Half-year Financial Report

South East Water Limited

22 December 2025

 

South East Water Limited

Condensed group financial statements

for the six months ended 30 September 2025

Chair and CEO joint report

We are pleased to present our interim report for the six months ended 30 September 2025. It has been a very challenging six months on the back of the driest spring in this country since 1893, the hottest summer on record and unparalleled demand for tap water. As we head from Autumn into Winter, we have seen our surface reservoirs and groundwater sources recover quickly. We are continuing to monitor those vital sources closely, as we are mindful that a drier than average winter may impact on their full recovery.

We have taken action to reduce pressure on the water resources across our operating area throughout the developing drought by following our drought plan. This work has been undertaken with the relevant authorities, including the Environment Agency (EA) and the Secretary of State. This close working relationship remains vital as we continue to navigate our way through a serious situation. Beyond our ongoing investment in infrastructure, we have had more teams out round the clock finding and fixing more leaks than ever before. We have also moved water around the network, injected water into the network and put a temporary use ban (hosepipe ban) in Kent and Sussex. These measures have had an impact, but we needed to take further action to protect customer drinking water supplies and the environment. Recent rainfall has not been anywhere near enough to make a significant impact on the declining resources so extra hosepipe restrictions have been needed in Sussex. These further restrictions from 10 October have extended to withdrawing all exemptions to the hosepipe ban apart from those in place for health and safety purposes.

Aside from the developing drought situation, we have made solid progress in other areas while we waited for the redetermination of our PR24 business plan funding by the Competition and Markets Authority (CMA). Throughout, we continue to be purpose-led with decisions taken by the board and through the business balancing the long- and short-term interests of the company with the interests of our customers, employees, the environment, and other stakeholders.

Competition and Markets Authority

In February we asked Ofwat to refer the Final Determination (FD) of our business plan to the CMA for an independent review. Our new 2025 to 2030 plan proposed an investment of £2.1 billion over five years to improve customer service, reduce customer supply interruptions and strengthen network resilience. However, we felt the FD fell short of what we needed to make the plan financeable and deliverable. In our view, it did not address our specific and unique operational challenges in ensuring water security for customers in the water-stressed south east. The CMA published its Provisional Determination (PD) in September. We have responded to the CMA, providing robust evidence that their PD remains insufficient. We continue to advocate for a Final Determination that secures the investment needed to deliver our business plan. This year's drought again brings sharply into focus the rapid pace of climate change in our area. We hoped that funding for our new plan would provide the reset needed to equip us to secure the long-term resilience of our water supply system in light of environmental pressures, population growth and changes in consumer behaviour. The funding gap puts water security at risk for our customers in the short and longer term as it undermines our plan to re-establish resilience, operational flexibility and headroom.

Driest spring and record-breaking demand

At the start of 2025, our raw water storage levels were normal for the time of year. However, our operating area was affected by extremely low rainfall during the spring and summer months. We launched our communications campaign earlier than ever before to encourage customers to take simple steps to use water wisely. The weather was very dry and hot unusually early in the year and demand was accordingly high. From May onwards, we saw our raw water levels fall faster and earlier than usual and we activated our drought plan. Household demand for treated water increased to levels not previously experienced due to four prolonged heatwaves. Demand reached 680 million litres on 30 June 2025 - that is 105 million litres of water more than the average summer daily demand. Storage levels dropped so low that additional measures in our drought plan were triggered. The situation remains concerning. According to the EA's Water Situation summary report for August 2025, it was the driest August since 2003, and England received just 42 per cent of the long-term average (LTA) rainfall for the month. The National Drought Group met on 11 August 2025 and declared the worsening situation a "nationally significant incident." In its summary report on dry weather and drought in England (10 to 16 October 2025), the EA warned that "further significant rainfall over a sustained period is needed to return [the water resource position] to normal conditions." On 31 October 2025, the National Drought Group warned England must prepare for an ongoing drought in 2026, unless there is significant rain this autumn and winter.

Sussex

In our operating area, Sussex has been impacted most by the drought. The River Ouse catchment has only experienced two years (1976 and 1893) with lower spring and summer rainfall in the 155-year rainfall record. We take water from the River Ouse for supply and to refill Ardingly Reservoir, which supplies 228,000 homes with drinking water. Reservoir levels have been decreasing since June, driven by the factors mentioned above. They have been so low that they triggered further levels in our drought plan and, in September, the EA granted a Drought Permit for Ardingly Reservoir when the reservoir was at only 27.6 per cent total capacity. In October, to help conserve the remaining water stored within Ardingly Reservoir and protect drinking water supplies in Sussex, the EA issued a Drought Order, removing all exemptions to the existing hosepipe ban, barring those for health and safety purposes. This is expected to remain in place for the time being. By the end of November, Ardingly reservoir level was 42 per cent full which is still lower than this time last year when the reservoir was around 70 per cent full. Groundwater has shown some early signs of recovery. However, the situation remains serious and experts advise that a wet autumn and a wet winter is needed to reverse the cumulative impact of the below average rainfall seen over several months. We must continue taking precautionary measures and planning for a potentially dry winter. This is why the hosepipe ban remains in place for the time being. We are engaging with stakeholders, businesses, trade associations and business forums to discuss our application for a Non-Essential Use Ban (NEUB). This application is a precautionary step and would only be implemented if the drought situation worsens. We also continue to accelerate supporting projects, such as Bewl pipeline (see below), capacity upgrades at treatment works (Forest Row and Barcombe) and pulling out all the stops to reduce leakage. We are working closely with the EA and continue to monitor the situation closely to manage the effects of this year's historically low rainfall.

We have been doing everything possible to address the water shortage. This has included fast-tracking several projects to help water to move more easily around the network and take pressure off existing supply sources. We have also transferred more water into Sussex and are continuing to invest in infrastructure to improve resilience and flexibility. A new pipeline connecting treated water from Bewl Water Reservoir in Kent to the East Sussex network will soon be active. This will move water between the counties for the first time. Our teams have successfully repaired over 2,350 leaks in Sussex, marking a 14 per cent increase compared to last year. This rise is strongly linked to the increasing soil moisture deficit over the summer, as the resulting ground shrinkage and movement place extra stress on pipes. We recognise Sussex as a high-priority area and have deployed more teams than ever before to aggressively tackle leak repairs across the county.

We would like to thank our dedicated teams for working 24/7 to keep taps flowing over this challenging period. With the collaboration of our customers, they have minimised the impact of these record-breaking weather events. Without this support, the situation could have been much worse.

Pembury/Tunbridge Wells

We always do our best to provide customers with top-quality drinking water, but we know that we sometimes fall short of the high standards we set ourselves and the standards our customers quite rightly expect. Although outside the reporting period of this report, we want to apologise to customers affected by the supply interruption and extended water quality issues across the Tunbridge Wells area in November/December. The problems were caused by unusual and repeated water quality issues, related to the final disinfection treatment process, at our water treatment works (WTW) at Pembury on 29 and 30 November. We shut down the site to protect drinking water quality but fixing the problems proved very complex. This meant we had to change the treatment process to ensure the water we produced consistently met strict regulatory standards. The level of treated water already in the network fell critically low, resulting in some customers losing supplies or experiencing low pressure. We moved as much water around the network as we could and used our new fleet of tankers to keep as many customers as possible in supply. However, with Pembury WTW offline for an extended period, we were not able to keep taps flowing for every household and business, for which we are extremely sorry. On 3 December we restarted the WTW to pump water to customers to enable them to flush toilets and wash. While the water was safe, we issued an instruction to boil tap water before using it for drinking or cooking. This was a precautionary measure which we kept in place until 12 December while all the water we produced was flushed through the entire water network.

During the incident, we were able to continue to support our PSR customers, care homes, hospitals, GPs, nurseries and schools with alternative water. Our teams made more than 30,000 deliveries to around 5,000 customers on our PSR while also responding to requests from other vulnerable customers not already on the PSR. We supplied more than 30 million litres of alternative water to the area through our new water tankers and bottled water stations.

We are genuinely sorry. A full independent review of what happened, and how we responded, will take place and we will take any action required to prevent a similar issue in the future. We are committed to compensating our customers for the disruption caused and are currently considering the appropriate steps in this regard. We will use the comments, suggestions and views submitted about the incident to learn lessons and help shape our future services.

Ofwat investigation into supply resilience

We still await the outcome of Ofwat's investigation into our supply resilience, which was launched in November 2023, following the exceptional high demand events and supply interruptions in 2022 and 2023. Our company has provided evidence and updated action plans outlining the ways we are continuing to improve supply resilience, service delivery and support to customers in areas that were most affected by the high demand events in Kent and Sussex. We have also underlined the need for adequate future investment so we can address the root causes of these supply resilience issues.

Securing the future of water

We are committed to securing the future of water. Investment in infrastructure, reducing leakage and promoting water efficiency are key to ensuring we have resilient water resources for our customers and the environment. Ground investigation works have started near the Broad Oak reservoir site, and we have a stakeholder advisory group in place as design work continues. The Butler WTW (water treatment works) is in the final commissioning stages and should be operational by March 2026, providing up to 20 million litres of water a day to customers in Kent.

While we have been in drought management mode, our focus has also been on delivering short-term resilience improvements in Kent and Sussex, where they are most needed. In the spring, we made good progress with reducing leakage but the drought led to a record number of leaks over the summer. These were in part caused by ground movements resulting from very dry soil. We continue to prioritise leakage work orders and have seen a reduction in leakage in August and September but know there is still more to do. We have increased the number of teams available to find and fix leaks by 40 per cent. We started our water efficiency campaign earlier than usual this year to steal a march on the consequences of extreme weather and we have given away more free water-saving devices than ever before. Our household visits have continued too, enabling us to offer specific water efficiency advice to customers.

Lessons we learn from the current drought event will help to inform our next draft drought plan, which will be published for consultation next year. Other longer-term planning is continuing alongside the current drought management situation. We have started working on our new draft Water Resources Management Plan (WRMP) 2029. We must prepare a WRMP at least every 5 years and review it annually. This will outline how we will provide a reliable and resilient water supply to our customers over the next 25 years and beyond, while helping to create a thriving environment. Housing and population growth add additional stress to water supplies, including in some areas where there is no available headroom. To address this, we are looking to reconfigure and balance our network and we are also setting up a new planning team to work with local authorities and advise on the threat to water resources from housing development proposals.

Improving infrastructure and service

We continue to strive to make our infrastructure more flexible and better able to cope with extreme weather caused by climate change. Since April, we have strengthened our network resilience and protected water supplies for customers through investment in infrastructure. We are about to complete a multimillion-pound investment to create a more resilient water supply network within Wealden, Sussex. We have invested more than £12 million installing 17 km of new pipeline between our WTW at Bewl and our drinking water storage tanks at Wadhurst and Rotherfield. Along with upgrades to Bewl WTW, this project will allow us to move water between Kent and Sussex for the first time. This gives us greater resilience and flexibility in the future, so we can maintain customer supplies more readily during unexpected disruptions. Our new £55 million Butler WTW and Broad Oak reservoir project are other large-scale investments, alongside other smaller ones, which have progressed in the first six months. To help us bridge short-term service issues, our 10 new water tankers are now fully operational and have been used to move more than 9 million litres of water around our network to keep taps flowing.

Thriving environment

As well as making the right decisions about investment in infrastructure, we must also make well-balanced long-term decisions to protect and improve our environment and water resources. To do this, we have restructured our Environment department this year to provide a more localised, catchment-based approach to protecting existing water sources. We have collaborated with many partners on our biodiversity commitments and water industry national environment programme (WINEP) programme. Our WINEP helps us identify necessary actions to protect and improve the environment. Projects have included improving breeding success for swifts and house martins, fish habitat enhancements, a staff volunteer day ragwort pulling at Lullington Heath National Nature Reserve and sponsorship of the Longbridge Regenerative grazing project, using Exmoor ponies to restore chalk grassland. Our award-winning catchment management programme has seen us engaging with more farms and landowners to support improvements to land management practices, reduce erosion, run-off and contaminants affecting water quality and to enhance their resilience during extreme weather and unexpected supply disruptions.

Low-carbon sustainable future

As a responsible business, we continue to play our part in tackling climate change and meeting wider emissions reduction targets. This year we have installed battery storage at our Ospringe WTW to replace a diesel generator. We are also trialling different types of electric vehicles (EV) in a bid to decarbonise our commercial transport fleet, while exploring other ultra-low emission options. A new EV car salary sacrifice scheme for colleagues has attracted a lot of interest, with 20 per cent of eligible colleagues registering their interest in the scheme within two weeks of its launch.

Supporting customers and society

Following feedback from our customers, stakeholders and partners, we launched our new Vulnerability Strategy in June. This aims to deliver industry-leading support to our customers with additional needs. As part of this, we are developing trusted partnerships with organisations such as Citizens Advice Hampshire. We are also continuing to set up data sharing agreements with other organisations and utility providers to help our most vulnerable customers gain automatic access to free support, while giving them reassurance that their personal information is safe. We want to make sure support is easily accessible and tailored to customers' specific and individual needs. We are proud of a new partnership with SignVideo, which means deaf people will be able to videocall us and connect with a British Sign Language interpreter.

Since April, we have grown our Priority Services Register by almost 12 per cent to 189,378 people. The number of customers on our affordability tariffs has also increased. Customers on our social tariff rose by 10.5 per cent to 726,667, while those eligible for our WaterSure bill cap rose by nearly 4 per cent to 7,667. More information on our Vulnerability Strategy can be found here: southeastwater.co.uk/about/our-plans/our-vulnerability-strategy-2025-2030.

Future-ready

As we mention above, our PR24 business plan was ambitious and our corporate plan giving life to that is equally ambitious and transformative. We have set up a Change Project Management Office to help us deliver our corporate plan. Our major new HR IT system has been successfully running for more than six months and we have received more than 8,000 job applications from people wanting to join the teams we need to deliver the plan, as AMP 8 requires us to recruit a technical skillset at a high volume. We have completed 278 candidate hires and we are particularly proud that one in five of our new hires has come from internal promotions or transfers, underlining our commitment to grow our talent. Colleagues must feel safe and equipped to do their job so we are launching a revamped health and safety policy and a new range of personal protective equipment, appropriate for all our employees.

More details about these initiatives and other developments can be found later in our interim report.

Financial performance

The financial year 2025/26 is the first year of our new Asset Management Period (AMP 8). Improved revenues have led to an increase in profits for the period compared to the previous year, as discussed below. However, we expect that the operational issues experienced in Tunbridge Wells from late November and discussed earlier in the report will have a significant impact on the company's financial performance for the year ending 31 March 2026, which will be reported in the Annual Report in July 2026.

The group's liquidity position has also improved with the injection of £200 million new share capital in May 2025, which followed an injection of £75 million in December 2024. These funds, together with a new £30 million variable rate loan, entered into in August 2025, have been used to repay our £120 million bank loan and repay our maturing Revolving Credit Facility (RCF). A new £150 million RCF has also been negotiated, with the new RCF undrawn in the period.

The equity investment in the company reflects our shareholders desire to maintain an investment grade credit rating, but does not alter our conclusion as set out in our Statement of Case presented to the CMA that we do not consider that the AMP 8 Final Determination provides the right foundations for the long-term investability of the water sector.

The results published in this statement summarise our performance for the six months ended 30 September 2025. The financial statements are prepared under UK-adopted international accounting standards and report the consolidated results for South East Water Limited and its subsidiary, South East Water (Finance) Limited.

Revenue

Revenue for the period was £182.8 million (2024: £149.3 million). The additional £33.5 million of revenue was due to tariff increases of £34.7 million, in line with our regulatory FD in December 2024 from Ofwat, and increased demand of £1.0 million. This was partially offset by £1.2 million additional social tariff allowances given to customers and a reduction in other revenue of £1.0 million in this period when compared to the same period in the previous year.

Operating expenditure

Operating costs, excluding bad debt, were £138.7 million for the six months to 30 September 2025. This compares to costs of £118.4 million in the corresponding period for the previous year.

Employee costs increased by £4.3 million as a result of an average company pay award of 3.5 per cent and increased headcount as we move into the new AMP (AMP 8) and bring in additional resources to improve resilience and deliver on specific elements of the FD. Depreciation and amortisation increased by £2.6 million as new assets have been brought into service. Contractors' expenditure has increased by £6.8 million. This includes £1.9 million in respect of new WINEP workstreams which are included in enhancement spend in AMP 8. Other contractor increases relate to higher reactive maintenance activity (£2.8 million) as a result of an even greater focus on leakage, and incident costs including bottled water of £0.4 million. Computing costs have continued to increase, reflecting the move to cloud-based arrangements which bring higher operating expenditure. Other cost increases reflect the wider impact of inflation as well as higher incident-related customer compensation associated with AMP 8.

Profit from operations

Operating profit for the six months period was £51.1 million (2024: £37.1 million), an increase of £14.0 million as detailed above.

Finance expenses

Finance expenses for the period totalled £36.0 million (2024: £35.4 million). The net increase of £0.6 million is primarily due to a £1.3 million rise in fees and interest associated with the new term loan. This increase was partially mitigated by a £0.8 million increase in capitalised interest, reflecting the increase in our capital programme.

In May 2025, the group raised an additional £200 million through an ordinary share issue. These funds were utilised to repay our £120 million variable rate loan and the £69 million drawn on the Revolving Credit Facility (RCF).

In August 2025, the group successfully established two new credit facilities, both scheduled to mature in August 2028. The first is a £30 million variable rate term loan. The group also entered into a new £150 million RCF. As of 30 September 2025, there had been no drawdown against this new RCF.

Finance income

Finance income for the six months to 30 September 2025, comprising interest earned on bank deposits and returns on pension scheme assets, was £3.1 million (2024: £0.9 million).

Profit before taxation

The profit before tax for the six months to 30 September 2025 was £18.2 million (2024: £2.6 million) largely as a result of higher operating profit in the period.

Profit after taxation

The group has recorded a profit after tax of £14.6 million for the period (2024: £7.8 million).

The tax charge for the period was £3.5 million (2024: credit £5.2 million), reflecting the profit before tax.

Net debt and cash flow

During the six months to 30 September 2025, cash generated from operations was £67.0 million (2024: £64.4 million). Net payments in respect of capital activities in the period totalled £80.8 million (2024: £73.5 million). Net payments in respect of interest and other finance income and costs were £17.5 million (2024: £21.5 million).

The reduction in net interest paid during the period reflects the lower interest rates on outstanding borrowings and the repayment of the £120 million loan and the RCF. Higher interest received on increased cash deposits also contributed to the net reduction.

Dividend

No dividends were declared or paid in the six months ended 30 September 2025 or the corresponding period in 2024.

Going concern

The group's business activities together with the factors likely to affect its future development were set out in the strategic report included in the group's annual report for the financial year ended 31 March 2025. The group finances its working capital requirements through cash generated from operations and committed facilities that can be called upon as required. The group's liquidity position and cashflow projections are closely monitored and are updated each month. When necessary, mitigating actions are identified and implemented.

In preparing the financial statements the directors considered the group's ability to meet its debts as they fall due for a period of 12 months from the date of this report. The directors believe that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements. The consolidated financial statements for the six months ended 30 September 2025 and have been prepared on the going concern basis.

As part of the going concern assessment, the directors have considered the forecast cash flows over the 12 months to December 2026, the capital structure of the group and the financing needs for the period. Cash flows for the period to 31 March 2026 are consistent with the most recent forecast. Cash flows for the period to 31 March 2027 are based on the Provisional Determination issued by the Competition and Markets Authority in October 2025, and our desktop assessment of P50 Totex and ODI performance under those regulatory targets and allowances.

In forming their view on going concern, the directors are aware that the financial statements of South East Water Limited for the year ended 31 March 2025 contained a material uncertainty in respect of going concern. At the date of signing of the South East Water Limited financial statements on 14 July 2025, refinancing of a revolving credit facility which was due to mature in September 2026 was well advanced but had not been legally committed. Since that time, on 15 August 2025, South East Water Limited closed the facility and entered into a new £150 million revolving credit facility with a maturity of 15 August 2028 and also entered into a new £30 million term loan with a maturity of 15 August 2028. As a consequence, the group forecast does not indicate a requirement for additional financing during the going concern period to December 2026.

Under the terms of its banking arrangements, the financing group (comprising South East Water Limited, South East Water (Finance) Limited and South East Water (Holdings) Limited), has to comply with a number of financial covenants based on interest cover and gearing ratios, both on a retrospective and a prospective basis. Breach of these covenants can result in either a Trigger Event or an Event of Default. A Trigger Event activates initial creditor protections under the terms of the financing group's securitised financing arrangements, which are designed to maintain South East Water's creditworthiness without disrupting its ability to trade. The Trigger Event operates to prevent cash payments out of the ring-fence group (comprising South East Water Limited, South East Water (Finance) Limited and South East Water (Holdings) Limited) to affiliated entities, providing a degree of protection to these companies and specifically to the operation of the regulated business of South East Water. The Trigger Event preserves the value of the ring-fence group, which is in the interests of creditors and customers.

There is comfortable headroom across all covenant ratio thresholds that could result in an Event of Default during the going concern period. Ratios that could result in a Trigger Event are forecast to maintain positive headroom under our base case assumptions but could be breached under certain downside scenarios characterised by material adverse weather events.

We continue to hold ratings from Moody's and Standard & Poor's consistent with the requirements of both our securitisation structure and our instrument of appointment. South East Water's credit rating as at 30 September 2025 was BBB- (Negative Outlook) with S&P and Baa3 (Stable Outlook) with Moody's.

In adopting the going concern basis of preparation for these financial statements, the directors have assessed the group's overall financial position and the latest cash flow forecast shared with the board. The directors have also noted that the group has no drawn debt maturities until August 2028.

Based on the above, the directors have a reasonable expectation that the group has sufficient resources to continue in operation for a period of at least 12 months from the date of approval of the financial statements and to meet its obligations as they fall due. For this reason, the board considers it appropriate to continue to adopt the going concern basis of accounting in preparing the financial statements.

Condensed group income statement

for the six months ended 30 September 2025

	Note	Six months ended 30 September 2025 £000	Six months ended 30 September 2024 £000
Revenue	6	182,830	149,306*
Bad debts		(1,287)	(1,022)*
Net operating costs	8	(138,720)	(118,432)
Other income	6	8,309	7,256
Profit from operations		51,132	37,108
Finance income	9	3,059	912
Finance expense	9	(36,034)	(35,435)
Profit before taxation		18,157	2,585
Taxation	10	(3,546)	5,212
Profit for the six months		14,611	7,797
Profit per share attributable to the ordinary equity holders of the parent	Note	Six months ended 30 September 2025 Pence	Six months ended 30 September 2024 Pence
Basic and diluted	11	5.25	15.81

* See note 6 for details of prior period changes to presentation

The group activities above are derived from continuing operations.

Group statement of other comprehensive income

for the six months ended 30 September 2025

	Six months ended 30 September 2025 £000	Six months ended 30 September 2024 £000
Profit for the six months	14,611	7,797
Other comprehensive income:
Items that will not be reclassified to the income statement:
Net actuarial gain on pension schemes	425	238
Deferred tax charge on net actuarial gain	(106)	(60)
Other comprehensive income for the six months	319	178
Total comprehensive income	14,930	7,975

Condensed group statement of financial position

as at 30 September 2025

Registered number: 02679874

		30 September 2025 £000	31 March 2025 £000	30 September 2024 £000
Assets Non-current assets
Property, plant and equipment		1,921,810	1,870,841	1,820,478
Right of use assets		3,185	3,461	3,538
Intangible assets		8,290	8,787	9,715
Defined benefit pension surplus		9,198	8,378	26,385
		1,942,483	1,891,467	1,860,116
Current assets
Inventories		1,096	1,268	1,264
Trade and other receivables		124,028	99,278	106,604
Cash and cash equivalents		44,349	36,072	7,523
		169,473	136,618	115,391
Total assets		2,111,956	2,028,085	1,975,507
Liabilities Non-current liabilities
Trade and other payables		3,595	3,483	3,454
Loans and borrowings		1,247,085	1,325,934	1,310,197
Deferred income		4,971	3,913	2,865
Defined benefit pension liability		2,261	2,357	2,296
Deferred tax liability		181,914	178,169	184,570
		1,439,826	1,513,856	1,503,382
Current liabilities
Trade and other payables		154,725	143,759	124,393
Loans and borrowings		471	69,484	82,457
Deferred income		3,966	4,615	6,034
Provisions		9,681	8,014	8,486
		168,843	225,872	221,370
Total liabilities		1,608,669	1,739,728	1,724,752
Net assets		503,287	288,357	250,755
Issued capital and reserves attributable to owners of the parent
Share capital		324,312	124,312	49,312
Revaluation reserve		201,772	204,067	206,365
Retained earnings		(22,797)	(40,022)	(4,922)
Total equity		503,287	288,357	250,755

The condensed interim financial statements were approved and authorised for issue by the board of directors and were signed on its behalf by:

David Hinton                                                                                   Andrew Farmer

DIRECTOR                                                                                           DIRECTOR

22 DECEMBER 2025                                                                            22 DECEMBER 2025

Condensed group statement of changes in equity

for the six months ended 30 September 2025

	Share capital £000	Revaluation reserve £000	Retained earnings £000	Total equity £000
At 1 April 2025	124,312	204,067	(40,022)	288,357
Comprehensive income for the six months
Profit for the six months	-	-	14,611	14,611
Other comprehensive income	-	-	319	319
Total comprehensive income for the six months	-	-	14,930	14,930
Issue of shares	200,000	-	-	200,000
Amortisation of revaluation reserve	-	(3,055)	3,055	-
Release revaluation reserve on disposals	-	(5)	5	-
Deferred tax on revaluation and retained earnings transfers1	-	765	(765)	-
	200,000	(2,295)	2,295	200,000
At 30 September 2025	324,312	201,772	(22,797)	503,287

At 1 April 2024	49,312	208,657	(15,189)	242,780
Comprehensive income for the six months
Profit for the six months	-	-	7,797	7,797
Other comprehensive income	-	-	178	178
Total comprehensive income for the six months	-	-	7,975	7,975
Amortisation of revaluation reserve	-	(3,055)	3,055	-
Release revaluation reserve on disposals	-	(1)	1	-
Deferred tax on revaluation and retained earnings transfers1	-	764	(764)	-
	-	(2,292)	2,292	-
At 30 September 2024	49,312	206,365	(4,922)	250,755

All transactions relate to the equity holders of the group.

1 The movement between the revaluation reserve and retained earnings arises from the depreciation of the fair value uplift of assets at the time of transition to IFRS, together with the associated deferred tax.

Condensed group statement of cash flows

for the six months ended 30 September 2025

		Six months	Six months
		ended	ended
		30 September	30 September
		2025	2024
		£000	£000
Cash flows from operating activities
Profit for the six months Adjustments for:		14,611	7,797
Depreciation of property, plant and equipment		33,279	30,822
Amortisation of intangible assets		1,318	1,186
Finance income		(3,059)	(912)
Finance expense		36,034	35,435
Loss/(profit) on sale of property, plant and equipment		6	(112)
Difference between pension contributions paid and amounts recognised in the income statement		(316)	(3,330)
Taxation		3,546	(5,212)
Movements in working capital		85,419	65,674
Increase in trade and other receivables		(24,598)	(9,238)
Decrease in inventories		172	79
Increase in trade and other payables		5,976	7,838
Cash generated from operations		66,969	64,353
Income tax received/(paid)		102	(1,048)
Interest element on lease liability payments		(51)	(52)
Interest received		2,833	894
Interest paid		(20,243)	(22,349)
Net cash generated from operating activities		49,610	41,798
Cash flows from investing activities
Purchase of property, plant and equipment		(79,977)	(72,829)
Proceeds from disposal of property, plant and equipment		27	143
Purchase of intangible assets		(821)	(835)
Net cash outflow from investing activities		(80,771)	(73,521)
Cash flows from financing activities
Credit facility repayment		(69,000)	(15,000)
New loan financing		30,000	50,000
Repayment of variable rate loan		(120,000)	-
Issue of shares		200,000	-
Net payment of lease liabilities		(268)	(235)
Issue costs of debt		(1,294)	(505)
Net cash generated from financing activities		39,438	34,260
Net increase in cash and cash equivalents		8,277	2,537
Cash and cash equivalents at the beginning of the six months		36,072	4,986
Cash and cash equivalents at the end of the six months		44,349	7,523

Notes to the condensed group financial statements

for the six months ended 30 September 2025

1.  Reporting entity

South East Water Limited (the 'company') is a limited company incorporated in the United Kingdom. The company's registered office is at Rocfort Road, Snodland, Kent, ME6 5AH. These condensed consolidated financial statements comprise the company and its subsidiary, South East Water (Finance) Limited (collectively the 'group'). The group's principal activities are the supply of water to a population of 2.3 million in an area of 5,700 square kms and the provision of certain ancillary services for customers, developers and other bodies within the limits of the relevant legislation.

2.  Basis of preparation

The condensed consolidated financial statements for the six months ended 30 September 2025 are prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 Interim Financial Reporting as endorsed by the UK endorsement board. The statements should be read in conjunction with the financial statements for the year ended 31 March 2025, which have been prepared in accordance with UK adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The condensed group financial statements are presented in sterling.

These interim financial results have not been audited or reviewed by our auditor. The information herein for the year ended 31 March 2025 does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2025 were approved by the Board of Directors on 14 July 2025 and delivered to the Registrar of Companies. The report of the auditors on those accounts was not qualified and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

3.  Key judgements and sources of estimation uncertainty

The preparation of interim financial statements requires the application of judgements and assumptions by management which affects the value of assets and liabilities at the balance sheet date and income and expenditure for the six months ended 30 September 2025. Actual results may differ from those arrived at based on management's judgements and assumptions. In preparing these condensed interim financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the Group Annual Report for the year ended 31 March 2025.

4.   Going concern

The directors have undertaken a detailed review of the group's liquidity requirements compared with the cash and facilities available, which includes cash at hand, cash on deposit, and committed bank facilities of which £150 million remained undrawn at 30 September 2025. The directors have also considered the financial covenant position including projections based on future forecasts, the current credit ratings and financial risk.

The PR24 business plan is the group's most ambitious business plan ever with proposed investment of £2.1 billion to improve customer service, reduce customer supply interruptions and strengthen network resilience. As a result of the higher operating and capital expenditure in AMP 8 the group has forecasted a net cash outflow position before financing inflows over the going concern period to December 2026. As a consequence of the recent significant equity injections by the group's shareholders, the renewal of the Revolving Credit Facility and the new term loan entered into in August 2025, the group forecast base case does not indicate an additional requirement for financing in the going concern period.

Based on the above and on the basis of their assessment of the group's overall financial position, and the latest cash flow forecast shared with the board, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least 12 months from the date of approval of these financial statements. For this reason, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

5.   Accounting policies

The accounting policies applied in these condensed interim financial statements are the same as those applied in the annual financial statements for the year ended 31 March 2025.

6.  Revenue and other income

The following is an analysis of the group's revenue and other income for the six months from continuing operations:

Group	Six months ended 30 September 2025 £000	Six months ended 30 September 2024 £000
Revenue
Household - measured	133,967	107,785
Household - unmeasured	13,205	10,907
Non-household - measured	33,008	26,635
Non-household - unmeasured	649	561
Other revenue	4,165	5,247
Charge for bad and doubtful debts	(2,164)	(1,829)*
Total revenue	182,830	149,306*
Other income
Rental income	577	612
Laboratory income	3,012	2,252
Commission income	4,363	3,680
Other income	357	712
Total other income	8,309	7,256

All revenue is from customers within the United Kingdom.

Other revenue comprises a number of income streams, including those associated with activities typically performed for property developers, which impact the group's infrastructure network assets, including diversions works to relocate water assets, and activities that facilitate the creation of an authorised connection through which properties can obtain water services. Other revenue includes new connections income of £1.5 million (2024: £1.9 million), infrastructure income of £1.2 million (2024: £0.05 million) and capital contributions of £0.5 million (2024: £2.1 million).

* Under IFRS 15, revenue should only be recognised to the extent that it is probable that economic benefits will flow to the entity.

In the six months to September 2025, we have estimated the amount of revenue potentially uncollectable to be £2.2 million (2024: £1.8 million). We have reflected this adjustment as a deduction against revenue in the current period, and in order to ensure comparability between years we have restated the presentation of revenue and bad debt for the prior period. This has no impact on operating profit and is purely presentational.

7. Segmental analysis

Financial and other performance information is reported internally every month to the South East Water Limited Executive Committee. The Executive Committee is responsible for the day to day running of the business and, accordingly the Executive Committee is considered to be the chief operating decision maker of the group for the purposes of segmental reporting under IFRS 8: Operating Segments. The Executive Committee considers that the group's activities largely fall into one main business segment, namely Regulated Water, with all other activities included in "Other" below. Regulated Water is the supply of potable water on a wholesale and retail basis, both of which are governed by the Water Act 2014.

A segmental analysis of the management results are presented below together with a reconciliation to the statutory revenue and loss before tax.

	Regulated water £000	Other activities £000	Total £000
Six months ended 30 September 2025
Water revenue	180,829	-	180,829
Other income	2,595	9,879	12,474
Net operating costs	(99,141)	(8,302)	(107,443)
EBITDA	84,283	1,577	85,860
Depreciation and amortisation	(34,597)	-	(34,597)
Company operating profit	49,686	1,577	51,263
Six months ended 30 September 2024
Water revenue	145,888	-	145,888
Other income	3,204	9,299	12,503
Net operating costs	(87,116)	(7,314)	(94,430)
EBITDA	61,976	1,985	63,961
Depreciation and amortisation	(32,008)	-	(32,008)
Company operating profit	29,968	1,985	31,953

Water revenue on a management basis above of £180.8 million (2024: £145.9 million) compares with total revenue on a statutory basis of £182.8 million (2024: £149.3 million). The difference is Other revenue of

£4.2 million (2024: £5.2 million) (see note 6) and an adjustment of £2.2 million (2024: £1.8 million) attributed to bad debt on bills raised in the year, in line with the requirements of IFRS 15.

The business segments' operating profit is reconciled to the group's statutory operating profit and loss before tax as follows:

	Six months ended 30 September 2025 £000	Six months ended 30 September 2024 £000
Management operating profit	51,263	31,953
Results of South East Water (Finance) Limited (1)	(7)	-
Pension costs adjustment (2)	(272)	2,834
Profit on disposal of property, plant and equipment	(6)	112
Capitalisation of new connections (3)	2,090	2,235
Other statutory adjustments (4)	(1,936)	(26)
Statutory profit from operations	51,132	37,108
Finance income	3,059	912
Finance expense	(36,034)	(35,435)
Statutory profit before taxation	18,157	2,585

1)   The profit of South East Water (Finance) Limited is consolidated into these financial statements but not included in the finance reports presented to the Executive Committee.

2)   The internal finance reports include pension costs on the basis of contributions paid and unfunded pension benefits paid whereas the financial statements include pension costs on the basis of IAS 19 Employee Benefits.

3)   The internal finance reports record the costs associated with new connections in operating costs but these costs are capitalised as Property, Plant and Equipment in the financial statements.

4)   Other statutory adjustments includes reclassification of items to align with international accounting standards.

The group analyses results by segment to profit from operations only, so no segmental statement of financial position or statement of cash flows are presented and unfunded pension benefits paid.

8.  Net operating costs

	Six months ended 30 September 2025 £000	Six months ended 30 September 2024 £000
Employee benefits expense	25,976	21,697
Asset expense:
Depreciation of property, plant and equipment	33,279	30,822
Amortisation of intangible assets	1,318	1,186
Loss/(profit) on disposal of property, plant and equipment	6	(112)
	34,603	31,896
Other operating expenses:
Operating lease rentals:
Vehicles and office equipment	109	172
Land and buildings	5	-
Energy costs	14,516	14,334
Rates	8,359	7,800
Contractors	29,601	22,793
Bulk water supplies and abstraction licences	6,622	5,873
Chemicals	3,959	3,382
Insurance and related costs	2,136	2,059
IT costs	5,019	3,282
Transport	1,199	1,013
Staff related expenses	2,459	1,945
Materials	2,593	2,063
Other	5,524	3,103
Other operating expenses charged to capital projects	(3,960)	(2,980)
	78,141	64,839
Total operating costs	138,720	118,432

9.   Finance income and expense

	Six months ended 30 September 2025 £000	Six months ended 30 September 2024 £000
Finance income
Interest receivable on bank balances and short-term deposits	2,884	387
Net interest income on defined benefit asset	175	525
Total finance income	3,059	912
Finance expense
Debenture Interest	21	21
Effective interest on listed debt	7,706	7,595
Interest on lease liabilities	51	52
Financing guarantee fees	813	680
Bank interest and other finance charges	7,801	10,630
Amortisation on loan issue costs	1,187	332
Indexation on index linked bonds	5,369	3,682
Interest payable on index linked loans	9,470	8,517
Indexation on index linked loans	6,144	5,917
Term loan	240	-
Interest capitalised	(2,768)	(1,991)
Total finance expense	36,034	35,435

Interest is capitalised at the weighted average rate of interest on the group senior long-term debt of

5.04 per cent (2024: 5.04 per cent).

10.  Taxation

	Six months ended 30 September 2025 £000	Six months ended 30 September 2024 £000
Current tax credit	(93)	(57)
Deferred tax charge/(credit)	3,639	(5,115)
	3,546	(5,212)
The current tax credit is in respect of Research and Development claim for the prior year. The total deferred tax charge is estimated to be £3.6 million (2024: credit of £5.1 million), based on management's estimate. The rate of corporation tax used for calculation of current and deferred tax is 25 per cent, the corporation tax rate as enacted by the Finance Act 2021 and further endorsed under section 5 (2) of the Finance Act 2023. Factors that may affect future tax charges Capital investment is expected to remain at similar or higher levels and the group expects to be able to claim capital allowances in excess of depreciation in future years. There are losses of £61.8 million available within the company to mitigate future profits. The enacted enhanced 100 per cent first year full expensing capital allowance for qualifying plant and machinery and 50 per cent allowance for special rate assets expenditure have been made permanent.

11.  Earnings per share

	Six months ended 30 September 2025	Six months ended 30 September 2024
Profit for the six months from continuing operations (£000)	14,611	7,797
Basic and diluted weighted average number of shares (number)	278,410,815	49,312,354
Basic and diluted profit per share from continuing operations (pence)	5.25p	15.81p

 

END