Shares in water utility company Pennon (PNN) gained 2.4% to £10.95 after it announced a special dividend and buyback as well as the acquisition of Bristol Water.
Following the divestment of waste management services company Viridor for £4.2 billion in July 2020, Pennon is now a focussed water and waste-water company.
Almost half the cash proceeds of £3.7 billion have been reinvested back into the water businesses, including the repayment of £1.1 billion of debt, resulting in debt of £180 million which the company said will reduce to £150 million in July 2022.
A further £100 million will be invested in South West Water to support the green initiative.
SPECIAL DIVIDEND/BUYBACK
The company plans to return £3.5 billion to shareholders via a special dividend of £3.55 per share as well as buyback up to £400 million of shares up to September 2022. This will be subject to the company using some of the allocation to make acquisitions to boost growth.
Given the large size of the distribution, the special dividend will be accompanied by a share consolidation intended to maintain the comparability of the share price as far as possible.
The firm confirmed plans to grow dividends in line with consumer price inflation plus 2%. The board proposed a final dividend of 14.97 pence per share for 2020/21 which together with the interim payment of 6.77 pence per share increases the dividend by 3% on the rebased 2019/20 dividend of 21.11 pence per share.
For comparative purposes the total dividend for 2020/21 of 21.74 pence will equate to 32.61 pence post consolidation.
ACQUISITION BUILDS SCALE
Pennon today announced the acquisition of Bristol Water for £425 million as part of its strategic plan to grow the water business. The purchase increases the regulated asset base by 16% and builds the scale of the group to serve around 3.5 million customers.
Chief executive Susan Davy commented: ‘We have ensured Pennon is well positioned for the future, reinvesting for growth, and retaining sufficient funds to drive further value.
‘The acquisition of Bristol Water announced today, is the next step in the growth of the group, building on significant experience as a leader and consolidator in the industry.’
Pennon reported full year underlying pre-tax profits to 31 March down 14% to £157 million and adjusted earnings per share from continuing operations down 9.4% to 31.9p, in line with expectations.
