Pennon delivers ‘robust’ half-year results

The company is ‘on track’ to deliver against all business plan commitments by 2020

Pennon Group, parent company of South West Water, said it has delivered a “robust” set of half-year results for 2017/18, according to figures published today (29 November).

For the six months ended 30 September 2017, the group reported a 5.6 per cent increase in revenue to £723.9 million compared to H1 2016/17.

The company’s profit before tax increased by 2.3 per cent from £121.1 million to £131.1 million.

Speaking to Utility Week, Pennon’s chief executive, Chris Loughlin, said: “It’s been a good half-year performance for water and waste activities and I’m pleased with the progress.

“For water we are half way through the regulatory cycle, so it’s good to see we are doing well and are on track as we approach the next price review, PR19. Ofwat will not only assess plans going forward but will also be looking to see companies are delivering against their current plan.

“We have focused hard on efficiency and will continue to drive it further.”

He said £159 million of savings have been made in the first half of the five-year period, which has allowed the company to focus on customers and communities.

Loughlin explained water bills for customers are lower than eight years ago in “pound note terms” and customer satisfaction is at an “all-time high”.

The financial report said the water business is “on track” to deliver against all business plan commitments, including those under financial ODIs (outperformance delivery incentives) by 2020.

It is currently delivering 33 of its 36 financial ODIs, but the firm acknowledges pollution events in wastewater “continue to be higher than committed levels”.

Loughlin said it will continue to be an area of “focus for improvement” over the remaining regulatory period and the company has been in discussions with the Environment Agency to address the issue.

The company said it is sharing the benefits of outperformance with customers through its “unique ‘WaterShare’ mechanism” with £68 million identified for sharing with customers to date.

Susan Davy, chief financial officer at Pennon, told Utility Week the company has a “strong” balance sheet with “stable” gearing of around 64 per cent.

She said capital investment was up by a third as Pennon looks to “improve services” for its customers.

In a statement released with the company’s financial results, Loughlin, said: “Pennon has delivered robust performance in the first half of 2017/18 across both water and waste activities. Our priority continues to be to provide an outstanding level of service to our customers and communities, while offering a sector-leading dividend policy for our shareholders.

“In water, our focus on cost savings means bills are lower now than they were eight years ago, whilst at the same time we are continuing to invest significantly in our plants and distribution network. This means we have delivered significant improvements in clean water and bathing water quality and our leakage levels have halved since privatisation.”

He added: “Good progress is being made to bring Viridor’s remaining four energy recovery facilities in the portfolio on stream, with three in commissioning in 2017/18 and the final facility under construction. The expansion of Viridor’s Energy Recovery Facility portfolio will support Pennon’s earnings growth to 2020 and beyond.”

Pennon Group is investing “significantly” in its UK water and waste infrastructure and expects capital expenditure of around £1.7 billion between 2015 and 2020.

It said it continues to “seek and identify” further growth opportunities.