Pennon on track to hit financial targets as it delivers 'robust' performance

 
Rebecca Smith
The firm said both its water and waste businesses were on track
The firm said both its water and waste businesses were on track (Source: Getty)

Environmental infrastructure firm Pennon plans to make a splash with its upcoming half-year results, saying today that it continues to deliver “a robust” underlying financial performance.

The FTSE 250 company said it was on track to deliver in line with management’s expectations across both its water and waste businesses.

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And it said it was “well-placed to continue to deliver for customers, communities and shareholders”, with the update coming ahead of half-year results in November.

Shares were flat in early morning trading at 789.50p.

Meanwhile, progress is being made on the final agreements relating to its Greater Manchester PFI contract.

George Salmon, equity analyst at Hargreaves Lansdown, said that while a major surprise was never on the cards today, "the show of confidence in its waste management division is particularly welcome, especially after Kier bemoaned difficult conditions in this part of its business".

"We hope that once an agreement is reached for the termination of the beleaguered Greater Manchester waste disposal contract, any worries over the division start to fade into the rear view mirror. If this is the case, the yield of 4.9 per cent, plus the prospect of inflation-beating dividend increases, should continue to lure investors in," he said.

In May, the South West Water owner beat expectations with its yearly results, reporting an 18 per cent rise in pre-tax profit to £250m, which it attributed to improved cost savings at South West Water, as well as rising customer demand.

The firm said it remains committed to reducing the cost of water bills by 2020.

Earnings before interest, tax, depreciation and amortisation rose 8.4 per cent to £486m, compared to £448.4m the year before.

Pennon has outlined plans to increase its dividend by the rate of retail prices index plus four per cent to 2020, and Hargreaves Lansdown equity analyst Nicholas Hyett said in May there was little reason to think that the group won’t be able to maintain “what is one of the most generous dividend policies in the sector for years to come”.

Earlier this month, the parent firm of waste giant Viridor launched a tender offer to buy £300m of securities.

Read more: Pennon beats forecasts with higher-than-expected earnings

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