Pennon Group PLC on Wednesday said half-year profit fell sharply despite higher revenue, amid high cost inflation, but it still declared an increased dividend to shareholders.

The Exeter, England-based water services company said pretax profit in the six months that ended September 30 was £20.9 million, down 74% from £79.9 million a year prior, while revenue increased by 9.3% to £425.5 million from £389.3 million.

This fall in profit was because net finance costs doubled to £74.7 million from £37.0 million and operating expenses other than employment and raw materials increased by 36% to £185.9 million from £137.1 million. This included an increase of around £50.0 million in power costs.

Pennon declared an interim dividend of 12.96 pence per share, up 11% from 11.70p a year prior. Shares in Pennon were down 3.3% to 908.00p in London on Wednesday morning.

Pennon invested a record £142.5 million across its asset base, up 30% from £109.6 million during the half year period.

Pennon said it expects its underlying results for the full financial year to be weighted to its half-year performance above. Operating costs are expected to rise in its second half due to seasonal increases and inflation. The effect of this, alongside lower revenue, is expected to be partially offset by lower levels of financing costs via rebalancing some index-linked debt.

‘In the first half of this year we’ve delivered record levels of investment to support a step change in environmental performance and build resilience for the longer term, having experienced the hottest, driest year since records began. Today we are announcing a further increase in investment in water resilience schemes of circa £45 million to repurpose ex-quarries and mines and introduce de-salination units to ensure our resilience to 2050 is in place now,’ said Chief Executive Susan Davy.

Pennon added its ‘robust’ balance sheet allowed it to make those investments while still ensuring its pension scheme remains in surplus.

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