Pennon Group Sees a ‘Strong Return to Profitability’ in 2025/26

Pennon Group PLC (LON: PNN) shares moved around 0.9% lower in early Friday trading after it announced a trading statement for the period from April 1 to September 25, 2025, signaling a strong return to profitability.

The company said it is on track to meet expectations for the full year 2025/26, targeting a return on regulated equity (RORE) of 7%. This target is underpinned by efficient financing strategies for FY26.

Pennon also confirmed that its price control deliverables are progressing as planned for 2025/26, with program efficiencies being secured throughout the delivery process.

Pennon's financial performance is showing a promising rebound, with EBITDA anticipated to increase by approximately 60% year-on-year, even after factoring in revenue deferred into 2026/27.

The company attributes the strong performance to efficient financing costs and capital program efficiencies that are offsetting other cost pressures.

A robust liquidity position has been further enhanced by a £300 million new issuance in September 2025 under its Euro Medium Term Note (EMTN) program.

Wastewater services are also showing improvement, with Outcome Delivery Incentives (ODIs) tracking to be net neutral for 2025/26, a first for South West Water since ODIs were introduced.

Pollution incidents have been halved in the eight months leading up to August 2025, reflecting the benefits of Pennon's pollution reduction plans. Furthermore, storm overflow spills have decreased by nearly 50% year-on-year, driven by interventions and investments in the wastewater network, as well as lower rainfall in the South West region.

Water services faced challenges due to supply interruptions from a burst main at the Dousland Water Treatment Works, impacting Outcome Delivery Incentives. Despite hot weather and high demand, the company's water resources position benefited from investments made following the 2022 drought. However, dry ground conditions led to increased network incidents and leakage.

Progress is reportedly being made in resolving regulatory investigations, with Environment Agency prosecutions related to wastewater incidents from 2015-2021 advancing through the court process. Action has already been taken to address the issues. In September, the Drinking Water Inspectorate (DWI) progressed the court process regarding the 2024 water quality incident.

Pennon Power is advancing with its renewable energy projects. Construction is underway on all four major projects, with Dunfermline in Fife and Cullerlie in Aberdeenshire fully constructed and scheduled to connect to the grid and generate power in October. Once all four sites are operational by the end of FY27, Pennon Power's renewable energy portfolio will generate the equivalent of 40% of the Group's total consumption.

The board is currently undergoing a search process to appoint a new Chief Executive Officer following the announcement of Susan Davy's intention to retire from the Group.

CEO Susan Davy commented, “We're driving real improvements for our customers and communities whilst delivering a return to strong profitability. Despite the pressures of a hot summer, we've maintained resilient water supplies and continued to improve services for our customers. Whilst there is more to do, our pollution reduction plans are delivering tangible benefits, halving the number of pollutions and spills from storm overflows, reducing our impact on the environment.”