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RNS Number : 8772T
Pennon Group PLC
30 March 2021
PENNON GROUP
Trading Statement
30 March 2021
Pennon Group, one of the leading water groups in the UK is
issuing the following update ahead of its results for the full year
ended 31 March 2021, which will be announced on 3 June 2021.
Pennon is on track to deliver resilient financial results in
line with management expectations.
Key Highlights
Disciplined management of the GBP3.7 billion net cash proceeds
from the Viridor sale
-- Established a sustainable capital structure - c.GBP1 billion
utilised to efficiently de-gear, leaving a sustainable position of
c.GBP200 million gross debt at the Pennon company level
-- Responsible pension contributions, with GBP36 million paid during 2020/21
-- Continuing focused and disciplined review of potential value
accretive growth opportunities; benchmarked against a return of
capital to shareholders.
Investment, totex and financing plans all delivering
-- Resilient delivery of critical services across the Group
during the pandemic, COVID-19 financial impact in line with
expectations
-- South West Water is on track to deliver strong totex and
financing outperformance - anticipating a doubling of base returns
on regulated equity (RORE) of 3.9%
-- Capital investment programme delivering improvements in the
areas that matter most for customers whilst supporting the regional
economy, with c.80% of Outcome Delivery Incentives (ODIs) on or
ahead of target
-- Pennon Water Services, our business to business water
retailer, continues to win new contracts.
Re-shaping the Group
The Group remains in a strong financial position with expected
cash and committed facilities well in excess of GBP3 billion at 31
March 2021.
Pennon believes there is significant value potential from the
reinvestment of the Viridor sale proceeds in the UK water sector
and continues to narrow down its review of potential growth
opportunities. In the event a major value accretive investment
opportunity is not available, Pennon expects to make a substantial
return of capital to shareholders.
The Group expects to provide clarity on this position by the
time of its full year results on 3 June 2021.
Strong operational and financial performance
South West Water continues to deliver strong operational
performance in the areas that matter most to customers. In water,
we are achieving our committed target for supply interruptions two
years ahead of plan, and in waste, we are ahead of our target for
both internal and external sewer flooding. Our leadership in
working with local nature partnerships continues to deliver
biodiversity benefits with c.20,000 hectares improved during
2020/21, ahead of our planned commitment.
We continue to target improvements to support the delivery of
our most stretching Outcome Delivery Incentives. Our targeted
pollution incident reduction plan continues to build momentum,
delivering significant improvements since its launch in July 2020.
Whilst we anticipate a net ODI penalty position for 2020/21 based
largely on performance in this area, we are encouraged by the
impact of the plan to date, and our focus remains on ensuring this
positive trend continues into 2021/22.
During the second half of 2020/21 we have seen a net increase in
demand and associated revenues as increased household demand has
more than offset a decline in non-household demand driven by
COVID-19 related restrictions. Operational costs have increased in
line with these higher levels of demand, and we have worked to
maximise the safety and wellbeing of our customers and our
employees, whilst delivering improvements to services.
Pennon Water Services continue to focus on growing their high
quality, sustainable customer base, with c.GBP20 million annualised
new contract wins during the year partially offsetting reduced
demand.
Cash collections have remained robust throughout the year and
our expected credit loss assumptions, made at the outset of the
COVID-19 pandemic, remain largely intact.
Sustainable future
We continue to raise funds for South West Water through our
pioneering Sustainable Financing Framework, with a further GBP90
million raised in 2020/21, which includes South West Water's first
ever green private placement for GBP60 million. This brings the
total raised since its introduction to more than GBP900
million.
South West Water's Green Recovery Initiative could see
investment to 2025 increasing by GBP92 million -a c.10% increase to
its existing GBP1 billion investment programme, with six projects
focused on improving public health, protecting the environment, and
addressing climate change. This investment would result in a c.3%
RCV increase, supporting a sustainable future for the Group and the
creation of up to 500 additional jobs across the region.
We are passionate about championing diversity and are pleased to
have been recognised again within the top quartile in the
Hampton-Alexander review for 2020. Alongside this, for the second
year running, Pennon has been named in the Bloomberg
Gender-Equality Index (GEI) - recognising our commitment to
supporting gender equality through policy development,
representation and transparency.
We are also pleased that Pennon has been recognised as the
winner in Britain's Most Admired Companies (Utilities) - the
longest-running annual survey of corporate reputation in the UK.
This award demonstrates our commitment to engaging employees in our
strategy and the important role they play in delivering it.
For further information, please contact:
+44 (0)1392 443
Pennon Group plc 168
Paul Boote Group Finance Director
Jennifer Cooke Group Investor Relations Manager
+44 (0)207 251
Media Enquiries 3801
James Murgatroyd Finsbury
Harry Worthington
Cautionary statement
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 2020 Pennon Group Annual Report which can be
viewed online at 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.
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END
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