Pennon's (PNN) decision to implement a tariff freeze last year meant revenue for its South West Water business grew just 0.4 per cent to £522m during the final 12-months of the regulatory cycle. However, it was waste management business Viridor that delivered strongest growth last year, increasing underlying cash profits by 8 per cent to £135m.
During the year, Viridor brought five energy-recovery facilities on line, boosting revenue by 4 per cent to £836m, although the business had to contend with a £30m drop in recycling remits. While Pennon was forced to book £11m in charges for underperforming landfill contracts, overall exceptional charges relating to Viridor fell, helping boost the group's pre-tax profits. Viridor intends to close at least three of its flagging landfill sites annually over the next five years.
South West Water is preparing for the market liberalisation brought in by last year's Water Act. This will allow non-household customers to switch their water supplier. Effectively, it meant that the utility has had to separate its wholesale and retail businesses. South West has also driven greater cost efficiencies by installing operational information systems on its plants.
Broker RBC Capital expects adjusted EPS of 40.7p in 2016, up from 39.8p last year.
PENNON GROUP (PNN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 872p | MARKET VALUE: | £3.6bn | |
| TOUCH: | 871-873p | 12-MONTH HIGH: | 925p | LOW: 745p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 258p* | NET DEBT: | 162% | |
| Year to 31 March | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.16 | 189 | 48.4 | 24.65 |
| 2012 | 1.23 | 201 | 48.1 | 26.52 |
| 2013 | 1.20 | 14.0 | 5.7 | 28.46 |
| 2014 | 1.32 | 159 | 38.8 | 30.31 |
| 2015 | 1.36 | 197 | 32.3 | 31.80 |
| % change | +3 | +24 | -17 | +5 |
Ex-div: 6 Aug Payment: 2 Oct *Includes intangible assets of £396m, or 96p per share | ||||
