Slides
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Full Year Results 2024/25 3 June 2025
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Disclaimer For the purposes of the following disclaimers, references to this “document” shall mean this presentation pack and shall be deemed 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 verbal 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 which may constitute “forward-looking statements”. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “anticipate”, “aim”, “believe”, “continue”, “could”, “due”, “estimate“, “expect”, “forecast”, “goal”, “intend”, “probably”, “may”, “plan”, “project”, “seek”, “should”, “target”, “will”, “negative” 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 may or may not occur in the future. Forward-looking statements are not guarantees of future performance and no assurance can be given that the forward-looking statements in this document will be realised. 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. There are a number of 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 and include all risks described in the Pennon Group Annual Report to be published in June 2025; changes in the economics and markets in which the Group operates, changes in the regulatory and competition frameworks in which the Group operates, the impact of legal proceedings against or which affect the Group; and changes in interest and exchange rates. 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 document should be construed as a profit forecast. All written or verbal 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) n either 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; b) n either 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; and c) n o 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 2025
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Susan Davy Pennon Chief Executive Officer © Pennon Group plc 2025 3
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Delivering on our four strategic priorities Serving more customers and communities across our regions Point of inflection – reset and rebased for K8 Strong platform secured for the future Robust outlook for K8 4 © Pennon Group plc 2025 A resilient end to K7
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With record investment Tackling storm overflows and pollutions Building water resources, improving water quality Driving environmental gains Supporting affordability, delivering for customers Breaking the drought cycle Sector- leading water quality 100% Bathing Water quality Sector- leading internal sewer flooding 2 EPA RNAGS reduced 19% 12% 144,000 hectares of catchment improvements 100% affordability c.70% ODIs delivered 5 © Pennon Group plc 2025 Delivering on our four strategic priorities in K7
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Robust outlook for K8 Delivering efficiently Growing shareholder base of customers Two new state-of-the-art treatment works First time sewerage and step change in water quality Cheddar 2 investment approved Securing financial resilience and Bough beach reservoir opportunities 6 © Pennon Group plc 2025 Serving more customers and communities across our regions – a growing footprint
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Water efficiency initiatives driving lower revenue – ahead of K8 revenue reset Resetting the cost base c.£76m annualised savings On target c.£86m in K8 Strong balance sheet £1.3bn funding raised in 2024/25 Record capital investment Delivering our outcomes for our customers and the environment Cumulative WaterShare RORE 10.4% 1 nominal 6.0% 1 real Rebased dividend post Rights Issue 3.4% growth (CPIH) Reset and rebased for K8 7 © Pennon Group plc 2025 Point of inflection 1 Cumulative South West Water WaterShare RORE (excluding Bristol Water and SES)
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Robust outlook for K8 Solid business plans – already delivering Step change in investment – 34% growth in RCV Driving efficiency and innovation Targeting c.7% RORE in K8 – continuing K7 outperformance run rate ‘outstanding’ ‘standard’ 8 © Pennon Group plc 2025 Strong platform for the future Our business plan 2025 to 2030 Summary October 2023 Business Plan 2025-2030 We’re doing this
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Laura Flowerdew Group Chief Financial Officer © Pennon Group plc 2025 9
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31.57p 61.8% CAPEX £652m £336m £(35.1m) 6.0% 1 Underlying loss before tax Water Group gearing 2 Resilient underlying EBITDA Record investment SWW Return on Regulated Equity Rebased dividend per share 10 © Pennon Group plc 2025 Financial highlights 1 Real cumulative RORE on underlying totex, financing and ODIs with notional gearing for South West Water, excluding Bristol Water and SES; 2 Net debt / shadow R CV at 31 March 2025
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F ull year results from SES Group S WW revenue flat, resulting from lower customer consumption Operational efficiencies partly offsetting cost pressures Financing c osts reflect record capital programme Non-underlying costs • W ater quality event – interventions and customer support • Reshaping and transformation costs Underlying1 (£m unless otherwise stated) 2024/25 2023/242 Revenue 1,047.8 907.8 EBITDA 335.6 338.3 Operating profit 148.5 166.3 Net finance costs (184.4) (150.2) JV PAT 0.8 0.7 (Loss)/profit before tax – underlying (35.1) 16.8 Non-underlying items before tax 3 (37.6) (25.9) Loss before tax (72.7) (9.1) Tax4 15.9 0.6 Loss after tax (56.8) (8.5) Basic loss per share (p) (16.1) (2.9)7 Adjusted (loss)/ earnings p er share (p) 5 (10.3) 5.17 Dividend per share (p) 6 31.57 36.677 Reset for K8 11 © Pennon Group plc 2025 FY25 results shaped by customer demand measures and record K7 investment 1 Measures before non-underlying items; 2 Results for 2023/24 include post-acquisition contribution from SES which was acquired in January 2024. 2023/24 earnings per share restated to reflect the Rights Issue; 3 Non-underlying items are adjusted for by virtue of their size, nature or incidence to enable a full understanding of financial performance; 4 Tax includes tax on underlying and non-underlying items; 5 Adjusted EPS: before deferred tax and non-underlying items; 6 Dividend policy of CPIH using 3.4% at 31 March 2025; 7 2023/24 adjusted to reflect the Rights Issue
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• Full year benefit of SES Group – Water and non-regulated businesses • SWW revenue reduced by customer demand measures, offset by inflation and tariff increases • Strong PWS performance, benefiting from new contract wins and tariff inflation, offsetting lower customer usage Revenue (£m) Pennon Group 907.8 1,047.8 2023/24 revenue SWW inflation and tariff movements SWW water efficiency and customer demand PWS tariff and new contracts PWS water efficiency and customer demand Other 2024/25 SES 2024/25 revenue 23.0 4.0 932.7 115.1 21.9 (19.4) (4.6) 12 © Pennon Group plc 2025 Revenue
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EBITDA (£m) • Full year of SES Group – revenues and costs • Flat revenues year on year for SWW • Operational efficiencies offsetting inflation impacts • Investment in new technology – new customer platform and network monitoring programme • Increased front line activity to drive wastewater improvements 338.3 Pennon Group 2023/24 EBITDA Full year effect of SES SWW revenue impacts Cost inflation Operational efficiencies Investment in new technology Increased front line activity 2024/25 EBITDA 21.6 2.5 (9.5) (17.6)(15.7) 335.6 16.0 13 © Pennon Group plc 2025 Underlying EBITDA
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Fully delivered 1 Reflects cumulative savings delivered and those in progress at FY 2025 Reshaping the business Bristol Water integration c. £20m c. £55m c. £11m • Integration synergies achieved in full • Deployment of integration experience from Bristol Water and Bournemouth Water • Programme well underway, with benefits in delivery 2024/25 TARGETED K8 RUN RATE • Improving how we work, being more efficient • Reshaping the business to right size and right source • Aligned to delivery of our strategic priorities £76m Business Plan 2025-2030 We’re doing this SES Water integration Ahead of plan Ahead of plan 14 © Pennon Group plc 2025 Delivering efficient performance c. £86m targeted K8 run rate annualised savings £20m £47m1 £9m
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Group capital investment (£m) • Record investment to deliver on our commitments and strategic priorities • Early start expenditure to ensure delivery in K8 – c.£65m to March 2025 2024/25 2023/24 South West Water 588.7 582.9 Clean water 325.2 369.3 Wastewater 263.5 213.6 Pennon Power 40.7 59.0 Other Group 0.4 0.5 Total Group (excl. SES) 629.8 642.4 SES 22.7 7.1 Total Group 652.5 649.5 15 © Pennon Group plc 2025 Investing to deliver our four priorities
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Water Group gearing SWW effective interest rate 2 Average maturity Mix of debt 61.8% 5.4% 14 years Net debt at 31 March 2025 £3,936.2 m 1 (FY 2023/24: £3,697.0m) Available liquidity c.£1bn Sustainable Financing Framework100% Diversified debt portfolio Strong liquidity and funding position Efficient financing £1.3bn raised in 2024/25 £800m £490mPublic bond issuances Private placement New debt Rights Issue Private placements £836.1m Preference shares £12.5m RPI linked debt £940.5m Fixed bonds £838.5m Bank bilateral £731.8m Leases £1,052.4m Cash £476.1m Fixed rate debt 71% Inflation linked debt 22% Floating rate debt 7% 16 © Pennon Group plc 2025 Financing our growth 1 Net debt e xcluding acquisition related fair value adjustments and unamortised hedging adjustment; 2 South West Water Group including Bristol Water excl. SES
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• £ • £ Shareholder value K7 shareholder value c.£910m Dividends paid c.£200m Retained value 3 (including dividends declared) c.£710m Growth1 75% (25% base, 20% K7 additional investment, 30% acquisition) 34% floor for growth Nominal RCV growth (£m) Unprecedented growth from UK water K7 outperformance K8 RORE target Cumulative SWW returns 2 2020 2025 2030 9,000 7,000 6,000 5,000 4,000 3,000 8,000 PR19 allowed growth 2,000 K7 additional investment recognised in RCV at 31 March 2025 £3.2bn K8 base allowances 6.0% real 10.4% nominal 200 bps outperformance K6 ACTUAL 2 K7 ACTUAL 2 K8 TARGET 0 Base Outperformance 4 FD upp er RORE range 10% 12% 8% 6% 2% 4% 17 © Pennon Group plc 2025 Funding secured for next phase of growth 1 C omprises acquisitions and organic growth (including Green Recovery, accelerated investment and transition spend); 2 B ased on cumulative South West Water WaterShare RORE (excluding Bristol and SES) on a real/notional balance sheet nominal returns based on real 4.4% average inflation over K7; 3 Including dividends de clared but not yet paid of £45m; 4 Outp erformance reflects the average cumulative net outperformance for totex, financing and ODIs inclusive of tax benefits over the regulatory period after sharing mechanisms (where applicable) in real terms on a notional balance sheet
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RORE 7% 1 target returns 160 bps outperformance, 30 bps reward Capital investment £3.2bn investment programme RCV growth 34% to 2030 Dividend policy Growing in line with CPIH Resilient balance sheet 55-65% gearing policy for Water Group Moody’s: Baa1 FitchRatings: BBB+Investment grade credit ratings 18 © Pennon Group plc 2025 Financial framework over K8 1 Return on Regulated Equity on a real, notional basis
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EBITDA • £710-740m Group wide capital investment • Front loaded Water Group investment over K8 to deliver early benefits • Ongoing construction for Pennon Power projects, with Fife energisation in June • Record capital investment programme and full year impact of 2024/25 debt issuances, increasing Group net financing costs by £25-35m • 7% target over K8 • Driving financing efficiency – effective interest rate below Ofwat allowances 1 • Driving totex efficiency • Neutral ODIs over 2025/26 2 • Regulated Water Group revenue increasing by £180-240m, aligned with Final Determination allowed revenues • Non-household retailers increase revenue in line with sector wide tariff increases • Pennon Power first revenues from Q2, following energisation Revenue • Water Group EBITDA materially improving due to higher revenues • Stable Water Group cost base, benefitting from efficiency programmes offsetting inflationary pressures • Non-household wholesale costs increasing in line with revenue • EBITDA increasing by two thirds year on year Group financing costs (net) RORE Group capital expenditure 19 © Pennon Group plc 2025 Outlook 2025/26 – Strong return to profitability Note: All guidance on an underlying basis 1 Based on CPIH at 31 March of 3.4%, nominal allowance of 6.55%; 2 Subject to EPA consultation finalisation
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Susan Davy Pennon Chief Executive Officer © Pennon Group plc 2025 20
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Prioritising the impact on homes and businesses Pollution incident reduction a key focus Industry-leading performance Top quartile performer 2019/20 2024/25 2019/20 2024/25 Internal sewer flooding (per 10,000 properties) External sewer flooding (number) 1.5 1,500 2.0 2,000 2.5 1.0 1,000 0.5 500 0 0 68% 2020 2021 2022 2023 2024 EPA Pollutions 40% reduction in network pollution incidents over K7 30% reduction in sewer collapses over K7 Anticipating 2 EPA – plans to deliver 4 for 2028 assessment 150 200 250 100 50 16%24% Lowest number of pollutions to homes, businesses, water courses and land 400 200 1.200 1,400 1,000 800 600 Average Total emissions1 (per 10,000km) 21 © Pennon Group plc 2025 Tackling pollutions and storm overflows 1 Cat 1-3 pollutions, internal and external sewer flooding per 10,000km using 2023/24 industry data from Annual Performance Reports
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Driving spills down through interventions Focus on bathing waters 2/3 of 2023 top spillers resolved c.15,000 spills prevented through K7 WaterFit interventions Bathing water spills down 20% over K7 100% bathing water quality – fourth year in a row1 Spill reductions (%) One of only 5 companies to reduce spills Bathing water/ Bathing season spills (number) 40 30 20 10 -10 -20 -30 50 0 2019/20 2024/25 20% 22 © Pennon Group plc 2025 Tackling storm overflows and pollutions Progress made despite 2024 being the wettest hydrological year on record 1 For those beaches impacted by our own assets on a like for like basis
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100% Supply Demand Balance index Securing supply resilience into the future Reducing demand and driving water efficiency Supplemented resources (%) 2022 2024 30% 34% Devon Cornwall Sector-leading demand reduction scheme Innovative tariffs – driving 2-9% demand reduction Leakage reduction Exceeded target reservoir levels at March 2025 No restrictions anticipated this summer 9% 4% 3% Marginally missing target Meeting target 23 © Pennon Group plc 2025 Building water resources, improving water quality
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Top industry performers Clean, safe, drinking water – our customers’ number 1 priority CRI score1 ODI deadband average Water Only Companies (WOC) Water and Sewerage Companies (WASC) 12 14 8 10 6 4 2 16 0 Quality First approach delivering results Industry-leading CRI >67% improvement in SWW over K7 24 © Pennon Group plc 2025 Building water resources, improving water quality 1 2024 CRI score for Pennon, 2025 CRI score for industry comparison. The exceptional events at Brixham and Cheam are recorded as water quality events by the DWI and therefore not included within the CRI score.
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c.144,000 hectares improved – c.£25m K7 ODI benefit Leveraging third party contributions for peatland restoration 3 sites under construction 1 site cold commissioned 80% phosphorus reduction at 37 sites 1 RNAGs 2 reduced to 12% from 19% over K7 Enhancing biodiversity Commitment to Net Zero Improving water quality 25 © Pennon Group plc 2025 Driving environmental gains 1 33 sites complete with 4 under construction; 2 RNAGS: Reasons for not achieving good status
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Site name Total capital expenditure Peak output Annual generation Battery storage Status PV infrastructure complete3 Energisation Fife £62m 45 MWp 39 GWh 60 MWh (2 hrs) Cold commissioning complete March 2025 June 2025 Aberdeenshire £12m 15 MWp 13.5 GWh In construction 2025/26 2025/26 Cumbria £27m 34 MWp 30.5 GWh In construction 2025/26 2025/26 Buckinghamshire £44m 50 MWp 52 GWh Preferred partner appointed 2026/27 2026/27 Total £145m 135 GWh 60 MWh • Equity returns in the range of 11-15%1 • Consistent with our 2030 net zero strategy • Provides natural hedge against significant 1 energy costs • Targeting c.40%2 of Group energy requirements • Remaining funding until completion will be via debt • We will review and optimise ownership and financing closer to or at completion Strategic rationale Standalone, debt-funded plan to complete Aberdeenshire 13.5 GWh Fife 39 GWh Cumbria 30.5 GWh Buckinghamshire 52 GWh 26 © Pennon Group plc 2025 Pennon Power 1 Based on 55% assumed leverage, pre-tax, 7-9% unleveraged pre-tax returns; 2 Gr oup energy requirements excluding SES, including battery storage; 3 Ex cludes grid connection and enabling works
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Supporting vulnerable customers Significant support packages Working with our local communities 24 customer roadshows engaging with over 1,000 customers 55 charities benefiting from our Neighbourhood Fund Unlocking over £124m of financial support 100% affordability for K7 – meeting our zero water poverty pledge Exceeding our target every year Consumer debt 0.9% of revenue – upper quartile 4 2 12 14 16 10 8 6 SWW BRL SES 2020/21 SWW BRL SES 2024/25 Priority Services Register (reach %) 0 Target 27 © Pennon Group plc 2025 Supporting affordability, delivering for customers and communities £200m support fund in place for K8
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100% ownership 4.8 5.0 “It is a pleasure to deal with a company that obviously invests in its team so they can help and aid customers.” Opportunity for consolidation efficiencies and sharing best practice “So easy and friendly to deal with. I couldn’t be happier with their service.” 80% ownership 30% ownership 1 EBITDA 2021/22 2022/23 2023/24 2024/25 EBITDA 2021/22 2022/23 2023/24 2024/25 EBITDA 2021/22 2022/23 2023/24 2024/25 £7.6m £6.5m 28 © Pennon Group plc 2025 Sector-leading retailers 1 Profit after tax contribution from 30% share £0.8m in 2024/25
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c.4,000 courses through our training centres 680 graduates & apprentices c.4,000 brilliant colleagues – delivering for customers and the environment Supporting 2,000 jobs across our region Confident in delivery – working with innovative supply chain 29 © Pennon Group plc 2025 Delivering through our colleagues
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Delivering on our four strategic priorities Serving more customers and communities across our regions Point of inflection – reset and rebased for K8 Strong platform secured for the future Robust outlook for K8 30 © Pennon Group plc 2025 A resilient end to K7
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Appendix 31© Pennon Group plc 2024
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Water retail services Renewable energy generation RCV growth K7 K8 20% Additional investment 34% 25% Base 30% SES / BRL 1 1 32© Pennon Group plc 2025 A growing footprint – strong platform for delivery 1 Pennon Water Services – 80:20 joint venture with South Staffs, water2business – 30:70 joint venture with Wessex Water
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Merging our water operations and investment • Sharing control room capability and incident management practises • Water resources teams with integrated action plans – WRMP24 submissions managed together • Water Quality First approach rolled out to Bristol operations • New capital delivery alliance mobilised across all regions • Workshops across billing teams, to understand and adopt ‘best of both’ processes and customer experience Integrating our systems and processes • IT programme underway • Procurement buying power and processes delivering benefits • Assurance and governance consistently applied – ISO standards and assurance being rolled-out Integration ongoing • Builds on Pennon’s existing water operations through the acquisition of another high-quality, water-only business • Experienced and talented management team and proven integration framework • SES Water’s customers will be offered opportunity to participate in Pennon’s unique WaterShare+ customer shareholding scheme • Incident management support across regions • Anticipated synergies of c.£11m annualised Targeted c.£20m annualised benefits achieved in 2024/25 SES integration programme ongoing, c.£9m annualised benefits delivered in 2024/25 Acquisition June 2021 Merger completion February 2023 c. 1.2m population served 280m litres of drinking water per day Acquisition January 2024 Merger completion June 2024 c. 750,000 population served 160m litres of drinking water per day 33© Pennon Group plc 2025 Bristol Water and SES – acquisitions driving growth
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Measures Unplanned outage Internal sewer flooding Bathing water quality Biodiversity Water supply interruptions Compliance risk index C-MeX Leakage Repairs to burst mains Customer contacts about water quality D-MeX External sewer flooding Sewer collapses Discharge permit compliance Serious pollution incidents Per Capita Consumption Total pollution incidents New measures Embodied greenhouse gas emissions – bespoke Operational greenhouse gas emissions (water) Operational greenhouse gas emissions (wastewater) River water quality (phosphorus) Storm overflows Business demand BR-MeX Ofwat 2023/24 Water Company Performance Report 1 Upper quartile performance in common ODIs Met in at least one year in K7 Industry upper quartile in 2023/24 On track for shadow 2024/25 Area of focus Strong comparative performance in K7 Wastewater performance 2 1 3 0 Water performance 4 3 2 1 6 5 0 • Water quality • Supply interruptions • Unplanned outage • C-MeX • Internal sewer flooding • Unplanned outages • Water quality • Bathing water quality • Biodiversity 34 © Pennon Group plc 2025 Outcome Delivery Incentives 34 Water company performance report 2023-24 October 20241 Number of Water and Wastewater common ODIs achieved by each company in 2023/24, as published by Ofwat in October 2024
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Increased training and enhanced induction programme Sharing best practice Customer roadshows Public campaigns to tackle wet wipes, fats, oils and grease Enhanced proactive inspections Enhanced Storm Preparedness Procedures Targeted asset upgrades Increase network and sewage treatment capacity Enhanced burst detection analytics Optimised sewer level monitoring Our plan revolves around five essential pillars Smarter operations Focused capital investment Asset information & intelligence People & culture Customer & community engagement Pollution Incident Reduction Plan April 2025 southwestwater.co.uk 35© Pennon Group plc 2025 South West Water Pollution Incident Reduction Plan
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SWW & BRL 2020/ 21 2021/ 22 2022/ 23 2023/ 24 2024/ 25 Cumulative total Financials Totex 60 33 -80 -73 -80 -140 Financing 14 53 133 55 89 344 ODIs -12 1 2 -10 -14 -23 -58 Total 96 94 8 -38 -14 146 SWW BRL SWW GROUP 4 Real 6.0% 5.1% 5.9% Nominal 5 10.4% 9.6% 10.3% Cumulative RORE performance 1 (£m) Cumulative WaterShare RORE 3 • 50% for 2024/25 ODIs impacted by water network issues (including one-off events) • SES RORE for 2024/25 4.2% Base Totex Financing ODI 6.0% 5.1% 36 © Pennon Group plc 2025 South West Water RORE outperformance 1 Including tax impacts and financing true-ups; 2 Excludes the ODI impact of the third-party Carland Cross event in 2021; 3 Real cumulative RORE on underlying totex excluding reinvestment expenditure, financing and ODIs on a notional gearing basis including tax impacts from K7 allowances; 4 Based on South West Water (including Bristol Water); 5 Real RORE plus average K7 inflation of 4.4%
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• Historically achieved the lowest effective interest rates in the sector • c.4.2% RORE outperformance delivered in K7 • Protection mechanism for cost of new debt • Diversified debt portfolio for K8 − EMTN programme − Bilateral agreements − Leasing − Private placements • Hedging policy locks in financing outperformance against Ofwat’s allowed cost of debt 1 1 B ased on cost of debt allowance of 3.15% + 2.3% = 5.45% assumed average inflation over K8. 2024/25 equivalent inflation at 3.2% Efficient & effective financing Diversified debt portfolio Hedging strategy to manage risk 1.5 5.5 4.5 3.5 2.5 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 12% 10% 8% 6% 4% 2% 0 K8 nominal cost of debt CoD allowance I ndustry effective interest rate S WW effective interest rate 5 Y ear 7 Y ear 1 0 Year 2 0 Year Hedging JUNE 2022 DEC 2024DEC 2022 JUNE 2023 DEC 2023 JUNE 2024 K8 nominal cost of debt Fixed rate debt Fixed by swap Inflation linked debt Floating rate debt 37 © Pennon Group plc 2025 Driving financing outperformance
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Portfolio • Driving an efficient cost base, already targeting £86 million of annual b enefits from reshaping the business, and realising acquisition cost synergies • Pennon Power: remaining investment to be fully debt funded – continuing to review and optimise value Debt & Gearing • Anticipated water business gearing for K8 of 60-65%, consistent with our long-term gearing policy of 55-65% debt to RCV – strong investment grade credit rating profile • Group leverage1 expected to be a few percentage points higher than the water businesses – unlikely to exceed c.5% • Flexible and diversified debt portfolio Equity • c.£490m Rights Issue • Approach to funding in line with Ofwat Framework • WaterShare+ customer shareholders to benefit from Rights Issue via forthcoming top-up issuance Dividend • Maintaining the total dividend in absolute terms, dividend per share rebased to reflect the Rights Issue • Rebased DPS then targeted to grow in line with CPIH to 2030 Prudent and sustainable leverage over K8 Key pillars of our approach £2.0bn £1.2bn £0.3bn £0.5bn K8 increase in RCV Water Business debt funding at c.60% Indicative outperformance Equity funding 38 © Pennon Group plc 2025 Supported by our comprehensive financing package 1 Gr oup RCV metric includes estimated value of non-regulated businesses
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Gross debt Net debt Pennon Group plc 247.2 202.2 Water Group 4,107.1 3,698.3 SWW 1 3,815.9 3,481.7 SES Water 291.2 216.6 Other Group companies 155.9 133.6 Intercompany borrowing eliminations 2 (97.9) (97.9) Total adjusted Group 4,412.3 3,936.2 FV & other non cash indebtedness 3 142.0 142.0 Total Group (statutory basis) 4,554.3 4,078.2 Group debt at 31 March 2025 (£m) Funding strategy Financing considerations • Maintain two strong investment grade credit ratings • Continued use of our diverse portfolio assessing the best options to support the business and our customers • New fixed rate debt to align to iBoxx indices • Updated Sustainable Financing Framework in July 2024 • £800m raised in FY25 • £2.5bn EMTN programme established for SWW to further diversify portfolio – debut £400m public bond issuance in July 2024, £250m issuance in December 2024 • From March 2025 c.£600m of our K7 interest rate swaps mature reverting to floating rate • In preparation for K8 over £500m of swaps have been executed to fix our floating rate portfolio • In addition to our effective interest rate hedging, the short-term RPI-linked swaps issued in 2022 have matured in 2025 39 © Pennon Group plc 2025 Flexible funding strategy 1 Within South West Water Group, South West Water Limited is the guarantor entity for the EMTN programme, net debt for South West Water Limited at 31 March 2025 was £3,560.2m (including a capital injection on the 31 March 2025); 2 Includes Intercompany loans from Pennon Group plc to Pennon Power and Pennon Water Services; 3 Fair value accounting adjustments recognised for acquisitions and adjustment to net debt in relation to the de-designation of a hedging relationship with the 2040 bond which was terminated in 2016 and has been reclassified
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Balance sheet – diversified funding portfolio Balance at 31 March 2025 (£m) Pennon Group Pennon incl. non-regulated South West Water SES Water Leasing 1,052.2 5.1 1,045.7 1.6 Bank bilaterals 728.3 155.5 547.3 26.5 Index-linked debt (RPI) 1,030.5 90.4 715.1 224.6 Fixed rate bonds 888.9 15.6 870.3 - Private placements 841.9 145.2 660.2 38.8 Preference shares 12.5 - 12.5 - Total borrowings 4,554.3 411.8 3,851.1 291.5 Less: cash / liquid investments (476.1) (67.3) (334.2) (74.6) Net borrowings 4,078.2 344.5 3,516.9 216.9 40© Pennon Group plc 2025 Pennon
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• At 31 March 2025, Pennon Group had access to undrawn committed funds and cash and cash deposits totalling c.£977.9m, including cash and other short-term deposits of £417.9m and c.£560m of undrawn facilities. • In 2024/25 we have raised c.£800m for South West Water. • South West Water’s gross debt at 31 March 2025 was £3,815.9m. The debt has a maturity profile of up to 32 years. • Weighted average maturity of 14 years. Group debt maturity profile (£m) Debt maturity profile Liquidity position 2025/262026/272027/282028/292029/302030/312031/322032/332033/342034/352035/362036/372037/382038/392039/402040/412041/422042/432043/44 450 400 350 300 250 200 150 100 50 0 S outh West Water Other 41 © Pennon Group plc 2025 Pennon
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Net debt movements Pennon Group – summarised net debt flow (£m) 2024/25 flows 2023/24 flows Net debt excluding fair value uplifts 1 April (3,684.8) (2,841.4) Opening balance 1 April (restated) (3,844.8) (2,965.4) Cash generated from operations 233.6 261.7 Corporation tax received 3.0 3.4 Net interest paid (132.0) (109.1) Capital investment (666.7) (598.1) Proceeds from Rights Issue 1 491.0 (62.7) Share Issue transaction costs (15.4) (361.4) Ordinary dividends paid (126.9) 175.7 Non-cash index-linked accretion (33.4) (111.7) Other movements 13.4 (46.8) Closing balance 31 March excluding other non-cash indebtedness (4,078.2) (3,810.5) Net debt excluding fair value uplifts 31 March (3,936.2) 2 (3,684.8) 42 © Pennon Group plc 2025 Pennon 1 £491m 2024/25 raised offset by £15.4m transaction and advisory fees; 2 Carrying value of fair value adjustments to debt as at 31 March 2025 – £29.3m Bournemouth Water, £71.0m Bristol Water and £9.5m SES
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Total interest charge (£m) • Full year impact of SES • Reduction in inflation and rates offset by new debt to fund the ongoing investment programme • SWW effective interest rate 5.4% 2023/24 SES FY25 impact Interest and inflation movements New debt impact Capitalised interest Interest receivable Other 2024/25 150.2 (21.3) 16.1 4.747.3 (9.2) (3.4) 184.4 43 © Pennon Group plc 2025 Financing costsPennon
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(£m unless otherwise stated) 2024/25 2023/24 Underlying net interest charge (170.6) (155.5) Less: pensions net interest (1.1) (1.4) Non-debt related interest (23.1) (14.1) Add: capitalised interest 4.5 - Net interest for average rate calculation (190.3) (171.0) Split between: Interest payable (175.0) (161.8) Capitalised interest payable (23.1) (14.1) Other finance income 7.8 4.9 Net interest payable (190.3) (171.0) Effective interest rate (%) 1 5.4% 5.6% 44 © Pennon Group plc 2025 Net interest analysis 1 A measure of the mean average interest rate payable on net debt associated with South West Water Limited’s group of companies, which excludes interest costs not directly associated with net debt South West Water
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Impact of the Rights Issue on EPS and DPS Impact on reported FY 2023/24 historical per share figuresDividend (£m) FY 2023/24 EPS Bonus adjusted2 FY 2023/24 adjusted EPS FY 2023/24 DPS Bonus adjusted FY 2023/24 DPS 6.2p 44.4p 5.1p 36.7p Combined impact on Dividend Per Share 36.7p FY 2023/24 underlying DPS Bonus adjusted2 FY 2023/24 underlying DPS Impact of new shares Rebased FY 2023/24 underlying DPS FY 2024/25 DPS 45.2p (26%) 27.4p 31.57p 2023/24 2023/24 adjustment 2024/25 £129.3m£126.9m £2.4m £133.7m 3.4% CPIH 45 © Pennon Group plc 2025 Pennon