Pennon Group’s underlying profits before tax increased by 2.6% to nearly £288 million in 2019/20, its full year financial results show.
However, Pennon’s profit after tax fell by more than £16 million in the same period to £206.3 million. It attributes this reduction in profits to a change in the legislated tax rate from 17% to 19%. This, Pennon says, has increased the deferred tax charge.
The Group, which is to sell waste management company Viridor to investment business Planets UK Bidco Limited this year, attributed its increase in profits to efficiencies across the company and earnings growth from Viridor’s energy from waste (EfW) plants.
And, Pennon says it has liquidity of £1.6 billion prior to receiving net cash proceeds from the sale of Viridor to weather ongoing uncertainty caused by the coronavirus pandemic.
Chris Loughlin, chief executive of the Pennon Group, 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.
“Viridor has continued to drive growth”
“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.”
Pennon’s revenue reduced by 6% to £1,389.9 million in 2019/20. The company says this reduction in revenue reflects the exit from Viridor’s Greater Manchester contract and lower demand at South West Water (see letsrecycle.com story).
The sale of Viridor to Planets UK Bidco Limited for £4.2 billion was announced on 18 March (see letsrecycle.com story).
Pennon says it is now finalising the last condition precedent after the sale received shareholder approval on 28 May (see letsrecycle.com story).
Pennon says the net cash proceeds of the sale are expected to be £3.7 billion. The company says the proceeds are to be used to reduce Pennon company borrowings, reduce the pension deficit, retain headroom for future value creating opportunities, and make a return to shareholders.
Following the sale of Viridor, Pennon says it will focus on its water and wastewater businesses and will continue to pursue growth within the UK water industry.
Pennon says the financial impacts of the coronavirus for 2019/20 focus on expected credit losses related to customer debt, with a provision of £9 million across the Group.
Under the assumption that the lockdown is to last three months, Pennon expects its non-household revenue to reduce, though this is offset by increased household demand.
It says it is at risk of expected credit losses from businesses, retailers and households. It expects support schemes to mitigate the impact of these losses.
And, Pennon says Viridor should remain resilient because of its EfW contracts.