Pennon Group Plc

Right, I'll make a start. Good morning, everyone, and thank you for joining myself and Paul as we share Penland's full year results for 2022-23. We also have some new members of our executive team with us here today in the audience. We're joined by John Horsall, who's our Chief Operating Officer. Andrew Garrard, who is our GC, and David Harris, who is our Drought and Resilience Director. And there will be opportunity to meet all our new executive team later in the year when we take you through our strategy and business plan into 2030. I think it's probably worthwhile me talking about the context for the 2022-23 results. It has been one of extremes. We have seen extreme weather patterns Those have tested our operational resilience, and we've had the volatility of the macroeconomics that have impacted the income statement, which Paul will talk about later. But the one thing that we have done, we have responded with agility, with pace, and we have pivoted to focus on the things that matter most, right here, right now, for our customers and our communities. We couldn't have done this without the support and the dedication of our 3,000 employees who have continued to show extraordinary care for the communities that they serve and for each other. Now, understandably, given our region, the beautiful region that I call my home in the South West, we've had a unique level of interest in what's been going on in our region over this last year. Understandably, customers are keen to understand our environmental fundamentals how we've been tackling the drought that started last year and is continuing as we stand here today many of our customers are indeed shareholders through our watershare plus scheme and i know some of them will be joining us online so what i'm going to do today is take you through how we've been tackling the biggest challenges head-on and with those challenges the progress we've been making in 2022-23 and towards our targets to 2025. And we have made progress. We have had resilient financial performance. I talked about the macroeconomics, but we have a resilient balance sheet. We have a robust level of gearing and that is supporting us to invest and a step change in investment you will see in our results that is the new run rate for us going forwards. And finally, as an outlook, We are building our plan for 2025 to 2030 based on what matters most to our customers, to our communities. And we will take you through that in October, but I'll give you some highlights of how that's coming together. So tackling the challenges head on. Let's start with storm overflows and pollutions. So I think it would be remiss of me not to acknowledge up front that this has been a challenging time for the sector. And I'm sure there's no one in the room today who hasn't seen any of the media, any of the social media headlines, and heard and felt the strength of feeling and anger around the use of storm overflows, a feature of our Victorian sewerage system. For us in the South West, we look after one third of the nation's bathing beaches. a huge responsibility, over 150 bathing beaches. And we have to make sure that they are available for our communities and for the over 10 million visitors that we have to our region and supporting the tourist economy. So we've put in place our WaterFit programme, which I'll talk about today. So that's the first challenge. Second challenge, water resilience, water quality. Storm overflows and pollutions are a key priority for our customers, absolutely, and for the visitors to the region. But the number one priority for our customers is always safe, clean drinking water. And we have to make sure that we have that in place. The supply across our region is under pressure. We have a granite coastal peninsula. We operate across a unique topography where over 92% of our water is And our resources in the region is reliant upon what comes from the rivers backed up by our reservoirs. And last year, we saw that acutely impacted with the hottest dry weather on record, culminating in a one in 200 year event with all the visitors that we had to the region. That picture that you can see there, that's not one of our beaches. That's actually Colliford Reservoir. And that's where Colliford Reservoir went to last year. So what have we been doing? We've been doubling down our efforts, we've been investing, we've been getting ourselves to a better place, and I'll take you through that. Third challenge, net zero, climate change. We live in a fantastic region, a beautiful region. The topography of it means that we use a lot of power, a lot of energy. It's our second largest operating cost after people. We have seen, given the power markets and the impact on us for last year, that we need to accelerate one of the three pillars that we have in place for our net zero plans, which is around renewable energy investment. And we are accelerating that. That will help us mitigate the impacts of a volatile energy market. And so we are investing in new infrastructure to prevent those impacts. Last challenge, customer affordability. We're living through probably one of the worst cost of living crises that many have experienced in their lifetime. And in our region, where one in three constituencies have above average levels of deprivation, it's incredibly important that we do what we always said we were going to do. Keep our costs as low as possible, be as efficient as possible, and keep our bills as low as possible, whilst also having an affordability toolkit that helps our customers and our communities. In order to do that, it's meant that we have reached out to our communities in different ways and expanded our community support. And I'll come on to some of the ways that we have done that. So those are the challenges. So what are we doing to tackle those challenges? So starting with storm overflows. We launched our WaterFit plan last year. That programme... has many activities within it, but its fundamental focus is around reducing the number of times that stormwave flows are used in our region, targeting our rivers, our seas, but predominantly our bathing beaches for our region in the first instance. And we're targeting to halve the number of releases from those stormwave flows by 2025. Pollutions and Pollution Incident Reduction Plan. We put that in place. We are targeting a significant reduction in pollution. One pollution is one pollution too many. Now there are times when things go wrong in our system. We know that. But we have to mitigate those risks. We have to make sure operationally we're targeting where we've got hot spots and we need to make sure that we are delivering the improved infrastructure. We've delivered a 50% reduction in pollutions so far over the last couple of years, and we're on track for a green EPA assessment from the Environment Agency for 2024, and I'll talk you through what we're doing for that. So the second challenge that I referred to, water resources. As I said, we're still in drought in the southwest, officially. We have been working at speed, We have been agile, we have been looking at how we optimise the water resources that have gone in place already whilst developing new water sources and building new infrastructure. We are going to increase the amount that we can access in terms of resources by 45% of the needs for Cornwall when they need it most and by 30% in Devon by 2025. And I can talk to you in a moment about the work that we're doing to achieve that. The pillar of our net zero commitment around renewable energy, we have allocated 160 million to developing our renewable energy generation capability and capacity. We've acquired a 40 gigawatt site in Dunfermline and we've got advanced discussions on further sites. When we've got those in place, that will equate to around 45% of our energy requirements for the group. Now, in terms of our last focus area, affordability, I think it's incredibly important we help everybody by keeping the bills as low as possible, but also for those who are finding it acute at the moment with their cost of living issues. So we are doubling the number of customers who are benefiting from our support tariffs, where customers can get up to an 85% discount to their tariffs. And we are tackling water poverty. Underpinning the plans that we've got and the improvements that we're making is our investment programme. We've invested more than we've ever done before, £350 million in 2022-23, and our run rate is set for the next two years. We're going to be investing £750 million as part of our K7 programme, and importantly, accelerating investment to make sure that we can achieve the priorities I've set out and the challenges that we're facing. And one last point in terms of what we're doing. We need to be innovative. We need to work smarter. We are on with that, but we also realise we don't have all the answers ourselves. So we have joint ventures with the University of Exeter and we have a brand new facility which will be open this autumn that's focused internationally on looking at some of the acute issues that we have in the water sector. And that centre for resilience, environment, water and waste will be international, not just nationally placed, looking at those issues that we've got whether it's forever chemicals, whether it's microplastics, we'll be looking at how can we help solve these issues. And that will help us in turn face some of the challenges that we have. So we are making progress, but we also know there is more to do. Now I touched at the beginning about stormwater flows and the reputation of the sector and the reputation of our own business. Hang on. I know we can only rebuild trust over time through what we do, through our actions. I also know it's incredibly important for us to support our customers and communities. WaterShare Plus. That is the scheme. I mentioned it at the beginning. Many of our customers are now shareholders. That is the scheme that we set up to do two things. One... Make sure where we are financially outperforming, and you'll see that in our results today with our Return on Regulated Equity, we are sharing the benefits of that with all of our customers so that they can get reductions on their bill or indeed join us in terms of supporting the business and becoming shareholders, and many of them have. We now have one in 14 customers in the South West who are shareholders in the business. But that's only one part of it. The other part of it is how we engage regularly with our customers. Every other month, myself and the exec team get together with whoever wants to join from our communities and ask us what's happening in the business and what are we doing about these priorities. It's been incredibly important, incredibly useful to understand what's on our customers' minds and also understand some of their specific issues. And in doing that, we're also attending every week, day in, day out, town halls, parish councils. So we really get to understand what it is communities would like from us and what it is they need to see as our priority in their region, in their village, in their town. Alongside the direct engagement, we've also been... thinking about the information that we can give customers about their communities and their region that help them make decisions and indeed visitors to our region. We launched WaterFit Live earlier this year. If any of you have seen it, it's the map of all our 150 plus bathing beaches and it lets you know where our assets are that may or may not impact bathing water. It lets you know what's happening in real time so you can make decisions. If something's happening that day, then you can maybe choose to go to another beach. It's been incredibly important, giving that transparency so everybody knows what's happening with our assets. And then lastly, Save Every Drop. I talked about the fact that we are in drought. One of the campaigns we ran, Save Every Drop, last year, was about how we engaged Cornwall to help us rebuild Cornwall. the volumes that are in Corriford Reservoir. Coming together as a community, putting customers in control. They obviously came together. We saw, a bit like a church fund, we saw the reservoir levels rising. They gained by getting money off the bill. And we saw that across everybody in the South West, in Cornwall. They all came together to do that. So it's incredibly important that we are reaching out to make progress. And lastly, strengthening our capabilities. I introduced some members of the new exec team this morning, but this isn't just about the exec team. This is about our 350 apprentices and grads that we've welcomed over the last couple of years. This is about how we are enforcing and making sure that for our delivery schemes on the engineering side, if we've got the right capabilities. This is about making sure we're match fit for today and for what's coming. So I'm going to move on and just give you some of the facts, figures and insight from the work we've been doing this year with those challenge areas, starting first with the environment. and starting first with pollution. I said at the beginning, things go wrong. Things can happen. In 2020, we had 225 wastewater pollution incidents. In 2021, we had 151. In 2022, we had 108. You can see the direction of travel. We're bringing them down. We know one too many, and we're targeted in getting that to where it needs to be. So, 50% reduction since 2020. We have our plan in place, whether that's tackling some of the acute pressures and hotspots we've got around rising mains, whether it's making sure that we can see what's going on on our network that stretches from here to Australia as an equivalent length. We're putting in pseudo-depth monitors so that we can see what's happening and we know where to intervene. And the hotspot investments, 50 areas that we did in 22-23, which cumulatively brings us to 260 over this K7 period. Storm overflows. We know the strength of feeling around this. I get it. We have to make sure that we're reducing our use of storm overflows because it puts at risk our bathing water quality, which for the second year running is 100%. And we don't want to risk that for our communities, for our customers, for our visitors. So we are investing. We are changing our operational strategy. Approach, we are reducing the flows that are getting into our network that cause those triggers on the stormwater flows to release. And we are putting in storm storage so that we can capture any of those flows and treat those. I've talked a lot about the beaches because that's where our customers see their priority. But we also are in a region where we have some beautiful rivers as well. and we need to improve river water quality, and we're investing to do that. And we have reduced the rivers not achieving good ecological status from 19% to 12% so far in K7, and we're going to reduce that further by the time we get to 2025. And in terms of bathing water, we know how important it is for our region. Schemes, accelerated, 19 done today, a couple more to do. But thinking about bathing waters, we've also had feedback from our communities. They'd like rivers to be bathing waters as well. So we're progressing pilots on the TAVI and the DART. And we're hopeful that those will get designated when they go forward. And one of them is going forward this autumn. And we're helping the community with that. So we've been busy. There's been a lot going on. We have got our reductions in pollutions in storm overflow use. Our bathing water for the second year running, 100%. Now in terms of our assessment from the Environment Agency around our environmental performance, yes, we have improved from one star to two star, but let's be clear, that's not good enough for our region and that's not good enough for our customers. We want to make sure we achieve that four star, not because it's a star rating, but because it will mean that we have reduced our impact on the environment and we are on with doing that. So that's our environmental improvements. I think I need to give the spotlight on Cornwall and Devon and water resilience. Before I talk through what we've been doing this year, the first box around water quality and quality first is incredibly important. Yes, customers want to turn on their tap and receive fresh, clean drinking water, but we cannot sacrifice quality, and we haven't. And indeed, the metric around water quality for Devon and Cornwall improved last year, which is pleasing. There were less risks around water quality than we'd had the year before. So yes, we were under pressure to make sure that we were delivering for our customers, But actually, water quality is our first priority, has to be. So in terms of the level of resources, what have we been doing? Well, you can see on that slide, it is a busy slide. We have been doing a lot. And there are two twin track strategies for this. First is resource and supply. Second is how do we help customers to use less? And how do we as a company use less? And for customers, if they use less, that means they save money as well. So it's a win-win. So first of all, supply-side investments. Well, for both Devon and Cornwall, we've been working at pace with the Environment Agency, with the Drinking Water Inspectorate, to augment the supply, to make sure that when we can recharge into our reservoirs, we've got the infrastructure in place to do that, and that we can recharge and make sure that we are replenishing when we need to. We've put in schemes this year that will boost when we need it most, Devon by 12%, Cornwall by 11%. We've also been looking at opportunities where we can put in small new treatment works, again with an abstraction that allows us to serve the population in a slightly different way and optimise our operations. Extra 3% for Cornwall for that. And then something that has been talked about a lot for the sector. Where are the new reservoirs? Where's the new supply? Well, in our region, we've been thinking innovatively about that. We've been looking at X quarries, X mines that have water in them that we can repurpose. Almost recycling in action, isn't it? So we've invested in the quarries that we have. We've also bought a new one. And we've put those to work, and that will give the next 11% in terms of supply. So you can see the total increase to date that we've achieved. We're not going to stop there. On the right-hand side of the slide, there is more that we're on with. For Cornwall, we're looking at desalination. We have a small desalination plant on the Alta Silly already, and we're bringing that onto the mainland into Cornwall. And we've also got another quarry that we've identified where we can take resource from there. And that will bolster our resource availability by another 20% for Cornwall. And for Devon, we put in our green recovery back in 2020, a scheme that again would help us with more storage and recharge. And that will deliver another 18% by 2025. So that's the supply side. And we're on with it. Demand side. Well, first of all, I have to talk about what are we doing to reduce our own usage on our own sites, where one of the bigger users of water in our own region. So we have to look first to ourselves. And we have that figure there, six megalitres a day. What does that mean? Well, it's about 20% of what we use. So last year, we absolutely focused on ourselves being as efficient as we can be. We've been fixing more leaks than ever before. We've been giving free leak repairs to our customers and the take-up has been good. And we have been supporting customers with free water efficiency devices, $130,000, free water bucks, free shower heads, making sure that customers can take control and do what they need to do. I talked about the Stop the Drop campaign earlier. You can see there in terms of the rise of the COVID reservoir and the fact that that was a targeted campaign of eight weeks. We learned a lot from it. And the demand that we saw in terms of the reduction, 5%, Paul will talk about in his financials in terms of the revenues. Yes, we saw increase through the drought, but with our initiatives, we've seen demand from our customers falling as well in the latter part of the year. So we've been busy, but it is working. We've made progress and we've got some more to deliver, but it's working well. Net zero. Three pillars. I talked about accelerating the renewables pillar, which is in the middle of the slide, where we're investing in solar PV to achieve that 45% of self-generation. We're on with it. We've got the first slide, advanced discussions for the portfolio of four pillars. That will help us mitigate risk in terms of volatility of the market and give us that security. The other two pillars, one's around process emissions, putting our monitoring in place so that we know what's happening across our assets and our networks so that we can target how we reduce our impact on the environment. And we're also investing significantly in our catchments. We work in 80% of our catchments. Why? Because we have more land. We have water quality improvements that we can gain from working on the moorland. So those natural sponges that we have in our catchments, that captures the water, natural filtration, comes down into our treatment works and makes it easier for us to treat. But it also captures carbon, and that's why we're doing it. We've invested in 300 hectares of peatland restoration this last year. And we're on for 1,000 by 2025. And we get biodiversity benefits that go alongside this. And we're planting trees. So, again, doing all the right things, reducing our carbon footprint by 40%, and, importantly, mitigating risks in the volatile energy market with our renewables. Customer affordability. I said at the beginning, this is about keeping bills as low as possible, being as efficient as possible. We bought Bristol Water. We knew there would be efficiencies from that. Paul will talk about those. That is helping keeping our cost base as low as it needs to be. Yes, we're investing. Yes, we're doing all the things we need to do. But ultimately, where we can make efficiencies, that helps with the overall levels of bills. You can see there, our inflation linked bill increases for 23, 24. Southwest Water, 0.8% compared to the headline level in inflation, keeping it as low as possible. Bristol Water, 5.5%. And I talked about WaterShare. We know we're giving back to our customers when we can. And indeed, if you look at the WaterShare issuances, you look at the support with Stop the Drop, you look at the support we're unlocking for our customers, with the tariffs that we give them that are discounted, with the one-off toolkit changes that help them get back on track, we're unlocking that support to the tune of £85 million to date. But we know we want to eliminate water poverty in our region. Now that sounds a big ask for the South West, but actually Bristol customers, when we ask them if they find their bill affordable, It's actually gone up. Bristol Water, 100% of customers that we've asked find their bill affordable. And that's also risen for South West, Devon and Cornwall, 97% of customers, ahead of the profile that we anticipated. We also know, though, that going forwards, whilst customers will be benefiting from our social tariffs and we will be investing in the community with our community funds, we know we need to think about charging in a different way, certainly for our region. where we have many visitors who come to the region and usage can go quite high through the summer months, as we saw last year. We need to think about seasonal tariffs. We need to think about how we are charging for capacity in a different way, because we have to have a system that can cope with those visitors to our region. I'm going to think very innovatively about that going forward and supporting customers in our region when we do so. So those are the four challenge areas. I'll just touch very briefly on our performance. Given the weather patterns we have had last year, it's not surprising when you look at this chart that our delivery measures have been slightly impacted, both for South West and for Bristol. But we are being clear that that we are focusing on making sure that we take learnings from that. We did, through the freeze-fall, perform much better than we did when it was beat from the east. We are finding and fixing more leaks than we've ever done before. So we will take those learnings, but a key underpin for us is making sure that we've got our compliance in place and that we are providing safe, clean drinking water. Bristol Water do particularly well on their customer service measures, and we're going to take that learning across into Devon and Cornwall as well. I talked about the investment that we're making. £358 million, a step up for 2022-2023. 50% increase, and £750 million over the next two years. The important piece of information to take away from this slide, yes, the increase, But actually it's around the capability. So we've got our frameworks in place for K7 that takes us to 2025, absolutely. But we are working now and we will have in place in the autumn our supply chain for the step up and the increase in investment that we see coming. We've had excellent interest. We've engaged the supply chain. It's as much about the supply chain wanting to work with us as much as us working with them. And we're going through that process now. but we will be much fit and ready for that by the autumn. And finally, in terms of our financial resilience before that, elegantly segued into Paul's section, I think for me, return on regulated equity, we are performing. That allows us to reinvest in those priorities that I've identified this morning. Our gearing is stable. And we've had gearing around about the 60% for a number of periods now. And that helps us support the investment and accelerate investment that we want to make. And liabilities like the pension scheme are in surplus. So from a balance sheet perspective, we're in a good place, despite the fact we've had the macro economic impact on the income statement for this year. We're actually in a good place. And you can see where we are reinvesting outperformers that we have made. back into the business, whether it's our WaterFit programme for storm overflows or whether it's our Water Resilience programme to get our resources and resilience on the waterside where they need to be. So with that I'm going to hand over to Paul who's going to take us through that point.

Thank you Susan and good morning everyone. So let's move on to the summarised income statement that you can see there. Now, as Susan says, macroeconomic challenges have obviously been before us this year, but inflation is something I've talked about a number of times in these presentations, and the inflation effect on Penn and Group really is about changing a profile of earnings. So in this first period of the high inflation, what we're seeing is our costs being impacted first, and for us, as we've said a few times now, That means power costs going up and it means our financing costs going up as we have higher interest charges on our index linked debt. Now those two factors alone make up the majority of the reason for the reduction that we've got in underlying profit before tax this year. Now, in terms of inflation impacts on revenue, that will come through in future years, and we will see inflation feed into higher tariffs and higher RCV growth going forward. So it is really a timing point to consider that. One way of looking through that is looking at our regulated return on regulated equity, the regulatory financial performance, and that continues to be strong in double digits. And that really does underpin, as Susan was just talking about, all the outperformance we're delivering, which is enabling the reinvestment that we're on with now. And one of those key areas that we've accelerated is one of our commitments to our groundbreaking watershed scheme, And that gives customers the opportunity to take a credit on the bill or to take a share in Penn and Group PLC. And that had a cost of 20 million. You can see that in the income statement there as a non-underlying item in the year. Regulatory earnings are also important because they are one of the main factors that underpin the dividend alongside our substantial retained earnings and indeed our resilient and robust gearing position. Looking at profit before tax in more detail, you can see the bridge here and the two biggest items very much being power and financing costs, as I've already alluded to. I'll just touch quickly on some of the other key moving parts in our profit this year. So this is the first full year of contribution from Bristol Water. Last year had 10 months worth of contribution given the acquisition date. So we've got a step up in earnings coming through there from Bristol. In terms of our demand, this has a number of moving parts, as it always seems to have with us. And COVID is still having a little effect as we're seeing our business customer demand pleasingly recover as businesses are getting back to work and their demand now is near pre-pandemic levels. So that demand has stepped up. In terms of household customers, well, through the year, we did see demand peak in those summer months, as Susan has talked about, with the weather-related events that we had in the summer. Demand did peak, but we did see demand reduce in the second half of the year in response to the water efficiency campaigns that we were putting out, and obviously the good work that our customers were doing to reduce demand themselves. So a small step down for demand. Then the next bar there is around 26 million reduction in revenue for regulatory adjustments. And again, this really relates back to COVID-19 and casting our mind back to the first year of the regulatory period when our demand was higher than it would have otherwise been because of all the usage in the region and the second homeowners and the influx that we had into that region. So we had higher demand, very much COVID driven, and that is returned through the regulatory mechanism in this year. And that's that adjustment there. I won't talk too much about power now because I'll come on to that in the outlook. But you can see in that slide there that it's not just the wholesale costs that have gone up. It's also the non-commodity charges for transmission that are also up in the year. But I'll come on to power later. In terms of other inflationary impacts, like all businesses, all costs have increased. whether it be our chemicals costs that we use or our consumables, we are seeing higher costs. So we're working hard to drive efficiencies through the business and one of those key areas for us where we have the opportunity to do that is the integration of Bristol and South West Water. Now, as some of you may know, that formal process, if you like, from a company statutory perspective, concluded on the 1st of February this year. So these two businesses now operate under Southwest Water Limited under one regulatory licence. And that's enabled us now to start delivering on financial efficiencies that we're seeing from having that one combined executive management team and back office functions, as well as procurement benefits that we're now starting to realise now. So if I cast my mind back to the acquisition deal model and look at the numbers in there and where we're coming out at the moment, we can see nine million of benefits already locked in ongoing in terms of delivery of operational costs. And if we add to that the effect of higher inflation when we compare back to the deal model, plus the benefit of terminating a Bristol water bond that I talked about at the half year, we can see benefits coming to close to 50 million from those activities. And there's more to come because we're still rolling out a second and third phase of the integration plan. So good work on Bristol integration. In terms of the other bar there, we talked about inflation interest a little bit. I mean, that change there, the 43 million is entirely related to inflation linked debt. I'll pause for a moment just to talk about Penn and Water Services because it is pleasing what we're seeing there. So they have benefited as well from the increase in business demand that I talked about earlier. And they've also benefited from contract wins coming through. And that's actually improved their margin. So not only have they got higher revenue, they do have higher profit before tax, increasing to 1.8 million from 1 million last year. And pleasingly, we've also received our first contribution from Water to Business of 0.3 million in the year. And just for those who may not know, Water to Business is a very similar company to Penn and Water Services, operating in the same market, same size and scale. Moving to the next slide, looking at our net debt position, quite a few numbers on here, but the headlines are, As I see them, net debt has increased around 300 million year on year. And there's three main factors driving that increase. The first is around our capital investment plans. And Susan's talked through all the work we've been doing there. As you can see, there are a number of areas of high levels of activity. And our capital investment in terms of cash flow has stepped up 100 million year on year. The second key aspect is inflation. So inflation has contributed to us having a higher net debt. through partially reduced earnings, yes, but also those interest accretions onto debt, increasing the principal amount of debts that we will be paying at the end of the debt's maturity. And the final element I draw your attention to is the final challenge of the buyback programme, the £40 million in there, that concluded in summer 2022. And as I've said before, the key item and the way we look at net debt is excluding fair value adjustments. So that bottom line there that takes that net down 100 million, net debt down 100 million, is the key one we use internally when we're tracking net debt and looking at our ratios. And it excludes acquisition fair value adjustments. Moving now to our financing performance in the year. It's been another strong year of financial performance in terms of our interest charge. Sector leading at 5.5%. We have a good average maturity of 15 years. And that really is based on our financing strategy of having a relatively low level of index-linked debt and around 65% of our debt either fixed through the natural fixing of the instruments or having hedges in place on floating rate debt. I touched earlier on inflation increasing net debt. It also increases our RCV, our regulatory capital value. So you can see our regulatory capital value there increasing to 4.7 billion. That's gone up 479 million in this year alone, inflation being a key driver of that. And as Susan has articulated already, that leaves us with a gearing of around 60.8%, a nudge down from where it was last year end, leaving us in a good sustainable position there. I would note I'm presenting shadow RCV here because of the green recovery and the accelerated infrastructure delivery initiatives. I think it's important we do track shadow RCV through this period as we will be spending and that money will be going into net debt. So to compare light with light, we're putting it into that shadow RCV as well so we can see that. Finally, it's been a busy year in terms of raising new debt. You can see that we've raised 825 million of new and refinanced debt since March 2022. So I'll just take a moment to say thank you to those investors in the audience who have helped and given advice and supported us through that process. Thank you to you. I'm pleasing to see in this period we issued a first syndicated USPP, 300 million. We're very pleased with that. It was heavily oversubscribed and we've got an average maturity of 12 years there. And we see further issuances of syndicated debt as we move forward through the rest of this regulatory period and into the next. We're also continuing with our usual bilateral loans and leasing. That's been part of the portfolio for many years. And the one thing I would note as well is the amount of RCFs that we've got on the books. We've ticked that up slightly to give us a higher level of pre-funding given the level of capex that we're looking at is moving up. And then just a little bit more on the financing portfolio. So what sets us apart and why do we have that leading position? Well, for me, we have a diverse portfolio of debt. I think that's a key pillar of what we've always done. So our debt portfolio looks different to most companies in our sector. And it's something that I think is one of our strengths. And really having the USPP is just diversifying that even further. And we'll continue to look at diversifying that portfolio and making sure we're in the right markets at the right time to get the best credit margins. We're going to continue to target an index-linked debt proportion of around 20% to 25%. We have seen that nudge up on the acquisition of Bristol Water. Bristol Water came to us with 50% index-linked debt, so therefore it did step up over 30%. We've taken action to reduce it, and by the time we're in the next regulatory period, we expect to be at 20%, 25% of index-linked debt. We're going to be continuing to manage our hedging on a 10-year rolling basis. So as we're putting in new debt now, floating rate debt, we will be looking to swap that out over longer times to lock in the benefits that we're seeing. And something else that's a little bit new for us as we go into the next regulatory period is we will be having a rating at the Southwest Water Company level. And that's something that will be in place for K8 and we're very much targeting a strong investment grade rating there. And just to note, so that was about Southwest Water. At the Penn and Group level, we do also have an element of debt, a modest amount of debt, gives us a bit of flexibility, supports the funding we have into Penn and Water services. And now, as Susan's talked about with us moving forward with acquisitions of renewable opportunities, that does also give us the opportunity to raise further debt at the Penn and Group level, backed by those renewable returns that are going to come through there. So that's an exciting part of the business that's going to be growing. In terms of RCV, you can see there our expectation for this regulatory period to end at around 5.2 billion, an increase of over 50% from where we started the regulatory period, a combination of acquisition of Bristol plus all the accelerated investments that are continuing. Now, as I look at those accelerated investments, and Susan outlined them earlier, we are expecting a gearing level to tick up as we move towards the end of the regulatory period. But as I say, RCV also will be driving that growth into the long term. I'll just touch on outlook now, if I may, because we are still in a high inflationary environment. I think the expectations are for it to soften somewhat. But at the moment, there are persistent pressures which are keeping it at an elevated level. So what does that mean in terms of Southwest Water's revenues, as Susan's talked about already? Our tariffs will be increasing by less than the headline rate of inflation, but nevertheless, they will still be increasing. And that means our revenues in southwest water will be stepping up this year. From an operating cost perspective, very much the challenge is to keep that flat. And I think one of the key aspects of that is clearly our power costs. I said I'd come back to them. So power costs year on year. So where are we for 23, 24? We're around 75% hedged as I stand here today. And given where the markets are and they have softened somewhat and that softening has really continued, it seems one direction at the moment, we're expecting our power costs to be broadly similar to this year. Perhaps there's even that opportunity for them to become a little bit lower depending on where markets move to. So we've got 25% left unhedged for this year as we stand here today. Clearly, we'll be looking at continued efficiencies rolling out in terms of Bristol Water, which will also help offset general inflation pressures in our operating costs. In terms of financing costs, I think here it's key to note that we are going to be and we have been raising more debt. We are going to be raising more debt to fund the capital investment that we've got on the horizon. And everyone in the room will probably know that yields are somewhat higher than they were 12 months ago. And therefore, not only our variable rate debt, but also new debt that we put in place will be more expensive than we've seen in recent years. And that will lead to an overall increase in our financing costs for the year coming. CapEx, Susan's already touched on, so I won't focus on that too long. But yes, we're expecting an elevated level of CapEx to continue and 750 million to be incurred over the remainder of this regulatory period. And then finally, I'll just touch on Penn and Water Services again. So, yes, we're seeing continued revenue growth and we're also expecting to see continued margin growth. So we should be able to hopefully sustain the levels of improvement that we've seen. So we'll be looking for another step change improvement as we deliver for this financial year. And with that, I shall hand back to you, Susan.

So thank you Paul for taking us through that and just for the next couple of minutes sticking on the theme of outlook I wanted to talk about the work we've been doing on our plans for 2025 to 2030. Very much putting them in the context of our long-term delivery strategies that we have been working on and publishing more recently. I think it's the first thing that I want to touch on, though. And I said this right at the beginning of the 2022-23 results presentation where we focus on what we've been doing for this last year. What is important to us is what is important to our customers and communities. And so we engage with customers, communities every single day in very different ways. But one thing we do learn is what their priorities are. I said number one priority is safe, clean drinking water. So it won't be a surprise to see that as a pillar and a feature in our plan for 2025 to 2030. We know our area is very much focused on tourism, agriculture. Making sure that we protect the natural environment is also a key pillar of what's in our 2025 to 2030 plan. we know our customers want to spend time at the beach want to make sure that tourists who come to our region can spend time at the beach too so when we're looking at our program of interventions to alleviate the use of storm overflows we will be tackling the bathing waters and the beaches first we know that our customers and communities want us to help support their local communities with water saving with efficiency and we are out there doing that today and we'll be doing a lot more of that going forward and we are engaging with our customers through our watershed share scheme in a way that we've not engaged in the past and that will only grow and develop over that period too So going back to the challenges I talked about at the beginning, are the challenges that we'll see for 2025 to 2030. We have to tackle the storm overflows, we have to eradicate pollutions in our region, and we are prioritising the work that we're doing in that period to achieve that. We'll be upgrading many wastewater treatment works, we'll be addressing issues around microplastics and forever chemicals, working with the University of Exeter to think about innovative ways to do that. We will be building further our resilience on the water resources side. We will be investing in new resources. We are going to look to start to accelerate our investment for Cheddar 2 up in the Bristol region that will help with the greater southwest resourcing position. And we are making sure that we are investing in our operations, our bio resources work, reducing emissions, making sure we're fit for the 25 to 30 period. continuing to work in our catchments, moving that 80% percentage up further, looking at restoring thousands of hectares of habitat and making sure that that habitat then delivers us fresh, clean water into our treatment works. And I mentioned at the beginning, customer affordability. We need to be innovative with how we charge customers. We need to make sure it's fair. Customers have told us that's what they expect us to do and that's what we'll be focusing on. In terms of the timetable, I'm sure many of the room will be aware of it. We've already been issuing our long-term positions and plans. We know there is a step change in investment required. We are already ramping up for that new run rate now. And those investments will be tackling the most significant challenges that we've got. And we'll be more than quadrupling our enhancement investment programme. There will be a lot for us to take you through, and we're excited about it. It's going to be a very innovative, well-positioned plan, and we're going to undertake a spotlight on that plan on the 5th of October. So I'm hoping many of you in the room will be able to make that and come and meet the exec team who will be delivering it. So, in terms of a summary, this has been a very... busy year we have been tackling the biggest challenges head-on we have made good progress we are on with our targets for 2025 we've got a resilient balance sheet and our outlook is good we're developing a robust plan for 25 to 30 so with that I'll thank you for coming today and we'll take your questions

Good morning. It's Martin Young at Investec. Can we expand a bit on storm overflows and what needs to be done? It strikes me if I try to simplify this, you can possibly drop it into three boxes. Firstly, make sure what you already have works. Secondly, reduce what actually goes in to those storm overflows. And thirdly, make them bigger. So if you think about those three boxes, could you sort of give... That's an indication of whether there are any issues with the functionality of what you already have. And then as it pertains to stopping or reducing inflows, what you actually can do there, right across the sort of the broader spectrum. And then thirdly, how much you might have to invest in terms of making the storm overflows actually bigger in size. Thanks.

Yeah, great. Great question, Martin. There's no coincidence that that was the first pillar in terms of challenges that I talked about we've been looking at and tackling in 2023. And it features heavily in our plans going forward. So you're right how we will tackle our storm overflows. First of all, we have got all our monitors in place. So our monitors across our 1,400 storm overflows are now giving us the information that we need to let us know how those are operating and when they're operating. So you're right, there's a threefold approach to this. One is investigating and making sure we're clear about how they are operating and when they are operating. And John, who has come in as the Chief Operating Officer, is looking at the teams that are in place already and making sure that we have the resource available to undertake those investigations and at speed. And indeed, we have a wealth of information available that we have going into the plans that we'll be putting forward at the end of June, which will indicate for each of those overflows what we will be doing. And you're right, it's a combination. It's a combination of making sure flows keep out of the network. So where we have surface water coming into the network, how do we redirect those flows and how do we work in those catchments to achieve that? And if the flows are coming into the network and we think it's the best way to resolve the overflow issue, then we will be building more storm storage so that we can capture those flows and then treat them. So you're absolutely right, it is going to be a combination of diverting flows as well as capturing flows to then treat them. Our focus is around our bathing beaches. So in our WaterFit programme, which is what we're badging as the programme to tackle our storm overflow use, we are addressing 49 of the 151 beaches in our region in the period of 2025. And that is a mix of more storm storage going in, as well as looking at how we can divert flows. And it might be a combination of both at some of those beaches as well that we're talking about. But our focus is around the beaches. And there is a lot of focus on the average number of spills. And there are assets in our region where inland we need to investigate and understand what is happening there. But we know our priorities from our communities are focusing on the bathing beaches. Because one spill at one of our pristine beaches is something that we want to try and alleviate as quickly as possible. So it is a mix. And it will be, sorry, just your last part of the question, it will be a key driver of that ramp up of investment that I talked about, certainly around our enhancement investment going forward into 25, 30 business plans. Dominic?

Hi there. Yeah, it's Dominic Ashbar. Please, a couple of questions. Actually, the first question I'm going to follow on from Martin, which I think he probably would have followed up with himself, which is the water industry's earmarked £10 billion of CSA spend out to 2030. Could you give us an indication of what proportion of that comes from southwest water? And when you look at the Stantec, report the southwest water contribution of the 56 billion is really tiny is that a realistic expectation or do you think it'll be a lot larger than that and then the second question is um southwest water obviously clearly you've got a number of investigations going on at the moment from off what and the ea um on full to flow uh investigations and then also announced a couple weeks ago on the leakage and per capita consumption could you give us sort of an update of what you see what sort of news flow and impact that potentially could have and could it give us any assurances that there's nothing else out there beyond those two investigations please

Okay, thanks for those questions. So the first question, you talked about the Stantec work and what that looked like as a proportion for the southwest region. I think the Stantec work, as I understand it, focused quite a lot on inland and rivers. Obviously, we're talking about beaches and bathing beaches in our region. And as I just touched on for Martin, obviously, we want to make sure that we can reduce and in some cases, well, target elimination of storm warfare use for those beautiful, pristine bathing beaches. So the numbers for us will be influenced by the amount that we are focused on in terms of those bathing beaches. So as I said, I think the stand tech focused more on what was inland and river, whereas ours is more bathing beaches. And in terms of the 10 billion, you can see the run rate that I talked about was stepping up in terms of our investment. So there is going to be the 350 that we spent last year, the 750 million over the next two years. That is a run rate for our kind of investment going into the next regulatory period. And yes, a significant proportion of that will be around tackling storm overflows. Just moving on to your other question around the investigations. Now, let's be clear. We, as a sector, are in the spotlight. And our regulators, understandably, will want to understand how we are operating and what our performance is. And we'll want to deep dive into that. We are working through the investigations, both from Ofwat and the EA, around full flow to treatment. That is ongoing. We have been giving information across to our regulators and been open and transparent about doing that, obviously. And they will be working through a process. So I don't have an update here today around that investigation. And then similarly for the leakage investigation that was launched by Ofwat last week, obviously we have shared information with the regulator and will continue to do so through that review process. And we have to, borrowing the phrase from somebody I spoke to recently, trust in the process. in terms of what we're going to go through with the regulators. But it's not a surprise to me that the sector is in the spotlight and the regulators will want to understand our performance, perhaps at levels and in depth, in a way that they haven't done historically. And that is fine. I think we need to be open not just with our regulators but also with our customers and communities, which we will do so. We are working through this process. If there is information to give, we will be giving it and we will be making sure that we're very clear about where we land with that. James?

James Brown from Deutsche Bank. Three questions, please. on slightly different topics. Firstly, on the shadow RAV, it's quite useful to have that, so thank you for that. Can I just ask what adjustments are in that? Because when we go into the next regulatory period, there'll be all sorts of adjustments made by OFWA around TOTEX overspend or underspend, tax. So is that a view of literally... You know, once the adjustments are made at the end of the period, that would be where your RAB's running, or there are some things that are included in that and some are not. Secondly, on ODI performance, you obviously said you're impacted by the weather this year. Do you have any expectations? Obviously, you don't have a firm target, but do you have any rough expectations for next year or the year we've just gone into? And then thirdly, on TOTEX... Is Totex underspend a thing of the past? Thank you.

Well, I'll start with the last one first, actually. If Totex underspend a thing of the past, I think efficiency isn't. So where we talked about the work we're doing, obviously, on the integration of Bristol and the fact that we want to make sure we're as efficient as we can be internally. and with our supply chain that won't stop but you can see from the presentation where we are making efficiency that gives us headroom to reinvest and to make sure that we are prioritising those improvements for our customers so I think underspend is probably the wrong way to think about it but efficiency is absolutely here today sorry Paul

Okay so in terms of shadow RCV James we are intending to put as many adjustments through as we can into that so it should be everything obviously when it out turns clearly it will be different as every forecast tends to be and obviously there's inflation forecasts in there as well but it does include technical adjustments for tax things like that you were mentioning as well as blind year adjustments and previous regulatory periods that would normally come through at this time so it does pick up on those aspects.

Yeah, ODIs, so obviously we were impacted in our ODIs by some of those weather events, whether it was supply interruptions that obviously got impacted, whether it was the hosepipe ban that went in place, there will obviously be restrictions for customers. So we are obviously wanting to make sure that we deliver for our customers and communities and want to target the better performance that we've had in the first couple of years for our ODIs and we will be putting plans in place to make sure that we can do that not just for the year we're in now but also for the last year of the regulatory period. So it's important for us to deliver for our customers and make sure that we are reducing those supply interruptions and making sure that we get our resource position into a place where we can lift those hosepipe bans. Any more questions? Go on, Dom.

There's no other questions. I'm happy to lob in a couple more. It's Dominic here from Barclays. A couple of things piqued my interest. One, looking at your water resources, and you talk about increasing Devon and Cornwall. What about the good people of Bristol and Bournemouth? Is there any plans to increase water resources for those regions? And particularly in Bristol, if I remember, one reason why it made strategic sense for you was the infrastructure to link it up to the greater sort of southwest and water transfer. And then the second question on second homes and holiday homes and your tariff reforms, I think that you're talking about. Could you just give us a colour of what percent of your revenues come from sort of second homes and what second homes and holiday homes should be contributing to your revenues? Thank you.

Okay, thanks Dominic. So in terms of water resources, the impact last year for the regions in drought were Cornwall and parts of Devon and we are obviously still in drought in those periods now. That doesn't mean to say that there weren't pressures in Bristol and in Bournemouth and indeed the Isles of Scilly, but the resources were there in place and and we were able to abstract from the environment in such a way that we were able to replenish those going forward into the autumn period. That said... We know that there will be a requirement for more resources going forward and we are putting in plans for advancing the work for Cheddar 2, which is up at Bristol. We put that forward as part of the Acceleration Investment Programme that we more recently discussed with DEFRA. And so, yes, Don, we will be looking to bolster resources for the Greater South West.

Then in terms of second homes... Shall I just articulate the sort of revenue level that we've got there? So in terms of second homes, I think we talked about one in 17. So if you use that as a proportion of household revenue, and if you're thinking of South Water's revenue, around 80% of that is household. So then take that to proportion, and you'll get somewhere close to that revenue that's from those people. And I think the whole point around this really is... thought process that if meters are in place then perhaps the level of bill that they are paying if they're not there utilising the second home through a full year might be somewhat lower than an average bill so that level of revenue may be somewhat sub-optimal and effectively being subsidised by the rest of the resident population which is what we're looking at in terms of that fair charging to make sure we can get the best outcome for the good people of Devon and Cornwall and Bristol and Bournemouth.

Artis?

Can I follow on from Dom's question around second homes, but thinking about what you said about innovative tarification. If you were to go to seasonal tariffs, rising block tariffs, You're presumably going to have to have smart meters in place in order to facilitate that. So where are you at the moment with smart meter rollout and where do you think you will get to in AMP8? And then on the continuation of the tub that you have in place, when do you think you will be able to lift that for the good people of the Southwest?

Yeah, great question, Martin. So in terms of our metering penetration, for Devon and Cornwall, we're up at around 85%. We have some, but a modest number of smart meters in now. But the tariffs that we're looking at... We are looking at how we might be able to implement them sooner rather than later with the meters we have in already as our estate. So that's one thing we are looking at because I think the need to move to a fairer basis of charging is really important. And then secondly, so that we can be more sophisticated again with the tariffing structures that we put in place, you write smart metering will be incredibly helpful for that. So we have advanced our programme for smart metering, which again was part of our acceleration. So we're putting in 50,000 as part of an accelerated programme so we can get those in place and see what that's telling us. And then, yes, it forms a key pillar for our business plan for 25 to 30 but just to be clear I think there's a way we can introduce tariffs now with the meter penetration we've got obviously they won't be as sophisticated as perhaps where they might end up when we get with smart metering but that doesn't stop us looking at this now and that's why we're going to put the pilots and trials in place to do that and then in terms of um uh temporary use bands and the hose pipe band um I did say in the presentation, and just to be clear, we are making sure we're helping our customers through this. The free water efficiency devices and the free water butts, incredibly helpful. You can use your hose pipe off a water butt. So making sure that customers can have those devices in place will help them through this period and yes you're absolutely right we are looking at building our resource position there is a graph that's in the appendix to the presentation that shows you where we are for the colliford reservoir and the fact that we are and have been building our resource to a good position but we need to make sure that we don't impact the environment so we are going to be looking at our position at the end of july and then we'll look again at the end of august and we'll see whether we are in a position that our resources availability allows us to lift that temporary use ban. So we will keep checking that. But we obviously want to make sure that we're keeping customers updated with that and giving them all the ability to manage their own water use and efficiency. Okay, good. I think we've done well. Thank you very much to everybody for coming this morning. Great to see you and hopefully we'll see you at our Spotlight event in October. Thank you.