Pennon Group Plc
Half Year Results 2020/21
For the period ended 30 September 2020
Bringing water to life
Supporting the lives of people and the places they love for generations to come
Susan Davy, Pennon Chief Executive, commented:
“I am delighted to be leading the business at this important time in Pennon's history. The completion of the Viridor sale in July this year has seen significant shareholder value realised, allowing us to refocus our business on excellence in the water and wastewater sector. It is an incredibly exciting time for the Group as we forge ahead with our 'New Deal' plans for the K7 2020-25 period.
We will deliver our New Deal by being even closer to the people we serve, understanding people's needs, demonstrating the positive impacts we're making, and above all else, doing the right thing. We are promoting social mobility, addressing racial and gender inequality, and providing secure jobs across our regions.
This starts with our new WaterShare+ scheme, in which one in 16 of our household customers are now shareholders in the business helping us to create a new kind of water company, closer to the customers and communities we serve. Environmental considerations continue to be at the heart of our decision making, and we are focused on delivering on our commitments.
Pennon has delivered resilient operational and financial performance through the first half of 2020/21, making good progress in the new K7 regulatory period and against the backdrop of COVID-19. I'd like to recognise the exceptional commitment and resilience of all our people during this time. Since taking on the role of CEO I have spent time out and about on our sites and have been humbled by their dedication and professionalism that has allowed us to continue to deliver for customers, communities and the environment.”
Reshaping the Group
· Successful sale of Viridor
- £1.7 billion profit on disposal following sale of Viridor: £3.7 billion net cash proceeds received
- Debt rightsizing progressing well with c.£0.75 billion repaid to date
- £36 million contribution to Pennon's principal pension scheme
- £2.7 billion headroom for investment
· Focused on UK Water
- Sector leading dividend policy – growth of CPIH +2%, underpinned by our sustainable strategy with expectations for continued outperformance
A new deal for K7 – changing the nature of our relationship with customers, communities and people
· Driving operational excellence for customers in H1 2020/21
- Continued improvements in key customer measures with period on period reductions in supply interruptions (down 51%), improvements to water quality (taste and odour complaints down 18%) and written complaints (down 5%)
- Maintaining excellent bathing water quality – 99.3% meeting the quality standard
- Catchment and biodiversity gains through improvements on 14,000 hectares of land
- Delivering against our commitments for K7 with 80% already on target or in reward. Key focus on improving pollutions performance.
· Nurturing talent with 500 apprenticeships planned over the next 5 years and we are an early adopter of the Government's Kickstart scheme
· Creating a diverse and inclusive place to thrive. We are in the top quartile for the Hampton Alexander review, our gender pay gap is significantly below the national average and have become a signatory to Change the Race:Ratio taking action to increase racial and ethnic participation in our business
· Delivered our ground breaking innovative WaterShare+ scheme giving customers a stake and a say
- c.£20 million of outperformance from 2015-20 shared with customers through unique WaterShare+ scheme
- One in 16 household customers opted to receive shares, more than tripling the number of Pennon shareholders, demonstrating significant customer ownership for a listed company
Financial and operational performance throughout COVID-19 remains robust
· Resilient COVID-19 operations – limited financial impact
· Cash collections for South West Water and Pennon Water Services remain robust
· No requirement for the use of regulatory or market support mechanisms
· 21,000 additional customers added to South West Water's dedicated COVID-19 priority services register
Resilient financial results following K7 revenue reset
· Results in line with management expectations
· WaterShare RORE[1] of c.8.0% driven by strong totex^ and financing outperformance
- £34 million totex efficiency delivered to date, maintaining momentum over K7
- 2.5% average effective interest rate^, significantly below Ofwat's 4.2% notional cost of debt
· £86.7 million Continuing Group underlying profit before tax^ (H1 2019/20 £101.4 million[2])
· 17.9p underlying earnings per share^ for the Continuing Group (H1 2019/20 20.1p2)