South West Water owner Pennon Group PLC (LSE:PNN, OTC:PEGRY) offered “no positives” in its annual earning statement today, said analysts at UBS.
Underlying earnings came below UBS estimates of £171 million and the company-compiled consensus of £174 million.
Adjusted earnings per share were 6.2p, which was higher than the UBS estimate of 4.8p but fell short of the consensus of 6.6p.
Debt was also a concern for UBS analysts, who noted the company’s group net debt position of £3.81 billion, which was £170 million higher than UBS estimates, partly due to a non-cash fair value adjustment of £126 million.
A £2.4 million downward adjustment to the final dividend has raised questions of further dividend adjustments should pending investigations result in further fines.
According to UBS, this could be as much as £55 million, or 41% of the current year’s dividend.
Reporters on the results call said investors flagged these concerns, though chief executive Susan Davy said, “It's not precedent, it's not policy, it's right for us to signal that shareholders bear the risk.”
Despite the roundly disappointing results, UBS maintains a 'buy' rating on Pennon shares with a 12-month price target.
The stock fell 7% to 665.5p on Tuesday in response to the annual results.