27 November 2024
Pennon Group plc
Half Year Results 2024/25
Pennon Group plc ('Pennon' or the 'Group') today announces its results for the half year ended 30 September 2024.
Susan Davy, Group Chief Executive Officer, commented:
"Water companies are rightly being challenged to do more for customers today and invest more for the future. We are doing both. 100% of customers across the south west found their bills affordable for the first time - five years ahead of the sector-wide pledge to eradicate water poverty. We continue to lead the way in helping customers to use less and save more with a range of money saving campaigns and pilots. Whilst that's led to lower wholesale water business revenues, it's the right thing to do.
"Alongside our bill support, we are delivering record capital investment. Our supply chain 'amplify' is up and running, delivering accelerated K8 investment to tackle the use of storm overflows. We are forecasting growth in regulatory capital of 75% over this regulatory period.
"Underpinned by solid relative operational performance, as assessed in Ofwat's latest Water Company Performance Report across all parts of the Group, we have continued to deliver to all of our customers across South West Water, Bristol Water and SES. When things go wrong, as they did for customers and businesses in and around Brixham earlier this year, we put it right, with no excuses. But we know we have more to do.
"As we look ahead, we are energised following our Business Plans for SWW and SES achieving 'outstanding' and 'good' ratings, respectively, from Ofwat. In preparation, we are reshaping the Group and driving cost base efficiency. We are putting more resources on the front line than ever before, streamlining our support functions, with clear business lines, aligned to our four strategic priorities.
"Of course, it's not what we are doing but how we do it that also matters. Our operations across the Group need a reliable and efficient power supply and we are investing to increase renewable energy provision through Pennon Power, supporting our Net Zero ambitions.
"Overall, we are well positioned for the future, with lower revenues protected by regulatory mechanisms, as we continue to focus on sustainable growth. Our financial position remains resilient to the challenges ahead, with good liquidity and a diversified debt portfolio. Our plans to restructure the business, as well as the benefits being delivered through integration of SES into our Group, will allow us to deliver efficiently as we move forward."
FINANCIAL PERFORMANCE
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H1 2024/25 |
H1 2024/25 (excl. SES) |
H1 2023/24 |
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Underlying revenue^ |
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Underlying EBITDA^ |
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Underlying (loss)/profit before tax^ |
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Non-underlying items before tax1 |
( |
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(Loss)/profit before tax - statutory |
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(Loss)/profit after tax - statutory |
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(Loss)/earnings per share |
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Adjusted EPS |
(6.6p) |
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3.6p |
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Basic EPS |
(10.6p) |
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0.5p |
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Dividend per share2 |
14.69p |
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14.04p |
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Capital expenditure |
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Group (incl. SES) |
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South West Water |
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At 30 Sept 2024 |
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At 31 Mar 2024 |
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Water Group |
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RCV3 |
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Gearing4 |
65.0% |
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64.4% |
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SWW |
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Cumulative RORE (real, notional)5 |
6.0% |
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7.3% |
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Cumulative RORE (nominal, actual6 |
10.8% |
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Financial results for H1 2024/25
· Results for H1 2024/25 in line with management expectation7
· On a like for like basis, lower revenues in South West Water ('SWW') compared to H1 2023/24 driven by successful water demand customer initiatives resulting in a loss before tax on both an underlying and statutory basis, with regulatory revenue mechanisms in place to protect future recovery
· As anticipated, newly acquired
· Profitable sector leading B2B retailers; Pennon Water Services ('PWS') and Water2Business - with plans to consolidate SES Business Water
· Loss before tax for the Group increased to
· Capital expenditure run rate is slightly lower than H2 2023/24, but increased by
· Solid relative performance for the wholesale water businesses in respect of common Outcome Delivery Incentives (ODIs)
· Balance sheet for the Group is robust with Pennon Group gearing at c.68%8, and total Water Group RCV gearing of 65% (SWW gearing of 64%)
· Strong investment grade credit rating with liquidity of c.
· Return on regulated equity for SWW is relatively strong, equating to 10.8% on a nominal, actual balance sheet basis, and 6.0% on a real notional WaterShare basis
· Interim dividend of 14.69p is in line with policy of CPIH +2%
Reshaping our business
· Four clear business units established focused on Water Services, Wastewater Services, Pennon Power and Retail Services, aligned with our four strategic priorities
· Reshaping the Group to drive greater efficiencies, as we grow, with improvements in processes and operational effectiveness delivered and in progress of c.
o deliver the synergies identified through the water company acquisitions of Bristol Water in 2021 and SES in 2024
§ c.
§ c.
o right size and reshape the Group to ensure we have resources focused on our priorities - bolstering front line staff by c.100, and ensuring we have a best-in-class customer service platform to serve our customers
Investment driving benefit
· SWW capital expenditure in H1 2024/25 broadly in line with the K8 run rate; delivering investments to meet our K7 commitments, support performance in our ODIs and respond to operational incidents as well as accelerate agreed K8 transitional spend and early start planning and design activities
· Investment in water resource diversification continues with the completion of the abstraction and new water treatment works at Rialton - supplementing resources in
· Water quality investments are on track including the two new treatment works in
· Tackling sewer overflow spills through our WaterFit 2025 programme - preventing c.12,500 spills with over c.350 interventions, with two thirds of our top spillers in 2023 resolved this year
· Pennon Power solar investments on track with construction underway at two sites equating to c.45% of our targeted generation with first energisation expected at the end of 2024/25
· Supporting customers with c.
Strong relative sector performance
· Upper quartile performance in: SWW on internal sewer flooding and water quality for water and sewerage companies; Bristol Water on customer service; SES Water on supply interruptions and water quality
· Growing and profitable non-household retail businesses - with c.15% market share, strong customer service - with Trustpilot scores for PWS and W2B of 4.8 and 5.0, respectively - alongside a doubling of business retail PBT from H1 2022/23
Underpinned by an 'outstanding' Business Plan for K8
· SWW's Business Plan for
· Having acquired SES Water in January 2024, Ofwat has assessed their plan as standard, confirming this plan is 'generally good'
· SWW Draft Determination reflects minimum c.30% RCV growth to 2030, with a cost of capital protected against reduction between Draft and Final Determinations, with 30bps upside potential
· SES Draft Determination reflects growth of c.11% and 5bps upside for a good standard plan
· Representations made to Ofwat in respect of risk return balance (particularly focused on ODIs), providing additional evidence for our totex investments, requesting that natural rates are applied for capital charges and the balance between our regions and priorities
· Final Determination confirmed as 19 December 2024
Well positioned for a period of significant growth
· We have a sustainable supply chain to deliver our K8 programme - over 1,000 schemes already underway, with transition expenditure of c.
· Strong investment grade credit ratings secured, with
Notes:
All percentage movements are on a half on half basis unless otherwise stated
Results include the results of SES in the current period. SES was acquired in January 2024 and therefore the prior year comparative period excludes the impact of this acquisition
^ Measures with this symbol are defined in the Alternative Performance Measures (APM) section of this document, underlying measures are presented before non-underlying items
1 Non-underlying items are adjusted for by virtue of their size, nature or incidence to enable a full understanding of financial performance.
2 Dividend policy of CPIH+2%. The CPIH rate used is 2.6% at 30 September 2024
3 Forecast shadow RCV at 31 March 2025 based on K7 Business Plan levels of investment, Green Recovery, accelerated delivery, and transitional investment, along with regulatory true-ups and inflationary impacts and the impact of acquisitions and shadow RCV at 31 March 2024
4 Based on Water Group (SWW including Bristol Water and SES Water) - net debt at period end/forecast shadow RCV at 31 March
5 Real cumulative RORE on underlying totex, financing and ODIs with notional gearing
6 Nominal cumulative RORE based on underlying real RORE using actual gearing plus average inflation over K7 at 4.3%
7 As set out in our Trading Statement in September 2024
8 Pennon Group net debt excluding fair value adjustments/Water Group forecast shadow RCV at 31 March 2025 and effective value of the non-regulated businesses
Results presentation
A presentation of the Half Year 2024/25 results hosted by Susan Davy, Group Chief Executive Officer and Laura Flowerdew, Group Chief Financial Officer, will be available at 08:00am (GMT) today, 27 November 2024. This will be followed by a live Q&A session at 08:45am (GMT). The presentation and Q&A session can be accessed here: www.pennon-group.co.uk/investor-information
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For further information, please contact:
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Institutional equity investors and analysts
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Louise Rowe - Compliance, ESG and IR Director
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01392 446 688 |
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James Murgatroyd - FGS Global
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020 7251 3801 |
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Debt investors
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Chris Tregenna - Group Treasurer
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01392 446 688 |
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Retail investors
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Link Asset Services
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0371 664 9234 |
GROUP CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Water companies are rightly being challenged to do more for customers today and into the future. We are doing both, with good progress in K7, ensuring we are well positioned for the delivery of our 2025-30 (K8) Business Plan and in laying the foundations for sustainable future growth.
Our c.4,000 colleagues who live and work in the communities we support, care passionately about what we do, each day and I couldn't be more proud. Our customer and community roadshows continue to ensure we are hearing first-hand what matters most and as we fix the things they care about. From
Whilst South West Water ('SWW') revenues are lower on a like for like basis due to our water efficiency initiatives, it's the right thing to do and is protected by future regulatory mechanisms.
Agile group delivering for all in K7
As we are closing the K7 regulatory period we look back on a period of significant change for the Group. Our agility in delivering for all stakeholders has been a constant.
Following the sale of Viridor in 2020, as part of a highly disciplined strategic review:
· we responsibly deployed capital, positioning the Group sustainably by minimising liabilities
· we have reinvested in
· we have recognised shareholder support through our K7 dividend policy of CIPH+2%.
We have made record investment in the asset base of c.
We are also expanding our non-regulated business; our three retailers now having a combined market share of around 15% and our investments in Pennon Power are on track.
Customers have benefitted through our innovative first of its kind WaterShare+ scheme. Launched in 2020, this gives customers a stake and a say in our business and they have also shared in financial benefits.
Alongside this we have delivered solid relative sector performance with c.70% of ODIs met over the period and we have focused on supporting customers, keeping bills as low as possible through a drive for efficiency and providing tangible support to those who need it most achieving 100% affordability for the first time.
Reshaping our business to align with our four strategic priorities
To support the delivery of our outstanding and good rated Business Plans for SWW and SES we are reshaping the Group. We are putting more resources on the front line than ever before, with clear business lines, aligned to our four strategic priorities.
With Managing Directors in place for Water Services, Wastewater Services, Pennon Power and Retail Services, we have also commenced a Group-wide reshaping programme ensuring we have the right resources and capabilities, with more resources on the front line, supported by expert and streamlined corporate functions. Our supply chain partnership 'amplify' has already been stood up and is on track to deliver
At September 2024, our transformation and restructuring programmes have delivered, or are in progress to deliver, c.
Investment driving benefits
With over
Building water resources, improving water quality
Our investments mean we are making good progress in providing a more resilient and diverse portfolio for water resources across
There are always two sides to the coin to ensuring a sustainable supply demand balance, and reducing demand is also key to future resilience. Our sector leading demand reduction schemes are focused on supporting customers to use less and save money. Leading with our 'Water is Precious' water efficiency campaign targeting both residents and visitors, we are also trialling several firsts for the region with progressive tariff trials. In
Whilst we are focused on protecting water resources, safe, clean drinking water remains customers' number one priority and we continue to make good progress in rolling out our successful Quality First culture and training programme in
The incident earlier in the year in Brixham highlights just how important it is that all customers can have confidence in their water supply. We continue to work with the Drinking Water Inspectorate on the lessons learned from the incident. We supported customers throughout, ensuring homes and businesses had access to bottled water, and went over and above our customer promise of
Our primary focus throughout was the health and safety of our customers and the 800 strong team who worked tirelessly around the clock to restore clean, safe drinking water to customers and businesses affected. Nothing mattered more, and over the period, SWW flushed over 34km of water pipes 27 times at high velocity to clean network pipes, with 17 phases of ice-pigging and swabbing the network, and installed ultraviolet (UV) solutions and microfilters to provide barriers. Over 1.2km of new pipework was laid to provide future resilience across the network.
Our underlying water quality is improving. With SES the top performer in the industry, and SWW upper quartile for water and sewerage companies, we are confident that we can do even more as we share best practice.
For
Tackling storm overflows and pollutions
Tackling storm overflows is a priority, and there's no doubt we have been challenged with high rainfall and the third wettest October 2023 to August 2024 since records began. Ground water levels have remained exceptionally high with a corresponding increase in the headline number of storm overflow spills. However, beneath the headlines our investments are working, having resolved two thirds of our highest spillers from 2023, and preventing c.12,500 spills through c.350 interventions since 2022. Importantly, we have maintained our sector leading performance for internal sewer flooding and upper quartile for external flooding incidents.
Our WaterFit investments are focused on:
· reducing the flows into our network, with 57km of sewers relined to reduce infiltration and completing over 12 hectares of sewer separation
· increasing storage at 60 sites, nearly tripling our storage capacity to capture flows that otherwise would have split, returning them for treatment after the storm event
· increasing treatment capacity at 15 wastewater treatment works
· and maximising existing capacity at 90 sites through interventions such as increasing weir heights and flow optimisation.
With our regions 860 miles of coastline, we are rightly focused on improving our bathing beaches, with a 12% reduction in the number of spills during the 2024 bathing season and maintaining 100%[12] quality standards for the fourth year in a row.
Six new bathing water designations were made in 2024, and we are working to support catchment schemes to ensure the designations meet the highest standards. Three have already met standard, the remaining three are where our assets have a limited impact, so we are working to understand other upstream sources to support improvements.
We also recognise that there is still more to do on pollutions. We have some of the lowest absolute levels of serious pollutions across the sector, and we have not had a Category 1 incident since 2018. We remain focused on driving improvements to overall levels for
Historically, the majority of our pollutions occurred in the network and the work we have done here is working with c.40% reduction in network incidents over K7. We have seen improvement underlying performance at our treatment works but our focus has now turned to our pumping stations, where resilience to the weather and increased flows has been challenging. We are responding with improved site MOTS and enhanced cleansing as well as tackling power resilience. We are also focused on up-skilling teams so we are better equipped to mitigate and react to pollution events.
Driving environmental gains
Customers and communities across our region live, relax and work around our bathing beaches and more and more people are using our rivers and water courses all year round.
Our award-winning catchment management programme is leading the way for biodiversity gains as well as continuing to help the way others manage their land, improve water quality, biodiversity and climate resilience. Activities range from building ponds, improving farm tracks, slurry storage, planting trees and creating buffer strips to catch and filter water, as well as peatland restoration that is benefiting from third-party contributions. Overall c.135,000 hectares have been improved, with a c.
We are supporting six newly designated bathing waters this year four of which are on the Dart Estuary. We are improving water quality by reducing the amount of post treatment phosphorus by c.80% at 37 sites, and have improved RNAGs[13] over K7 from 19% to 12%.
With our commitment to Net Zero, our investment in Pennon Power has continued. Around 45% of our targeted capacity is already under construction at two sites, with the first energisation expected at the end of 2024/25, and the two further sites on track. Annualised returns are expected to be between 11% to 15%[14].
Supporting affordability, delivering for customers
In tackling affordability, we are doing two things, keeping bills as low as possible and supporting those who are vulnerable. By focusing on efficiency, we have kept bills below inflation and our bill in the South West is lower now (in actual value) than it was 10 years ago, with the average bill now less than
Whilst bills are lower, we are supporting more customers than ever before with over 140,000 across the Group benefitting from our support tariffs. By unlocking over
Key to building trust is reducing complaints and with
Delivering strong relative sector performance
Against our customer commitments, c.70% of our ODI commitments are ahead or on track and as outlined in Ofwat's Water Company Performance Report we are delivering good relative performance in the sector. We are industry leading or upper quartile in a number of measures including internal sewer flooding and unplanned outages in South West, quality and supply interruptions in SES, and in customer service in
The common ODI framework has been challenging across the sector, with the majority of companies in net penalty for water and wastewater measures, with significant outperformance largely achieved on bespoke measures during this period.
As we enter the next regulatory period with the majority of measures common, our relative position puts us in a solid position.
While we are targeting an EPA 2-star rating for 2024, 4-star EPA status remains our focus. In recognition of the progress we are making and the challenges we face from the weather and topography, Ofwat has set a target of 2028 for achieving 4-star status. Pollution incidents remain the key element of this and while we have seen improvements in underlying performance across our networks and treatment works, we continue to focus on ensuring our pumping stations are resilient to the high flows we are experiencing. The Environment Agency's consultation on the revised EPA is underway and we are contributing to ensure an appropriate performance framework for the future - which truly reflects overall environmental performance.
Our non-regulated retailers, with a combined market share of c.15%, which now include SES Business Water, continue to build their strong performance and grow EBITDA and profit contributions. Pennon Water Services ('PWS') and Water2Business have an outstanding focus on customer service with Trustpilot scores of 4.8 and 5.0, respectively. Following the SES acquisition which included other non-regulated businesses we see opportunity for consolidation, efficiencies and sharing best practice.
Underpinned by an 'outstanding' Business Plan for K8
We were delighted to be awarded 'outstanding' status on our SWW business plan by Ofwat, recognising the quality and ambition within our proposals. The Draft Determination provides a floor for RCV growth of c.30% for SWW to 2030. The cost of capital is protected against reduction, with 30bps upside if we meet four criteria by 2028, including 4-star EPA. SES's Business Plan was assessed as a 'standard' plan and receives a 5bps upside to the cost of capital.
We had one of the lowest levels of totex reductions of any water and sewerage company in the sector at c.8% reflecting the efficient Business Plan we had submitted, and we positively received all funding for our storm overflow plans - allowing us to accelerate
Given the outstanding status and good status for our respective plans, our response to the Draft Determination covered four key areas, many of which were consistent across the sector:
· we need to ensure a balance of risk and return with targets set at stretching but achievable levels that show upper quartile performance in one area can substantively offset underperformance in another. Whilst we welcomed the recent Outcome Adjustment Model proposed by Ofwat the underlying framework, targets and incentives also need to be balanced
· our response provided further evidence and justification to support a return to the expenditure levels within our submitted plan
· we recognise the need to balance customer bills, particularly given the scale of investment planned to 2030, however our customer research shows that this should not be at the expense of future customers and therefore capital charges (specifically RCV run-off) should reflect the natural rates
· as a Group that supports customers from as far west as the Isles of Scilly to
With the Final Determination due on 19 December, we intend to hold a Capital Markets Day on 25 February, ahead of the start of K8 on 1 April.
Talented people doing great things for customers and each other
As a purpose led business, we recognise that the best way to deliver for customers is to focus on our people. Key to this is embedding our new business operating model, led by the four Managing Directors as we drive end to end accountability for delivery. We are ensuring we get the balance right between protecting and improving local services for customers and communities, through our brands, and using our size and scale to deliver efficient and effective support services across the Group. This includes having more resources on the front line than ever before and as we support the wider supply chain. We are also focused on making it simpler, easier and cheaper to work together by reducing duplication and management layers, with clear roles and responsibilities, with everyone living our values.
At the same time, we continue to invest in future skills and capabilities. We are the only water company to have been recognised as a Top 100 employer for apprenticeships for the second year running, as we are ahead of plan to offer 1,000 apprenticeships and graduate roles by 2030, with 680 to date. We've delivered over 4,000 courses at our growing number of internal training facilities and in November, were recognised for our "earn and learn" approach to development, with platinum status awarded to us by the '5% Club' who share an ambition to shape the future of workforce development and national prosperity.
We continue to promote social mobility, through the Social Mobility Business Partnership giving young people the opportunity to dive into their local water company, so important in a region where deep seated social mobility issues exist, and where the South West ranks the third worst for upward occupational mobility.
Well positioned for period of significant growth
As we move towards K8, we have built our sustainable supply chain through our delivery partners, establishing 'amplify', an alliance with six tier one and multiple tier two partners, supported by a network of local sub-contractors which is already delivering on over 1,000 schemes.
We have a robust financial position with good liquidity having secured
GROUP CHIEF FINANCIAL OFFICER'S REVIEW
We have delivered a resilient financial performance in the first half of 2024/25, in line with our expectations as set out in our Trading Statement in September. Our half year results reflect the inclusion of
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Underlying |
H1 2024/25 |
H1 2024/25 (SES) |
H1 2024/25 (excl. SES) |
H1 2023/24 |
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Revenue |
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Operating costs |
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EBITDA^ |
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Depreciation and amortisation |
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Operating profit |
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Net interest charge |
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Share of associated companies PAT* |
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(Loss)/profit before tax |
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Non-underlying items before tax |
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Loss before tax |
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Underlying tax credit/(charge) |
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Non-underlying tax credit |
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(Loss)/profit for the period |
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(Loss)/earnings per share |
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Adjusted EPS |
(6.6p) |
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3.6p |
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Basic EPS |
(10.6p) |
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0.5p |
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Interim dividend per share |
14.69p |
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14.04p |
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Total Group capital expenditure |
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At 30 Sept 2024 |
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At 31 Mar 2024 |
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Total Group net debt |
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* Share of associated companies PAT refers to the Group's 30% interest in Water2Business Limited which is accounted for under the equity method.
Revenue increased to
Operating costs increased on a like for like basis (excluding SES) by 7.3% with costs in South West Water ('SWW') up by 4.7% reflecting the impact of inflation, as well as continued high power costs and costs associated with the implementation of a new customer billing system in SWW, partially offset by efficiency savings. Costs for Pennon Water Services ('PWS') increased by 7.1%, slightly below revenue increases, due to wholesale cost increases (outside the South West Water region) and new contract wins. Including the impact of SES costs increased to
Cash collections across the Group have remained robust during the half year, with SWW achieving upper quarter debt performance at 1.5% of revenue.
Overall, underlying EBITDA for the Group was
Depreciation and amortisation increased in the period to
The net interest charge increased to
As a result, the Group reported an underlying loss before tax of
Our focus has been on reshaping and restructuring our operations for efficient delivery ahead of K8. We will recognise c.
Our continued transformational and integration programmes have, and are in progress to, secure c.
The Brixham water contamination incident resulted in non-underlying costs of
Capital expenditure of
We secured strong investment grade credit ratings at South West Water Limited, which enabled us to launch a
In line with Pennon's 2020-2025 dividend policy for growth of CPIH+2%, the Board has declared an interim dividend of
Integration of our acquisitions
Since the completion of the merger of Bristol Water in February 2023, we have been delivering on our proven acquisition and integration blueprint. We are on track to deliver a run rate of c.
In addition, we received clearance from the CMA in June 2024 for our acquisition of SES. We will be aligning the SES businesses to the Pennon Group structure and are on target to deliver c.
SEGMENTAL PERFORMANCE
SES was acquired on 10 January 2024 and has contributed to the Group financial results since that date. It largely comprises the regulated water company,
WATER
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Underlying |
H1 2024/25 Water |
H1 2024/25 SES Water |
H1 2024/25 SWW
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H1 2023/24 Water
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Revenue |
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Operating costs |
( |
( |
( |
( |
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EBITDA^ |
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Depreciation and amortisation |
( |
( |
( |
( |
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Operating profit |
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Net interest charge |
( |
( |
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( |
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(Loss)/profit before tax |
( |
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( |
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Non-underlying items before tax |
( |
- |
( |
( |
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(Loss)/profit before tax |
( |
( |
( |
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South West Water
SWW includes the operating businesses trading as South West Water, Bournemouth Water and Bristol Water.
SWW's statutory and underlying revenue for H1 2024/25 was
Underlying operating costs of
SWW's underlying EBITDA reduced by 9.8% to
The net interest charge of
SWW's statutory loss before tax was
SWW's capital expenditure was
SES Water
In H1 2024/25, SES Water contributed
The net interest charge of
SES Water capital expenditure in the first half was
NON-HOUSEHOLD RETAIL
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H1 2024/25 NHH Retail |
H1 2024/25 SESBW |
H1 2024/25 PWS
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H1 2023/24 NHH Retail
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Revenue |
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Water segment wholesale elimination |
( |
( |
( |
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Revenue excluding elimination |
' |
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Operating costs |
( |
( |
( |
( |
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Water segment wholesale elimination |
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Operating costs excluding elimination |
( |
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EBITDA^ |
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Depreciation and amortisation |
( |
- |
( |
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Operating profit |
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Net interest charge |
( |
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Profit before tax |
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Pennon Water Services
PWS has delivered a robust financial performance for the half year through its focus on its key strategic initiatives of growing through long-term contracts in targeted business sectors, good customer retention, and strong control of operating costs despite additional cost pressures.
Non-household demand has continued to fall within our underlying water region, however, revenue for PWS was 7.4% higher at
Operating costs have increased, although at a lower rate than revenue, driving a 19.4% improvement in EBITDA to
The business continues to maintain its focus on targeting high quality, sustainable customers who will benefit from the value-added services that form part of PWS' differentiated service proposition, with new annualised contract wins of c.
SES Business Water
The results of SES Business Water ('SESBW', SES's non-household retail business) for the half year ended 30 September 2024 are reflected in the Non-household retail segment. As the business was acquired in January 2024, there are no results for SESBW in the prior year comparative period.
SESBW contributed
OTHER
The Other segment comprises the result of Pennon Group plc company and other Group businesses, including the recently acquired ancillary businesses of SES. The Other segment contributed an underlying loss before tax of
With the CMA clearance received in H1 2024/25, work is underway to perform a strategic review of the SES ancillary businesses to consider their fit and role within the Group for the future.
GROUP PERFORMANCE
Net finance costs
Total net finance costs for the Group were
The non-cash element of our finance charges, which accretes to the debt principal, was c.
With the majority of debt in SWW, our efficient funding mix and hedging strategy has resulted in an effective interest rate of 5.3% (H1 2023/24: 5.8%) for SWW. The Group continues to secure efficient funding for SWW to ensure c.60% of its interest rate risk is mitigated in line with the Group Treasury Policy, which is achieved both through issuing fixed rate debt and effective interest rate hedging, with a further element being index-linked. SWW has a lower proportion of index-linked debt than the industry average.
SWW's net debt at 30 September 2024 comprised:
|
At 30 September 2024 |
Notional |
Proportion |
Industry average* |
|
Fixed/swapped |
|
75% |
39% |
|
Floating |
|
12% |
11% |
|
Index-linked |
|
13% |
50% |
|
Total |
|
100% |
100% |
|
|
|
|
|
*
From March 2025, c.
In addition to our effective interest rate hedging, the short term RPI-linked swaps issued in 2022 will be maturing in 2025.
Non-underlying items
Non-underlying items for H1 2024/25 were a net charge before tax of
The non-underlying charge before tax in H1 2024/25 comprised:
·
·
·
The non-underlying charges above gave rise to a deferred tax credit of
Tax
We are proud of our responsible approach to tax. The Group has once again maintained its Fair Tax Mark accreditation for the year, having been the first water company to achieve this status and holding the award continuously since 2018.
The overall H1 2024/25 tax credit for the Group is
· a deferred tax credit of
· a current tax charge of
The deferred tax credit for the period and the nil current tax position (excluding prior year items), reflect the tax effect of the Group generating both an accounting loss and a tax loss in the period. The tax loss follows on from the accounting loss, coupled with the effect of the
There is also a non-underlying deferred tax credit of
Earnings per share
The Group has recorded a basic loss of
Our adjusted loss per share excludes the impact of deferred tax charges and non-underlying items. For the Group, we have generated an adjusted loss per share for H1 2024/25 of
Capital expenditure
|
|
Capital expenditure |
H1 2024/25 |
H1 2023/24 |
|
|
South West Water |
|
|
|
Water |
|
|
|
|
Wastewater |
|
|
|
|
|
Pennon Power |
|
|
|
|
Other* |
|
|
|
|
Total Group (excl. SES) |
|
|
|
|
SES |
|
n/a |
|
|
Total Group |
|
|
* Other includes PWS and Pennon Group plc
Total Group capital expenditure in the first half was
SES capital expenditure of
Investment in Pennon Power of
Robust liquidity and funding position
At 30 September 2024, the Group had £675.1m of cash and committed facilities contributing to a resilient balance sheet and strong liquidity position. This consisted of cash and cash deposits of £175.1m (including
During H1 2024/25 the Group, through SWW, has achieved two strong credit ratings with Moody's and Fitch, supporting the strength of the Group's financial outlook. We were also pleased that SES Water's credit rating was strengthened by Moody's in November, in recognition of the benefit gained from being part of the wider Pennon Group.
SWW also completed two debt raises totalling
·
·
These issuances signal the move to more benchmark-sized transactions in both the private placement and public bond markets as the scale of capital expenditure and ongoing refinancing grows. The bond followed the launch of our
Group debt
|
At 30 September 2024 |
Gross debt |
Net debt |
|
Pennon Group plc |
|
|
|
Water Group |
|
|
|
SWW |
|
|
|
SES Water |
|
|
|
Other Group companies: |
|
|
|
Pennon Power Limited |
|
|
|
Pennon Water Services |
|
|
|
Other subsidiaries |
|
|
|
Intercompany borrowing eliminations |
( |
( |
|
Group indebtedness |
|
|
|
Acquisition related fair value adjustments[16] |
|
|
|
Total Group |
|
|
The Group's IFRS net debt at 30 September 2024 was
At 30 September 2024, SWW's net debt/forecast shadow RCV gearing ratio was 64.0% (31 March 2024: 63.5%), reflecting increased capital expenditure and reduced operating cashflows.
SES's total net debt was
SWW's gross debt at 30 September 2024 was
SES Water's gross debt at 30 September 2024 was
Return on Regulated Equity^
During K7 to date we have continued to deliver SWW RORE outperformance (excluding SES Water). Cumulatively to H1 2024/25 SWW Group RORE was 6.0% (6.1% in South West and 4.8% in
The cumulative benefits from the structure of our debt book on financing costs persist but have reduced due to the impact of falling inflation. Additional expenditure to deliver our K7 commitments is more than offsetting positive outperformance delivered earlier in the regulatory period.
ODI performance across the SWW Group has continued to be dominated by pollutions performance, partly mitigated by areas of outperformance such as internal sewer flooding, catchment management and bathing waters. Overall a net penalty is anticipated in 2024/25.
The table below summarises the cumulative average RORE position for South West and
|
|
South West Water |
Bristol Water |
|
Base return |
4.0% |
4.5% |
|
Financing |
4.0% |
1.0% |
|
Totex |
(1.3%) |
1.0% |
|
ODI |
(0.6%) |
(1.7%) |
|
Cumulative RORE |
6.1% |
4.8% |
For SES Water, forecast RORE for one year is (6.7%) driven by higher totex expenditure and an effective interest rate above Ofwat's allowance resulting in underperformance.
Dividends
In line with Pennon's 2020-2025 dividend policy of growth of CPIH +2%, the Board has declared an interim dividend of
Pennon Group plc has substantial retained earnings and a sustainable balance sheet to support its stated dividend policy. Dividends are charged against retained earnings in the year in which they are paid.
FINANCIAL OUTLOOK FOR 2024/25
Looking forward to the full year 2024/25, the outlook for SWW revenue sees a continuation of lower customer demand, offsetting tariff increases and new customer numbers, resulting in a balanced H1/H2 split and a broadly flat year on year position.
Continued elevated non-commodity power costs and the costs of the new digital customer services platform in SWW are expected to be partially offset by increased efficiency savings realised with effect from the final quarter of 2024/25.
We anticipate ongoing growth in Pennon Water Services, increasing revenue and costs, and benefitting full year profitability.
Our acquisition of SES in January 2024 will result in a full year benefit of SES results in the full year position.
We anticipate Group capital expenditure in H2 2024/25 to continue at the H1 2024/25 run rate. This reflects early work in preparation for K8, including
The impact of our ongoing capital programme on our debt position, in addition to SES's financing charges, is expected to increase Group net finance costs for the full year.
The Water Group's RCV for 2024/25 is expected to increase reflecting additional and accelerated investment along with regulatory true-ups and inflationary impacts at the close of the K7 regulatory period.
TECHNICAL GUIDANCE FOR FY 2024/25
|
Pennon Group |
FY 2023/24 |
Change |
|
|
Revenue* |
• Higher year on year • SWW revenue expected to see a continuation of lower customer demand, offsetting tariff increases and new customer numbers, resulting in a balanced H1/H2 split and broadly flat year on year position • Ongoing growth in our retail businesses • Full year impact of SES acquisition |
|
▲ |
|
Operating costs* |
• Higher year on year • SWW operating costs in H2 2024/25 expected to be lower than H1 2024/25, with a full year increase on 2023/24 • Pay increases of c.4% • Growth in retail businesses leading to higher wholesale supply charges • Full year impact of SES acquisition |
|
▲ |
|
Depreciation* |
• Higher year on year • SWW broadly equal H1/H2 split • Full year impact of SES acquisition |
|
▲ |
|
Net interest charge* |
• Higher year on year driven by increased levels of debt to support capital investment profile • SWW interest costs step up in H2 2024/25 reflecting timing of debt issuance and capital investment • Full year impact of SES acquisition |
|
▲ |
|
Current tax |
• 2023/24 effective credit rate reflects prior year credits arising from settlement of outstanding tax returns with HMRC. These are unlikely to recur • Group is unlikely to be in a • As a result, the current tax rate, excluding the effect of any prior period items, is expected to remain at 0% |
3.6%
|
▲ |
|
Capital expenditure |
• Group capital expenditure in H2 2024/25 expected to continue at H1 2024/25 run rate including a step up in investment in Pennon Power |
|
- |
|
Net debt |
• Continued delivery of capital investment programme across the Group increases net debt • Full year impact of SES acquisition |
|
▲ |
|
SWW RORE (excl. SES) |
• Expected year on year reduction in line with lower inflation expectations - continued expectation of RORE outperformance |
7.3% |
▼ |
|
Water Group RCV |
• Increase reflecting additional and accelerated investment, along with regulatory true-ups and inflationary impact, and inclusion of SES |
|
▲ |
*Underlying basis
PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risks
During the first half of 2024/25 the Board has carried out a detailed review of the Group's principal risks in the context of the Group's strategic objectives and priorities as well as the external environment within which it operates. This has included the impact of changes to the external macro-economic, legal and regulatory environment within which the Group operates. This has resulted in the following change to the Group's principal risks compared with those reported within the Pennon Group plc Annual Report and Accounts 2024:
· The risk of failure to receive CMA approval for the acquisition of
The Group's principal risks are:
Law, Regulation and Finance
1. Changes in Government policy
2. Changes in regulatory frameworks and requirements
3. Non-compliance with laws and regulations
4. Inability to secure sufficient finance and funding, within our debt covenants, to meet ongoing commitments
5. Non-compliance or occurrence of an avoidable health and safety incident
6. Failure to pay all pension obligations as they fall due and increased costs to the Group should the defined benefit pension scheme deficit increase
Market and Economic Conditions
7. Macro-economic near-term risks impacting on inflation, interest rates and power prices
Operating Performance
8. Failure to secure, treat and supply clean drinking water
9. Failure to improve wastewater performance resulting in environmental commitments not being delivered
10. Failure to provide excellent service or meet the needs and expectations of our customers and communities
11. Inability to attract and retain staff with the skills to deliver the Group's strategy
Business Systems and Capital Investment
12. Insufficient capacity and resilience of the supply chain to support the delivery of the Group's operational and capital programmes
13. Inadequate technological control or cyber attack results in a breach of the Group's assets, systems and data
Financial Timetable
|
30 January 2025 |
Ordinary shares quoted ex-dividend |
|
31 January 2025 |
Record date for interim dividend |
|
25 February 2025 |
Capital Markets Day |
|
14 March 2025 |
Final date for receipt of DRIP applications |
|
March 2025 |
Trading Statement |
|
4 April 2025 |
Interim dividend payment date |
|
May/June 2025 |
Full Year Results 2024/25 |
|
June 2025 |
Annual Report and Accounts Published |
|
24 July 2025 |
Annual General Meeting 2025 |
|
24 July 2025* |
Ordinary shares quoted ex-dividend |
|
25 July 2025* |
Record date for final dividend |
|
8 August 2025* |
Final date for receipt of DRIP applications |
|
4 September 2025* |
Final dividend payment date |
|
September 2025 |
Trading Statement |
|
November 2025 |
Half Year Results 2025/26 |
* Subject to obtaining shareholder approval at the 2025 Annual General Meeting
CAUTIONARY STATEMENT IN RESPECT OF FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements relating to the Pennon Group's operations, performance and financial position based on current expectations of, and assumptions and forecasts made by, Pennon Group management which may constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified in this Report by words such as "anticipate", "aim", "believe", "continue", "could", "due", "estimate", "expect", "forecast", "goal", "intend", "may", "outlook", "plan", "probably", "project", "remain", "seek", "should", "target", "will", "would" and related and similar expressions, as well as statements in the future tense. All statements other than of historical fact may be forward-looking statements and represent the Group's belief regarding future events, many of which, by their nature, are inherently uncertain and outside the Group's control. Various known and unknown risks, uncertainties and other factors could lead to substantial differences between the actual future results, financial situation, development or performance of the Group and the estimates and historical results given herein. Important risks, uncertainties and other factors that could cause actual results, performance or achievements of Pennon Group to differ materially from any outcomes or results expressed or implied by such forward-looking statements include, among other things, changes in Government policy; regulatory and legal reform; compliance with laws and regulations; maintaining sufficient finance and funding to meet ongoing commitments; non-compliance or occurrence of avoidable health and safety incidents; tax compliance and contribution; failure to pay all pension obligations as they fall due and increased costs to the Group should the defined benefit pension scheme deficit increase; non-recovery of customer debt; poor operating performance due to extreme weather or climate change; macro-economic risks impacting commodity and power prices and other matters; poor customer service and/or increased competition leading to loss of customer base; business interruption or significant operational failure/incidents; difficulty in recruitment, retention and development of skills; non-delivery of regulatory outcomes and performance commitments; failure or increased cost of capital projects/exposure to contract failures; failure of information technology systems, management and protection, including cyber risks; and all other risks in the Pennon Group Annual Report published in June 2024. Such forward looking statements should therefore be construed in light of all risks, uncertainties, and other factors, including without limitation those identified above, and undue reliance should not be placed on them. Nothing in this report should be construed as a profit forecast.
Any forward-looking statements are made only as of the date of this document and no representation, assurance, guarantee or warranty is given in relation to them including as to their accuracy, completeness, or the basis on which they are made. The Group accepts no obligation to revise or update publicly these forward-looking statements or adjust them as a result of new information or for future events or developments, except to the extent legally required.
UNSOLICITED COMMUNICATIONS WITH SHAREHOLDERS
A number of companies, including Pennon Group plc, continue to be aware that their shareholders have received unsolicited telephone calls or correspondence concerning investment matters which imply a connection to the company concerned. If shareholders have any concerns about any contact they have received, then please refer to the Financial Conduct Authority's website www.fca.org.uk/scamsmart. Details of any share dealing facilities that the Company endorses will be included in Company mailings.
|
PENNON GROUP PLC |
|||||||
|
|
|||||||
|
Consolidated income statement for the half year ended 30 September 2024 |
|||||||
|
|
|||||||
|
|
|
Unaudited |
|||||
|
|
|
Before non-underlying items |
Non-underlying items (note 5) half year ended 30 September 2024 |
Total |
Before non-underlying items |
Non-underlying items (note 5) half year ended 30 September 2023 |
Total |
|
|
Notes |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
Revenue |
4 |
527.2 |
- |
527.2 |
448.6 |
- |
448.6 |
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
|
|
|
|
Employment costs |
|
(79.6) |
(0.9) |
(80.5) |
(61.3) |
- |
(61.3) |
|
Raw materials and consumables used |
|
(26.3) |
(0.2) |
(26.5) |
(18.6) |
- |
(18.6) |
|
Trade receivables impairment |
|
(6.5) |
- |
(6.5) |
(3.8) |
- |
(3.8) |
|
Other operating expenses |
|
(251.3) |
(19.1) |
(270.4) |
(196.4) |
(5.9) |
(202.3) |
|
Earnings before interest, tax, |
4 |
163.5 |
(20.2) |
143.3 |
168.5 |
(5.9) |
162.6 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortisation |
|
(94.0) |
- |
(94.0) |
(82.6) |
- |
(82.6) |
|
Operating Profit |
4 |
69.5 |
(20.2) |
49.3 |
85.9 |
(5.9) |
80.0 |
|
Finance income |
6 |
7.9 |
- |
7.9 |
5.7 |
- |
5.7 |
|
Finance costs |
6 |
(96.5) |
- |
(96.5) |
(83.0) |
- |
(83.0) |
|
Net finance costs |
6 |
(88.6) |
- |
(88.6) |
(77.3) |
- |
(77.3) |
|
Share of post-tax profit from associated companies |
|
0.5 |
- |
0.5 |
0.5 |
- |
0.5 |
|
|
|
|
|
|
|
|
|
|
(Loss) / profit before tax |
4 |
(18.6) |
(20.2) |
(38.8) |
9.1 |
(5.9) |
3.2 |
|
Taxation credit / (charge) |
7 |
3.9 |
4.9 |
8.8 |
(2.8) |
1.4 |
(1.4) |
|
(Loss) / profit for the period |
|
(14.7) |
(15.3) |
(30.0) |
6.3 |
(4.5) |
1.8 |
|
Attributable to: |
|
|
|
|
|
|
|
|
Ordinary shareholders of the parent |
|
(15.0) |
(15.3) |
(30.3) |
5.9 |
(4.5) |
1.4 |
|
Non-controlling interests |
|
0.3 |
- |
0.3 |
0.4 |
- |
0.4 |
|
|
|
|
|
|
|
|
|
|
(Loss) / earnings per ordinary share |
8 |
|
|
|
|
|
|
|
(pence per share) |
|
|
|
|
|
|
|
|
- Basic |
|
|
|
(10.6) |
|
|
0.5 |
|
- Diluted |
|
|
|
(10.6) |
|
|
0.5 |
|
The Group activities above are derived from continuing activities.
The notes on pages 30 to 49 form part of this condensed half year financial information. |
|||||||
|
PENNON GROUP PLC |
||||||
|
|
||||||
|
Consolidated statement of comprehensive income for the half year ended 30 September 2024 |
||||||
|
|
||||||
|
|
Unaudited |
|||||
|
|
Before non-underlying items |
Non-underlying items (note 5) half year ended 30 September 2024 |
Total |
Before non-underlying items |
Non-underlying items (note 5) half year ended 30 September 2023 |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
(Loss) / profit for the period |
(14.7) |
(15.3) |
(30.0) |
6.3 |
(4.5) |
1.8 |
|
|
|
|
|
|
|
|
|
Other comprehensive income / (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that will not be reclassified to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurement of defined benefit |
14.4 |
- |
14.4 |
(28.6) |
- |
(28.6) |
|
Income tax on items that will not be reclassified |
(3.6) |
- |
(3.6) |
7.1 |
- |
7.1 |
|
Total items that will not be |
10.8 |
- |
10.8 |
(21.5) |
- |
(21.5) |
|
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges |
(9.9) |
- |
(9.9) |
19.1 |
- |
19.1 |
|
Income tax on items that may be reclassified |
2.6 |
- |
2.6 |
(4.7) |
- |
(4.7) |
|
Total items that may be reclassified |
(7.3) |
- |
(7.3) |
14.4 |
- |
14.4 |
|
|
|
|
|
|
|
|
|
Other comprehensive income / (loss) for the period net of tax |
3.5 |
- |
3.5 |
(7.1) |
- |
(7.1) |
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period |
(11.2) |
(15.3) |
(26.5) |
(0.8) |
(4.5) |
(5.3) |
|
|
|
|
|
|
|
|
|
Total comprehensive loss attributable to: |
|
|
|
|
|
|
|
Ordinary shareholders of the parent |
(11.5) |
(15.3) |
(26.8) |
(1.2) |
(4.5) |
(5.7) |
|
Non-controlling interests |
0.3 |
- |
0.3 |
0.4 |
- |
0.4 |
|
The notes on pages 30 to 49 form part of this condensed half year financial information. |
||||||
|
PENNON GROUP PLC |
|
||||||||
|
|
|
||||||||
|
Consolidated balance sheet at 30 September 2024 |
|
||||||||
|
|
|
Unaudited |
Audited |
||||||
|
|
|
30 September 2024 |
31 March |
||||||
|
ASSETS |
Notes |
£m |
£m |
||||||
|
Non-current assets |
|
|
|
||||||
|
Goodwill |
|
179.5 |
179.5 |
||||||
|
Other intangible assets |
17 |
70.3 |
67.7 |
||||||
|
Property, plant and equipment |
17 |
5,601.0 |
5,361.6 |
||||||
|
Other non-current assets |
|
8.7 |
8.7 |
||||||
|
Financial assets at fair value through profit and loss |
|
0.6 |
0.9 |
||||||
|
Derivative financial instruments |
|
15.6 |
17.4 |
||||||
|
Investments in associated companies |
|
1.5 |
1.0 |
||||||
|
Retirement benefit assets |
16 |
31.4 |
26.6 |
||||||
|
|
|
5,908.6 |
5,663.4 |
||||||
|
Current assets |
|
|
|
||||||
|
Inventories |
|
13.0 |
13.2 |
||||||
|
Trade and other receivables |
|
342.9 |
353.7 |
||||||
|
Current tax receivable |
|
- |
6.0 |
||||||
|
Derivative financial instruments |
|
18.3 |
23.4 |
||||||
|
Cash and cash equivalents* |
14 |
137.0 |
134.0 |
||||||
|
Restricted funds* |
14 |
38.1 |
37.4 |
||||||
|
Retirement benefit assets |
16 |
9.4 |
- |
||||||
|
|
|
558.7 |
567.7 |
||||||
|
LIABILITIES |
|
|
|
||||||
|
Current liabilities |
|
|
|
||||||
|
Borrowings |
14 |
(239.4) |
(238.2) |
||||||
|
Unamortised hedging adjustment |
|
(2.5) |
(2.6) |
||||||
|
Derivative financial instruments |
|
(5.0) |
(5.4) |
||||||
|
Trade and other payables |
18 |
(306.7) |
(341.2) |
||||||
|
|
|
(553.6) |
(587.4) |
||||||
|
|
|
|
|
||||||
|
Net current assets/(liabilities) |
|
5.1 |
(19.7) |
||||||
|
|
|
|
|
||||||
|
Non-current liabilities |
|
|
|
||||||
|
Borrowings |
14 |
(4,167.9) |
(3,742.4) |
||||||
|
Other non-current liabilities |
18 |
(161.5) |
(154.9) |
||||||
|
Unamortised hedging adjustment |
|
(30.8) |
(31.8) |
||||||
|
Derivative financial instruments |
|
(3.8) |
(3.3) |
||||||
|
Deferred tax liabilities |
|
(540.4) |
(548.3) |
||||||
|
Provisions |
|
(0.4) |
(0.4) |
||||||
|
|
|
(4,904.8) |
(4,481.1) |
||||||
|
|
|
|
|
||||||
|
Net assets |
|
1,008.9 |
1,162.6 |
||||||
|
|
|
|
|
||||||
|
Shareholder's equity |
|
|
|
||||||
|
Share capital |
10 |
174.6 |
174.6 |
||||||
|
Share premium account |
11 |
398.0 |
398.2 |
||||||
|
Capital redemption reserve |
12 |
157.1 |
157.1 |
||||||
|
Retained earnings and other reserves |
|
277.5 |
431.3 |
||||||
|
Total shareholders' equity |
|
1,007.2 |
1,161.2 |
||||||
|
Non-controlling interests |
|
1.7 |
1.4 |
||||||
|
Total equity |
|
1,008.9 |
1,162.6 |
||||||
|
*Cash and cash deposits has been re-presented to separately disclose cash and cash equivalents and restricted funds. The notes on pages 30 to 49 form part of this condensed half year financial information.
|
|
||||||||
|
PENNON GROUP PLC |
|
||||||||
|
|
|
||||||||
|
Consolidated statement of changes in equity for the half year ended 30 September 2024 |
|
||||||||
|
|
|
||||||||
|
|
Unaudited |
|
|||||||
|
|
Share capital |
Share premium account (note 11) |
Capital redemption reserve |
Retained earnings and other reserves |
Non-controlling interests |
Total equity |
|
||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
||
|
|
|
|
|
|
|
|
|
||
|
At 1 April 2023 |
159.5 |
237.6 |
157.1 |
570.6 |
0.4 |
1,125.2 |
|
||
|
|
|
|
|
|
|
|
|
||
|
Profit for the period |
- |
- |
- |
1.4 |
0.4 |
1.8 |
|
||
|
Other comprehensive loss for the period |
- |
- |
- |
(7.1) |
- |
(7.1) |
|
||
|
Total comprehensive loss for the period |
- |
- |
- |
(5.7) |
0.4 |
(5.3) |
|
||
|
|
|
|
|
|
|
|
|
||
|
Transactions with equity shareholders: |
|
|
|
|
|
|
|
||
|
Dividends paid |
- |
- |
- |
(111.7) |
- |
(111.7) |
|
||
|
Adjustments in respect of share-based |
- |
- |
- |
0.2 |
- |
0.2 |
|
||
|
Own shares acquired by the Pennon Employee |
- |
- |
- |
(1.4) |
- |
(1.4) |
|
||
|
Proceeds from shares issued under |
- |
0.1 |
- |
- |
- |
0.1 |
|
||
|
Total transactions with equity shareholders |
- |
0.1 |
- |
(112.9) |
- |
(112.8) |
|
||
|
At 30 September 2023 |
159.5 |
237.7 |
157.1 |
452.0 |
0.8 |
1,007.1 |
|
||
|
|
|
||||||||
|
|
Unaudited |
|
|||||||
|
|
Share |
Share premium account (note 11) |
Capital redemption reserve (note 12) |
Retained earnings and other reserves |
Non-controlling interests |
Total equity |
|
||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
||
|
|
|
|
|
|
|
|
|
||
|
At 1 April 2024 |
174.6 |
398.2 |
157.1 |
431.3 |
1.4 |
1,162.6 |
|
||
|
|
|
|
|
|
|
|
|
||
|
Loss for the period |
- |
- |
- |
(30.3) |
0.3 |
(30.0) |
|
||
|
Other comprehensive income for the period |
- |
- |
- |
3.5 |
- |
3.5 |
|
||
|
Total comprehensive loss for the period |
- |
- |
- |
(26.8) |
0.3 |
(26.5) |
|
||
|
|
|
|
|
|
|
|
|
||
|
Transactions with equity shareholders: |
|
|
|
|
|
|
|
||
|
Dividends paid |
- |
- |
- |
(126.9) |
- |
(126.9) |
|
||
|
Adjustments in respect of share-based |
- |
- |
- |
1.1 |
- |
1.1 |
|
||
|
Own shares acquired by the Pennon Employee |
- |
- |
- |
(1.2) |
- |
(1.2) |
|
||
|
Transaction costs arising on shares issued |
- |
(0.2) |
- |
- |
- |
(0.2) |
|
||
|
Total transactions with equity shareholders |
- |
(0.2) |
- |
(127.0) |
- |
(127.2) |
|
||
|
At 30 September 2024 |
174.6 |
398.0 |
157.1 |
277.5 |
1.7 |
1,008.9 |
|
||
|
The notes on pages 30 to 49 form part of this condensed half year financial information. |
|
||||||||
|
PENNON GROUP PLC |
|
|||
|
|
|
|||
|
Consolidated statement of cash flows for the half year ended 30 September 2024
|
|
|||
|
|
|
Unaudited |
||
|
|
|
Half year ended 30 September 2024
|
Half year
|
|
|
|
Notes |
£m |
£m |
|
|
Cash flows from operating activities |
|
|
|
|
|
Cash generated from operations |
13 |
125.4 |
88.8 |
|
|
Interest paid |
|
(64.6) |
(49.3) |
|
|
Tax received |
|
3.0 |
- |
|
|
|
|
|
|
|
|
Net cash generated from operating activities |
|
63.8 |
39.5 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Interest received |
|
4.1 |
3.8 |
|
|
Movement in restricted funds |
|
(0.7) |
- |
|
|
Purchase of property, plant and equipment |
|
(352.1) |
(249.8) |
|
|
Purchase of intangible assets |
|
(4.7) |
(20.7) |
|
|
Proceeds from sale of property, plant and equipment |
|
0.9 |
0.2 |
|
|
Net cash generated from investing activities |
|
(352.5) |
(266.5) |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from issuance of ordinary shares |
|
- |
0.1 |
|
|
Purchase of ordinary shares by the Pennon Employee Share Trust |
|
(1.2) |
(1.4) |
|
|
Proceeds from new borrowings |
|
655.1 |
325.1 |
|
|
Repayment of borrowings |
|
(246.9) |
(70.2) |
|
|
Cash inflows from lease financing arrangements |
13 |
25.0 |
24.8 |
|
|
Lease principal repayments |
|
(13.4) |
(10.7) |
|
|
Dividends paid |
9 |
(126.9) |
(111.7) |
|
|
Net cash used in financing activities |
|
291.7 |
156.0 |
|
|
|
|
|
|
|
|
Net increase / (decrease) in cash and cash equivalents |
|
3.0 |
(71.0) |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period* |
14 |
134.0 |
143.7 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
14 |
137.0 |
72.7 |
|
|
*Cash and cash equivalents opening balance has been amended due to the re-presentation of restricted funds on the balance sheet. The notes on pages 30 to 49 form part of this condensed half year financial information. |
|
|||
|
PENNON GROUP PLC |
|
|
|
|
|
Notes to condensed half year financial information |
|
|
|
|
|
1. |
General information |
|
|
Pennon Group plc is a company registered in the United Kingdom under the Companies Act 2006. The address of the registered office is given on page 49. Pennon Group's business is operated through its principal subsidiaries. South West Water Limited, provides water and wastewater services in Devon, Cornwall and parts of Dorset and Somerset and water only services in parts of Dorset, Hampshire, Wiltshire and Bristol. Sutton and East Surrey Water plc ("SES Water") provides water only services in the South East region. Sutton and South East Surrey Water Services ("SESWS") provides water and wastewater retail services to non-household customer accounts. Pennon Group is the majority shareholder of Pennon Water Services Limited, a company providing water and wastewater retail services to non-household customer accounts across Great Britain. Bristol Water Holdings Limited owns a 30% share in Water 2 Business Limited, a joint venture with Wessex Water, operating in the same sector as Pennon Water Services Limited and SESWS. This condensed half year financial information was approved by the Board of Directors on 26 November 2024. The financial information for the period ended 30 September 2024 does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts for 31 March 2024 were approved by the Board of Directors on 20 May 2024 and have been delivered to the Registrar of Companies. The independent auditor's report of the previous auditor, Ernst &Young LLP, on these financial statements was unqualified and did not contain a statement under section 498 of the Companies Act 2006. |
|
|
|
|
2. |
Basis of preparation |
|
|
This condensed half year financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, and UK adopted IAS 34 'Interim financial reporting'. This condensed half year financial information should be read in conjunction with the Pennon Group plc Annual Report and Accounts for the year ended 31 March 2024, which were prepared in accordance with UK-adopted international accounting standards and in conformity with the requirements of the Companies Act 2006. The going concern basis has been adopted in preparing the condensed half year financial information (interim accounts). At 30 September 2024 the Group has access to undrawn committed funds and cash and cash deposits totalling In making their assessment, the Directors reviewed the principal risk which has been deemed to be the outcome of the PR24 pricing review and the Ofwat Final Determination due on 19 December 2025. A combined stress testing scenario has been performed to assess the overall impact of a "severe but plausible" outcome from the Final Determination and its impact on the Group. This severe but plausible scenario has been assessed at an interim point between the Draft Determination and Draft Determination response. The nature of the Group's financing portfolio means that we are continuously raising new debt to fund our growth and investment along with refinancing individual facilities. Our operational cashflow remains resilient, and with a Baa1/BBB+ investment grade credit rating from Moodys and Fitch, our funding and financial position is strong, and our EMTN programme also allows us to raise funding on a regular and timely basis. Given this strong credit rating and the regulated nature of the business, it is fully anticipated that funding can be raised to support the investment programme and ongoing needs of the business over the forthcoming period. In addition, management mitigations are also available to the business, should it be required, in order to manage the cash flow impact of any crystallisation of risks; these include, but are not limited to, raising additional funding, reduction and/or deferral of operational expenditure and the reduction and/or deferral of capital expenditure. As a result, the Directors have considered the Group's funding position and financial projections, taking into account a range of possible scenarios and concluded that there is a reasonable expectation that the Group will meet the requirements of its covenants and has adequate resources to continue in operational existence for a period of at least 12 months from the date of signing the financial statements. For this reason, they continue to adopt the going concern basis in preparing the interim accounts. |
|
|
|
|
PENNON GROUP PLC |
|
|
|
|
|
Notes to condensed half year financial information (continued)
|
|
|
2. |
Basis of preparation (continued) This condensed half year financial information has been reviewed, but not audited, by the independent auditor pursuant to the Auditing Practices Board guidance on the 'Review of Interim Financial Information'. The preparation of the half year financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty are consistent with those that applied to the consolidated financial statements for the year ended 31 March 2024.
|
|
3. |
Accounting policies |
|
|
The accounting policies adopted in this condensed half year financial information are consistent with those applied and set out in the Pennon Group plc Annual Report and Accounts for the year ended 31 March 2024, except for the estimation of income tax (see note 7) and are in accordance with IFRS and interpretations of the IFRS Interpretations Committee expected to be applicable for the year ending 31 March 2025 in issue which have been adopted by the UK. New standards or interpretations which were mandatory for the first time in the year beginning 1 April 2024 did not have a material impact on the net assets or results of the Group. New standards or interpretations due to be adopted from 1 April 2025 are not expected to have a material impact on the Group's net assets or results. |
|
|
|
|
PENNON GROUP PLC |
|||
|
|
|||
|
Notes to condensed half year financial information (continued) |
|||
|
|
|
||
|
4. |
Segmental information |
||
|
|
Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision-Maker (CODM), which has been identified as the Pennon Group plc Board ('the Board'). The earnings measures below are used by the Board in making decisions. The Group is organised into two operating segments. The water segment comprises the regulated water and wastewater services undertaken by South West Water and the regulated water services undertaken by SES Water. The non-household retail segment (business retail) reflects the services provided by Pennon Water Services and SESWS. |
||
|
|
Unaudited |
||
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
|
|
Revenue |
£m |
£m |
|
|
Water total |
412.9 |
377.8 |
|
|
Non-household retail |
160.8 |
117.6 |
|
|
Other |
10.8 |
1.2 |
|
|
Less intra-segment trading |
(57.3) |
(48.0) |
|
|
Total revenue |
527.2 |
448.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
|
|
|
Operating profit before depreciation, amortisation and |
|
|
|
|
Water total |
166.0 |
167.1 |
|
|
Non-household retail |
4.6 |
3.1 |
|
|
Other |
(7.1) |
(1.7) |
|
|
|
163.5 |
168.5 |
|
|
|
|
|
|
|
Operating profit before non-underlying items |
|
|
|
|
Water total |
75.4 |
87.5 |
|
|
Non-household retail |
4.5 |
2.8 |
|
|
Other |
(10.4) |
(4.4) |
|
|
|
69.5 |
85.9 |
|
|
(Loss) / profit before tax before non-underlying items |
|
|
|
|
Water total |
(14.5) |
6.6 |
|
|
Non-household retail |
2.6 |
1.7 |
|
|
Other |
(6.7) |
0.8 |
|
|
|
(18.6) |
9.1 |
|
|
(Loss) / profit before tax |
|
|
|
|
Water total |
(34.0) |
1.2 |
|
|
Non-household retail |
2.6 |
1.7 |
|
|
Other |
(7.4) |
0.3 |
|
|
|
(38.8) |
3.2 |
|
|
|
Intra-segment trading between different segments is under normal market based commercial terms and conditions. Intra-segment revenue of the other segment is reflected as a cost. Factors such as seasonal weather patterns can affect sales volumes, income and costs in the water segments. All revenue is generated in the United Kingdom. The grouping of revenue streams by how they are affected by economic factors, as required by IFRS 15, is as follows: |
||
|
PENNON GROUP PLC |
|
|
|
|
||
|
Notes to condensed half year financial information (continued) |
|
|
|
|||
|
4. |
Segmental information (continued) |
|
|
|
||
|
|
|
|
|
|||
|
|
Unaudited |
|||||
|
Six months ended 30 September 2023 |
UK total |
|||||
|
Water |
Non-household |
Other |
Total |
|||
|
|
£m |
£m |
£m |
£m |
||
|
Segment revenue |
377.8 |
117.6 |
1.2 |
496.6 |
||
|
Inter-segment revenue |
(46.7) |
(0.1) |
(1.2) |
(48.0) |
||
|
Revenue from external customers |
331.1 |
117.5 |
- |
448.6 |
||
|
Significant service lines |
|
|
|
|
||
|
Water |
331.1 |
- |
- |
331.1 |
||
|
Non-household retail |
- |
117.5 |
- |
117.5 |
||
|
|
331.1 |
117.5 |
- |
448.6 |
||
|
|
||||||
|
|
Unaudited |
|||||
|
Six months ended 30 September 2024 |
UK total |
|||||
|
Water |
Non-household |
Other |
Total |
|||
|
|
£m |
£m |
£m |
£m |
||
|
Segment revenue |
412.9 |
160.8 |
10.8 |
584.5 |
||
|
Inter-segment revenue |
(50.8) |
(0.1) |
(6.4) |
(57.3) |
||
|
Revenue from external customers |
362.1 |
160.7 |
4.4 |
527.2 |
||
|
|
|
|
|
|
||
|
Significant service lines |
|
|
|
|
||
|
Water |
362.1 |
- |
- |
362.1 |
||
|
Non-household retail |
- |
160.7 |
- |
160.7 |
||
|
Other |
- |
- |
4.4 |
4.4 |
||
|
|
362.1 |
160.7 |
4.4 |
527.2 |
||
|
PENNON GROUP PLC |
|||
|
|
|||
|
Notes to condensed half year financial information (continued) |
|||
|
|
|
||
|
5. |
Non-underlying items |
||
|
|
Non-underlying items are those that in the Directors' view are required to be separately disclosed by virtue of their size, nature or incidence to enable a full understanding of the Group's financial performance in the period and business trends over time. The presentation of results is consistent with internal performance monitoring. |
||
|
|
Unaudited |
||
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
|
|
|
£m |
£m |
|
|
Operating Costs |
|
|
|
|
Restructuring / transformational costs(1) |
(3.7) |
(3.6) |
|
|
Costs associated with water quality event in Brixham(2) |
(16.3) |
- |
|
|
Acquisition costs(3) |
(0.2) |
(0.5) |
|
|
Drought related costs(4) |
- |
(1.8) |
|
|
Earnings before interest, tax, depreciation and amortisation |
(20.2) |
(5.9) |
|
|
|
|
|
|
|
Non-underlying tax credit |
4.9 |
1.4 |
|
|
Net non-underlying charges |
(15.3) |
(4.5) |
|
|
|
|
|
|
|
(1) |
£3.7 million (half year ended 30 September 2023: £3.6 million) of costs were incurred in connection with the business transformation of South West Water following the merger of Bristol Water into South West Water, £0.9 million of which were employment costs. Total additional restructuring costs of c.£12 million expected to be incurred wholly in H2 of the current financial year. |
||
|
(2) |
On 15 May 2024 an outbreak of cryptosporidium was detected in the water supply in the Brixham area of Devon, causing South West Water to issue a notice to customers in the area to boil water before consuming. £16.3 million of costs have been incurred which includes enhanced customer compensation, provision of bottled water over an eight-week period, and extensive interventions to clean and filter the network. |
||
|
(3) |
The Group incurred expenses of £0.1 million in the half year ended 30 September 2024 in relation to the costs of acquisition of SES and £0.1 million (half year ended 30 September 2023: £0.5 million) of expenses in connection with the acquisition of four renewable power generation investments. |
||
|
(4) |
In financial year 2022/23, a combination of elevated demand from increased tourism and record-breaking extremes of prolonged dry and hot weather led to extremely low water storage levels in the Cornwall region. Drought permits were issued allowing increased extractions and water-saving measures for the South West Water region were implemented for the first time since 1995. To ensure the region could be supplied with water over the summer and continuing into 2023, South West Water instigated a series of mitigating measures and one-off expenditure to address the situation. £1.8 million of specifically identifiable costs were recognised in the first half of 2023/24. Cash totalling £28.6 million was paid in the half year ended 30 September 2024 (half year ended 30 September 2023: £2.7 million) in relation to items disclosed as non-underlying in the current and previous financial years. |
||
|
PENNON GROUP PLC |
||||||||||||
|
|
|
|||||||||||
|
Notes to condensed half year financial information (continued) |
||||||||||||
|
|
|
|||||||||||
|
6. |
Net finance costs |
|||||||||||
|
|
Unaudited |
|||||||||||
|
|
Half year ended |
Half year ended
|
||||||||||
|
|
Finance costs |
Finance income |
Total |
Finance |
Finance income |
Total |
||||||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
||||||
|
Cost of servicing debt |
|
|
|
|
|
|
||||||
|
Bank borrowings and overdrafts |
(66.4) |
- |
(66.4) |
(58.0) |
- |
(58.0) |
||||||
|
Interest element of lease payments |
(25.1) |
- |
(25.1) |
(22.9) |
- |
(22.9) |
||||||
|
Other finance costs |
(5.0) |
- |
(5.0) |
(2.1) |
- |
(2.1) |
||||||
|
Interest receivable |
- |
7.1 |
7.1 |
- |
5.0 |
5.0 |
||||||
|
|
(96.5) |
7.1 |
(89.4) |
(83.0) |
5.0 |
(78.0) |
||||||
|
Notional interest |
|
|
|
|
|
|
||||||
|
Retirement benefit obligations |
- |
0.8 |
0.8 |
- |
0.7 |
0.7 |
||||||
|
|
|
|
|
|
|
|
||||||
|
Net finance costs |
(96.5) |
7.9 |
(88.6) |
(83.0) |
5.7 |
(77.3) |
||||||
|
|
|
|
|
|
|
|
||||||
|
|
In addition to the above, finance costs of £12.1 million have been capitalised on qualifying assets included in property, plant and equipment (H1 2023/24: £4.1 million). |
|||||||||||
|
|
|
|||||||||||
|
|
|
|||||||||||
|
7. |
Taxation |
|||||||||||
|
|
Unaudited |
|||||||||||
|
|
Before non-underlying items |
Non-underlying items (note 5) half year ended 30 September 2024 |
Total |
Before non-underlying items half year ended 30 September 2023 |
Non-underlying items (note 5) half year ended 30 September 2023 |
Total |
||||||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
||||||
|
Analysis of charge |
|
|
|
|
|
|
||||||
|
Current tax charge / (credit) |
0.1 |
- |
0.1 |
(0.6) |
- |
(0.6) |
||||||
|
Deferred tax (credit) / charge |
(4.0) |
(4.9) |
(8.9) |
3.4 |
(1.4) |
2.0 |
||||||
|
Tax (credit) / charge for the period |
(3.9) |
(4.9) |
(8.8) |
2.8 |
(1.4) |
1.4 |
||||||
|
|
|
|
|
|
|
|
||||||
|
|
UK corporation tax is calculated at 25% (H1 2023/24: 25%) of the estimated assessable profit for the year. The tax charge for September 2024 and September 2023 has been derived by applying the anticipated effective annual tax rate to the first half year profit before tax. Tax on amounts included in the consolidated statement of comprehensive income, or directly in equity, is included in those statements respectively. The effective tax rate for the period for the group, including prior year adjustments but before the impact of non-underlying items was an effective charge of 21.0% (H1 2023/24: charge of 30.8%). The effective tax rate for the period for the group including prior year adjustments and the impact of non-underlying items was a charge of 22.7% (H1 2023/24: charge of 43.8%). |
|||||||||||
|
|
|
|||||||||||
|
PENNON GROUP PLC |
|||||||||
|
|
|||||||||
|
Notes to condensed half year financial information (continued) |
|||||||||
|
|
|
||||||||
|
8. |
Earnings per share |
||||||||
|
|
Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding those held in the employee share trust which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to include all dilutive potential ordinary shares. The weighted average number of shares and earnings used in the calculations were: |
||||||||
|
|
Unaudited |
||||||||
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
|||||||
|
Number of shares (millions) |
|
|
|||||||
|
|
|
|
|||||||
|
For basic earnings per share |
285.9 |
261.2 |
|||||||
|
|
|
|
|||||||
|
Effect of dilutive potential ordinary shares from share options |
- |
0.7 |
|||||||
|
|
|
|
|||||||
|
For diluted earnings per share |
285.9 |
261.9 |
|||||||
|
|
|
||||||||
|
|
Adjusted basic and diluted earnings per ordinary share Adjusted earnings per share are presented to provide a more useful comparison of business trends and performance. Non-underlying items are adjusted for by virtue of their size, nature or incidence to enable a full understanding of the Group's financial performance (as described in note 5). For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to include all dilutive potential ordinary shares. Potential ordinary shares that could dilute basic earnings per share in the future were not included in the calculation for diluted earnings per share because they were anti-dilutive for the current year as any dilution would reduce the loss per share. Diluted earnings per share is therefore equal to basic earnings per share. Earnings per share have been calculated as follows: |
||||||||
|
|
|
||||||||
|
|
Unaudited |
||||||||
|
|
Half year ended |
Half year ended |
|||||||
|
|
Loss |
Earnings per share |
Profit |
Earnings per share |
|||||
|
after tax |
Basic |
Diluted |
after tax |
Basic |
Diluted |
||||
|
|
£m |
p |
p |
£m |
p |
p |
|||
|
|
|
|
|
|
|
|
|||
|
Statutory earnings |
(30.3) |
(10.6) |
(10.6) |
1.4 |
0.5 |
0.5 |
|||
|
Deferred tax before non-underlying items |
(4.0) |
(1.4) |
(1.4) |
3.4 |
1.4 |
1.4 |
|||
|
Non-underlying items (net of tax) |
15.3 |
5.4 |
5.4 |
4.5 |
1.7 |
1.7 |
|||
|
Adjusted earnings before non-underlying items and deferred tax |
(19.0) |
(6.6) |
(6.6) |
9.3 |
3.6 |
3.6 |
|||
|
|
|
||||||||
|
PENNON GROUP PLC |
|||
|
|
|||
|
Notes to condensed half year financial information (continued) |
|||
|
|
|
||
|
9. |
Dividends |
||
|
|
|
||
|
|
Amounts recognised as distributions to ordinary equity holders in the period: |
Unaudited |
|
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
|
|
|
£m |
£m |
|
|
|
|
|
|
|
Interim dividend paid for the year ended |
40.1 |
33.9 |
|
|
|
|
|
|
|
Final dividend paid for the year ended |
86.8 |
77.8 |
|
|
|
|
|
|
|
|
126.9 |
111.7 |
|
|
In the six months to 30 September 2024 the 2023/24 interim and final dividends were paid resulting in a cash outflow of £126.9 million. |
|||
|
|
|||
|
|
Unaudited |
||
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
|
|
|
£m |
£m |
|
|
Proposed interim dividend for the year ended |
|
|
|
|
42.0 |
36.7 |
||
|
The proposed interim dividend has not been included as a liability in this condensed half year financial information. The proposed interim dividend for the year ending 31 March 2025 will be paid on 4 April 2025 to shareholders on the register on 31 January 2025. |
|||
|
PENNON GROUP PLC |
||||
|
|
||||
|
Notes to condensed half year financial information (continued) |
||||
|
|
|
|||
|
10. |
Share capital |
|||
|
|
|
|||
|
|
Allotted, called up and fully paid: |
|
||
|
|
|
|
||
|
|
1 April 2023 to 30 September 2023 |
Unaudited |
||
|
|
Number of shares |
|
||
|
|
|
Treasury shares |
Ordinary shares |
£m |
|
|
|
|
|
|
|
At 1 April 2023 ordinary shares of 61.05 pence each |
5,628 |
261,315,489 |
159.5 |
|
|
|
|
|
|
|
|
For consideration of £0.1 million, shares issued in |
- |
17,606 |
- |
|
|
|
|
|
|
|
|
At 30 September 2023 ordinary shares of 61.05 pence each |
5,628 |
261,333,095 |
159.5 |
|
|
|
|
|
|
|
|
|
1 April 2024 to 30 September 2024 |
Unaudited |
||
|
|
Number of shares |
|
||
|
|
|
Treasury shares |
Ordinary shares |
£m |
|
|
|
|
|
|
|
At 1 April 2024 ordinary shares of 61.05 pence each |
5,628 |
286,045,323 |
174.6 |
|
|
|
|
|
|
|
|
For consideration of £21,000, shares issued in |
- |
3,386 |
- |
|
|
|
|
|
|
|
|
At 30 September 2024 ordinary shares of 61.05 pence each |
5,628 |
286,048,709 |
174.6 |
|
|
Shares held as treasury shares may be sold, re-issued for any of the Company's share schemes, or cancelled. The weighted average market price of the Company's shares at the date of exercise of share scheme options during the period was 625 pence (H1 2023/24: 631 pence). |
||||
|
PENNON GROUP PLC |
||
|
|
||
|
Notes to condensed half year financial information (continued) |
||
|
|
|
|
|
11. |
Share premium account |
|
|
|
|
Unaudited |
|
|
1 April 2023 to 30 September 2023 |
£m |
|
|
|
|
|
At 1 April 2023 |
237.6 |
|
|
Shares issued under the Sharesave Scheme |
0.1 |
|
|
At 30 September 2023 |
237.7 |
|
|
|
|
|
|
|
1 April 2024 to 30 September 2024 |
|
|
|
|
|
|
At 1 April 2024 |
398.2 |
|
|
Shares issued under the Sharesave Scheme |
- |
|
|
Less: Transaction costs arising on share issues |
(0.2) |
|
|
|
|
|
|
At 30 September 2024 |
398.0 |
|
|
|
||
|
|
||
|
12. |
Capital redemption reserve |
|
|
|
|
|
|
|
|
Unaudited |
|
|
1 April 2023 to 30 September 2023 |
£m |
|
|
|
|
|
At 1 April 2023 and 30 September 2023 |
157.1 |
|
|
|
|
|
|
|
1 April 2024 to 30 September 2024 |
|
|
|
|
|
|
At 1 April 2024 and 30 September 2024 |
157.1 |
|
|
PENNON GROUP PLC |
|||
|
|
|||
|
Notes to condensed half year financial information (continued) |
|||
|
|
|
||
|
13. |
Cash flow from operating activities |
||
|
|
Reconciliation of (loss)/profit for the period to net cash generated from operations: |
Unaudited |
|
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
|
|
|
£m |
£m |
|
|
Cash generated from operations |
|
|
|
|
(Loss) / profit for the period |
(30.0) |
1.8 |
|
|
Adjustments for: |
|
|
|
|
Share-based payments |
1.1 |
0.3 |
|
|
Profit on disposal of property, plant and equipment |
(0.5) |
(0.1) |
|
|
Depreciation charge |
91.9 |
80.8 |
|
|
Amortisation of intangible assets |
2.1 |
1.7 |
|
|
Non-underlying costs |
- |
5.9 |
|
|
Share of post-tax profit from associated companies |
(0.5) |
(0.5) |
|
|
Finance income |
(7.9) |
(5.7) |
|
|
Finance costs |
96.5 |
83.0 |
|
|
Taxation (credit) / charge |
(8.8) |
1.4 |
|
|
Changes in working capital: |
|
|
|
|
Decrease in inventories |
0.2 |
0.1 |
|
|
Increase in trade and other receivables |
5.7 |
(45.8) |
|
|
Decrease in trade and other payables |
(24.4) |
(31.0) |
|
|
Cash impact of non-underlying costs |
- |
(2.7) |
|
|
Decrease in provisions |
- |
(0.4) |
|
|
Cash generated from operations |
125.4 |
88.8 |
|
|
|
|
|
|
|
|
Unaudited |
||
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
|
|
Total interest paid |
£m |
£m |
|
|
|
|
|
|
|
Interest paid in operating activities |
64.6 |
49.3 |
|
|
Interest paid in investing activities |
12.1 |
4.1 |
|
|
Total interest paid |
76.7 |
53.4 |
|
|
|
|
|
|
|
|
During the period the Group completed a number of sale and leaseback transactions in respect of its infrastructure assets as part of its ongoing finance arrangements. Cash proceeds of £25.0 million (H1 2023/24: £24.8 million) were received and a gain of £nil (H1 2023/24: £nil). These assets are leased back at market rates with lease terms of 10.0 years. |
||
|
PENNON GROUP PLC |
||||
|
|
||||
|
Notes to condensed half year financial information (continued) |
||||
|
|
|
|||
|
14. |
Net borrowings |
|||
|
|
|
Unaudited |
Audited |
|
|
|
Half year ended 30 September 2024 |
Year ended 31 March 2024 |
||
|
|
£m |
£m |
||
|
|
|
|
||
|
Cash and cash equivalents |
137.0 |
134.0 |
||
|
Restricted funds |
38.1 |
37.4 |
||
|
|
175.1 |
171.4 |
||
|
Borrowings - current |
|
|
||
|
Bank and other current borrowings |
(114.2) |
(186.3) |
||
|
Lease obligations |
(125.2) |
(51.9) |
||
|
Total current borrowings |
(239.4) |
(238.2) |
||
|
|
|
|
||
|
Borrowings - non-current |
|
|
||
|
Bank and other non-current borrowings |
(3,137.0) |
(2,658.7) |
||
|
Listed preference shares |
(12.5) |
(12.5) |
||
|
Lease obligations |
(1,018.4) |
(1,071.2) |
||
|
Total non-current borrowings |
(4,167.9) |
(3,742.4) |
||
|
|
|
|
||
|
Total net borrowings |
(4,232.2) |
(3,809.2) |
||
|
|
|
|
||
|
|
|
|||
|
|
Restricted funds are deposited with lessors or held for bond interest, are available for access, subject to being replaced by an equivalent valued security. |
|||
|
PENNON GROUP PLC |
|||||||
|
|
|||||||
|
Notes to condensed half year financial information (continued) |
|||||||
|
|
|
||||||
|
14. |
Net borrowings (continued) |
||||||
|
|
The movements in net borrowings during the periods presented were as follows: |
||||||
|
|
Unaudited |
||||||
|
|
|
Net cash/ (borrowings) at 1 April 2023 |
Cash flows |
Transfer between non-current and current |
Other non-cash movements |
Net cash/ (borrowings) at 30 September 2023 |
|
|
|
|
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash deposits |
|
165.4 |
(71.0) |
- |
- |
94.4 |
|
|
Bank and other current borrowings |
|
(92.7) |
45.2 |
(36.1) |
- |
(83.6) |
|
|
Current lease obligations* |
|
(32.0) |
30.6 |
(13.9) |
(30.2) |
(45.5) |
|
|
Bank and other non-current borrowings |
|
(1,960.9) |
(300.1) |
36.1 |
(8.0) |
(2,232.9) |
|
|
Listed preference shares |
|
(12.5) |
- |
- |
- |
(12.5) |
|
|
Non-current lease obligations* |
|
(1,032.7) |
(24.8) |
13.9 |
(3.1) |
(1,046.7) |
|
|
Net borrowings |
|
(2,965.4) |
(320.1) |
- |
(41.3) |
(3,326.8) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
Net cash/ (borrowings) at 1 April 2024 |
Cash flows |
Transfer between non-current and current |
Other non-cash movements |
Net cash/ (borrowings) at 30 September 2024 |
|
|
|
|
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash deposits |
|
171.4 |
3.7 |
- |
- |
175.1 |
|
|
Bank and other current borrowings |
|
(186.3) |
147.0 |
(76.1) |
1.2 |
(114.2) |
|
|
Current lease obligations |
|
(51.9) |
38.5 |
(82.0) |
(29.8) |
(125.2) |
|
|
Bank and other non-current borrowings |
|
(2,658.7) |
(555.2) |
76.1 |
0.8 |
(3,137.0) |
|
|
Listed preference shares |
|
(12.5) |
- |
- |
- |
(12.5) |
|
|
Non-current lease obligations |
|
(1,071.2) |
(25.0) |
82.0 |
(4.2) |
(1,018.4) |
|
|
Net borrowings |
|
(3,809.2) |
(391.0) |
- |
(32.0) |
(4,232.2) |
|
|
|
|||||||
|
|
*The movement in net borrowings for the prior year has been corrected to show the gross cash flows and other non-cash movements relating to lease obligations whereby interest accrues to and is paid from net borrowings, these amounts were previously shown net within other non-cash movements. Transfers between non-current and current for these items has also been corrected. The Group has entered into covenants with lenders and, while terms vary, these typically provide for limits on gearing and interest cover. The Group has been in compliance with its covenants during the year to date. Other non-cash movements for the Group in the period includes the increase in borrowings from interest which is rolled into the amount repayable. |
||||||
|
PENNON GROUP PLC |
|||||||
|
|
|||||||
|
Notes to condensed half year financial information (continued) |
|||||||
|
|
|
||||||
|
15. |
Fair value disclosure for financial instruments |
||||||
|
|
Fair value of financial instruments carried at amortised cost. Financial assets and liabilities which are not carried at an amount which approximates to their fair value are: |
||||||
|
|
Unaudited |
Audited |
|||||
|
|
Half year ended |
Year ended |
|||||
|
Book value |
Fair value |
Book value |
Fair value |
||||
|
|
£m |
£m |
£m |
£m |
|||
|
Non-current borrowings: |
|
|
|
|
|||
|
Bank and other loans |
3,137.0 |
3,045.0 |
2,658.7 |
2,540.8 |
|||
|
Other non-current borrowings |
12.5 |
19.7 |
12.5 |
20.1 |
|||
|
Non-current borrowings excluding leases |
3,149.5 |
3,064.7 |
2,671.2 |
2,560.9 |
|||
|
|
|
|
|
|
|||
|
|
Valuation hierarchy of financial instruments carried at fair value The Group uses the following hierarchy for determining the fair value of financial instruments by valuation technique: × quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) × inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2) × Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3) The fair value of financial instruments not traded in an active market (level 2, for example over-the-counter derivatives) is determined by using valuation techniques. A variety of methods and assumptions are used based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The Group's financial instruments are valued principally using level 2 measures: |
||||||
|
|
|
Unaudited |
Audited |
||||
|
|
Half year ended 30 September 2024 |
Year ended 31 March 2024 |
|||||
|
|
£m |
£m |
|||||
|
Level 2 inputs |
|
|
|||||
|
Assets |
|
|
|||||
|
Derivatives used for cash flow hedging |
33.8 |
40.5 |
|||||
|
Derivatives used for fair value hedging |
0.1 |
0.3 |
|||||
|
Total assets |
33.9 |
40.8 |
|||||
|
|
|
|
|||||
|
Liabilities |
|
|
|||||
|
Derivatives used for cash flow hedging |
(8.8) |
(8.7) |
|||||
|
Total liabilities |
(8.8) |
(8.7) |
|||||
|
|
|
|
|||||
|
PENNON GROUP PLC |
||||||||||
|
|
||||||||||
|
Notes to condensed half year financial information (continued) |
||||||||||
|
|
|
|||||||||
|
16. |
Retirement benefit assets |
|||||||||
|
|
Defined benefit schemes All the Group's defined benefit pension schemes are closed to future accrual. The principal actuarial assumptions were the rate used to discount schemes' liabilities and expected return on scheme assets with the same rate of 5.1% (Sept 2024: 5.5%) and the inflation assumption of 3.1% (Sept 2024: 3.3%). |
|||||||||
|
|
|
Unaudited |
||||||||
|
|
|
Half year ended |
Half Year ended |
|||||||
|
|
Present value of obligation |
Fair value of plan assets |
Total |
Present value of obligation |
Fair value of plan assets |
Total |
||||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
||||
|
At beginning of period |
(774.2) |
800.8 |
26.6 |
(719.5) |
748.8 |
29.3 |
||||
|
Amounts recognised in the |
(18.6) |
18.3 |
(0.3) |
(17.4) |
17.0 |
(0.4) |
||||
|
Remeasurements through other |
27.6 |
(13.2) |
14.4 |
43.5 |
(72.1) |
(28.6) |
||||
|
Company contributions |
0.1 |
- |
0.1 |
- |
- |
- |
||||
|
Benefits and expenses paid |
23.7 |
(23.7) |
- |
21.2 |
(21.2) |
- |
||||
|
At end of period |
(741.4) |
782.2 |
40.8 |
(672.2) |
672.5 |
0.3 |
||||
|
|
|
|||||||||
|
|
Recognition of surplus on principal pension scheme In accordance with IAS 19 'Employee Benefits' the value of the net pension scheme surplus that can be recognised in the statement of financial position is restricted to the present value of economic benefits available in the form of refunds from the scheme or reductions in future contributions. In respect of the Group's principal pension scheme, PGPS, the surplus has been recognised as the Group believes that ultimately it has an unconditional right to a refund of any surplus assuming the full settlement of the plan's liabilities in a single event, such as a scheme wind up. Bristol Water The overall surplus includes a net surplus of c.£9.4 million relating to the Bristol Water Section of the Water Companies Pension Scheme (WCPS) which remains largely unchanged as the liabilities of the scheme are fully insured through a bulk annuity policy. The Group believes that it has an unconditional right to a refund of surplus and that the gross pension surplus can be recognised. This benefit is only available as a refund as no additional defined pension benefits are being earned. Under UK tax legislation a tax deduction of 25% is applied to a refund from a UK pension scheme, before it is passed to the employer. This tax deduction has been applied to restrict the value of the surplus recognised for this scheme. The process to buy out and wind up the scheme continues and the Trustee has indicated its intention to return the surplus to the Company. The buy-out of the section is expected to completed within the next 12 months and therefore the surplus relating to the Bristol Water Section has been recognised as a current asset on the balance sheet.
Sutton and East Surrey Water The Group believes that it has an unconditional right to a refund of surplus and that the gross pension surplus can be recognised. This benefit is only available as a refund as no additional defined pension benefits are being earned. Under UK tax legislation a tax deduction of 25% (2024: 25%) is applied to a refund from a UK pension scheme, before it is passed to the employer. This tax deduction has been applied to restrict the value of the surplus recognised for this scheme.
|
|||||||||
|
PENNON GROUP PLC |
||||||||||
|
|
||||||||||
|
Notes to condensed half year financial information (continued) |
||||||||||
|
|
|
|
||||||||
|
16. |
Retirement benefit assets (continued) |
|
||||||||
|
|
|
|
||||||||
|
|
In June 2023, the High Court handed down a decision (Virgin Media Limited v NTL Pension Trustees II Limited and others) which potentially has implications for the validity of amendments made by schemes, including the PGPS and other Group defined benefit schemes, which were contracted-out on a salary-related basis between 6 April 1997 and the abolition of contracting-out in 2016. This decision was upheld by the Court of Appeal in August 2024. There is potential for legislative intervention following industry lobbying efforts that may retrospectively validate certain rule amendments that would otherwise be held void where the requirements of section 37 were not met. However, the Company has engaged with the relevant Trustee for PGPS and other Group defined benefit schemes who have confirmed that based on the governance processes in place and an initial review of significant deed changes during the period in question, these bodies have no reason to believe, at this stage in their review, that the relevant requirements were not complied with in relation to the Schemes with regard to the relevant period in question. Given that there is no indication at this stage of non-compliance with the relevant requirements, the PGPS and other Group defined benefit schemes valuation as at 30 September 2024 does not reflect potential additional liabilities arising from the Virgin Media case. |
|||||||||
|
|
|
|
||||||||
|
17. |
Capital expenditure |
|
||||||||
|
|
|
Unaudited |
Audited |
|||||||
|
|
Half year ended 30 September 2024 |
Year ended 31 March 2024 |
||||||||
|
|
£m |
£m |
||||||||
|
Property, plant and equipment |
|
|
||||||||
|
Additions |
327.1 |
604.5 |
||||||||
|
Arising on acquisitions |
- |
441.6 |
||||||||
|
Assets adopted at fair value |
6.7 |
10.6 |
||||||||
|
Net book value of disposals |
(0.4) |
- |
||||||||
|
|
|
|
||||||||
|
Intangible assets |
|
|
||||||||
|
Additions |
4.7 |
45.0 |
||||||||
|
Arising on acquisitions |
- |
11.6 |
||||||||
|
Net book value of disposals |
- |
(0.1) |
||||||||
|
|
|
|
||||||||
|
Capital commitments |
|
|
||||||||
|
Contracted but not provided for the Group |
157.6 |
211.5 |
||||||||
|
|
|
|
||||||||
|
|
|
|||||||||
|
|
||||||||||
|
PENNON GROUP PLC |
||||||||||
|
|
|
|
||||||||
|
Notes to condensed half year financial information (continued) |
||||||||||
|
|
|
|
||||||||
|
18. |
Trade and other payables & other non-current liabilities |
|
||||||||
|
|
|
Unaudited |
Audited |
|||||||
|
|
Half year ended 30 September 2024 |
Year ended 31 March 2024 |
||||||||
|
|
£m |
£m |
||||||||
|
Trade and other payables - current |
|
|
||||||||
|
Trade payables |
164.0 |
227.5 |
||||||||
|
Contract liabilities |
10.7 |
10.6 |
||||||||
|
Other tax and social security |
1.9 |
3.1 |
||||||||
|
Accruals |
41.2 |
37.4 |
||||||||
|
Other payables |
88.9 |
62.6 |
||||||||
|
|
306.7 |
341.2 |
||||||||
|
Other non-current liabilities |
|
|
||||||||
|
Contract liabilities |
161.5 |
154.9 |
||||||||
|
|
|
|
||||||||
|
|
|
|
||||||||
|
19. |
Contingencies and Financial Guarantee |
|
||||||||
|
|
|
|
|
|||||||
|
|
Financial Guarantee |
|
|
|||||||
|
|
|
Unaudited |
Audited |
|||||||
|
|
Half year ended 30 September 2024 |
Year ended 31 March 2024 |
||||||||
|
|
£m |
£m |
||||||||
|
|
|
|
||||||||
|
Performance bonds |
21.7 |
13.8 |
||||||||
|
|
Guarantees in respect of performance bonds relate to changes to the collateral requirements for the non-household retail business with other wholesalers. The possibility of the bond being required is remote hence the fair value of the bond is not material. |
|||||||||
|
|
Contingency |
|
|
|||||||
|
|
Other contractual and litigation uncertainties In November 2021, Ofwat and the Environment Agency announced industry-wide investigations into how companies manage their wastewater assets. In June 2022, as part of its ongoing investigation, Ofwat announced enforcement action against South West Water Limited and has subsequently included all 11 water and sewerage companies in the scope of their enforcement activities. If Ofwat were to find a company were in breach of its legal obligations, it has a range of options that it could apply from accepting formal section 19 undertakings which would accept operational improvements in lieu of any fine or penalty, through to fining the Group up to 10% of its revenue in relation to the regulated wastewater business. In August 2024, Ofwat proposed penalties for three companies, ranging from 5% to 9% of relevant wastewater turnover; Ofwat has however stated that the opening of enforcement cases does not automatically imply that a financial penalty will necessarily follow. On 23 May 2023 Ofwat announced an investigation into South West Water's 2021/22 operational performance data relating to leakage and per capita consumption. This operational performance data was reported in South West Water's Annual Performance Report 2021/22. This report is subject to rigorous assurance processes which include independent checks and balances carried out by an external technical auditor. Ofwat has a range of options that it could apply should its investigation identify any concerns, from accepting to formal section 19 undertakings through to fining the Group up to 10% of its revenue in relation to the regulated drinking water business. Whilst to date, Ofwat has not given a firm indication of the expected timeframe for either of its ongoing investigations or any subsequent actions it will take, we have engaged openly and transparently with Ofwat throughout the investigation and continue our discussions with them in respect of these matters. On 2 February 2024 summons were received by South West Water Limited from the EA in relation to alleged breaches of environmental permits relating to the illegal water discharge activity at seven locations with a total of 30 charges. In May 2024 the EA withdrew six of the 30 charges. At a court hearing on 14 November 2024 the company entered a guilty plea on five of the charges, sentencing is expected for these charges in the third quarter of 2025. Further hearings are due for the remaining cases. The potential outcome of the remaining prosecutions is currently unknown. |
|||||||||
|
PENNON GROUP PLC |
||||||||||
|
|
||||||||||
|
Notes to condensed half year financial information (continued) |
||||||||||
|
|
|
|
||||||||
|
19. |
Contingencies and Financial Guarantee (continued) |
|
||||||||
|
|
The Group establishes provisions in connection with contracts and litigation where it has a present legal or constructive obligation as a result of past events and where it is more likely than not an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where it is uncertain that these conditions are met a contingent liability is disclosed unless the likelihood of the obligation arising is remote or the matter is not deemed material. |
|||||||||
|
|
|
|||||||||
|
20. |
Related party transactions |
|||||||||
|
|
|
|||||||||
|
|
Group companies entered into the following transactions with joint ventures which were not members of the Group. Bristol Wessex Billing Services Limited ("BWBSL") and Water 2 Business Limited ("Water 2 Business") are joint venture investments of Bristol Water plc. |
|||||||||
|
|
|
|||||||||
|
|
Transactions with joint ventures |
Unaudited |
||||||||
|
|
Half year ended 30 September 2024 |
Half year ended 30 September 2023 |
||||||||
|
|
£m |
£m |
||||||||
|
Sales to Water 2 Business |
15.0 |
9.6 |
||||||||
|
Purchases from BWBSL |
2.0 |
2.0 |
||||||||
|
|
|
|
||||||||
|
|
Balances with joint ventures |
Unaudited |
Audited |
|||||||
|
|
Half year ended 30 September 2024 |
Year ended 31 March 2024 |
||||||||
|
|
£m |
£m |
||||||||
|
|
|
|
||||||||
|
Trade and other receivables |
|
|
||||||||
|
Water 2 Business (including loan receivable of £8.7m, 2024: £8.7m) |
8.9 |
8.9 |
||||||||
|
|
|
|
||||||||
|
Trade and other payables |
|
|
||||||||
|
BWBSL |
2.6 |
3.0 |
||||||||
|
|
|
|
||||||||
|
|
|
|
||||||||
|
|
PENNON GROUP PLC |
|||||||||
|
|
|
|||||||||
|
|
Notes to condensed half year financial information (continued) |
|||||||||
|
|
|
|||||||||
|
|
21. |
Acquisition of SES Group |
||||||||
|
|
|
|||||||||
|
|
On 10 January 2024, the Pennon Group acquired 100% of the issued share capital of Sumisho Osaka Gas Water UK Limited, which has subsequently been renamed Sutton and East Surrey Group Holdings Limited ('SESGHL'). SESGHL is the holding company of the SES Group which comprises Sutton and East Surrey Water plc ('SES Water'), a regulated water only company, and certain other ancillary businesses. The purpose of the acquisition was to expand the Group's presence in water supply across Southern England.
The details of the business combination, accounted for in the year ended 31 March 2024, are as follows:
|
|||||||||
|
|
|
£m |
||||||||
|
|
Fair value of consideration transferred |
|
||||||||
|
|
Amount settled in cash |
90.2 |
||||||||
|
|
Total consideration transferred |
90.2 |
||||||||
|
|
|
|
||||||||
|
|
Fair value of assets and liabilities recognised on acquisition |
|
||||||||
|
|
Property, plant and equipment |
441.6 |
||||||||
|
|
Intangible assets |
11.6 |
||||||||
|
|
Inventories |
2.1 |
||||||||
|
|
Trade and other receivables |
61.4 |
||||||||
|
|
Cash and cash deposits |
27.5 |
||||||||
|
|
Current tax receivable |
0.4 |
||||||||
|
|
Borrowings |
(360.1) |
||||||||
|
|
Trade and other payables |
(65.3) |
||||||||
|
|
Retirement benefit obligations |
3.3 |
||||||||
|
|
Deferred tax liabilities |
(47.5) |
||||||||
|
|
Provisions |
(0.4) |
||||||||
|
|
Identifiable net assets |
74.6 |
||||||||
|
|
|
|
||||||||
|
|
Goodwill on acquisition |
15.6 |
||||||||
|
|
|
|
||||||||
|
|
Outflow of cash to acquire subsidiary, net of cash acquired |
|
||||||||
|
|
Consideration for equity settled in cash |
90.2 |
||||||||
|
|
Cash and cash equivalents acquired |
(27.5) |
||||||||
|
|
Net cash outflow on acquisition |
62.7 |
||||||||
|
|
|
|
||||||||
|
|
Acquisition costs paid charged to expenses |
9.7 |
||||||||
|
|
PENNON GROUP PLC |
|
|||
|
|
|
|
|||
|
|
Notes to condensed half year financial information (continued) |
|
|||
|
|
|
|
|||
|
|
21. |
Acquisition of SES Group (continued) |
|
||
|
|
|
|
|||
|
|
Acquisition related costs Acquisition related costs of £9.7 million are not included as part of the consideration transferred and were recognised as an expense in the consolidated income statement in the year ended 31 March 2024 (£9.6 million) and 30 September 2024 (£0.1 million) within other operating expenses. Adjustments made to the carrying values of SES Group at acquisition. The net assets recognised in the 30 September 2024 financial statements were based on a provisional assessment of their fair value, whilst all necessary information is finalised to complete the valuation exercise. The initial significant fair value adjustments are described further below and have been incorporated into the 10 January 2024 fair value balance sheet. Acquired receivables The provisional fair value of trade and other receivables acquired as part of the business combination amounted to £32.9 million with a gross contractual amount of £35.1 million. At the acquisition date the Group's best estimate of the contractual cash flows expected not to be collected amounted to £2.2 million. Goodwill Goodwill is attributable to the recognition of deferred tax liabilities on fair value gains recognised as part of the acquisition. None of the goodwill recognised is expected to be deductible for tax purposes. Goodwill has been allocated to the water segment.
|
||||
|
|
22. |
Events after the reporting period |
|
||
|
|
|
|
|||
|
|
In October 2024 the Group announced a restructuring of the business, it is expected that c.£12 million of costs will be incurred as a result of the restructuring. |
||||
|
|
|
||||
|
|
Pennon Group plc |
||||
|
PENNON GROUP PLC |
|||||
|
|
|||||
|
DIRECTORS' RESPONSIBILITIES STATEMENT |
|||||
|
|
The Directors named below confirm on behalf of the Board of Directors that this unaudited condensed half year financial information has been prepared in accordance with UK adopted IAS 34 "Interim financial reporting" and to the best of their knowledge the interim management report herein includes a fair review of the information required by DTR 4.2.4, DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the period and their impact on the unaudited condensed half year financial information; a description of the principal risks and uncertainties for the remaining six months of the current financial year; and the disclosure requirements in respect of material related party transactions. The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. The Directors of Pennon Group plc at the date of the signing of this announcement and statement are:
Dorothy Burwell Jonathan Butterworth Iain Evans Susan Davy Laura Flowerdew Claire Ighodaro David Sproul Loraine Woodhouse
For and on behalf of the Board of Directors who approved this half year report on 26 November 2024.
L Flowerdew Group Chief Financial Officer
|
||||
|
|
|
|
|||
|
PENNON GROUP PLC |
|||||
|
|
|||||
|
INDEPENDENT REVIEW REPORT TO PENNON GROUP PLC |
|||||
|
|
Report on the condensed consolidated interim financial statements Our conclusion We have reviewed Pennon Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the Half Year Results of Pennon Group plc for the 6 month period ended 30 September 2024 (the "period"). Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. The interim financial statements comprise: • the Consolidated balance sheet as at 30 September 2024; • the Consolidated income statement and Consolidated statement of comprehensive income for the period then ended; • the Consolidated statement of cash flows for the period then ended; • the Consolidated statement of changes in equity for the period then ended; and • the explanatory notes to the interim financial statements. The interim financial statements included in the Half Year Results of Pennon Group plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. Basis for conclusion We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. We have read the other information contained in the Half Year Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements. Conclusions relating to going concern Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern. Responsibilities for the interim financial statements and the review Our responsibilities and those of the directors The Half Year Results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Half Year Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the Half Year Results, including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
|
||||
|
|
|
||||
|
PENNON GROUP PLC |
|||||
|
|
|||||
|
INDEPENDENT REVIEW REPORT TO PENNON GROUP PLC (continued) |
|||||
|
|
Our responsibility is to express a conclusion on the interim financial statements in the Half Year Results based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP Chartered Accountants Bristol 26 November 2024 |
||||
|
PENNON GROUP PLC |
|||||||||
|
|
|
||||||||
|
Alternative performance measures |
|||||||||
|
|
Alternative performance measures (APMs) are financial measures used in this report that are not defined by International Financial Reporting Standards (IFRS). The Directors believe that these APMs assist in providing additional useful information on the underlying trends, performance and position of the Group as well as enhancing the comparability of information between reporting periods. As the Group defines the APMs they might not be directly comparable to other companies' APMs. They are not intended to be a substitute for, or superior to, IFRS measurements. The following APMs have been added or amended to those presented previously: · Group dividend cover is not presented in the half year APM disclosure. The ratio represents a measure of full year adjusted profit and dividend performance and cannot be calculated on a comparable basis using half year adjusted profits and the interim dividend. · Underlying Return on capital employed is not presented in the half year APM disclosure. This ratio represents the total of underlying operating profit by capital employed (net debt plus total equity invested). An average value for this metric is part of the long-term incentive plan for Directors. · Like for like has been added following the acquisition of SES in January 2024 to aid comparability between reporting periods. |
||||||||
|
|
|
||||||||
|
|
(i) Underlying earnings |
||||||||
|
|
Underlying earnings are presented alongside statutory results as the Directors believe they provide a useful comparison on business trends and performance. Note 5 in the notes to the financial statements provides more detail on non-underlying items, and a reconciliation of underlying earnings for the current year and the prior year is as follows: |
||||||||
|
|
|
Non-underlying items |
|
|
|
||||
|
Underlying earnings reconciliation 30 September 2024 |
Underlying |
Restructuring / transformational costs |
Costs associated with water quality event in Brixham |
Acquisition costs |
Statutory results |
Earnings |
|
||
|
|
£m |
£m |
£m |
£m |
£m |
p |
|
||
|
EBITDA (see below) |
163.5 |
(3.7) |
(16.3) |
(0.2) |
143.3 |
|
|
||
|
Operating profit |
69.5 |
(3.7) |
(16.3) |
(0.2) |
49.3 |
|
|
||
|
Loss before tax |
(18.6) |
(3.7) |
(16.3) |
(0.2) |
(38.8) |
|
|
||
|
Taxation |
3.9 |
0.8 |
4.1 |
- |
8.8 |
|
|
||
|
Loss after tax |
|
|
|
|
(30.0) |
|
|
||
|
Non-controlling interests |
|
|
|
|
(0.3) |
|
|
||
|
Profit after tax attributable to shareholders |
|
|
|
(30.3) |
(10.6) |
|
|||
|
|
|
Non-underlying items |
|
|
||
|
Underlying earnings reconciliation 30 September 2023 |
Underlying |
Restructuring / transformation costs |
Drought related costs |
Acquisition costs |
Statutory results |
Earnings |
|
|
£m |
£m |
£m |
£m |
£m |
p |
|
EBITDA (see below) |
168.5 |
(3.6) |
(1.8) |
(0.5) |
162.6 |
|
|
Operating profit |
85.9 |
(3.6) |
(1.8) |
(0.5) |
80.0 |
|
|
Profit before tax |
9.1 |
(3.6) |
(1.8) |
(0.5) |
3.2 |
|
|
Taxation |
(2.8) |
0.1 |
0.4 |
0.9 |
(1.4) |
|
|
Profit after tax |
|
|
|
1.8 |
|
|
|
Non-controlling interests |
|
|
|
(0.4) |
|
|
|
Profit after tax attributable to shareholders |
|
|
1.4 |
0.5 |
||
|
|
|
|
|
|
|
|
|
PENNON GROUP PLC |
|||||
|
|
|||||
|
Alternative performance measures (continued) |
|||||
|
|
|
||||
|
|
(ii) Underlying EBITDA |
||||
|
|
Underlying EBITDA (earnings before interest, tax, depreciation and amortisation and non-underlying items) is used to assess and monitor operational underlying performance. |
||||
|
|
|
||||
|
|
(iii) Effective interest rate |
||||
|
|
A measure of the mean average interest rate payable on net debt associated with South West Water Limited's group of companies which excludes interest costs not directly associated with net debt. This measure is presented to assess and monitor the relative cost of financing for South West Water. |
||||
|
|
|||||
|
|
|
|
|||
|
|
H1 2025 |
H1 2024 |
|||
|
|
£m |
£m |
|||
|
Net finance costs before non-underlying items (note 6) |
88.6 |
77.3 |
|||
|
Remove: net finance (cost)/income before non-underlying items not associated with South West Water Limited's group of companies |
(8.4) |
3.6 |
|||
|
Net finance costs before non-underlying items associated with South West Water Limited's group of companies |
80.2 |
80.9 |
|||
|
Net interest on retirement benefit obligations associated with South West Water Limited's group of companies |
0.6 |
0.7 |
|||
|
Capitalised interest (note 6) |
10.2 |
4.1 |
|||
|
Net finance costs for effective interest rate calculation |
91.0 |
85.7 |
|||
|
Group net debt (opening) (note 14) |
3,809.2 |
2,965.4 |
|||
|
Remove: opening net debt not associated with South West Water Limited's group of companies |
(514.5) |
(100.1) |
|||
|
Opening net debt for calculation |
3,294.7 |
2,865.3 |
|||
|
Group net debt (closing) (note 14) |
4,232.2 |
3,326.8 |
|||
|
Remove: closing net debt not associated with South West Water Limited's group of companies |
(670.9) |
(235.4) |
|||
|
Closing net debt for calculation |
3,561.3 |
3,091.4 |
|||
|
Average net debt (opening net debt + closing net debt divided by 2) |
3,428.0 |
2,978.4 |
|||
|
Effective interest rate (%) |
5.3 |
5.8 |
|||
|
|
|||||
|
|
(iv) Effective cash cost of interest |
||||
|
|
Effective cash cost of interest for South West Water Limited's group of companies is based on the effective interest cost calculation above, but excludes finance costs that are not paid in cash, but accrete to the carrying value of debt (principally the inflationary impact of indexation on index-linked debt). |
||||
|
|
H1 2025 |
H1 2024 |
|||
|
|
£m |
£m |
|||
|
Net finance costs for effective interest rate calculation (as above) |
91.0 |
85.7 |
|||
|
Remove non-cash interest accrued (income statement indexation charge) |
(12.6) |
(28.7) |
|||
|
Net finance costs for effective cash cost of interest calculation |
78.4 |
57.0 |
|||
|
Opening net debt (as above) |
3,294.7 |
2,865.3 |
|||
|
Closing net debt (as above) |
3,561.3 |
3,091.4 |
|||
|
Average net debt (opening net debt + closing net debt divided by 2) |
3,428.0 |
2,978.4 |
|||
|
Effective cash cost of interest (%) |
4.6 |
3.8 |
|||
|
|
|||||
|
PENNON GROUP PLC |
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Alternative performance measures (continued) |
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(v) Underlying interest cover |
|||
|
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|
Underlying net finance costs (excluding pensions net interest cost) divided by operating profit before non-underlying items. |
|||
|
|
|
H1 2025 |
H1 2024 |
||
|
|
|
£m |
£m |
||
|
|
Net finance costs after non-underlying items |
88.6 |
77.3 |
||
|
|
Net interest on retirement benefit obligations |
0.8 |
0.7 |
||
|
|
Net finance costs for interest cover calculation |
89.4 |
78.0 |
||
|
|
Operating profit before non-underlying items |
69.5 |
85.9 |
||
|
|
Underlying Interest cover (times) |
0.8 |
1.1 |
||
|
|
|
||||
|
|
|
(vi) Capital investment |
|||
|
|
|
Property, plant and equipment and intangible asset additions. The measure is presented to assess and monitor the total capital investment by the Group. |
|||
|
|
|
H1 2025 |
H1 2024 |
||
|
|
|
£m |
£m |
||
|
|
Additions to property, plant and equipment |
327.1 |
239.1 |
||
|
|
Additions to intangible assets |
4.7 |
27.2 |
||
|
|
Capital investment |
331.8 |
266.3 |
||
|
|
|
|
|
||
|
|
|||||
|
|
|||||
|
|
(vii) Capital payments |
||||
|
|
Payments for property, plant and equipment (PPE) and intangible asset additions net of proceeds from sale of PPE and intangible assets. The measure is presented to assess and monitor the net cash spend on PPE and intangible assets. |
||||
|
|
H1 2025 |
H1 2024 |
|||
|
|
£m |
£m |
|||
|
Cash flow statements: purchase of property, plant and equipment |
352.1 |
249.8 |
|||
|
Cash flow statements: purchase of intangible assets |
4.7 |
20.7 |
|||
|
Cash flow statements: proceeds from sale of property, plant and equipment |
(0.9) |
(0.2) |
|||
|
Capital payments |
355.9 |
270.3 |
|||
|
|
|||||
|
PENNON GROUP PLC |
||
|
|
||
|
Alternative performance measures (continued) |
||
|
|
|
|
|
|
(viii) Return on Regulated Equity (RORE) |
|
|
|
This is a key regulatory metric which represents the returns to shareholders expressed as a percentage of regulated equity. Returns are made up of a base return (set by Ofwat, the water business regulator, at c.3.9% for South West Water and c.4.4% for Bristol Water for the period 2020-25) plus Totex (see ix) outperformance, financing outperformance and ODI outperformance. Returns are calculated post tax and post sharing (only a proportion of returns are attributed to shareholders and shown within RoRE). The three different types of return calculated and added to the base return are: · Totex outperformance - Totex is defined below, and outperformance is the difference between actual reported results for the regulated business compared to the Final Determination (Ofwat published document at the start of a regulatory period), in a constant price base · Financing outperformance - is based on the difference between a company's actual effective interest rate compared with Ofwat's allowed cost of debt · ODI outperformance - the net reward or penalty a company earns based on a number of different key performance indicators, again set in the Final Determination. Regulated equity is a notional proportion of regulated capital value (RCV which is set by Ofwat at the start of every five-year regulatory period, adjusted for actual inflation). For 2020-25, the notional equity proportion is 40.0%. References are made to Ofwat RORE and Watershare RORE which utilise differing inflation assumptions and the disclosure of tax. Further information on this metric can be found in South West Water's annual performance report and regulatory reporting, published in July each year. |
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|
(ix) Total Expenditure (Totex) |
|
|
|
Operating costs and capital expenditure of the regulated water and wastewater business (based on the Regulated Accounting Guidelines). |
|
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|
|
|
|
(x) Outcome Delivery Incentive (ODI) |
|
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|
ODIs are designed to incentivise companies to deliver improvements to service and outcomes based on customers' priorities and preferences. If a company exceeds these targets a reward can be earned through future higher revenues. If a company fails to meet them, they can incur a penalty through lower future allowed revenues. |
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(xi) Regulatory Capital Value (RCV) RCV has been developed for regulatory purposes and is primarily used in setting price limits. RCV is widely used by the investment community as a proxy for the market value of the regulated business and forms part of covenant debt limits.
Shadow RCV reflects the addition of anticipated regulatory adjustments which amend RCV at the end of a regulatory period. These changes are accrued due to performance through ODIs, changes in levels of totex expenditure, changes in inflation rates and other regulatory adjustments.
(xii) Like for like To aid comparison between reporting periods, "like for like", refers to the results of the Group excluding SES which was acquired on 10 January 2024 and therefore the results of SES are not included in H1 2023/24. |
|
[9] Reflecting Bristol acquisition of £425m and £180m equity capital raised for SES acquisition
[10] Capex investment for South West and Bristol Water over K7, excluding transition spend
[11] Based on Water Group (SWW and SES) forecast shadow RCV growth over K7
[12] For those beaches impacted by our own assets on a like for like basis
[13] RNAGs - Reasons for Not Achieving Good status
[14] Based on 55% assumed leverage, pre-tax; 7-9% unleveraged pre-tax returns
[15] Within SWW Group, South West Water Limited is the guarantor entity for the EMTN programme, net debt for South West Water Limited at 30 September 2024 was £3,635.4m
[16] Fair value accounting adjustments recognised for acquisitions
[17] Excludes the ODI impact of the third party Carland Cross event in 2021
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