Water and waste management group, Pennon (PNN) reports underlying revenue up 6% to £1.4bn and profit before tax up 8.3% to £280.2m for the year ended 31 March 2019. The shares are trading down 6p at 728p.
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STRONG GROWTH AT VIRIDOR
Revenues are 8.5% higher at £852.7m, while profit before tax is up a whopping 25% to £88.5m. Growth is being driven by 3 new recycling facilities coming on-stream, as well as increased like-for-like performances from existing facilities.
The company announces the start of a new growth phase at its Avonmouth state of the art recycling facility.
The facility, costing £65m will be powered by low carbon energy, and has the capability to handle 3 types of plastics.
The plant will allow local authorities to recycle 320,000 tonnes of non-recyclable residual waste each year into renewable energy, which would otherwise go to landfill. The company expects the project to provide a payback of under 4 years, giving a rate of return on investment of 15%.
LOWER BILLS AND LOUDER VOICE FOR CUSTOMERS
South West Water revenues are 1.7% higher to £581m, with profit before tax flat at £180.6m. Costs increased lower than inflation despite the extreme weather in 2018, which cost the group c£5m.
Pennon Water Services has continued to generate net customer gains during its second year of trading with revenue increasing by 4.7% to £173.7m (2017/18 £165.9m).
Pennon claims that it will deliver lower bills for customers by 2025 than in 2010, while improving the efficiency of the network and reducing leakage by 15%. The company achieved its highest ever customer satisfaction score and South West Water is now ranked number 2 overall for quality of service.
The water regulator Ofwat has given Pennon fast track status for its business plan covering the 2020-25 period. The plan envisages giving customers the option of a financial stake in the business and to hold Pennon to account, through a customer annual general meeting.
For 2018/19, the Board is recommending a final dividend of 28.22p. Together with the interim dividend of 12.84p, this would result in a total dividend of 41.06p, an increase of 6.4% from last year, providing investors with a 5.6% yield.
Pennon has a long established dividend policy of growing its dividend at least 4% above inflation out to 2020. Over the last nine years, the dividend has increased by close to 7% a year.
