in a range of projects across its water and wastewater networks over AMP8, capex actually fell by 2% to £496m. Including infrastructure renewals at £120.7m (unchanged compared to the prior year), £617m was invested in the network.

Management had already admitted there has been some re-phasing of plans, including as a result of delays in finalising the National Environment Programme. The company is also investing more time than originally anticipated in scheme design. Its regulated gearing, based on the Regulatory Capital Value published by Ofwat, was 61% at the year end (2025: 62%).

In January 2026, Roch Cheroux was appointed as the new chief executive. The board reported that it has seen early evidence of strong focus, clear priorities and a disciplined approach to execution from him.

A new vision and strategic direction have been developed to improve performance. The board hopes that the new executive leadership can deliver a transformation programme which is designed to improve resilience, performance and value for customers. This includes a targeted 

headcount reduction of c.12% (up to 500 roles) over the period to September 2028. During 2025-2026, a total of c.180 employees were identified in the first phase of the restructuring programme, incurring cash severance costs of £3m (c.90 employees), and a £4m provision for future restructuring costs (c.90 employees).

The new executive team has aspirations to increase Welsh Water’s Environmental Performance Assessment ranking, which is currently in the two-star category. Targeted investment includes:

• £889m to minimise the environmental impact of storm overflows. 

• £160m to deliver 93 phosphorus removal schemes.

• £148m in 115 schemes to improve the quality of final effluent returned to the environment.

In March, Welsh Water agreed to accept a £44.7m redress package from Ofwat. Nearly £40.6m of this package will fund additional work to reduce spills from specific storm overflows and tackle groundwater entering the sewer network. £4.1m will be invested to help improve river water quality in extremely sensitive catchments.

The board admitted that “the scale of change required across the group is substantial.” Unless the investment can be supercharged by the new team, Outcome Delivery Incentive penalties will keep ratcheting up, and there will be no prospect of price re-opener success compared with peers. Time is of the essence to rapidly meet customer expectations, improve performance, and modernise ageing infrastructure.

• Welsh Water parent Glas Cymru has appointed Mick Jeavons as chief financial officer and as a new executive director. He has served as interim CFO since May 2025. Glas Cymru has also appointed David Staziker as a non-executive director. He is CFO at the Development Bank of Wales.