Pennon profit rises, dividend hiked

Pennon posted a rise in full-year pre-tax profit on Friday and hiked its dividend as it sounded a positive note on the outlook for water and waste.

In the year to the end of March 2018, pre-tax profit increased 3.5% to £258.8m on revenue of £1.39bn, up 2.9% on the previous year.

Statutory earnings per share were up 20.6% to 48.0p and Pennon lifted its dividend per share by 7.3% to 38.59p.

The company said earnings growth was driven by net tariff increases and higher demand at South West Water, energy recovery facilities growth and a strong focus on cost savings.

The cost savings and synergy targets of around £17m a year from 2019, identified by the shared services review, is on track, the group said, with approximately £13m a year delivered to date.

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.

"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."

Looking ahead, Pennon continues to expect UK residual waste market dynamics to be favourable, with demand for energy recovery facilities exceeding capacity into the long term.