Pennon Group Half Year Results 2020/21

[idpickering]

Financial and operational performance throughout COVID-19 remains robust

· Resilient COVID-19 operations - limited financial impact

· Cash collections for South West Water and Pennon Water Services remain robust

· No requirement for the use of regulatory or market support mechanisms

· 21,000 additional customers added to South West Water's dedicated COVID-19 priority services register

Resilient financial results following K7 revenue reset

· Results in line with management expectations

· WaterShare RORE[1] of c.8.0% driven by strong totex^ and financing outperformance

o £34 million totex efficiency delivered to date, maintaining momentum over K7

o 2.5% average effective interest rate^, significantly below Ofwat's 4.2% notional cost of debt

· £86.7 million Continuing Group underlying profit before tax^ (H1 2019/20 £101.4 million[2])

· 17.9p underlying earnings per share^ for the Continuing Group (H1 2019/20 20.1p2)

Moderator Message:
Mistaken reference to 28.6p dividend deleted. -- MDW1954

https://www.investegate.co.uk/pennon-gr ... 00032552G/

[Arborbridge]

And later;

The proposed interim dividend 28.6p for the year ending 31 March 2021 will be paid on 1 April 2021 to shareholders on the register on 29 January 2021.

https://www.investegate.co.uk/pennon-gr ... 00032552G/[/quote]


I'm having trouble finding that figure, though it's much larger than last year. I can see mention of 6.77p to be paid on April 1st. It is some sort of special for the sale of Viridor?
I note they now have £2.7 billion burning a hole in their back pocket: always dangerous to give managements so much cash to splash. So far, I don't see a benefit to shareholders, only a lessening of the debt burden they built up.

Knowing me, I've probably missed an announcement, but I don't recall seeing anything about returning money to shareholders, only a note about them considering the future.

Arb.

[daveh]

And later;

The proposed interim dividend 28.6p for the year ending 31 March 2021 will be paid on 1 April 2021 to shareholders on the register on 29 January 2021.

https://www.investegate.co.uk/pennon-gr ... 00032552G/

I'm having trouble finding that figure, though it's much larger than last year. I can see mention of 6.77p to be paid on April 1st. It is some sort of special for the sale of Viridor?
I note they now have £2.7 billion burning a hole in their back pocket: always dangerous to give managements so much cash to splash. So far, I don't see a benefit to shareholders, only a lessening of the debt burden they built up.

Knowing me, I've probably missed an announcement, but I don't recall seeing anything about returning money to shareholders, only a note about them considering the future.

Arb.

I think whoever wrote Pennon's RNS should be sent to clear out blocked sewers somewhere. It starts by mentioning a (reduced) Interim dividend of 6.77p

For H1 2020/21 the Board has declared an interim dividend of 6.77p for the Continuing Group. The interim dividend will be paid on 1 April 2021 to shareholders on the register on 29 January 2021. Pennon offers shareholders the opportunity to invest their dividend in a Dividend Reinvestment Plan (DRIP).

-

Then in the dates section talks about a Final dividend:

Final dividend payment information

28 January 2021

Ordinary shares quoted ex-dividend

29 January 2021

Record date for final dividend

8 March 2021

Final date for receipt of DRIP applications

1 April 2021

Final dividend payment date

And nowhere can I see what they plan to do with the proceeds of the Viridor sale - other than that they have:

· £2.7 billion of available cash resources following the disposal and retirement of certain Group borrowings

[Arborbridge]

And nowhere can I see what they plan to do with the proceeds of the Viridor sale - other than that they have:

· £2.7 billion of available cash resources following the disposal and retirement of certain Group borrowings

But Ian did find this, though I can't see it for looking: The proposed interim dividend 28.6p for the year ending 31 March 2021 will be paid on 1 April 2021 to shareholders on the register on 29 January 2021.

And as for the proceeds of the sale, as you say, they are still dithering about it. Originally, we assumed shareholders would see some immediate benefit, but now it's looking like they might be tempted by some other schemes. I do not think it's a good idea to give grown up kids too much cash to play around with!
Frankly, why sell off one of the best bits of a business, if you haven't a clue what you will do with it? It makes me feel I should sell PNN - we have been kept waiting long enough "on a string" while management play games with us.

I humbly apologise if there has been some masterplan announced which I have missed, with the appopriate emoji:

[Darka]

It makes me feel I should sell PNN - we have been kept waiting long enough "on a string" while management play games with us.

I sold a while ago (as I did with Pearson) as I don't like it when businesses sell off such a valuable part of themselves, I should have done the same with Vodafone too....

[gawabsky]

idpickering wrote:

"The proposed interim dividend 28.6p for the year ending 31 March 2021 will be paid on 1 April 2021 to shareholders on the register on 29 January 2021."

I think Ian may have been referring to Note 9 Where 28.6 million will be utilised for the Interim Dividend of 6.77p, payable 1st April 2021.
An easy mistake to make.

Gawabsky

[Arborbridge]

idpickering wrote:

"The proposed interim dividend 28.6p for the year ending 31 March 2021 will be paid on 1 April 2021 to shareholders on the register on 29 January 2021."

I think Ian may have been referring to Note 9 Where 28.6 million will be utilised for the Interim Dividend of 6.77p, payable 1st April 2021.
An easy mistake to make.

Gawabsky

Thanks, that could be the explanation. As you say, easy enough to do.

I noticed it because I always enter up prospective dividends and compare with the previous year. The revised 6.77 is now massively down from 13.66p, even after selling off the family silver.

What are they playing at?

Arb.

[idpickering]

idpickering wrote:

"The proposed interim dividend 28.6p for the year ending 31 March 2021 will be paid on 1 April 2021 to shareholders on the register on 29 January 2021."

I think Ian may have been referring to Note 9 Where 28.6 million will be utilised for the Interim Dividend of 6.77p, payable 1st April 2021.
An easy mistake to make.

Gawabsky

Thanks, that could be the explanation. As you say, easy enough to do.

Sorry for any confusion caused.

Ian.

[Arborbridge]

I notice the cencensus forecast is 21.66p for 2021. This is in line with the 6.77p plus a final reduced in the same proportion from 2020, giving a pathetic yield of 2.1%.

PNN SP down 2.8% as I write. Has the management grasped defeat from the jaws of success? Up to this moment, they seem to have turned a good dividend payer into some sort of lottery case with a rotten carrot which hasn't yet amounted to anything tangible for us.

Arb.

[kempiejon]

Thanks, that could be the explanation. As you say, easy enough to do.

I noticed it because I always enter up prospective dividends and compare with the previous year. The revised 6.77 is now massively down from 13.66p, even after selling off the family silver.

What are they playing at?

Arb.

Now I'm intrigued as you say Arb 13p last year 6p this year yet on the website Pennon say the interim is over 2% up?

An interim dividend of 6.77p will be paid on 1 April 2021 to shareholders on the register on 29 January 2021. This is represents an increase of 2.7% and maintains our sector-leading dividend policy (announced with our full year 2019/20 results in June 2020) confirming growth of CPIH(1) +2%. The dividend policy is underpinned by our sustainable earnings and growth strategy with expectations for continued outperformance during the regulatory period supporting sustainable dividend growth and dividend cover.

https://www.pennon-group.co.uk/dividends

[miner1000]

The reason Pennon Shares are down is that they have reneged on their pledge to return cash to shareholders following the sale of Viridior. They are planning to use that cash to buy South west water, to inflate the ego of the new CEO. So basically they have slashed the divi in half to reflect the earnings of the group post the sale of V, and they will splurge the rest, plus some borrowings on the purchase of SW Water. So we are left with lower earnings and a much lower yield. Should have sold long ago after the V announcement. But if you wait 10 years it might be of benefit on the long run.

[Arborbridge]

Thanks, that could be the explanation. As you say, easy enough to do.

I noticed it because I always enter up prospective dividends and compare with the previous year. The revised 6.77 is now massively down from 13.66p, even after selling off the family silver.

What are they playing at?

Arb.

Now I'm intrigued as you say Arb 13p last year 6p this year yet on the website Pennon say the interim is over 2% up?

An interim dividend of 6.77p will be paid on 1 April 2021 to shareholders on the register on 29 January 2021. This is represents an increase of 2.7% and maintains our sector-leading dividend policy (announced with our full year 2019/20 results in June 2020) confirming growth of CPIH(1) +2%. The dividend policy is underpinned by our sustainable earnings and growth strategy with expectations for continued outperformance during the regulatory period supporting sustainable dividend growth and dividend cover.

https://www.pennon-group.co.uk/dividends

This sounds like directorspeak. I've just checked my April 2020 dividend actually paid and using the number of share I had and it was 13.659p a share.
They are on planet Trump where truth is what you want it to be.

Arb.

[kempiejon]

The reason Pennon Shares are down is that they have reneged on their pledge to return cash to shareholders following the sale of Viridior. They are planning to use that cash to buy South west water, to inflate the ego of the new CEO. So basically they have slashed the divi in half to reflect the earnings of the group post the sale of V, and they will splurge the rest, plus some borrowings on the purchase of SW Water. So we are left with lower earnings and a much lower yield. Should have sold long ago after the V announcement. But if you wait 10 years it might be of benefit on the long run.

They already own South West Water, the speculation is over a Southern Water bid; I found news articles about takeover like here https://www.business-live.co.uk/enterpr ... d-19288215

[idpickering]

It makes me feel I should sell PNN - we have been kept waiting long enough "on a string" while management play games with us.

I sold a while ago (as I did with Pearson) as I don't like it when businesses sell off such a valuable part of themselves, I should have done the same with Vodafone too....

Me too, with both shares. At that time I think I had 34 holdings, then I got to thinking, I was a good example of diworsification. I trimmed down to my current 25 holdings, and feel happier having done so. I’m not saying I might not go beyond that 25 holdings in the future though, but have no current plans to do so.

Ian.

[kempiejon]

Much of the attraction for Pennon was its commitment to an inflation beating dividend policy CPIH +2% and its long history of inflation beating growth going back decades at 6% for much of that time, now we see a drop of about 50% from 13p to 6p in the interim.

[miner1000]

The reason Pennon Shares are down is that they have reneged on their pledge to return cash to shareholders following the sale of Viridior. They are planning to use that cash to buy South west water, to inflate the ego of the new CEO. So basically they have slashed the divi in half to reflect the earnings of the group post the sale of V, and they will splurge the rest, plus some borrowings on the purchase of SW Water. So we are left with lower earnings and a much lower yield. Should have sold long ago after the V announcement. But if you wait 10 years it might be of benefit on the long run.

They already own South West Water, the speculation is over a Southern Water bid; I found news articles about takeover like here https://www.business-live.co.uk/enterpr ... d-19288215

Apologies, as you say, Southern Water.

Miner

[daveh]

The reason Pennon Shares are down is that they have reneged on their pledge to return cash to shareholders following the sale of Viridior. They are planning to use that cash to buy South west water, to inflate the ego of the new CEO. So basically they have slashed the divi in half to reflect the earnings of the group post the sale of V, and they will splurge the rest, plus some borrowings on the purchase of SW Water. So we are left with lower earnings and a much lower yield. Should have sold long ago after the V announcement. But if you wait 10 years it might be of benefit on the long run.

They already own South West Water, the speculation is over a Southern Water bid; I found news articles about takeover like here https://www.business-live.co.uk/enterpr ... d-19288215

Apologies, as you say, Southern Water.

Miner

There is this quote in the article:

Pressed on the potential acquisition, a Pennon spokesman would only say a firm “no comment”. But it is understood shareholders have been told the company wants to use cash from the Viridor sale to fund a takeover.

Which shareholders have been told - not me. If a subgroup of shareholders are being told things shouldn't there have been an RNS announcement so we all know! Or even have been a bit more explicit in the half year results on what there plans are with our money.

[kempiejon]

Ah well, it least it's not being taken over. I had pencilled in an increase in dividend from PNN so I expect that's off; I'll have to wait and see about any final dividend announcements. We could still get a spesh?

[Arborbridge]

Well, I mustn't grumple too much. PNN has given me a return of 11% pa even at today's lower price.
Far better than some I can think of!

[MDW1954]

I don't understand some of the comments on this thread. Pennon have just sold Viridor, a massive waste business for which they got £3.7bn in cash.

It was clearly very profitable. Left with a smaller business, is it any surprise that the dividend is smaller?

MDW1954