Pennon halves dividend growth target

The FTSE 100 utility declared a final dividend of 30.11p taking the payout to 43.77p, up from 41.06p a year earlier.

Pretax profit for the year to the end of March from continuing operations fell to £193.1m from £201.4m as underlying revenue from continuing operations rose to £636.7m from £632.6m. Pennon took a provision of £9m for businesses and households failing to pay their bills during the Covid-19 crisis.

Pennon said its dividend for the last financial year reflected the group's £1.6bn of cash and liquidity. The dividend increased in line with the company's policy of retail price index inflation plus 4%.

For the next five years the dividend will increase by consumer price inflation plus housing costs (CPIH) plus 2% from a rebased 2019-20 payout of 21.11p, reflecting the sale of the Viridor recycling and waste business. It also promised returns to shareholders from the sale of its Viridor recycling and waste business.

The owner of South West Water is selling Viridor to private equity firm KKR for £4.2bn. It will use the £3.7bn net proceeds to reduce debt and the pension deficit, expand the business as well as delivering returns to shareholders.

Chris Loughlin, Pennon's chief executive, said: "We are pleased with the solid operational and financial performance delivered this year. The performance for 2019/20 underpins the dividend of 43.77p per share.

"Following the sale [of Viridor], Pennon will be a leading UK-focused water infrastructure group, delivering for customers and providing services in the most efficient and sustainable way possible. We are pleased to announce our Continuing Group dividend policy of CPIH + 2% growth per annum through to 2025, with additional returns to shareholders to come from the sale of Viridor."