Half Year Results 2021/22
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 CMeX[1] 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 affordability[2] 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%[3] water 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 CMeX 1 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 RCV[4] 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 PERFORMANCE
|
Underlying^ |
H1 2021/22 |
H1 2020/21 |
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 tax[5] |
(£10.5m) |
(£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 year |
(£22.2m) |
£1,770.4m |
(101.3%) |
|
Earnings per share |
|
|
|
|
– Adjusted EPS^ – continuing operations (adjusted for share consolidation)[6] |
30.6p |
26.8p |
+14.2% |
|
– Statutory EPS |
(6.3p) |
420.9p |
(101.5%) |
|
Dividend per share[7] – dividend policy |
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[8] 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 ta
- +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.