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Pennon: Pennon Group's Strong H1 Results Driven by Regulatory Reset and Operational Successes

Pennon Group reported a robust start to the UK regulatory period, with revenues increasing by 25% year-on-year to £658 million, driven by higher tariffs from the regulatory reset and increased customer consumption. The company's operating profit more than doubled, with EBITDA showing a step change. Underlying profit before tax was £65.9 million, compared to an underlying loss of £18.6 million in the prior year. Adjusted basic earnings per share increased to 14p per share, beating analyst estimates of 13.72p. The actual EPS came out at 0.139, slightly higher than the estimated 0.1372.

PNN.L

GBp 540

-0.18%

A-Score: 4.2/10

Publication date: November 27, 2025

Full Report

Author: Analystock.ai

📋 Highlights
  • Strong Revenue Growth: Revenues surged 25% YoY to £658 million, driven by regulatory tariff increases and higher customer consumption.
  • Profitability Surge: Operating profit more than doubled, with underlying pre-tax profit jumping to £65.9 million from a £18.6 million loss in the prior year.
  • Storm Overflow Reduction: Achieved a 45% decline in storm overflow spills, avoiding 6,000 incidents in H1 2025-26.
  • Capital Investment Progress: £305 million in H1 capital expenditure, with £279 million allocated to the Water Group and £25 million to renewables.
  • Net-Zero Advancement: £20 million invested in CREWW and plans to meet 40% energy self-sufficiency by 2030, aligning with net-zero targets.

Operational Highlights and Strategic Priorities

The company has seen operational successes across its four strategic priorities, including providing safe, clean drinking water, tackling storm overflows and pollution, driving environmental gains, and supporting customers. Pennon Group has reduced storm overflow spills by 45% and avoided around 6,000 spills in the first half of 2025-26. The company has also made progress on its net-zero targets, with a £20 million investment in CREWW and plans to deliver 40% of its energy requirements by 2030.

Financial Performance and Outlook

Pennon has had a robust start to the new regulatory period, K8, with a strong return to profitability and notable operational successes. The company expects revenue to reflect normalized demand, with EBITDA anticipated to increase by around 60% year-on-year. Analysts estimate next year's revenue growth at 24.0%. The company's gearing policy is 55-65%, and it has a strong balance sheet, with gearing at 60%.

Valuation and Dividend Yield

The current valuation metrics indicate that the stock is trading at a P/E Ratio of -54.15, P/B Ratio of 1.65, and Dividend Yield of 6.19%. The EV/EBITDA is 31.08, suggesting a relatively high valuation. However, the dividend yield is attractive, and the company's commitment to delivering stable returns on investment is positive.

Transition and Future Plans

The company is undergoing a CEO transition, with Susan Davy handing over to Keith Haslett, who will start in 2026. Pennon has a strong executive team in place, and Susan Davy will continue to support the business during the transition. The company is well-positioned to take advantage of reopener opportunities, with a potential to accelerate more investment on the horizon.

Pennon's A-Score