Pennon Group (LSE:PNN) said EBITDA for the period to 9 March 2026 rose by roughly 55% year on year, with underlying profitability for the 2025/26 financial year expected to meet market forecasts, albeit toward the lower end of expectations. The company noted that operational performance has been affected by unusually heavy rainfall and storm-related power outages, factors that are likely to result in a net Outcome Delivery Incentive (ODI) penalty across its water and wastewater services.
Despite the challenging weather conditions, the group reported significant improvements in environmental performance. Wastewater pollution incidents have declined by about 40%, while normalised pollution levels have fallen 55% and storm overflow usage is down 17%. Pennon said these improvements reflect substantial investment in network infrastructure. Water quality metrics remain strong, with the company delivering upper-quartile performance, while early-stage work on its AMP8 capital investment programme is progressing as planned and supported by solid liquidity and balance sheet strength.
The company is also continuing to address regulatory investigations related to historical wastewater pollution events and a water quality incident that occurred in 2024. Pennon expects these matters to conclude during 2026. At the same time, the group is expanding its renewable energy initiatives through the Pennon Power portfolio. Two of the four planned sites are now operational, and the full portfolio is projected to generate energy equivalent to around 40% of the company’s consumption by the 2027 financial year.
A leadership transition is also underway, with Keith Haslett set to take over as chief executive officer on 1 April 2026. Pennon reiterated that its largest capital investment programme to date remains fully funded and is designed to deliver operational efficiencies, strengthen asset resilience, and generate returns on capital during the K8 regulatory period despite ongoing regulatory scrutiny and operational challenges.
The company’s outlook reflects a combination of positive operational progress and ongoing pressures. Revenue growth has been encouraging, but concerns remain around profitability and leverage levels. Technical indicators currently show positive market momentum, while the relatively high price-to-earnings ratio suggests the stock may be trading at elevated valuation levels. Management believes continued operational improvements and strategic investments will support longer-term performance.
More about Pennon Group plc
Pennon Group plc is a UK-based provider of water and wastewater services, operating primarily through South West Water and SES Water. The company supplies regulated utility services across South West England and other regions while expanding into renewable energy generation through its Pennon Power portfolio to help meet its operational energy requirements.
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