ROADSHOW PRESENTATION FULL YEAR RESULTS 2015/16 DELIVERING FOR CUSTOMERS AND SHAREHOLDERS
DISCLAIMER For the purposes of the following disclaimers, references to this “document” shall mean meet ongoing commitments, uncertainty arising from open tax computations where this presentation pack and shall be deemed to include references to the related liabilities remain to be agreed and difficulty in recruitment, retention and development of appropriate skills which are required to deliver the Group’s strategy. speeches made by or to be made by the presenters, any questions and answers in relation thereto and any other related verbal or written communications. Forward looking statements should therefore be construed in light of such risks, This document contains certain “forward -looking statements” with respect to Pennon uncertainties and other factors and undue reliance should not be placed on them. Group’s financial condition, results of operations and business and certain of Pennon Nothing in this document should be construed as a profit forecast. Group's plans and objectives with respect to these matters. All written or verbal forward-looking statements, made in this document or made Forward-looking statements are sometimes, but not always, identified by their use of a subsequently, which are attributable to Pennon Group or any other member of the date in the future or such words as “anticipate”, “aim”, “believe”, “continue”, “could”, Pennon Group or persons acting on their behalf are expressly qualified in their entirety “due”, "estimate“, “expect”, “forecast”, “goal”, “intend”, "may", “plan", “project”, “seek”, by the factors referred to above. Pennon Group may or may not update these forward- “should”, “target”, “will” and related and similar expressions, as well as statements in the looking statements. future tense. 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 By their very nature forward-looking statements are inherently unpredictable, speculative transfer such securities in any jurisdiction. and involve risk and uncertainty because they relate to events and depend on Without prejudice to the above, whilst Pennon Group accepts liability to the extent circumstances that will or will not occur in the future. required by the Listing Rules, the Disclosure Rules and the Transparency Rules of the Various known and unknown risks, uncertainties and other factors could lead to UK Listing Authority for any information contained within this document which the substantial differences between the actual future results, financial situation development Company makes publicly available as required by such Rules: or performance of the Group and the estimates and historical results given herein. Undue a) neither Pennon Group nor any other member of Pennon Group or persons acting on reliance should not be placed on forward-looking statements which are made only as of their behalf shall otherwise have any liability whatsoever for loss howsoever arising, the date of this document. Important risks, uncertainties and other factors that could directly or indirectly, from use of the information contained within this document; cause actual results, performance or achievements of Pennon Group to differ materially b) neither Pennon Group nor any other member of Pennon Group or persons acting on from any outcomes or results expressed or implied by such forward-looking statements their behalf makes any representation or warranty, express or implied, as to the are changes in law, regulation or decisions by governmental bodies or regulators, non- accuracy or completeness of the information contained within this document; and recovery of customer debt, poor operating performance due to extreme weather and climate change, poor service provided to customers or increased competition leading to c) no reliance may be placed upon the information contained within this document to the loss of customer base, global economic downturn pressuring volumes and margins, extent that such information is subsequently updated by or on behalf of Pennon downward pressure on UK wholesale power prices, business interruption or significant Group. operational failures/ incidents, non-compliance or occurrence of avoidable health and safety incidents, failure or increased cost of capital projects, exposure to contractor Past performance of securities of Pennon Group cannot be relied upon as a guide to the failure to deliver construction progress, failure of information technology systems future performance of any securities of Pennon Group. management and protection including higher risks, maintaining finance and funding to 2
PENNON UNIQUE COMBINATION OF ENVIRONMENTAL INFRASTRUCTURE ASSETS SOUTH WEST WATER South West Water provides water and wastewater services to a population of c.1.7 million in Cornwall, Devon and parts of Dorset and Somerset. South West Water was awarded enhanced status for its 2015-2020 Business Plan, and has the highest potential returns in the water sector. Bournemouth Water provides water services to a population of c.0.5 million in parts of Dorset, Hampshire and Wiltshire. Bournemouth Water was acquired in April 2015 and has been substantially integrated into South West Water. VIRIDOR Viridor is a leading UK energy recovery, recycling and waste management company, providing services to more than 150 local authorities and major corporate clients as well as over 32,000 customers across the UK. 3
PENNON STRATEGY STRONG PLATFORM, EVOLVING FOR FUTURE LEADING UK-LISTED ENVIRONMENTAL INFRASTRUCTURE GROUP Strategic priorities FOCUSED ON MOVING TOWARDS A MORE CONSISTENT RISK PROFILE DELIVER FOR LEADERSHIP IN CAPITALISE ON INVESTING FOR CUSTOMERS, EFFICIENT COST GROUP-WIDE GROWTH COMMUNITIES, BASE AND STRENGTHS, ENVIRONMENT, FINANCING BEST PRACTICE, SHAREHOLDERS SYNERGIES Strategic objective LONG-TERM, PREDICTABLE, ASSET-BACKED, INDEX-LINKED RETURNS 4
DELIVERING OUR STRATEGY DELIVERING FOR CUSTOMERS AND SHAREHOLDERS STRONG DRIVING VALUE GROWING AND PERFORMANCE THROUGH MAINTAINING OUR ACROSS WATER AND EFFICIENCY ASSET BASE WASTE OPERATIONAL SECTOR-LEADING PERFORMANCE WELL-PREPARED DIVIDEND POLICY - DELIVERING FOR THE FUTURE +4% P.A. GROWTH FINANCIAL BENEFITS OVER RPI TO 2020 RORE 11.7% 5
FINANCIAL HIGHLIGHTS 2015/16 STRONG RESULTS VIRIDOR GROWTH AND BOURNEMOUTH WATER RESULTS IN-LINE WITH CONTRIBUTION MANAGEMENT MITIGATING EXPECTATIONS SOUTH WEST WATER REVENUE RESET SIGNIFICANT CAPITAL STRONG FUNDING INVESTMENT POSITION CONTINUES 6
FINANCIAL HIGHLIGHTS 2015/16 STRONG RESULTS A £M PBT IN-LINE WITH 2014/15 Underlying (1) 2015/16 2014/15 CHANGE • Net £13.5m (3) impact of revenue reset Group Revenue 1,352.3 1,357.2 (0.4%) mitigated by ERF profit growth Group EBITDA 448.4 411.0 +9.1% • Contribution from Bournemouth Water Group Adjusted EBITDA (2) 508.4 465.9 +9.1% B Group Operating Profit 261.8 246.6 +6.2% EPS COMPARABLE WITH 2014/15 Group Profit Before Tax 211.3 210.7 +0.3% A Earnings per share (4) (p) 39.5 39.8 (0.8%) • Growth in Viridor B • Outperformance in water Dividend per share (p) 33.58 31.80 +5.6% C Underlying Profit Before Tax to NON-UNDERLYING ITEMS Statutory Profit After Tax (PAT) • Restructuring • Derivatives Non-underlying Items (Profit Before Tax) (5.0) (13.7) +63.5% C Tax (38.0) (54.7) +30.5% D D PAT (attributable to holders of hybrid capital) (16.2) (16.0) (1.3%) TAX • Government headline corporation tax PAT (attributable to shareholders) 152.1 126.3 +20.4% rates reduced (1) Before non-underlying items as set out on p.12 (2) Statutory EBITDA plus share of Joint Venture EBITDA and IFRIC 12 interest receivable (previously reported as “underlying EBI TDA”) (3) Cost of capital reset £35.7m net of 14/15 bill smoothing £22.2m 7 (4) Before deferred tax. Basic earnings per share (statutory basis) 37.0p
VIRIDOR FINANCIAL HIGHLIGHTS 2015/16 GROWTH DRIVEN BY ERFs £M 2015/16 2014/15 CHANGE A GROWTH IN ERF EBITDA Revenue (1) 806.2 835.9 (3.6%) • Increasing as plants ramp-up, 8 plants EBITDA (2) +44.9% 116.5 80.4 now on-stream • Expected to contribute c.£100m of ERFs +166.2% 89.7 33.7 A EBITDA in 2016/17 (59.1%) Landfill B 6.3 15.4 (12.0%) Landfill Gas 31.5 35.8 B B +13.9% OPTIMISING LANDFILL Recycling C 13.1 11.5 • Landfill declining as expected, focused Contracts, Collections & Other (2.7%) 36.5 37.5 on delivering value (13.3%) Indirect Costs (60.6) (53.5) • Maximising gas yields +4.6% Share of JV EBITDA 43.3 41.4 IFRIC 12 Interest Receivable 16.7 13.5 +23.7% C Adjusted EBITDA (2)(3) 176.5 135.3 +30.5% RECYCLING SELF-HELP Profit Before Tax (2) 30.7 27.7 +10.8% • EBITDA up year-on-year reflecting self- help measures Non-underlying Items Before Tax (4) (5.0) (26.7) +81.3% Capital Investment (5) 182.8 262.2 (30.3%) (1) Including landfill tax and construction spend on service concession arrangements (2) Before non-underlying items Statutory EBITDA plus share of Joint Venture EBITDA and IFRIC 12 interest receivable (previously reported as “underlying EBITDA” ) (3) (4) £5.0m restructuring charge in 2015/16 8 (5) Including construction spend on service concession arrangements
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