South West water giant Pennon labelled 2021 a year of “resilient performance” as soaring costs and inflation offset a 22 per cent surge in revenues last year.
The Exeter based utilities firm reported a 3.3 per cent fall in pre-tax profits to £127.7m for the full year, down from £132.1m in 2020.
Inflation and rising cost pressures choked off any lift from the revenue boost, which analysts said today had been felt across utilities firms.
“Despite lifting revenues from £644m in the previous year to £792, an increase of 22.9 per cent, Pennon Group’s increased interest charges on index-linked debt were enough to offset any growth in revenue,” said Neil Shah, Director at Edison Group.
“The group’s rival, United Utilities, was hit with similar interest rate bills in its results recently, and with 26 per cent of Pennon Group’s regulated water businesses’ gross debt of £3.1bn being index-linked, recent spikes in inflation have impacted the utility provider significantly.”
Shareholders are in line for a boost in payouts however, with the firm still to deploy £200m of a £400m buy-back scheme, while dividends have also risen eight per cent to 38.53p .
Pennon’s results for the full year come fresh on the back of a £425m tie-up with its smaller rival Bristol Water which got the go-ahead from regulators in March, after the competition watchdog began an investigation last September.
Bosses said the newly merged firms were now looking to double down on investment across the South West in the years ahead.
“We’re investing more where it matters most,” said Susan Davy, Group Chief Executive.
“With our largest ever environmental programme in 15 years, we are accelerating plans to make a step change in river and sea health, building on our track record of 100% coastal bathing water quality, with WaterFit, delivering a tangible difference to communities and customers in the region over the next 3 years, and with no impact on bills.”
Pennon has been among the worst-rated water firms for environmental performance by the Environment Agency in recent years.