Coronavirus Update

Pennon Group Plc - Full Year Results 2020/21

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Full Year Results 2020/21

Bringing water to life

Supporting the lives of people and the places they love for generations to come

Susan Davy, Group Chief Executive, commented:

This has been a pivotal year for the Group as we have repositioned Pennon to focus on driving sustainable growth in the UK water sector, building stability for the longer term, and recognising ongoing shareholder loyalty

One of my main priorities as the new CEO has been to focus everyone on transforming Pennon to be the best place to work, supporting one another and our communities through the pandemic.  The worst of times brings out the very best in people, and that's true of everyone who works for the Group. I'm so proud of the way they have responded to the challenge.

We have ensured Pennon is well positioned for the future, reinvesting for growth, and retaining sufficient funds to drive further value.  The acquisition of Bristol Water announced today, is the next step in the growth of the Group, building on significant experience as a leader and consolidator in the industry.

Additionally, we have demonstrated our credentials as a responsible business, reducing debt levels, increasing pension contributions, and further supporting the Green Recovery for the much-needed regeneration of our region.

With one in 16 households now shareholders as part of our innovative Watershare+ scheme, giving customers a stake and a say, we've made a strong start to K7, focusing on what matters most, with c.80% of ODIs on or ahead of track. Operating in the public interest, we are also putting ESG at the forefront of our decision making, as we scale up investment in the environment, kickstart our race to net zero, and deliver sustainable solutions.

Our sector leading dividend policy, together with the planned special dividend, recognises the ongoing loyalty of our shareholders, underpinned by the Group's confidence in our ongoing growth strategy, and building a sustainable future for all.

TRANSFORMATIVE YEAR FOR PENNON - RESHAPING THE GROUP

Successful sale of Viridor

· £3.7 billion net cash proceeds from the sale of Viridor, completed on 8 July 2020; £1.7 billion profit on disposal

Positioning the Group sustainably

· Almost half of the net cash proceeds reinvested in the business and UK water to date

· Pennon company debt repayment of £1.1[1] billion - restructuring complete

· Responsible employer - over £50 million additional pension contributions - fund now in small surplus[2] position

·   c.£0.1 billion capital investment supporting a Green Recovery in the South West - accelerating South West Water's de-gearing profile

· Value accretive c.£0.4 billion acquisition[3] of Bristol Water[4] - reflecting 16% RCV[5] growth

· Retention of c.£0.1 billion of cash at Group level to maintain flexibility for future growth opportunities

Recognising shareholder support

·     c.£1.5 billion return of shareholder capital - special dividend of £3.55 per share, with consolidation

·     Up to c.£0.4 billion share buy-back over 12 months - subject to further value accretive opportunities

·     Maintaining sector-leading dividend policy of CPIH + 2%, underpinned by sustainable performance from the Continuing Group

·     Dividend base in 2021/22 is expected to increase by 2.00p (c.9%) recognising the earnings accretive nature of the Bristol Water acquisition

Delivering for customers and communities

· Pioneering a new relationship with customers - expanding our pioneering WaterShare+ scheme to our enlarged customer base

· Supporting our customers and communities

 Helping c.67,000 customers through our range of affordability schemes

 Introducing community funds - including our Neighbourhood Fund and Water Saving Community Fund

· Officially a Great Place to Work

 Nurturing talent through apprenticeships, graduate scheme and Kickstart

 Living wage accredited employer

·   A robust start to K7 operationally and financially - continued Return on Regulated Equity^ (RORE) outperformance at 7.8%

· Growing in the business customer market - c.£20 million annualised contract wins during the year