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RNS Number : 8753N
Pennon Group PLC
27 September 2019
27 September 2019
PENNON GROUP PLC
Trading Statement
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 2019, which will be announced on
26 November 2019.
Key highlights
-- On track to meet management expectations for 2019/20
-- Strong funding and liquidity position
-- Viridor's ten operating Energy Recovery Facilities (ERFs)
performing well, with Avonmouth, the final ERF in the current
portfolio on track for commissioning during H2 2019/20 with
operational ramp-up from 2020/21
-- Joint venture with Grundon Waste Management Limited to build a new ERF in West Sussex
-- Construction at Viridor's recently announced GBP65 million
plastics reprocessing facility is underway. The plant is set to
contribute to earnings from 2020/21 with c.85% of inputs and c.75%
of offtake now contracted
-- South West Water remains on track to deliver continued
outperformance and enhanced Return on Regulated Equity (RORE) of
c.11.8% for K6 (2015-2020) whilst focusing on the early
implementation of the fast-track K7 (2020-25) Business Plan
-- Reviewing strategic focus, growth options and capital allocation policy for the Group.
Viridor investing for growth
Construction at Avonmouth Energy Recovery Facility (ERF)
continues to progress with the facility on track for commissioning
during H2 2019/20 and operational ramp up expected from 2021.
Viridor's portfolio of ten operating ERFs are performing well with
optimisation and operational ramp-up for the Glasgow, Beddington
and Dunbar ERFs commissioned in 2018/19 underway.
As outlined at our Capital Markets Day earlier in 2019, we
remain confident in the UK residual waste sector fundamentals, with
further capacity required to meet longer term demand. We continue
to develop options for up to three new ERFs, and as a first step
towards one of the three new ERFs we have now signed Heads of Terms
with Grundon Waste Management Limited for a new joint venture in
Ford, West Sussex. A site with outline planning permission has been
identified which is neighbouring one of our existing Materials
Recycling Facilities and Grundon Waste Management Limited's waste
transfer station, giving rise to potential Energy Park
benefits.
We see plastics reprocessing as an exciting area of growth and
see opportunities to increase our market share in this area.
Viridor's GBP65 million plastics reprocessing facility, co-located
with Avonmouth ERF, remains on track for contribution to earnings
in 2020/21. Viridor has now secured c.85% of inputs and c.75% of
offtake contracts, creating a viable and sustainable alternative to
virgin plastic. We see strong market fundamentals in plastics
recycling and reprocessing and we are exploring investment
opportunities for two further reprocessing facilities co-located
with our ERFs in Ardley, Oxfordshire and Dunbar, near
Edinburgh.
South West Water delivering for customers and shareholders
South West Water continues to deliver strong operational and
financial performance, with a focus on efficiency and improving
customer service.
South West Water continues to deliver resilient operational
performance with no water restrictions for the 23(rd) consecutive
year. The exceptionally hot, dry summer last year resulted in
higher revenue which has not been repeated this year, and as a
consequence revenue for H1 2019/20 has reduced to a more normal
level compared with H1 2018/19, in line with revenue control
expectations.
Cost saving momentum is being maintained, leading to ongoing
Total Expenditure (Totex) outperformance remaining on target to
deliver c.GBP300 million savings for K6.
We continue to deliver sector-leading Return on Regulated Equity
(RORE) performance, remaining on track for continued outperformance
for 2019/20, estimated at c.11.8% for K6.
Aligned with the 2019 Price Review process, South West Water has
made representations to Ofwat following both the fast-track and
slow-track Draft Determinations. Having secured fast-track status
South West Water is comparatively well placed for K7. In opting
into the Early Certainty Principle in January 2019, protection has
been provided in a number of areas, including Outcome Delivery
Incentive (ODI) performance commitments.
Strong operational and financial delivery continues to underpin
an early start to the delivery of South West Water's K7 Business
Plan, ensuring we are well placed to deliver outstanding services
to customers through 2020-2025.
Brexit
The Group continues to actively monitor and evaluate the
potential risks and opportunities arising from any potential Brexit
scenario and has plans in place to mitigate key risk areas.
Outlook
Given the strong financial performance and operational progress
of Viridor and South West Water, coupled with the imminent start of
the new K7 regulatory delivery period for South West Water and the
near and medium-term growth opportunities at Viridor, the Pennon
Board has concluded that it is an appropriate time to conduct a
full review of the strategic focus, growth options and capital
allocation policy for the Group.
Pennon Half Year Results - 26 November 2019
Pennon intends to announce its half year results for 2019/20 on
Tuesday 26 November 2019. Further information on Pennon, Viridor
and South West Water can be found on the Group's website,
www.pennon-group.co.uk.
For further information, please contact:
Pennon: Susan Davy Chief Financial Officer
Sarah Heald Director of Corporate Affairs & Investor
Relations
Jennifer Cooke Investor Relations Officer
01392 44 3168
Finsbury: James Murgatroyd
Harry Worthington
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 2019 Pennon Group Annual Report which can be
viewed online at http://annualreport.pennon-group.co.uk/ 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 news service of the
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Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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