Pennon Group Plc · LSE:PNN
Pennon — H1 2024/25 Earnings Presentation
40 slides from Pennon's earnings presentation, Nov 27, 2024
Slide 1: Half Year Results 2024/25
Half Year Results 2024/25 27 November 2024
Slide 2: Disclaimer
Disclaimer For the purposes of the following disclaimers, references to There are a number of factors that could cause actual results, Without prejudice to the above, whilst Pennon Group accepts this “document” shall mean this presentation pack and shall be performance or achievements of Pennon Grou
Slide 3: Susan Davy, Group Chief Executive Officer
Susan Davy Group Chief Executive Officer © Pennon Group plc 2024 3
Slide 4: Robust fundamentals
Robust fundamentals Reshaping the business Investment driving benefits Solid relative sector performance – delivering for customers Business Plan Underpinned by an ‘outstanding’ Business Plan for K8 2025-2030 Our business plan 2025 to 2030 Summary October 2023 We’re doing this Well positioned for an
Slide 5: Agile Group – delivering for all in K7
Agile Group – delivering for all in K7 Responsible deployment of capital in K7 75% Water Group RCV growth 3 Positioning the Group Reinvesting in UK Water Recognising shareholder 30% acquisitions 45% organic growth WaterFit, Resilience, Green Recovery, sustainably – Bristol and SES support Defra Acce
Slide 6: Reshaping the business
Reshaping the business Four clear business units established Water Wastewater Pennon Retail Services Services Power Services Four strategic priorities being delivered Building water Tackling storm Driving Supporting resources, improving overflows environmental affordability, delivering water quality
Slide 7: Overview – Pennon Half Year 2024/25
Overview – Pennon Half Year 2024/25 On track Cumulative to deliver RORE Profitable sector c.£55m 10.8% 1 leading Successful annualised efficiency Record nominal Robust retailers water savings in capital 6.0% 2 relative efficiency 2024/25 investment WaterShare performer campaigns at K8 (real) for Ofw
Slide 8: Laura Flowerdew, Group Chief Financial Officer
Laura Flowerdew Group Chief Financial Officer © Pennon Group plc 2024 8
Slide 9: Key financial metrics
Key financial metrics Resilient underlying Water Group SWW Return on performance gearing Regulated Equity £164m EBITDA c.65% (SWW gearing 64% excl. SES) 1 6.0% (SWW excl. SES) 2 Investing Profitable Dividend to deliver retailers per share CAPEX Doubling £332m PBT 14.69p CPIH +2% (SWW: £306m) OVER K7
Slide 10: H1 performance – in line with expectations
H1 performance – in line with expectations Underlying1 H1 H1 H1 (£m unless otherwise stated) 2024/25 2024/25 2023/242 (excl. SES) Revenue 527.2 450.6 448.6 Tariff increases offset by EBITDA 163.5 150.2 168.5 lower customer demand Operating profit 69.5 64.6 85.9 Efficiencies partly Net finance costs
Slide 11: Revenue
Revenue South West Water SES Pennon Group • Down c.2% as lower customer demand • Six months’ contribution of £76.6m • PWS growth continues from new more than offsets c.3% tariff increases from SES Group contract wins and inflation and new customer numbers • Group revenue broadly flat vs H1 2023/24 e
Slide 12: Underlying EBITDA
Underlying EBITDA South West Water SES Pennon Group • Lower customer demand more than offset c.3% tariff increases • Six months’ contribution • Group EBITDA • Cost pressures from non-commodity power costs, wage inflation, of £13.3m from SES down c.3% and new digital customer services platform partia
Slide 13: Reshaping the business – transitioning to K8
Reshaping the business – transitioning to K8 c. £86m Underpinning K8 12% p.a. efficiency target K8 run rate annualised savings Bristol Water 2022/23 2023/24 2024/25 K8 integration • Mature programme, nearing completion • c.£18m annualised benefits at H1 2024/25 £18m c. £20m Reshaping • Improving how
Slide 14: Group capital expenditure – investing to deliver
Group capital expenditure – investing to deliver Group capital investment (£m) H1 H1 2024/25 2023/24 South West Water 306.0 234.4 Clean water 175.2 150.2 Wastewater 130.8 84.2 Pennon Power 13.4 31.7 Other Group 0.4 0.2 Total Group (excl. SES) 319.8 266.3 SES 12.0 Total Group 331.8 266.3 © Pennon Gro
Slide 15: Flexible funding strategy, robust liquidity
Flexible funding strategy, robust liquidity Pennon Group Continuing to build our diversified debt portfolio Available New borrowings liquidity since March 2024 Gross debt (At 30 Sept 2024) £4,407.3 m (FY 2023/24: £3,980.6m) c.£675m £550m Preference shares £12.5m Strong credit ratings 1 Private place
Slide 16: Outlook – Full Year 2024/25
Outlook – Full Year 2024/25 Revenue Operating costs • SWW revenue sees continuation of lower customer demand, • Continued elevated non-commodity power costs and the costs offsetting tariff increases and new customer numbers, of the new digital customer services platform in SWW are resulting in a bal
Slide 17: Susan Davy, Group Chief Executive Officer
Susan Davy Group Chief Executive Officer © Pennon Group plc 2024 17
Slide 18: Building water resources, improving water quality
Building water resources, improving water quality Securing resilience into the future Supplemented resources (%) 100% Supply Cornwall 34% c. 2-9% demand Demand 30% reduction Balance through index Devon innovative tariffs 2022 2024 New treatment works – Porth, Cornwall Quality First approach deliveri
Slide 19: Tackling storm overflows and pollutions
Tackling storm overflows and pollutions Driving spills down Focus on Bathing Pollution incident through interventions Waters reduction a key focus 2/3 c.12,500 100% 6 new of 2023 spills prevented water quality – Bathing c.40% reduction in network incidents over K7 top spillers through WaterFit fourt
Slide 20: Driving environmental gains
Driving environmental gains Improving c.80% phosphorus river water quality at reduction 37 sites at those sites – improving RNAGS1 Leveraging c.135,000 hectares improved – third party contributions Peatland c.£25m K7 ODI benefit for peatland Before After restoration on Bodmin Moor, restoration Cornw
Slide 21: Supporting affordability, delivering for customers
Supporting affordability, delivering for customers Efficiency has kept Significant support Reduction in customer bills low packages complaints Industry average SWW bill range £548 £478 £421 £335 2013/14 2023/24 CCW 2023/24 Report: Unlocking Bills lower Top performer than they were 10 years ago over
Slide 22: Solid relative sector performance
Solid relative sector performance Ofwat 2023/24 Water Company Cumulative common ODI Upper quartile Performance Report1 performance to 2023/24 performance in common ODIs October 2024 (£m) Water performance Water company performance report 2023-24 6 10 0 • Water quality 5 -10 • Supply interruptions -2
Slide 23: Retail
Retail EBITDA £3.8m “So easy and friendly to deal 4.8 with. I couldn’t be happier with their service.” 80% ownership H1 2021/22 H1 2022/23 H1 2023/24 H1 2024/25 EBITDA £3.9m “It is a pleasure to deal with a company 5.0 that obviously invests in its team so they can help and 30% ownership1 aid custom
Slide 24: Underpinned by an 'outstanding' Business Plan for K8
Underpinned by an ‘outstanding’ Business Plan for K8 2023 Business Plan recognised as ‘outstanding’ by Ofwat 2 October Business Plan 2025-2030 Business Plan submitted Benefit of Totex1 (£bn) 2024 Our business plan 2025 to 2030 Summary ‘outstanding’ October 2023 K7 K8 We’re doing this EPA Business Pl
Slide 25: Talented people doing great things for customers and each other
Talented people doing great things for customers and each other c.4,000 courses through our training centres 680 graduates & apprentices Funder 800+ of the Social colleagues Mobility Business Member supporting Brixham Partnership of the #blackinterns programme © Pennon Group plc 2024 25
Slide 26: Well positioned for another period of significant growth
Well positioned for another period of significant growth Sustainable supply chain Over 1,000 schemes already underway Good liquidity 100% ork Sustainable Financing Framew2024 through Solid sustainable funding financing position (H1 2024/25) © Pennon Group plc 2024 26
Slide 27: Robust fundamentals
Robust fundamentals Reshaping the business Investment driving benefits Solid relative sector performance – delivering for customers Business Plan Underpinned by an ‘outstanding’ Business Plan for K8 2025-2030 Our business plan 2025 to 2030 Summary October 2023 We’re doing this Well positioned for an
Slide 28: Appendix
Appendix © Pennon Group plc 2024 28
Slide 29: Pennon Power
Pennon Power Complementary investment in environmental infrastructure • Total £145m commitment to renewable energy generation supports our long-term sustainable growth strategy and helps achievement of our 2030 Net Zero target • Provides a natural hedge to our power costs, reducing exposure to futur
Slide 30: Bristol Water and SES – acquisitions driving growth
Bristol Water and SES – acquisitions driving growth Merging our water operations and investment • Sharing control room capability and incident management practises • Water resources teams with integrated action plans – Acquisition WRMP24 submissions managed together June 2021 • Water Quality First a
Slide 31: RORE outperformance
South RORE outperformance West Water Cumulative RORE Cumulative performance RORE (£m) 6.1% H1 2020/ 2021/ 2022/ 2023/ 2024/ Cumulative 21 22 23 24 251 total 4.8% Financials Totex2 60 33 -80 -73 -30 -90 Financing 14 53 133 55 53 308 ODIs -12 13 -10 -14 -7 -42 Base Totex Financing WaterShare 96 94 8 -
Slide 32: Pennon Responsible approach to tax
Pennon Responsible approach to tax Tax credit on underlying result – H1 H1 effective rate of 21.0% 2024/25 2023/24 • No current tax for H1 2024/25 due to generation Corporation tax Pennon SES Group Group of current period tax losses (£m) (excl. SES) • £0.1m current tax charge due to small prior Curr
Slide 33: Flexible funding strategy
Flexible funding strategy Group debt Funding strategy at 30 Sept 2024 (£m) Gross Net • Maintain two strong investment grade credit ratings debt debt • Continued use of our diverse portfolio assessing the best options to support Pennon Group plc 245.0 238.9 the business and our customers Water Group
Slide 34: Pennon Balance sheet – diversified funding portfolio
Pennon Balance sheet – diversified funding portfolio Balance at 30 September 2024 Pennon South West (£m) Group Water Leasing 1,143.6 1,136.7 Bank bilaterals 792.4 575.9 Index-linked debt (RPI) 1,012.0 694.0 Fixed rate bonds 606.3 590.4 Private placements 840.5 656.7 Preference shares 12.5 12.5 Total
Slide 35: Pennon Net debt movements
Pennon Net debt movements Pennon Group – summarised net debt flow H1 2024/25 H1 2023/24 (£m) flows flows Net debt excluding fair value uplifts 1 April (3,683.5) (2,841.4) Opening balance 1 April (3,809.2) (2,965.4) Cash flows from operating activities 125.4 88.8 Corporation tax repayment/(paid) 3.0
Slide 36: Pennon Debt maturity profile
Pennon Debt maturity profile Group debt Liquidity position maturity profile (£m) • At 30 September 2024, Pennon Group had access to undrawn committed funds 450 and cash and cash deposits totalling 400 c.£675m, including cash and other short- 350 term deposits of c.£175m and c.£500m of 300 undrawn fa
Slide 37: Financing costs
South Financing costs West Water • H1 2024/25 financing costs broadly flat as • Expect a step up in H2 2024/25 and overall impact of additional gross debt has been increase year on year due to bond issuance offset by a reduction in inflation and rates in July 2024, increase in levels of debt to supp
Slide 38: Net interest analysis
South Net interest analysis West Water H1 H1 (£m unless otherwise stated) 2024/25 2023/24 Underlying net interest charge (80.2) (80.9) Less: pensions net interest (0.6) (0.7) Add: capitalised interest (10.2) (4.1) Net interest for average rate calculation (91.0) (85.7) Split between: Interest payabl
Slide 39: SES Financial contribution
SES Financial contribution Group H1 2024/25 Underlying1 SES SES SES (£m) Water Other2 Group Revenue 41.6 35.0 76.6 Overall profitability Operating costs (26.3) (37.0) (63.3) impacted by high levels of index-linked EBITDA 15.3 (2.0) 13.3 financing costs Depreciation and amortisation (8.1) (0.3) (8.4)
Slide 40: Pennon Technical guidance for Full Year 2024/25
Pennon Technical guidance for Full Year 2024/25 Pennon Group FY 2023/24 Change Revenue* • Higher year on year • SWW revenue expected to see a continuation of lower customer demand, offsetting tariff increases and new customer numbers, resulting in a balanced H1/H2 split and a broadly flat year on ye