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Operator: Ladies and gentlemen, welcome to the Adler Group Q3 2025 Results Investor Conference Call. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Julian Mahlert, Head of Investor Relations and Communications at Adler Group. Please go ahead. Julian Mahlert: Thank you, Valentina. Good morning, everyone, and thank you for joining us for the Adler Group Q3 2025 Results Call. Speakers today, as usual, are our CEO, Dr. Karl Reinitzhuber; and our CFO, Thorsten Arsan. Both will lead through today's presentation and then answer your questions. Also, please note that this call is being recorded and will be made available on our website, where you can also find today's presentation. For me, today will be my last results call with you as I am leaving Adler Group by the end of November after 6 eventful years. I have always appreciated working with you, and it has been an honor to be part of this great team. As such and with great confidence, I will hand over my responsibilities to my successor, Sven Doebeling, our Head of Finance, whom some of you already know. You will find his contact details on the last slide of the presentation. And with that, I'll hand it over to Karl. Karl Reinitzhuber: Good morning, everyone, and thank you, Julian. Thanks, Julian, for your knowledgeable and effective handling of your role as Head of Investor Relations. It has been instrumental in securing a smooth and dependable communication for Adler Group. Now before we start with the Q3 numbers, let me give you an overview of our recent asset disposals on Page 4. As communicated before, in the third quarter, we fully completed the disposal of our North Rhine-Westphalia portfolio holding entities. We exercised the put option in order to transfer the remaining 10.1% stake in the respective propcos to the buyers, Orange Capital Partners and One Investment Management. The closing occurred in August and the net proceeds of EUR 21 million were fully returned to the investors of our first lien. We also continue to make good progress on the disposals of our development projects. In the third quarter, we executed and completed the transactions of Cologneo III and The Wilhelm in Berlin. The net proceeds were also returned to the first lien holders. We have made further significant progress with additional disposals post the Q3 balance sheet date. First, we notarized the sale of the Holsten Quartier to a Hamburg consortium consisting of Quantum and HanseMerkur Grundvermögen in cooperation with the Hamburg-based housing provider, SAGA, at Q2 2025 book value. We expect the transaction to be completed in the first quarter of '26. We are very pleased with the sale of this project, which with its exceptional size and location in Hamburg is obviously one of the most prominent projects in our portfolio. Second, we sold the Kaiserlei development project in Offenbach to the Frankfurt housing association, ABG. Closing of this transaction is expected for early '26, if not earlier. And third, we have signed the sale of the Düsseldorf-based development project, Benrather Gärten, to Instone Real Estate at Q2 2025 book value. We expect the closing of this transaction by the end of this year. And we expect more signings before year-end or in Q2 2026. We'll then inform and alert you on this. Now as we experienced good momentum in the disposal of our developments, let me elaborate a bit on the market environment for residential development and new building in Germany. My perception is that the framework for resi developers has somewhat stabilized over the recent months and a higher degree of certainty and less fear of adverse changes in the market prevails. The average price for new residential units in Germany is up around 3% compared to last year. The time to market for sale of condo units is slowly but steadily decreasing. I could witness in some of our development sales processes that the municipalities are increasingly supportive to enable residential developments and acknowledge the more challenging environment for financially successful projects compared to 4 or 5 years ago. Construction costs seem to flatten and bank financing has come through for the buyers of our projects. All buyers of Adler developments will now engage in zoning and permitting processes and will then execute construction themselves. There is no buyer with speculative intent behind the acquisition of the project or land plot. Now all of this is not to say that we expect significant uplift in the pricing of our remaining developments over the coming year, but we have proven that we can sell even complex assets like Wilhelm in Berlin or Kaiserlei in Offenbach to experienced and well-financed buyers in what continues to be a challenging market. Now I attribute our ability to do all these transactions also very much to the excellence and tenacity of our sales team, which works closely with the best local brokers. We run very focused and competitive sales processes and execute on transactions once we have reached the best possible outcome. Now in terms of smaller yielding asset sales, we continued the disposal of our noncore assets in Eastern Germany, thereby reducing the remaining units from 162 down to 117. Further disposals of these noncore assets are in the pipeline. We also took the opportunity to dispose 32 condominium units in Berlin for a total sales price of EUR 9 million. With EUR 245 million, our disposal holdback basket remains almost fully filled, unchanged versus 3 months ago. Now moving on to Page 6. On the financials, our net rental income came in at EUR 101 million for the first 9 months. Compared to the prior year period, net rental income decreased as a result of the disposals of BCP and the North Rhine-Westphalia portfolio. The decrease was partly compensated by rent increases realized on the remaining assets. We are well on track to reach our 2025 net rental income guidance in the range of EUR 127 million to EUR 135 million. The adjusted EBITDA from rental activities amounted to EUR 58 million with a margin slightly improved compared to last year. The adjusted EBITDA total was negative as the development segment did not contribute positive earnings. As more and more development projects are being sold and the organization is becoming smaller, the negative financial impact from the development business will become smaller as well. Our group's equity position stands at EUR 0.9 billion. The LTV increased slightly to 73.5%, in line with our expectations. Our cash position amounts to EUR 241 million. Thorsten will provide more color on financials later in the presentation. Our portfolio, overall, our Berlin anchored assets continued its strong operational performance, fully in line with what we have seen throughout the year. We achieved 3.2% like-for-like rental growth on a year-to-year basis. This was supported by an increase on current rental contracts and ongoing reletting activities. We have a closer look at all KPIs on the following slides. Then let's proceed to portfolio and operational performance on Page 8. At the end of September 2025, we had 17,695 rental units. It's a marginal decrease of 77 units compared to June, driven by the disposals in Q3, which I mentioned before. As a reminder, our portfolio is fully Berlin anchored with more than 99% Berlin assets. Only 117 units are located outside of Berlin, and we expect to sell these units within the coming quarters. In terms of value, the GAV of our yielding portfolio remained stable at EUR 3.5 billion. This reflects no change from the prior period as there were no revaluation and only limited disposals during the third quarter. The GAV per square meter increased slightly to EUR 2,847, up from EUR 2,843 in Q2. Let's now move on to Page 9 to further discuss our operational KPIs. We achieved 3.2% like-for-like rental growth year-on-year. This is lower than the 4.1% we reported last year, which is explained by the timing of Mietspiegel-related adjustments in 2023 and 2024. As expected, we realized like-for-like rental growth well in our target zone of around 3% per year. Rent increases for almost 3,000 rental units became effective in the third quarter. Over the last 12 months, we have increased the rents of 50% of our residential units, therefore -- thereof half CPI indexed and half Mietspiegel-based leases. The rental growth of 3.2% is a healthy and sustainable level that reflects increases on our current rental contracts as well as ongoing reletting activities. We are confident to report a rental growth number north of 3% at the year-end 2025. Our average rent increased from EUR 7.71 per square meter per month reported a year ago to EUR 8.52 in September 2025. This growth is largely driven by the disposal of the North Rhine-Westphalia portfolio, which had structurally lower rents compared to our Berlin assets. These units were still included in the prior year figures. On a like-for-like comparable basis, the average rent grew from EUR 8.24 to EUR 8.52 per square meter per month. Turning to vacancy. Our operational vacancy rate remains at a very low level of 1.6%, slightly down from 1.7% a year earlier. This confirms the continuous demand for rental apartments in Berlin, driven by continued population growth and the very limited new housing supply. Now I would like to hand it over to Thorsten, who will talk -- walk you through the financials, starting on Page 11. Thorsten Arsan: Thank you, Karl, and also a warm welcome from my side. At the end of September 2025, our yielding portfolio was valued at EUR 3.5 billion and our development portfolio at around EUR 700 million based on externally appraised values. This brings our total GAV to EUR 4.2 billion, slightly down from EUR 4.3 billion at the end of June 2025. This change was primarily driven by the disposal of the 2 development projects, Cologneo III and The Wilhelm, both of which were signed and transferred to the respective buyers during Q3 as stated earlier. In yielding assets, there was a slight decrease in value resulting from disposals of 45 of the remaining rental units based in Eastern Germany and 32 condominium units in Berlin. These disposals reduced the GAV only marginally. Also in the GAV overview, we marked the value of the Offenbach Kaiserlei project down to the notarized sales price level. With that, all development projects, which were sold post the Q3 balance sheet date are reflected with the agreed price within our Q3 financials. Let's now move on to the financing section on Page 12. Let me briefly walk you through the debt repayments update. As you know, we continue to use the ongoing inflow of disposal proceeds to deleverage our capital structure. Over the last -- over the past quarter, we made further partial redemptions under the first lien New Money Facility, returning a total of EUR 87 million to investors of the first lien notes. These repayments were fully funded by asset sales, both smaller yielding asset disposals in Berlin and completed development project sales. And there is more in the pipeline in terms of expected net proceeds when looking at the recently signed more sizable project disposals such as Holsten Quartier, Offenbach Kaiserlei and Benrather Gärten, which we expect to close in the coming months, if not weeks. Turning to the 2026 maturities. The remaining EUR 50 million Adler Real Estate bond falling due in April 2026 is expected to be repaid from additional disposal proceeds in line with the New Money Facility. We also successfully completed the extension of a EUR 9 million secured bank loan, extending the maturity from March 2026 to Q4 2028. This is another good example of constructive discussions with our lending banks, especially where assets in Berlin provide strong collateral. For the remaining EUR 19 million of 2026 bank maturities, discussions are ongoing. These are standard bilateral talks with the respective lenders. And based on the tone so far, we expect to reach prolongation agreements well ahead of maturity. Overall, the picture remains unchanged. With the continuous inflow of disposal proceeds and the supportive dialogue with the banks, the 2026 maturity profile is largely addressed, and we remain focused on reducing the first lien facility with further disposal proceeds. Let's now move on to Page 13 and take a look at our current debt KPIs. Following the further partial redemption of the first lien New Money Facility in Q3, our total nominal interest-bearing debt decreased to EUR 3.7 billion, down from EUR 3.8 billion in June. Our LTV increased slightly to 73.5% as we had expected. The weighted average cost of debt remains unchanged at 7.1% at the end of September, and our average debt maturity is around 3.6 years with the vast majority of our financing maturing only in 2028 or later. Let me add one minor update on the ratings. Based on our request, S&P withdrew its rating on the remaining Adler Real Estate 2026 notes. There is no obligation to maintain this rating. And given the very small outstanding nominal amount, we decided to discontinue it for reasons of cost efficiency and structural simplification. All other ratings, including the issuer rating of B- with stable outlook remain unchanged. Let's turn to the debt maturity schedule on Page 14. The debt maturity picture looks largely unchanged compared to 3 months ago. As told in the last quarter, there is no outstanding financial debt maturity this year. Looking ahead, our next significant maturity is in 2026, where we have a total of EUR 42 million due, comprising EUR 15 million of the remaining Adler Real estate bond maturing in April '26, which is expected to be repaid using disposal proceeds. EUR 9 million of the remaining EUR 27 million of bank debt were already extended after the end of Q3, leaving EUR 19 million with maturity not before October 2026. Discussions with the lenders of the 2026 bank maturities are ongoing, and we are confident that these will be addressed well ahead of maturity. As you can see on this slide, 97% of our financial debt matures only in 2028 or beyond. Let's turn to the LTV on the next page, Page 15. As anticipated, the LTV increased this quarter by 140 bps points, mainly due to the usual impact from interest expenses, both paid and accrued. Other movements such as CapEx expenses for our yielding and development asset portfolio can be out with various smaller effects. As always, as a reminder, kindly notice that our bond covenant LTV with a threshold of 90% is calculated differently, leading to a lower figure than stated here. Let's continue with cash on the next page, Page 16. At the end of the third quarter, our cash position stood at EUR 241 million, in line with our expectations. As you might know, we invest our cash holdings usually in money market funds and call money in order to generate interest income. You see the development of the cash position in the usual format on this slide. On the cash inflow side, we realized proceeds from various disposals as discussed earlier. Yielding asset disposals include proceeds from the second closing of the Cosmopolitan transaction as well as from condominium and smaller asset sales. Development asset disposals include proceeds from completed sales of the Cologneo III and The Wilhelm development projects. These proceeds were largely returned to the investors of the first lien notes. The net decrease in our cash position resulted primarily from capital expenditures spent on our development assets, particularly construction activities around our forward sales projects, Ostforum in Leipzig and LEA in Frankfurt. And with that, back to you, Karl. Karl Reinitzhuber: Thank you, Thorsten. Let me now conclude this presentation with some final remarks. We confirm our guidance of a net rental income between EUR 127 million to EUR 135 million for the full year 2025. Experts see a moderate improvement in the residential real estate market. Last quarter, standing assets were perceived moving ahead, driven by strong rental growth. As I mentioned earlier, we now see a stabilization and soft improvement in the activities around developments in new building. We are able to capture rental growth with our strong 3.2% like-for-like growth, in line with our expectations, and we confirm our net rental income guidance for 2025. On the back of recent guidance provided by our peers, we expect a stable revaluation result for our Berlin portfolio for the full year 2025. When it comes to the disposal of our development projects, we are making good progress as a credible and trustable partner, for example, with our successful disposals in Hamburg, Offenbach and Düsseldorf. We do not face any material maturities of capital market indebtedness before the end of 2028. Just as Thorsten said, 97% of our financial debt matures only in 2028 or beyond. It goes without saying that we remain focused on our comprehensive cost-cutting programs and budget discipline to ultimately preserve our liquidity position. And with that, I'd like to thank you for dialing in. We are now looking forward to your questions. Julian, back to you for the Q&A. Julian Mahlert: Thank you, Karl and Thorsten. And I hand it over to our operator, Valentina, to open the Q&A, please. Operator: [Operator Instructions] The first question comes from Emmanuel Arnoldi from Barclays. Emanuele Arnoldi: A quick question. I couldn't hear the comment that you made on the Holsten development asset in relation to the price. And if you didn't do any comment, please just say so, in relation to the book value. And I wanted to ask, and it's the same question really, if we should take the -- I think it's EUR 289 million value for current -- noncurrent assets held for sale as a proxy of the sum of the prices for all these assets where you signed a document, but you haven't -- or a purchase agreement, but you haven't yet closed the disposal. Karl Reinitzhuber: Okay. Well, we do not publish the pricing for individual assets, but we can -- what we can say on Holsten is that we sell it at book value. And well, yes, with the EUR 289 million comprising the assets that have been sold, but where the process is not closed, you're quite right on that. Emanuele Arnoldi: So it would be the Holsten, the Kaiserlei, the other one that I was -- forgot how it's called... Karl Reinitzhuber: Holsten, Kaiserlei, Düsseldorf and we still have, yes, Schwabenland Tower, [ Cologneo III. ] Yes. That's what it is. Thorsten Arsan: Emanuele, you are right. I mean the EUR 289 million are mainly the developments that we've signed and not closed yet. Offenbach is not included because that's something we basically signed after Q3, but all other developments are mainly comprising the EUR 289 million. Karl Reinitzhuber: Okay. Yes. So to be -- let's say, to be complete, right, we also have Grand Central, Eurohaus and UpperNord Tower within the EUR 289 million. Operator: [Operator Instructions] The next question comes from Antonio Casari from Northlight Investment Services. Antonio Casari: First of all, thank you very much to Julian and best of luck for your next endeavor. It was really helpful, the dialogue with you. And then my question is regarding the regulation. A few of your peers talked about this Bau-Turbo that is going to be put in place and clearly has been in line with what you mentioned at the beginning of the presentation, but it would be interesting to have your perspective around that. Karl Reinitzhuber: Okay. It was a bit difficult hearing you, but I understand your question is around the Bau-Turbo, right? Antonio Casari: Yes. Yes, sorry. Karl Reinitzhuber: Yes. What I can say from my observation in the disposal processes of our developments and the interaction with municipalities is that a number of municipalities are thinking about using the Bau-Turbo on some of our disposal projects, at least for a part of the intended buildings within the project. I have not seen Bau-Turbo yet, but I would expect that over the course of the coming year, we would see the first examples, particularly there where, let's say, the expected zoning for residential buildings is very clear and undisputed and where the municipalities do not have to expect any, let's say, criticism from within the political environment in the city or from neighbors or other stakeholders around these projects. Antonio Casari: Great. And then the second question relating to your forward sale and condominium, you mentioned a book value of EUR 0.2 billion. I assume the list is only the 3 projects that are listed in Slide 31, which has expected completion in 2026. So my question is, do we expect monetization of all of them in 2026? And how much would be the cash proceeds from the disposal since with forward sale and condominiums, there's a portion, I understand that is paid as the project advances. Karl Reinitzhuber: Yes. Well, I cannot tell you, let's say, the individual expected cash-ins or the pricing. But what I can say is that on Ostforum, this will be disposed over the course of '26. and we will then eventually receive the full proceeds at closing. Now it is slightly different with the 2 other projects with Hoym in Dresden, there have been -- this one has been presold, and we have received progress payments from the buyer so that there would be still a rather small cash value coming in going forward. And in the LEA at Frankfurt, there out of 165 apartments, a bit less than 150 apartments have been sold. And progress payments have been received. There are further progress payments to be received from these 150 owners over the course until completion, and we will sell the remaining around 15 apartments once the construction and the building is fully completed. Antonio Casari: Perfect. Very clear. But just to be clear, the EUR 0.2 billion book value reflects the expectation of what in total you should cash in from forward sale and condominiums? Karl Reinitzhuber: Yes. This is, let's say, the gross value of these assets at this point in time. The cash from the received progress payments has not been netted at this point or in this number. Operator: The next question comes from Niki Kouzmanov from Jefferies. Niki Kouzmanov: Can you guys hear me? Karl Reinitzhuber: Hear you well. Niki Kouzmanov: Great. Just on -- I think I wanted to ask more on the cost savings and G&A optimization and CapEx optimization and the cash balance that we have at September, which is quite elevated and the upcoming, as you mentioned, the additional disposal on the development side, which is going to further pay down the first lien. I think the 1.5 lien has a noncore until February. Are there any sort of plans or thinking about refinancing and further optimizing the capital structure, especially if some of the CapEx for these developments, specifically the condominiums is going to disappear once the projects are completed? And then probably in relation to that, I think you referred to some early signs of warming up of the yielding transaction market in Berlin. But how are you thinking about your -- I think last -- at the last call, you mentioned you're doing sort of a soft marketing exercise to look at the value of the units in Berlin and how they could be disposed of. Kind of these 2 things hand in hand together, is there any progress or update you can provide us on? Karl Reinitzhuber: Yes. Well, first on your question, what we are doing with regard to our Berlin portfolio. As I said, we are assessing our options and no decisions are taken at this point in time, but we are working on it, but there is not more I can say with regard to your first question. Thorsten? Thorsten Arsan: Thank you. Niki, I can basically touch or answer your question regarding the potential refinancing. I mean, with EUR 3.7 billion of total debt and a weighted average cost of debt slightly above 7%, I mean, it's our utmost duty to always assess whether there are opportunities to refinance more attractively than currently. There are no specific plans right now. I mean you know we refinanced the 1L and the 1.5L in the first half of this year. As said, we are assessing all kind of opportunities, but there are no specific plans right now. Operator: [Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Karl Reinitzhuber for any closing remarks. Karl Reinitzhuber: Yes. Thanks, everyone, for joining today. We will publish our 2025 annual report on April 30, 2026, and the respective results presentation will take place on the same day. Thorsten and I look forward to speaking to you then. All the best for everyone. We close the call. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Susan Davy: Good morning, everyone. I'm Susan Davy, CEO of Pennon Group. I'm pleased to share the group's half year results speaking to you from Dawlish in Devon, where we are making progress on our investment to reduce the use of storm overflow. I'm here today to see firsthand what it means for customers and communities and say thank you to my brilliant team here from South West Water and our Amplify supply chain delivery partners. If you're one of the millions of visitors that ever caught the train down to Cornwall, you'll recognize Dawlish. The track runs directly parallel along the sea line and the cliff, giving you a fantastic view for the visible coastline. You might also remember the rail track here being washed into the sea, cutting off Cornwall from rest of UK, a result of climate change and the changing weather patterns. Those weather patterns have also meant that the wastewater network here in Dawlish is under pressure as more homes are being built and more visitors arrive to this fantastic town with a population of 12,000, more than doubling in the summer months. In response, we're doing 3 things. First, engaging with the community to explain the work we need to do here on a time scale; second, applying a tailor-made solution for Dawlish with a nature-first approach by removing as much flow from the system as we can. And third, installing 2 new underground tanks to store stormwater before it's been treated. When combined with existing storage, it will hold up to 4.5 million liters of stormwater, the equivalent of 2 Olympics sized swimming pools, which combined will reduce the use of storm overflows by nearly 70%. This investment is just one of our wider multibillion pound regional program to reduce storm overflows and enhance bathing water quality all year around. There will be hundreds of similar projects going on in towns and villages like Dawlish right across the Southwest. Of course, undertaking this work needs the support of local community, and we're here to do that. From supporting the annual Carnival to Dawlish Cycle Grand Prix, we're here on the ground working together with the council and community groups playing our part. As Dawlish shows, what we do matters and what better place to talk about our half year results for 2025, '26 and here in the heart of the community. I am pleased to report that we've had a robust start to the U.K. regulatory period. We've had a strong return to profitability and notable operational successes and a step change in [ waste ] water performance. Having had record investment into our asset base over the last 2 years of K7 with early mobilization of our supply chain through Amplifying, the momentum we started then has been maintained at the start of K8, delivering on projects like the one here in Dawlish. As the only water company to have received an outstanding rating for our business plans for the third consecutive time, our focus is to make sure we deliver on our agreed plans for communities. Of course, alongside that, following the recommendation of the Cunliffe review, we are fully engaged in how the sector is evolving for the future. We are confident that the new regulatory framework will work for customers, for water companies and investors. In summary, the group is well positioned as the sector evolves. As anticipated, we've seen a good set of financial results for 2025, '26 in the first with a step change in EBITDA with operating profit more than doubling. Revenues have increased period-on-period as the business grows organically, but we have rightsized the cost base and continue to drive efficiencies, which meant wholesale water business operating costs are only rising fully in line with inflation. We're on track to deliver our targeted return on regulated equity for water group at 7% on a real notional water share basis with our effective efficient financing underpinning the performance in 2025, '26. Supporting our investment program is a robust funding position, having raised GBP 500 million in the first half of this year. Earnings per share more than covers the dividend share supporting the equity providers of finance this year. With a strong balance sheet and good liquidity and with the Water Group gearing at circa 60%, we maintain the agility to deliver on our strategy in U.K. water well positioned for a sustainable future. We've seen operational successes in the first half of the year across the 4 strategic priorities for our customers. The first priority always is safe, clean drinking water. And in K7, we invested to bolster water resources with Devon and Cornwall, repurposing disused quarries and mines as many reservoirs, new treatment capacity and building more resilience into the network as we target network upgrades where it was needed most. In September, the Met office confirmed that the summer of 2025 was the hottest on record with the 5 warmer summers all occurring since 2000 and following the hottest spring in over 50 years. Thanks to our investments, innovative approaches, improved monitoring, network rezoning, and operational focus right across the group, we have not needed to impose water restrictions for our customers across the 5 geographies we serve. The changing weather fronts have, however, tested our network, increasing the number of failures. And whilst the customer impacts have been mitigated on 70% of these, it has been challenging for the operational team. Despite the 15% increase in activity, we've held leakage at the '24, '25 levels and are targeting improvements in the second half of the year. If as a customer you need supply, you realize that the average GBP 1.85 a day you pay for your water and wastewater services is worth so much more in terms of value. We rely on water for everything from the morning cup of tea to the manufacturing process that makes [indiscernible], to the transport that takes you to the work and still on everything in between. We are therefore focused on repairing and upgrading our networks with our network investment plans on track in 2025, '26. We're never complacent about water quality as Sutton and East Surrey remains the top performer in the industry and South West Water is upper quartile across the water and sewage companies. Bristol is above average, and we are confident that we can do even more as we share best practice across the group. We continue to roll out a successful quality-first culture and training program in Bristol with plans to replicate in Sutton and East Surrey. Our second priority, tackling storm overflows and pollutions. Whilst we have had a hotter weather front in the first half of the year to '25, '26 across all the regions we serve, in Devon and Cornwall, the rainfall has been in line with long-term averages. We're therefore pleased our operational investment interventions are delivering a step change in wastewater performance. This improved position has meant we are targeting net neutral for wastewater ODIs for '25, '26. And our pollution incident reduction plan with its 5 key pillars has been a key focus of our operational teams, achieving a 50% reduction in Category 1-3 pollutions year-to-date, underpinned by a 75% reduction in repeat pollutions. Using the EA's EPA metric of total pollution incident per kilometer of main, we're on track to have improved our position for 2025 by 2/3. We've maintained our sector-leading internal sewer flooding performance, having reduced incidents by over 7% since 2020 with 12,000 smart network sensors helping to detect potential issues earlier, shifting from reactive to preventative interventions. At the same time, storm overflow spills have reduced by 45% so far this calendar year. As part of our 15-year investment program and operational activities, we have avoided around about 6,000 spills in the first half of '25, '26, bringing a total of 20,000 spills avoided over the last 18 months. With spill durations down by 1/4, we are on track to protect our 100% bathing water quality for a fifth consecutive year, whilst working to improve the 6 newly designated bathing water in 2024. Our third priority is driving environmental gains, how we work with the natural environment and lessen any impact we have. As you can see here in Dawlish, we rely on the natural environment for all that we do, and we have always focused on a priority that improves our position. This is not new for us. In fact, we've just celebrated our 15th year of upstream thinking and are on track for our biodiversity gains in 2025, '26, one of the new common incentives in place for K8 as pioneers in the sector and enhancing biodiversity, we have always held the fundamental belief that the role of water companies needed to be more than just simply treating water to achieve world's quality standards. We also have a responsibilities to focus on protecting and improving its source. When [ raw ] water is clean, with less sediment, nutrients undepleted, rivers get healthier, biodiversity thrives and environment is protected. By working through long established partnerships to improve thousands of hectares of catchments to increase water retention and water quality in the natural environment, we are now working in over 95% of our catchments. In the first half of this year, we have restored 300 hectares involving 15 stakeholders, as well as contributing of a 350 volunteer hours and hosting 50 stakeholder events. As a significant user of electricity across our assets, derisking the energy requirements in the water business and building a portfolio that can both power Pennon and produce returns higher than the regulated water business with capital allocated is part of a balanced plan to deliver on our net zero targets. We've continued to make good progress on our 4 sites with 1 now operational and 1 in final commissioning, and we are on track to deliver 40% of the group's energy requirements by 2030 with internal rate of return expected to be between 11% and 15%. Our GBP 20 million investment in CREWW continues to lead the way with our state-of-the-art lab, researching some of the most important challenges facing the sector and society from microplastics in sewage sludge to future fibers and plastics in clothes. And as we look to support the removal of 8,000 lead pipes in 2025, '26, supporting the commitment to be lead-free by 2050. We have continued to support our customers. Whilst spills have had to increase across the sector and for us, customers pay on average GBP 1.85 a day, we recognize that for some, GBP 1.85 is too much. Our successful water demand customer initiatives, smart metering, financial incentives, customer campaigns and efficiency support continue to help customers to use less and save more. As a result, we've seen a 20% increase in the number of customers on one or more of our support packages as we work harder than ever before to support customers who need it most. And as part of the GBP 200 million package in place for K8, we've also launched our GBP 5 million Better Futures Fund, working closely with community groups across physical activity, education, health, well-being and positive environmental impact as well as those who work to alleviate hardship. In the first 6 months, we supported over 55,000 customers with that set to double over the year. Responsible businesses also need to do more than just deliver services. Today, vulnerability can mean many things, and we are focused on increasing the number of customers in our priority services register with 1 in 7 of our households now registered and for which we have been recognized as a leader. Some of my most enjoyable days are when I get the opportunity to meet customers and talk about what my brilliant colleagues do day to day. And this year, we've held nearly 300 drop-in sessions as well as our WaterShare customer AGM in Bournemouth. WaterShare+ continues to be the sector's most innovative customer engagement scheme, giving customers both a stake in the business and a say in their water company. We continue to invest in our new billing system and customer platforms using AI to improve the customer and contact experience. Growing the RCV by over 1/3 over K8 ultimately means that everyone will benefit from the investments we're making as we drive efficiency and innovative solutions from the building of new reservoirs to the fixing of storm overflows as we power our net zero ambitions and deliver improved services to customers. Our capital delivery supply chain partnership, Amplify has a strong pipeline of programs. Having ramped up expenditure during K7, we have made a fast start to hit the ground running at the required K8 run rate with over 60% of the K8 price control delivery program in progress. At the same time, efficiencies are being secured as projects progress from design into delivery. As someone with a well-furnished copy of the prospectus of South West Water from the time of privatization and as a group who has grown organically in the sector, we have a long history of responding positively. We are engaged in the transition planning and support the direction for customers, the environment and investors. And with that, I'll hand over to Laura to take you through the financial performance in more detail. Laura Flowerdew: Thank you, Susan. Let me provide some more detail on our financial performance in the first half of the year. As Susan has talked about, we've seen a strong return to profitability, benefiting from the commencement of the K8 regulatory period and the inflection point that, that represents. As a result, we've seen a step change in profitability with both underlying and statutory operating profit more than doubling year-on-year, resulting in a profit before tax, again, on both a statutory and an underlying basis, moving from a loss in the prior year to a profit in the current year of GBP 65.9 million. This means our adjusted earnings per share has increased to 14p from a loss in the prior year of 5.5p, more than covering our dividend per share of 9.26p per share. Our interim dividend reflects our dividend policy of increasing in line with CPIH of 4.1% in the first half of the year. Delivering on our K8 commitments has been the focus of our teams across the business, and we've made a strong start with GBP 305 million of CapEx in the first half compared with GBP 332 million in H1 2024-'25, a strong start to our program, and we're driving efficiency across that program whilst being on track to deliver all our year 1 price control deliverables. This capital investment is supported by our strong and robust balance sheet with gearing at 60% following the rights issue and given RCV growth of around 8% projected for this year. This places us in a strong position to deliver the around 34% growth in the Water Group RCV across the 5 years as we continue to invest in our assets and to deliver on our customer priorities. Turning to the income statement for the half year. You will see revenue increased by 25% across the group and by 26% in the regulated water business as a result of the increase in allowed revenues for K8. I will cover that in more detail in a moment. With a strong focus on costs and benefiting from our efficiency in integration programs, costs in the Water Group have increased by 6%, including one-off impacts of around GBP 9 million. We've worked hard to mitigate underlying inflationary and operational cost pressures through our ongoing focus on efficiency and driving the benefits of the integration of SES into the group as well as benefiting from lower commodity prices for power through our hedging strategy. This has meant that EBITDA and operating profit have shown strong improvement year-on-year, whilst financing costs have benefited from our diversified and efficient approach to financing with lower interest and inflation rates mitigating the impact on interest of the higher net debt year-on-year. These movements mean we've seen underlying and statutory profit before tax move to GBP 65.9 million from an underlying loss of GBP 18.6 million and a statutory loss of GBP 38.8 million in the prior year. We've incurred no non-underlying charges in the current period. Consequently, adjusted basic earnings per share have increased to 14p per share. We've declared a dividend per share of 9.26p, increasing in line with 4% CPIH to September and rebased as a result of the rights issue in January 2025. Our revenues have increased by 25% year-on-year to GBP 658 million as our financial performance benefits from the commencement of our K8 plans. GBP 88 million of the increase reflects higher tariffs from the regulatory reset, whilst year-on-year, we see GBP 22 million increase from customer consumption, reflecting both low customer demand in '24, '25 due to the water efficiency programs ongoing at that point, whilst the current half year has seen higher-than-normal customer consumption given the hot dry periods we experienced over the summer. Despite this higher year-on-year consumption, our deferral of current year revenue through tariff mechanisms will benefit future periods. Revenue in our national water retailers has also increased by 24%, given the sector-wide tariff increases passed on to businesses through the market mechanisms. Our water retailers continue to focus on ensuring building a high-quality customer base to deliver a solid financial performance, coupled with strong customer service. EBITDA over the period has increased by around 55% to GBP 254 million in the current year from GBP 164 million on an underlying basis in the prior year. This resulted from the step-up in revenue, whilst a strong focus on cost discipline has resulted in a 6% increase in the Water Group. Our costs have been impacted by one-off items relating to the hot summer, together with GBP 4 million of customer compensation incurred in the water business in respect of the supply interruption earlier in the year. Underlying these one-off impacts, we've seen cost pressures from regulatory, supply chain and operational costs as we enter the new regulatory cycle as well as continued investment in our cloud-based customer platform. Our focus on efficiency through our operational and integration programs has stabilized the cost base as we have more than offset these additional cost pressures with GBP 19 million of savings throughout the business. Susan has already spoken about our ongoing investment program and CapEx in H1 of GBP 305 million reflected GBP 279 million of Water Group CapEx as well as GBP 25 million of ongoing investment in our renewables program through Pennon Power. We have also focused on ensuring we deliver on the price control deliverables and see some strong efficiencies being identified and delivered throughout our enhancement program. We continue to fund our capital investment program through our diversified debt portfolio with strong outperformance against the regulatory allowances being delivered both through our ongoing financing costs and new issuances. We've raised over GBP 500 million in new debt during the first 6 months of the year. Our GBP 300 million bond issued in September 2025 under our EMTN program provided 109 basis points outperformance against the iBoxx, ensuring ongoing benefits through our financing cost efficiencies. Overall, our 5.6% effective interest rate for our Water Group, 5.5% for South West Water compared with allowed returns on a nominal basis using H1 CPIH, providing over 160 basis points of outperformance in H1. K8 is a transformative period for Pennon with investment focused on the delivery of the priorities of our customers and our stakeholders, whilst the growth this investment brings, coupled with strong returns on regulatory equity, will also ensure delivery for our shareholders. We remain focused on delivering financial performance in line with market expectations for the full year, with revenue anticipated to reflect normalized demand over the winter period, whilst our continued focus on cost management will help mitigate the impact of inflationary pressures. Our EBITDA is, therefore, anticipated to increase by around 60% year-on-year, whilst our profit will continue to benefit from our efficient financing costs despite the ongoing impact of our capital program. We anticipate that strong efficiencies being delivered through our capital program will offset the impact of ODI penalties in the water business, and we anticipate that ODIs will be net neutral in our wastewater business. Strong financing outperformance in the current year will support delivery of our 7% RORE target for K8. Susan, back to you. Susan Davy: In summary, a robust start to K8. We're on track financially with a strong return to profitability with operational improvements in train. We have had notable successes and have delivered a step change in wastewater and environmental performance, [ halving ] pollutions and reducing storm overflow spills. The momentum we started in K7 with the early mobilization of our supply chain Amplify is being maintained in the start of K8. We are confident that the new regulatory framework will work for customers, water companies and investors. Finally, everyone who works at Pennon is fiercely proud of our heritage in the water sector, and I'm extremely proud of our brilliant team. I'd like to thank them for everything they have done and will continue to do. Thank you. Operator: Thank you for your patience. A Q&A session will begin shortly. [Operator Instructions] I'll now hand it over to Susan Davy for some introductory remarks. Please go ahead. Susan Davy: Thanks, Alex, and good morning, everybody, and welcome this morning to the Pennon Half Year 2025-'26 Results Q&A. So I hope you enjoyed the video from Dawlish, where we're looking at the investments we're making to alleviate and reduce the storm overflows. To recap from the presentation, we have had a robust start to '25, '26 and the new K8 regulatory delivery period. We've had a strong return to profitability and some notable operational successes, including a step change in wastewater performance. The momentum of record investment over the last 2 years through early mobilization of our supply chain has continued into H1 '25, '26. And we've got a strong balance sheet and good liquidity. So in short, we are well positioned for the future and well done to all my brilliant colleagues for the performance this half year. So with that, I'm going to hand back to you, Alex, and over to everyone else for taking your questions. Operator: [Operator Instructions] Our first question for today comes from Sarah Lester of Morgan Stanley. Sarah Lester: So a couple of questions, please, from me on reopeners. So firstly, just wondering how much Pennon is planning to lean in to this reopener opportunity? I guess the ultimate question I'm asking is, do you anticipate the RCV growth could meaningfully surpass the current guidance to 2030 once we consider those opportunities? And then just quickly, curious what your understanding is at this stage of what the assessment process will look like for winning any reopener spending? Susan Davy: Okay. Sarah, thank you for that question. So in terms of increased opportunity for K8, obviously, we've got a program to deliver that we've got in our enhanced business plan. But in terms of what else and what's emerging, let's be clear with the new cost change process that came as part of the determination, and if that kicks in from Feb '26. We've had previous form in doing other investments through a price review period. So we had pre-recovery and accelerated investment, which we did in K7. And of course, there are new mechanisms for aspects like [ cyber, PFAS ] and changes to planning. Now if you look at all regions, and we've been looking at this and submitting some of our information through to DEFRA and government housing targets and housing expectations have changed since we put in our business plan. And there's something like a 40% increase projected in terms of new homes in our regions. And we've had an assessment of that. And on our wastewater assets, it's around about 10% of our wastewater work that we would have to think about in terms of supply-demand capacity and what we would do with those to support that new growth. So we can see that there is the potential to accelerate more investment on the horizon. Obviously, there are new change processes in play, and we will look to work through those. But we've been through this process before. We submitted our business plans, and we've had those fast tracks in the past. So we certainly can work around the fact that there are needs, and we will obviously work to support those for the community. Operator: Our next question comes from Julius Nickelsen of Bank of America. Julius Nickelsen: Two from me. Maybe the first one, just a clarification on the guidance. So on the net interest, you no longer mentioned the GBP 25 million to GBP 35 million. The wording has changed a little bit. Just wanted to understand if this is worse or better. And then on the EPA rating, just wondering now with like the changes that are coming in a few years and you're getting 2 star again. Are you still confident to reach the 4-star rating that is needed for your outstanding business plan? Susan Davy: Both great questions. So in terms of guidance for net interest, I'll let Laura that one up. But you'll have seen in our presentation in terms of our efficient financing position and our outperformance for '25, '26 with our target 7% RORE being supported by financing outperformance, and I'll let Laura talk about the guidance. Laura Flowerdew: Yes. So the guidance, we're probably just a little bit lower than we were saying previously, but we're in a good place. As you can see, we have a strong outcome in terms of our financing position and continue to benefit from our diversified portfolio such that we are anticipating efficient financing costs over the full year. Susan Davy: Okay. Thanks, Laura. And then, your second question was around the EA environmental performance assessment. So let me reflect on this. The new EPA framework methodology has been issued. So we know what that is. And having studied that in detail, as you might expect that we would, we think there is a really good opportunity to rerate over the period to 2028, which is obviously when the assessment is taken for our enhanced business plan cost of capital uplift. And why do we think there's a good opportunity to rerate? Well, 2 aspects really. So if you look at the new metrics that are in the framework methodology, we're in a good position. One of those is around stormwater flow operability. And I think if you look at the stats for last year, then we were second in the sector for that one in terms of our position. Other aspects around climate conditions and water resources, [indiscernible] are all in a good place. And indeed, with some of the measurements for flow compliance post the FFT review, we've obviously ramped up our position on that. So I feel with the new metrics, we're in a very good place. And the Achilles heel for us, which has been the situation since the EPA was issued and used as a methodology to prevent that, we're also seeing total pollution incident numbers, and that is normalized using kilometerage. Now we've been working with the regulator, and we've been looking at our calculations for that and how that is positioned and that will be changing from 2025 onwards. And that will obviously impact in terms of that metric going forward. And also in terms of total pollution incidents, that will now be a shadow metric in the EPA star rating assessment until 2028. So it actually comes out of the assessment at this period and then goes back into it in 2028. So I think we're in a good position to rerate on the EPA. And we're very pleased where the methodologies have landed. And I think it will be very clear for customers and for those looking at the assessment, what the metrics are and how they're being assessed. Operator: Our next question comes from James Brand of Deutsche Bank. James Brand: Well done on the good results. Three questions from me, please. The first is on the RORE commentary. Obviously, you've reiterated the target of 7% real RORE based on regulatory gearing over the period. And you've also said you're on track for that level this year. Is that a bit -- not to complain, it's obviously a good overall target to have, but like is that a bit disappointing? Because this year, obviously, inflation is quite a lot higher, which is quite favorable to the obviously, the absolute RORE, but also the real RORE, financing costs are starting lower. That kind of feels like if you're going to be averaging 7% over the period, you should be doing a bit better this year. Is that harsh or not question? Secondly, on the balance sheet. So you people are generally pretty enthusiastic about the reopeners, but then obviously, the counterfactual is then kind of how do the companies finance additional spending. Could you remind us the gearing at the Water Company you said was 60% at the half year? It's obviously a bit higher at the group level. Like what do you see your thresholds at either in terms of net debt to RAB, where you'd want to be over the period or any other metric if there's a better metric to use, please? And then finally, Keith Haslett, I think the expectation is he'll join as CEO sometime next year. Is there any way you could kind of narrow that down for us? Is it kind of late next year, mid next year, early next year? Susan Davy: Great. Good questions, James. So thank you very much for those. Look, perhaps if I start with the return on regulated equity, we set a target for the whole payout period. We're just 6 months into the first year of that payout period. And we are saying that we would have a supportive position for '25, '26 that delivers that. And in our presentation, we talked about, yes, financing supporting that. We are seeing capital investment efficiencies coming through on our PCDs. And we have had a good position overall for ODIs to wastewater, but we have had a couple of incidents on water that has meant overall will be net penalty for ODIs for this year. But in the round, we're comfortable to pull that 7%. So I think that's a good performance positioning. And obviously, we've got the whole payout period to deliver. I think, obviously, yes, you're right, it's real returns on regulated gearing. Obviously, if you look at it on an actual regulated return based on actual equity, we're returning something closer to 11%, 12%. So I think we're in a good place in terms of our performance. And in terms of the balance sheet, I mean, obviously, we mentioned earlier with Sarah's question, what is it we see on the horizon? And yes, there may be investments to come in this period. Obviously, reopeners and interim determinations give you revenue in the period, but that would help with any balance sheet and gearing aspects. But I'll let Laura just talk about where we're positioned and how strong the balance sheet is and what that looks like going forward. Laura Flowerdew: Yes. I mean, obviously, we did the rights issue in order to strengthen the balance sheet for the plan that came through from the final determination. At that point, you'll recall that we talked about having a gearing policy that was between 55% to 65% with an expectation of being 60% to 65% in the period based on our plan. Any reopeners, we will obviously need to look at the size and scale of that, but our ambition would be to remain within that approach and policy. And there's some question obviously about timing, the revenue and some of those aspects that we've worked through to make sure that our balance sheet supported the investment that may need to happen. Susan Davy: Great. Thank you, Laura. And in terms of Keith, so obviously, I announced my intention to retire in July, and it's always been in my mind to make sure we have a smooth and orderly transition. And as you can see from today's results, it's very much business as usual. But the brilliant news is we have got Keith. He is coming in. He's got great industry experience and everyone is really looking forward to his arrival, and he's been meeting people and getting up to speed, which is great. Obviously, in the meantime, I'll continue to support the business and my colleagues and the in-train transition plan. And I've got a brilliant team and everyone is focused on the job at hand. There's nothing new to announce today in terms of timings. But as you can see from the results, it's very much business as usual, and we're all excited about Keith's arrival. Operator: Our next question comes from Mark Freshney of UBS. Mark Freshney: If I could ask Susan 3 questions. So Keith clearly starts in 2026. I'm sure there will be a very, very extensive handover. What 3 pieces of advice or 3 priorities would you give Keith when you hand the business over to him? Susan Davy: Okay. Mark, really good question. Now I did say with Keith, he is well experienced in this sector. So he's coming in with vast experience. He's going to hit the ground running. So he knows this sector inside and out. So of course, I'm there and on hand to talk to him about all things. I know then he will grow to love it as much as I do, I am sure. In terms of advice, actually, I think I only need to take a couple of seconds to say this. If you look at our priorities and what we're focused on, there are customers' priorities. And those priorities are really clear in our presentation. You ask customers to make sure that we are reflecting what they ask us to do every single day and walking in customer shoes is absolutely that. So he knows as he works in the sector. So definitely make sure you're focusing on customers' priorities, and that's what we've done with our plans. And our customers are really seeing the benefits from that. So you'll see one of our priorities -- one of our 4 priorities is absolutely storm overflows and pollutions and tackling those, and we're on it, and you saw that in the video today. And secondly, I know he is brilliant, got fantastic colleagues in the business, and he will see that in place when it comes. So supporting them to do what they do every day is the only thing you can ask somebody to do. So that's probably it actually, Mark. Operator: Our next question comes from Laura Marconi of Barclays. Laura Marconi: Two questions from my side, please. Do you have an update for us on the EA fines? I think last time you said that you're still talking to the EA. How is that going? And can we expect clarity still within this financial year? Or is that too ambitious? And then secondly, on the government white paper that I believe should come out by the end of this year, what will your main focus points be? And what would be the most positive thing that could come out of that for you? Susan Davy: A thank you for your questions. So in terms of the environment agency and the full flow's treatment investigation, we don't have any more news to give you today. Obviously, that investigation continues. I wish I could be clear about the time scales, but I can't. But we are obviously liaising with them and working with them openly and making sure they've got all the information that they need to assess that position. So obviously, that will come out in due course. Now in terms of the white paper and what we expect, I mean, obviously, we all saw the Cunliffe review and we saw the [indiscernible] recommendations. And we are fully supportive of the sector reform agenda. And we want to make sure that our voice is heard, and I've got Sarah Heald, who is our Strategy and Corporate Affairs Director here with us today, and I'm sure she'll want to comment on this. But we really want to make sure that in the white paper, we see all the things that we saw coming out of the Cunliffe review. We want to make sure that whatever is in that white paper, it's a package. And there's a really fair deal for investors and having sat around the table with the new Strategy Director for water, and she absolutely recognizes that and recognizes that providing fair stable returns on investment is absolutely key. As you know, we're looking at how we are structuring the business in terms of water and wastewater plans. And again, that's in line with the Cunliffe review, we'll probably see some more of that coming through in the white paper. But I'll get Sarah to comment because I know she's looking at all things [indiscernible] and liaising with them, if not on a daily basis, certainly on a weekly basis. So Sarah, would you like to comment on this one? Sarah Heald: Sure. Thanks, Susan. Hi Laura. So as Susan said, we're very engaged in the process as are our industry peers. One of the things that we've been really heartened by is the way that we've been involved in the process of the Cunliffe review all the way through to the final report. And that, that has been taken through into the transition planning with DEFRA. We're then really looking to co-create the transition plan and get industry views on how things can work in practice. So we're very positive on that. I think it's really important that the white paper does come out this year. It's been delayed a little bit, but it would be good to see it come out in December. Obviously, we know it's been decoupled from the transition plan just to give DEFRA a little bit more time on that. And we think that's a positive thing because then it's important that they work through all the industry feedback and that they get to the right place and that the transition plan when it comes out, gives real clarity for everybody, particularly for customers and for investors and for us as companies so we can plan and move forward into the next phase. As Susan said, we're really keen to see the government accept the independent water report as a package. So there are 88 recommendations. We might not take all of them. We've already seen the government has been very clear about the 5, but they definitely are taking forward. Keen to see the establishment of the single regulator as soon as possible. We're very keen on the establishment of the regional element, we think for us in the Southwest, that could be a really positive thing. Obviously, we've got over the nation's bathing water which has got very unique quality and geography and the tourist population that comes down in the summer, and it will be good to be able to move forward into a regulatory framework that allows us to take more account and for the regulator to understand the specificities of the business better. We're quite keen on the idea of moving to the separate water and wastewater plans, the 9 plans down to 2. We think that will be very positive. And then the 2 areas that we're really focused on, I think, are, as I said, supervisory regime, we'd like to make sure that, that comes through and it's forward-looking, it's proactive, and it's also manageable and transparent. And there's the right balance between the whole firm view and the ability to have some constrained discretion, but also that there's clear benchmarking that's retained and you can -- across thematics like financial resilience, et cetera. And then system planning, we're very keen to see the role of government set out in clear terms that the government is going to set the trade-offs in the long-term strategy and targets and that there'll be consultation with the involved body. And then on the regional planner, we think that's important that it leaves on some enhancement planning where there's cross-sector coordination that's needed. So things like flooding and storm overflow programs where we've got issues with surface water that could be really positive. And then obviously, we want to make sure that we retain responsibility for all the areas that are quite clearly the Water Company. So drinking water quality schemes, et cetera. But as I say, coming back to the key point, which we're really heartened with the way that DEFRA has taken forward the co-creation that we're involved, that we're in the room, we're giving our views and as is the rest of the industry, and that feels like a very positive collaborative process. And we're just keen to make sure that they keep up the pace and that we stick to the time line and we get the clarity on the single regulator as soon as possible. Operator: [Operator Instructions] Our next question comes from Jenny Ping of Citigroup. Jenny Ping: Three questions from me, please. Firstly, just on -- going back to the EA 4-star rating. Obviously, that's the commitment that you have put forward to receive the QAA. And it seems that you're still convinced 4 star is what you need to achieve in order to get that QAA award. But when I speak to Ofwat, it does seem to be a bit more blurry given the change of the methodology to a 5-star rating. So what sort of conversation are you having with Ofwat and whoever the super regulator may be on how to translate that 4-star into 5 star? So that's the first question. And then secondly, just going back to James' question in terms of Keith and the start date. Can you tell us why we don't have a further clarity at this stage because we've seen from one of your peers with handover being relatively short. And I know, Susan, you want to get full involvement in the handover, but I think also having that clarity as to when the new management starts is -- would be helpful. So any comments there? And then just related to that, I guess, is with regards to the sale of -- or potential sale of Pennon Power. Is this something that Keith will have to decide when he starts? Or is this something that you're sort of already in train starting the sales process and he just has to give the final nod as to when he starts. So just some commentary around that would be helpful. Susan Davy: Yes. Great questions. Jenny. In terms of EA 4-star rating, look, obviously, the methodology has just been finalized by the EA, and we're all working through what that means in terms of its assessment, which under the new framework starts in 2026. So obviously, we're working through those aspects. Now in terms of the QAA and that decision point, yes, we'll obviously have to have the conversation with Ofwat just to make sure we're all aligned on what this is. We signed up to a 4-star rating and the methodology has slightly changed. But let's be really clear, we're 4 star or 5 star, we're in a really good place. So obviously, we'll have those conversations with Ofwat. But as I said earlier, we've got all opportunity to get there with that metric on that trajectory to 2028. I think in terms of Keith and the start date, look, obviously, Keith coming in from the sector has got lots and lots of experience, but it is an external appointment. So there is obviously a process to walk through with that. We don't have an update today in terms of timing. But obviously, when we've got that, we will let the market know when that will be. And obviously, as the baton will be passed over to Keith, I'll continue to support the business and the in-train transition plan. So I've got a brilliant exec team and everyone is focused on the job in hand, which is what you can see from the results today. In terms of Pennon Power, obviously, we have been building out the 4 sites that we have got in terms of that portfolio. And as I said before, we want to make sure that we have built out those sites and the timing for that with the last site in Buckingham is 2026, '27 financial year. And we said we would obviously get those built out and they will be valuable assets in this market. As a result, the returns are good and in line with what we said in the business cases. And obviously, in terms of that capital allocation, the returns are comparably higher than the regulated business for what we are investing in as well as derisking our power requirements within the group. But you're right, Keith will come in, and it will be -- given the timing of the last investment is '26, '27, he will obviously be looking at the strategy for Pennon Power on an ongoing basis. Jenny Ping: Okay. So there's no plans to sell them individually. It's going to be a portfolio based once they're all reaching -- have reached COD. Susan Davy: Well, to be fair, Jenny, that's what I've always said that we would get these assets built out. And you can see from the timetable, '26, '27 is when that occurs. And obviously, Keith will come in and with the rest of the Board make an assessment around that. Operator: At this time, we currently have no further questions. So I'll hand back to Susan Davy for any further remarks. Susan Davy: Great. Well, thank you, everyone, for joining this morning, and thank you for your questions. As I said, it's a fantastic time to be in the water sector, and I have a fantastic time in it. I've always said I work in water because it's too important not to. And I know my brilliant colleagues across the business all feel the same, and I'm immensely proud of what they do day in, day out. So looking forward to keep arriving, looking forward to us continuing to deliver and you see a good set of results for this H1 2025, '26. So thank you for this morning, and that's it from us.
Susan Davy: Good morning, everyone. I'm Susan Davy, CEO of Pennon Group. I'm pleased to share the group's half year results speaking to you from Dawlish in Devon, where we are making progress on our investment to reduce the use of storm overflow. I'm here today to see firsthand what it means for customers and communities and say thank you to my brilliant team here from South West Water and our Amplify supply chain delivery partners. If you're one of the millions of visitors that ever caught the train down to Cornwall, you'll recognize Dawlish. The track runs directly parallel along the sea line and the cliff, giving you a fantastic view for the visible coastline. You might also remember the rail track here being washed into the sea, cutting off Cornwall from rest of UK, a result of climate change and the changing weather patterns. Those weather patterns have also meant that the wastewater network here in Dawlish is under pressure as more homes are being built and more visitors arrive to this fantastic town with a population of 12,000, more than doubling in the summer months. In response, we're doing 3 things. First, engaging with the community to explain the work we need to do here on a time scale; second, applying a tailor-made solution for Dawlish with a nature-first approach by removing as much flow from the system as we can. And third, installing 2 new underground tanks to store stormwater before it's been treated. When combined with existing storage, it will hold up to 4.5 million liters of stormwater, the equivalent of 2 Olympics sized swimming pools, which combined will reduce the use of storm overflows by nearly 70%. This investment is just one of our wider multibillion pound regional program to reduce storm overflows and enhance bathing water quality all year around. There will be hundreds of similar projects going on in towns and villages like Dawlish right across the Southwest. Of course, undertaking this work needs the support of local community, and we're here to do that. From supporting the annual Carnival to Dawlish Cycle Grand Prix, we're here on the ground working together with the council and community groups playing our part. As Dawlish shows, what we do matters and what better place to talk about our half year results for 2025, '26 and here in the heart of the community. I am pleased to report that we've had a robust start to the U.K. regulatory period. We've had a strong return to profitability and notable operational successes and a step change in [ waste ] water performance. Having had record investment into our asset base over the last 2 years of K7 with early mobilization of our supply chain through Amplifying, the momentum we started then has been maintained at the start of K8, delivering on projects like the one here in Dawlish. As the only water company to have received an outstanding rating for our business plans for the third consecutive time, our focus is to make sure we deliver on our agreed plans for communities. Of course, alongside that, following the recommendation of the Cunliffe review, we are fully engaged in how the sector is evolving for the future. We are confident that the new regulatory framework will work for customers, for water companies and investors. In summary, the group is well positioned as the sector evolves. As anticipated, we've seen a good set of financial results for 2025, '26 in the first with a step change in EBITDA with operating profit more than doubling. Revenues have increased period-on-period as the business grows organically, but we have rightsized the cost base and continue to drive efficiencies, which meant wholesale water business operating costs are only rising fully in line with inflation. We're on track to deliver our targeted return on regulated equity for water group at 7% on a real notional water share basis with our effective efficient financing underpinning the performance in 2025, '26. Supporting our investment program is a robust funding position, having raised GBP 500 million in the first half of this year. Earnings per share more than covers the dividend share supporting the equity providers of finance this year. With a strong balance sheet and good liquidity and with the Water Group gearing at circa 60%, we maintain the agility to deliver on our strategy in U.K. water well positioned for a sustainable future. We've seen operational successes in the first half of the year across the 4 strategic priorities for our customers. The first priority always is safe, clean drinking water. And in K7, we invested to bolster water resources with Devon and Cornwall, repurposing disused quarries and mines as many reservoirs, new treatment capacity and building more resilience into the network as we target network upgrades where it was needed most. In September, the Met office confirmed that the summer of 2025 was the hottest on record with the 5 warmer summers all occurring since 2000 and following the hottest spring in over 50 years. Thanks to our investments, innovative approaches, improved monitoring, network rezoning, and operational focus right across the group, we have not needed to impose water restrictions for our customers across the 5 geographies we serve. The changing weather fronts have, however, tested our network, increasing the number of failures. And whilst the customer impacts have been mitigated on 70% of these, it has been challenging for the operational team. Despite the 15% increase in activity, we've held leakage at the '24, '25 levels and are targeting improvements in the second half of the year. If as a customer you need supply, you realize that the average GBP 1.85 a day you pay for your water and wastewater services is worth so much more in terms of value. We rely on water for everything from the morning cup of tea to the manufacturing process that makes [indiscernible], to the transport that takes you to the work and still on everything in between. We are therefore focused on repairing and upgrading our networks with our network investment plans on track in 2025, '26. We're never complacent about water quality as Sutton and East Surrey remains the top performer in the industry and South West Water is upper quartile across the water and sewage companies. Bristol is above average, and we are confident that we can do even more as we share best practice across the group. We continue to roll out a successful quality-first culture and training program in Bristol with plans to replicate in Sutton and East Surrey. Our second priority, tackling storm overflows and pollutions. Whilst we have had a hotter weather front in the first half of the year to '25, '26 across all the regions we serve, in Devon and Cornwall, the rainfall has been in line with long-term averages. We're therefore pleased our operational investment interventions are delivering a step change in wastewater performance. This improved position has meant we are targeting net neutral for wastewater ODIs for '25, '26. And our pollution incident reduction plan with its 5 key pillars has been a key focus of our operational teams, achieving a 50% reduction in Category 1-3 pollutions year-to-date, underpinned by a 75% reduction in repeat pollutions. Using the EA's EPA metric of total pollution incident per kilometer of main, we're on track to have improved our position for 2025 by 2/3. We've maintained our sector-leading internal sewer flooding performance, having reduced incidents by over 7% since 2020 with 12,000 smart network sensors helping to detect potential issues earlier, shifting from reactive to preventative interventions. At the same time, storm overflow spills have reduced by 45% so far this calendar year. As part of our 15-year investment program and operational activities, we have avoided around about 6,000 spills in the first half of '25, '26, bringing a total of 20,000 spills avoided over the last 18 months. With spill durations down by 1/4, we are on track to protect our 100% bathing water quality for a fifth consecutive year, whilst working to improve the 6 newly designated bathing water in 2024. Our third priority is driving environmental gains, how we work with the natural environment and lessen any impact we have. As you can see here in Dawlish, we rely on the natural environment for all that we do, and we have always focused on a priority that improves our position. This is not new for us. In fact, we've just celebrated our 15th year of upstream thinking and are on track for our biodiversity gains in 2025, '26, one of the new common incentives in place for K8 as pioneers in the sector and enhancing biodiversity, we have always held the fundamental belief that the role of water companies needed to be more than just simply treating water to achieve world's quality standards. We also have a responsibilities to focus on protecting and improving its source. When [ raw ] water is clean, with less sediment, nutrients undepleted, rivers get healthier, biodiversity thrives and environment is protected. By working through long established partnerships to improve thousands of hectares of catchments to increase water retention and water quality in the natural environment, we are now working in over 95% of our catchments. In the first half of this year, we have restored 300 hectares involving 15 stakeholders, as well as contributing of a 350 volunteer hours and hosting 50 stakeholder events. As a significant user of electricity across our assets, derisking the energy requirements in the water business and building a portfolio that can both power Pennon and produce returns higher than the regulated water business with capital allocated is part of a balanced plan to deliver on our net zero targets. We've continued to make good progress on our 4 sites with 1 now operational and 1 in final commissioning, and we are on track to deliver 40% of the group's energy requirements by 2030 with internal rate of return expected to be between 11% and 15%. Our GBP 20 million investment in CREWW continues to lead the way with our state-of-the-art lab, researching some of the most important challenges facing the sector and society from microplastics in sewage sludge to future fibers and plastics in clothes. And as we look to support the removal of 8,000 lead pipes in 2025, '26, supporting the commitment to be lead-free by 2050. We have continued to support our customers. Whilst spills have had to increase across the sector and for us, customers pay on average GBP 1.85 a day, we recognize that for some, GBP 1.85 is too much. Our successful water demand customer initiatives, smart metering, financial incentives, customer campaigns and efficiency support continue to help customers to use less and save more. As a result, we've seen a 20% increase in the number of customers on one or more of our support packages as we work harder than ever before to support customers who need it most. And as part of the GBP 200 million package in place for K8, we've also launched our GBP 5 million Better Futures Fund, working closely with community groups across physical activity, education, health, well-being and positive environmental impact as well as those who work to alleviate hardship. In the first 6 months, we supported over 55,000 customers with that set to double over the year. Responsible businesses also need to do more than just deliver services. Today, vulnerability can mean many things, and we are focused on increasing the number of customers in our priority services register with 1 in 7 of our households now registered and for which we have been recognized as a leader. Some of my most enjoyable days are when I get the opportunity to meet customers and talk about what my brilliant colleagues do day to day. And this year, we've held nearly 300 drop-in sessions as well as our WaterShare customer AGM in Bournemouth. WaterShare+ continues to be the sector's most innovative customer engagement scheme, giving customers both a stake in the business and a say in their water company. We continue to invest in our new billing system and customer platforms using AI to improve the customer and contact experience. Growing the RCV by over 1/3 over K8 ultimately means that everyone will benefit from the investments we're making as we drive efficiency and innovative solutions from the building of new reservoirs to the fixing of storm overflows as we power our net zero ambitions and deliver improved services to customers. Our capital delivery supply chain partnership, Amplify has a strong pipeline of programs. Having ramped up expenditure during K7, we have made a fast start to hit the ground running at the required K8 run rate with over 60% of the K8 price control delivery program in progress. At the same time, efficiencies are being secured as projects progress from design into delivery. As someone with a well-furnished copy of the prospectus of South West Water from the time of privatization and as a group who has grown organically in the sector, we have a long history of responding positively. We are engaged in the transition planning and support the direction for customers, the environment and investors. And with that, I'll hand over to Laura to take you through the financial performance in more detail. Laura Flowerdew: Thank you, Susan. Let me provide some more detail on our financial performance in the first half of the year. As Susan has talked about, we've seen a strong return to profitability, benefiting from the commencement of the K8 regulatory period and the inflection point that, that represents. As a result, we've seen a step change in profitability with both underlying and statutory operating profit more than doubling year-on-year, resulting in a profit before tax, again, on both a statutory and an underlying basis, moving from a loss in the prior year to a profit in the current year of GBP 65.9 million. This means our adjusted earnings per share has increased to 14p from a loss in the prior year of 5.5p, more than covering our dividend per share of 9.26p per share. Our interim dividend reflects our dividend policy of increasing in line with CPIH of 4.1% in the first half of the year. Delivering on our K8 commitments has been the focus of our teams across the business, and we've made a strong start with GBP 305 million of CapEx in the first half compared with GBP 332 million in H1 2024-'25, a strong start to our program, and we're driving efficiency across that program whilst being on track to deliver all our year 1 price control deliverables. This capital investment is supported by our strong and robust balance sheet with gearing at 60% following the rights issue and given RCV growth of around 8% projected for this year. This places us in a strong position to deliver the around 34% growth in the Water Group RCV across the 5 years as we continue to invest in our assets and to deliver on our customer priorities. Turning to the income statement for the half year. You will see revenue increased by 25% across the group and by 26% in the regulated water business as a result of the increase in allowed revenues for K8. I will cover that in more detail in a moment. With a strong focus on costs and benefiting from our efficiency in integration programs, costs in the Water Group have increased by 6%, including one-off impacts of around GBP 9 million. We've worked hard to mitigate underlying inflationary and operational cost pressures through our ongoing focus on efficiency and driving the benefits of the integration of SES into the group as well as benefiting from lower commodity prices for power through our hedging strategy. This has meant that EBITDA and operating profit have shown strong improvement year-on-year, whilst financing costs have benefited from our diversified and efficient approach to financing with lower interest and inflation rates mitigating the impact on interest of the higher net debt year-on-year. These movements mean we've seen underlying and statutory profit before tax move to GBP 65.9 million from an underlying loss of GBP 18.6 million and a statutory loss of GBP 38.8 million in the prior year. We've incurred no non-underlying charges in the current period. Consequently, adjusted basic earnings per share have increased to 14p per share. We've declared a dividend per share of 9.26p, increasing in line with 4% CPIH to September and rebased as a result of the rights issue in January 2025. Our revenues have increased by 25% year-on-year to GBP 658 million as our financial performance benefits from the commencement of our K8 plans. GBP 88 million of the increase reflects higher tariffs from the regulatory reset, whilst year-on-year, we see GBP 22 million increase from customer consumption, reflecting both low customer demand in '24, '25 due to the water efficiency programs ongoing at that point, whilst the current half year has seen higher-than-normal customer consumption given the hot dry periods we experienced over the summer. Despite this higher year-on-year consumption, our deferral of current year revenue through tariff mechanisms will benefit future periods. Revenue in our national water retailers has also increased by 24%, given the sector-wide tariff increases passed on to businesses through the market mechanisms. Our water retailers continue to focus on ensuring building a high-quality customer base to deliver a solid financial performance, coupled with strong customer service. EBITDA over the period has increased by around 55% to GBP 254 million in the current year from GBP 164 million on an underlying basis in the prior year. This resulted from the step-up in revenue, whilst a strong focus on cost discipline has resulted in a 6% increase in the Water Group. Our costs have been impacted by one-off items relating to the hot summer, together with GBP 4 million of customer compensation incurred in the water business in respect of the supply interruption earlier in the year. Underlying these one-off impacts, we've seen cost pressures from regulatory, supply chain and operational costs as we enter the new regulatory cycle as well as continued investment in our cloud-based customer platform. Our focus on efficiency through our operational and integration programs has stabilized the cost base as we have more than offset these additional cost pressures with GBP 19 million of savings throughout the business. Susan has already spoken about our ongoing investment program and CapEx in H1 of GBP 305 million reflected GBP 279 million of Water Group CapEx as well as GBP 25 million of ongoing investment in our renewables program through Pennon Power. We have also focused on ensuring we deliver on the price control deliverables and see some strong efficiencies being identified and delivered throughout our enhancement program. We continue to fund our capital investment program through our diversified debt portfolio with strong outperformance against the regulatory allowances being delivered both through our ongoing financing costs and new issuances. We've raised over GBP 500 million in new debt during the first 6 months of the year. Our GBP 300 million bond issued in September 2025 under our EMTN program provided 109 basis points outperformance against the iBoxx, ensuring ongoing benefits through our financing cost efficiencies. Overall, our 5.6% effective interest rate for our Water Group, 5.5% for South West Water compared with allowed returns on a nominal basis using H1 CPIH, providing over 160 basis points of outperformance in H1. K8 is a transformative period for Pennon with investment focused on the delivery of the priorities of our customers and our stakeholders, whilst the growth this investment brings, coupled with strong returns on regulatory equity, will also ensure delivery for our shareholders. We remain focused on delivering financial performance in line with market expectations for the full year, with revenue anticipated to reflect normalized demand over the winter period, whilst our continued focus on cost management will help mitigate the impact of inflationary pressures. Our EBITDA is, therefore, anticipated to increase by around 60% year-on-year, whilst our profit will continue to benefit from our efficient financing costs despite the ongoing impact of our capital program. We anticipate that strong efficiencies being delivered through our capital program will offset the impact of ODI penalties in the water business, and we anticipate that ODIs will be net neutral in our wastewater business. Strong financing outperformance in the current year will support delivery of our 7% RORE target for K8. Susan, back to you. Susan Davy: In summary, a robust start to K8. We're on track financially with a strong return to profitability with operational improvements in train. We have had notable successes and have delivered a step change in wastewater and environmental performance, [ halving ] pollutions and reducing storm overflow spills. The momentum we started in K7 with the early mobilization of our supply chain Amplify is being maintained in the start of K8. We are confident that the new regulatory framework will work for customers, water companies and investors. Finally, everyone who works at Pennon is fiercely proud of our heritage in the water sector, and I'm extremely proud of our brilliant team. I'd like to thank them for everything they have done and will continue to do. Thank you. Operator: Thank you for your patience. A Q&A session will begin shortly. [Operator Instructions] I'll now hand it over to Susan Davy for some introductory remarks. Please go ahead. Susan Davy: Thanks, Alex, and good morning, everybody, and welcome this morning to the Pennon Half Year 2025-'26 Results Q&A. So I hope you enjoyed the video from Dawlish, where we're looking at the investments we're making to alleviate and reduce the storm overflows. To recap from the presentation, we have had a robust start to '25, '26 and the new K8 regulatory delivery period. We've had a strong return to profitability and some notable operational successes, including a step change in wastewater performance. The momentum of record investment over the last 2 years through early mobilization of our supply chain has continued into H1 '25, '26. And we've got a strong balance sheet and good liquidity. So in short, we are well positioned for the future and well done to all my brilliant colleagues for the performance this half year. So with that, I'm going to hand back to you, Alex, and over to everyone else for taking your questions. Operator: [Operator Instructions] Our first question for today comes from Sarah Lester of Morgan Stanley. Sarah Lester: So a couple of questions, please, from me on reopeners. So firstly, just wondering how much Pennon is planning to lean in to this reopener opportunity? I guess the ultimate question I'm asking is, do you anticipate the RCV growth could meaningfully surpass the current guidance to 2030 once we consider those opportunities? And then just quickly, curious what your understanding is at this stage of what the assessment process will look like for winning any reopener spending? Susan Davy: Okay. Sarah, thank you for that question. So in terms of increased opportunity for K8, obviously, we've got a program to deliver that we've got in our enhanced business plan. But in terms of what else and what's emerging, let's be clear with the new cost change process that came as part of the determination, and if that kicks in from Feb '26. We've had previous form in doing other investments through a price review period. So we had pre-recovery and accelerated investment, which we did in K7. And of course, there are new mechanisms for aspects like [ cyber, PFAS ] and changes to planning. Now if you look at all regions, and we've been looking at this and submitting some of our information through to DEFRA and government housing targets and housing expectations have changed since we put in our business plan. And there's something like a 40% increase projected in terms of new homes in our regions. And we've had an assessment of that. And on our wastewater assets, it's around about 10% of our wastewater work that we would have to think about in terms of supply-demand capacity and what we would do with those to support that new growth. So we can see that there is the potential to accelerate more investment on the horizon. Obviously, there are new change processes in play, and we will look to work through those. But we've been through this process before. We submitted our business plans, and we've had those fast tracks in the past. So we certainly can work around the fact that there are needs, and we will obviously work to support those for the community. Operator: Our next question comes from Julius Nickelsen of Bank of America. Julius Nickelsen: Two from me. Maybe the first one, just a clarification on the guidance. So on the net interest, you no longer mentioned the GBP 25 million to GBP 35 million. The wording has changed a little bit. Just wanted to understand if this is worse or better. And then on the EPA rating, just wondering now with like the changes that are coming in a few years and you're getting 2 star again. Are you still confident to reach the 4-star rating that is needed for your outstanding business plan? Susan Davy: Both great questions. So in terms of guidance for net interest, I'll let Laura that one up. But you'll have seen in our presentation in terms of our efficient financing position and our outperformance for '25, '26 with our target 7% RORE being supported by financing outperformance, and I'll let Laura talk about the guidance. Laura Flowerdew: Yes. So the guidance, we're probably just a little bit lower than we were saying previously, but we're in a good place. As you can see, we have a strong outcome in terms of our financing position and continue to benefit from our diversified portfolio such that we are anticipating efficient financing costs over the full year. Susan Davy: Okay. Thanks, Laura. And then, your second question was around the EA environmental performance assessment. So let me reflect on this. The new EPA framework methodology has been issued. So we know what that is. And having studied that in detail, as you might expect that we would, we think there is a really good opportunity to rerate over the period to 2028, which is obviously when the assessment is taken for our enhanced business plan cost of capital uplift. And why do we think there's a good opportunity to rerate? Well, 2 aspects really. So if you look at the new metrics that are in the framework methodology, we're in a good position. One of those is around stormwater flow operability. And I think if you look at the stats for last year, then we were second in the sector for that one in terms of our position. Other aspects around climate conditions and water resources, [indiscernible] are all in a good place. And indeed, with some of the measurements for flow compliance post the FFT review, we've obviously ramped up our position on that. So I feel with the new metrics, we're in a very good place. And the Achilles heel for us, which has been the situation since the EPA was issued and used as a methodology to prevent that, we're also seeing total pollution incident numbers, and that is normalized using kilometerage. Now we've been working with the regulator, and we've been looking at our calculations for that and how that is positioned and that will be changing from 2025 onwards. And that will obviously impact in terms of that metric going forward. And also in terms of total pollution incidents, that will now be a shadow metric in the EPA star rating assessment until 2028. So it actually comes out of the assessment at this period and then goes back into it in 2028. So I think we're in a good position to rerate on the EPA. And we're very pleased where the methodologies have landed. And I think it will be very clear for customers and for those looking at the assessment, what the metrics are and how they're being assessed. Operator: Our next question comes from James Brand of Deutsche Bank. James Brand: Well done on the good results. Three questions from me, please. The first is on the RORE commentary. Obviously, you've reiterated the target of 7% real RORE based on regulatory gearing over the period. And you've also said you're on track for that level this year. Is that a bit -- not to complain, it's obviously a good overall target to have, but like is that a bit disappointing? Because this year, obviously, inflation is quite a lot higher, which is quite favorable to the obviously, the absolute RORE, but also the real RORE, financing costs are starting lower. That kind of feels like if you're going to be averaging 7% over the period, you should be doing a bit better this year. Is that harsh or not question? Secondly, on the balance sheet. So you people are generally pretty enthusiastic about the reopeners, but then obviously, the counterfactual is then kind of how do the companies finance additional spending. Could you remind us the gearing at the Water Company you said was 60% at the half year? It's obviously a bit higher at the group level. Like what do you see your thresholds at either in terms of net debt to RAB, where you'd want to be over the period or any other metric if there's a better metric to use, please? And then finally, Keith Haslett, I think the expectation is he'll join as CEO sometime next year. Is there any way you could kind of narrow that down for us? Is it kind of late next year, mid next year, early next year? Susan Davy: Great. Good questions, James. So thank you very much for those. Look, perhaps if I start with the return on regulated equity, we set a target for the whole payout period. We're just 6 months into the first year of that payout period. And we are saying that we would have a supportive position for '25, '26 that delivers that. And in our presentation, we talked about, yes, financing supporting that. We are seeing capital investment efficiencies coming through on our PCDs. And we have had a good position overall for ODIs to wastewater, but we have had a couple of incidents on water that has meant overall will be net penalty for ODIs for this year. But in the round, we're comfortable to pull that 7%. So I think that's a good performance positioning. And obviously, we've got the whole payout period to deliver. I think, obviously, yes, you're right, it's real returns on regulated gearing. Obviously, if you look at it on an actual regulated return based on actual equity, we're returning something closer to 11%, 12%. So I think we're in a good place in terms of our performance. And in terms of the balance sheet, I mean, obviously, we mentioned earlier with Sarah's question, what is it we see on the horizon? And yes, there may be investments to come in this period. Obviously, reopeners and interim determinations give you revenue in the period, but that would help with any balance sheet and gearing aspects. But I'll let Laura just talk about where we're positioned and how strong the balance sheet is and what that looks like going forward. Laura Flowerdew: Yes. I mean, obviously, we did the rights issue in order to strengthen the balance sheet for the plan that came through from the final determination. At that point, you'll recall that we talked about having a gearing policy that was between 55% to 65% with an expectation of being 60% to 65% in the period based on our plan. Any reopeners, we will obviously need to look at the size and scale of that, but our ambition would be to remain within that approach and policy. And there's some question obviously about timing, the revenue and some of those aspects that we've worked through to make sure that our balance sheet supported the investment that may need to happen. Susan Davy: Great. Thank you, Laura. And in terms of Keith, so obviously, I announced my intention to retire in July, and it's always been in my mind to make sure we have a smooth and orderly transition. And as you can see from today's results, it's very much business as usual. But the brilliant news is we have got Keith. He is coming in. He's got great industry experience and everyone is really looking forward to his arrival, and he's been meeting people and getting up to speed, which is great. Obviously, in the meantime, I'll continue to support the business and my colleagues and the in-train transition plan. And I've got a brilliant team and everyone is focused on the job at hand. There's nothing new to announce today in terms of timings. But as you can see from the results, it's very much business as usual, and we're all excited about Keith's arrival. Operator: Our next question comes from Mark Freshney of UBS. Mark Freshney: If I could ask Susan 3 questions. So Keith clearly starts in 2026. I'm sure there will be a very, very extensive handover. What 3 pieces of advice or 3 priorities would you give Keith when you hand the business over to him? Susan Davy: Okay. Mark, really good question. Now I did say with Keith, he is well experienced in this sector. So he's coming in with vast experience. He's going to hit the ground running. So he knows this sector inside and out. So of course, I'm there and on hand to talk to him about all things. I know then he will grow to love it as much as I do, I am sure. In terms of advice, actually, I think I only need to take a couple of seconds to say this. If you look at our priorities and what we're focused on, there are customers' priorities. And those priorities are really clear in our presentation. You ask customers to make sure that we are reflecting what they ask us to do every single day and walking in customer shoes is absolutely that. So he knows as he works in the sector. So definitely make sure you're focusing on customers' priorities, and that's what we've done with our plans. And our customers are really seeing the benefits from that. So you'll see one of our priorities -- one of our 4 priorities is absolutely storm overflows and pollutions and tackling those, and we're on it, and you saw that in the video today. And secondly, I know he is brilliant, got fantastic colleagues in the business, and he will see that in place when it comes. So supporting them to do what they do every day is the only thing you can ask somebody to do. So that's probably it actually, Mark. Operator: Our next question comes from Laura Marconi of Barclays. Laura Marconi: Two questions from my side, please. Do you have an update for us on the EA fines? I think last time you said that you're still talking to the EA. How is that going? And can we expect clarity still within this financial year? Or is that too ambitious? And then secondly, on the government white paper that I believe should come out by the end of this year, what will your main focus points be? And what would be the most positive thing that could come out of that for you? Susan Davy: A thank you for your questions. So in terms of the environment agency and the full flow's treatment investigation, we don't have any more news to give you today. Obviously, that investigation continues. I wish I could be clear about the time scales, but I can't. But we are obviously liaising with them and working with them openly and making sure they've got all the information that they need to assess that position. So obviously, that will come out in due course. Now in terms of the white paper and what we expect, I mean, obviously, we all saw the Cunliffe review and we saw the [indiscernible] recommendations. And we are fully supportive of the sector reform agenda. And we want to make sure that our voice is heard, and I've got Sarah Heald, who is our Strategy and Corporate Affairs Director here with us today, and I'm sure she'll want to comment on this. But we really want to make sure that in the white paper, we see all the things that we saw coming out of the Cunliffe review. We want to make sure that whatever is in that white paper, it's a package. And there's a really fair deal for investors and having sat around the table with the new Strategy Director for water, and she absolutely recognizes that and recognizes that providing fair stable returns on investment is absolutely key. As you know, we're looking at how we are structuring the business in terms of water and wastewater plans. And again, that's in line with the Cunliffe review, we'll probably see some more of that coming through in the white paper. But I'll get Sarah to comment because I know she's looking at all things [indiscernible] and liaising with them, if not on a daily basis, certainly on a weekly basis. So Sarah, would you like to comment on this one? Sarah Heald: Sure. Thanks, Susan. Hi Laura. So as Susan said, we're very engaged in the process as are our industry peers. One of the things that we've been really heartened by is the way that we've been involved in the process of the Cunliffe review all the way through to the final report. And that, that has been taken through into the transition planning with DEFRA. We're then really looking to co-create the transition plan and get industry views on how things can work in practice. So we're very positive on that. I think it's really important that the white paper does come out this year. It's been delayed a little bit, but it would be good to see it come out in December. Obviously, we know it's been decoupled from the transition plan just to give DEFRA a little bit more time on that. And we think that's a positive thing because then it's important that they work through all the industry feedback and that they get to the right place and that the transition plan when it comes out, gives real clarity for everybody, particularly for customers and for investors and for us as companies so we can plan and move forward into the next phase. As Susan said, we're really keen to see the government accept the independent water report as a package. So there are 88 recommendations. We might not take all of them. We've already seen the government has been very clear about the 5, but they definitely are taking forward. Keen to see the establishment of the single regulator as soon as possible. We're very keen on the establishment of the regional element, we think for us in the Southwest, that could be a really positive thing. Obviously, we've got over the nation's bathing water which has got very unique quality and geography and the tourist population that comes down in the summer, and it will be good to be able to move forward into a regulatory framework that allows us to take more account and for the regulator to understand the specificities of the business better. We're quite keen on the idea of moving to the separate water and wastewater plans, the 9 plans down to 2. We think that will be very positive. And then the 2 areas that we're really focused on, I think, are, as I said, supervisory regime, we'd like to make sure that, that comes through and it's forward-looking, it's proactive, and it's also manageable and transparent. And there's the right balance between the whole firm view and the ability to have some constrained discretion, but also that there's clear benchmarking that's retained and you can -- across thematics like financial resilience, et cetera. And then system planning, we're very keen to see the role of government set out in clear terms that the government is going to set the trade-offs in the long-term strategy and targets and that there'll be consultation with the involved body. And then on the regional planner, we think that's important that it leaves on some enhancement planning where there's cross-sector coordination that's needed. So things like flooding and storm overflow programs where we've got issues with surface water that could be really positive. And then obviously, we want to make sure that we retain responsibility for all the areas that are quite clearly the Water Company. So drinking water quality schemes, et cetera. But as I say, coming back to the key point, which we're really heartened with the way that DEFRA has taken forward the co-creation that we're involved, that we're in the room, we're giving our views and as is the rest of the industry, and that feels like a very positive collaborative process. And we're just keen to make sure that they keep up the pace and that we stick to the time line and we get the clarity on the single regulator as soon as possible. Operator: [Operator Instructions] Our next question comes from Jenny Ping of Citigroup. Jenny Ping: Three questions from me, please. Firstly, just on -- going back to the EA 4-star rating. Obviously, that's the commitment that you have put forward to receive the QAA. And it seems that you're still convinced 4 star is what you need to achieve in order to get that QAA award. But when I speak to Ofwat, it does seem to be a bit more blurry given the change of the methodology to a 5-star rating. So what sort of conversation are you having with Ofwat and whoever the super regulator may be on how to translate that 4-star into 5 star? So that's the first question. And then secondly, just going back to James' question in terms of Keith and the start date. Can you tell us why we don't have a further clarity at this stage because we've seen from one of your peers with handover being relatively short. And I know, Susan, you want to get full involvement in the handover, but I think also having that clarity as to when the new management starts is -- would be helpful. So any comments there? And then just related to that, I guess, is with regards to the sale of -- or potential sale of Pennon Power. Is this something that Keith will have to decide when he starts? Or is this something that you're sort of already in train starting the sales process and he just has to give the final nod as to when he starts. So just some commentary around that would be helpful. Susan Davy: Yes. Great questions. Jenny. In terms of EA 4-star rating, look, obviously, the methodology has just been finalized by the EA, and we're all working through what that means in terms of its assessment, which under the new framework starts in 2026. So obviously, we're working through those aspects. Now in terms of the QAA and that decision point, yes, we'll obviously have to have the conversation with Ofwat just to make sure we're all aligned on what this is. We signed up to a 4-star rating and the methodology has slightly changed. But let's be really clear, we're 4 star or 5 star, we're in a really good place. So obviously, we'll have those conversations with Ofwat. But as I said earlier, we've got all opportunity to get there with that metric on that trajectory to 2028. I think in terms of Keith and the start date, look, obviously, Keith coming in from the sector has got lots and lots of experience, but it is an external appointment. So there is obviously a process to walk through with that. We don't have an update today in terms of timing. But obviously, when we've got that, we will let the market know when that will be. And obviously, as the baton will be passed over to Keith, I'll continue to support the business and the in-train transition plan. So I've got a brilliant exec team and everyone is focused on the job in hand, which is what you can see from the results today. In terms of Pennon Power, obviously, we have been building out the 4 sites that we have got in terms of that portfolio. And as I said before, we want to make sure that we have built out those sites and the timing for that with the last site in Buckingham is 2026, '27 financial year. And we said we would obviously get those built out and they will be valuable assets in this market. As a result, the returns are good and in line with what we said in the business cases. And obviously, in terms of that capital allocation, the returns are comparably higher than the regulated business for what we are investing in as well as derisking our power requirements within the group. But you're right, Keith will come in, and it will be -- given the timing of the last investment is '26, '27, he will obviously be looking at the strategy for Pennon Power on an ongoing basis. Jenny Ping: Okay. So there's no plans to sell them individually. It's going to be a portfolio based once they're all reaching -- have reached COD. Susan Davy: Well, to be fair, Jenny, that's what I've always said that we would get these assets built out. And you can see from the timetable, '26, '27 is when that occurs. And obviously, Keith will come in and with the rest of the Board make an assessment around that. Operator: At this time, we currently have no further questions. So I'll hand back to Susan Davy for any further remarks. Susan Davy: Great. Well, thank you, everyone, for joining this morning, and thank you for your questions. As I said, it's a fantastic time to be in the water sector, and I have a fantastic time in it. I've always said I work in water because it's too important not to. And I know my brilliant colleagues across the business all feel the same, and I'm immensely proud of what they do day in, day out. So looking forward to keep arriving, looking forward to us continuing to deliver and you see a good set of results for this H1 2025, '26. So thank you for this morning, and that's it from us.
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