Pennon Group estimates £8m credit blow from pandemic impact

Pennon Group has estimated an £8m credit loss at its water businesses arising from the Covid pandemic in its financial results for the year to 31 March 2020.

The group reported profit before tax at its South West Water subsidiary, down year-on-year 3.7% to £174m. Revenue for the same period was down 1.8% to £570.3m due to weather-related falls in consumption and charges under regulatory revenue forecasting incentives, offset by tariff increases.

Operating costs were down 3.6% to £206.1m assisted by a fall in weather related costs. Depreciation and amortisation was up 2.4% to £118.8m contributing to a fall in operating profit of 2.3% to £254.4m. The company reported a credit loss of about £3m caused by

Pennon’s a pre tax loss from its non-household retail joint venture with South Staffordshire Group, Pennon Water Services (PWS), of £0.4m – down from £1.6m in the previous year. Operating profit was up £0.9m to £1.2m.

PWS’ sales were virtually unchanged at £173.5m. Revenue external to Pennon Group was up 23% on the previous year to £67.1m. while operating costs external to the group up 22% to £65.2m.

The company forecast a £5m credit loss to the PWS business taking its statutory reported post tax loss to £5.4m.

Pennon said it expected to complete its £4.2bn disposal of its waste management arm Viridor, in “early summer 2020.” The deal has received Pennon shareholder approval and European Commission merger clearance.

Pennon said following the disposal, the remaining operations, South West Water and Pennon Water Services along with Pennon Group will be “a UK-focused water infrastructure group.”