Pennon Share Discussion Threads

[rimau1] 12/5/2020 16:03

The simple answer to the question is that PNN are revising their dividend policy for the next regulatory period and to also reflect the sale of the waste business. I think they said they would publish the revised policy In June. Suffice to say the dividend can be expected to be in line with other water utilities and shareholders can also expect a fat special dividend. I would also say that after the sale this will be a relatively small utility - maybe under £1bn cap so i doubt it will remain i dependent as a pure play water company. Pension funds love these businesses for certainty of earnings.

[gateside] 10/5/2020 12:31

But their area, especially Cornwall & Devon receives a relatively higher rainfall, creating fewer challenges.

[redartbmud] 10/5/2020 10:27

The industry may be the same, but the challenges are different.
Pennon has the largest area of coastline, for any of the water utilities. That creates a set of challenges, the scale of which is not faced by the others.

[wet your knot] 10/5/2020 09:10

Is there any way to estimate what PNN's divi policy will pay percentage wise (in the new regulatory period) by reviewing some of the other water utilities? Are there any websites that look at this and publish their assessments/assumptions?

[rimau1] 01/4/2020 14:14

I am still topping up at these levels, utilities are one of the few dividend payers left and PNN is looking good value with £4bn inflow due later in the year. 4% looking like a good yield now!!

[badtime] 22/3/2020 14:31

Fair points ..nice to see some good reasoning against the hyperbole on other threads

[essentialinvestor] 22/3/2020 11:26

Thanks for the view, let's see what happens.

[rimau1] 21/3/2020 15:17

I disagree essential - yield too low? You will find most non utilities are urrently cancelling dividends to preserve cashflow, not only will Pennon not cancel theirs its also inflation linked so given we can expect plenty of inflation over the coming years this is a 4% yield that is secure, likely to rise and will be accompanied by a special this year.

[essentialinvestor] 20/3/2020 15:14

Worth a look around £9-9.50 ...?

[essentialinvestor] 20/3/2020 11:38

Would expect a continued drift down?.


Yield too low with a tightening regulatory environment imv.
£12 looked a gift.

[poikka] 19/3/2020 20:37

This from HL, fwiw.

"With Viridor, the waste management business, on the way out, Pennon's focus in future will be on one thing and one thing only - water.

If the deal's given the go ahead Pennon could receive cash proceeds of around £3.7bn. It plans to return some to shareholders, reduce debt, and keep some for future investment. All eminently sensible in our opinion.

As with most utilities, the potential for a reliable income is Pennon's main attraction. The current dividend policy, of increasing the payout by RPI inflation plus 4 percentage points each year, is very generous. But with a new regulatory period beginning this April and lasting until 2025, this policy is likely to change.

Life as a utility means that in return for providing an affordable water supply, Pennon's allowed to make an acceptable return on capital invested. Ofwat's reduced what it considers to be 'acceptable' for the coming period and increased performance targets. Lower earnings tend to mean less generous returns for shareholders and that's been the case for Pennon's rivals. We suspect Pennon will follow suit.

To date Pennon's built a good record as a water business. Rigid cost control has helped generate some of the best regulated returns in the sector, while service levels have been good enough to earn rewards from Ofwat.

While the next regulatory cycle is set to be tougher, we see no reason why this shouldn't continue. Pennon's plans have received approval from the regulator and the group's confident it can continue to outperform. Investment using sale proceeds could help Pennon's quest for outperformance.

Against a backdrop of wider uncertainty, Pennon currently trades on 19.8 times future earnings, some way above the long run average. Given the reliable nature of Pennon's business, that doesn't come as too much of a surprise. The prospective yield is 4.2%, but be aware the dividend policy will likely change in June."

Hanging on for the long term, especially as a hedge against inflation - loads of government money sloshing around.

[sllab101] 19/3/2020 19:30

There was one guy from one of the banks who asked would they give the money to the local community , I think it must have something to do with Steptoe Corbyn bank or the like.

[poikka] 19/3/2020 18:51

Thanks, slab, keeping theirs cards close to their chests, then.

[sllab101] 19/3/2020 17:32

Poilkka, I listened in on the conference call but there were very few answers.

[poikka] 19/3/2020 16:50

Any whizz kids out there like to guess what they're going to do with the £3.7bn in terms of: how much debt to cut, and how much to us shareholders?

I mean, they could cut a lot of debt and replace it with stuff at knock-down prices.

Here's another thought: what's going to be their new strategy? Maybe they're just going to stick to their knitting, or maybe buy-up yet another water company at - once again - knock down prices.

[gateside] 03/3/2020 18:06

86th biggest company, so should make the cut off to join FTSE? tomorrow. All it needs to do is follow the Market.

[gateside] 02/3/2020 21:19

After the price movement today. PNN on course to be promoted to FTSE100. Two trading days to Quarterly review.

[dplewis1] 15/2/2020 21:05

Be warned - entropick is a spam account do not click the link.

[entropick] 15/2/2020 21:04

Pennon’s (PNN) water business South West Water has decided to accept Ofwat’s final determination for the next regulatory period, AMP7. BUY

[tombag] 15/2/2020 00:18

Was Blackrock a buyer?

[gateside] 14/2/2020 22:41

Next quarterly review of FTSE is on 4th March.As it stands PNN is on the verge of being promoted to FTSE100

[sllab101] 11/2/2020 14:53

Pennon’s $5 Billion Viridor Sale Draws Veolia, EQT Interest

[wet your knot] 07/2/2020 08:48

I'm in a healthy profit position on these (don't ask me what went wrong!!) and considering my options.

My simplistic view from the last numbers (ignoring waster services as its currently loss making:

Total rev. £712m
Total PBT £143m

SWW rev £292m i.e 41%
On which it makes PBT of £96m so 67% of total PBT

Viridor rev £388 i.e. 55%
On which it makes PBT of £42m so 29% of total PBT

Yes I know the % don't quite add up, just using the data sent out.

My question to those with much more experience than me in this area is:

At £11/share is the value of the remaining SWW business going to be worth around £7.40/share i.e. in line with the 67% of PBT? And would we be likely to get something like the £3.63 difference (i.e. the Viridor share of PBT) as a return to shareholders? That would be a huge amount of value to return, do these things transpire in that way normally or does some of that value not get realised by investors (private like me or otherwise)?

Appreciate there's lots of potential outcomes but views would be welcome.