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RNS Number : 0736A
Pennon Group PLC
25 September 2020
25 September 2020
PENNON GROUP PLC
Trading Statement
Pennon Group, one of the leading water companies in the UK, is
issuing the following update ahead of its results for the half year
ended 30 September 2020, which will be announced on 24 November
2020.
Key Highlights
-- Pennon is on track to deliver resilient financial results in
line with management expectations
-- The impact of COVID-19 to date is broadly in line with our
initial assumptions for a net revenue impact in 2020/21 of GBP10
million. We will continue to monitor the ongoing financial impact
of COVID-19 closely
-- GBP4.2 billion sale of Viridor completed on 8 July with net
cash proceeds of GBP3.7 billion received
-- We continue to focus on our sector leading water and
wastewater businesses, whilst pursuing opportunities for growth
within the UK water industry, alongside reviewing the most
effective and efficient method of returning value to
shareholders.
COVID-19 - Resilient delivery
We continue to deliver essential services through the ongoing
COVID-19 pandemic, supporting our customers, employees and
communities, without utilising any government support schemes and
with no employees furloughed. The vast majority of our operations
continue as usual in COVID-19 secure environments, prioritising the
health and wellbeing of our employees. In addition, we have signed
up to the Kickstart Scheme as part of our commitment to supporting
the Government's broader build back better campaign.
As expected, the largest impact of COVID-19 on water usage has
been on businesses and commercial customers (non-household).
Overall revenue has reduced with an increase in household revenue
offset by lower non-household revenue. Ofwat's regulatory model
allows for differences in revenue compared to the Final
Determination to be trued up in future years.
Pennon Water Services (our Business-to-Business retailer)
continues to work to minimise bad debt risk through the
implementation of cash collection initiatives. Whilst cash
collections across the Group to date have remained robust, we
continue to closely monitor changes in revenue and payment patterns
in response to new national and regional restrictions and changes
in government support for businesses and individuals.
To support customers who have seen an impact on their household
finances we have accelerated planned affordability and
vulnerability initiatives ensuring accessible support to those who
need it most during these challenging times.
Delivering for customers, communities and shareholders
South West Water remains on track to deliver continued Return on
Regulated Equity (RORE) outperformance, driven by efficient
financing and totex, and we remain focused on targeting
improvements to support the delivery of our most stretching Outcome
Delivery Incentives.
Delivery of South West Water's c.GBP1 billion investment
programme to 2025 to improve services for customers, protect and
enhance the environment, and strengthen resilience is well
underway, with continued innovation central to our plans.
South West Water has signed a new sustainable GBP30 million long
funding finance lease with a deferred draw down period and a margin
in line with those seen pre COVID-19. In addition, a maturing GBP30
million lease has been extended, supporting South West Water's
ongoing capital programme.
South West Water's WaterShare+ scheme launched earlier in
September which will see c.GBP20 million of outperformance from K6
shared with customers via either Pennon shares, a bill reduction or
a cash rebate - for eligible customers to choose.
On 1 April 2020 South West Water successfully completed the
expansion into the Isles of Scilly, following collaboration with
regulators and stakeholders. A first for the industry, our plans
over the next five years include significant investment in critical
infrastructure and improvements for both customers and the
environment.
Outlook
The Group remains in a strong financial position with expected
cash and committed facilities well in excess of GBP3 billion at 30
September 2020.
Following the completion of the sale of Viridor in July,
Pennon's debt restructuring programme is progressing well, with
around two thirds repaid to date of the up to GBP900 million the
Group announced it would seek to retire. With shorter term deposit
rates remaining low, the swift repayment of debt has significantly
reduced the Group's cost of carry. Alongside this, a contribution
of GBP36 million has also been made into the Group pension
schemes.
We continue to review the most efficient and effective method of
returning value to shareholders, alongside considering earnings
accretive market opportunities. Any potential investment will be
assessed in terms of value creation and the impact on shareholder
returns, income and growth, as well as the impact on customers and
other stakeholders. Any use of capital to pursue an investment
opportunity will be compared with the alternative of returning that
capital to shareholders, ensuring our strong focus on financial
discipline is maintained.
An update for shareholders on this review will be provided at
Pennon's half year results announcement in November 2020.
For further information, please contact:
+44 (0)1392 443
Pennon Group plc 168
Paul Boote Group Finance Director
Jennifer Cooke Group Investor Relations Manager
+44 (0)207 251
Media Enquiries 3801
James Murgatroyd Finsbury
Harry Worthington
Cautionary statement
Cautionary statement in respect of forward-looking
statements
Certain statements in this announcement are forward-looking
statements relating to the Group's operations, performance and
financial position based on current expectations of, and
assumptions and forecasts made by, management. They are subject to
a number of risks, uncertainties and other factors that could cause
actual results, performance or achievements of the Group to differ
materially from any outcomes or results expressed or implied by
such forward-looking statements. The Group's principal risks were
described in the 2020 Pennon Group Annual Report which can be
viewed online at http://annualreport.pennon-group.co.uk/ . Such
forward looking statements should therefore be construed in light
of such risks, uncertainties and other factors and undue reliance
should not be placed on them. They are made only as of the date of
this announcement and no representation, assurance, guarantee or
warranty is given in relation to them including as to their
accuracy, completeness, or the basis on which they are made. No
obligation is accepted to publicly revise or update these
forward-looking statements or adjust them as a result of new
information or for future events or developments, except to the
extent legally required. Nothing in this Statement should be
construed as a profit forecast.
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END
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