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Investing.com -- U.K.-based utility company Pennon Group (LON:PNN) posted a first-half performance slightly below Morgan Stanley’s estimates but maintained its full-year guidance, with operational improvements in wastewater management and capital delivery supporting the outlook, sending the shares up over 3% on Thursday.
Analysts at Morgan Stanley described the first-half outcome as “a small miss” against its preview estimates but noted that it was broadly in line with company-compiled consensus.
Pennon reaffirmed guidance for fiscal 2026 EBITDA to rise about 60% year over year, implying £536 million, which aligns with both the bank’s estimate and company consensus.
Morgan Stanley flagged progress toward Pennon’s targeted 7% real RoRE for AMP8, noting that this remains “anchored in expected financing outperformance, with capex efficiencies offsetting an ODI penalty in the water business.”
First-half revenue reached £658.1 million, slightly below Morgan Stanley’s £660 million estimate.
Underlying EBITDA was £254.4 million, versus the bank’s £266 million expectation. Net debt stood at £4.20 billion, compared with a £4.10 billion estimate. Cash flow capex totaled £305 million, modestly higher than the £300 million forecast.
Operational metrics showed improvements in wastewater management. The company reported a halving of pollution incidents compared with the prior year and stated that wastewater ODIs are expected to be net neutral for the year.
Capital delivery was described as “on track,” supporting expectations of roughly 8% RCV growth this year and an anticipated increase of more than one-third by 2030. Morgan Stanley models this as 39% RCV growth through 2030.
Morgan Stanley also flagged that factors linked to the previous day’s U.K. budget and the stock’s correlation with bond yields may have a larger influence on the share price than earnings in the near term.
Morgan Stanley retained its “equal-weight” rating and 620p price target on Pennon, with no change to the full-year ODI outlook.
The brokerage underscored a “positive signal from wastewater” where net neutrality is expected, reinforcing the operational improvement narrative.