In a trading statement, water company Pennon Group (PNN) said it was on track to meet management expectations to deliver resilient financial results for the half year ending 30 September. The shares nudged up 1.2% to £10.50.

The largest impact from the pandemic has been on business and commercial customers which has been offset by increased household revenues as a result of more people working from home.

So far the revenue loss has been in line with the company’s initial assumptions for the current financial year ending 31 March 2021 at around £10 million. This is a relatively small dent in a business with £1 billion in revenues and reflects the fact Pennon is operating largely as usual in Covid-19 secure environments.

Cash collections across the group are said to have ‘remained robust’ while management are keeping a close eye on the pattern of payments in response to new regional and national restrictions.

DEBT RESTRUCTURING ON TRACK

The group is expected to have ‘well in excess’ of £3 billion in expected cash and committed banking facilities at the end of September.

In July the group completed the sale of Viridor to funds advised by Kohlberg Kravis Roberts for an enterprise value of £4.2 billion receiving a net £3.7 billion.

As previously reported, the intention is to retire up to £900 million of the firm’s £1.2 billion of debts and today the company confirmed it has so far repaid £600 million while also injecting £36 million in the group’s pension scheme.

With short-term deposit rates remaining low, the debt repayments have significantly reduced the group’s cost of carry.

The company is reviewing the most efficient and shareholder friendly ways to deploy capital and the conclusions will be revealed with half-year results on 24 November.

Management reiterated its continuing focus on financial discipline and said any use of capital for investment purposes will first be compared with the alternative of returning capital to shareholders.

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Issue Date: 25 Sep 2020