Full Year Results 2020/21
Susan Davy, Group Chief Executive, commented:
This has been a pivotal year for the Group as we have repositioned Pennon to focus on driving sustainable growth in the UK water sector, building stability for the longer term, and recognising ongoing shareholder loyalty.
One of my main priorities as the new CEO has been to focus everyone on transforming Pennon to be the best place to work, supporting one another and our communities through the pandemic. The worst of times brings out the very best in people, and that's true of everyone who works for the Group. I'm so proud of the way they have responded to the challenge.
We have ensured Pennon is well positioned for the future, reinvesting for growth, and retaining sufficient funds to drive further value. The acquisition of Bristol Water announced today, is the next step in the growth of the Group, building on significant experience as a leader and consolidator in the industry.
Additionally, we have demonstrated our credentials as a responsible business, reducing debt levels, increasing pension contributions, and further supporting the Green Recovery for the much-needed regeneration of our region.
With one in 16 households now shareholders as part of our innovative Watershare+ scheme, giving customers a stake and a say, we've made a strong start to K7, focusing on what matters most, with c.80% of ODIs on or ahead of track. Operating in the public interest, we are also putting ESG at the forefront of our decision making, as we scale up investment in the environment, kickstart our race to net zero, and deliver sustainable solutions.
Our sector leading dividend policy, together with the planned special dividend, recognises the ongoing loyalty of our shareholders, underpinned by the Group's confidence in our ongoing growth strategy, and building a sustainable future for all.
Successful sale of Viridor
· £3.7 billion net cash proceeds from the sale of Viridor, completed on 8 July 2020; £1.7 billion profit on disposal
Positioning the Group sustainably
· Almost half of the net cash proceeds reinvested in the business and UK water to date
· Pennon company debt repayment of £1.1[1] billion - restructuring complete
· Responsible employer - over £50 million additional pension contributions - fund now in small surplus[2] position
· c.£0.1 billion capital investment supporting a Green Recovery in the South West - accelerating South West Water's de-gearing profile
· Value accretive c.£0.4 billion acquisition[3] of Bristol Water[4] - reflecting 16% RCV[5] growth
· Retention of c.£0.1 billion of cash at Group level to maintain flexibility for future growth opportunities
Recognising shareholder support
· c.£1.5 billion return of shareholder capital - special dividend of £3.55 per share, with consolidation
· Up to c.£0.4 billion share buy-back over 12 months - subject to further value accretive opportunities
· Maintaining sector-leading dividend policy of CPIH + 2%, underpinned by sustainable performance from the Continuing Group
· Dividend base in 2021/22 is expected to increase by 2.00p (c.9%) recognising the earnings accretive nature of the Bristol Water acquisition
And later on dividends;
Dividends
The Group continues to deliver on its commitments to customers, shareholders and stakeholders, as our investments drive tangible, positive and sustainable results. Around two thirds of Pennon's shareholders are UK pension funds, savings, charities and individuals with over half of South West Water's employees being shareholders.
Pennon's sector-leading dividend policy, of growth of CPIH + 2% per annum, reflects the Board's confidence in the Group's sustainable growth strategy and is underpinned by continued RORE outperformance, driven by totex and financing outperformance, in South West Water.
In line with this policy, the Board has recommended a final dividend for 2020/21 of 14.97p per share, subject to shareholder approval at the Annual General Meeting on 22 July 2021. Together with the interim dividend of 6.77p, this will result in a total dividend of 21.74p per share, an increase of 3.0% on the re-based 2019/20 dividend of 21.11p[15]. Pennon offers shareholders the opportunity to invest their dividend in a Dividend Reinvestment Plan (DRIP).
Subject to shareholder approval of the proposed share consolidation, the final dividend will be re-based to 22.46p per new ordinary share. For comparative purposes the total dividend for 2020/21 of 21.74p will equate to 32.61p post consolidation.
The Bristol Water acquisition[16] is expected to deliver further dividend growth for the Group. The Board expects that Bristol Water will deliver dividend growth on a pre-consolidation and post-consolidations basis of 2.0p and 3.0p per share respectively.
https://www.investegate.co.uk/pennon-gr ... 00076586A/