According to South East Water's latest annual results for 2022-23, Chief Executive David Hinton received an annual bonus of £104,759 on top of his £280,040 salary while Chief Financial Officer Andrew Farmer received a bonus of £68,982 on top of his £162,290 salary - despite incurring a £74 million pre-tax loss and significant operational performance penalties.

In 2021/22, their bonuses totalled £422,838 - David Hinton received £236,414 and Andrew Farmer £162,290.

In addition, the annual results for 20222-23 show that the water company’s directors also approved ordinary dividends totalling £9.0 million (2022: £9.0 million) paid in equal instalments of £2.25 million per quarter.

South East Water’s dividends policy states:

“Factors considered by directors when approving dividends – dividends are considered in the context of the overall performance and financial resilience of the company which also depends on our operational performance against our outcome delivery incentives and any reward or penalty.”

Operating profit for the year decreased by £42.5 million - the group recorded a loss before tax of £74.2 million, representing a £91 million swing from a profit before tax of £17.0 million recorded for 2021-22.

Revenues rose 2,5% on the previous year to £257. 5 million while capital expenditure decreased by 2.9% to £102.0 million. Cash generated from operating activities fell 22.7% to £105.0 million.

Introducing the Annual Report for 2022-23, a joint report by Chair Chris Train OBE and David Hinton CEO states:

“Our joint Chair/CEO statement reflects on our performance during one of the most challenging years for our company, our colleagues, and our customers, as well as the communities we serve and our natural environment.

“Whilst we acknowledge that the climate is changing, we have seen an exceptional combination of extreme weather events this year that has significantly impacted on our business operations and financial performance. While we have done everything we can to meet the exacting performance targets and rigorous environmental commitments that go even beyond our statutory obligations, extreme weather events have had a significant impact on our performance in the past year.”

The joint report says that during June 2023 soaring temperatures continued to impact the company’s ability to supply drinking water to all customers and that following six weeks with almost no rainfall, demand for water consistently exceeded the capacity at which it could supply all its customers.

The company chiefs say:

“We are seeing the true cost of these events, both in tangible and intangible terms. These events have impacted our performance on ODIs, including those for supply interruptions. We have seen this reflected in significant penalties which will reduce our revenues in future years.”

Overall the company incurred a net penalty of £5.4 million in 2022/23, including an estimate of penalties under C-MeX and D-Mex ( the final C-Mex and D-Mex will be announced by Ofwat later in 2023). This is almost double the total net penalty of £2.9 million in 2021-22 using Ofwat’s final C-Mex and D-Mex figures for that year.

According to the joint report, the exceptional weather related events (in addition to the impact on financial performance) have also put pressures on the cost base, including significant increases in the cost of power, chemicals and other energy intensive products.

Operating profit for the year decreased by £42.5 million, while the group recorded a loss before tax of £74.2 million (2021/22: profit of £17.0 million).

Chris Train and David Hinton say that until the exceptional weather events occurred, the company had been “well ahead” of its target to reduce leakage. For the first time in over a decade, South East Water has not been able to achieve its annual leakage targets.

“We have an ambitious recovery plan under way to make up the ground lost during the exceptional events of the past year.

“It was the long run time of the leaks, due to the volumes we were dealing with during incidents, that detrimentally affected our overall leakage performance. This was the case even though we maximised the resource on this activity, both internally and from the supply chain.

“We are acutely aware of the commitment required by us as a company to ensure we put all necessary operational measures in place to improve our readiness and response to extreme events like drought and to prioritise short-term investment as appropriate, in addition to the need for additional and longer-term investment.”

Operational highlights during the year included:

• continued investment in satellite technology, intelligent pressure monitoring (calm network) and use of the latest digital reporting and data analysis system (Waternet).
• nearing completion of one the company’s most ambitious pipelaying projects in Hampshire - an £11 million, to lay 11 kilometres of new pipe in a two-year project to protect the future of water supplies in Fleet
• renewal of 1.2km of water main in Pluckley
• replacement of an ageing water pipe in Uckfield
• installation of 200m of new water pipe in Marden, 845m of new water pipe in Balcombe and installation of a new generator atGodmersham Water Treatment Works site
• submission of designs for a £39 million state-of-the-art water treatment works on the site of the old Aylesford Newsprint in Aylesford, Kent, to the local planning authority in February 2023. If approved, work on the new treatment works which will enable South East Water to produce an additional 18 million litres of water per day, should begin later in 2023 and become fully operational and pumping water to homes by March 2025.

“We regret that any customers suffered interruptions to their supplies in 2022/23 and would like to take this opportunity to apologise again to those customers and communities affected by any of the incidents outlined below. We have made every effort possible to compensate those affected, over and above our statutory obligations, and this has clearly had a severe impact on our company's financial performance this year.”