Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
SES Water said it has “significantly lowered” its gearing from 77 per cent to below 60 per cent as it published its first ever “customer-friendly” guide which explains how the company is owned, run and financed.
The water company has reduced its gearing – the ratio of its debt to the value of its ordinary equity – “in light of recent concerns from Ofwat about highly geared companies”.
It said it has “proactively set out” to achieve a better balance between levels of net debt and equity and claims to be the only water company to achieve this to date.
The Keeping it Clear publication outlines that SES Water’s mortgage has now been significantly reduced, with its gearing level at around 58.7 per cent as of 31 October 2018.
It has achieved this through an equity injection from shareholders, which has enabled the company to pay back a £30 million bank loan. It has also converted £12.4 million of preference shares into ordinary shares so they “no longer command such a high rate of interest.”
This resulted in gearing dropping from 77.1 per cent on 31 March 2018 to 58.7 per cent as at 31 October 2018.
SES Water said its business plan for 2020 to 2025 indicates that borrowings will “rise modestly” over the five years but gearing will remain below 65 per cent, a level “considered appropriate” by the regulator.
Paul Kerr, finance and regulation director at SES Water, said: “This wasn’t about increasing our financial resilience – we were already in a good place and have been for many years – but we wanted to support Ofwat’s direction of travel. Our simple ownership structure and supportive and responsible shareholders have enabled us to make these changes quickly and easily – a great example of the agility of a small company.”
The document, which aims to present information about finances and governance to customers in a clear and understandable way, also includes details on how dividend and executive pay decisions are made.
Kerr added: “We fundamentally believe that we are already carrying out a lot of the enhanced governance and transparency measures recommended to improve trust in the industry but there is always more we could do.
“Our main focus is now on better explaining the decisions we make and how we make them which is where ‘Keeping it Clear’ comes in. Our employees are also really keen to understand more about the company they work for, in language that is relevant to them.”
In its financial results for the first six months of 2018/19, SES Water’s chair Jeremy Pelczer said the company has “remained focused” on delivering the commitments it made to customers in its business plan for 2015 to 2020, “despite some challenging circumstances”.
“I am pleased to say that we have delivered some strong results in the first half of this year,” he said.
The company’s turnover increased by almost five per cent (£1.5 million) to £33.3 million compared to £31.8 million in 2017. This was principally due to an in increase in measured consumption and RPI lined increase in customer bills.
Operating costs increased by £1.5 million (7 per cent) to £23.8 million primarily due to an increase in costs relating to the “burst events and increased leakage mitigation activity” in 2018.
Meanwhile profit after tax fell by 45 per cent to £3.7 million compared to £6.7 million for the same period last year.
Please login or Register to leave a comment.