FTSE 100 listed water company, Pennon Group plc (LON:PNN) saw its shares post a modest rally on Friday, as it told investors it had booked ‘resilient’ trading during the first half, and ‘in line with expectations’.
The company said that the impact of Covid had been broadly in line with its previous predictions, with a net revenue hit of £10 million.
It added that during the period, it had sold Viridor – a waste management company – for £4.2 billion on 8 July, with Pennon receiving £3.7 billion in cash from the sale.
The company also said it had not utilised any government support during the period, with none of its employees having been furloughed. It continued, saying that ‘the vast majority’ of its operations has continued in Covid-secure environments. Pennon also said it had signed up to the Kickstart Scheme, in order to support the Government’s ‘build back better’ campaign.
Speaking on the impacts of Coronavirus on the company’s operations, the Pennon statement read:
“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.”
Speaking on its financial outlook, it added:
“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 £900 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 £36 million has also been made into the Group pension schemes.”
The Group said its South West Water business is also on track to outperform on it return on regulated equity, with a £1 billion investment programme underway, alongside a £30 long funding finance lease, its WaterShare+ expected to outperform by £20 million, and its successful expansion into the Isles of Scilly.
After mustering around a 1.5% rally, Pennon Group shares have since tapered off, now up 0.44% or 4.61p, to 1,044p a share 25/09/20 11:42 BST. The company currently has a 12-month consensus price target of 1,135.00p a share, which would represent around a 9% upside on its current price.
The company also has a consensus ‘Hold’ rating, with 54% of Marketbeat’s community voting ‘Underperform’, and a p/e ratio of 16.86 below the utilities sector average of 19.82.