21 May 2024
Pennon Group plc
Full Year Results 2023/24
Pennon Group plc (‘Pennon’ or ‘the Group’) today announces its results for the full year ended 31 March 2024 (2023/24).
Susan Davy, Group Chief Executive Officer, commented:
“Whilst the results we are announcing today are based on our performance for the last financial year, we are 100% focused on returning a safe water supply to the people and businesses in and around Brixham. Normal service has returned for 85% of customers, but we won’t stop until the local drinking water is returned to the quality all our customers expect and deserve. Our absolute priority continues to be the health and safety of our customers and our operational teams are working tirelessly around the clock to deliver this.
“We have delivered a robust performance for 2023/24 and retained good levels of liquidity. We have continued to make sure we are prepared for a sustainable future for all our stakeholders with a record level of investment, record support for customers and the creation of new jobs.
“At a time when media, public and regulatory scrutiny is high, it is important we do what is right for all. In the context of the wider group performance, we have carefully considered Ofwat’s new dividend guidance for water businesses. We have followed our K7 dividend growth policy of CPIH + 2%, and adjusted the final dividend quantum by £2.4 million, equivalent to the South West Water Court fine in 2023/24, signaling we are listening, clearing the way for long-term shareholder value.”
KEY FINANCIAL METRICS
| 2023/24 | 2022/23 | Change | |
| Underlying^ revenue | £907.8m | £825.0m | 10.0% |
| Statutory revenue | £907.8m | £797.2m | 13.9% |
| Underlying operating profit | £166.3m | £153.1m | 8.6% |
| Non-underlying items before tax1 | (£25.9m) | (£25.3m) | |
| Statutory operating profit | £140.4m | £109.4m | 28.3% |
| Profit/(loss) before tax | |||
| Underlying | £16.8m | £16.8m | flat |
| Statutory | (£9.1m) | (£8.5m) | |
| Loss/(profit) after tax | |||
| Statutory | (£8.5m) | £0.4m | |
| Earnings/(loss) per share (EPS) | |||
| Adjusted EPS | 6.2p | 7.3p | (15.1%) |
| Statutory EPS | (3.6p) | Nil p | |
| Total dividend per share2 | 44.37p | 42.73p | 3.8% |
| Capital expenditure | |||
| Group (excl. SES Water) | £642.4m | £358.3m | 79.3% |
| South West Water group | £582.9m | £358.2m | 62.7% |
| Net debt | At 31 March 2024 | At 31 March 2023 | |
| Group (excl. SES Water) | £3,479.9m | £2,965.4m | |
| South West Water group | £3,294.7m | £2,865.3m | |
| South West Water group | |||
| RCV (shadow) | £5,186.4m | £4,715.9m | 10.0% |
| RCV gearing3 | 63.5% | 60.8% | |
| RORE (cumulative)4 | 7.3% | 7.8% | |
| South West Water | |||
| RORE (cumulative) 5 | 7.6% | 8.0% |
Key financial points
· Overall performance in line with our expectations
· Underlying profitability improving – underlying operating profit (excl. SES water) up c.9%
· Stabilising operating costs – cost inflation below revenue inflation, early benefits from transformation programme
· RORE outperformance – continued cumulative outperformance, 7.6% for South West Water, 7.3% for South West Water group
· Peak investment year as expected – step up in investment leads to expected cumulative year 4 and 5 capex of c.£930m
· RCV growth of c.65% – K7 to date
· Flexible funding strategy – c.£1.2bn new and renewed facilities raised since March 2023
· Robust liquidity position – available liquidity in excess of £1bn
· Targeting two public credit ratings by March 2025 – expect strong investment grade ratings
· South West Water group RCV gearing – within 55-65% policy for K7
· Ability to optimise balance sheet with K8 clarity – retained shareholder value of over £500m in South West Water
· Carefully considered final dividend position – recommended final dividend of 30.33p per share, total dividend per share for 2023/24 of 44.37p in accordance with policy (CPIH +2%), with 0.84p reduction for £2.4m fine from South West Water prosecution
Key operational points
· Broken the drought cycle for Devon and Cornwall – 100% peak reservoir capacity achieved
· Exceptional rainfall driving headline increases in storm overflow and pollutions6
· Sector-leading internal sewer flooding performance – focusing on what matters most for our customers
· 100% bathing water quality for third consecutive year
· Peak investment of £583m in water business to protect our customers, the network and the environment
· Road map to achieve EPA 4 star in 20257 – expect to maintain EPA 2 star8 for 2023
· C,£145m commitment to renewable energy providing 40% of group energy requirements
· Below inflation bill increases for two years – bills lower today than they were 10 years ago
· Over £100m customer support enabled in K7 to date
Outlook for 2024/25
· Expect organic revenue growth driven by combined impact of inflationary tariff increases and growth in non-household retail businesses
· Operating costs in South West Water expected to be broadly flat net of inflation. Total Group operating costs will increase overall
· Increased debt levels to support our capital investment profile drive overall increase in net finance costs
· Group RCV expected to increase in line with K7 business plan levels of investment, additional and accelerated investment, regulatory true-ups and inflationary impacts
· Overall results will reflect a full year’s contribution from SES Water