Half Year Results 2019/20 1
Disclaimer For the purposes of the following disclaimers, references to this “document” outcomes and performance commitments; failure or increased cost of capital shall mean this presentation pack and shall be deemed to include references projects/exposure to contract failures; failure of information technology to the related speeches made by or to be made by the presenters, any systems, management and protection, including cyber risks; and all risks questions and answers in relation thereto and any other related verbal or described in the Pennon Group Annual Report published in June 2019. Forward written communications. looking statements should therefore be construed in light of such risks, uncertainties and other factors and undue reliance should not be placed on This document contains certain “forward - looking statements” with respect to them. Nothing in this document should be construed as a profit forecast. Pennon Group’s financial condition, results of operations and business and certain of Pennon Group's plans and objectives with respect to these matters All written or verbal forward-looking statements, made in this document or which may constitute “forward - looking statements” within the meaning of the made subsequently, which are attributable to Pennon Group or any other U.S. Private Securities Litigation Reform Act of 1995 (the “PSLRA”). member of the Pennon Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Pennon Group may or Forward-looking statements are sometimes, but not always, identified by their may not update these forward-looking statements. use of a date in the future or such words as “anticipate”, “aim”, “believe”, “continue”, “could”, “due”, "estimate“, “expect”, “forecast”, “goal”, “intend”, This document is not an offer to sell, exchange or transfer any securities of “probably”, "may", “plan", “project”, “seek”, “should”, “target”, “will” and related Pennon Group or any of its subsidiaries and is not soliciting an offer to and similar expressions, as well as statements in the future tense. purchase, exchange or transfer such securities in any jurisdiction. By their very nature forward-looking statements are inherently unpredictable, Without prejudice to the above, whilst Pennon Group accepts liability to the speculative and involve risk and uncertainty because they relate to events and extent required by the Listing Rules, the Disclosure Rules and the depend on circumstances that will or will not occur in the future. Various known Transparency Rules of the UK Listing Authority for any information contained and unknown risks, uncertainties and other factors could lead to substantial within this document which the Company makes publicly available as required differences between the actual future results, financial situation, development by such Rules: or performance of the Group and the estimates and historical results given a) neither Pennon Group nor any other member of Pennon Group or persons herein. Important risks, uncertainties and other factors that could cause actual acting on their behalf shall otherwise have any liability whatsoever for loss results, performance or achievements of Pennon Group to differ materially from howsoever arising, directly or indirectly, from use of the information any outcomes or results expressed or implied by such forward-looking contained within this document; statements include, among other things, changes in Government policy; the exit of the United Kingdom from the European Union; international treaty changes b) neither Pennon Group nor any other member of Pennon Group or persons and other events; re-nationalisation; regulatory and legal reform; compliance acting on their behalf makes any representation or warranty, express or with laws and regulations; maintaining sufficient finance and funding to meet implied, as to the accuracy or completeness of the information contained ongoing commitments; non-compliance or occurrence of avoidable health and within this document; and safety incidents; tax compliance and contribution; failure to pay all pension c) no reliance may be placed upon the information contained within this obligations as they fall due and increased costs to the Group should the defined document to the extent that such information is subsequently updated by or benefit pension scheme deficit increase; non-recovery of customer debt; poor on behalf of Pennon Group. operating performance due to extreme weather or climate change; macro- economic risks impacting commodity and power prices and other matters; poor Past performance of securities of Pennon Group cannot be relied upon as a customer service and/or increased competition leading to loss of customer guide to the future performance of any securities of Pennon Group. base; business interruption or significant operational failure/incidents; difficulty in recruitment, retention and development of skills; non-delivery of regulatory 2
Chris Loughlin Group Chief Executive 3
Pennon Bringing resources to life Good results, momentum maintained – delivered in the right way • Our core values are embedded in delivering outstanding service to customers and communities Viridor • Focus on infrastructure model, de-risked through index-linked long-term contracts • Portfolio of operating Energy Recovery Facilities (ERFs) consistently outperforming base case • Well positioned to take advantage of strong market fundamentals – confidence in long-term market outlook • Growth through investment in further ERFs, Plastics Recycling Facilities and Energy Parks - JV with Grundon to build a new ERF in West Sussex Construction of Viridor’s £65m Avonmouth Plastics Recycling Facility underway - South West Water • Delivering for our customers – best ever customer service score • Continued sector leading outperformance – cumulative 11.8% RORE (1) – sharing benefits with customers • Highest potential outperformance for K7 • Fast start well underway for K7 – projects delivering early benefits focused on ODI (1) performance Review of Pennon Group strategic focus, growth options and capital allocation underway (1) RORE - Return on Regulated Equity; ODI – Outcome Delivery Incentives 4 4 Half Year Results 2019/20
Susan Davy Chief Financial Officer
H1 2019/20 Financial Highlights Robust financial performance Robust financial performance Responsible delivery of results for all stakeholders Adjusted EBITDA (1)(2) • Founder of the Sustainable Financing Framework - at the +3.3% forefront of sustainable financing • First water and waste company to receive the Fair Tax Mark Earnings Per Share accreditation +4.3% +17.6% Adjusted (2)(3) • Innovative mechanism to share Statutory benefits of outperformance Strong Balance Sheet 3.5% • Responsible contributions – Voluntarily accelerated pension deficit recovery Effective Interest Rate contributions of £17.2m in H1 2019/20 – Total tax contribution (5) £141m in H1 2019/20 Dividend Per Share (4) +6.4% (1) Adjusted EBITDA includes IFRIC 12 interest and joint venture EBITDA (2) Measures presented are on a consistent accounting basis, to exclude the impact of IFRS 16 Leases and adjusted/underlying measures are presented before non-underlying items, see slide 10 (3) Underlying EPS before deferred tax, non-underlying items and proportionately adjusted for the return due on the perpetual capital securities (4) Dividend policy of 4% + RPI to 2020. RPI 2.4% at 30 September 2019 (5) Total tax contribution includes landfill tax collected and borne, VAT, business rates, employment taxes, corporation tax, fuel excise duty, carbon reduction commitment, environmental payments and climate change levy and external landfill tax 6 Half Year Results 2019/20
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