Pennon lifts profit and divi

Utilities firm Pennon, which owns South West Water and waste business Viridor, said it is responding well to falling recyclate prices as it delivered half year pre-tax profit in line with expectations.

Pre-tax profit rose 3.4% to £111.1m for the half year ended September 30th 2012 while revenue for the period slipped 1.4% to £633.7m.

Operating profit fell 4.8% to £136.3m while diluted EPS rose to 260p compared to 25.9p before.

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"Viridor is responding to the near-term challenges and has recovered about half of the impact of the reduction in recyclate prices through the terms of customer supply contracts and cost reductions," the group said in a company statement.

Falling prices of recycled materials have hurt trading at Viridor, which was previously seen as the firm's biggest source of growth. Pennon said it was cautious about the future prospects for recyclate prices.

Half year pre-tax profit at Viridor tumbled 26.5% to £22.5m while profit at South West Water rose 10% to £83.8m.

Pennon said South West Water continuing to perform well with strong operational performance against the 2010-2015 regulatory contract with further progress in operating efficiency.

"Despite the wettest summer in 100 years impacting customer demand and operating costs, the company's profit before tax has increased through rigorous cost control, efficiency delivery and stable interest costs," Pennon explained.

Net borrowings increased £68m since March 31st 2012 to £2.2bn.

An interim dividend of 8.76p per share has been offered, up 6.6%.

CJ