So, good morning everyone and welcome to the Pennon full year results. So, I'm Keith Haslett, the new CEO of the Pennon Group and I'm now delighted to be in the role, having joined on the 1st of April. The agenda for today is an introduction from myself and then I will hand over to our CFO, Laura Flowerdew, and we will take you through the financial and operational results for the year. I'll then take you through my key areas of focus across the next few months and then finish up on sector reform and the cost change process. So in terms of, I guess, my background, I'm a chartered civil engineer by origin. After following my father into the water industry, I've worked in the industry now for over 25 years in a range of leadership roles. that includes capital delivery, operations and more recently leading Affinity to be one of the highest performing water-only companies from a low start point. I'm really passionate about my employees and making a difference for our customers and enhancing the environment through large investment plans and operational excellence. In the past, I've delivered a positive step change in delivering world-class drinking water for our customers and reaching blue flag status for our beaches. I've also enjoyed watching new apprentices and graduates grow into senior influence and roles across our industry today, something I'm very proud of as a leader. In Penon, I see a huge opportunity as a listed business to really transform in all aspects and drive tangible performance through our growth plans, but also building capability through improved systems, processes, and more importantly, our employees. Based on my experience in various roles and companies, I can quickly diagnose and gain an understanding of what is working well and areas of opportunity to improve. As you can see, some of my first engagements across the first two months in role is meeting my colleagues across various office locations, hosting Q&A sessions to get a first-hand knowledge of, I guess, the successes, but also the challenges, site visits to meet some of the front line to really understand our culture and the ways we work, meeting our customer call centres which includes our water retail services as well and deep dive sessions into all areas of the business to really understand our current position in order to develop coherent plans for delivery. So I guess just some initial observations and opportunities. This initial period has already given me some very clear perspectives about Penon and how we deliver for our customers and stakeholders. I'm very focused on reviewing our group strategy as a priority starting with the regulated business. It has been very clear from my first day that we have very passionate employees that want to deliver an excellent service for our customers and improve the environment that they all enjoy with their families. We have strong foundations and strategies in a number of areas. Clearly there are other performance areas that require improvement plans. Outline plans are now in place after two months and more to follow in the next quarter. So I guess looking at customer experience here in front of you, it's important to put customers at the heart of our values, our decision making and our behaviours. CMEX is a great opportunity for improvement in South West Water and SES to really mirror our performance in Bristol. Similar opportunities exist on DMEX and BRMEX, measures based on improvement plans being implemented now, and alignment of our resources and systems across the group to be more effective and efficient. Asset life cycle is an area where you know streamlining the asset life cycle from inception to operation and maintenance is key review and asset health to ensure we have clear asset information and decision making tools for operational improvement and linking that to future price review submissions important to have very coherent total tax investment plans that clearly link to our performance for amp 8 and beyond into amp nine environmental performance assessment is a really important area i guess firstly i'm sure you will have seen that pennon has been provisionally graded as one star on its epa rating for last year i just want to be very clear that you know i don't tolerate or even recognize one star rating um from my previous performance in delivering four star um in in other jobs in the past performance will certainly improve and the bar has been raised to meet the expectations of myself going forward and my action plan has already started a number of these metrics are in our control to deliver for winep including the winep outputs really important we deliver these commitments on time self-reporting of pollution we need to improve to meet our requirements on that framework and improving our compliance against permits linked to the investment program ahead of us. So I guess another area just to talk about is really energy management. I've been surprised the size of the opportunity for improving our approach to energy management based on positive step changes I've made in the past. We have an untapped and sizable opportunity for solar generation behind the wire for high energy sites this work has commenced using the skills of our pen on par team with five sites now identified and being implemented at pace we have an opportunity to optimize our existing asset base to consume less across our water and wastewater assets and the buyer resource strategy has a great opportunity to centralize six of our sludge treatment centres into one or two to optimise the sludge into biogas into energy and to create larger efficiencies going forward in the future. So these are some of the initial observations. I will now hand over to Laura for the next section on the financial and operational performance.
Thank you Keith and thanks all for your time today. So I'll first of all start with taking you through some of our financial performance. So the group has seen a return to profitability in the 2025-26 financial year with a 55% increase in EBITDA and underlying operating profit more than doubling to £326 million. Return on regulatory equity for the year is 6.7% without performance in respect of financing and Totex offset by ODI penalties as a result of operational performance, which I will come back to later. We incurred £644 million of group capex in the period as we continue to invest in improvements to our asset base across the water group, whilst gearing for the water group remained stable at 61.8% at the end of the year. We've proposed a dividend for the year of 29.29 pence per share in line with our policy. So, first of all, focusing a little more on the income statement, increased revenues provided a material benefit year on year, partially offset by an 8% increase in our underlying operating costs, which together provided that 55% EBITDA growth year on year. Non-underlying costs of around £20 million include costs from the implementation of our new customer experience platform, as well as some restructuring costs. and they also included the close-out costs of two regulatory investigations. Firstly, the income statement impact of the Ofwat wastewater investigation for which enforcement undertakings were agreed last August. And then secondly, the Brixham Water Quality Event judgment was received on the 2nd of June with a full fine of £1.9 million recognised in the four-year results. Our ongoing capital programme has led to increasing depreciation charges and financing costs are also higher as net debt has increased as we fund investment in our asset base. And as I mentioned, our dividend per share remains aligned with our policy and increased by CPIH. So, as I mentioned, EBITDA has shown strong improvement year on year, and revenue has provided significant benefit with a 23% increase in our water tariffs, reflecting our regulatory determination, as well as, to a lesser extent, increased consumption from our customers. The start of the new regulatory cycle has resulted in an increase in our underlying cost base through a reset of regulatory and environmental charges, coupled with inflationary increases. Our focus on commercial, operational and integration measures to drive efficiency savings across the business has resulted in savings in the year and going forward, whilst our commodity price hedging has also provided cost benefit year on year. However, operational incidents resulted in around £18m of cost increases caused by storms and adverse weather conditions, as well as the dousal and drinking water supply interruption in April last year. Whilst revenue in our non-household retailers has also increased in line with sector-wide tariff increases, wholesale water costs have also increased in these businesses. A net EBITDA improvement of £2.4 million in those businesses therefore results from a strong focus on margin improvement and contract retention and renewal. Pen on Power has also seen its first income with £1.8 million EBITDA this year as a result. Touching on our capital expenditure, our capital programme has continued with a focus across our business on delivery against our AMP8 targets, as well as ensuring closeout of our AMP7 deliverables. CapEx has been lower than originally anticipated in the water group as we reprofiled spend to ensure robust modelling and clear design across our major projects prior to commencing on-site delivery. Our ongoing investment programme is supported by a robust balance sheet with a diversified debt portfolio and strong liquidity. Watergroup gearing is flat year on year and within our guidance. We raise £635 million in the year to fund our capital expenditure through our bond programme and other bilateral or lease arrangements. At a group level, debt is a few percent higher at around 65%. So our out-term position results in RORI or return on regulated equity on a real basis of 6.7% in year, slightly below our 7% target. This reflects out-performance as anticipated on financing costs as higher inflation and new financing provided benefit against the allowed cost of debt. CAPEX efficiencies are being delivered as we work through the capital programme although the in-year performance is also aided by timing differences which we anticipate to reset over years two and three. From an operational perspective, our performance has been impacted by the adverse weather conditions resulting in net penalties across our business. This reflects network resilience challenges in water And whilst we have seen underlying performance improvement in wastewater, we still incurred a net penalty as the last four months of the financial year materially impacted on some of the measures, reducing reward and increasing penalties. overall this results in 6.7% RORI in real terms despite the adverse operational performance in the year and allowing for inflation and the actual balance sheet this would result in a regulatory return of 12.4%. Moving on to next year we anticipate a further improvement in financial results with revenue increasing by around 50 to 70 million whilst water group costs will increase by up to 5% year on year. Revenues and costs for our retailers will reflect sector wide tariff changes with EBITDA remaining stable. So overall this will result in a group EBITDA growth year on year of around 5 to 10%. Depreciation and financing costs will continue to rise as our capital programme progresses and we'll see increases of up to 10 and 15% respectively. Capex is anticipated to remain in a similar range of between £620 and £700 million. We anticipate that underlying operational performance will improve year on year, although with stretching targets and some measures still impacted by the extreme rainfall in the first quarter of 2026, it is anticipated that the Water Group will remain in net ODI penalty next year. So let me talk a little bit more about our operational performance this year. Firstly, as you will recall, we continue to focus on our four strategic priorities. These are aligned with the outcomes in our five-year business plan and are critical to delivering on our commitments across our operating regions. As is clear from the net operational penalties we've incurred, in-year operational performance has been challenging and has been impacted by weather conditions, which have often been localised in extreme, particularly in Devon and Cornwall. This means that whilst the UK as a whole has seen lower than average rainfall, in the south-west we have still seen above average rainfall and we've also seen extremes with dry, hot weather in the summer and periods of intense rainfall, including 190% of rainfall across January and February this year in Devon and Cornwall. So let me talk you through a little bit more our strategic priorities and our performance measures. Our first priority, reflecting the top priority of our customers, is building water resources and improving water quality. We've seen significant challenges this year as the hot summer period followed by freeze-thaw conditions and heavy rainfall in the winter put pressure on our networks. You can see from the chart that January in particular was challenging. There were five named storms including the red storm Goretti which heavily impacted power supplies in Cornwall this created tough operating conditions and impacted our performance across a number of metrics underlying performance outside one-off or weather related events remains strong and the operational teams are working hard to bring performance back in line with our ambitious targets however this has led to material penalties in terms of supply interruptions mains repairs and leakage, meaning that network resilience and asset health is an area we will focus on as we move forward. Water quality remains sector-leading in SES, with Southwest Water also retaining a top quartile position, and Bristol showing underlying improvement year on year. Moving on to our second priority of tackling pollutions and storm overflows. This has been a particular focus given challenging targets and the topography and historic performance for southwest water as many of you will be aware this has been an area of continued focus and one where we have seen improvement over the past year our pollution incident reduction plan has been key to this improvement with reductions in pollutions to a watercourse as well as spills from storm overflows the absolute number of pollutions has reduced by around a third whilst our revised sewer length agreed with the Environment Agency resulted in normalised pollutions reducing by around 53% year on year, bringing us within the range of performance for the sector for the first time. We continued to work hard to reduce spills from storm overflows and saw the benefit with 17% lower spill numbers, whilst spill duration reduced by around 25%. These improvements resulted from our continued focus on initiatives to reduce the underlying number of spills, and we've taken action at our top five spilling sites that reduce spills across those sites by more than 50%, through both targeted operational interventions and focused investment. Sewer flooding remains an area of strength. We're in reward on internal sewer flooding although this is lower than we had targeted as the extreme rainfall in January and February impacted our networks. This increased the number of customers affected and reduced the reward relative to a more normal year. As such, whilst good progress continues, the year outturned with lower benefit from outperformance and higher penalties resulting in a net wastewater ODI penalty. In addition, and as Keith mentioned, whilst we've made good progress in moving forward our capital programme, four projects related to our WNEP programme were not completed by the year end, which will impact on our EPA scorecard. Alongside performance in respect of normalised and serious pollutions, this has resulted in a provisional one-star assessment for the 2025 EPA. We do remain focused on protecting the environment, not only by improving performance in our wastewater business, but also by delivering on a number of initiatives which will provide environmental gains. We've continued our award-winning upstream management programme and peatland restoration to support biodiversity and environmental net gains across our regions. Our renewable investments in Penham Power saw two sites energised in the year with first revenues also occurring. The remaining two sites are making good progress and we're also progressing some behind-the-wire projects that will provide multiple benefits in terms of financial returns, resilience and carbon offset against performance commitments for the regulated business. And then last, but by no means least, our final priority relates to customer affordability and support. With tariffs increasing, the past year has been challenging across the sector, and our customer teams have been managing increased calls due to higher bills, coupled with continued focus on the service we provide as the water industry remains under the spotlight. It's therefore been important to ensure we are communicating, supporting and engaging with customers across our regions. From a support perspective, we ended the last five year cycle with support provided to all customers deemed to be in water poverty. And despite tariff increases, our target is to return to this position by the end of the five year cycle. In this year, with a step up in tariffs, it's therefore been vitally important to support customers who cannot afford their bills, and we increased the number of customers receiving support by 11% year-on-year, both in response to customer contact as well as by proactively enrolling customers on tariffs where we think they need the support. We're also focused on ensuring we support all our customers and drive improvements in the services we provide. We listen, learn and respond to feedback from our customers through our programme of research and community drop-ins, as well as using the feedback we get every day on the services we provide. We continue to work with our WaterShare Plus panel to ensure we're putting customers at the heart of our decision making. Our retailers are also going from strength to strength, engaging every day with business customers across the UK. We've seen excellent Trustpilot scores, including a step change for SES Business Water. And finally, we're making good progress in investing for the future in our customer service. Both in South Westwater and in our retailer business, we're implementing new technology platforms that would drive best-in-class customer service, better functionality to allow customers to self-serve, and improved capabilities for communicating and engaging with customers, whether on their bills, on the service they receive, or the improvements we're making.
With that, I'll hand back over to Kim. okay so thanks laura um look i'm very focused on now over the next few months completing i guess an operational review that will now deliver material improvements for our customers and stakeholders so you can see in front of you there are five key areas that will focus me in terms of the regulated business across the next few months that include our customer transformation our people and culture our target operating model asset management and reliability and our capital investment program. So I guess just to unpack that a little bit, there's a comprehensive plan now in progress. Actions are being taken, as you can see, and that's already underway with the team as we speak. Customer transformation is an area where we have a project fusion going live for our new CRM system in October, which will transform our customer experience with further capability planned. We are planning the next phase to introduce channels of choice to our customers and using artificial intelligence applications already built into the Salesforce platform. The focus is really to improve our customer experience whilst reducing our cost base through Ampate and beyond. People and culture, I've completed a survey now with employees and created tangible action plans with our teams. I've introduced a new scorecard from CEO down to the front line to really start to introduce a performance-led culture. I've recruited a new Chief People Officer who is passionate about cultural transformation in alignment with my approach and ambition. I've elevated the importance of technology and data in our business and our existing chief information officer is now part of the exec committee and reports in to me in terms of the target operating model i am now introducing a best practice approach from my experience in previous roles to ensure we maximize our capability and performance i've introduced new clear lines of accountability and responsibility within my executive team and the senior leaders I have observed a range of excess processes and roles that require simplification to achieve the required outcome and I have also made a number of structural changes to accelerate our improvement plan within the initial two months. So a real passion of mine is also asset management and reliability. I have appointed a new Chief Asset Officer who started in May and centralising all asset management functions which now includes the capital delivery team. targeted recruitment now for some of the best asset leaders in the industry and they are due to start in the next few months completed a review of our asset management structure and required deliverables for ambient and beyond and introduced a new capability for improving asset reliability with a clear focus on asset performance to mitigate and remove the unplanned failures of the past building our picture i guess on asset health for current and future investment plans including the cost change submission and lastly on our capital investment program i've completed a deep dive into the ampute delivery plan for enhancing our environment there are certainly opportunities to accelerate the program linked to our performance commitments in an efficient way and it's important that we map our key dependencies for the investment program to ensure we always deliver on time and to budget and of course this will help to improve our EPA rating going forwards as I talked about earlier. So it has been a solid start in terms of progress and more details will follow in the coming months. So just to talk a little bit about sector reform, we continue to be well positioned and supportive of sector reform and we are engaging regularly with government and regulators. It is clear that government intend to organise industry reform that includes increasing the team at DEFRA with a new structure to support reform work streams the appointment of dame julia black as the environment secretary's new senior advisor on water reform transition the environment secretary is to be given the powers to appoint the chair of the new regulator as well as its inaugural ceo and the transition plan is expected to be published and the clean water pill introduced by the end of the year so in terms of cost change today we've announced that we submitted just over 250 million in 2026 cost change claims as part of the reopener process with off what with in-amp funding requested as part of that submission we have targeted most of the sorry most of the investment to asset health with a focus on sewer rehabilitation network storage and rapid gravity filters for water assets we also put in a discreet growth claim for new key sewage treatment works and a claim for cyber security. This represents a carefully prioritised investment package to deliver benefits to our customers and the environment earlier based on customer research and engagement with our Watershare Plus panel. So in summary the first year results of Cayet demonstrate a positive shift in profitability but our performance must improve across the regulatory commitments for both customer service levels and improving the environment i can assure you that my current observations have identified key areas of opportunity have refreshed plans to target improved performance and have set clear accountability for delivery pulling all of that together i look forward to sharing my operational and strategic update in late september i would like to take this opportunity to thank everyone at Pennon for welcoming me and I look forward to engaging with all investors and stakeholder groups across the coming months and years ahead. So that's it for the end of the presentation. We will now take questions from the room.
James Brad from Deutsche Bank. I was hoping I could ask three questions. One is more of a clarification. Firstly, on the four-star requirement for the 30 basis points uplift to your allowed return on equity. Is it still a target to, I'm not sure that's four star or five star now, but is that still a target for the group to try and hit that or is that looking too difficult now? That's the first question. Secondly, on the Totex outperformance that you delivered, you mentioned that phasing had an impact on that. Is it possible to kind of strip that out or to give an indication of how that if it hadn't been for the phasing how that would have impacted you would you have still been outperforming on totex or would it be more neutral and then thirdly on the non-regulated businesses it looks like your guidance is to go into a loss or to certainly for profitability to move backwards over the course of this coming year could you just explain a little bit what's causing that because obviously you've got the pen on power investments, which is stepping up. Thank you very much.
Okay, thanks for the questions. I'll take the first one, and then I'll maybe just pass to Laura for the last two. Look, I think in terms of the four-star rating, clearly there's a number of components within that framework for the assessment. As we sit here today, clearly it's not been a good year one, partly because of what we talked about with Winept deliverables. We are very sort of I guess focused from my perspective on what the challenges look like ahead to to get there and from my perspective at the minute certainly pollutions and treatment compliance are probably the two big challenge areas that I see over the next number of years and there will be a couple of other measures introduced as well between now and 2028 and so for me it's really a bit more time required over the next few months to really do a deep dive on those areas to really understand where we are but look it is a challenge okay so where we are at the minute we need to deliver what we're in control of and i think we can
definitely improve on that but there are a couple of big challenge areas that we'll have to think about over the next few months if i move on to the more financial ones james so the totex yes we would still have been in outperformance without that phasing but there is a little bit of time indifference too so it's broadly split between some of it being time indifference and then some of it being efficiencies as i mentioned we are driving through the capital program but will happen across the five-year period rather than it all landing in the first year so so some of that reverses but over the five-year period we're still very much targeting outperformance on totex and would have seen some of that crystallise despite the time and differences. On the non-underlying, they're broadly flat in the underlying retailers and then power comes into benefit. So we can work through numbers in due course, but no, they are not loss-making.
Speaker 1
Hi, it's Mark Freshney from UBS. If I may ask about balance sheets, we had an equity raise, which people subscribed to 18 months ago. Since then, I think the ODI incentives weigh quite heavily on things like EBITDA and some of the credit metrics. There isn't a plan to sell the solar assets that you've communicated today. If anything, you're talking about investing more. So I just wondered whether, having spent time, and I know your capital delivery operations is your background, Keith, but are you happy with where the balance sheet is and do you think it can handle all the things that you're talking about for the next four years?
Yeah, look, I'll maybe let Laura come in in a second, but yes, I'm comfortable at the minute, Mark. I think we are going to do review across the group, including Penn On Power, across the next period. So I think it's just important to maybe hold off on that. We are deploying that skill set internally at the minute to do bigger things behind the wire, as we talked about in the presentation. But as we sit here, we're certainly very confident in the balance sheet. Maybe Laura might want to come in on that as well.
Yeah, I mean, I think the power assets that we're talking about behind the wire are a much smaller scale. We are obviously working together, Keith and I, as he looks at the operational performance, looks at what we need to do to remediate that ODI performance, and we will come back in September to talk about the strategic review, the operational improvements, and what that means in terms of the financial outlook as well.
Thanks. Thanks very much. It's Jenny Ping from Citi. A couple of questions, please. Just firstly on the reopeners, you talk about 65% gearing. with the reopeners. Can I just ask what the assumptions behind that, does they include asset disposals, is the first one. And then secondly, linked to that, Keith, I think you talked specifically about in-period AMP funding has been requested. Does this mean that you won't do it if there is no in-period funding? Because what I'm hearing from some of the other water companies is that of what is less inclined to allow in period funding for the first reopener in which case this may be pushed back into future periods um so that's the first on reopeners um secondly just on strategy and i know we have to wait for september to cut to hear the full uh version but i was intrigued uh just that you said starting with water i think when you talked about the strategic review obviously the operational side is needless to say but are you also open to looking at asset disposals given your three you know very distinctive geographies
in terms of the regulated business I'll stop there thanks do you want to take the first question yeah let me start on the reopeners so absolutely we have said in our submission to off what that a we have asked for in period revenues and b we have caveated to say that if we don't achieve those then we do not need to progress i think it's also worth saying that we have put in a submission that whilst we believe they are the right priorities for the business i'm sure that they will need discussion and debate with off what and there are certainly some areas of that as well which are probably uh less likely to be fully funded this year but we thought it was important to put forward a need uh to start that dialogue with off what as well so there's quite a long way to go on all of those reopeners to understand where we end up uh through the process by december with off what in terms of what that outturn investment might be um and to understand the funding position of that as well so that is something that we will obviously update on in due course but I think early at this stage to make any confirmed positions in return in respect of balance sheet and so on and I think we felt strongly that it was important to make the point about in period funding given you know the importance of investability and financeability
and you know that was obviously a theme coming out of Cunliffe and the the white paper and so one as well um so that's probably everything from me on the re-open list please so i think jenny on the strategy certainly my focus initially is of course in the regulated businesses and just getting a real sense of where we are um i've been very impressed with ses and bristol i think there are lots of strengths in those business um geographic areas and the teams there are really committed. I think the performance actually in SES is really strong. With Bristol, a little bit of work to do on interruptions to supply and just getting back on track with leakage, but again, strong. So actually, when you look at the asset base, pretty much two thirds of the asset base is clean water only, when you include South West in that. And I think that's important for the group and the portfolio and how we perform going forwards. And then of course, really focusing on wastewater performance and where we can really try and get some quick wins whilst we put the investment plan in place so as I sit here you know obviously we we will look at pin on par and how we try and move forwards with the water retail businesses as well in that update hopefully in September but for now I've been really pleased with what I've seen with certainly the clean water assets in SES and Bristol and of course South West.
Speaker 4
Thank you very much. Sarah Lester from Morgan Stanley and Keith, welcome. It's great to have you in the seat. Two questions from me, please. The first one's back to the FY27 guidance. The biggest delta to consensus looks to be the OPEX and the key driver of that year-on-year change looks to be inflation. So just wondering, is it fair to say that most of that, all of it, could be trued up at a later stage in revenues via the energy true-up, i.e. MPV neutral, non-economic. And then the second question, maybe one for Keith. This is a turnaround story. It's a very exciting turnaround story. There's a lot of metrics that we can be following on that turnaround story. So just wondering if you were to narrow it down to two key metrics that the market can watch and track, what would they be? Thank you. Shall I start?
Yeah, I mean, I think there's a lot of different movements going through in opex i think certainly what we're seeing coming through power we're in a good position we're well hedged though um and that should give us a good position as we move forward but you would hope to see coming through the regulatory mechanism any variances in that across the relevant index and obviously if inflation is higher we will certainly see some benefit in that true up over time as well um i think uh we are very focused on delivering operationally so we do see some costs coming through from things like leakage and so on as we move forward and then we have a program underway to make sure we minimize all those pressures as well so there's a whole group of things but I think Sarah you're right the inflationary protections that we have in the regulatory mechanisms as well should help support that position as well going forward.
Great so I think in terms of two metrics I would prefer five for six but i'll take two so look i think i think if i pick water i would say interruptions to supply i think we've had a bit of a surprise there in year one it's it's not something i recognize from my past and in that space particularly previously at affinity where their sector leading in that so that would be one metric i think the second second metric i would say treatment compliance i think from my background i have got the zero in this space from a culture of maybe six or seven field works each year that's where we need to get to as a business and i think there are components attached to that whether that's operational performance or
Speaker 7
capital investment so so those would be the two at this point i would pick morning thank you pavan from jpmorgan i have two questions please firstly following up on mark's question on on the balance sheet I just wanted to pick on a particular area in terms of how you see the dividend versus growth I think one of the attractions of the pen on story relative to listed peers has been a higher dividend yield and I was wondering if you could share thoughts on how you think of balancing that versus the growth opportunities that you're seeing both in terms of cost change and maybe looking ahead into amp nine that's my first question and then secondly I wanted to inquire about the Rory target you had previously guided to a seven percent Rory target over AMP8. Is that something you're comfortable reiterating or is that also under review? Thank you.
So I think on the dividend yield, we've declared a dividend for the full year in line with our policy. And as we progress the strategic review, obviously the overall position will be part of that and we'll confirm where that ends up at the end of September. On Rory I'm going to say something similar. Obviously the operational performance has impacted this year. We've outturned at 6.7% but I think in looking with Keith through our operational performance, our financial performance and the targets for the period that will be one of the components that we look at and come back to you um in september hi it's alex wheeler from rbc uh just one from me please just on well i don't have the data in front of me but it feels like weather and the extremities in weather are becoming more common in the sector i just wanted to get your thoughts on i guess how you think about that and whether that should lead to a little bit more conservatism in in how you
guide on on operational performance yeah look i i could probably name every storm come back last 10 years that i've been involved with and they've had different impacts right across corners of england um i think what i would say to you is that you know from storm garedi and in january it feels like the extremities in cornwall is where we probably need to focus on some of our resilience in that space, both now, but probably really focused on PR29 and what else we can put into that space from the lessons learnt of that red warning. Look, we are really strong, actually, on internal sewer flooding, which is always a difficult metric for other companies to tackle. I think from that perspective, you know, making sure we put the plans in place with our drainage water, wastewater management plan, and how we sort of look at the risks of flooding and those aspects around storms that you refer to so look i think the the investment going in is definitely going to help in terms of how we reduce spills how we deal with power outages how we deal with um getting water to customers 24 7 and more of the extreme parts of of cornwall and devon and that's going to be the focus really in amp eight but but definitely in amp nine as well Hello, this is Laura Marconi from Barclays.
Thank you very much for your presentation this morning. Two questions from my side, please. I'd like to follow up on your 250 million reopener. Could you give us a bit more colour on what the proportion of different investment areas would look like? What would your priorities in that be? And the second one is on the EA court hearing. I believe that one has been rescheduled to July. Do you expect that date to be a clearing event or do you think we'll have to wait a little bit longer for an actual decision?
Thank you. okay so look i think in terms of uh the reopener um that i was involved with pretty much from day one in terms of the process behind that it's broken down into a number of areas as i as i talked about at a very high level we've got around 45 million in our asset health category for rapid gravity filters we've got 23 million in the space of of wastewater treatment works in asset health We have about, I think in terms of sewer rehabilitation, we've got probably around about 62 million. And then you sort of move down into the categories of water storage and treatment works. And there's probably about another, I think, 85 million in that space. So cyber picks up about 12 of that at the end. So that's kind of the high level breakdown. I think in terms of, I guess, end of July and the process, I think it's very important to just note that we're in a process at the minute with, I guess, that court case. We'll have to respect that process. We can't really comment on, I guess, that outcome and how we lead up to that at this point in time. Look, we have regulators that will continue to regulate, inspect, challenge i guess how we perform and that's exactly what we expect of of the environment agency and drinking water inspectorate and others associated so you know we will continue to improve our systems our processes our capability and our people to make sure that we learn from the lessons of the past and make sure we put some proper plans in the future so that's really all i can say at this stage must be one more question now there we go hi hello keith can i just clarify
Speaker 1
rather laura on the 6.7 roe is that at the 55 notional gearing or is it at your actual water company gearing of 62 percent um it's on the 6.7 is on the notional real balance position the 12.4 is on the actual nominal james brown from deutsche again um on the odis it's obviously it's a pretty big penalty and you mentioned the weather and there were some kind of
adverse effects but as we look forward is there any kind of it's obviously not formal guidance but any kind of commentary you could give us in terms of what might be a reasonable expectation for how the ODI penalties might evolve in, say, 26-7 and in the medium term? Is it possible to get that down to a less material negative number? Thank you.
Obviously, our target will be to reduce that penalty right down. There will be some lag effect from last year, and as I said, the first quarter of this year where we saw the red storm will impact because it's in the 2026 environmental period.
We've got the calendar and the financial years. that said obviously what we're doing at the moment is working through the detailed plans in terms of how to improve that operational performance and what that will look like so um i sound a little like a broken record but come september we will give you more james yeah i think i think what i would say there is that um we've got some really strong performance as well so it's how do we further that and there are five or six key metrics that i'm very focused on over the next few months to really put a plan in place and that's going to make a difference so we'll see that in a few months. Okay, so I think we're going to conclude there with the Q&A. Thank you for attending. I look forward to seeing you in due course.
