Pennon Group: FTSE 250 water firm swings to loss after parasite scandal
Pennon Group, the British utility firm which owns South West Water, swung to a loss in the latest financial year after struggles driven by the Brixham water supply scandal.
The FTSE 250 company made a loss of £35.1m for the year, which the firm said was in line with management expectations. It marked a steep drop from the £16.8m in profit pocketed for the previous year.
Pennon faced mounting costs after it was found to be supplying Brixham with water containing cryptosporidium – a parasite that causes infection.
The scandal led to more than 100 confirmed cases of diarrhoea-type illness in May 2024 and restructuring and intervention costs took a chunk out of the company’s bottom line.
Pennon recorded around £12m in costs due to returning qualities supplies and around £16.6m to restructure activities as a result of the supply scandal.
Capital expenditure for the group topped £652.5m, up from £649.5m.
Pennon said in January, along with utility peer United Utilities, it would increase dividends as consumers grapple with significant bill increases over the next five years.
The water firm said dividends would rise in line with inflation each year until 2030. Pennon pledged a record £3.2bn in investment.
Pennon entering new regulatory period
The water company said losses also reflected its “point of inflection into K8” and eyed a return to profitability in the next 12 months.
Its current regulatory framework under Ofwat, K7, runs from 2020 to 2025.
Pennon has earmarked over £1bn for investment programmes for K8 – its next regulatory period from 2025 to 2030.
The firm’s underlying revenue jumped to over £1bn for the year up from £908m, but this was offset by the mounting expenses.
Shareholders were also feeling the squeeze of a tough year, with earnings per share swinging to a loss of 16.1p.
Susan Davy, Pennon’s group chief executive, said: “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.”
Davy added: “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.”