Susan Davy, Group Chief Executive, commented: This has been an extraordinary year for Pennon in which extreme weather patterns have tested our operational resilience.

At the same time, inflationary pressures have proven our financial resilience. We have been able to respond to both, with agility and pace, focusing on the things that matter right now, and tackling the biggest challenges head on. Whether it's the use of storm overflows, water resilience, the cost of living crisis or climate change, we are investing more than ever before. We are also investing for the future.

In a year in which the sector has been rightly challenged to clean up its act, we have delivered improvements in environmental performance, building on our sector leading 100% water quality for our 860 miles of coastline and on track to reduce our use of storm overflows by 50% by 2025. I am also clear that one pollution is one too many, and numbers are falling as we implement sustained change.

Water is essential for life. As one of only two regions officially in drought, and with the hottest, driest, weather on record, we are investing to break through the drought cycle, deploying innovative solutions such as desalination, repurposing ex quarries and mines into mini reservoirs to create more capacity in Cornwall and Devon as and when it's needed, and empowering customers to use less and save money.

At Pennon, we believe that every customer should benefit from what we do especially in this cost of living crisis. With over GBP85 million customer benefits delivered, we have kept bills as low as possible, with below inflationary increases, considerably lower than the sector average of c.7%. We continue to focus on eradicating water poverty in our region, with many more customers benefiting from affordability and support tariffs. At the same time, more customers than ever before are shareholders in our Group, with our socially responsible business model, Watershare+, giving customers both a stake and a say in their local water company.

And given the ongoing volatility of the energy markets, we have boosted the renewable energy pillar of our Net Zero strategy, with investments in energy generation well underway, and with more to come.

We can do all this, because of our robust balance sheet and financial resilience, supported by year on year increases in outperformance. In summary, we are tackling the biggest challenges head on, focusing on the things that matter most, investing more, and in building the capabilities for the future.

Underlying revenue increase includes growth in Non-household demand, supported by contract wins from Pennon Water Services4, in areas outside of our wholesale supply regions, and a full twelve-month contribution from Bristol Water. The Group's statutory revenue for 2022/23 of GBP797.2 million includes non-underlying revenue reductions of GBP27.8 million. GBP16.8 million underlying profit before tax - reduction compared to the prior year reflects the flagged near-term pressures on earnings from inflation driven power and financing costs.

Net non-underlying costs before tax of GBP25.3 million - delivering on our WaterShare+ commitments and helping to address the severe drought conditions.

Statutory profit after tax of GBP0.4 million (2021/22: GBP15.6 million profit after tax).

Adjusted earnings per share of 7.3 pence, down from 50.2 pence in 2021/22.

Statutory earnings per share of nil pence after net non-underlying costs. Statutory earnings per share for 2021/22 were impacted by the significant non-underlying deferred tax charge in respect of the change in corporation tax rate.

Group RORE2 for 2022/23 of 10.5% reflecting an increase of 1.6% on 2021/22.

Delivering on established K7 (2020-25) dividend policy - total dividend up 10.9% (CPIH +2%) to 42.73 pence.

A full reconciliation to the statutory reported results is included in item (i) in the Alternative Performance Measures on pages 58 to 63 of this announcement.

MAKING PROGRESS AGAINST OUR KEY PRIORITIES

Improving environmental water quality c.50% reduction in pollution incidents since 2020, c.30% reduction delivered in 2022. c.30% reduction in storm overflow use over 2022 to an average of 285 (2021: 39) and a c.50% reduction during the bathing season. This is supported by our WaterFit investment, which remains on track to reduce releases to an average of 205 by 2025.

Installation of monitors at 100% of storm overflows completed, one year ahead of target.

Achieved 100% bathing water quality, as assessed by the Environment Agency, for the second consecutive year, with 99% achieving good or excellent status.

Reduced our impact on rivers by almost one third to date, from 19% to 12.6%6, well ahead of our target of 12% by 2025, and river water quality pilots underway.

Water resilience and quality

Investing c.GBP125 million to diversify water resources and secure future resilience - progressing desalination solutions, installing new pipelines and repurposing quarries.

Significant increase in water resources available by 2025 - Cornwall by c.45%7 (c.25% delivered to date), Devon by c.30%7 (c.12% delivered to date).

Climate change and Net Zero

Delivering on our Net Zero 2030 plan, having already reduced our carbon footprint by c.40% since 2021. c.GBP160 million investment to accelerate our Net Zero 2030 commitments - first site acquired in Dunfermline producing c.40 GWh for acquisition and build costs of c.GBP35 million, additional opportunity for 60 MW battery storage capacity totalling c.GBP25 million. 80% of catchments improved, >110,000 hectares improved to date, 220,000 trees planted.

Addressing customer affordability

Keeping bills as low as possible - below inflation bill increases for South West Water and Bristol Water customers in 2023/24.

Over GBP85 million of customer benefits delivered in K7 to date o Second GBP20 million issuance of our unique customer sharing mechanism - WaterShare+, with Bristol Water customers also benefitting for the first time o Over 110,000 customers benefitting from our affordability initiatives o 23% increase in customers accessing our support tariffs

Financially resilient Year on year reduction in gearing8 to 60.8%, broadly in line with Ofwat's notional assumption.

Pension scheme c.GBP29 million surplus - 2022 valuation agreed, no ongoing deficit recovery. Strong, double-digit RORE2 for South West Water - 11.1%, Bristol Water - 4.6%. o Outperformance supporting reinvestment in additional environmental initiatives.

Delivering on our largest ever environmental investment programme c.50% increase in capital expenditure in 2022/23, investing over GBP750 million over the next two years to deliver our c.GBP1.5 billion K7 programme.

RORE outperformance and Pennon balance sheet strength supporting reinvestment in accelerated and additional initiatives totalling c.GBP300 million over K7.

Investment of c.GBP358 million in 2022/23 across our asset base to support the delivery of our environmental, water and wastewater service outcomes. o c.70% of Outcome Delivery Incentives^ (ODIs) on track or ahead of target for SWW o c.65% of Outcome Delivery Incentives on track or ahead of target for Bristol Water.

Driving long-term sustainable growth Sustainable, profitable B2B retailer growth.

On track to deliver a high quality, ambitious plan for PR24 - balancing a step change in investment with a continued focus on customer affordability.

Twin-track strategy for growth - delivering RCV growth of >50% over K7, positive outlook for RCV growth in K8 and beyond.

Presentation of results

A presentation of these results hosted by Susan Davy, Group Chief Executive and Paul Boote, Group Chief Financial Officer, will take place at London Stock Exchange, 10 Paternoster Sq, London, EC4M 7LS at 09:00am (GMT), today, 1 June 2023.

Contact:

Tel: 01392 443 168

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