Pennon raises dividend on the back of robust first half of 2019
Pennon, which owns waste management firm Viridor and utility supplier South West Water, said it had posted a “robust” set of results for 2018 as the firm raised its shareholder dividend.
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The figures
Pennon’s profit rose 0.8 per cent in the half ending 30 September, up to £143.7m from £142.5m in the same period last year.
Revenue dropped 4.6 per cent from £746.7m in 2018 to £712.4m this year.
Earnings per share were up 17.6 per cent to 30.1p. The company announced a dividend of 13.7p, a 6.4 per cent increase on 2018’s 12.8p.
Why it’s interesting
Pennon’s strong performance was based on consistent growth in its Viridor recycling business, which the company said is “consistently outperforming” investment case returns.
The company said its new plastics processing facility was on track, which would add much needed capacity to the UK market.
South West Water, Pennon’s other division, also became the only water company to receive fast-track status from Ofwat for the second consecutive review.
The company said it was planning to further reduce customer bills, with the average bill price estimated to be lower in 2025 than it is today.
As part of South West’s recently announced “new deal”, customers will be offered a financial stake in the utility, as well as the means to hold it to account over its policy direction.
The company is currently undergoing a full review, with conclusions to be announced in 2020.
James Smith, fund manager at Premier Miton Investors, commented on the results:
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“Pennon remains a top quality pick in the UK utility space. Growth is coming through from the waste business, and management has done a good job of de-risking this earnings stream through securing long-term contracted volumes and pricing.
“The water business remains at the forefront of innovation in the sector, and this has been consistently recognised by the regulator. The ongoing strategic review may possibly lead to a change in the group structure and this will be a key event to watch for in 2020.”
What Pennon said
Chris Loughlin, chief executive of Pennon, said:
“Pennon has maintained its positive momentum through the first half of 2019/20, delivering robust performance across our water and waste businesses.
“We continue to deliver on our promises to customers, communities and shareholders as our strong operational performance and ongoing investments drive tangible, positive and sustainable results.”