Pennon board says it is appropriate to pay dividend

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Pennon board says it is appropriate to pay dividend

Pennon Group PLC (LON:PNN), the water company that owns South West Water, said half-year results were in line with expectations as cash collections remain “robust”.

In July, the FTSE 250 group sold off its waste arm Viridor for proceeds of £3.7bn net cash, of which £0.75bn has been used to repay debt, £36mln contributed to the principal pension scheme, leaving £2.7bn, which the company says is for investment.

The company said this leaves it focused on its water and wastewater businesses, “with our environmental, social and governance (ESG) commitments at the heart of all we do”.

It has a lot to do to improve as the most recent data available shows that in terms of environmental pollution, South West Water was the second worst performing companies, with 105 pollution incidents per every 10,000km of sewer, as well as releasing raw sewage into rivers more than 36,000 times last year.

In terms of performance for customers, Pennon said South West Water has done well in the six months to end-September 2020, with £34mln of total expenditure, or totex, efficiency savings to date and a 2.5% effective interest rate that is well below regulator Ofwat’s 4.2% allowed nominal cost of debt.

This has resulted in what the industry calls a RORE, or return on regulated equity, of circa 8.0%, inside Ofwat’s maximum RORE of 8.5% as defined for the current five-year regulatory period that began at the end of March.

Having pledged to grow its dividend at 2% above inflation over the next five years, Pennon said the board’s evaluation of the payout in light of the COVID-19 pandemic “concluded that it is appropriate for Pennon to continue to deliver on its dividend commitment”, with a payment of 6.77p per share due to be paid at the start of April.

Proactiveinvestors.co.uk

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