Mirroring similar customer-friendly proposals from peers reporting earlier in the week, Pennon (PNN) announced a tariff freeze for its South West Water business next year. The company said this can be achieved without hitting shareholder value as the water regulator Ofwat will take the lost revenue into account when drawing up plans for the 2015-2020 regulatory period. Pennon will submit its business plan for the 2015-2020 review on 2 December and will propose average bills below inflation over the period.
South West Water’s first-half revenues rose 5 per cent to £269m and operating profit rose 6 per cent to £121m. Overall, a 1.3 per cent above inflation increase in tariffs, together with new connections, helped offset the impact of customers switching to metered charging.
Recycling unit Viridor remained a drag as it grapples with tough conditions in landfill: "we recognise it’s a declining business," says Viridor chief executive Ian McAulay. The recycling side of the business has also faced challenges as prices for recycled materials have dropped due to competition and global economic headwinds. But there were some signs of stabilisation with recycling margins improving, thanks to cost-cutting - there are promising prospects for the energy from waste business, too.
Broker Whitman Howard expects full-year adjusted EPS of 42.9p (from 7.4p in 2013).
PENNON (PNN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 644p | MARKET VALUE: | £2,384m | |
| TOUCH: | 642p-644p | 12-MONTH HIGH: | 729p | LOW: 597p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 66 | |
| NET ASSET VALUE: | 229p* | NET DEBT: | 184% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 634 | 107 | 25.4 | 8.76 |
| 2013 | 667 | 111 | 29.4 | 9.39 |
| % change | +5 | +4 | +16 | +7 |
Ex-div: 29 Jan Payment: 3 Apr *Includes intangible assets of £352m, or 95p a share | ||||
