Shares in Pennon were up on the FTSE 250 despite concerns about a eurozone debt crisis, thanks to a rise in underlying pre-tax profit of over 14 per cent for the full year ended 31 March.

The water services group said that underlying pre-tax profit at its South West Water business was up 8.7 per cent to £142.5 million, while at its Viridor business profits increased 34.8 per cent to £55.4 million. Overall the group made pre-tax profits of £189.1 million, up 14.2 per cent from the previous year.

Pennon said it would be recommending a final dividend of 15.60 pence per share, up 9.5 per cent from the previous year. The full year dividend is to be 22.55 pence per share, up 7.4 per cent from the previous year.

The group said it would be increasing real dividends by four per cent per year from 2010/11 to at least 2014/15.

Ken Harvey, Chairman of Pennon, said, "This has been another successful year for the Group. During the year South West Water has delivered strong operational performance and has outperformed the operating cost efficiency and financing targets set by Ofwat for the K4 period. Viridor has once again delivered a very strong financial performance. The Greater Manchester Waste PFI contract, Lakeside Energy from Waste project and the latest acquisitions are further major steps forward in the successful evolution of Viridor.

"Notwithstanding the lower returns envisaged by Ofwat's Final Determination and the impact of current economic conditions, the Group remains well positioned to continue to deliver shareholder value and meet future challenges. South West Water is well placed to achieve Ofwat's efficiency targets and outperform its financing cost assumptions for K5. Viridor expects to continue to deliver strong long-term growth through successfully leading the way in exploiting opportunities arising from the Government's landfill diversion, recycling and renewable energy targets. As a result the Board is pleased to announce its intention to increase the dividend by 4% per annum above inflation from 2010/11 at least until 2014/15."

By 14:09 shares in Pennon were up 2.66 per cent on the FTSE 250 to 502.50 pence per share.

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