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All Life Depends All life depends Annual Report 2019 Who we are SES Water supplies 160 million litres of clean water each day to 712,000 people in east Surrey and parts of West Sussex, west Kent and south London. Our values Service Commitment Innovation Integrity Collaboration Compassion SES Water Annual Report 2019 2019 highlights • Despite challenges like the hottest summer on record, we met the majority of our annual performance commitments, including our leakage target for the 20th successive year • Our water continues to be of the highest quality and we made good progress towards ensuring every customer can be supplied by more than one treatment works • We have made significant capital investment, including the completion of our major refurbishment of Woodmansterne Treatment Works • We moved to using 100% renewable electricity, installed more solar panels and electric vehicles joined our fleet • Work started on a brand new website and customer billing system • Our Business Plan for 2020 to 2025 – developed in partnership with our customers and including several industry leading measures – was submitted to Ofwat • We significantly reduced our gearing level to achieve a better balance between debt and equity Revenue £66.8m 2019 £66.8m 2018 £65.0m Profit before tax £9.7m 2019 £9.7m 2018 £10.5m Capital investment £25.3m 2019 £25.3m 2018 £26.0m What we do We We We collect clean store 85% of our raw To make sure we We have 31 water comes from maintain high quality operational service underground sources drinking water for our reservoirs and (groundwater) customers, our water water towers and 15% from quality is continuously river sources monitored at all our treatment works Contents Overview Introduction 01 Chairman’s statement 02 Our values in action 04 Industry review 16 Business overview 18 Our performance 22 Strategic report Operating and financial review 24 Our values in action | See page 04 Managing our risks 28 Governance Introduction to governance 30 Directors and advisors 32 Directors' report 34 Corporate governance report 37 Nomination Committee report 50 Remuneration Committee report 52 Audit Committee report 61 Statement of directors' responsibilities in respect of the strategic report, directors' report and the financial statements 64 Financial statements Industry review | See page 16 Independent auditor's report 65 Statutory accounts 70 Regulatory reporting Annual Board statement on the Company's direction, aspirations and performance 90 Statements of the directors to the Water Regulation Authority 95 Customer Scrutiny Panel report 98 Regulatory accounts 100 Independent auditor's report to the Water Services Regulation Authority (WSRA) and the directors of Sutton and East Surrey Water plc 101 Our performance | See page 22 See our glossary on inside back flap Where we do it We We Sutton distribute sample Purley Cobham Coulsdon Leatherhead Caterham M25 Dorking Reigate Redhill M23 Edenbridge 24 pumping stations Each year we carry Horley pump water to our out 120,000 tests Gatwick customers through on around 13,000 Airport 3,500 kilometres samples at every of pipes point from source to tap Read more about what we do at: seswater.co.uk Follow us on twitter @SESWater Overview ...but did you know the average person thinks about their water service for less than ten minutes a year? That’s a report Strategic problem for the world’s most-consumed resource. In the south east there is less rainfall per person than in Morocco. By 2080 we expect the population in our supply area to increase by nearly half – that’s a million people all needing water for their vital everyday needs. Governance But we cannot make any more. There will always only be the same amount of water on our planet and we can only use about 1% of it. And it’s not just people either – the need to conserve water to protect our environment Financial statements and the wildlife it supports has never been greater. Our greatest challenges are addressing issues like climate change and embracing opportunities and new technology to secure safe and resilient supplies for our customers now and their grandchildren in the future – reporting Regulatory all while keeping bills fair and affordable for all. We hope you enjoy reading about our progress towards this over the last year. Delivering Getting ready Transparency Resilience Being a Developing despite for the future and governance in the round responsible our people to challenges business deliver for our customers See page 04 See page 06 See page 08 See page 10 See page 12 See page 14 SES Water Annual Report 2019 01 Chairman’s statement A long-term approach is the key to sustained success Each year we produce our Annual This targeted investment approach Report which summarises our has provided customer benefits over performance and activity for the a number of years too: reductions in leakage, burst rates, water quality given time period. However, every failures, taste and discolouration We have a strong track report is just a snapshot of progress contacts and supply interruptions. On record in making the against our longer term strategy each of these we have been either the right decisions for to ensure our customers – both best performer or in the upper quartile of the industry for the last few years. the long-term, which present and future – are supplied means our customers with high quality water for many This year has seen other successes years to come. The key to achieving too. In 2015 we set ourselves the target today benefit from a this is resilience in all its forms – of helping 5,000 customers by 2020 more robust service. operational, financial and people – through our Water Support Scheme and we take our responsibility which provides a 50 per cent bill reduction. We achieved that number Jeremy Pelczer of ensuring appropriate investment Chairman very quickly and now over 10,000 in all these areas over the years customers facing financial hardship are very seriously. benefitting. The additional numbers being helped meant we had a gap in Our Business Plan for 2020 to 2025, funding which shareholders are bearing, submitted to our regulator Ofwat demonstrating their commitment to our in September 2018, sets out the priorities too. investment we will make to improve Our strong track record on performance our services and deliver more of what was recognised by Ofwat in their matters to our customers as part of a initial assessment of our Business Plan. longer term investment programme, Nevertheless, along with the majority which will benefit future generations. of the industry, our submission achieved For instance, by 2025 we want every ‘slow track’ status which means there single customer to be connected to were challenges in some areas, in more than one water treatment works, particular cost efficiency and the need which means that the risk of interrupted to better evidence how we concluded supplies, even if there are issues like on some of our investment and power cuts or drought, are significantly expenditure decisions. Whilst we were reduced. Delivering on this commitment pleased with the quality of the plan we is only possible thanks to our consistent submitted in September 2018, we have network resilience strategy and since engaged further with Ofwat and accompanying investment that our Customer Scrutiny Panel to address started nearly ten years ago. those areas highlighted by Ofwat We have a strong track record in as worthy of additional information making the right decisions for the long- in our re-submission, which we did term which means our customers today ahead of the 1 April 2019 re-submission benefit from a more robust service. A deadline. Later in July 2019 following great example is that over the last 30 the publication of this Annual Report, years since privatisation of the sector, we will hear back from Ofwat with their we have invested around £220 million in ‘draft determination’ of our plan – the ongoing improvements to our network service levels we must provide and the including a programme to replace cost of customer bills - and their final Our focus aging pipes. This ongoing investment determination comes in December, programme served our customers well ahead of starting to deliver our plan Delivering Planning for during the large swings in temperature from April 2020. last year. On 8 July 2018 we saw the today tomorrow Planning water resources is a long-term greatest demand of the year with an business too. Our Water Resources extra 40 million litres of water put into Management Plan, submitted to the supply which is 35% more than the Government (Defra) in September 2018, average summer weekend. Companies looks ahead 60 years and considers a across the country battled to keep up range of factors we need to be ready with demand and we were no exception for. The first five years will be delivered with our teams busy working behind the through our Business Plan for 2020 scenes. We were able to move water Transparency to 2025 which forecasts an adequate around our pipe network and make use supply/demand balance without needing of more plentiful resources and as a to develop new water sources, despite result, there were no significant issues. 02 SES Water Annual Report 2019 Overview Did you know? We supply 160 million litres of high quality drinking water to homes and business in our area every day Strategic report Strategic our modelling projecting a 40% increase should not take steps to better explain to ordinary shares and paying off our in the population of our supply area it to them, along with other corporate £30 million loan, both part of our de- by 2080. This is achieved through a subjects like dividends and executive gearing strategy.
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