Pennon FY profits up but Viridor takes landfill pricing hit

3rd Jun 2014 07:09

Household bill hikes helped South West Water (SWW) owner Pennon to boost annual profits and dividends, but said its Viridor landfill and waste recycling business took a hit from cut-throat pricing by rivals.Pennon said a near-11% rise in profits to £162.5m at regulated water business SWW drove a 9.1% increase in group profits in the year to March 31st of £207.3m.The group also increased its full year dividend by 6.5% to 30.31p, giving a final dividend per share of 20.92p, up 6.2%.SWW revenue increased 4.3% to £520m due to higher prices, new connections and higher other sales, offset by an overall reduction in demand and the effects of customers switching to meters.Customer demand fell 1% from last year, a lower reduction than previous years reflecting the dry summer in 2013. The fall in demand reduced revenue by £2.8m with the largest impact on commercial customers.SWW, whose operating profit rose £12.2m to £227m, achieved an 'enhanced' rating for its business plan from regulator Ofwat.It said a bill freeze for 2014/15 would affect profits this year, but foregone revenues had been accounted for in its regulatory settlement on a net present value neutral basis.But Pennon said profits in Viridor's landfill business had fallen faster than expected due to aggressive prioing by rivals facing local council cuts and increasing landfill taxes.As a result, Pennon has recognised a net pre-tax exceptional impairment charge of £42.9m to write down the carrying value of landfill property, plant and equipment, although the charge has no immediate cash impact.Pennon is restructuring Viridor away from landfill and towards waste-based renewable energy and waste recycling.PW