25th May 2018 08:54
LONDON (Alliance News) - Pennon Group PLC said Friday its annual profit jumped on a slight increase in revenue as it continued to up its dividend due to its "strong performance".
The water company posted, for the financial year ended March, a statutory pretax profit rise of 25% to GBP262.9 million from GBP210.5 million. The company's revenue increased 3.7% to GBP1.40 billion from GBP1.35 billion.
Pennon say the increase was driven by its South West Water business posting higher revenue on net tariff increases and customer demand. Its waste management business, Viridor, increased its energy recovery facility earnings growth.
South West Water's cost savings on capital and operational expenditure outperformed at GBP177 million since 2015, resulting in an outcome delivery incentive reward of GBP8.1 million. Revenue from South West Water rose due to a net tariff increase of 2.5%.
Viridor delivered an increase in earnings before interest, tax, depreciation and amortisation of 8.6% to GBP150.2 million from GBP138.3 million the year before, saying this was due to its "improved performance of energy recovery facility assets and a focus on quality and efficiency".
As a result, Pennon's underlying earnings before interest, tax, depreciation and amortisation increased 4.9% to GBP509.6 million from GBP486.0 million the year before.
The FTSE 250-listed company increased its final dividend by 7.0% to 26.62 pence resulting in a total dividend increase of 7.3% to 38.59p.
Looking ahead, Pennon continues to expect the UK residual waste market to be favourable with deman for energy recovery facilities exceeding capacity.
It has planning permissions and permits already in place for an expansion in Cardiff for a potential 75,000 additional tonnes per annum and at Ardley for a potential 27,000 additional tonnes.
The recycling market has "been challenging" following China's new import policy, costing the company about GBP3 million. But Pennon is "confident of delivering sustainable, long-term returns from water and waste".
Chief Executive Chris Loughlin said: "Pennon has delivered a strong performance this year across water and waste. As a British business providing vital services to our communities, we are committed to delivering for customers and shareholders. Thanks to ongoing cost savings at South West Water, average bills are lower today than they were nine years ago, while we continue to invest significantly in our treatment plants and distribution network. Since 2015 our unique WaterShare policy has identified GBP79 million of financial performance benefits to share with customers and we have been delighted by the response to our customer engagement campaign 'Get Into Water', which sets out our plans for ever improving service and increasing investment in the next regulatory period 2020-2025.
"At Viridor the operating fleet of energy recovery facilities is performing well, transforming household waste into electricity and heat. Good progress is being made to bring Viridor's remaining four energy recovery facilities in the portfolio on stream, with three in commissioning and the final facility under construction. The expansion of Viridor's portfolio will support Pennon's earnings growth to 2020 and beyond. Viridor has looked to navigate a challenging recycling market in 2017/18 through self-help measures and a programme of innovation. That said, the UK recycling system needs fixing. We are encouraged that the 'Blue Planet' effect is spurring action and we are optimistic that positive changes will be announced in the Resources & Waste Strategy later this year creating a UK recycling system fit for the future."
Shares in Pennon were up 5.9% Friday morning to 772.80 pence each.
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