LONDON (Alliance News) - Pennon Group PLC Tuesday raised its dividend after reporting higher full-year profit, with profit growth at its South West Water unit more than offsetting a decline at its waste recycling and management business Viridor.
The company reported a pretax profit of GBP158.7 million in the year to end-March, up from just GBP13.6 million a year earlier, as revenue grew to GBP1.32 billion, from GBP1.20 billion, and exceptional items fell sharply. Excluding those items, pretax profit rose to GBP207.3 million, from GBP190.0 million.
It said it will pay a final dividend for the year of 20.92 pence, up 6.2% on the previous year. That will bring the total dividend to 30.31 pence, a 6.5% increase.
The growth was driven by South West Water division, the licensed water and sewerage service provider for Devon, Cornwall and parts of Dorset and Somerset. Operating profit at the unit rose 5.7% to GBP227.0 million while revenue grew 4.3% to GBP520.0 million thanks to tariff rises, new connections and other sales. That was partly offset by lower demand, particularly from industrial customers, during the dry summer of 2013.
Waste recycling and management Viridor performed less well. It had to book an impairment charge of GBP42.9 million on the carrying value of its landfill property, plant and equipment, blaming aggressive pricing by rival landfill operators that it expects to continue. Environmental and landfill restoration provisions cost another GBP5.7 million. Still, this was well below the GBP188.9 million it had booked for the same things plus onerous contract provisions in fiscal 2013.
Excluding exceptional charges, Viridor's profit before interest and tax including joint ventures fell 4.6% to GBP43.6 million, even though revenue rose 14.0% to GBP802.0 million. Recycling revenue decreased GBP17.1 million due to lower prices, while landfill revenue was up GBP43.1 million due to higher landfill tax, and construction revenues were up reflecting growth in assets under construction.
The company has been restructuring its Viridor division, and is trying to grow its energy from waste business to meet expected growing demand for this service. The UK is required under the EU Landfill Directive to reduce the amount of biodegradable municipal waste going to landfill sites, and the British government is encouraging more waste recycling and energy from waste by raising landfill taxes.
Pennon shares were down 3.4% at 757 pence Tuesday morning, the biggest decline on the FTSE 250.