Rigid cost control keeps Pennon’s head above water

THE owner of waste giant Viridor reported better than expected profits despite a drop in recycling as its rubbish-fuelled power plants continue to drive growth.

Pennon, which also owns South West Water, said its eight energy-fromwaste plants continued to perform well and the next four to start up would provide an “earnings kicker”.

Pennon is planning to spend £1.2bn on new facilities that can burn waste that would otherwise top up Britain’s heaving landfills to create electricity.

Full-year pre-tax profits at South West Water rose by 4.7pc to £180.5m in the year to March 31 but were still dwarfed by growth at Viridor, where profits jumped 17.2pc to £70.8m. The company will pay a full-year dividend of 38.59p, up 7.3pc.

“A rigid control of costs has allowed it to generate some of the best regulated returns in the sector, while earning rewards from Ofwat for exceeding targets,” said Hargreaves Landsdown, the financial service provider.

The FTSE 250 company helped to drag the index higher as its share price rose 7.6pc to close at £78.58.

Susan Davy, Pennon’s chief financial officer, said recycling still contributed around 10pc of its earnings.