Pennon shares sink 17% after launching rights difficulty, cuts dividend to fund water funding
Pennon Group has launched a £550m rights difficulty and lower its dividend, because the water firm raises cash to step up funding in its community underneath a brand new chief government.
It’s not typically you see a London-listed utilities firm drop greater than 15%, and the autumn displays the challenges going through the UK’s water business.
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The proprietor of South West Water stated it will faucet current shareholders for about £550m by way of a completely underwritten rights difficulty, a part of a funding plan to help round £1bn of extra funding.
It may even ‘rebase’ its dividend, utilizing the phrase rebase to melt the blow of what’s nothing lower than a slash. The whole payout for the present yr will fall to about £125m from £138m, which, mixed with the impact of the rights difficulty, equates to a discount in dividend per share of round 30%, to about 18p.
Dan Coatsworth, head of bourses at AJ Bell, stated: “Pennon shareholders have been delivered a blow after the water firm slashed its dividend.”
“Investors sometimes purchase shares in utility firms for his or her dividends, seeing them as a dependable supply of revenue and a little bit of capital development on high. Pennon has rebased its dividend by roughly 30% from the earlier yr, saying it can now goal development in step with inflation from the brand new decrease degree.”
The strikes accompany an operational overhaul set out by new chief government Keith Haslett, who stated his evaluate had discovered areas the place the corporate wanted to enhance.
The plan includes bringing key abilities again in-house, together with leakage technicians, centralising asset administration and investing extra the place its property most want it. Total funding in its regulated water industry over the present regulatory interval is now anticipated to achieve about £3.6bn, some £1bn above its unique plan.
Pennon stated the additional spending would carry the worth of its regulated asset base by greater than 40% over the interval, and that its dividend would develop in step with inflation from the brand new, decrease degree. It can also be searching for to get well a part of the funding by way of the regulator Ofwat’s cost-change course of.
