Profits and dividend up at Pennon

Water group Pennon reported a jump in profits despite business customers cutting back on water usage due to the tight economic climate.

Profit before tax across the group was up 11.6% to £107.4m in the six months to the end of September.

South West Water saw profits rise 8.5% to £76.2m, while profits at its waste management arm, Viridor were up 7.0% to £30.6m. Underlying earnings per share went up 11.9% to 23.5p.

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The company also pushed up its dividend by 9.6% to 8.22p, which it said was line with a previously announced policy to grow it by 4% above inflation per annum up to the end of 2014/15.

Revenues rose 5.8% at South West Water to £244.3m as a result of tariff increases and new connections.

However, this had been offset by an overall reduction in demand and the effects of customers switching to a metered tariff, Pennon said.

Customers switching from unmeasured to metered charging reduced revenue by £3.7m, but 3,137 new customer connections contributed £1.4m of additional revenue.

"Customer demand has fallen by 2.3% on the same period last year, with general economic conditions impacting industrial and commercial customer demand," the firm said.

Chairman Ken Harvey said South West Water continued its very strong operational performance and was well placed to outperform the assumptions for the K5 regulatory period.

K5 is the current water industry regulatory period, which runs from 2010 - 2015.

The firm also said that Viridor was successfully exploiting opportunities arising from the government's landfill diversion, recycling and renewable energy targets, with 51% of its profits already coming from recovering value in waste.

"Its recycling business is key to profits in the next two years," Pennon said.