Strategic
priorities

Our strategic objectives are set and monitored through a rolling long-term strategic planning process. This takes into account potential risks and our sustainability drivers.

  1. Leadership in UK water and waste
  2. Leadership in cost base efficiency
  3. Driving sustainable growth
Workers in a row

Near term priorities

  • Build on the strong track record of our water business by delivering and outperforming the K6 (2015-2020) plan
  • Continue to develop a new model for proactive customer service that puts our customers at the heart of everything we do
  • Develop and fully maximise value from our infrastructure business
  • Mitigate the risk arising from local authority austerity and global challenges in recycling
  • Improve our environmental performance
  • Strengthen employee engagement across the Group.
Construction workers

Progress in 2017/18

  • Outperformance by South West Water continued in 2017/18
  • Largest ever programme of customer research and engagement carried out in support of PR19 business planning
  • Introduction of customer service improvements have allowed South West Water to increase the speed and quality of its responses through a more proactive, tailored approach
  • High levels of performance and availability maintained by the ERF fleet, which delivered £123.7 million EBITDA in 2017/18
  • Greater Manchester contract reset – positive outcome reached
  • New trading relationships developed within Asia and ongoing 'self-help' initiatives to mitigate challenges in the market
  • Reduction in wastewater pollution incidents
  • New people strategy developed and Group vision and values launched.
Woman on phone

Sustainability drivers

  • Investing in people – protecting the health, safety and wellbeing of our people to ensure we have a skilled, diverse, engaged and motivated workforce to deliver our strategy
  • Environmental protection – integral to our water business’s regulatory contract and the promotion of the circular economy by our waste management business
  • Waste prevention and resource efficiency – delivering solutions for society is core to our strategy and helps to address the challenge of depleting natural resources.
Workers looking at board

Risks and uncertainties

Our aspiration to be a leader in the sectors in which we operate could be affected by the occurrence of certain events, many of which have reputational consequences:

  • An avoidable health and safety incident
  • Legal, regulatory or tax non-compliance
  • Poor customer service
  • Failure to recruit, retain and develop people with the appropriate skills
  • Business interruption (for example, as a result of a failure of our information technology systems) or operational failure
  • Failure of a capital project
  • Loss or corruption of data as a result of a cyber attack.
Construction site

Near-term objectives

  • Realise value from the organisation change programme following our Shared Services Review
  • Continue to maximise the benefits of the integration of Bournemouth Water operations into South West Water
  • Ongoing initiatives to reduce central overheads, share best practice and deliver synergies.
Glass recycling

Progress in 2017/18

  • £13 million of Group-wide efficiencies secured to date, including integration of a Group-wide IT platform. On track to deliver £17 million by 2019
  • Final phase of Bournemouth Water integration complete: on track to deliver K6 cost savings of £27 million
  • South West Water cumulative totex efficiency of £177 million driven by continuing advantages from our strategic alliances
  • Cost-efficient, long-term financing in place – 3.7% interest rate on annual net debt.
Water works

Sustainability drivers

  • Minimising disruption and inconvenience for our communities – means that we also minimise the cost to the business
  • Energy efficiency – the use of solar photovoltaics to power our facilities and other energy saving initiatives help us to reduce our own demand for electricity from the grid while maximising the energy generated from our core operations
  • Responsible sourcing – value for money secured through robust procurement practices and sustainable supply chains.
Mayflower ERF

Risks and uncertainties

Risks that could impact our ability to deliver efficiencies include:

  • Operational failures that result in rectification costs
  • Changes in law or regulation that require additional expenditure to fund implementation and ongoing compliance
  • An increase in customer bad debt resulting in additional debt collection costs
  • Failure to recruit and retain people with the right skills, mindset and motivation to share best practice, deliver synergies and move the Group forward in the new shared services structure.
Workers

Near-term objectives

  • Continue to grow the ERF business, including the successful completion of construction projects at Glasgow, South London, Dunbar and Avonmouth ERFs
  • Build on the success of PR14 by developing a high-quality, ambitious and innovative business plan for PR19 that meets the needs and priorities of South West Water’s customers and other stakeholders
  • Continue to build scale and efficiency in the non-household retail market through Pennon’s water retail business, Pennon Water Services
  • Identify and consider opportunities for further growth, including initiatives to expand our customer base or form partnerships with other organisations.
Beddington ERF facility

Progress in 2017/18

  • £398 million invested in key infrastructure during the year
  • Perpetual capital securities issuance delivering funding and balance sheet flexibility
  • Three ERFs in commissioning and one under construction
  • Well positioned for regulatory and market developments – ongoing engagement with Ofwat reforms and prepared for the 2019 price review
  • Construction of the innovative Mayflower water treatment works in Plymouth – on track to become operational in 2018
  • Progress towards the adoption of water and wastewater services for the Isles of Scilly in 2019
  • Pennon Water Services’ high-quality, service-based approach means it is one of only four retailers who were previously part of a water company to achieve growth since the competitive market opened in April 2017, with the second lowest attrition rate
  • Sustainable dividend – increase in total dividend for the year of 7.3% reflecting strong performance of Pennon’s water and waste management businesses.
Board visit

Sustainability drivers

  • Customer service and engagement – increased focus to improve the customer experience and help expand our customer base while retaining existing customers
  • High standards of business conduct – ensure that our people are incentivised appropriately and exhibit the right behaviours to enable us to achieve long-term and sustainable growth.
Mayflower plant

Risks and uncertainties

Our ability to deliver sustainable growth could be impacted by:

  • Unfavourable economic conditions
  • Local authority austerity
  • Poor customer service
  • Loss of market share as a result of regulatory reform and increased competition
  • Difficulties in recruiting, retaining and developing people with the necessary commercial acumen to help our businesses grow and prosper.