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RNS Number : 2587K
Pennon Group PLC
20 September 2016
20 September 2016
PENNON GROUP PLC
TRADING STATEMENT
Robust performance, driving Group efficiency and
effectiveness
Pennon, one of the UK's largest environmental infrastructure
groups, is issuing the following update ahead of its results for
the half year ended 30 September 2016, which will be announced on
25 November 2016.
Key highlights:
-- On track to meet management expectations for 2016/17
-- Continued leading efficiency in water, driving an enhanced Return on Regulated Equity
-- ERFs on track to deliver targeted c.GBP100m of EBITDA in 2016/17
-- Recycling 'self-help' delivering higher EBITDA year-on-year
-- On-going cost reduction plans progressing well and Shared Services Review nearing conclusion
-- Well-placed to continue to deliver for customers, communities and shareholders
Chris Loughlin, Pennon Chief Executive said:
"Pennon has made a good start to 2016/17 delivering a strong
performance across both water and waste. The portfolio of energy
recovery facilities is performing in-line with expectations and
remains on track to contribute the targeted c.GBP100m of EBITDA
this year. South West Water continues to significantly outperform
its regulatory contract and we anticipate achieving a
sector-leading Return on Regulated Equity again this year. Our
Shared Services Review, which will result in cost savings, supports
our strategy of working more closely as a group. With this clear
strategy and our strong balance sheet, Pennon is well-placed to
continue to deliver for customers, communities and
shareholders."
Financial performance on track to meet expectations, delivering
our ERF EBITDA target
Pennon continues to deliver a good underlying financial
performance and is on track to meet management expectations for
2016/17.
Group EBITDA expectations for 2016/17 are driven by additional
ERF earnings as Peterborough ramps-up and as availability increases
at Trident Park in Cardiff and Runcorn II in Greater Manchester. We
therefore expect to see an H2 weighting in the ERF results.
South West Water has continued to experience higher customer
demand in H1 and is focused on delivering further Total Expenditure
(Totex) savings from efficiency initiatives outlined at the 2015/16
full year results.
Robust operational performance
South West Water continues to deliver a strong performance. RoRE
for the combined water business is on track for continued
outperformance in 2016/17 (11.7% reported for 2015/16), supported
by Totex outperformance, cost savings and synergies.
At Viridor, the portfolio of eight operational ERFs continues to
perform well. There are three further ERFs under construction.
Construction at Dunbar and Beddington (South London) is
progressing as planned and to budget.
As we have previously said, Glasgow's Recycling and Renewable
Energy Centre is receiving waste and the Materials Recycling
Facility (MRF) is in initial commissioning. The ERF is nearing
completion and remains on track to meet our commitment to our
client. Viridor is working with its contractor to finish the
construction as soon as possible and is in receipt of contractual
compensation(1) for delays against original expectations.
The Board will also take a decision this year on whether to
proceed with the investment in an additional ERF at Avonmouth, near
Bristol.
Landfill volumes continue to decline in-line with expectations.
Viridor has so far closed two landfill sites to waste inputs in
2016/17, leaving thirteen open sites (fifteen as at the end of
2015/16) as part of the strategy to reduce the number of open sites
to a small number of strategic sites by 2020. Landfill power
generation is performing in-line with expectations given that power
prices are lower in 2016/17 than in 2015/16.
Self-help measures in recycling are delivering the anticipated
increase in EBITDA year-on-year.
Increased cost efficiency targets
Ongoing cost reduction plans announced in 2015/16 are
progressing well. These included c.GBP27 million of net synergies
by 2020 from the integration of South West Water and Bournemouth
Water and c.GBP11 million a year of enduring financial benefits by
2017/18 from additional Totex outperformance over and above
existing plans at South West Water and reorganisation,
restructuring and streamlining of overheads at Viridor.
In addition to those plans announced in 2015/16, the Shared
Services Review is expected to deliver net additional efficiencies
and an update on this will be provided at the half year
results.
Outlook
Pennon expects to deliver a strong 2016/17 performance in-line
with management expectations. As expected, capital expenditure
across the group is forecast to be higher than 2015/16, reflecting
South West Water's investment in the Mayflower water treatment
works in North Plymouth, as well as waste water improvements, and
the profile of investment in the ERF portfolio.
Half Year Results - 25 November 2016
Pennon intends to announce its half year results for 2016/17 on
Friday 25 November 2016. Further information on Pennon, Viridor,
South West Water and Bournemouth Water can be found on the Group's
website, www.pennon-group.co.uk
(1) Primarily liquidated damages due when construction is
completed post the original contractual completion date.
For further information, please contact:
Pennon: Susan Davy - Chief Financial Officer
Sarah Heald - Director of Corporate Affairs & Investor
Relations
01392 443 401
Finsbury: James Murgatroyd
Faeth Birch
0207 251 3801
Cautionary statement in respect of forward-looking
statements
Certain statements in this announcement are forward-looking
statements relating to the Group's operations, performance and
financial position based on current expectations of, and
assumptions and forecasts made by, management. They are subject to
a number of risks, uncertainties and other factors that could cause
actual results, performance or achievements of the Group to differ
materially from any outcomes or results expressed or implied by
such forward-looking statements. The Group's principal risks were
described in the 2016 Pennon Group Annual Report which can be
viewed online at http://www.pennonannualreport.co.uk/2016/. Such
forward looking statements should therefore be construed in light
of such risks, uncertainties and other factors and undue reliance
should not be placed on them. They are made only as of the date of
this announcement and no representation, assurance, guarantee or
warranty is given in relation to them including as to their
accuracy, completeness, or the basis on which they are made. No
obligation is accepted to publicly revise or update these
forward-looking statements or adjust them as a result of new
information or for future events or developments, except to the
extent legally required. Nothing in this Statement should be
construed as a profit forecast.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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