Bringing water to life
Building momentum, driving sustainable growth

Susan Davy, Group Chief Executive, commented:

We are reporting resilient performance across the group, we continue to build momentum, driving sustainable growth, and ensuring we are well positioned to help tackle climate change. This, together with an evolving environmental strategy will deliver the step change we all want to see for the health of our region now and for generations to come.

We continue to pursue a relentless approach to improving operational performance through innovative solutions that drive efficiency, and in turn keeping customer bills as low as possible, at a time when customers need supporting most.

I'd like to recognise the pioneering spirit of Pennon's c.2,500 employees, who live in our regions and love what they do, and are at the heart of our ambition in developing innovative and sustainable solutions for customers, communities and the environment.

Our sector leading dividend policy recognises the ongoing loyalty of our shareholders, many of whom are customers, charities, employees and pensioners in the UK, underpinned by the Group's confidence in our ongoing growth strategy, and building a sustainable future for all.

RESILIENT PERFORMANCE

South West Water
Delivering for our customers and communities

  • c.60% reduction in all complaints and year on year improvement in CMeX1 Performance
  • Community funds providing c.£180,000 support to community groups since inception
  • Bills lower than they were 10 years ago and £3.8million of affordability2 support delivered for those customers most in need

Innovation helping to address wastewater challenges

  • c.40% reduction in internal and c.20% reduction in external flooding, are both ahead of target and reflecting a step-change in performance
  • c.40% improvement in sewer collapses ahead of 2025 target, using automated sewer conditioning surveys and AI to proactively detect faults on our network
  • Halving pollution incidents compared to last year, using technology to predict potential events. This pace of improvement needs to be sustained to meet our 2025 targets

Improving river and coastal water quality

  • 100% 3water quality standards achieved at our bathing beaches - our best ever performance
  • Focused on reducing our impact on river quality by one third by 2025, pilot schemes underway on the Dart and Tavy for inland bathing water quality - proving the case for K8 step change investment
  • c.5,000 hectares of land within our catchments improved during H1 2021/22, ahead of our target for K7

Innovation driving performance and efficiency in water

  • c.30% reduction in mains repairs focusing on the resilience of our network
  • Supply interruptions and unplanned outages ahead of target, maintaining our best ever performance
  • • Leakage reduction plan on track, using innovative technology to identify leaks resulting in increased repair

Consistent RORE delivery

  • H1 2021/22 outperformance in all areas - cumulative K7 RORE^ 7.8%
  • c.85% of our ODIs^ on track or ahead of target
  • Sector leading effective interest rate - 2.9%^
  • Driving efficient delivery through innovation and nature-based solutions

Bristol Water

  • Financial performance ahead of expectations, contributing £7.2 million in profit and capital investment of £12.7 million
  • Leakage ahead of target and CMeX1 in upper quartile position for H1 2021/22

Well positioned for the future

Talented people delivering for customers and communities

  • Investing in the next generation - new graduate programme underway, c.30% of our 500 2025 apprenticeships already underway and c.55% of Kickstarters retained in permanent roles
  • Supporting diversity with the #10000BlackInterns initiative, increasing gender diversity to >30%

Evolving our environmental strategy

  • Piloting innovative solutions to meet wastewater environmental challenges through Green Recovery - informing future investment plans
  • First tranche of c.£80 million renewables investment programme underway to meet our Net Zero 2030 target
  • Climate change resilience and adaptation a key focus for PR24

Driving sustainable growth

Delivering growth in Pennon Water Services

  • Continued focus on securing sustainable business in the non-household market c.£9 million of contracts won in H1 2021/22
  • Demand recovering near to pre-Covid-19 levels - cash collections remaining robust
  • Working collaboratively to develop the market and customer experience

Investing sustainably, for the benefit of all

  • >30% total RCV4 growth to 2025 through organic investment and acquisitions
  • Delivering our base plans and £82 million Green Recovery investments already underway
  • Logical, accretive acquisition of Bristol Water, growing RCV by 16%.

FINANCIAL HIGHLIGHTS

Underlying^

H1 2021/22

H1 2021/22 (restated7)

Change

Revenue

£389.3m

£319.7m

+21.8%

EBITDA^

£199.4m

£174.5m

+14.3%

Operating profit

£127.4m

£114.8m

+11.0%

Profit before tax

£90.4m

£86.7m

+4.3%

Non-underlying items before tax5

(£10.5.m)

(£24.8m)

-

Profit before tax

£79.9m

£61.9m

+29.1%

Underlying Tax

(£5.2m)

(£16.3m)

+68.1%

Non-underlying Tax

(£96.9m)

(£4.8m)

-

Discontinued operations

-

£1,720.0m

-

(Loss)/Profit for the period

(£22.2m)

£1,770.4m

(101.3%)

Earnings per share

  • Adjusted EPS^ - continuing operations(adjusted for share consolidation)8

30.6p

26.8p

+14.2%

  • Statutory EPS

(6.3p)

420.9p

(101.5%)

Dividend per share7

11.70p

11.15p

+4.9%

Resilient financial performance

  • Results in line with management expectations
  • +21.8% underlying revenue^, with Bristol Water contributing £41.6 million
  • +8.8% organic underlying revenue^ primarily due to a recovery in non-household demand both in and out of region and contributing contract wins from Pennon Water Services
  • +1.8% organic8 underlying EBITDA^ growth with higher costs to serve driven by high levels of demand and cost pressures from macro-economic factors
  • +14.3% underlying EBITDA^ growth with contribution from Bristol Water from 3 June 2021
  • +29.1% increase in profit before tax
  • +4.3% increase in underlying profit before tax^ with contribution from underlying EBITDA^ growth offsetting increased interest charges on index-linked debt
  • +14.2% increase in adjusted earnings per share^ (adjusted for share consolidation)6
  • Loss per share of 6.3 pence (H1 2020/21 earnings of 420.9 pence) reflecting non-underlying costs, primarily related to deferred tax charge (£96.9 million) for the future change in tax rate
  • Sector-leading dividend growth of 4.9% with dividend per share up (CPIH +2%) to 11.70 pence7

A full reconciliation to the statutory reported results is included in item (i) in the Alternative Performance Measures on pages 61 to 65 of this announcement.

Presentation of results

A presentation of these results hosted by Susan Davy, Group Chief Executive and Paul Boote, Group Finance Director, will be available at 08:30am (GMT), today, 30 November 2021 and can be accessed here: https://pennon-group.connectid.cloud/register

The presentation will be followed by a live Q&A conference call at 09:15am (GMT). Details are included below:

United Kingdom (Toll Free)

0800 640 6441

United Kingdom (Local):

020 3936 2999

All other locations:

+44 203 936 2999

Conference code

198676

For further information, please contact:

Paul Boote - Group Finance Director
Jennifer Cooke - Group Investor Relations Manager 01392 443 168

James Murgatroyd - Finsbury Glover Hering
Harry Worthington 020 7251 3801

1Customer measure of experience ^ Measures with this symbol ^ are defined in the Alternative Performance Measures (APMs) as outlined on pages 61 to 65
2K7 cumulative performance, H1 2021/22 £1.4 million
3Based on our preliminary analysis of Environment Agency sample data. The Environment Agency will publish formal results in January 2022
4Regulatory Capital Value (RCV)
5Non-underlying items are adjusted for by virtue of their size, nature or incidence to enable a full understanding of financial performance
6Adjusted earnings per share for H1 2021/22 and H1 2020/21 rebased to reflect impact of share consolidation. This calculation is outlined in the Alternative Performance Measures (APMs) on pages 61 to 65
7Dividend policy of CPIH + 2%. The CPIH rate used is 2.9% as of 30 September 2021. Base H1 2020/21 uplift for share consolidation and return of capital (from 6.77p to 10.15p), in addition 1.0 pence of 3.0 pence full dividend uplift announced at the 2020/21 Full Year Results in June 2021
8References to organic movements throughout this commentary refer to the performance of the business excluding the contribution from Bristol Water from 3 June 2021.

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Pennon Group plc published this content on 30 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 November 2021 07:20:08 UTC.