With operational efficiency a key metric against which water utilities are judged by the regulator, it makes sense that Pennon (PNN) is in the midst of a review to create a leaner and fitter business. As part of this, management is considering integrating support services for its South West Water and Viridor businesses, such as IT and human resources functions.
Viridor continued to ramp up operations at its energy recovery facilities, with total inputs almost doubling to 2.1 metric tonnes (MT). Eight of the committed 11 plants are now fully operational, with another expected to come on line during the 2017 financial year. It was this that drove up cash profit for Viridor by 45 per cent to £117m, helping offset the continuing decline in landfill.
The acquisition of Bournemouth Water bumped up sales for the water business and helped offset a decline in regulated returns at South West Water. The combined water business delivered an 11.7 per cent return on regulated equity, 20 basis points of that relating to its outcome delivery incentives (ODI), where it generated £2.1m in rewards.
Prior to these results analysts at Whitman Howard forecast adjusted pre-tax profit of £217m in the year to March 2017, giving EPS of 40.8p (from £211m and 39.5p in FY2016).
PENNON (PNN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 863p | MARKET VALUE: | £3.56bn | |
| TOUCH: | 862.5-864p | 12-MONTH HIGH: | 901p | LOW: 712p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 289p* | NET DEBT: | 167% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.23 | 201 | 48.1 | 26.52 |
| 2013 | 1.20 | 14 | 5.7 | 28.46 |
| 2014 | 1.32 | 159 | 38.8 | 30.31 |
| 2015 | 1.36 | 197 | 32.3 | 31.8 |
| 2016 | 1.35 | 206 | 37.0 | 33.58 |
| % change | -1 | +5 | +15 | +6 |
Ex-div: 7 Jul Payment: 2 Sep *Includes intangible assets of £449m, or 109p a share | ||||
