Pennon Group (PNN) H1 24/25 Q&A earnings summary

Executive summary

• Full-year RCV guidance is just under £6 billion, with detailed SES data and Water Group RCV at £5,916m, up from £5,536m at March 2024.

• Gearing stands at 64% excluding SES and 65% including SES, with group gearing at c.68% due to advanced investments and lower revenues.

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

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

• Four business units established: water services, wastewater services, Pennon Power, and retail services, focusing on operational efficiency and customer delivery.

Financial highlights

• Net debt at the group level is £4,232.2m, with £3.8 billion attributed to the water group, against an RCV of £5.9 billion.

• SWW RORE (nominal, actual) at 10.8%; Return on regulated equity for SWW at 6.0% real notional.

• Group maintains two strong investment-grade credit ratings and cash/committed facilities of £675.1m.

• Interim dividend of 14.69p per share declared, in line with policy of CPIH +2%.

• Record capital investment of £331.8m in H1, up 24.6% year-over-year.

Outlook and guidance

• Awaiting the FD for visibility on the next regulatory period; policy on gearing and capital structure will be reviewed post-FD.

• 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.

• Group capital expenditure in H2 to continue at H1 run rate, including £75m accelerated storm overflow investment.

• Water Group RCV to rise further with additional and accelerated investment.