20th May 2015 10:46
LONDON (Alliance News) - Pennon Group PLC Wednesday said it had delivered a "resilient" set of results for the last financial year after reporting a rise in pretax profit as both its South West Water business and Viridor waste to energy business experienced a lift in earnings.
The FTSE 100 company reported a pretax profit before exceptional items of GBP210.7 million in the year ended March 31, up 1.6% from GBP207.3 million a year earlier, whilst pretax profit after exceptional items rose to GBP197.0 million from GBP158.7 million.
The South West Water division reported a 3.3% rise in profit before tax and exceptional items to GBP167.9 million whilst Viridor experienced a 0.4% increase to GBP27.7 million.
Earnings before interest, tax, depreciation and amortisation rose 0.9% to GBP411.0 million, compared to GBP407.3 million, with South West Water reporting a 0.1% rise in Ebitda to GBP331.3 million whilst Viridor experienced a 5.4% lift to GBP80.4 million.
"The group has delivered a resilient set of results for 2014/15. South West Water's Ebitda was higher than last year despite the tariff freeze, thanks to a strong focus on cost efficiency, and as expected Viridor's Ebitda exceeded last year," said Chairman Ken Harvey.
Prior to the results, analysts had said the market focus would be on the Viridor division which had been forecast to report strong earnings growth over the next few years due to capacity expansions in the energy-from-waste UK market. Analysts at Macquarie had said Viridor's earnings in 2015 should increase from 2014.
"Viridor has made excellent progress in its energy business bringing five new Energy Recovery Facilities on stream in the year. Pennon is well positioned to continue to deliver profitable growth and consistent, sustainable cash returns to shareholders," said Harvey.
Revenue for the year was up 2.7% to GBP1.35 billion compared to GBP1.32 billion, with South West Water revenue rising 0.4% to GBP522.2 million from GBP520 million whilst Viridor generated GBP835.9 million in revenue, a 4.2% rise from GBP802 million.
South West Water attained 7,600 new customers in the period, which contributed GBP2.8 million toward revenue, whilst customer demand was up 0.9% year on year, reflecting drier weather over the summer and benign months over the winter. However, Pennon said customers switching from unmeasured to metered charges reduced revenue by GBP4.8 million. 79% of South West Water's domestic customers are now metered.
Pennon increased its dividend by 4.9% to 31.80 pence per share and reiterated that its dividend policy is to grow year on year by a minimum of 4% of retail price index inflation until 2020.
In the period, Pennon booked GBP11.0 million in impairments related to a small number of landfill sites and under-performing contracts, partly offset by a reduction in environmental provisions and reduced retirement benefit obligations following pension scheme benefit changes.
At the end of March, the company's net debt stood at GBP2.19 billion, which Pennon described as "stable". That represents a gearing level of 61.9% from 64.7% a year earlier which it said "reflects Pennon Group's efficient financing", it said.
Capital investment in the financial year fell 6.2% to GBP407.3 million from GBP434.1 million.
Cash and committed facilities totalled GBP1.74 billion, of which GBP771 million is in cash balances. Pennon said committed funding for South West Water is in place until March 2017, whilst the Viridor Energy Recovery Facilities pipeline is fully funded. Pennon has spent GBP839 million so far on the pipeline.
Pennon said its priority continues to be the creation of shareholder value through its strategic focus on water and sewerage services; and renewable energy, recycling and waste management.
"South West Water is continuing its strong performance with robust operational delivery and high standards of customer service and financial performance," said the company. "Viridor has now passed its strategic point of inflexion, and the company's financial performance has been in line with expectations as 2014/15 full year Ebitda exceeded 2013/14 despite current market conditions in recycling".
The Energy Recovery Facilities pipeline projects are located in Exeter, Oxford, Cardiff, Runcorn, Peterborough, Beddington and Dunbar. The pipelines will transport residual municipal waste to facilities that will convert the waste into energy under a 25 year contract. All of the pipeline projects are at different stages in each location.
Pennon said Viridor's pipeline projects are set to contribute an additional GBP100 million to the division's Ebitda in the financial year expected to end March 31, 2017.
Pennon shares were trading up 0.1% late Wednesday morning at 880.38 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
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