Pennon 2019/20 financial results show strong position
UK infrastructure group Pennon has posted solid financial results for 2019/20, though its profit after tax has fallen by 7.3 per cent.
The Group, which is the parent company of waste management company Viridor, made £287.6 million underlying profit before tax, up by 2.6 per cent from £280.2 million in 2018/19. Pennon attributed its pre-tax profits to efficiencies across the Group and increased earnings from Viridor’s energy recovery facilities (ERF).
However, its profit after tax fell by £16 million to £206.3 million, down from £222.6 million in 2018/19. Pennon stated that its fall in profit was largely down to the deferred impact of the government’s decision not to reduce corporation tax from 19 per cent to 17 per cent.
In March, Pennon announced it would be selling Viridor for an Enterprise Value of £4.2 billion to Planets UK Bidco Limited. Shareholders approved the sale on 28 May, with completion expected in early summer 2020.
Pennon’s financial results show that it expects the sale of Viridor to bring in net cash proceeds of £3.7 billion, which the Group will use to ‘reduce the company’s borrowings, reduce its pension deficit, retain headroom for future value creating opportunities and make a return to shareholders’.
Overall revenue fell by six per cent to £1,389.9 million, which Pennon attributes to lower demand at South West Water, which it also owns, and Viridor’s exit from the Greater Manchester waste contract.
The Group revealed it has £1.6 billion of cash in reserves, which will allow it to continue to make dividend payments to shareholders and weather the impact of the ongoing Covid-19 crisis.
The financial impact of Covid-19 has been limited to expected credit losses on its customer debt across the Group to the tune of £9 million, with the biggest impact coming for its non-household business customers, though it expects strong household waste and recycling collections performance to mitigate the impact from commercial and industrial customers.
Chris Loughlin, Pennon Chief Executive, said: “We are pleased with the solid operational and financial performance delivered this year. Viridor has continued to drive growth while South West Water has maintained its sector leading returns. In these uncertain and difficult times arising from the Covid-19 pandemic we would like to thank all our employees across the Group for the incredible hard work and dedication that has contributed to this performance. The health, safety and wellbeing of our employees and customers is paramount and continues to be our number one priority.”