Pennon Group Plc · LSE:PNN
Pennon — H1 2024/25 Earnings Presentation
25 slides from Pennon's earnings presentation, Nov 27, 2024
Slide 1: Half Year Update 2024/25
Half Year Update 2024/25 27 November 2024
Slide 2: South West Water Group credit ratings and funding
South West Water Group South West Water South West Water Limited (guarantor) Fin Co (issuer) credit ratings • Establish EMTN1 Programme, July 2024 • Issued £400m Bond, July 2024 – Instrument rating Baa1 (Moody’s) Guarantor rating Baa1 BBB+ and A- (Fitch) Sustainable Financing Framework 2024 Outlook
Slide 3: 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 4: Operational update
Operational update © Pennon Group plc 2024 4
Slide 5: 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 6: 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 7: 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 8: 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 c.£25m K7 ODI benefit for peatland Before After restoration Peatland restoration on Bodmin Moor, Cornw
Slide 9: 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 Bills lower Unlocking Top performer than they were 10 years ago over £110m of financial s
Slide 10: 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 5 -10 • C-MeX -20 4 -30 -40 3 -50 • Internal se
Slide 11: Underpinned by an 'outstanding' Business Plan for K8
Underpinned by an ‘outstanding’ Business Plan for K8 2023 Business Plan recognised as ‘outstanding’ by Ofwat Business Plan 2025-2030 2 October Business Plan submitted Totex (£bn) Business Plan 2024 30bps 2025-2030 K7 K8 We’re doing this EPA 4 Benefit of 2.4 3.9 11 July Ofwat publish Draft Determinat
Slide 12: 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 12
Slide 13: Well positioned for another period of significant growth
Well positioned for another period of significant growth Sustainable supply chain 1,050 schemes already underway Good liquidity 100% ork Sustainable Financing Framew2024 through Solid sustainable funding financing position (H1 2024/25) © Pennon Group plc 2024 13
Slide 14: Financial update
Financial update © Pennon Group plc 2024 14
Slide 15: South West Water key financial metrics
South West Water key financial metrics Resilient underlying South West Water SWW Return on performance gearing Regulated Equity EBITDA £150.7m 64% 6.0% 1 Investing New investment grade Strong to deliver credit ratings liquidity CAPEX £306m Baa1 BBB+ SWW guarantor £475m © Pennon Group plc 2024 1 Real
Slide 16: Robust liquidity
South Robust liquidity West Water SWW Group1 Available New borrowings liquidity since March £475m c. £550m 2024 Effective Mix of Average interest debt Fixed rate debt 75% maturity 5.3% 14 years rate Inflation linked debt 13% Floating rate debt 12% Strong credit ratings 2 Guarantor rating Baa1 BBB+ O
Slide 17: H1 performance – in line with expectations
H1 performance – in line with expectations Underlying H1 (£m unless otherwise stated) 2024/25 Revenue 371.3 Tariff increases offset by Operating costs (220.6) lower customer demand EBITDA 150.7 Efficiencies partly Depreciation and amortisation (82.5) mitigating cost pressures Operating profit 68.2 F
Slide 18: Reshaping the business – transitioning to K8
Reshaping the business – transitioning to K8 c . £75m Underpinning K8 12% p.a. efficiency target K8 run rate annualised savings 2022/23 2023/24 2024/25 K8 Bristol Water • Mature programme, nearing completion integration • c.£18m annualised benefits at H1 2024/25 £18m c. £20m Reshaping • Improving ho
Slide 19: Group capital expenditure – investing to deliver
Group capital expenditure – investing to deliver Group capital RCV growth investment (£m) Investment (£m) H1 H1 growth 2024/25 2023/24 7,000 South West Water 306.0 234.4 6,000 Clean water 175.2 150.2 5,000 Wastewater 130.8 84.2 4,000 3,000 2,000 1,000 0 OPENING K7 2021 2022 2023 2024 2025 © Pennon G
Slide 20: Flexible funding strategy, robust liquidity
Flexible funding strategy, robust liquidity Funding strategy Continuing to build our diversified debt portfolio • Maintain two strong investment grade credit ratings • Continued use of our diverse portfolio, assessing the best options to Gross debt (At 30 Sept 2024) £3,666.2 m support the business a
Slide 21: 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 25 total 4.8% Financials Totex1 60 33 -80 -73 -30 -90 Financing 14 53 133 55 53 308 ODIs -12 12 -10 -14 -7 -42 Base Totex Financing WaterShare 96 94 8 -3
Slide 22: Balance sheet – diversified funding portfolio
South Balance sheet – diversified funding portfolio West Water Balance at 30 September 2024 SWW SWW (£m) Limited Group Leasing 1,136.7 1,136.7 Bank bilaterals 576.0 576.0 Index-linked debt (RPI) 694.0 694.0 Fixed rate bonds 590.4 590.4 Private placements 655.1 656.6 Preference shares - 12.5 Loans fr
Slide 23: Debt maturity profile
South Debt maturity profile West Water Liquidity position SWW debt maturity profile (£m) • At 30 September 2024, SWW Group had 450 access to undrawn committed funds and cash and cash deposits totalling 400 £474.9m, including cash and other short- 350 term deposits of £104.9m and £370.0m 300 of undra
Slide 24: 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 reduction in inflation and rates in August 2024 and increase in levels of debt to s
Slide 25: 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