Wessex back in profit, paying dividends and hoping for higher totex allowances

Wessex Water’s annual report showed operating profit increased by 19% to £165m compared to revenues of £652.6m, up 13.6%. Profit before tax was £17m compared to a £43.2m loss the previous year, reflecting a lower cost of debt and the quantum of allowed revenue increase.

Capex increased by 12.9% to £446.5m. Regulatory gearing increased to 71.9% from 68.8%. Wessex will pay a dividend of £66.5m, representing a 5% yield on regulatory equity.

Wessex Water was fined £500,000 for a sewage pumping station failure which killed over 2,000 fish in Melksham, with sewage from a burst rising main also killing fish near Weston-super-Mare. This has rendered the senior management ineligible for bonuses. However, chief executive Ruth Jefferson is not subject to the ban because she was not in post when the incidents occurred.

In terms of reaching its performance targets, Wessex achieved its water quality assessment, lack of water restrictions target, affordable bills, priority services, D-Mex, storm risk, sewer collapses, bathing water quality, most environment (WINEP) measurements and void and gap sites targets. It remained a sector leader in C-Mex. It failed to reach its water supply interruptions target, its water quality compliance risk index score, its event risk index target, leakage, treatment works compliance, lead pipe replacement programme target, pollution incidents and all sewer flooding targets.

Subject to the Competition and Markets Authority’s redetermination, given the 17% shortfall in totex in Ofwat’s final determination relative to its submission, Wessex management plans to invest more than £2bn compared to 2020-25.