Pennon Group (PNN) H1 2025 (Q&A) earnings summary

Executive summary

• Group is positioned well ahead of the final determination (FD) on December 19, focusing on financial resilience, operational efficiency, and restructuring into four units: water services, wastewater services, Pennon Power, and retail.

• Revenue rose to £527.2m in H1 2024/25, up from £448.6m year-over-year, mainly due to the SES acquisition, but underlying EBITDA fell to £163.5m from £168.5m as lower demand in South West Water offset gains.

• Statutory loss before tax widened to £38.8m, driven by £16.3m Brixham water incident costs and £3.7m restructuring charges.

• Significant investments, including acquisitions and accelerated capital expenditure, support growth and regulatory compliance.

• Customer affordability and support remain priorities, with innovative tariffs and financial assistance programs in place.

Financial highlights

• Net debt for the water group stands at £3.8 billion versus an RCV of £5.9 billion, with group net debt at £4.2322 billion and gearing at c.68%.

• Gearing is at 64% excluding SES and 65% including SES, about 3 percentage points higher than planned due to advanced investments and lower revenues.

• RCV has grown by approximately 75% over the regulatory period, driven by investment and acquisitions.

• SWW RORE (nominal, actual) at 10.8%; Water Group RCV at £5,916m, up from £5,536m at March 2024.

• Cash and committed facilities of £675.1m at period end.

Outlook and guidance

• Full-year RCV guidance is just under £6 billion for the water groups, with RCV expected to rise further with additional and accelerated investment.

• Full-year revenue expected to be broadly flat year-over-year, with lower demand offsetting tariff increases and new customers.

• Operating costs to rise due to inflation and digital platform investment, but efficiency savings expected in Q4.

• Awaiting the FD for further clarity on funding, capital structure, and dividend policy.

• Capital Markets Day scheduled for February 25 to update on strategy post-FD.