November 20, 2009 3:17 am

Pennon weathers worst of crisis

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Pennon Group saw half-year profits rise 13 per cent on the back of a strong performance by its two subsidiaries.

The water and waste management group, which operates South West Water and Viridor, managed to weather the worst of the financial crisis in the six months to September 30 as turnover increased 6 per cent from £505m ($842m) to £536m, lifting pre-tax profits from £83.9m to £94.8m.

SWW, a water supply and sewage treatment utility operating in south-west England, saw revenue edge up 1.5 per cent to £226m as it benefited from £2m of efficiency savings and a lower than average number of industrial clients in the region.

“It’s a good set of results for us,” said Chris Loughlin, chief executive of SWW.

“The financial results have been underpinned by a combination of solid performance and of holding costs steady ... We were given the challenge of reducing operating costs by £13m over 10 years and we’ve achieved that early.”

Analysts at Cazenove agreed: “South West Water has exceeded its target efficiency savings for the period and is well positioned going into the next period.”

However, the robust results come amid industry uncertainty as providers wait for a price ruling by Ofwat due on November 26. New rules will place a limit on the expected rate of return and institute new pricing regulations.

“We wait with baited breath,” said Mr Loughlin.

Viridor, which operates landfill sites in the UK, saw pre-tax profit rise 14 per cent to £22.8m after it acquired London Recycling, Intercontinental Recycling and Greater Manchester Waste, which produced £42.4m of extra revenue.

Colin Drummond, chief executive of Viridor, said: “Our profits are up 14 per cent and have grown 17 per cent per annum since 2000, so these are good results.

“The important point is we are no longer just a waste management company; over 40 per cent of our profit comes from recovering value from waste. Waste is the major form of renewable energy in the UK, it constitutes about 30 per cent of renewable energy now.”

Pennon declared an interim dividend of 6.95p (6.75p) to be paid from diluted earnings per share of 19.6p (9.5p). Shares in the group rose 5.6p to 485.8p.

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