South East Water, which left thousands of customers without running water this summer, has paid out dividends of £2.25m over six months while overseeing increased losses of £18.1m before tax.
The water company, which serves customers in Kent, Sussex, Berkshire and Surrey, made the payout to shareholders despite facing huge rises in the costs of its £1.4bn debt mountain, its half-year report showed on Thursday. In the six months to 30 September, the cost of serving the debt rose by £7.4m to £54.8m, as inflation and higher interest rates bit.
South East Water is already under investigation by the regulator Ofwat over the loss of water supply for several days during the summer. Its results revealed the cost of the outages was £3m, which contributed to the £5.4m increase in losses before tax. The cost of the supply failings included £700,000 spent on bottled water and £1.5m paid in compensation to customers.
“Regrettably, despite all our planning and preparation, this long, extreme period of hot weather challenged us deeply and, even with all our treatment works and water sources working at full output, we were unable to keep up with demand and return our drinking water storage tanks to acceptable levels,” the company said.
South East Water, which is owned by a consortium including funds based in Australia and Canada, defended paying the £2.25m dividend to shareholders for the six months to 30 September, saying it was “lower than that paid in the corresponding period last year and this represents a nominal dividend yield of 0.9%”.
It added: “The dividend was in line with our dividend policy and was lower than Ofwat’s view of what is a reasonable nominal dividend yield, which is 4%.”
Water companies’ dividend payments have been in the spotlight as the industry faces significant criticism over underinvestment in infrastructure, water leaks, pollution and high executive pay.
On Tuesday, the industry regulator for England and Wales, Ofwat, launched an investigation into whether a £37.5m dividend announced by Thames Water could be a breach of its licence conditions.
An Ofwat spokesperson said on Thursday: “We note that South East Water has this morning published its interim results, which contain details about its interim dividend.
“We will look at payments made by South East Water as part of our ongoing monitoring of the company. It is the responsibility of the company to meet its licence requirements. However, where we identify that a company is not, we will take action.”
South East Water plans to increase customer bills to pay for investment in infrastructure. Bill rises are likely to result in an average customer paying almost £20 a month more in 2025.
The company said the impact of the climate crisis was hitting harder and faster than expected. “Like most water companies, we have known about and planned for climate change but what we are seeing now is a pattern of accelerated climate change, far exceeding forecasts made just a few years ago, and this is impacting our ability to supply our customers with the public water service they deserve. We want to put that right,” it said.
Despite the increased losses and the soaring cost of its debts, the company said it was still financially resilient and had “sufficient resources to continue in operation for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the financial statements”.
Separately on Thursday, the company said some customers in Sussex would have low pressure or no water after a burst pipe disrupted supplies.
