After a wet and wild 2018 – the 1st half saw the stock take in £8-plus highs and £5.75-tickling lows – Pennon has continued to move in the same range seen in the back end of last year. Opening at £6.81, it had climbed above £7.90 by mid-March, only to lose its way following that month’s update.
A sustained slide over the last couple of months – in part prompted by fears that a potential Labour government could renationalise the water industry – caused it to hit a 4-and-a-half-month low of £6.91 on May 20th. Pennon Group PLC now sits at a current trading price of £7.13.
The main issue in that aforementioned March statement was news that the company would be taking a £16 million hit due to problems at its collapsed infrastructure partner Interserve (LON:IRV), which owes Pennon £72 million.
Elsewhere the return on regulated equity rate at South West Water is expected to come in at 11.8%, with the division’s 2020-2025 business plans ‘fast tracked’ by Ofwat. Meanwhile it said its waste management arm Viridor ‘is on track for full year results in line with our expectations’.
In terms of Thursday’s full year report, analysts are expecting a 9% rise in pre-tax profit to £353 million, alongside a 7% dividend increase.
Pennon Group (LON:PNN) has a consensus rating of ‘Hold’ alongside an average target price of £8.06.
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