Pennon Group PLC on Wednesday said it is focused on reducing its impact on river water quality as it announced a higher dividend despite a dive in profit.
The Exeter-based water utility company said in the six months to September 30, pretax profit declined 60% to £9.1 million from £22.5 million a year prior. This was despite a 5.4% rise in revenue to £448.6 million from £425.5 million.
However, Pennon raised its interim dividend by 8.3% to 14.04 pence per share from 12.96p a year ago.
Notably, operating costs increased 11% to £224.9 million from £202.2 million a year prior, while depreciation and amortisation costs came in 6.7% higher at £82.6 million compared to £77.4 million.
‘Whilst this out-turn reflects a reduction in earnings compared to [the first half of financial 2023] it represents a marked improvement in performance compared to [the second half of that year] where the impact of elevated power pricing and financing costs resulted in a second half underlying loss before tax of £5.7 million,’ Pennon said.
Looking ahead to the current financial year ending on March 31, 2024, the company said its underlying results will likely be second-half weighted, with operating costs expected to reduce. However, it anticipates lower revenue in the second half due to seasonal demand patterns.
Chief Executive Officer Susan Davy said: ‘Our twin track strategy of both organic and acquisitive growth in UK water ensures we continue to drive long term value, with the Bristol acquisition benefits on track, alongside a growing portfolio of complementary services delivered through our business to business retailers and growing renewable energy business.’
The company said: ‘Total outperformance to date is being utilised to support reinvestment across the group to deliver additional environmental initiatives, including our WaterFit programme, to improve coastal and river water quality, and water resource diversification investments to boost resilience and break the cycle of drought.’
Further, Pennon remained focused on its plan to reduce and divert groundwater ingress at 30 key wastewater treatment works and six sewer separation projects. It also aims to deliver 43 bathing and shellfish water schemes.
‘For South West Water, ensuring quality and compliance is a key underpin, and we have consolidated our top quartile water quality position for Devon, Cornwall and Bournemouth regions,’ Pennon added.
‘Following the lifting of official drought status for the South West in October, we are enhancing our network flushing activity which was temporarily reduced as a result of the drought conditions.’
Pennon shares were 3.1% lower at 723.50 pence each on Wednesday morning in London.
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