Pennon Group H2 2025 Earnings Report

Pennon Group EPS Results

• Actual EPS: -GBX 10.30
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Pennon Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Pennon Group Announcement Details

• Quarter: H2 2025
• Date: 6/3/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, June 3, 2025
• Conference Call Time: 4:00AM ET

At the top end of the FTSE 250, Pennon is an infrastructure group, focused on the UK water market is one of only three listed water companies in the UK. Operating in a stable regulatory environment with a positive outlook, we are focused on long-term sustainable growth, through disciplined capital allocation, organic and acquisitive. Our 25-year rolling licence provides predictable index-linked growth and visibility over future revenues. We provide clean and wastewater services through our businesses across the Great South West. Our team of around 4,000 brilliant colleagues work around the clock to deliver services to a population of over 3.5 million. We embrace innovative ways of working, we nurture and support our people – recognising that people are our greatest asset, and we listen to our stakeholders – working in partnership to deliver lasting improvements. We believe that the role of a responsible business is one of stewardship for sustainable living, supporting communities, customers and the environment to thrive, now and into the future. As one of only three listed water companies in the UK, strong governance is at the heart of our decision making as we focus on doing the right things, in the right way, every day. We are investing more than ever before to deliver environmental benefits, and to support the achievement of our stretching commitments for customers and communities. Since privatisation in 1989, we’ve invested c.£13 billion in our infrastructure across the region and we are well underway in delivering more. We know there is more to do, and we are well positioned to deliver for all.

Pennon Group H2 2025 Earnings Call Transcript

Key Takeaways

• Top quartile performance: Pennon delivered on 70% of its stretching regulatory targets in AMP7, placing it in the sector’s top performance quartile.
• Accelerated growth: The group’s regulatory capital value grew 75% over the regulatory period, with 30% coming from acquisitions including Sutton & East Surrey, Bournemouth and Isles of Scilly.
• FY24/25 challenges: Operational and customer water-efficiency initiatives led to lower wholesale revenues and a £35m pre-tax loss, offset by a successful £490m rights issue securing a robust balance sheet (Water Group gearing 61.8%).
• Record investment & efficiencies: The business invested £652m in CapEx for AMP7 while delivering £76m of annualised cost savings towards an £86m K8 target, underpinning future delivery.
• Pollution & overflow targets: Despite industry-leading reductions in internal and external flooding and avoiding a hosepipe ban, sewer pollution incidents remain elevated and an EPA two-star rating is forecast, requiring further action on storm overflows.

Presentation

[Susan Davy, CEO at Pennon Group]

good morning, everybody, and thank you so much for coming here this morning. I'm Susan, CEO of Pennant Group, and I'm joined by Laura, our CFO today. And I am delighted to be, in person and great to see so many of you, who've come along to, hear the presentation.

[Susan Davy, CEO at Pennon Group]

Now, I'm often asked, why why do I work in the water sector? And I think the answer is the same, that, I gave twenty eight years ago when I first started. Quite simply, I'm in water because it's too important not to be. What we do really matters, really matters to people and to communities every single day. And this morning, the review undertaken by sir John Cunliff has reported on its interim findings, and I'm sure some of you might ask some questions about that later.

[Susan Davy, CEO at Pennon Group]

Let's be clear. I'm excited about what comes next for the sector, what comes next for Penon and what comes next for our customers and our shareholders. So we're going to have a look at what's ahead for Penon, but I wanted to take a few moments to reflect on the end of the K7 regulatory delivery period. So we've just ended with twenty four-twenty '5 year, and that also marks the end of the five year period that we've had to '25. And for some of you in the room today, because I recognize many of you, we last met in the West Country in March, where we took you on a day trip to the seaside, for those of you that came.

[Susan Davy, CEO at Pennon Group]

And we were showcasing some of the investments that we had made, some of the work we've done on our natural habitats as well, the innovation that we've been deploying, the training centers we've been creating for our thousands of brilliant employees and colleagues across the business. And it was all about being focused on what it's like to walk in the shoes of our customers. The stars of the day, if you recall, were Denzel and Kilo. They were two of our leakage dogs who are trained to detect small traces of chlorine and can cover miles of rural land, which is really for our regions, and successfully find leaks as much as the work we do with our satellites and drone pilots. So I'm sure many people, when I got some of the emails that came back, many people were commenting on the dogs and I think they were a real hit.

[Susan Davy, CEO at Pennon Group]

So they do a fantastic job. So I think it was great to have people come down, But of course, there's always a balanced scorecard to reflect on too. So I think that's where the presentation we will start with. So how do we think we've got on for K7? So there's four things that I really want to talk about today, and then we can obviously have a reflection about the outlook and what we see coming next.

[Susan Davy, CEO at Pennon Group]

So four things I'd like to cover. The first, we've spoken to our customers, thousands and thousands of them, about the priorities and what matters most to them. And we have been delivering on four strategic priorities that we've made as the pillars within our organization and that all the things that customers really care about. We have been delivering. We have done well.

[Susan Davy, CEO at Pennon Group]

We have delivered on 70% of stretching regulatory targets, which comparatively across the sector puts us in the top quartile. So that's the first thing I'm going to reflect on. Second thing, we are serving more communities and regions across the group. We have a different strategy. We have a strategy of organic growth, yes, but also acquisition.

[Susan Davy, CEO at Pennon Group]

And more recently, we added Sutton and E, sorry, to the group and got CMA approval last June. And so we are spreading the work that we do with all those communities and delivering against those stretching targets for them. Thirdly, we are going to talk about twenty fourtwenty five. It has been a challenging year for us operationally, and we've had a financial reset as well. We've reset, we've reshaped the business.

[Susan Davy, CEO at Pennon Group]

It is a point of inflection into K8. And following the funding and financing that we have done, and thank you to many of you in the room who have supported and the successful rights issue, we have got a strong balance sheet going forward. And then lastly, that strong platform secured for the future. Actions taken this year undoubtedly puts us in a good place. We've also got our outstanding and good business plan assessments relatively to South West Water and certainly Surrey.

[Susan Davy, CEO at Pennon Group]

We are on with them. We are doing it, and I'm really confident that we have a robust outlook for K8. So the four strategic priorities that we focus on. And we have realigned our business internally and reshaped the business internally to make sure that we're really focusing on these because they're really important to our customers and therefore really important to us. First one, always, is around water resources and safe, clean drinking water and improving drinking water quality.

[Susan Davy, CEO at Pennon Group]

We will touch on it, I'm sure, but it has been a hot, dry start to 2025, hasn't it? We learned our lesson in 2022. We've been investing significantly to break the drought, and we have broken that drought cycle. As I'm here today and with the forecasts that the team have been working through, we don't see the need for a hosepipe ban in the Southwest as we had in 2022. So we're in a very different place.

[Susan Davy, CEO at Pennon Group]

So that's a really good outcome. Now water quality, really important that we have improved our water quality position, necessarily so given the incident that we had in Brixham last summer where we worked tirelessly to return safe, clean drinking water to the people and businesses in and around Brixham in Devon. Eight hundred colleagues were there focused with our supply chain partners as well in making sure that we were flushing 30,000 kilometers of network, 27 times installing UV and infiltration to make sure we could restore their resource at their source as quickly and effectively as possible. Obviously, I'd like to thank the customers for their incredible patience and for the kindness that they showed colleagues through that. So important that we have delivered on our water quality targets.

[Susan Davy, CEO at Pennon Group]

Second priority, no surprise, I'm sure, tackling storm overflows, the use of them, and eradicating pollutions. Now I'll go through this in some more detail later. Two things that I'm really wanting to talk about today. First of all, we always said in K seven, we were going to focus on the impact for homes and businesses. So things like internal self flooding and external sea flooding for homes and businesses is really troubling to our customers, to any customers when it happens.

[Susan Davy, CEO at Pennon Group]

So making sure we delivered on that was important, and we have sets of using. Bathing waters. We have eight sixty miles of cosign that we look after for our regions. Our customers understand it's an incredibly important, valuable asset for them, and we know that. So making sure we've got bathing water standards and for the fourth year running at 100%, really important.

[Susan Davy, CEO at Pennon Group]

So we've ticked the box there. Where do we need to do more? Well, you can see there, the EA's environmental performance assessment, we're forecasting again for 2024. The, final close down is not out yet, but we're anticipating another two star. Why?

[Susan Davy, CEO at Pennon Group]

Our pollutions to water courses overall, we've got to do better. There are some improvements beneath the headlines, which I will talk through. We've got to do better. Third priority, driving environmental gains. I was just chatting at coffee with one of our supporters on the banking side, and they were talking about the work that we have been doing.

[Susan Davy, CEO at Pennon Group]

And they come down for a visit to look at all the catchment work we've been doing, where we're working with over 80% of our farmers and those who have significant landholdings, where we work to make sure that the natural environment improves the quality of water that we have and that we rely on to serve our customers. So I'm really pleased over this five year period that we have been making those improvements. You can see the hectare there that we've improved. And you can also see the reasons we're not achieving good ecological status has reduced for us from 19% to 12%, A huge undertaking, lots more to do going forwards, but some great strides that have been made. And then the picture that you can see there is of our Pelon power assets, renewable energy.

[Susan Davy, CEO at Pennon Group]

We are a large user of electricity. All that moving water around takes a lot of energy. And we have invested and are investing in four sites that, when they are up and running, represent around 40% of our generation power generation needs. And I'm sure we will talk about that later. And then lastly, supporting our customers.

[Susan Davy, CEO at Pennon Group]

It is not the last priority. It is one of the key priorities that we have. We're really proud and pleased of the work that we do to support our customers. We have been working to make sure that customers, despite the fact that bills have gone up, that customers are in a good place in terms of the bills that they receive and the tariffs that they're on. We ended the regulatory period with 100% affordability.

[Susan Davy, CEO at Pennon Group]

That was a really important position for us to get to so that we knew when the bills come that we could then have that contact with our customers and support them going forward. So we're pleased with what we've done and the outreach work. There is more to do, which I will touch on. And as I said at the beginning, 70% of our outcomes and stretching regulatory targets we have delivered on. That puts us up a quartile relatively in the sector.

[Susan Davy, CEO at Pennon Group]

It still means there's more to do. We didn't get 100%. We've got 70%. They were stretching, and we have made improvements and that's all been done and underpinned with record investment. So that's what I would summarize in terms of the priorities and where we are with those.

[Susan Davy, CEO at Pennon Group]

So I touched on the fact that we do have a different approach at Penon in terms of our growth. We've had a twin track approach of both organic and acquisitive. So why do we do that? Why have we got that? Now the RCV has grown by 75% over the regulatory period to 25%, and 30% of that growth has come from acquisition.

[Susan Davy, CEO at Pennon Group]

So why not just organic? Well, we think there are real benefits to consolidation. We've said it before, and we can see it in the results that we've got. It's about delivering efficiently. So coming together, we get to deliver things in a way that you wouldn't have as a stand alone business.

[Susan Davy, CEO at Pennon Group]

And if you look back to the acquisitions that we've made, Bournemouth Water, two new state of the art treatment works that we've invested on. And a few weeks ago, I was at Oldenay, where we were just looking at the work that we had completed, and I met with the water minister, and, our regulator, Ofwat, to give them a sneak preview of the works. And once it's commissioned, along with the NAP mill treatment works as well, that will be providing around 85% of customers' needs in and around Bournemouth. Now what's exciting about that? It was state of the art off-site build techniques, largest off-site modular build that's happened in The UK, delivered twice the speed of traditional projects, and it's just been awarded the King's Awards for Enterprise Innovation.

[Susan Davy, CEO at Pennon Group]

So the good thing about coming together in the sector and the consolidation that we've done, yes, we are able to invest in new treatment works for customers, and they will get the safe, clean drinking water that they want. But the way we do that efficiently and effectively, we do that from that acquisition. Isles of water Isles of Silly Water, sorry. We took that on in 2020. Interesting time to take it on in COVID, but we took them on.

[Susan Davy, CEO at Pennon Group]

And customers in the islands are now experiencing first time at sewage and a step change in water quality. I was really pleased when I went to the drinking water inspectors update annual update last year, and the Isles Of Scilly have made it onto the map and made it onto the chart for the first time, which was great to see and is in the pack in terms of water quality results. Bristol Water. We've successfully resurrected plans to construct a new reservoir to improve the Southwest Water Resilience. So that wouldn't have happened as a standalone.

[Susan Davy, CEO at Pennon Group]

The previous plans were scrapped by the previous owners, and we've resurrected that, and that's the right thing to do. And lastly, certainly Surrey Water. We've obviously made sure that financial resilience is there. And Bow Beach Reservoir, there are opportunities for that going forward. So the other thing that we've done as part of these acquisitions and part of our approach is make sure that we've got a growing shareholder base of customers.

[Susan Davy, CEO at Pennon Group]

So with the acquisitions that we make, we also have share issuances. And we now have quite a number of customers, in fact, four times the number of institutional shareholders who are shareholders. So we're in a really good place for them to be part of the story going forward. So my list of things I was going to talk about, '24, '20 '20 '5, I'm saying is a point of inflection. And why do I say that?

[Susan Davy, CEO at Pennon Group]

Well, it has been a challenging year with a number of moving parts. So I'll talk you through some of those moving parts, and I'm sure Laura will go into this in some more detail. So the first area I'm going to talk about on the left for me is around the revenues and the water efficiency work we've been doing. So we have been really driving our water demand initiatives with customers. Our loans from the drought, we know it's really important.

[Susan Davy, CEO at Pennon Group]

Our loans from affordability for customers, we know that's really important. So if they use less, it will cost them less. And we know that in achieving that 100% affordability, you've kind of got to do both. So we've been doing a whole host of campaigns. Now what that has meant is that we have had, on a like for like basis, water business, wholesale revenues lower than you would have anticipated.

[Susan Davy, CEO at Pennon Group]

And that has contributed to the loss before tax that you will see in the results. But it has been the right thing to do, and there are obviously revenue mechanisms in place to protect future recovery. But it's been an important part of what we have done. The second important part of what we have done this last year is make sure that we've reshaped, rightsized, and we're in the right place for what we need to do going forward. Yes, we have made savings.

[Susan Davy, CEO at Pennon Group]

Yes, we have thought about how to structure the business differently. And yes, we have put around 35% more staff on the front line over the last few years, which has been an important part of the work that we have been doing to make sure we are well prepared for what we need to deliver on. So we have reset the cost base. We have delivered £76,000,000 of annualized savings, which we will see coming through in future years. And we're on target to meet the 86,000,000 that we'd set ourselves ahead of time.

[Susan Davy, CEO at Pennon Group]

Third, investment, which again has had an impact on the twenty fourtwenty five income statement. We have been advancing, investing, making sure we can deliver for our customers and communities, and that obviously assesses in good stead going forward. That has had an income statement impact that we will get recognition of going forward into K8. And what does that mean for our overall returns? The fourth bubble.

[Susan Davy, CEO at Pennon Group]

Well, our water share mechanism is all about making sure that we are performing. And where we do perform, we can share some of those benefits with our customers. We have performed and over the K period returns around about 190 basis points above base returns. We got a strong balance sheet, 1,300,000,000.0 of fundraising. As I said earlier, thank you to everyone who's been supporting.

[Susan Davy, CEO at Pennon Group]

Balance sheet is in a really good place, and we're in a really strong position. And lastly, because of the work we've done on the balance sheet, a sort of rebasing around the dividend, but we have performed. We have performed as a business. Yes, there are things that we need to do more of going forwards, but we are in a good place. So the dividend that we are announcing today that we put to the AGM is a 3.4% growth CPIH, in line with what we had announced earlier this year.

[Susan Davy, CEO at Pennon Group]

So reset, rebase for K8. So what about that strong platform for the future? Well, a couple of things I would point to. It's always a really good idea to get your good business plan in and get a good assessment so you can start delivering on it. And we've done that with both South West Water and Sutton and East Surrey business plans.

[Susan Davy, CEO at Pennon Group]

We're already delivering against that. We know the business plans will give a growth in LCV and a growth in capital investment at a run rate that we are already at. We are driving efficiency and innovation through the supply chain amplify alliance that we have set up, and they're already working on thousands of schemes to make sure we can deliver for our customers. And in terms of driving efficiency and driving performance, we have said before we're targeting a 7% return in K8, which pretty much is a continuation of the outperformance rate I just talked about for K7. So in a good place for K8.

[Susan Davy, CEO at Pennon Group]

And with that, Laura is going to come on and talk about the results on the financial side. Thank you, Susan.

[Laura Flowerdew, CFO at Pennon Group]

Good morning, everybody. Good to see you all here today. Let me talk you through this year's financial results as well as some of the key aspects of K7 as we close out this regulatory period and head into the next. First of all, looking at the financial highlights for the year. We're pleased to have delivered a stable EBITDA performance against a challenging sector backdrop.

[Laura Flowerdew, CFO at Pennon Group]

This has led to a loss before tax of £35,100,000 in line with our expectations. And I'll come on to some of the reasons for this as we go through this the presentation. Our cumulative Rory over AMP7 has remained strong at 6% for Southwest Water on a watershed basis providing outperformance over the regulated cost of equity. We continue to invest record amounts in our Water Group with £652,000,000 of CapEx this year principally from the Water business. This includes early start expenditure and positions us well for delivery in K8.

[Laura Flowerdew, CFO at Pennon Group]

Our rights issue in February raised £490,000,000 of equity, which means that our Water Group gearing ends K7 at 61.8% with group gearing just a couple of percentage points higher at 64.3. Finally, our proposed full year dividend rebased for the rights issue is 31.57p per share consistent with our policy announced in January of the total dividend growing in line with CPIH. Our full year results from an income perspective basis, it's important to note that this includes the full year results from the SES Group compared with around three months of those results in the prior year following the acquisition in January. Excluding SES, it's been a challenging year for the Water business with as Susan mentioned customer demand measures reducing our anticipated in year revenues whilst record K7 investment has continued which has impacted on our financing charges and our depreciation. We would see the benefit of that investment come through our revenues next year.

[Laura Flowerdew, CFO at Pennon Group]

But given this year's flat revenues year on year and increasing capital related charges as anticipated we're reporting a loss of £35,100,000 for the on an underlying basis this year. We've also reported non underlying items of £37,600,000 reflecting the costs of the bricks and mortar quality incident as well as costs to support our ongoing transformation and reshaping activities. These activities will drive cost efficiencies as we move into K8 to help ensure we maintain a stable cost base. Looking a little more closely at the revenue line. Again as I say the full year impact of SES is incorporated into the full year results for the first time compared with the three months prior year.

[Laura Flowerdew, CFO at Pennon Group]

We've then seen inflation and tariff movements on Southwest Water offset by lower customer demand impacted by our water efficiency measures and helping ensure customers' bills remain affordable. This has led to broadly flat revenues in Southwest Water, whilst our non household retailers continue to perform strongly with Pen on Water services seeing increase in revenues through tariff and new contract wins partially offset by also seeing some customer demand reduction. Overall this means we're reporting full year revenues of just over £1,000,000,000 at £1,047,800,000 Our underlying EBITDA is broadly flat year on year at 3 and £35,600,000 Again this reflects the full year benefits of SES being within the group whilst the flat revenue for South West Water can be seen in the numbers on the chart here. From a cost perspective, inflation was broadly offset by operational efficiencies and we've then seen costs from investment in new technologies including our customer experience platform and network monitoring activities as well as greater focus on frontline activity in order to close out the Amphen position as well as we move forward. As we head into K8, we're very focused on ensuring that we are delivering efficiently as well as effectively for our customers.

[Laura Flowerdew, CFO at Pennon Group]

And we made a commitment to deliver £86,000,000 of annualized benefits in K8. We're making strong progress against that target with £76,000,000 annualized benefits being identified and in progress as we speak. And particularly of note that falls into two categories, one around the integration synergies and benefits we obtained from our acquisition strategy. We've now completed our integration savings and they are fully underway for Bristol Water. And we've made strong progress on delivering synergies with SES Water where we've got nine of the committed £11,000,000 synergies in train.

[Laura Flowerdew, CFO at Pennon Group]

We've also made strong progress in reshaping the business and driving underlying operational efficiencies. We've identified £47,000,000 of benefits that are underway in terms of delivering operational benefits as we move forward. And we've also as Susan mentioned reshaped the business to align with our four strategic priorities to ensure we deliver effectively and efficiently as we move forward. Talking of our four strategic priorities, our capital investment program continued at record levels across 2024, '20 '20 '5 with key projects such as the Alderney treatment works in Bournemouth, a water fit program to deliver our storm overflow and environmental targets as well as delivering on our WinEP outputs for K7. Penn On Power continued to progress with construction in particular of the five project and will continue as we move forward into the next AMP.

[Laura Flowerdew, CFO at Pennon Group]

Of course, this has been a key year on which we focused on our balance sheet resilience, completing our £490,000,000 rights issue earlier on in this calendar year. And last year, we also saw the launch of our EMTN public bond program. We've raised around £800,000,000 of debt this year continuing to focus on our diversified debt portfolio and delivering an effective interest rate that will enable us to outperform the regulatory allowances as we move forward into the twenty twenty fivetwenty twenty six financial year. We end the year with gearing of 61.8% in the Water Group again benefiting from the rights issue and putting us in a good position for delivering on our £3,200,000,000 capital program across the K8 period. Our group gearing is a few percentage points higher at 64.3%.

[Laura Flowerdew, CFO at Pennon Group]

So as we close K7, our Water Group RCV is just a touch under £6,000,000,000 and reflects the 75% growth that we've seen over this five year period both through the organic growth in Southwest Water as well as the acquisition of Bristol Water and Sutton and East Surrey. Alongside this growth, we've delivered 6% real Rory over the five year period and at a water business level have added around £900,000,000 of shareholder value with around £700,000,000 still retained within the group. For K8, we target to continue the current level of outperformance on the cost of capital as Susan mentioned earlier with a target as I'm sure many of you are fully aware of 7% Rory over the five year period. At the rights issue, we confirmed our financial framework for the K-eight period with 7% returns on notional equity and a dividend growing in line with CPIH. Our two investment grade credit ratings will provide confidence in our financial position supported by our gearing policy of 55 to 65% for the Water Group.

[Laura Flowerdew, CFO at Pennon Group]

Whilst our £3,200,000,000 capital program will result in 34% growth over the period to 2030 based on the final determination. Finally, let me come on to the outlook for the next financial year. I believe the outlook for the year is strong with a good return to profitability as we head into the new period. We see that driven by a reset of our revenues in line with the allowed regulated revenue in the Water Group alongside a stable cost base, which will lead to EBITDA increasing by around two thirds year on year and a strong improvement in our operating profit. We'll see a consequential increase in financing costs and depreciation with the ongoing record levels of capital investment.

[Laura Flowerdew, CFO at Pennon Group]

And we also will see from a CapEx perspective the profile being front end loaded in terms of that capital investment profile over the five year period. From an outperformance perspective that 7% Rory is very much a focus where and we see benefits from financing and totex efficiency in this coming year whilst we target a neutral position across our ODIs as we transition to a new set of targets from Ofwat. Thank you for your time. I'll now hand back over to Susan.

[Susan Davy, CEO at Pennon Group]

Thanks, Laura. And I think as I said before, it really is a point of inflection and a reset into 25%, twenty six %, and you can see that from the outlook slide that Laura's just taking you through. So I'm going to go back to some of the operational aspects of the business and what we've been delivering and how we've landed at the end of this regulatory period and for twenty fourtwenty twenty five. So I said at the beginning, terms of tackling pollutions and reducing, the use of storm overflows, when we think about that within the business, we think of it in two ways. We think about how we're protecting homes and businesses, So by reducing homes who are impacted by internal floodings is incredibly important to our customers, and we've done really well at that.

[Susan Davy, CEO at Pennon Group]

We've got industry leading performance for it, and we're a good performer for external surfacing as well, where you can see a 24% reduction in the number of external surfacing that we've had. So that has been a really good aspect of our performance. If you look at the, pollution incidents that we have, and you add in those that go to water courses as well, on a total emissions basis, which is on the right hand side of that chart, we do have a good position in terms of, our overall number of pollutions. Now one pollution is one pollution too many, and we have to eradicate them, but, we are making progress. The area where we need to make the most progress is around watercourse, pollutions, and that's what's measured in the environment agencies' EPA assessment.

[Susan Davy, CEO at Pennon Group]

Now you can see from the chart on the right hand side that there has been some differences of performance over this k seven regulatory period. What we've got to do is make sure that we are consistently reducing and eliminating, those pollution incidents. Now the headlines, mean that we are still anticipating an EPA two star for 2024, and we have to get these numbers down. The good news is underneath, in terms of those headlines, we are seeing reductions in network pollution incidents over this regulatory period. We've invested significantly thousands of Suezmax monitors that we've put in that are allowing us to get ahead of incidents, and that is also helping us with sewer collapses as well.

[Susan Davy, CEO at Pennon Group]

We've got more work to do on our other assets, which, the team is on with. So we have a regulatory assessment point for the business plan, which is 2028, to deliver that full start EPA assessment, which then flows back into returns. And we have our reduction plans in place to achieve that. I'm going to move on in terms of storm overflows. So we know from feedback, we know ourselves that we have to do more to eradicate the use of storm overflows.

[Susan Davy, CEO at Pennon Group]

We are driving spills down through interventions. That said, we have had, not for excuse, but for context, incredibly wet weather over the last couple of years, which is good in the sense it has tested our systems, it's tested our networks, and we know where those issues are. You can see that we are one of five companies to reduce bills last year by 4%. It is the right direction. There is much more to do.

[Susan Davy, CEO at Pennon Group]

And we are really focused on making sure we are intervening and getting those investments in where we need to so that we can reduce those fills. Now that's gonna be a combination of both hard engineering with more storm storage, but also some of the catchment work that we're doing and some of the nature based solutions to get those flows out of the systems. It is going to take us fifteen years to get this storm overflow program done, but we are making progress. And one of the things that we always want to make progress on is our bathing waters, and any spills around bathing waters, is something that, of course, our communities and visitors to the region really look at. We have reduced that over k seven.

[Susan Davy, CEO at Pennon Group]

It is reducing, but we've got to go further. Still pleased with the paving water quality, but we need to do more. So it's been good in terms of understanding our systems and our networks and our assets, but there is more to do. So I'm going to move on to water resources and water quality. So when we had the drought in 2022, we thought long and hard about how we were going to tackle that.

[Susan Davy, CEO at Pennon Group]

We have broken the drought cycle. That is the headline. And you can see there, the resource increases that we have available, to us for use, as and when needed. And we have achieved 100%, on the, index, which is all about the health of your water resources. So we are in a good place.

[Susan Davy, CEO at Pennon Group]

As I said, for 2025, we were ahead of the target levels we'd set ourselves, so we are in a good place for this summer without restrictions. Now in terms of looking after the environment and looking after customers' purses and wallets, we want to encourage reducing demand and driving water efficiency. We have had a number of schemes that we have implemented with our customers so that they can understand how they can affect usage within their homes. And that has gone well. There have been some challenges with some of the tariffs that we've implemented.

[Susan Davy, CEO at Pennon Group]

We have learned lessons from those. We have had feedback on how we've implemented them. And there are trials, so that feedback has been really rich and means we can do something going forward. But ultimately, when you look at the, demand reductions that we're getting from those, it shows it's the right direction and the right thing to do. And our smart metering program, the picture of which you saw at the front of the presentation, is going to be really helpful in driving this.

[Susan Davy, CEO at Pennon Group]

Now it's not just about what our customers do, it's obviously about what we do with our own network as well, and that's where we're focused on leakage reduction. You can see there the numbers, percentages of reduction in leakage we had from 23, 20 four into twenty four, twenty five, which was good for St. Lees Surrey. We have missed the target in year four South West Water and Bristol Water. You can see the reductions we've made, but we need to do more and we will be focused on that going forward into 2025, '20 '20 '6.

[Susan Davy, CEO at Pennon Group]

But nevertheless, a good reduction. And over K7, we had some good strides in leakage overall. So water quality. I touched on it earlier. It is the number one priority for customers to get clean, safe drinking water, And we are making good progress with our quality first rollout across the group.

[Susan Davy, CEO at Pennon Group]

Now I mentioned Brixham earlier, which I will touch on again in the sense that we all know how important it is to our customers to receive that safe, clean drinking water. And therefore, our focus on this is unwavering, and we have to make sure that we are in a good place. And you can see from the chart there where we're positioned relatively. So our third priority that we talked about earlier, driving environmental gains, improving water quality. The iron ore, as I said, we had reduced.

[Susan Davy, CEO at Pennon Group]

That's been from investment. We've invested around 37 sites, and we've had a reduction in the amount of phosphorus that's going into raw water, which obviously improves the water quality for those communities. Now in terms of the work we do in catchments, yes, it's about the hectare we complete as well. There are added benefits of the work that enhances biodiversity more broadly, and we work with our partners to deliver that. And in doing that, we leverage much more in terms of contributions for areas like peatland restoration.

[Susan Davy, CEO at Pennon Group]

So you get added benefits if the investment we make with match funding from elsewhere is incredibly helpful for the region. And lastly, in terms of our net zero commitments, Pelham Power is one key aspect of that. We've got the sites under construction, and one is in cold commissioning. And if I move on to the next slide, which is a very busy slide, but nevertheless gives you all the detail that you would want on those four sites that we are investing in. We said before, yes, they're helpful for net zero.

[Susan Davy, CEO at Pennon Group]

Yes, they're helpful for the power offset that we have within the group, but they do make returns as stand alone projects that are in excess of the regulatory returns. So from a capital allocation perspective, it makes sense. Having said that, we will obviously review and optimize what we're doing with these assets, as I've said before, when we get close to completion of the projects. Now the last priority that I want to talk through, which I mentioned earlier, was how we support our customers. We know it is really important that we engage with our customers as much as we can.

[Susan Davy, CEO at Pennon Group]

I personally, I'm really pleased that I get out to see customers all the time. I thought it up that last year I've met over a thousand customers face to face. It's a brilliant way to understand what they really think about, the business, the sector, the services we provide. Obviously, feet is held to the fire with all sorts of questions that you might imagine that I'm asked about, but it's a great way to think about, understanding their priorities. One of the things that we also want to make sure that we do is that we support those customers who find themselves in vulnerable circumstances.

[Susan Davy, CEO at Pennon Group]

And you can see there from the chart, this is showing how many customers we've added to our register, which is really important so that when we have incidents and we are critical national infrastructure and sometimes we get incidents, and things go wrong. And we need to make sure that we are in contact with those customers who will need the help most. And so we're really pleased with the work we've done around the priority services register, and that has increased the number of customers on it. Now obviously, we talked earlier about affordability, and we talked about the work we had done to make sure that our bills in K7 were as low as they could be. In fact, for 24, 20 five bills, they were lower than they were ten years prior.

[Susan Davy, CEO at Pennon Group]

And that has helped in terms of engaging customers. And if you look at our customer debt aspects and our cash flows from customer bills, then the percentage of revenue that is associated with customers that don't pay their bills is at 0.9%. It's probably the lowest percentage that we have ever had. So we're in a good place going forward to support customers with the bill increases that I know they have had. We have significant support packages that we have had for customers over K7, and we absolutely focus on working with our local communities through roadshows and supporting local charities as well, which really help make sure that we are embedded in those communities.

[Susan Davy, CEO at Pennon Group]

And going forwards, we've got in place, which we had in our business plan, a GBP 200,000,000 support package for customers over the next regulatory period. Laura touched on our business to business retailers. That market has been open since 2017. We enjoy being part of that market. We enjoy helping our business customers.

[Susan Davy, CEO at Pennon Group]

Penel Water Services and Water to Business that we got through the acquisition of Bristol Water are two of the best performing retailers in the sector. Certainly, Business Water, which we've got through the acquisition with SES, we're looking at how we might incorporate that within the group going forwards. But we're pleased with the work that we do with our business customers. And you can see from those Trustpilot scores, which are better than Amazon, better than John Lewis. And so I know that the teams are doing a good job in supporting those customers.

[Susan Davy, CEO at Pennon Group]

And lastly, in terms of the colleagues that we have and the brilliant people that we have across the group. And one of the things I really love about working in this sector is that there's a real history and heritage built up over many years. Everyone who works at Pennant is really proud of their heritage in their water sector, whichever region that they are serving. There's generations of fathers, sons, mothers, and daughters who really have dedicated their their lives to water, and I'm really proud of, the brilliant teams that we've got. So in terms of supporting them, we obviously have, lots of investment in terms of training.

[Susan Davy, CEO at Pennon Group]

We have different schemes. We've had 680, people come through our apprenticeship and graduate schemes. And we have those schemes that also we've embedded within our Amplify alliance as well. So thank you to all the colleagues who have been helping us day to day. And one of the things that I've been most proud of actually isn't on that slide but our health and safety track record has significantly improved over the past five years as we work to make sure that everybody goes home safe.

[Susan Davy, CEO at Pennon Group]

And we've ended this regulatory period with the lowest ever rate for absence, which has halved over the last five years. So the teams have done a really good job and one of the things we want to make sure we do is always make sure that our colleagues go home safe. So last slide from me, which is about the end to K7. It's the same side I had at the beginning. So four things in terms of the takeaway for us.

[Susan Davy, CEO at Pennon Group]

We are delivering on our strategic priorities. We have more to do, yes, which is why I've got all the investment coming into K8, but we are delivering on our four strategic priorities. We are, through our acquisitions, serving more customers and communities, and that's serving both investors and customers well. Yes, twenty fourtwenty five has been a point of inflection into 2025, '20 '6, and Laura's taking you through what twenty twenty five, twenty six is going to look like. But all the work we have done has reset and rebases for what comes next, and we have got a strong platform for what we're going to do.

[Susan Davy, CEO at Pennon Group]

So with that, we're going go to Q and A. Thank you.

[Analyst]

I had a couple of questions. Firstly, on the non regulated businesses, you touched upon business retail a little bit. But could you flesh out a bit more what the outlook is there? Because I know when you made your acquisitions, one of the aims was to grow the non regulated businesses. And is there anything else that's non regulated other than the Business Retail?

[Analyst]

And the second question is on Thames. Basically, do you see the situation in Thames impacting you? Do you see it impacting you at all? How do you think about it? Thank you very much.

[Susan Davy, CEO at Pennon Group]

Yes, okay. So first of all, in terms of the retail businesses, which you said on the slide, we're really pleased with being in that market, and it has served us well. And the acquisitions, yes, we've got water business investment through our acquisition of Bristol, and we've got SES Business Water as well. So what do we see for that going forward? Well, we're pleased that we're in that market.

[Susan Davy, CEO at Pennon Group]

We're doing well at it. You can see from the scores and the profitability for Penner Water Services and Water business that the teams are doing a good job and therefore making a return as well. So we shall see how that market develops, but we're pleased with the progress that we have made. In terms of other non regulated businesses that we have in the group, when we acquired certainly, sorry, there were some small non regulated businesses that we are working through. Some of those we've decided not to continue with those activities.

[Susan Davy, CEO at Pennon Group]

But we're really pleased with the business to business retail market, so that's where our focus is. Second question was on Thames. That's an interesting question today, given the announcement with the preferred bid of KKR announcing that they are not looking at that in the same way. What do I think about Thames? I think hard for me to comment on because it's obviously a different business.

[Susan Davy, CEO at Pennon Group]

Very easy for me to comment on because it's part of the water sector, and we all want to make sure we've got a good functioning water sector with really successful businesses that are part of it. So I think, obviously, there's a lot of focus on Thames, a lot of work for them to do, I am sure. And I'm sure there'll be twists and turns in the story of ownership that comes next. And seeing some of the work that the Thames teams do. They do obviously a brilliant job day to day with what they have to deliver.

[Susan Davy, CEO at Pennon Group]

But in terms of ownership and where that goes, I'm sure there'll be twists and turns with that. Does it impact us? I think it impacts the sector in terms of uncertainty. And so we will obviously await what comes next. And I know with the funding work that we have been doing this year, there are obviously lots of questions around the stability of the sector and of business going forward, which is why I'm really pleased with the CUNNIF review and the interim findings that have come out today.

[Susan Davy, CEO at Pennon Group]

I've had a quick look at those. I haven't had time to sit down and go through every line. I had a quick look at those and really welcome the report. And sure there'll be meaningful reform. One of the key points that the Counter Review is looking at is how to encourage and ensure that there are investors and investment in the sector because it's much needed.

[Susan Davy, CEO at Pennon Group]

We're on the precipice of a GBP 100,000,000,000 investment over the next five years, which is record. So we do need investors to be there. So TENS specifically can't really comment, but does it affect the sector? It's the largest supplier, so inevitably.

[Dominic Nash, Head of European Utilities Research at Barclays]

Dominic Nash from Barclays. A couple of questions from me, please. Firstly, following up on the Carniv review. Would you mind giving us some sort of color as to the supervisory model that for regulation that I think is potentially proposing, which is clearly going down a more company specific rather than a sector wide sort of regulatory model and how that would how you think that would help or yourself? And second, could you give us some sort of update on the dry hot weather that we've had, which is quite nice, frankly, going from two years of sort of record rain to record drought.

[Dominic Nash, Head of European Utilities Research at Barclays]

Could you work through us you said you're ODI neutral or expected to be ODI neutral in the following twelve months. Could you go through where the pluses and minus will come through from this flip from being wet to dry? And also the impact on sort of revenues and costs like I presume more people will flock to Cornwall and you're going to have more usage and or you might have host pipe bandwidth, so you're not, etcetera, etcetera. Would just want to give us some color on that one, please? Of

[Susan Davy, CEO at Pennon Group]

course. Okay. So should I start with Cunliffe. Now as I said, I have an opportunity to look in detail at what was announced this morning, and I will obviously be looking at that as soon as we finish here. In terms of the supervisory model, so what do I think that will mean?

[Susan Davy, CEO at Pennon Group]

Well, to be quite honest, very much, and I'm sure with the quick look through that I have, there is still comparative assessment that's going to happen. And I'm sure that we're part of anything that happens in this sector going forwards. The supervisory point in terms of the specifics on a company by company perspective, we will obviously have to work through and understand. But it would be great to have more of an oversight, in-depth review and conversations with our regulators on an ongoing basis to understand the work that we're doing. I think when I look at the regime and I look at some of those stats facts and figures and the EPA is one of those, we've got a headline star rating and then you have to look underneath to see exactly what is going on because the headline is just one aspect to it.

[Susan Davy, CEO at Pennon Group]

So it would be great to take people through that and to understand the specifics for our region, regions that we serve and and how we perform against that. So like I said, in terms of the CUNLIFE review, really welcome the report that's come out. I think there will be meaningful reform from what I've scanned through and had to look at. And for an efficient, robust WAS company like ourselves. I'm really looking forward to what comes next.

[Dominic Nash, Head of European Utilities Research at Barclays]

Sorry, could I just follow-up on something you just said there on the Do you think that the EPA is going through consultation at the moment as well, isn't it? Do you think that that's going to give you a little bit more wiggle room on EPA score? Or do you think that's going be quite inflexible as well? Or could that be a more of a flexible company by company issue?

[Susan Davy, CEO at Pennon Group]

You're absolutely right, Dominic. It's out for consultation. It's not concluded yet. So don't know is the answer. I know what we've submitted in terms of our thoughts.

[Susan Davy, CEO at Pennon Group]

But I don't know where that's going to land because obviously it hasn't landed yet. But this point around meaningful engagement with regulators, I mean we have obviously robust, good relationships with our regulators. It's been part of a regulated business. That's what you you want to have. I think having something, you know, that allows us to, unpack our performance, in a way that takes account of the specifics for our region will be really useful.

[Susan Davy, CEO at Pennon Group]

So don't know where the EPA is going land yet because it hasn't concluded. I know what we've put forward, but we'll see where it lands. And then you asked about dry, hot weather, what that means what that means operationally. Think we've probably not got a couple of hours, but I'll give you a very different pitch. So if I think about the we've got David Hughes, MD of the water business here.

[Susan Davy, CEO at Pennon Group]

I'm sure he can talk to you about this at length going forward. Yes. Of course, the work we did from the 2022 drought, David, came in at that point as put us in a good position from a resource perspective. Of course, when we get lots of visitors, but we're used to that in the regions that we have, we need to make sure that our networks and our treatment works are in a good position going into what will be a busy operational period, which obviously, again, we are on with. And obviously, depending on the it's not necessarily for the networks, heat for a long time.

[Susan Davy, CEO at Pennon Group]

It's the change in variability in that. So that's what we have to make sure that we are on top of. So for the clean water, water business, those are things that we will be thinking about. And then for the wastewater business, then obviously Richard, who's MD of wastewater, puts his feet up and thinks, great. It's it's not raining.

[Susan Davy, CEO at Pennon Group]

So, he is obviously focused on making sure, that we are looking after the network in such a way that when, the rain and precipitation then does come, that the network doesn't have any blockages or issues, which is why all those sur depth monitors that we put in, thousands of them, are really helpful so we can see what's going on in the network now. And obviously, Richard will be thinking about all the festivals that we have in our regions and how we make sure that the wastewater treatment works are going to be able to cope with all those visitors that we have, which is a key part of the work that he does. So I think it's and from a strong overflow perspective, as you imagine, given the weather, if you looked at the strong overflow spill rates that we've had so far in 2025, they are appreciably lower than we had in 2024. But what is useful for us with that information is then to understand, because now we've got the monitors in, but we've had them since 2022, so all data is rich data for us. How is the network responding with these differences in weather patterns that we've got and where are the pinch points?

[Susan Davy, CEO at Pennon Group]

So again, more useful data for us to use from a storm overflow's perspective. But yes, the numbers for 2025 are a lot lower than they were for 2024.

[Sarah Lester, Equity Research - Utilities & Clean Energy at Morgan Stanley]

Sarah Lesser from Morgan Stanley. Just actually building on Dom's ODI question. Interested over the evolution of the five year period, and I'm not being sneaky and trying to triangulate the 160 basis points of outperformance, more just interested in how you see that net neutral position evolving, any key metrics, face value, all of that. And then Dom's question about the EPA. Now PR24 is not in scope of the Independent Water Commission.

[Sarah Lester, Equity Research - Utilities & Clean Energy at Morgan Stanley]

But if there are changes to the EPA, how does that impact the 30 basis points and that four star criteria? Or does it? And I feel like the answer to that might be too early to say. Thank you.

[Susan Davy, CEO at Pennon Group]

Well, I'll start with the last one first. I think until the consultation ends, we'll have to see where that lands and then what that means. I think Ofwat has said, I'm saying this now and I'm hoping that it is true, I think Ofwat said that they will reflect when the EPA lands to see if this if that has an impact at all for the sector. So let's see where that lands and and see the impact of that. I know for the EPA, what we have to do is get those pollution numbers down.

[Susan Davy, CEO at Pennon Group]

I've always been focused on the absolute numbers for pollutions, irrespective of the assessment and how that looks at the different numbers. We have to look at our absolute numbers and just get those eliminated. And that's what, Rich and the team is absolutely on with. So that's just going be our focus. And I think if you get that delivered, it doesn't really, matter, I'm sure, what the assessment is because you will have delivered, a reduction and elimination of those pollutions.

[Susan Davy, CEO at Pennon Group]

So I think that's what we've got to focus on doing, but we'll see where the EPA framework lands. In terms of the ODIs for K8 and how we see that changing from where we have been, I mean, pollutions. We see from the charts we've had some variable performance, but I think we've got with the work that we've done and the initiatives that we've got in place and the instant reduction plan which is put in place, we have a really good cadence of what we think we're going to be able to do over the coming months and years. So I think that will be slightly different for us going into K8 and K7. And in fact, we ended this regulatory period in a better place than we did at the start for that measure.

[Susan Davy, CEO at Pennon Group]

So that's one of the measures that will change for us. We've got internal self flooding that we touched on. Obviously, we do well in that, and we know we're going to be doing well in that again going forwards. We are really focused on bathing waters, and again, have done well in that in this regulatory period, and we've got more incentive for that going forward. So in a way, the areas where we do perform and do well, we see those continuing to K8, those that have been a challenge for us, like pollutions, are getting to a better place.

[Susan Davy, CEO at Pennon Group]

So I hope the makeup of the ODIs and where we take our benefit from, we have some real key metrics where we do well now that will continue to do well and those where we have been needing to improve our performance, we are improving. So that will lessen the impact.

[Mark Freshney, Executive Director at UBS Group]

It's Mark Freshney from UBS. My first question for you, Laura, just on working capital. There seem to be a big outflow this year. I think it was £42,000,000 in other receivables, 31,000,000 in payables. Is that which is fairly large, is that one time or as the business ramps up?

[Mark Freshney, Executive Director at UBS Group]

Or can we expect further working capital outflows in future years? And my second question for you, Susan, and this is entirely unfair, but I'll ask it anyway. Almost five years ago to the day your predecessor set a target that he knew he'd set for you, which is doubling the base return on equity, so 400 bps outperformance. You got half of it, but it came 400 bps came from financing, is a lot of which is high inflation. And then it was minus 200 in ODIs and totex.

[Mark Freshney, Executive Director at UBS Group]

And you've set in January, you set another five year target for this AMP, which was 190 bps, which takes you up to the seven. But my question is that given past experience, given there's so much that's going to happen over the coming five years, how can you be sure that that target will be met? And what's different about this review to last review? Because I'm not saying we'll get COVID, storm overflows again, but there will be something. And I'm just wondering why you needed to set the 190 bps.

[Laura Flowerdew, CFO at Pennon Group]

Let me start with working capital. I think the biggest change in working capital we'll see as we come into the next year will be contingent on the revenue position and making sure that as we increase tariffs we keep up to speed in terms of recovery. As Susan mentioned, we're in a really strong position on that in terms of debt. And we started early to make sure that we're supporting customers through those build changes and to avoid build shocks. But there will be a little bit of movement as we work through the year, given that we are looking at 28% increase in builds from a Southwest Water perspective.

[Laura Flowerdew, CFO at Pennon Group]

But some of those other issues that you talk about in terms of working capital outflow would be one offs rather than anything we'd expect to recur at this point. So really our focus is on managing that debt book, making sure we get that cash through and realize the benefit of that on a very timely basis.

[Susan Davy, CEO at Pennon Group]

Okay, thanks Laura. So yeah good question Mark. Hard answer that. I would say this has been an incredibly useful if not challenging, five years, where you're right, there have been lots of things we've had to face into as a sector and as a group. We've learned a lot, and we've ended that regulatory period, you're right, not delivering on the double, but we have delivered on performance, and we have had some outperformance.

[Susan Davy, CEO at Pennon Group]

And that outperformance rate, we are running into K8. So where we've landed is where we're pretty much forecasting we're going to be going forwards. So why do we have confidence in that? Well, as I said, we've been tested. We understand the business and our networks in a way that we didn't understand them five years ago, but we understand them now.

[Susan Davy, CEO at Pennon Group]

We have brilliant people who are focused on delivering against those targets that we put forward into the business plan and were accepted. So I think we're in a good place. Now obviously, we'll see what comes out from the CUNLIFE review and if that has any structural changes, not that I could particularly see that in the headlines today, who knows. But we're really focused on delivery. We're focused on making sure that there is outperformance.

[Susan Davy, CEO at Pennon Group]

And when we get outperformance, obviously, that gets shared with our customers as well as our investors. So it is absolutely the right thing to do. And as I say, we end this regulatory period at a run rate of outperformance around about 190 bps. I think that is the run rate that we've set ourselves for K8. So having all that test and all that challenge made the investment, I think we're in a good place for it.

[Mark Freshney, Executive Director at UBS Group]

Thank you.

[Jenny Ping, Managing Director - Equity Research at Citi]

Thanks very much. It's Jenny Ping from Citi. Just following on from the last question, and this is probably one for Laura. I'm looking at Page 37 of your presentation where you highlight the hedging strategy and how much of your debt book your ability to lock in, in terms of outperformance. So just going back to the previous question, what confidence can you give us out of the targeted ROE that you've already locked in via your debt book?

[Jenny Ping, Managing Director - Equity Research at Citi]

Just some sense of that would be helpful to give the market some confidence. And then one for Suzanne. Obviously, you talked about M and A as a core part of the group strategy. Can I just check that you're pretty much done now? It's all about integration?

[Jenny Ping, Managing Director - Equity Research at Citi]

Or are you looking at other things? I think I know what the answer is, but I just want to double Yes.

[Laura Flowerdew, CFO at Pennon Group]

Yes. Let me start on the financing outperformance. So we obviously look at it as we go through the period and as we get any determinations in terms of where do we hedge and how do we make sure that we're locking in outperformance. So as we finish the 2024, '20 '20 '5 year, we had a number of hedges drop off from the past period. That includes some of the hedges we put in place as inflation was going up, which have given us benefit to lock in a level which on the index linked portfolio as well.

[Laura Flowerdew, CFO at Pennon Group]

So as we move ahead into K8, we have about £05,000,000,000 of our debt book fixed at rates that provide a level of outperformance and come in under that level. Obviously, have a fixed index linked portfolio in addition to that. And our overall position, I think on a gross basis, we have about 18% on a floating rate position. A little bit more of that comes through as some of the final swaps come off from last AMP in this financial year. And that's where there'll be an opportunity to look at do we want to look in anything further.

[Laura Flowerdew, CFO at Pennon Group]

With the EMTM program, the move to more benchmark sized transactions, it's likely that quite a lot of the debt that we raise will be on a more fixed basis, but we do then look at whether we want to do anything in terms of refloating that and so on. And we'll look at that as we move forward depending on interest rate movements and so

[Jenny Ping, Managing Director - Equity Research at Citi]

So sorry, if I can push you, is it a third, a half? Can you give us a ballpark sense of the basis points that you've already locked in that's from your debt book?

[Susan Davy, CEO at Pennon Group]

So we haven't given that, have we?

[Laura Flowerdew, CFO at Pennon Group]

We haven't given that number yet.

[Jenny Ping, Managing Director - Equity Research at Citi]

Yes, think

[Susan Davy, CEO at Pennon Group]

about how we I mean, what we've always said about performance is when we start delivering, we will then start reporting on what we've done and how we've delivered. So when we come for the half year results, Jenny, we'll give an update as to what that's looking like, but we haven't given that as a forecast. And then your question around M and A, Jenny. So I do believe that you get benefit both for investors, shareholders and customers from the acquisitions that we've made. The slide that I put up for the acquisitions that we've had in the past, customers have really benefited from the investments that have been made, which stand alone balance sheets for those small watering companies would never have supported.

[Susan Davy, CEO at Pennon Group]

And then the growth in LCV that comes from that means investors do benefit going forwards. So and we make efficiencies by bringing obviously organizations together. So I do think they make sense. Do we actively look in that sense? And do I have a list of opportunities that we are looking at?

[Susan Davy, CEO at Pennon Group]

No, of course I don't. We look at opportunities as and when they arise to see if they make sense. We are focused on delivering what is a really large investment program over the next five years. But given our stated strategy of looking at both organic and acquisitive, if an opportunity came along that made sense, then of course, as we've done in the past, we look at whether it's an opportunity for customers, an opportunity for investors. So we've not changed our strategy, but you're absolutely right.

[Susan Davy, CEO at Pennon Group]

We've got a big investment program to deliver on, which we are busy delivering on right now. And we're focused on making sure that we've got our targets and our outcomes firmly in the sights of the teams who are delivering against them. Good. Well I think that's it from everybody. Thank you so much for your time this morning.

[Susan Davy, CEO at Pennon Group]

Great to see you all and hopefully see you in one of our regions soon. Thank

Participants

Executives

• Susan Davy, CEO
• Laura Flowerdew, CFO

Analysts

• Analyst
• Dominic Nash, Head of European Utilities Research at Barclays
• Sarah Lester, Equity Research - Utilities & Clean Energy at Morgan Stanley
• Mark Freshney, Executive Director at UBS Group
• Jenny Ping, Managing Director - Equity Research at Citi