Pennon shares (LON: PNN) (PNN.L) are marginally lower today after the company announced that it is on track to deliver financial results for the year to 31 March 2021 that are in line with previous guidance.
According to today’s update, the FTSE 250-listed water services company remains in a strong financial position. It has expected cash and committed facilities that are well in excess of £3 billion.
It continues to narrow down its potential investment opportunities regarding the proceeds of the sale of Viridor. Should it fail to find a suitable investment destination, it expects to make a ‘substantial’ return of capital to holders of shares in the company. It will provide greater clarity on this situation by the time its full year results are released to investors on 3 June 2021.
Pennon’s performance in 2021
During the 2021 financial year, Pennon has continued to deliver solid operational performance despite the Covid-19 pandemic. For example, South West Water has achieved its committed target for supply interruptions two years ahead of plan. Meanwhile, the company’s waste division is ahead of target for both internal and external sewer flooding.
Pennon Water Services has continued to grow its sustainable customer base. During the year it has won £20 million in new contracts, which has partially offset reduced demand.
In terms of the company’s financial performance, South West Water is on track to deliver strong totex and financing outperformance for the full year. It anticipates a doubling of base returns on regulated equity (RORE) of 3.9%. Pennon has also been able to use £1 billion to efficiently de-gear during the year, which leaves a sustainable position of £200 million gross debt at the Pennon company level, according to today’s update.
Looking ahead, the company’s next investor update is slated for 3 June 2021. The Pennon share price is currently trading at 992p. Over the past year it has fallen by 12%, while the FTSE 250 index (INDEXFTSE: MCX) has gained 47 % over the same time period.
Not Investment Advice
Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.