Building momentum, driving growth
Chris Loughlin, Pennon Group Chief Executive said:
“Pennon has delivered a strong performance in 2016/17 across its water and waste businesses. South West Water’s Return on Regulated Equity continues to lead the sector while Viridor is growing through its Energy Recovery Facility portfolio, delivering EBITDA(1) of £107 million, ahead of our c.£100 million target.
Across the Group we are investing for growth while driving efficiency to keep costs low for the benefit of our customers. We have delivered savings of £129 million in total expenditure at South West Water since the beginning of the current regulatory period, cementing our commitment to reduce the real cost of water bills to 2020.
We believe Pennon is well positioned now and for the future and our performance underpins our long established sector-leading 10 year dividend policy of 4% growth per annum above RPI inflation out to 2020.”
Financial Highlights
| Underlying(2) | 2016/17 | 2015/16 | Change |
| Group Revenue | £1,353.1m | £1,352.3m | +0.1% |
| Group EBITDA | £486.0m | £448.4m | +8.4% |
| Group Adjusted EBITDA (2) | £546.2m | £508.4m | +7.4% |
| Group Operating Profit | £304.6m | £261.8m | +16.3% |
| Group Profit Before Tax (PBT) | £250.0m | £211.3m | +18.3% |
| Non-underlying items before tax(4) | (£39.5m) | (£5.0m) | |
| Statutory Profit Before Tax | £210.5m | £206.3m | +2.0% |
| Tax | (£30.0m) | (£38.0m) | +21.1% |
| Statutory Profit After Tax (PAT) | £180.5m | £168.3m | +7.2% |
| Earnings per share(5) | 47.0p | 39.5p | +19.0% |
| Statutory Earnings per share | 39.8p | 37.0p | +7.6% |
| Dividend per share | 35.96p | 33.58p | +7.1% |
| PAT (attributable to holders of hybrid capital) | £16.2m | £16.2m | - |
| PAT (attributable to shareholders) | £164.3m | £152.1m | +8.0% |
- Underlying PBT up +18.3% following:
- higher revenues driven by customer demand and cost savings at South West Water
- growth at Viridor driven by the Energy Recovery Facilities (ERFs) which achieved EBITDA of £107 million, ahead of target
- improved recycling margins through ‘self-help’ initiatives
- continuing group efficiencies with £9 million p.a. of the c.£17 million p.a. expected from 2019 already secured
- Return on Regulated Equity (RORE) at 12.6%(7), unique WaterShare mechanism benefiting customers
- Sustainable, low cost funding position underpinning continuing capital investment
- Statutory earnings per share growth of +7.6%
- Dividend per share +7.1% to 35.96p
1Earnings before interest, tax, depreciation and amortisation
2Before non-underlying items. Underlying earnings are presented to provide a more useful comparison of business trends and performance
3Underlying EBITDA plus share of Joint Venture EBITDA and IFRIC 12 interest receivable
4Non-underlying items are adjusted for by virtue of their size, nature or incidence to enable a full understanding of the Group’s financial performance
5Before deferred tax and non-underlying items
6The RPI rate used is 3.1% as of March 2017
7See page 23
Operational Highlights
- Water business outperforming the regulatory contract with sector-leading RORE outperformance. Net ODI reward of £3.6 million(8) for 2016/17, and maintaining momentum from year one of the regulatory period
- ERF portfolio delivering growth with all eight operational sites performing well, with average availability at greater than 90% for 2016/17
- c.80%(9) of existing ERF portfolio volumes (and associated prices) contracted long-term
- Recycling margin improvement through ‘self-help’ measures, driving increased EBITDA
- Driving value through efficiency - integrating, sharing best practice, reducing costs through a Shared Service Review
- Negotiations with Greater Manchester Waste Disposal Authority (GMWDA) continue, seeking to ensure a well managed exit from the contract
- Secured further growth opportunities
- Non-household Retail Market – Pennon Water Services operating successfully. One of only three incumbent companies growing, with net customer growth since market opening
- Construction of four further ERFs are ongoing:
- Dunbar and South London (Beddington) progressing to budget
- Glasgow’s Recycling and Renewable Energy Centre is receiving waste and generating energy. New construction contracts with Doosan Babcock are progressing well with ERF final commissioning expected in 2017
- Avonmouth ERF investment now underway with key construction and operational contracts in place with completion expected in 2020/21
8£3.6m net reward reflecting £3.9m net reward which will be recognised at the end of the regulatory period and £0.3m net penalty which can be reflected during the regulatory period
9Excluding Avonmouth
Presentation of Results
A presentation for City audiences will be held today, Wednesday 24 May 2017, at 09.30am at the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS.
A live webcast of the presentation can also be accessed using the following link:
www.pennon-group.co.uk/investor-information
For further information, please contact:
Pennon
Susan Davy – Chief Financial Officer - Pennon
Louise Rowe – Finance Director South West Water, Pennon Investor Relations contact
01392 443 401
Finsbury
James Murgatroyd
Faeth Birch
0207 251 3801
About Pennon Group
As one of the largest environmental infrastructure groups in the UK, Pennon is at the top end of the FTSE 250. Pennon has assets of around £5.9 billion and a workforce of around 5,000 people.
The merged water company of South West Water and Bournemouth Water provides water and wastewater services to a population of c.1.7 million in Cornwall, Devon and parts of Dorset and Somerset and water only services to c.0.5 million in parts of Dorset, Hampshire and Wiltshire. South West Water was awarded enhanced status for its 2015-2020 Business Plan, and has the highest potential returns in the water sector.
Viridor is a leading UK recycling, energy recovery and waste management company, providing services to more than 150 local authorities and major corporate clients as well as over 32,000 customers across the UK.
