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Rising to the Challenge

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Rising to the Challenge Rising to the challenge Annual Report and Financial Statements 2021 Thank you With the support of our customers, our people, our suppliers and our investors we have turned a difficult and challenging time into a year that we’re proud of. As key workers, we have continued treating and distributing millions of litres of water 24/7 to homes, schools, hospitals and businesses – a vital part of fighting COVID-19. Our intent was simple – no one needed to worry about their water supply and we worked tirelessly to make sure this was always the case. But we don’t just play an important part in people’s daily lives – we actively work to help improve the communities we are privileged to serve and this has never been more important than ever over the last year. We… …were the first local company to give money to the Surrey Coronavirus Response Fund …donated water bottles to East Surrey Hospital to keep our wonderful NHS workers hydrated …constructed hundreds of beds at the new NHS Headley Court Hospital “Thank you so much for your help. I am on kidney dialysis and I can’t get out. With a payment holiday I don’t need to worry about how I am going to pay my bill now.” …gave plastic gloves to a local surgery that was running low Rising on supplies …helped local foodbanks with to the groceries and deliveries challenge …wrote a new book for children and gave over 600 copies to local community groups …donated laptops to a housing association which were used by job seekers “Thank you for the great customer service the residents in our area received yesterday following the burst main, especially for those shielding. We really appreciated the emergency water deliveries and of course thanks to those that carried out the repair.” 2 Who we are We are a local water supplier providing an essential public service while playing an active role in the communities we are privileged to serve. Key stories of the year Hear from our CEO How we have performed Why delivering more on his first year against our targets than water is important Read more on page 6 Read more on page 16 Read more on page 34 Strategic report Corporate governance Financial statements 03 At a glance 64 UK Corporate Governance Code 107 Independent auditors’ report 04 Chairman’s foreword Index table & compliance 114 Financial statements 06 Chief Executive Officer’s statement 118 Notes to the financial statements statement 65 Chairman’s introduction 10 Our business at a glance 66 Board of Directors The back cover provides a glossary 12 Business overview 68 Corporate governance report of terms used in this document. 14 Business model 80 Report from the Nomination 16 Our performance Committee 34 Working in the public interest 83 Report from the Audit Committee 38 Market review 88 Report from the Remuneration 42 Sustainability Committee 46 An independent view on our 102 Directors’ report plans and performance 106 Directors’ statement 50 Our stakeholders of responsibilities 52 Section 172 statement 54 Financial review 58 Managing risks 61 Board oversight of risks 62 Principal and emerging risks For this year’s regulated accounts, please read our separate Annual Performance Report 2021. SES Water Strategic report Annual Report and Financial Statements 2021 Governance 3 Financial statements At a glance Performance Highlights Leakage target met Customers on our – In response to COVID-19 we have continued to put the health and Water Support Scheme wellbeing of our employees and customers first, while striving to do the right thing and continue 24.9 20,274 to supply high-quality water all day, every day Megalitres/day Target: 12,960 – Our continued focus on vulnerable Target limit: 24.9 customers means we are now helping more people in more ways than ever before, and have launched our ‘Here For You’ campaign to raise awareness Greenhouse gas emissions Burst mains of our financial support schemes and priority services – We have demonstrated our 40 229 commitment to supporting many kgCO e/Megalitre Target limit: 234 good causes in the areas we serve, 2 including the Surrey Coronavirus Target limit: 55 Response Fund – The resilience of our resources and network have coped with increased demand throughout the Financial year, especially during hot spells – We have achieved The Wildlife Trusts’ Biodiversity Benchmark Capital investment Revenue for enhancing and protecting the biodiversity at our Elmer Water Treatment Works and are the only water company to currently £26.5m £65.8m hold the award 2020: £35.6m 2020: £69.8m – Our customer transformation programme has continued with the development of a new billing and customer relationship management system, due to Dividend paid Profit before tax launch in 2021 – We are working to become the first water company with a fully £4.9m £3.9m smart network of pipes and sensors, which help detect 2020: £6.7m 2020: £10.7m leakage in near real-time – We have opened a brand new education centre at our Bough Beech Treatment Works, so we can continue inspiring future generations for many years to come – We have welcomed two new members to our executive leadership team – Kate Thornton as Chief Customer Officer and John Gilbert as Chief Information Officer 4 Chairman’s foreword The last year has been a challenging time for all of us and life has been far from normal. It has reinforced the critical role we play in society and the commitment we have to the communities we serve, while also highlighting some important challenges that we need to address, both as a company and an industry. Jeremy Pelczer Our priority throughout the pandemic to address this and ensure that we Chairman has been to keep treating and continue to drive for more efficient distributing millions of litres of use of water over the long term high-quality water every single day, while agreeing how we manage whilst also focusing on the health the impact it has on our five-year and safety of our customers and 2020 to 2025 Business Plan agreed employees. Our employees have with our regulator. adapted to these difficult times and new working arrangements, rising Minimising the water lost from our to the challenge and continuing to network and our customers’ pipes provide an essential service. However, clearly reduces our impact on the their response has gone far beyond environment, too, so I am pleased delivering the basics. There has been that we have again stayed at or a huge effort to find the people who below the maximum allowed level need extra support. We are helping of leakage, as set by our regulator. more than 20,000 households to Not only that, but our investment in pay their water bill and have given innovative technology and improved over 10,000 customers a break data gathering, including working with from making payments to help them several specialist partners, means we through these difficult times. We’ve are now better placed to sustainably also been contributing to local efforts reduce leakage for the long term. to tackle COVID-19, working within our communities, to help wherever we can. Another key investment this year has been in a new billing system, Aptumo, Water use has changed significantly which will be brand new to the UK in the last year. Despite many water industry. It is a key enabler businesses being closed, we have to improving the service we offer to been distributing on average around our customers. The Board is looking 16 million extra litres every day with forward to seeing the benefits more people at home and in their reflected in our performance and gardens. This shift is unsurprising we remain committed to ensuring but has significant implications, our customers are at the heart of particularly if more home working the investment decisions we make. continues beyond the pandemic. We, like all water companies, have As a Board we acted decisively Our employees have committed to challenging targets to in the early stages of the pandemic reduce household water use so that to increase our financial resilience adapted to these difficult more water is left in the environment by extending our credit facilities times, rising to the challenge and thereby allow our rivers to be so that we can manage further and continuing to provide healthy and where wildlife can thrive. financial shocks, should they occur. What we are seeing is very different We consider this a sensible move in an essential service. to what we initially projected and order to manage financial pressures makes meeting our target much in the future. We also need to better more challenging. understand the longer-term financial effects on our customers as the Collective action is needed by the country works to recover and industry, Government and regulators rebuild the economy. SES Water Strategic report Annual Report and Financial Statements 2021 Governance 5 Financial statements While 85% of our water comes from underground sources, 15% comes from Bough Beech Reservoir in Edenbridge, Kent. Despite the pandemic we have of knowledge and expertise. I am following the Competition and progressed our work to enhance delighted to welcome Steve Crabb Markets Authority’s ruling on the our Board leadership and governance as the new Chair of our Customer four companies that appealed their agenda. We are continuing to develop Scrutiny Panel and look forward to Final Determinations. Both companies our enhanced social purpose so working with him and the rest of the and regulators must consider this that it represents all aspects of what panel as we continue to drive forward so that the next price review strikes we do and is relevant to where we our plans to improve the experience the right balance between risk and operate and the people we serve.
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