Okay. Well, good morning, everybody. I'm Susan Davy, CEO of Pennon Group, and I'm joined by Paul Boote, who's the Group Finance Director. I'm delighted to be here today in person to present Pennon Group plc's results for 2021, 2022. I'm delighted we've had resilient performance very much delivering on our strategy, building momentum, driving sustainable growth across the group. Now, we are a purpose-led business. Our purpose is bringing water to life, and we have 3,000 colleagues across the business who are innovating, seeing opportunities where others see obstacles, and tons of people very much delivering for our customers and communities. Now, with the cost of living crisis, we know at Pennon it's incredibly important that we support our customers. We are supporting our customers financially in three ways.
First of all, delivering on our commitments and our business plan efficiently, so keeping bills as low as possible for the services that we deliver. We have an affordability toolkit in place for customers who find themselves in difficulty. We can tailor individually for those customers support as and when they need it. Thirdly, we have our innovative WaterShare+ scheme, which is something that nobody else has in the sector, where we are able to share, on a timely basis, financial outperformance with customers, again, at a time when they most need it, either to get a reduction on a bill or to join the 1 in 16 households we now have as shareholders across the group.
The last two years, if it's taught us anything, whether it's the pandemic, whether it's the cost of living crisis I've just talked about, the climate emergency, or indeed, the very distressing, war, in the Ukraine, there are headwinds that businesses obviously have to make sure they can manage through. I'm very pleased with Pennon and its results for 2021, 2022 and our delivery, that we have had. Robust, resilient financial and operational performance. In terms of the financial metrics, revenue has grown organically 6.7%. EBITDA growth up 14.7%, and EPS growth up 5%. We acquired Bristol Water, during 2021, 2022, and we've had 10 months of EBITDA contribution, from Bristol Water, some GBP 53 million, ahead of acquisition expectations.
Very pleasingly for water companies, their business plan's very much focused on delivering outcomes, and attached to them are those financial incentives, those ODIs, outcome delivery incentives. For 2021-2022, both for Bristol Water and for South West Water, moving from a net penalty in 2021 to a net reward in 2021-2022. In terms of the returns for the water businesses, good, strong returns delivering on all areas, whether it's totex efficiency, ODIs, or financing outperformance. You can see there the numbers for South West Water, Bristol, and the group return on regulated equity of 8.9%. Now, that translates into, for the first two years of this delivery period to 2025, outperformance of GBP 150 million to date.
Now, in terms of the group, we also have profitable business-to-business retailers, Pennon Water Services, and through our acquisition of Bristol Water, a 30% investment in Water2Business. Now, supporting the business in terms of its performance is a good, robust balance sheet and a finance portfolio that's very strategically positioned with an optimum level of index linking in place. That balance sheet and the gearing levels are providing headroom for growth and investment. Moving to that investment in 2021, 2022, first of all, the Bristol acquisition. Obviously, in terms of the process we went through with the CMA, cleared at phase one, and that's enabled us to identify GBP 50 million of efficiency savings that we will see in the period to 2025.
Alongside investing in our largest ever capital investment on the water side, some GBP 240 million spent on the asset base in 2021, 2022. Of that 150 million outperformance, 130 million of it is going towards the environmental enhancements that we will be putting forward and investing into the asset base. A good set of results, sustainably positioned and well positioned for the future. That's what we've been doing. In terms of our approach to business, very responsible, sustainable, business. I think about the environment and the work we have been doing. Last year, we launched net zero plans to 2030, both for Bristol Water and for South West Water.
There are different pillars to those plans, but one of the key pillars is making sure that we are increasing our renewable energy investments, and we're able to then generate by 2030, 50% of our requirements from renewable energy. In terms of the Green Recovery Initiative that we put forward to the regulators, we got that cleared in 2021, 2022, so GBP 82 million will be going into nature-based solutions and other projects and initiatives. Very much pilots, very much shaping our plans for what will be our next delivery period. A few weeks ago, we launched our WaterFit initiatives, a step change for river and coastal quality, very important for our South West region.
All in all, very much delivering on our largest investment program that we've had for 15 years on the water side, and there'll be about GBP 1.4 billion spent in the period to 2025. In terms of customers and delivering for customers and communities, I said there were three things that I think is really important for us to do. The first one is make sure that we deliver efficiently and that our bills can be the lowest that they can be for the services that we deliver. Therefore, it's pleasing to see that South West Water customers will be receiving a bill cut for 2022-2023 at lower bills than they were 10 years ago. Bristol Water, through the acquisition, has enabled us to again think about reducing the bills for those going forward.
Alongside those bill positions is our WaterShare+ scheme. In 2020, GBP 20 million of outperformance went back to customers. Either they could choose to invest in Pennon and get shares, and one in 16 customers did that, or customers could get GBP 20 off their bill. That was in 2020. We are also going to give another GBP 20 million back to customers this summer, and again, broadening it to the new customer base for Bristol, with the option for customers to get money off their bill at a time when they most need it or indeed become shareholders in the business.
Now, in terms of the business and the group and the colleagues who work within the group, I'm really pleased to say that we've been accredited for the second year running as a great place to work. We are very much a company that has an inclusive culture where everyone counts, and we are embracing and promoting equality. We were the first water and sewage company to sign up to Change the Race Ratio and the 10,000 Black Interns initiative. In terms of building on our credentials, in 2018, we were accredited with the Fair Tax Mark. Really important for our customers, and something that they were very keen to see us do with all the interactions we have with our customers.
It's something they felt was very strong that a company such as ours in the South West is seen to do absolutely the right thing. I'm pleased to say we've kept that accreditation year after year since we first got it. We've also got strong and improving ESG performance metrics, and we're one of only three companies to sign up to science-based emission reduction targets. Good performance, 2021, 2022. Operating in a sustainable way, underpinning long-term value. Resilient performance in terms of our business plans, both for South West Water and for Bristol Water. Very much on with delivering against those year two into the plan. 8% of outcomes on track for South West Water. Bristol improving from 70%-75%, for 2021, 2022.
Pennon Water Services, our business to business retailer, GBP 90 million of contract wins builds quality contracts that will allow that performance to continue into the coming years. We're reinvesting outperformance either to pre-fund Green Recovery for GBP 82 million, the WaterFit+, which is going to improve rivers and coastline in our region, and the acceleration of the WaterShare+. We're responsibly deploying our capital, so gearing across the group with the work we've done post our transformation has reduced, and across the water business, we're at 61%, very much in line with the economic regulator's view of an efficient water company. We've put some funds into the pension scheme, and that is sustainably managed and on a technical provisions basis is fully funded.
We've obviously reinvested in UK Water, very confident outlook for the water sector. In terms of the buyback, GBP 200 million complete and GBP 200 million to deploy. All that leads us through to long-term sustainable growth and expectations for RCV growing of more than 40% over the period to 2025. Though it's supporting our shareholder dividend for 2021, 2022 in line with policy and growing at CPIH + 2%. With that, I will hand over to Paul, who'll take you through the financials.
Okay. Thanks, Susan, and good morning, everyone. I'm pleased to be reporting a resilient set of financial results today, very much underpinned by our growth strategy. We've obviously acquired Bristol Water in the period, and as you can see, that's contributed significantly to our EBITDA, GBP 53 million coming through in the year. Remembering that's 10 months' worth of contributions, so certainly more to come there. Organic revenue growth 7%. That's really driven by business customer demand improving and those contract wins we have in Pennon Water Services. Now, a key financial highlight for us is always our sector-leading efficient interest rate in South West Water. That's 3.4% for this financial year just gone.
That's really underpinned by our debt mix that we have in that business, with around 20-25%, 25%-30% of our debt in South West Water being index-linked. That number is a little bit higher than it was last year, and that reflects that inflation coming through, but still sector leading and well-positioned. In terms of our earnings per share, that's gone up by 5%, really reflecting the contribution of Bristol to the group and earnings per share of GBP 0.502. That really supports the dividend of GBP 0.3853 growing in line with our stated policy. Looking at the income statement, the underlying income statement in a little bit more detail, worth noting that all the numbers for the financial year 2021-2022 include 10 months worth of contribution from Bristol.
A step up in most of those numbers. But also, I'm just gonna focus a little bit on those higher interest costs coming through in the financing line, as well as, the tax line, where we've had a few changes too. In terms of the net finance costs, we've had about a GBP 20 million step-up in that financial year, due to inflation. Probably around GBP 5 or 6 million in Bristol Water and GBP 15 million in South West Water. That really reflects probably a half year impact, because if you think back to last year, the first half of the year, inflation was actually fairly, in line with long-term averages before it did step up, into the elevated positions that we're now seeing. About GBP 20 million step-up there. That led to our profit before tax falling, year-on-year.
However, when you look at a profit after-tax basis, we have an increase, and that reflects tax deductions that have come through based on our capital spend and our responsible pension contributions. That profit after tax increase very much driving our earnings per share growth. Focusing on now, revenue. Think it's worth noting that GBP 104 million coming in from Bristol Water, ten months there, so more to come again when we have twelve months in the coming financial year. Then I'll just speak about COVID for a little bit, because over the last eighteen months, I've talked to you about how our demand has changed with COVID being around for the past two years. For this financial year 2021-2022, we've seen business customer demand rebound coming back to near pre-COVID levels.
That's also been the same as you can see on that chart for developer services and new connections. If you think back to 2020, in that first half when the restrictions were very, very severe, that activity did almost nearly cease. That has rebounded well. On a non-household side, we are seeing revenue slightly reducing, demand slightly reducing, as people are returning to work and perhaps using less at home. Worth noting overall, demand is still higher than it would have been pre-COVID, and is higher than it was last year. We do have high demand in our region.
Now as you can see on revenue, we've also got the increases in Pennon Water Services, both from the business customers returning to higher levels of activity, but from those contract wins that have come in over the past year or so. Moving on to profit before tax. Here I've set out the numbers for Bristol Water, so you can see the contribution coming through. A solid contribution above our initial expectations, GBP 9 million of profit before tax. And there's that GBP 20 million for the interest number. I'll just maybe dwell on that again. As I say, about GBP 6 million of that relates to financing from inflation, high inflation.
When the inflation does return to the long-term average, as it will inevitably do at some point, might not be through this year, but at some point, it will come down again, then that interest cost will step back down. That's the same for the GBP 15 million increase that we've seen on South West Water this year. Worth noting, South West Water, we have had higher revenues coming through, but we've also had higher costs, so we've got a GBP 9 million reduction in EBITDA year-on-year. A key aspect of that I'll just focus on for a moment are power costs. In South West Water, our power costs are around GBP 47 million. GBP 24 million of that relates to wholesale power prices in the market. Now, we have seen higher demand in our region.
That means we have higher power usage as well. When we have higher demand, that means there's more water pumping around the network, both in terms of clean water and wastewater. With that comes higher power costs. Therefore, we saw a step up of around about GBP 5 million from the previous year. Finally, on this slide, I'll just touch on Pennon Water Services. Really pleased that it's recorded its first profit before tax, and it's actually recorded GBP 1 million profit before tax. That's really pleasing, putting it in a good place to continue to sustainably grow. In terms of tax, I mentioned earlier that we've got a reduced current tax charge this year, which is the case. It's down at 3.5%. Two aspects really driving that.
The first are the super-deductions that the government has introduced, encouraging capital spend in the UK economy. As Susan has mentioned, we've had higher capital spend ourselves in this financial year, as well as those allowances coming through. That gives us a significant deduction and a GBP 50 million worth of extra capital allowances coming in. We also get deductions for our pension scheme contributions, and over the past couple of years, we've put about GBP 70 million into our principal pension contributions, utilizing some of those proceeds, and that drives deductions as well over a number of years. It gets spread over a number of years. The final thing on this slide is deferred tax.
As people will be aware, all companies are hit by deferred tax when the UK headline rate changes, moving up to 25%. For us, that's a deferred tax charge of about GBP 100 million, and that comes off our statutory profit and loss account. For us, it does still leave us with a statutory profit even after that charge. Moving on to our cash flow position. Worth noting on this slide that, of course, Bristol is now included, so both cash inflows and capital investment are stepped up because of Bristol being part of the group. I would note that we've had strong cash collections in terms of customer accounts, and that really does talk to the efforts and the work we do with our customers on affordability, making sure they're on the right tariffs.
We're helping them where we can, helping them access the benefits that they can. That not only helps our customers in these times of high inflation, but it also helps us in making sure that the debt we charge is then very collectible, and that's been coming in, and that's stayed robust through the year. In terms of capital investment, that's increased by about GBP 70 million, but I'll touch on that on the next slide. We have the second section of this slide, which is all about the deployment of the Viridor proceeds. Over the past year or so, we've been doing that.
In the past financial year, the key aspects were the GBP 1.5 billion special dividend that was paid in July and the share buyback program of GBP 400 million, of which GBP 200 million has now been deployed. Now, as I've said, I think at the half-year presentation for us, following the acquisition of Bristol Water, the net debt number that we're focused on now is very much the one that excludes acquisition-related fair value adjustments. That really makes sure that we're looking at a net debt number that's comparing apples with apples and is on a basis that actually reflects the principal indebtedness that we will actually repay on that debt. Moving on to capital expenditure.
As I say, it's increased GBP 70 million year-on-year, so half of that principally relates to Bristol Water now being part of the group. The other half in South West Water is around acceleration of activities, looking to improve environmental performance in terms of pollution, as well as driving down leakage. Also looking at water treatment works, new water treatment works in the Bournemouth region, which have now commenced construction. We've got two water treatment plants that we're looking to do in this AMP. Similarly, similar technology to the Plymouth Mayflower plants that some of you may have visited. We're expecting that to come in within the allowances of around about GBP 165 million for those two plants. Moving to the balance sheet now.
Since we've had the acquisition of Bristol Water, our RCV has stepped up to GBP 4.2 billion. That compares to the water business net debt of GBP 2.6 billion. It puts us in a sustainable gearing position. You may also remember, as part of the Viridor deployment of proceeds, we talked about 100 million being invested from Pennon into the water businesses. Forty-five million of that was done in the last financial year, and that went into South West Water. That's within that 61.7 gearing number that you see there for South West Water. That means there's another 55 million for Pennon to inject into the water businesses. Once that's done, we expect the gearing level to be 61.4%.
We, as we've said before, expect that to continue to de-gear over the regulatory period and very much towards Ofwat's notional 60%. In terms of our debt mix, I mentioned at the start, and you can see it there on the right-hand side, that we have a relatively low level of index linking compared to the sector at large, and that really does put us in a good place in this high-level, high inflationary environment that we currently see. That really underpins that 3.7 effective interest rate for the water business. That's the water businesses combined. That's made up of 3.4 for South West Water and 5.6 for Bristol Water. Now how do we do that? One of the key ways we do that is through our sustainable financing framework.
We've revamped that during the year, made sure it's in line with the latest bond principles and loan principles. We're pleased to say that we issued GBP 300 million of debt in the year, and all of that was through the framework. I'd like to take this moment to thank all the banks in the room for their continued support and working with us to make sure when we do issue that debt, it is done through the framework. We do appreciate that, so thank you. Also just to give you a heads-up that we'll be looking to refinance and put in place new levels of debt of around a similar number next year. I'm sure we'll have some good discussions on options around that the weeks and months ahead.
Just a final slide from me on, I suppose, inflation, principally macroeconomic outlook, and this really reflects guidance that we recently gave at our Spotlight presentation back in April. With inflation comes near-term pressures in terms of our cost base and our financing, principally that is an energy cost for us. In terms of the financing, as I say, the important thing to remember there is it's very much a temporal effect. As soon as inflation returns to the long-term average, the interest costs will step back down. The really important thing to remember is that we also have our revenues and our RCV growing in line with inflation, and that will more than offset those headwinds in terms of totex costs and financing costs.
In terms of that RCV growth, when you look at the inflationary environment at the moment and you add in the impacts of the Bristol acquisition and the green recovery, we are expecting to see over 40% RCV growth over K7. That really does put us in a good position to continue to deliver sustainably and drive value into the future. With that, I will hand back to you, Susan.
Great.
Thank you.
Okay. Thanks, Paul. Thank you for taking us through the financial highlights. I'd just like to take you through some of the highlights from last year. A key highlight has been the acquisition of Bristol Water and expanding our reach across the Great South West. Now in terms of bringing Bristol into the group, it is very much about looking to bring together the best of the best. We're going to be deploying our proven integration blueprint. We've got a 24-month program to integrate the business, where we'll be looking at common systems, common processes, supply chain efficiencies, and making sure that we take the best from the best with South West Water and Bristol.
We've now got our expanded talent pool of 3,000 colleagues who are absolutely focused on innovating to deliver across the region. We're already partnering on 11 different innovation projects in the sector. We have invested from a Pennon perspective into a purpose-built facility that's gonna be focused on water and the environment with the University of Exeter. It's not just for the U.K. water sector but also internationally as well looking at innovative solutions to the challenges that we face. We're in a really good place in terms of bringing together the business into the Pennon Group. In terms of the organization and for those 3,000 talented colleagues we've got across the organization we are promoting an earn and learn culture.
We are a member of the 5% Club, and the 5% Club is all about making sure that you've got structured training in place for at least 5% of your colleagues across the business at any one time. I'm very pleased to say with our 600 apprenticeship and graduate scheme entrants that we're gonna have to 2025, we'll be very much exceeding that. We're absolutely focused on increasing gender diversity and promoting those equal opportunities. We've got 30% female diversity, and we are an employer of choice for female talent in our region. Now, I talked about a greater stake and say for customers in the South West. We will be expanding that scheme for the Bristol customers who came into the group last year.
In terms of talented people delivering for customers and communities, when customers think about service, we want to make sure we get things right and we get things right first time. How do we know how that's going? Well, we look at our complaint numbers, and I'm really pleased to see, you can see the chart at the bottom, we're more than halving complaints across the group, whether it's South West Water, whether it's Bristol Water. Now in terms of overall experience, there is a regulatory measure around that called C-MeX. For Bristol Water, a very pleasing 6 out of 17, and South West Water ranks at 12. Plenty there that we can take in terms of learnings to improve South West Water's performance going forwards.
In terms of community support and engagement, following the restrictions being lifted through the pandemic and lockdown, we've relaunched our educational outreach program, and we've reached out last year to over 5,000 pupils across the region. Now, why do we do that? Well, certainly, in schools, you've got a very receptive audience. They're environmentally savvy, and they're very much our change agents for the community. When we talk to children about water efficiency and what that does to improve the planet, they very much take that on board. Also on the waste side, really talking to them about the impacts of things that go down the loo, as we have our campaigns like the three Ps, just pee, paper, and poo. That's all that can go down the loo.
The kids really love it. That then goes home, and it gets out into the community, and it gives us an easier time on our network. That's why we do that educational outreach program. We've got our community funds in place that we started 18 months ago, and we've been helping over 100 organizations over the last year. In terms of our affordability measures and what we're doing to support customers. Remember I said at the beginning, 3 ways we support the bills, the affordability toolkit, and the water share mechanism.
In terms of those affordability measures, very much tailored to individuals, and making sure that we can support them either with reduced tariffs, or indeed the 6,000 visits that we undertook last year with very well-trained people in our organization, who help individuals to maximize their income, not just to pay water bills, but to pay all the other bills that they're facing at this point in time. A really important initiative that we have going. We've been helping over 100,000 customers this last year with their affordability issues. I'm just going to quickly talk through some of the water metrics and then go on to the wastewater metrics before we finish.
It's great having Bristol and South West Water in the group 'cause you can start comparing not just from an industry sector, but also company to company, how things are, going, and then think about some of those integration points and how we can learn the best from the best, from each of those businesses. Key metrics that we have on the water side. In terms of the health of the infrastructure, mains repairs, if you look at these charts, you can see South West Water Bristol, and then the red lines are the performance commitment levels from the regulatory business plans. Where we're below the red line, that's good. South West Water and Bristol, you can see improvements year on year, and below the commitment levels for 2021, 2022.
Lots of innovation going on in the network, and great things that we can learn from each other on the supply chain. In terms of treatment works and unplanned outages, again, very much below the commitment levels. For Bristol Water, there's a slight blip around the Storm Eunice, but actually performing well, and underlying performance is good. We've got Mel Karam here today, who's CEO of Bristol, and I'm sure if you've got questions then, he'll be able to to answer those later. At leakage, we've got our leakage reduction plans in place. Pleasing to see both below and on track with the performance commitments both for South West Water and Bristol, and across the group, a 7% reduction.
That's all around the technology that we have in the network, being able to spot where there are issues, and to make sure that we can intervene, and fix those where they occur. In terms of the next slide, just three more metrics to talk through. Compliance Risk Index. That's all about the quality of the water that we're producing. You can see there, both South West Water and Bristol Water, we're slightly elevated above the performance commitment, so there is more to do there, but that was impacted by one-off events for last year for both Bristol Water and South West Water. What are we doing about it? We're investing, we're accelerating service reservoir and tank enhancement activities.
In particular for the South West Water bit, that was around some of the Bournemouth treatment works, and one of the assets there. We have our new investments going in for two new water treatment works, which will be completed by 2025. Supply interruptions. No customer wants to be without water, very pleasing to see the improvements and the reduction there, especially with Bristol Water year-on-year, under the performance commitment level. On the right-hand side, this is all about the customer experience, whether you're a household, whether you're a developer, or whether you're a retailer. What this chart tells you, if you're above the line or on it, you're in a good place. If you're below, not so good. We can see there across the group in a pretty good place for those measures.
South West Water on the C-MeX, as I said earlier, things that we can learn in the group from Bristol Water to improve that. Just moving on to wastewater. Again, the metrics. Same in terms of performance commitment being the red line. Performance commitment is the red line, actual performance is the green bars year to year. These internal sewer flooding, sewer collapses, external sewer flooding, they're all about the state of the asset base. You can see there an improving trend, very much below the performance commitment level. In fact, for internal sewer flooding and sewer collapses, very much delivering already on our 2025 targets. Asset base in a good position.
In terms of other work we've been doing in the catchments for last year, and if I start with bathing water and the bathing water quality results. Now, people come to the South West, it's a fantastic region, and it is the destination for bathing waters. We have over a third of the nation's bathing waters in the South West. We have been investing to make sure we can support good quality bathing waters. In fact, for the first time ever last year, 100% of the bathing waters achieving quality standard, which is a great place to be.
What we've been doing to achieve that, well, one little example, one of the bathing beaches, Combe Martin, regained its designated bathing water status last year, and that was us working with the community both on some nature-based solutions to alleviate some of the impacts around, flooding and other aspects, so tree planting, as well as some storm attenuation tanks to improve the performance there. River water quality improvements. We're on with reducing our impact by a third to 2025. Schemes are underway to enable us to achieve that. What we are working on through the Green Recovery Initiative is the work with our partners on the rivers Dart and Teign, looking at piloting bathing water designation for those rivers, which will be for the first time in our region.
It really will be the region for quality water. Monitors, we're on with 80% of those installed to ensure we are tracking water quality across the region. Catchment management, we've been pioneering for the last 15 years. You can see there the hectareage that we've improved, and the peatland we're restoring, which helps not just with water quality, but also with carbon capture, and the trees that we have been planting. We're very much on track for our 250,000 target by 2025. Isles of Scilly, we took that on in 2020. I haven't talked too much about that, so I thought it was worth just putting on this slide.
We have been supporting those islands, very much focused on quality first for water, improving water treatment on the main island of St. Mary's and the other satellite islands, and very much underway, given it's a water-stressed area on those islands with our water efficiency program. 90% of customers now on a smart meter, which obviously they didn't have before, so we can track consumption and think about how we work efficiently on those islands. I'm just gonna touch on this slide for a moment. Since I took up the role as CEO, this has been a real focus area, making sure we can reduce our impact on the environment and reduce pollutions. It's a continued area of focus.
The chart on the right-hand side is our pollution performance every year for the last 10 years. We've had our best ever performance for 10 years for 2021, where we have reduced by a third the number of pollutions that we have, so that's from 150. There is more to do. We have a culture change program in place. We have many activities that are focused on using the data and information that we've got in a very sophisticated way to target for our 19,000 kilometers of network where we need to intervene to alleviate pollutions. We have intervened in 210 hotspots last year and improved the assets by those interventions alleviating pollutions for the future.
In terms of sewer blockages, we have reduced the number of blockages that we have seen, noting that about 70% of the blockages that we get are to do with wet wipes. There are education programs that go around that. We very much want to influence customers to not put wet wipes into the system, 'cause that obviously creates issues and potential pollutions. As I say, more to do in that area. We are consistently being a one, two-star company for the last 10 years.
We have plans to be four-star by 2024, and it's a real focus area for us. Overall, in terms of our performance, I said at the beginning, both for South West Water and Bristol Water, for outcomes that we put into the business plan, we're in a pretty good place for those across the group. You can see there, those that are doing well, and those where we have the areas of focus. Pleasing to see, certainly for Bristol Water, improving last year. Our overall returns on a regulatory basis, whether it's TotEx efficiency, whether it's financing outperformance, where we have the most effective financing cost in the sector, overall, our RoREs are in a good place. From a group, we're in a good position to deliver.
Water retail, as Paul said earlier, we've got Pennon Water Services that's delivered a profit in 2021 and 2022. Water2Business, through our investment in Bristol Water, we acquired a 30% stake in Water2Business. Again, a very good performing business. Actually, if you see the chart here, Pennon Water Services and Water2Business, in terms of complaint numbers and satisfaction, very much at the right end of that chart for retailers in the sector, so in a good place. We are well-positioned to deliver for the remainder of the regulatory delivery period. Very much focused on innovation, driving our performance. If any of you caught the capital markets event that we did in the autumn last year, you'll have seen some of those innovations.
That's helping us to sustain that performance. In terms of our focus, environmentally focused with our Green Recovery proposals, in terms of improving our impact on the environment. WaterFit, which we launched a few weeks ago, again making sure that we can target investments in our assets to improve the water quality in our region. For us, our bathing waters, where we've got 100% in terms of good or excellent for last year, what we want to do is extend that bathing season. Have it all year round water quality for people who want to enjoy that in our region. A very good sustainable platform for the business retail that we have across the group. I will finish there. Resilient performance, very much delivering on our strategy.
Building momentum, driving that sustainable growth. Resilient financial and operational performance for 2021, 2022. With that, I think we can go to Q&A. Thank you. Okay, for Alex.
Thanks. It's Alex Wheeler, RBC. Three questions from me, please. First on Bristol Water, I'd just be interested to understand what's gone better than you expected, and, you know, what the key drivers were to being ahead of expectations. Secondly, on ODIs, you've had a strong year-on-year improvement there. I'd just be interested to understand how we should think about that improvement run rate going forward, and where you might expect to be at the end of the AMP. Finally, on the cash collection, Paul, you mentioned that it had been robust in FY 2022. I'd just be interested to understand whether you expect any pressure into this year, and whether post year-end, you've seen any pressure as the cost of living crisis has ramped up. Thank you.
Okay, great. Thanks for those questions, Alex. First of all, in terms of Bristol Water, better than expected. I mean, certainly the operational performance, you can see from those charts, going in the right direction. And also, there was efficiency initiatives that Bristol Water implemented last year as well, that's meant that we're in a good place, both financially and operationally. In terms of ODIs, yes, it's good to see that we've gone from a net penalty to just creeping into the net reward. In terms of forecast, we don't give forecasts on ODIs, but we are committed to delivering on our business plan commitments.
and 75% Bristol Water, there is more that we need to do to get back up to the higher levels of commitment performance. We're in a good place. As I say, crept into the net reward, and we've got a trajectory to improve that further. No forecast on that. Paul?
Yeah.
Cash collection.
In terms of cash collections, you're right. As I said, been robust through the year, just gone. So far this year, I'd say that's continued to be the case, very much so. As we look forward, obviously when you're doing your accounts and you're thinking about bad debts, it's looking forward and what you might expect. You're quite right to ask. Obviously, the cost of living crisis will put pressure, no doubt, on customers' ability to pay. For us, what that's meant is when we've looked at our bad debt provisions in the round, if you recall, we did book some provisions for COVID back when that first occurred in 2020. Now, in the water businesses, those have largely remained unused, so they're still there, and they're still there within the calculation.
We're still, if you like, holding amounts ready for affordability issues should they arise. As Susan says, our first line of defense very much is the toolkits that we have and the help that we provide our customers, so that they don't get into those problems in the first place. From a technical point of view, we still have those elements of provision in the books.
Thank you.
Our bad debt charge has been pretty steady at 0.5% of turnover, hasn't it?
It still remains very low. I think 0.7% for the whole group of revenue.
Okay. Great. Chris? Oh, no.
Morning. Thank you very much. Chris Laybutt, Morgan Stanley. Thank you very much for the presentation. If we could start on the balance sheet, Paul, if you could give us an update on the buyback and what we can expect in the months ahead, timing and quantum. Also, I'm just wondering whether you have discussed the landing zone for gearing, and there's quite a range now in the sector from yourselves up to National Grid at 70% of RAB, the high watermark, high end of the range. Just wondering if you can give us a guide as to where you feel might be a good landing zone, or have you discussed it?
On EPS, if you could just give us some comments on consensus as it stands now. I know you gave us a lot of information in April, which is slowly feeding into consensus. Some comments there would be very useful too. Thank you.
Yes. Okay.
Mm-hmm.
Right. Happy to take those. In terms of buyback, as I said, GBP 400 million program was launched last year, GBP 200 million done to date, GBP 200 million to do. As we've always said, deploying that, in terms of it being a buyback is dependent on other opportunities coming through. As you can imagine, we are continually reviewing that with our advisors. We do expect another tranche to be issued imminently of the buyback, so I think that will be coming shortly. We set ourselves a timeline, if you like, of deploying that buyback out to September 2022. I still expect to be able to actually give the orders, if you like, to get the tranches started and done within that timeframe, subject to those other opportunities.
Whether it takes a little bit longer for those actually to be fulfilled by our advisors who actually do that, our brokers who actually do that for us, that may be the case. We're still looking at those, launching those tranches within that space, subject to those opportunities. Hopefully that gives you a feel on the timeline and profile. In terms of gearing, I mean, gearing we do, obviously we talk about that quite a lot. I think if you think back to our capital markets day, we actually talked about having headroom for growth.
If it is gonna be the case in PR24 that we are gonna be looking at much more significant investment needs, then there might be times when gearing levels will step up to support that. I think that's not something that we're afraid of. We have the capacity, we have the headroom, we have the ability to do that. But for this regulatory period, with the financials and the plans that we've got, we do expect it to be trending down towards that 60% notional level, and then we'll see what comes in terms of plans going forward. In terms of EPS consensus, you're right. It's obviously with inflation being where it is, the market is perhaps updating daily in terms of views that impact earnings.
In our trading statement and spotlight presentation in April, we did give some guidance, which is effectively being repeated today. The consensus that we're seeing where people have updated those figures now, we're seeing EPS of around about 38p for next year. We've had, I think it's four or five analysts compiled on that.
A quick follow-up. In terms of the net debt guidance and the glide path, does that include the buyback, and does it include the latest assumptions that you're including for inflation?
The net debt buyback?
The net debt that you've guided to for this AMP.
Oh, in terms of gearing?
Yeah, in terms of gearing.
Yeah. Well, in terms of gearing, when we do talk about that, we're talking about the water businesses. Importantly to remember, the buyback is actually at the Pennon level. That is outside that gearing, if you like. When we do talk about that 61%, you know, we talked about South West Water, and then we talked about the water businesses, that is South West Water and Bristol Water together. Then we do hold a little bit more cash and debt at Pennon level, but not material amounts. Obviously after that buyback has been utilized, it will be there or thereabouts, maybe a little bit higher than the water businesses in terms of gearing. Does that answer your question?
Yeah.
Yeah.
Okay. Thanks, Chris. Verity?
Verity Mitchell, HSBC. I've got three questions. How confident are you that you're gonna get the four-star rating by 2024, given your progress to date? I'm particularly interested if you could just talk through the compliance risk index and what that actually means and what that requires. On Pennon Water Services, what are you doing that your loss-making competitors are not doing to get into profit?
Okay. Yes, of course. Thank you very much, Verity. In terms of our four-star EPA focus, you're right, we're not at four stars yet here today. We have been historically one, two star for the last 10 years. Rightly so, the bar is also rising in terms of our performance. Yes, we had reduction in pollutions, and we've had the best ever performance for the last 10 years, but there is more for us to do. We have a very clear plan in place within the organization. We have, over the last 18 months, made sure that we have used all the data and information to know where we've got issues on the network and where we have some potential pinch points in terms of the assets.
As I said, we've invested in 210 hotspots last year. On a catchment basis as well, we've absolutely mapped, and we know where those catchment pinch points are. We are looking at a combination of nature-based and hard engineering interventions to improve and alleviate that going forwards. Given the topography of our region and the geography, you know, we are very close to water courses, so when something happens, it happens and it impacts a water course. We have to be very mindful of that, which is why we need to make sure we've done the work that we've done so we know where to invest.
Yes, it seems like a long way to go from where we are today to get to 2024, but we absolutely have the teams focused on it, and we've spent the last eighteen months knowing what we need to do. We're in a good place for that. In terms of CRI, this is a new measure that we've had for this regulatory period around compliance for our water quality standards. It's something that obviously the sector is looking at. In terms of the way it works, if there is an incident at a treatment works, then you know, that adds to the risk. Your at-risk index, what you're aiming for is to have minimal events and minimal impact.
We have a kind of tolerance band of around two, as a scoring measure, as an index. For the last year, we had a couple events, one in Bristol, and one in Bournemouth, which impacted that measure. We're probably about mid-pack in terms of the overall sector on that. As I said, we've got a water quality first transformation program going on, where we're investing, and we are accelerating schemes to improve that and reduce that risk index going forward. PWS?
Yes. Perhaps I'll just focus on what we do well, I think, in answer to this question, Verity. I think firstly, service levels is something that we're very keen on. And I think you can see that in both the chart that Susan put up in terms of Pennon Water Services and Water2Business, two companies that provide great service to their customers. That actually helps 'cause they then have low attrition rates. That's the first plank, actually doing the operations well. And then the second aspect for us is all around the growth. Pennon Water Services have a very targeted growth strategy, looking at large sustainable customers, trying to target them.
Really that was in place before COVID, but then having gone through COVID, that's really served us well, because we've been able to, you know, work with those customers who are largely still around and have made it through COVID. Therefore, as they've come back and their demand has gone up, we found ourselves in this better position where we've been able to record those profits.
I think Verity's got a follow-up.
Oh, sorry.
Just as I'm here and I've got the microphone. I've just got another two questions then. One's on CSOs. You were flat more or less last year compared with some people who had quite significant reductions. Perhaps you could talk us through what's happening with CSOs and also the percentage of monitors that you actually have on your CSOs. Just secondly, just looking at your RoRE chart, if you could just talk us through how you changed the Bristol financing penalty to a reward as part of the restructuring. Thank you.
Yeah, absolutely, Verity. So in terms of CSOs, you're right in terms of overall spill numbers, they were pretty similar one year to the last. Obviously we've had more monitors going in, so we're at about 80% in terms of monitors that are in place now. In terms of our plans, that was part of our WaterFit that we launched a few weeks ago, we're aiming to reduce the number of spills that we have from the networks and get that down to on average around 20, which is by 2025, so around about 35 at the moment. And RoRE?
Yeah, in terms of RoRE, I think, as you'll have seen, our RoRE outperformance has moved forward both in terms of South West Water and Bristol Water in terms of that financing. I think the credit for that really goes to the strategy of having that index-linked position, so having that lower index-linked position than in a high inflationary environment. That's what gives that outperformance. It's that sort of strategy that's led to that.
Peter Hyde from Atlas. Just following up on Chris's question, which I'm not quite sure you answered, Paul, on RCV growth and inflation. What are you actually assuming when you talk about gearing of 60%, in terms of inflation? Are you expecting it to remain, you know, take the two ends, very high for a year or two? Or are you expecting it to come crashing down to sort of 2%-3% very quickly? What are your assumptions there versus what impact that would have on the gearing? Secondly, just, can you just talk a bit about totex savings and ODI rewards and how you see the two playing off against each other? Thanks.
Okay. Well, shall I take that inflation question first then? In terms of our expectations for inflation, we're expecting inflation to remain elevated through this financial year, pretty much through 2022. CPI, CPIH somewhere between 7%-8%, and then RPI somewhere between 8%-9%. Obviously, it could peak higher than that. We expect to decline as we enter 2023. They're really the sort of central forecasts that U.K. OBR has set out and the Treasury use. Obviously events may prove otherwise, but they're the generic forecast that we're using. When we actually produce our WaterShare+ RoRE, the way we do that, we have an average inflation across the five years, and the assumption there is 3.1% CPIH.
That's 3.1% over the whole five years. That does take into account those low inflation at the start of the regulatory period, and then high inflation through this financial year just gone and the financial year we're going into.
Okay. Then Peter, I'll pick up that question around totex savings and the ODI interactions. In terms of you know our strategy, it's very much to deliver on the business plan. Deliver the outcomes and be as efficient as you can be, and that's what the regime and framework incentivizes you to do. It's important for us to deliver that so that when we have totex savings, we know that goes back to customers in the form of lower bills going forward. We do absolutely want to make sure we're driving both. You will see us driving efficiency, innovating to achieve that, and as you've seen for 2021, 2022, we are just nudging into the ODI net reward position for both Bristol and South West Water.
We are overall then delivering on our kind of business plan, commitments at the same time as being able to deliver efficiently and have that trajectory going into customer bills, which will be lower going forward, giving you the headroom for future improvements to the asset base. That's our strategy. Can't see.
Hello. Richard Alderman, BTIG. Three questions if I may. Just on the inflation-linked debt, how do you think about that going forward in terms of whether you will seek to reduce it going into the end of seven? In theory I guess if you're saying you think inflation's coming down quite quickly, you may not. But you're obviously at a lower level than your peer group. But how do you think about that? In terms of inflation itself, has the board had any discussions about what you might do with the tariff structure for next financial year, given that it's quite obvious that the peak of inflation is going to be the November reference point for next year's tariff?
I seem to remember in the last two decades you have deferred tariff in the past, in a minor way. Have you thought about that, as a political exercise going forward, or is it a requirement that your inflation-linked debt needs you to collect all of that and only rely on WaterShare+, your current process? On the buyback, unless my math is incorrect, I think when you look at the last buyback you undertook, or last but one buyback you undertook after the half year results, the liquidity was quite difficult in terms of your ability to complete it in the timescale.
Given that August will be a similar liquidity month to December, what are your advisers telling you about your ability to complete GBP 200 million in a very short space of time? Is it quite possible that this could still be ongoing as a sort of tranche by tranche process through the back end of this financial year?
Okay. Thanks, Richard. Do you wanna take the index-linked debt?
Yeah. I'll take the index-linked debt question first. The way we've positioned ourselves strategically to have a relatively low level of index-linked compared to our peers is something that we've strived to do, and we don't see any reason to deviate from that position. That's something that we'll look to stick with. If you think of the Ofwat notional company when they're setting out their price reviews and their determinations, they work on the basis of 33%. Historically we've tried to mirror and follow to some extent the Ofwat notional structure. That's therefore we are following it closely, but we are giving ourselves some headroom by being slightly under it. I think that will continue.
Maybe I'll just touch on the buyback question as well.
Yeah
Whilst I'm talking. In terms of buyback, as I said, in the answer to the earlier question, we have GBP 200 million to do. We will do it continually in tranches. I expect to be able to give the instructions on the tranches, within our timeframe to September. It then may take a little bit longer in the market to execute. I don't see that going into 2023 or anything like that.
Okay. Thanks, Paul. In terms of your question around board discussions for bills and tariffs and what that looks like going forwards, I mean, absolutely we discuss that as a board, which is why, you know, our strategy is very much to deliver our service for the lowest bill for our customers that we can bill. In terms of the profiling of that, I mean, obviously for 2022, 2023, bills will be lower for South West Water, and we're doing the WaterShare+ issuance as well. Our projections are, with some of the extra demand that Paul's talked about today, that's come through, that will inevitably lead to a slight reduction position for 2023, 2024 in terms of a starting position for tariffs and bills.
Absolutely we will look to manage that, making sure that we obviously have the revenue requirement collected that we have over the K7 period, but that we manage the profile and impact to customers, and that's what we're absolutely focused on doing. Okay. Are there any? Oh, yeah.
Hello. I'm Ruisi Liu from Credit Suisse. Thanks for taking the question. Can you give us an update on the flow to full treatment by the Environment Agency? Specifically if you see any remedial actions required at this stage from yourself. Secondly, can you talk about the Bristol Water B2B supply business, whether you think there's an option to merge that or combine that with the Pennon Water Services? Thank you very much.
Yeah. In terms of the EA and Ofwat investigation, I suppose I'll be quite short on that one. It is ongoing at this point in time. Both investigations are ongoing. Obviously as all companies have been, we have provided information and data, and we're just in that process at the moment. Nothing more I can really update for you today. In terms of the PWS and I think it was the question around the investment in Water2Business, on the retailing side, I mean, obviously we've got two great performing retailers. As part of our plans going forward, we'll want to understand whether there are any benefits from bringing those together. Back to Chris.
Good morning. One follow-up. Just wondering if you could, with the draft methodology paper coming up quite soon, if you think that we might get a view on returns allowances, or will we have to wait until December? And maybe just a comment if you could on where you think that may land higher, lower, in the context of some favorable reviews recently, but also the current political environment. Thank you.
Chris, yeah. Yes, you're absolutely right. Methodology coming out for the next price review this summer. It would be unusual, I think, for there to be any guidance around returns at this stage in terms of a price review. I wouldn't be anticipating that, but I'm not the regulator, so we shall see. I would have thought it would have been unusual for that to be the situation going forwards. What was the second question? What was the second question, Chris? Oh, what do you think it was? Yeah. Like I said, I'm not the regulator, so we shall wait and see.
Great.
Okay. I think that's it in terms of questions in the room. Can I just check if we've got any questions online? No, it doesn't sound as though we are.
Question via the telephone lines. You can do so by pressing star followed by one on your telephone keypad. If you joined us online, please click the Request to Speak flag icon. If you choose to withdraw your question, please press star followed by two. When preparing to answer your question, please ensure your line is unmuted locally. As a reminder, that's star followed by one on your telephone keypad now. We currently have no questions via the telephone line, so I'll hand back over to the team.
Nice little interlude there. Okay, great. Well, thank you very much for coming this morning. I say it's been great to do this in person. It's great to see so many familiar faces in the room. So thank you.
Thank you all.