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Investing.com -- Pennon (LON:PNN) Group shares fell over 2% on Tuesday after the company reported a statutory pre-tax loss of £72.7 million for the year ended March 31, as higher capital investment and restructuring costs offset flat operational efficiencies and revenue gains.
Despite issuing guidance for the next fiscal year in line with market expectations, the stock declined on the back of earnings pressure and continued investment outflows.
Underlying loss before tax came in at £35.1 million, with non-underlying costs totaling £37.6 million, including £21 million tied to a water quality incident in Brixham and £15.8 million related to restructuring. Statutory loss after tax was £56.8 million.
Group revenue rose 15% year over year to £1,047.8 million, boosted by the first full-year contribution from SES Water.
Retail revenue increased to £320.3 million from £253.5 million. Revenue from South West Water remained flat at £737.7 million, as higher tariffs were offset by reduced demand.
Adjusted earnings per share were negative 10.3p, while basic EPS showed a loss of 16.1p.
The board declared a dividend of 31.57p per share, up 3.4% year over year and in line with its policy of CPIH-linked growth.
EBITDA was £335.6 million, in line with guidance but 3% below consensus. Capital investment reached £652.5 million, of which £588.7 million was allocated to South West Water. Jefferies described the update as “a small positive for the company.”
Regulatory capital value stood at £5,983.1 million, consistent with guidance, and the group’s return on regulated equity (RoRE) was 6%, driven by financing outperformance. Net debt was £3.9 billion, with water group gearing at 61.8%.
The group incurred a net ODI penalty of £25 million in 2024-25, up from £13.8 million the year before.
Operationally, Pennon reported a 68% reduction in internal sewer flooding since 2020.
External flooding and pollution incidents also declined, while storm overflow spills were down about 4% despite elevated rainfall.
Key water resource investments included the now fully operational Blackpool pit and construction progress at Rialton, contributing to a 34% increase in available water resources since 2022.
Leakage rates improved across all regions, with SES meeting its targets and progress noted at South West and Bristol Water.
As for fiscal 2025-26, Pennon anticipates a two-thirds increase in EBITDA with a 5% to 10% increase in depreciation due to ongoing investment. An increase of £25 million to £30 million is expected in interest costs.
Group capital expenditure is forecast between £710 million and £740 million, front-loaded to deliver early returns in the K8 regulatory period.
Regulated water revenue is projected to rise by £180 million to £240 million, in line with the Final Determination.
For AMP8, the company continues to target a 7% return on regulated equity, assuming 2% outperformance from totex and financing, and a neutral ODI position for 2025-26, consistent with guidance previously issued at its Capital Markets Day.