Pennon Group Plc · LSE:PNN
Pennon — H1 2023/24 Earnings Presentation
26 slides from Pennon's earnings presentation, Nov 29, 2023
Slide 1: Half Year Results 2023/24
———y Pennon Half Year Results 2023/24
Slide 2: Disclaimer
Disclaimer For the purposes of the following disclaimers, references to There are a number of factors that could cause actual a) neither Pennon Group nor any other member of Pennon this “document” shall mean this presentation pack and shall results, performance or achievements of Pennon Group to Gro
Slide 3: Susan Davy, Group Chief Executive
Susan Davy Group Chief Executive © Pennon Group plc 2023 3
Slide 4: Making progress, growing sustainably
Making progress, growing sustainably Step up in investment across the Group • Capital investment across the Group up 87% v H1 2022/23 • Delivering on our organic and acquisitive growth strategy – on track for c.60% RCV growth to 2025 and c.100% to 2030 • Delivering on sustainable Bristol acquisition
Slide 5: Paul Boote, Group Chief Financial Officer
Paul Boote Group Chief Financial Officer © Pennon Group plc 2023 5
Slide 6: Resilient financial performance
Resilient financial performance Underlying EBITDA Effective interest rate Return on regulated equity £168.5 million 5.8% 7.9% 1 H1 2022/23 Driven by our strategically Cumulative Group RORE – £174.6 million positioned portfolio doubling base returns Capital investment Stable gearing Dividend per shar
Slide 7: Summarised income statement
Summarised income statement Underlying1 (£m unless stated) H1 2023/24 H1 2022/23 Revenue 448.6 425.5 esults in line R Power (55.2) (48.7) with management expectations Other operating costs (224.9) (202.2) EBITDA 168.5 174.6 • As flagged, elevated inflation impacting near Operating profit 85.9 97.2 t
Slide 8: Profit before tax
Profit before tax Net benefit of inflation through increased revenues Regulatory revenue adjustments reflect 2021/22 ODI outcomes and RFI true-up Increased depreciation driven by accelerated capital investment programme Inflationary impact on finance costs stabilised Continued growth in Non-Househol
Slide 9: Continued doubling of base returns enabling reinvestment
Continued doubling of base returns enabling reinvestment Cumulative Cumulative Additional RORE performance initiatives 7.9% Financing1 • Strategically positioned portfolio with low level Outperformance to date enabling reinvestment Group of index-linked debt enables greater level of c. £250m in addi
Slide 10: Step up in capital investment
Step up in capital investment H1 TOTAL 65% increase in 2023/24 £266.1 million2 capital investment vs H1 2022/23 1 £150.2 Water million • Water resources – investment to boost and protect supplies, including establishing new abstraction points, providing new strategic links between key supply sources
Slide 11: Financing portfolio strategically positioned
Financing portfolio strategically positioned Lower proportion of index-linked debt Effective interest Targeting compared to industry average rate 1 strong UK Water 5.8% investment grade credit gross debt rating 14 Average mix SOUTH maturity 69% 17% 14% • Progressing work WEST of debt to obtain two W
Slide 12: Guidance update
Guidance update H2 (vs H1) 2023/24 underlying results – H2 weighted 2023/24 Revenue Opex Financing guidance • Seasonally lower demand in H2 • Power reducing through pricing • High inflationary environment • Continued focus on water efficiency and usage1 evenly profiled over financing costs • Drought
Slide 13: Chief Executive's review
Chief Executive’s review © Pennon Group plc 2023
Slide 14: Tackling the biggest challenges across our regions
Tackling the biggest challenges across our regions Building water Alleviating Supporting resources, storm overflows Driving affordability, improving water and eliminating environmental delivering for quality pollutions gains customers Largest environmental 2020-2025 2025-2030 Further step up in inve
Slide 15: Building water resources, diversifying our portfolio through innovation
Building water resources, diversifying our portfolio through innovation Breaking the drought cycle + c. 45% On track C for Devon and Cornwall – to augment supplies by 45% ORN ALL W Building water on track for 90% strategic On in Cornwall and 30% in Devon resources, improving reservoir levels by Marc
Slide 16: Improving the environment – spotlight on bathing water
Improving the environment – spotlight on bathing water 100% 90% of K7 Alleviating storm overflows bathing interventions and eliminating water quality delivered pollutions – third consecutive year1 for bathing and shellfish waters Bathing • 100% monitoring across storm overflows with • Piloting catch
Slide 17: Improving the environment – tackling pollutions
Improving the environment – tackling pollutions Alleviating Improved serious storm overflows Sector-leading pollution performance internal sewer flooding performance and eliminating – one event to date in 2023 pollutions Continued focus on reducing pollution incidents Internal sewer floodings Pollut
Slide 18: Driving environmental gains
Driving environmental gains 50% £145m reduction investment Driving in renewable energy environmental in carbon footprint providing 40% of Group 2023IIB030 CREWW BRANDING anticipated in K7 gains energy requirements Spotlight on catchment innovation – secured c. £20m K7 ODI benefit Centre for Resilien
Slide 19: Supporting affordability
Supporting affordability Supporting Below inflation Over £90 million affordability, bill increases customer support delivering for for 2023/24 and 2024/25 provided in K7 to date customers Addressing • 35% increase in customers benefiting from our social tariffs1 customer affordability • Over 120,000
Slide 20: Delivering improved outcomes for customers
Delivering improved outcomes for customers c. 75% ODI performance • Industry upper quartile 90% ODIs on track performance to date 80% or ahead of target 70% average c. 70% 60% 50% 40% 30% Areas of excellence 20% K7 Cumulative average Outcome 10% • Bathing water quality Delivery Incentives 0% • Biodi
Slide 21: Investing in our communities' future
Investing in our communities’ future Largest private employer in the South West Promoting an earn and learn culture Graduates and diversity Work experience Created additional 500 jobs in the • Commitment to support 5,000 work community for K7 – with 2,000 anticipated • Launched our Graduate Programm
Slide 22: Strong PR24 platform for delivery
Strong PR24 platform for delivery Creating a strong foundation for K8 Bills at their lowest Top quartile Track record of point for 10 years common ODI RORE outperformance performance to date – doubling base returns Robust supply chain Established Unique Strong balance sheet in place – six Tier 1 ‘ea
Slide 23: Financial resilience – well positioned for PR24
Financial resilience – well positioned for PR24 Step change in investment Shareholder value – RCV growth • £2.8 billion capex programme over K8 – over 50% increase on K7 8,000 • c. 100% RCV growth forecast 2020-20301 7,000 6,000 Funding requirements 5,000 4,000 • £2.5 billion of new funding requirem
Slide 24: Ambitious plan for PR24 – the right plan for our regions
Ambitious plan for PR24 – the right plan for our regions Investing Keeping bills Strong support efficiently as low as possible from customers £4.5bn Totex, assuming 3 - 4% average increase 74% Customer 12% efficiency per annum acceptability Growth for Incentivising Underpinned by investors performan
Slide 25: Making progress, growing sustainably
Making progress, growing sustainably Step up in investment across the Group Making progress on what matters most across our regions Adopting a Green First approach Underpinned by robust fundamentals Ambitious K8 plan – transition © Pennon Group plc 2023 underway, mobilised supply chain 25
Slide 26: Q&A
Q&A Susan Davy and Paul Boote will host a conference call at 8:45am. Dial in details are included below: United Kingdom 0800 358 1035 All other locations +44 20 3936 2999 Conference passcode 803418 © Pennon Group plc 2023 26