Preliminary Results 23 May 2013 Pennon Group Plc (Pennon Group) - PowerPoint PPT Presentation

Preliminary Results 23 May 2013

Pennon Group Plc (“Pennon Group”) Disclaimers For the purposes of the following disclaimers, references to this “document” shall mean this presentation pack and shall be d eemed to include references to the related speeches made by or to be made by the presenters, any questions and answers in relation thereto and any other related oral or written communications. This document contains certain “forward - looking statements” with respect to Pennon Group's financial condition, results of operations and business and certain of Pennon Group's plans and objectives with respect to these matters. Forward- looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “anticipates”, “aims”, “believes”, “continue”, “could, “due”, “estimates”, “expects”, “forecasts”, “goal”, “intends”, “may”, “plans”, “project”, “seeks”, “should”, “targets”, “will” and related and similar expressions, as well as statements in the future tense. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will or will not occur in the future. 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. Undue reliance should not be placed on forward-looking statements which are made only as of the date of this document. 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 law, regulation or decisions by governmental bodies or regulators; general business and economic conditions in the UK and globally; the availability and cost of finance; poor operating performance or a failure or interruption of the Group’s operating systems or the inability to carry out network operations or damage to infrastructure; failure or increased costs of capital projects or acquisitions or joint ventures not achieving predicted revenues or performance; reduced customer base, increased competition affecting prices or reduced demand for services; and information technology and business continuity systems and processes failing. These and other risks will be described in greater detail in the Pennon Group Annual Report to be published on 28 June 2013. 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. Nothing in this report should be construed as a profit forecast. All written or oral forward-looking statements, made in this document or made subsequently, which are attributable to Pennon Group or any other 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 may not update these forward-looking statements. This document is not an offer to sell, exchange or transfer any securities of Pennon Group or any of its subsidiaries and is not soliciting an offer to purchase, exchange or transfer such securities in any jurisdiction. Without prejudice to the above, whilst Pennon Group accepts liability to the extent required by the Listing Rules, the Disclosure Rules and the Transparency Rules of the UK Listing Authority for any information contained within this document which the Company makes publicly available as required by such Rules: (a) neither Pennon Group nor any other member of Pennon Group or persons acting on their behalf shall otherwise have any liability whatsoever for loss howsoever arising, directly or indirectly, from use of the information contained within this document; and (b) neither Pennon Group nor any other member of Pennon Group or persons acting on their behalf makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained within this document Without prejudice to the above, no reliance may be placed upon the information contained within this document to the extent that such information is subsequently updated by or on behalf of Pennon Group. Past performance of securities of Pennon Group cannot be relied upon as a guide to the future performance of any securities of Pennon Group. 2

Pennon Group Plc 2012/13 Financial Highlights • Profit before tax (1) down 1.1% to £198.2m  South West Water up 7.5% to £152.1m  Viridor down 36.6% to £36.5m • Net exceptional charges £176.4m (post tax £140.2m) • Earnings per share (2) down 9.9% to 42.6p • Dividend  full year dividend up 7.3% to 28.46p  recommended final dividend per share up 7.7% to 19.70p • Group capital expenditure up 61% to £439m (3) • Strong liquidity and funding position  £782m (4) new/refinanced facilities since 31 March 2012  £1,150m cash and facilities at 31 March 2013 (5) • £300m hybrid capital issuance provides substantial additional funding and strengthens balance sheet • Group businesses well positioned for the future (1) Before net exceptional charges (2) Before net exceptional charges and deferred tax (3) Including construction spend on service concession arrangements (4) Including hybrid capital issuance 3 (5) Including £143m deposits with Letter of Credit providers and lessors

Pennon Group Plc 2012/13 Operational and Business Highlights South West Water • Strong performance against 2010 – 2015 regulatory contract  well placed to deliver outcomes and outperform assumptions • PBT up in spite of atypical weather • Average funding cost 4.1% • Strong operational performance and high standards of customer service • Preparing for PR14 • Investing c£60m improving services to customers in K5 4

Pennon Group Plc 2012/13 Operational and Business Highlights Viridor • Strong progress in long term PPP/EfW strategy but significant current headwinds in recycling and ongoing trend decline in landfill affecting 2012/13 results  aggressive action to reduce costs • As previously flagged, exceptional charges to reflect the above, now established as:  £99m asset impairment (primarily landfill) and onerous contracts  £90m increased landfill provisions  total post tax £150m • Key long term PPP/EfW developments:  Glasgow  South London  Peterborough  Dunbar  South East Wales 5

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Pennon Group Plc Summary Financial Results 2012/13 2011/12 Change £m £m Group revenue 1,201.1 1,233.1 (2.6%) Group operating profit (1) 246.3 268.8 (8.4%) - SWW 215.2 204.7 5.1% 30.8 63.7 (51.6%) - Viridor Viridor PBIT plus joint ventures (1) 45.9 75.2 (39.0%) Group profit before tax (1) 198.2 200.5 (1.1%) - SWW 152.1 141.5 7.5% 36.5 57.6 (36.6%) - Viridor 9.6 1.4 - - Plc/Other Earnings per share (2) 42.6p 47.3p (9.9%) Dividend per share 28.46p 26.52p 7.3% (1) Before net exceptional charges (2) Before net exceptional charges and deferred tax 7

Pennon Group Plc Exceptional Items 2012/13 2011/12 £m £m Operating costs Impairment of property, plant and equipment (78.2) - Environmental and landfill restoration provisions (90.1) - Onerous contracts and other (20.6) - (188.9) - Net finance income 12.5 - Charge before tax (176.4) - Tax credit 36.2 - Net charge for the year (140.2) - ► No immediate cash impact 8

Pennon Group Plc Cash Flow 2012/13 2011/12 £m £m Cash inflow from operations 384.6 389.9 Net interest paid (49.8) (61.3) Dividends paid (77.9) (69.1) Tax paid (18.5) (41.4) Capital expenditure (1) (421.8) (273.6) Acquisitions and investment in joint ventures (14.3) (42.6) Loan repayments and dividends received from joint ventures 8.8 3.6 Pension contributions (14.4) (49.2) Net cash outflow (203.3) (143.7) Perpetual capital securities issued 294.8 - Shares issued 3.7 1.6 Debt acquired with acquisitions (1.2) (0.1) Non-cash movements 1.9 (28.6) Decrease/(increase) in net borrowings 95.9 (170.8) ► Significantly increased capital expenditure to support future growth ► Perpetual capital issuance (1) Including construction spend on service concession arrangements 9

Pennon Group Plc Net Borrowings As at 31 March 2013 2012 £m £m Loans and finance leases - over one year 2,505 2,204 - under one year 139 326 2,644 2,530 Less: cash and cash deposits (635) (425) Net borrowings 2,009 2,105 65.4% 71.9% Net gearing (1) SWW debt/RCV 54.9% 56.1% ► Gearing reduced ► Net borrowings include £438m (2012 £143m) for EfW plants under construction (Runcorn II, Exeter, Ardley, Cardiff and Glasgow) 10 (1) Net borrowings/(equity + net borrowings)