(Adds details on impairment charge, focus on EFW business,
analyst comment, share price)
LONDON, June 3 British water group Pennon
reported a 9 percent rise in full-year pretax profit to
207.3 million pounds ($347.4 million), beating analyst
estimates, after tariff increases and new customers helped its
South West Water subsidiary.
The utility incurred an impairment charge of 39.7 million
pounds on its landfill business, prompting a decision to close
down 80 percent of its landfill sites, that may result in a
minimal loss of jobs.
Instead, the company will focus on energy-from-waste (EFW)
projects, a business that is expected to contribute around 100
million pounds in earnings before interest, taxes, depreciation
and amortisation (EBITDA) at Pennon's Viridor subsidiary within
"The profitability of the landfill business has declined
faster than anticipated due to aggressive pricing from other
landfill operators," Pennon said in a statement.
The utility also said it would pay a year-end dividend of
20.92 pence, taking its full-year total to 30.31p, in line with
expectations and up 6.5 percent on the previous year.
It has promised to freeze water tariffs for customers in
2014/15, a cost it said was evened out over a six year period
under which its prices are capped by regulator Ofwat.
South West Water has been granted "enhanced status" under
the water regulator's business plan review, meaning the
regulated tariffs it can charge through 2020 are now largely
clear, giving investors revenue clarity.
"Pennon's shares have been strong performers in recent
times, but we reiterate that it remains a quality play in the
sector," said analyst Angelos Anastasiou at brokerage Whitman
Howard, who recommends holding Pennon stock.
Shares in Pennon traded down 2.8 percent at 0734 GMT, having
climbed the previous session to a near two-year high of 790.69p.
($1 = 0.5968 British Pounds)
(Reporting by Karolin Schaps; Editing by Kate Holton and David