Pennon Group Plc

Good morning. I'm Susan Davie, Chief Executive of Pennon, and welcome to our half-year results presentation for 2022-23. Over the past six months, turbulent political and macroeconomics, escalating cost-saving pressures, and the continued war in Ukraine have weighed heavy on the UK and globally, creating an extraordinary degree of uncertainty and volatility. Closer to home and in our region, climate change has driven the hottest, driest year in the South West since records began. Against this backdrop, Pennel's results for the half-year 2022-23 demonstrates we are continuing to deliver fundamental services as we execute our strategy and drive sustainable long-term growth. Our business model ensures we have the headroom and capacity to be fleet of foot to respond with agility when it matters most, whether facing a challenge or an opportunity. What gives us that headroom is threefold, driving efficiency and performance, delivering on our plans and having a strong, robust balance sheet. We also couldn't do this without the pioneering spirit of our 3,000 employees who see opportunities when they see obstacles and show extraordinary care for customers, communities and each other. Turn to the highlights for the half year 2022-23 and starting first with the environment and the outcomes from our largest environmental programme in 15 years. This has been a half year in which we have been particularly focused in our catchments, delivering tangible benefits on a community by community approach. Stretching from Bristol to Bournemouth, Devon and Cornwall, including the Isle of City, we operate across a unique topography. Surrounded by water and with 860 miles of coastline, our network stretches over 22,000 kilometres. And as Britain's most treasured tourist region, our infrastructure regularly flexes to accommodate a population that swells from 3.5 million to over 10 million visitors in the summer months. Nine bathing water investments have been accelerated to support water quality improvement so far in K7, with one in the half-year 22-23, and I am pleased to say we have achieved 100% bathing water quality standard for the second consecutive year running, with 99% achieving good and excellent status. We announced our water fit plans earlier this year. We are underway with investing £45 million over the next two years, targeting a reduction in the use of storm overflows with a 50% reduction through the 2022 bathing season. With the climate crisis, it is important we remain focused on delivering our net zero objectives. And our plans across the three pillars have made progress this year, investing in an electric fleet, capturing carbon through our restoration of 2,800 hectares of peatland during K7 with 1,000 hectares delivered so far cumulatively, and developing our renewables capacity to support 50% of self-generation ahead of the 2030 target. We are continuing to invest across our asset base to support service outcomes, delivering a record amount of expenditure with a 30% increase this half year, representing £143 million of investment. Alongside our innovative operational ways of working, we continue to deliver against our business plan ODI commitments, and despite targets ratcheting, we are continuing to deliver 80% ahead or on track for Salvos Water, and 75% ahead or on track for Bristol Water. At Pennum, we believe every customer should benefit from what we do. Our investments aren't just in places and infrastructure. With rising food and power prices, we are focused on keeping customer bills as low as we can. Average bills for South West Water customers are lower in 2022 than they were 10 years ago. With our recently launched second Watershare Plus issuance, customers at South West Water and Bristol Water will be able to reduce their bills further this year at a time when it counts. We are also helping over 100,000 customers with specific affordability pinch points, and we are seeking to double those assisted by 2025. We are delivering over £78 million of benefits to customers at a time when they need it most, including our commitment to share the benefits of financial outperformance with customers through our second issuance of our unique Wardshare Plus scheme, with £40 million funded so far in K7 to give customers the option of a stake in the business, And they're saying to the water company, all money off their bill. And this is unique to our business. Robust financial and operational outcomes underpin the return on regulated equity, which for South West Water continues to double base returns for 2022-2023. And for the half year, we are delivering double digit return on regulated equity across the group. Driving out performance of plans across the group gives us options to go further faster within a regulatory delivery period, whether that's for reinvestment or for a timely sharing of those benefits with customers, lowering their bills. The outperformance delivered today in K7 is £225 million and that's supporting reinvestment this period through green recovery, water fit and additional water resources investments, as well as funding the WaterShare Plus scheme. Underpinning the business is a robust balance sheet delivered through long-term financial discipline. This half year, we have absorbed the impact of elevated inflation on power and interest costs, delivered significant operating efficiency, alongside record investment and ensuring the pension scheme continues to be in surplus. The water business has de-geared to 58% and there is hedging capacity for growth across the group of £500 million. Through our disciplined capital allocation, we have a sector-leading position on growth, both organically and through acquisition. The water business RCV is set to grow by 50% over K7, with our two business-to-business retailers profitably growing in a competitive market and £160 million earmarked for value-enhancing renewables investment across the UK. In summary, we're delivering fundamental service, executing our strategy and delivering long-term sustainable growth. Before we look at the financial results, recently I went to visit one of our new water resources, Hawk Store, which you can see just off the A30 in Cornwall. I couldn't talk about the half-year results without acknowledging the impact of climate change that we witnessed first-hand in the South West this year. And to bring that to life for you, I'm filming this today from Hawk Store on the western side of Bodmin Moor in Cornwall, joined by our new Drought and Resilience Director, David Harris. The southwest is particularly vulnerable to climate change given its 860 miles of coastline and adjacency to the western approaches of the Atlantic Ocean. The drought of 2022 for the South West is set to be the worst since records began over 130 years ago, with the hottest driest summer leaving river flows, groundwater levels and reservoir stocks depleted. Despite this, for the majority of our region, services remained unaffected across the group, continuing to supply Bristol, Bournemouth, the Isles of Scilly and the vast majority of Devon without restriction, thanks to the efforts, hard work and resilience of our teams using a quality first approach prioritising the delivery of clean, safe drinking water services to homes and businesses across the Greater South West. We have however needed to work innovatively and at pace in challenging circumstances to preserve supplies to Cornwall and a small part of North Devon with communities coming together to avoid using hosepipes. Just over six months ago, Hawkstall was a redundant China clay pit, a brownfield site and a lasting remnant of the Cornwall heartlands, where mining and manufacturing are forgotten symbols of a once prosperous past. Fast forward to today, and in just a matter of days' time, Hawksdale will become an important part of Cornwall's future, securing vital water supplies for our customers. Along with upgrading the Stannan Lake and Porth Reservoir, these additional resources will provide up to 30% of Cornwall's water supply for the future. It's a great example of where Pennon's pioneering spirit, agility and innovative thinking have delivered real benefits for customers and communities in real time. That pioneering spirit has also been evident in the way we have responded to the challenges, not just for Cornwall but for the wider region and the sector, and in the way we are approaching longer-term resilience. I'll hand you over to David Harris who will explain more. David joined the group recently with his previous experience of leading Water NSW through the worst drought in Australia's history and it's great for the region and the sector to benefit from his experience. Welcome David.

Thanks very much Susan. Over 90% of our current supply comes from surface water, rivers and reservoirs. Hawke's Tor is just one of a number of engineering projects we're progressing in tandem as part of a £75 million investment in securing supply, introducing further new water resources and with a focus on repurposing ex-quarries, dewatering mines and for the first time desalination. We've also delivered a number of firsts for the sector, working in collaboration with local government, regulators and communities. For example, in a first of its kind, our Stop the Drop campaign launched this month is already bringing together the collective might of the people of Cornwall, incentivising customers and businesses to work together to restore reservoir levels and save money. This is on top of the work we've been doing to support water efficiency with teams of people out door knocking. So far we've issued over 75,000 water saving devices from water butts to water saving shafts to have the potential to save more than 500 megalitres over a year. We continue to work around the clock using the latest artificial intelligence, drone and satellite technology to find and fix up to 2,500 leaks a month and have also introduced free find and fix services for customer side leaks, 30% of all leakage. Secondly, using our expertise from the Isles of Scilly, we're currently accelerating plans to introduce desalination units at a number of sites across Cornwall to treat seawater and produce either raw or potable water supplies. and to ensure our resilience to 2050 is in place now. Thirdly, and looking to the future and across the wider South West, we're also progressing our plans for a new reservoir in Bristol that will allow water to flow into the South West when it is needed most.

I hope you agree this is a great example of where Pennon's pioneering spirit, agility and innovative thinking have delivered real benefits for customers and communities in real time. I will now hand over to Paul to take you through the financials for the half year 2022-23.