Pennon Share News (PNN)

(Sharecast News) - Water company Pennon updated the market on its trading in light on its results for the year ending 31 March, and the Covid-19 coronavirus outbreak, on Monday, reporting that group performance for the 2019-2020 financial year was in line with management expectations.
The FTSE 250 company said it was doing "all we can" to support its employees and customers through the pandemic, reporting that it was "well positioned" with strong funding and liquidity to weather current uncertainty.

It said its South West Water operation had outperformed in the K6 regulatory period from 2015 to 2020 on total expenditure and financing, and would end the five-year period in a net reward position on outcome delivery incentives.

Revenue for 2019-3020 had reduced, which the board said was driven by prolonged wet weather with rainfall 50% more than the levels seen a year prior, and higher than long-term averages.

Year-on-year shortfalls in revenues, compared with the regulatory final determination, were subject to a revenue true-up mechanism in future years, the board noted.

It said that operationally, the business had performed "well", ensuring minimal impact to customers at times of extreme wet and stormy weather, with its water resources now at over 95%.

Pennon said Viridor continued to perform well, and was focussed on operational excellence and driving ongoing efficiency.

Growth in energy recovery was reported, with a ramp-up of existing plants, and the Avonmouth Energy Recovery Facility (ERF) now in commissioning and contributing to earnings, with operational ramp-up expected during the 2020-2021 period.

Pennon announced the sale of Viridor to Planets UK Bidco on 18 March, which it described as a newly-formed company established by funds advised by Kohlberg Kravis Roberts (KKR), for an enterprise value of ?4.2bn.

The firm said the transaction was expected to complete in summer.

It added that, following the sale of Viridor, Pennon would focus on its "sector-leading" water and wastewater businesses and would continue to pursue growth within the UK water industry.

"In these unprecedented times, the health and safety and wellbeing of our employees and customers is paramount and our number one priority during the Covid-19 epidemic," the board said in its statement.

"We are doing all we can to support them and help prevent the spread of the virus.

"Following the latest government and public health guidance, we have strict precautions in place at our sites including enhanced levels of cleaning, additional hygiene facilities and social distancing."

Pennon said many of its employees were designated key workers, and were delivering the best possible service to customers during the "challenging" time.

It added that enhanced precautions and safety checks were in place, and only essential customer visits were taking place, with everything possible being handled remotely.

"We know that this is a difficult time for our customers, and we have stepped up our support for those on our priority services register and customers that need extra support with their bills during this period."

Pennon said it was well positioned with "strong" funding and liquidity to weather the current uncertainty as a result of Covid-19, but added that it was "closely monitoring the current situation as it developed.

It explained that ?840m of new or renewed finance was raised in the 2019-2020 period, including ?245m of funding through the 'sustainable financing framework' for South West Water.

The group has around ?1.6bn of cash and committed facilities providing liquidity, with Pennon's ?300m perpetual capital security approaching the first call date in May 2020.

"On completion of the sale of Viridor, Pennon will continue to focus on its sector-leading water and wastewater businesses and will consider further growth opportunities that create value for customers, employees and shareholders," the board said in its statement.

"A further update, alongside a new dividend policy will be provided at the full-year results on 4 June."

At 0851 BST, shares in Pennon Group were up 1.54% at 1,089p.