Pennon Group plc (LON:PNN) has announced its results for the full year ended 31 March 2025.
Susan Davy, Group Chief Executive Officer, commented:
“Pennon has delivered a resilient operational performance during a demanding year, while building a robust platform for the future. We have reshaped and reset the cost base, delivered record levels of capital investment and – following a successful rights issue – maintained a strong balance sheet.
“We are listening to our customers, who are quite rightly demanding water companies to do more for customers today and to step up investment for the future. We are doing both. We have worked diligently to help customers use less water and save more money with a range of campaigns and pilots. At the same time, our record year for investment has improved services that matter most to our customers. Whilst this has impacted profitability this year, it has been the right thing to do.
As the only water company to have received an outstanding rating for our business plan for the third consecutive time, we have a track record of setting and delivering on stretching business plans. Consistently around 70% of the stretching regulatory deliverables have been met which put us top quartile compared to the sector. Of course there is more to do, not least on those measures we didn’t achieve, and our ambitious new plan includes a record £3.2bn of investment due to be completed by 2030.
We know customers are worried about rising bills to fund this level of investment. While we have made the tough decision to put bills up in 2025/26 – for the first time in over a decade – two thirds of our investments are being funded by our supportive investors and debt providers.
Ultimately everyone will benefit from the investments we are making – from building reservoirs, to fixing storm overflows, powering our net zero ambitions and helping to create economic growth. It’s why we’re able to make a £200m support package available to those who need it most. It’s also why – as the dry weather persists – we’re predicting that the South West won’t need a hosepipe ban this summer. We could not do this without the 4,000 brilliant colleagues who walk in our customers shoes every single day, focusing on the priorities that matter most for customers. “
FINANCIAL PERFORMANCE
| 2024/25 | 2023/24 | |
| Underlying revenue^ | £1,047.8m | £907.8m |
| Underlying EBITDA^ | £335.6m | £338.3m |
| Underlying (loss)/profit before tax^ | (£35.1m) | £16.8m |
| Non-underlying items before tax1 | (£37.6m) | (£25.9m) |
| (Loss) before tax – statutory | (£72.7m) | (£9.1m) |
| (Loss) after tax – statutory | (£56.8m) | (£8.5m) |
| (Loss)/earnings per share | ||
| Adjusted EPS^ | (10.3p) | 5.1p |
| Basic EPS | (16.1p) | (2.9p) |
| Dividend per share2 | 31.57p | 36.67p |
| Capital expenditure | ||
| Group (incl. SES) | £652.5m | £649.5m |
| South West Water | £588.7m | £582.9m |
| At 31 Mar 2025 | At 31 Mar 2024 | |
| Water Group | ||
| RCV3 | £5,983.1m | £5,536.0m |
| Gearing4 | 61.8% | 64.4% |
| SWW | ||
| Cumulative RORE (real, notional)5 | 6.0% | 7.6% |
| Cumulative RORE (nominal, notional6) | 10.4% | 12.3% |
Financial highlights
· Results for 2024/25 in line with management expectations7, reflecting a full year of Sutton and East Surrey Group (‘SES’)
· Our successful water efficiency initiatives reducing customer demand has driven lower revenues in South West Water (‘SWW’) with regulatory revenue mechanisms in place to protect future recovery
· c.5% operational efficiencies have offset inflationary cost pressures, we have also invested in new technology, including our new customer platform and increased our front-line activities to drive improved outcomes
· Our continued capital investment programme at £652.5m this year has increased finance costs, which have moved from £150.2m to £184.4m
· The resulting loss before tax on both an underlying and statutory basis reflects a point of inflection into K8 with an expected return to profitability in 2025/26 through increased revenue and a reset of our cost base
· Profitable sector leading B2B retailers; Pennon Water Services (‘PWS’) and Water2Business – with plans to consolidate SES Business Water
· Statutory loss before tax reflects the cost of interventions to return quality supplies following the Brixham water quality event (c.£21.0m) and the costs of restructuring to reshape the Group’s activities (c.£16.6m)
· Capital expenditure to drive our commitments and priorities as well as accelerating delivery from K8 has continued at the levels seen last year
· Following the successful rights issue supporting £1.3bn of funding raised in the year, the balance sheet for the Group is robust with total Water Group RCV gearing of 61.8%, with Group gearing which includes other businesses a few percentage points higher
· Strong investment grade credit rating with liquidity of c.£1bn in place to support continued investment
· Return on regulated equity for SWW is relatively strong, equating to 10.4% on a nominal basis, and 6.0% on a real notional WaterShare basis (10.3% and 5.9% including Bristol Water)
· Inflation linked dividend, growing from CPIH (3.4%) from the 2023/24 £129m rebased9 on a dividend per share basis of 31.57p.
Operational highlights
· Sector leading internal sewer flooding with a reduction in 2024/25 of 14% (68% over K7) and 11% in external sewer flooding in the year (20% over K7)
· One of only 5 companies to reduce storm overflows, down c.4% in 2024 compared with 2023 despite the exceptionally high rainfall and groundwater levels. Our focus on bathing waters has reduced spills by 20% over K7 (with 2024 and 2023 levels consistent)
· Investment in water resources, with Blackpool pit fully operational in 2024/25 and the new water treatment works at Rialton supplementing water available for use in Cornwall by c.34%, with the interventions already delivered in the previous year in Devon by 30% compared to the levels during the 2022 drought. As a result, despite the dry start to the year we are not predicting any water restrictions this summer
· Water quality investments are on track and we have already begun our planning and design for our K8 programme. Our quality first programme has delivered water quality improvements this year
· Pennon Power solar investments on track with PV construction complete at Fife and underway at Aberdeenshire and Cumbria. Cold commissioning at Fife completed, with energisation in June
· At the end of K7 100% of our South West and Bristol customers now find their bill affordable with c.£124m support benefiting over 150,000 customers over K7, including innovative tariffs driving water efficiency and affordability.
Outlook
· We are well positioned for the future and stand ready to implement government legislation
· As the only water company to have received an outstanding rating for our business plans for the 3rd consecutive time, we have a track record of setting and largely delivering on very stretching business plans.
· The foundations are in place and we are out of the blocks – already working on over 1,000 deliverables, representing around 1/3 of our £3.2bn investment.
· For 2025/26, we are anticipating a return to profitability, with EBIDTA expected to increase by 2/3rds through increased revenue and a reset of the cost base.
· Ultimately everyone will benefit from the investments we are making with a 34% growth in RCV over K8, as we drive efficiency and innovation as we build new reservoirs, fix storm overflows, power our net zero ambitions and deliver improved services for customers.
· In targeting 7% RORE – we will be delivering for all – and sharing that performance with customers through WaterShare.
Notes:
Results include the results of SES in the current period. SES was acquired on 10 January 2024 and therefore the prior year comparative year includes the impact from acquisition to 31 March 2024.
^ Measures with this symbol are defined in the Alternative Performance Measures (APM) section of this document, underlying measures are presented before non-underlying items
1 Non-underlying items are adjusted for by virtue of their size, nature or incidence to enable a full understanding of financial performance.
2 Dividend policy of CPIH. 2024/25 dividend reflects 2023/24 base increased by CPIH of 3.4% at 31 March 2025.
3 Shadow RCV at 31 March 2025 based on PR24 pre-closing regulatory true-ups including in the PR24 Final Determination, adjustments for the levels of investment for Green Recovery, accelerated delivery, and transitional investment, alongside inflationary impacts and changes post the K8 Final Determination.
4 Based on Water Group (SWW including Bristol Water and SES Water) – net debt at period end/forecast shadow RCV at 31 March
5 Real cumulative RORE on underlying totex, financing and ODIs with notional gearing
6 Nominal cumulative RORE based on underlying real RORE using actual gearing plus average inflation over K7 at 4.3%
7 As set out in our Trading Statement in March 2025
8The base dividend for the year ended 31 March 2024 was £129.3m adjusted from the dividend paid in that year of £126.9m to remove the £2.4m one-off deduction in respect of the fine from the Environment Agency paid by South West Water
Results presentation
A presentation of these results hosted by Susan Davy, Group Chief Executive Officer and Laura Flowerdew, Group Chief Financial Officer, will take place at London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS at 9:00am (BST), today, 3 June 2025. The presentation will be immediately followed by a Q&A and will both be available to view on our website here: https://www.pennon-group.co.uk/investor-information
