Finance

Pennon sees revenue growth as pandemic hikes demand for water

South West water has seen its earnings increase as the Covid pandemic led to the demand for water reaching record levels in the region.

Parent company Pennon Group Plc said the company had seen the West Country’s population grow substantially and businesses increase their use of water too as Covid restrictions eased.

In a trading update ahead of its Capital Markets Day event, for analysts and investors at South West Water’s (SWW) flagship Mayflower Water Treatment Works in Plymouth, Pennon said increased pressure on its services had also resulted in increased revenue and praised the company’s “resilient operational performance through record levels of demand for water”.

A report to investors said: “The Covid-19 pandemic has led to a substantial population increase in the regions we serve. Alongside this, as restrictions have eased businesses have ramped up demand, resulting in increased water usage and an increase in overall revenue.

“Given the increased demand and the sustained population increase in the region, pressure on our operational network has remained high.”

But the Exeter-headquartered firm said overall EBITDA, its earnings and a measure of profitability, remains in line with management expectations as increased costs have been offset by increased revenues.

Pennon said its capital investment programme is delivering in line with its profile of K7 (the business plan for 2020-2025) investment, with about a 30% increase on the prior year, including Green Recovery projects.

Following Ofwat’s approval in July 2021 for an additional £82m investment to support the green economic recovery, delivery of these Green Recovery plans are now under way.

These plans incorporate a number of pilot schemes to improve river quality and protect the environment and will help inform the long-term investment case. The company is also promising to achieve net zero carbon emissions by 2030.

Meanwhile, Pennon, which splashed £814 million on buying Bristol Water in 2021, is on the look out for more acquisitions after completing the first phase of a share buy-back programme.

Business Live’s South West Business Reporter is William Telford. William has more than a decade’s experience reporting on the business scene in Plymouth and the South West. He is based in Plymouth but covers the entire region.

To contact William: Email: [email protected] – Phone: 01752 293116 – Mob: 07584 594052 – Twitter: @WTelfordHerald – LinkedIn: www.linkedin.com – Facebook: www.facebook.com/william.telford.5473

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The company, which paid a £1.5bn special dividend to shareholders in July, has embarked on a £400m share buy-back with the first phase concluding on September 10, 2021, with about £60m deployed. Further phases are expected to commence over the period to 30 September 30, 2022. Investors were told the completion of the share buy-back is linked to Pennon’s continued review of value creating opportunities in the UK water sector, where the firm believes there remains significant scope for consolidation.

Susan Davy, group chief executive, said: “Pennon Group is on track to deliver resilient financial performance in line with management expectations. At the same time we are delivering a step change in environmental performance, as we focus on our Green Recovery and Net Zero ambitions. I’m delighted to be hosting our Capital Markets Day at our flagship water treatment works in Plymouth, a result of our pioneering spirit and a great example of how we are pushing boundaries for the long term benefit of customers and communities.”


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