REG - Pennon Group PLC - TRADING STATEMENT

PennonAnnouncement

25/03/2024 07:00

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RNS Number : 0563I  Pennon Group PLC  25 March 2024

PENNON GROUP PLC

25 March 2024

TRADING STATEMENT

Pennon Group announces the following trading update for the year ending 31
March 2024.

Financial performance for the full year 2023/24 1 , remains in line with
management expectations.

Key highlights

·     The acquisition of SES Water is progressing through the Competition
and Markets Authority (CMA) review, as expected

·     Four renewable energy generation sites acquired, Dunfermline solar
construction commenced

·     Record levels of K7 (2020-25) water and wastewater investment -
expectation of c.£850 million capex to 2025

·     90% strategic reservoir capacity achieved ahead of 1 April 2024
target

·     Targeted for 2023 to retain EPA 2  performance gains delivered in
2022 (EPA 2*)

o  50% increase in rainfall over the long-term average has impacted headline
levels for storm overflows and wastewater pollutions

o  78 interventions at storm overflow sites underway to improve water quality
at 49 of 151 beaches through our WaterFit programme to 2025

·     Supporting our customers - over £95 million customer support
unlocked to date

o  Innovative water efficiency campaigns launched across Devon & Cornwall

·     Well positioned to deliver on our ambitious business plan for K8
(2025-30)

o  New K8 capital delivery partners mobilised on over 1,000 schemes

o  The Group is well positioned with liquidity for the current regulatory
period - over £700 million funding secured since March 2023.

Investment in water resource diversification delivering results and long-term
resilience

100% of the programme of work to diversify the Group's portfolio of water
resources in Devon is now complete, with 70% of the programme of work in
Cornwall also complete. This has contributed to the early achievement of 90%
storage for our strategic reservoirs in the region.

Construction work at Blackpool Pit is now complete which brings our portfolio
of repurposed quarries to four. Blackpool Pit, along with Stannon, Park and
Hawks Tor, will have all been used this year to support an improvement in
water resources in Cornwall. In Devon, our winter pump storage work at
Gatherley is also now operational, and along with the Lyd pumping scheme
delivered last year, both new schemes have been used this year to support
improvement in our water resources in Devon.

In addition to these, our desalination plant in South Cornwall is on track to
be operational in 2024/25 and our Porth Rialton water abstraction and
treatment scheme will be operational under its winter licence in 2024/25. With
these projects we are improving the long-term resilience of the region
following a year-long drought. We are on track to reach our target of a 45%
increase in Cornwall water resources by 2025, having already achieved our
targeted 30% increase in Devon water resources one year ahead of schedule.

Waste water operational performance impacted by challenging weather conditions

Annual rainfall in the South West has increased by 50% in the second half of
the year, when compared to long term averages, in addition to the 10 named
storms since September 2023 3  and 12 yellow weather warnings for rain in the
region. The significantly increased wastewater flows have impacted our
headline performance for wastewater pollutions and use of storm overflows.

That said, we continue to make sustainable progress on delivering
environmental improvements across the region, with 78 interventions underway
to improve 49 of 151 beaches through our WaterFit programme by 2025.

We anticipate retaining 2 star EPA status for 2023, assuming Environment
Agency confirmation of our improved water resource position.

For 2024, whilst six of the seven EPA metrics are tracking positively towards
4 star equivalent performance, current operating conditions have meant the
benefits of our Pollution Incident Reduction Plan (PIRP) will not be seen
until 2025. As such overall 4 star EPA status is now reprofiled for 2025.

Supporting our customers

Over £95 million of customer support has been delivered for customers to date
in K7, whilst keeping bills as low as possible with below inflation increases
to 2025. We are investing record levels whilst keeping bills low for all
customers, and are pleased that more than 125,000 customers are now benefiting
from one or more of our extensive package of affordability support.

Alongside this, our suite of innovative water efficiency initiatives has
helped customers save money on their bills whilst enabling a sustained
reduction in demand of 2%. This included a 65% increase in free customer leak
repairs along with issuing over 300,000 water efficiency devices to date.

Executing our strategy for growth

Acquisition of SES Water

Following the successful acquisition of SES Water in January 2024, the
customary CMA review process is now underway, with potential for clearance at
phase 1 in summer 2024.

Progress to Net Zero

As planned, a total of four renewable energy generation sites have been
acquired at a cost of c.£40 million. Construction has commenced at one of the
four sites, Dunfermline, where 39 GWh generation is anticipated annually,
alongside 60 MWh battery storage, with grid connection in expected in late
2024.

Liquidity

The Group is well positioned with liquidity for the current regulatory period
and has secured over £700 million through Pennon's Sustainable Financing
Framework (SFF) since March 2023. New debt will be raised through the SFF
through access to public and private markets, whilst maintaining the Group's
diverse portfolio of debt.

 For further information, please contact:
 Pennon Group plc                                          +44 (0)1392 443 168

 Steve Buck              Group Chief Financial Officer
 Jennifer Cooke          Group Head of Investor Relations
 Media Enquiries                                           +44 (0)207 251 3801
 James Murgatroyd        FGS Global
 Harry Worthington

 

Cautionary statement in respect of forward-looking statements

Certain statements in this announcement are forward-looking statements
relating to the Group's operations, performance and financial position based
on current expectations of, and assumptions and forecasts made by, management.
They are subject to a number of risks, uncertainties and other factors that
could cause actual results, performance or achievements of the Group to differ
materially from any outcomes or results expressed or implied by such
forward-looking statements.

The Group's principal risks were described in the 2023 Pennon Group Annual
Report which can be viewed online at http://annualreport.pennon-group.co.uk
(http://annualreport.pennon-group.co.uk) . Such forward looking statements
should therefore be construed in light of such risks, uncertainties and other
factors and undue reliance should not be placed on them. They are made only as
of the date of this announcement 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.

No obligation is accepted to publicly revise or update 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. Nothing in this
Statement should be construed as a profit forecast.

 

 

 

 

 1  2023/24 financial results will reflect c.2.5 months contribution from
Sutton and East Surrey (SES) Water

 2  Environmental Performance Assessment (EPA) as measured and reported on an
annual basis by the Environment Agency

 3  Equivalent number of named storms in 2022/23: 1

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