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Pennon Group today announced an £8 million restructure at South West Water and Viridor that will result in £11 million of annual savings.
It also outlined £2 miliion of costs associated with the integration of recent acquisition Bournemouth Water into South West Water.
The one-off restructuring costs will be offset by efficiencies of £11 million a year. The group said it was progressing a number of further initiatives to deliver “greater totex outperformance” at South West Water (SWW) and a “more efficient cost base” at Viridor.
Pennon Group chief executive Chris Loughlin said: “We see further opportunity to deliver improved efficiency and effectiveness driven by management changes which support our strategy of working more closely together across the group.”
The statement also said the integration of Bournemouth Water into SWW is ongoing and will be “substantially complete by the end of 2015/16”.
SWW and Bournemouth “continue to perform well”. Return on regulated equity for the combined water business is on track to remain at 11.5 per cent for the full year 2015/16, supported by totex outperformance and the accelerated delivery of the K6 investment programme.
Loughlin said: “Viridor, SWW and Bournemouth are all performing well and results for the full year 2015/16 are on course to meet management expectations.
“We will employ the wide range of skills we have across Pennon to share best practice and deliver cost savings and growth opportunities. As we move towards a more consistent risk profile across Pennon, we are increasingly well-positioned to drive sustainable profit and dividend growth. We remain committed to growing dividends at +4 per cent above RPI inflation through to 2020.”
Analysts at Citi said: “We do not expect today’s announcement to have a material impact to the Pennon shares. Pennon is currently trading at a 32 per cent premium to RAV, in-line with the average of UK regulated utilities.”
Pennon will announce its full year results – for the year ended 31 March 2016 – 25 May 2016.
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