Pennon Group: FY12/13 preliminary results – Viridor still remains a drag
BUY, Fair Value 800p (+14%)
Pennon released weak FY12/13 results, unsurprisingly dragged down by the waste business. Despite Viridor’s PBT down 37% y/y, the PBT at the group level declined by only 1.1%, 3.4% above market expectations. Pennon published negative one-offs of GBP140.2m (net of tax) primarily linked to Viridor. EPS before one-offs is 1.4% above consensus. Dividend is in-line with our expections (28.47p for full dividend). The group has strong liquidity and funding positions which should reassure on the capability to finance the Viridor pipeline, which is key to our buy rating. We would take advantage of the share price weakness to play the M&A theme and the ramp-up of the energy-from-waste projects pipeline under construction.
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