REG - Pennon Group PLC - Full Year Results 2025/26
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RNS Number : 7307H Pennon Group PLC 10 June 2026
10 June 2026
Pennon Group plc
Full Year Results 2025/26
Pennon Group plc ('Pennon' or the 'Group') today announces its results for the
full year ended 31 March 2026.
Keith Haslett, Group Chief Executive Officer, commented:
"I am delighted to have started my tenure as Chief Executive at Pennon, at
what is an important moment both for the Group and for the wider UK water
sector.
As Pennon enters a new era under my leadership, it does so on the back of a
return to profitability and the mobilisation of our AMP8 investment plan.
However, it is clear that there is more work to do, and improving operational
discipline and capital delivery will be important to meet the commitments we
have made and the standards we aspire to achieve in the future.
Focusing on operational excellence, driving a performance culture and
delivering through technology and innovation will be my key priorities, to
improve performance for our customers and the communities we serve."
FINANCIAL PERFORMANCE
2025/26 2024/25
Revenue £1,291.4m £1,047.8m
Underlying EBITDA^ £519.2m £335.6m
Underlying profit/(loss) before tax^ £135.1m (£35.1m)
Non-underlying items before tax(1)^ (£20.7m) (£37.6m)
Profit/(loss) before tax - statutory £114.4m (£72.7m)
Profit/(loss) after tax - statutory £92.6m (£56.8m)
Earnings/(loss) per share
Adjusted basic EPS^ 28.3p (10.3p)
Basic EPS^ 19.4p (16.1p)
Dividend per share(2) 29.29p 31.57p
Capital expenditure^ £643.6m £652.5m
Financial highlights
· Return to profitability in 2025/26, with statutory profit before tax
of £114.4 million (2024/25: loss of £72.7 million)
· 55% increase in underlying EBITDA as a result of increased revenues
and a focus on cost management
· Regulated water revenue up c.25% year-on-year, driven by the benefit
of increased regulatory revenue allowances and higher consumption
· A focused start to our AMP8 capital investment programme, with
£643.6 million of capital investment across the Group in 2025/26 - reflecting
£588.5 million of investment in our water businesses as we focus on
delivering on our AMP8 commitments
· 2025/26 Return on Regulated Equity (RoRE) of 6.7%, with
outperformance on financing and totex partly offset by ODI penalties.
· Full year dividend of £138.2 million (2024/25: dividend £133.7
million), resulting in a dividend per share of 29.29p.
Operational highlights
· Our Pollution Incident Reduction Plan continues to deliver tangible
improvements with a c.34% reduction in year-on-year on pollutions, and
normalised pollutions reducing by c.53%(3)
· Storm overflow use reduced by 17% reduction over the past year, with
spill duration reducing c.25% reflecting continued investment in our
infrastructure, despite South West England receiving around 150% of average
rainfall in November and December
· Water quality performance remains strong with sector leading
performance in SES and strong performance in South West Water. Water
resources exceed our target position at 98%, aided by investment in storage
resilience and high rainfall
· Exceptional storms and sustained rainfall coupled with a step up in
targets and penalty rates from the beginning of the new regulatory cycle
created operational pressures across water and wastewater for 2025/26,
resulting in a net operational ODI penalty of c.£42.0 million(4)
· Investment in Pennon Power has continued with two of our four sites,
Fife and Aberdeenshire, fully energised and generating revenues
· Environmental and social focus resulted in 250 hectares of peatland
restored during the year, and 2,370 people engaged in events, volunteer days
and school excursions
· c.11% increase year-on-year in customers on one or more of our
support tariffs, as we support our customers with affordable bills
Outlook
· With a renewed focus and a strengthened leadership team, Pennon is
well positioned to deliver for customers, communities, and the environment in
the years ahead
· Our investments, combined with a refreshed and enhanced operational
plan that we are developing will benefit customers and communities across our
regions, whilst creating a 34% growth in RCV over AMP8. c.£250 million(5)
submission to Ofwat for further investment in asset health, providing further
growth opportunity whilst supporting resilience
· Our financial performance will continue to improve through increased
revenues and ongoing focus on cost management; operational performance will
remain in net ODI penalties as we look to improve operational outcomes.
· We are well positioned for anticipated changes in the water sector
and stand ready to support the government's Transition Plan.
· Continued drive on efficiency and innovation in our approach as we
focus on our strategic priorities - building resilience, fixing storm
overflows, powering our net zero ambitions and delivering improved services
for customers.
· Strategic update to follow before the end of September 2026.
Notes:
(^) Measures with this symbol are defined in the Alternative Performance
Measures (APM) section of this document, underlying measures are presented
before non-underlying items
(1) Non-underlying items are those that in the Directors' view should be
separately disclosed by virtue of their size, nature or incidence to enable a
full understanding of the Group's financial performance in the year and
business trends over time. Excluding these items is considered to provide
additional useful information on the performance and the position
of the Group as well as enhancing the comparability of information between
reporting periods. The presentation of
results is consistent with internal performance monitoring.
(2) Dividend policy of CPIH. 2025/26 dividend reflects 2024/25 base increased
by CPIH of 3.4% at 31 March 2026.
(3) Using the Environmental Agency's EPA metric reflecting increased sewer
length.
(4) Net ODI penalty (in 2022/23 prices) across water and wastewater for both
in-period and end of AMP measures, reflecting adjustments for items under
review with Ofwat and third-party impacts
(5) In 2022/23 prices
Results presentation
A live presentation of these results hosted by Keith Haslett, Group Chief
Executive Officer and Laura Flowerdew, Group Chief Financial Officer, will
take place at London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS
at 9:00am (BST), today, 10 June 2026. The presentation will be immediately
followed by audience Q&A.
The event will be available to view online as a live webcast and can be
accessed via our website here:
https://www.pennon-group.co.uk/investor-information
(https://www.pennon-group.co.uk/investor-information)
For further information, please contact:
Institutional equity investors and analysts
James Found - Head of Investor Relations 07970 066 634
Institutional debt investors
Chris Tregenna - Group Treasurer 01392 443 589
Media enquiries
Mike Turner - FGS Global
Harry Worthington 020 7251 3801
Retail investors
MUFG Corporate Markets Limited 0371 664 9234
EXECUTIVE CHAIR'S LETTER
This has been a year of progress, and continued delivery at Pennon in the face
of challenging weather patterns, particularly in the second half of the year.
It has also been a year of leadership transition and a changing regulatory
landscape in the UK water sector.
During the year, the industry has been subject to the most significant review
of its regulatory framework since privatisation. The work of the Independent
Water Commission, led by Sir Jon Cunliffe, and the Government's subsequent
White Paper, 'A New Vision for Water', signal a profound shift in expectations
for the sector, with greater transparency, stronger environmental
accountability and a renewed focus on long-term infrastructure resilience, all
of which we support wholeheartedly.
These reforms come at a time when the underlying challenges facing water
systems are intensifying. Climate change is placing increasing pressure on
water resources and wastewater networks, while population growth and ageing
infrastructure require sustained investment and long-term planning. Against
this backdrop, companies must demonstrate strong operational performance
coupled with the capability to deliver the significant investment required in
the decades ahead.
We have undergone important changes to our leadership and governance whilst
also entering the first year of a longer-term plan with AMP8 running from
2025-2030 and constituting the largest investment programme in the Group's
history. Our focus as a Board has therefore required a balance between
near-term delivery and ensuring we are best placed to achieve the goals of our
five-year plan.
Reflecting these priorities, the Board has focused in the past 12 months on
ensuring Pennon is well positioned to meet rising expectations by
strengthening leadership, focusing on operational delivery plans and
maintaining the financial resilience required to deliver improvements for
customers and the environment.
Leadership and Board Changes
This year has marked a significant transition in Pennon's leadership.
Susan Davy stepped down as Chief Executive in December 2025 after 18 years of
dedicated service. Under Susan's leadership Pennon navigated a period of
considerable change, including the acquisitions of Bristol Water and SES
Water, the mobilisation of our plans for the new regulatory cycle and the
development of our record investment programme. On behalf of the Board, I
would like to thank Susan for her commitment and leadership.
Keith Haslett joined Pennon as Chief Executive on 1 April 2026. In previous
roles Keith has delivered improvements in business performance and customer
outcomes and brings deep operational experience across complex infrastructure
businesses and a strong track record of both transformation and disciplined
operational and capital delivery. The Board is working closely with Keith as
we strengthen operational performance and deliver the ambitious programme of
investment now underway with discipline and focus.
In support of our clear aims and ambitions, we also announced in February 2026
the creation of a new Chief Asset Officer role, with Ian Christie joining
Pennon in May 2026. Asset health sits at the heart of reliable service
delivery and environmental performance and strengthening our asset management
capability is a deliberate step as we enter a period of record investment. Ian
brings extensive experience in asset management, operational delivery and
system planning, and will play a key role in ensuring that asset health and
long-term resilience sit at the centre of decision-making across the Group.
Alongside this transition, we have continued to evolve our Board and
leadership structure to ensure the right capabilities are in place for the
next phase of the business. Iain Evans stepped down from the Board on 31 March
2026 after nearly seven years of service, including as Senior Independent
Director. I would like to thank Iain for his thoughtful challenge, wise
counsel and commitment to the Company over many years. Andrew Haines,
appointed as a Non-Executive Director in November 2025 and assuming the role
of Senior Independent Director from 1 April 2026, brings extensive experience
from across regulated infrastructure sectors, most recently as Chief Executive
of Network Rail.
With these changes now in place, the work of the temporary Operating Committee
that I supported as Executive Chair over the leadership transition period has
concluded. I'd like to thank Laura Flowerdew, Sarah Heald and Andrew Garard
for their work and dedication serving on the Operating Committee during this
period. I resumed my Non-Executive Chair role on 1 April 2026 when Keith
joined as Chief Executive and I will continue to ensure continuity of
governance and oversight as the Group enters the next phase of delivery.
Our Performance
The Group has returned to profitability during the year, with underlying
EBITDA^ increasing by 55% compared with the prior year to £519.2 million.
This reflects tariff increases in the first year of AMP8 as well as improving
underlying performance across the business with the early benefit of
operational efficiencies as well as the investment programmes now underway.
Group Profit Before Tax was £114.4 million compared to a prior year loss of
£72.7 million.
Our first year has seen Water Group RoRE performance of 6.7%^, reflecting
benefits from financing and totex performance, partially offset by the in-year
impact of operational performance challenges from weather extremes.
Operational and Environmental Performance
The year has once again demonstrated how rapidly the operating environment for
water infrastructure is changing. Conditions during the year ranged from one
of the driest springs on record to intense storms and exceptional rainfall
later in the year. The South West of England experienced five named storms
with around 150% of average rainfall during November and December 2025, rising
to 190% in January and February 2026, placing significant pressure on both our
water and wastewater networks and resulting in net operational penalties of
c.£42.0 million 6 (#_ftn1) . These extremes, and the impact on our
performance, highlight the increasing volatility created by climate change and
reinforce the need for sustained investment in resilient infrastructure.
Despite these challenges and the disappointing outcome, we continue to make
progress in improving environmental performance across the Group, including on
a number of measures monitored by the Environment Performance Assessment
(EPA). We know we have further to go, but our Pollution Incident Reduction
Plan is delivering measurable improvements with a c.34% reduction year-on-year
in pollutions and normalised pollutions reduced by c.53%. Disappointingly, our
provisional assessment for the 2025 EPA rating is 1* as pollution incidents,
although improved, were still above target, and our WINEP programme did not
achieve full delivery in the year, with four projects not finalised by March
2026.
Storm overflow use reflects a 17% reduction over the past year, with spill
duration reducing c.25% as a result of continued investment in our
infrastructure despite the higher than average rainfall, particularly in the
last months of the year. During the 2025 bathing season, storm overflow usage
at bathing water sites reduced by more than 25% year-on-year and 96.2% of
bathing waters in the South West were classified as Excellent or Good. South
West Water maintained 100% bathing water compliance for the fifth consecutive
year.
We recognise the significant impact sewer flooding can have on customers when
homes, businesses and properties are affected. Internal sewer flooding
incidents remained strong, although increased year-on-year to 1.20 per 10,000
connections; around one-third of this increase is due to the exceptionally
high rainfall and weather events, with underlying performance consistent with
previous years and we are focused on ensuring we deliver at these levels going
forward. This performance still delivers strong outperformance against the
target of 1.34 and we expect it to remain a strong position compared with
industry performance.
We are also strengthening our water quality and water resource resilience
through upgrades to treatment works, enhanced monitoring and increased focus
on asset health. Our targeted investment in AMP7 coupled with high rainfall
across the winter months, meant that storage levels finished the year at c.98%
- well ahead of anticipated needs in the summer months. Our water quality
performance continues to strengthen - a testament to our Quality First
approach. SES Water maintained their industry-leading water quality position,
whilst South West Water maintained a strong sector wide position and Bristol
Water saw year-on-year improvements.
Reducing leakage remains central to long-term supply resilience. The year
presented significant challenges, particularly in the South West, due to
extreme weather conditions increasing pressure on our network resilience and
caused higher burst frequency across our networks. Whilst Bristol Water met
leakage targets, both South West Water's efforts were impacted by these
weather conditions and SES fell slightly short of the reduction required to
meet the year one target. Our teams remain focused on fixing leaks, as record
activity in leak detection and repair was achieved with more fixes carried out
than ever before.
The impact that weather had on leakage also impacted on our supply
interruption performance, as a result of an increase in burst pipes. Despite
these challenges, our operational teams ensured that around 75% of bursts
resulted in no impact to customer supply.
We continue to deliver environmental gains, having restored 254 hectares of
peatland during the year, engaging 2,370 people in events, volunteer days and
school excursions. Pennon Power also plays a central role in driving gains in
clean energy, enhancing energy resilience, and reducing exposure to energy
market fluctuations, while also delivering sustainable financial returns and
contributing to overall Group profitability. Two solar projects were fully
constructed by March 2026, with Aberdeenshire at full generation and Fife
energised and in commissioning stage. Two further sites are on track for
energisation and commissioning in 2026/27.
Supporting Customers and Communities
Supporting customers and communities remains central to Pennon's purpose.
The start of the new regulatory period saw bill increases across the sector
reflecting record levels of investment in infrastructure and environmental
improvements. Understandably this has heightened sensitivity around
affordability for many households.
In response, we have continued to strengthen support for customers needing
additional help, through our £200 million support package across this
five-year period coupled with our affordability toolkit. Over the past year,
we saw a c.11% year-on-year increase in those benefitting from that toolkit
and support available, and we continue to focus on proactively providing
support to those who need it most.
We also remain focused on supporting customers with the tailored services they
need through our Priority Services Register (PSR). c.309,000 customers are now
registered for additional help during an incident.
We have also listened to our customers and the feedback they have given us on
our services and continuously feed this back into our business. Initiatives
such as WaterShare+ also continue to give customers both a voice and a stake
in how their water company is run. We know that we are a critical part of the
communities we serve and are building in their feedback, particularly on how
we can do more to communicate and engage, to our strategy going forward.
Mobilising the AMP8 Investment Programme and delivering on our four priorities
The challenging weather events in the year underline the importance of
sustained investment in resilient infrastructure as climate extremes become
more frequent and more severe. April 2025 marked the beginning of the new
regulatory period and the start of the most ambitious investment programme in
Pennon's history.
Our acceptance of the PR24 Final Determinations enabled us to accelerate
mobilisation our £3.2 billion 7 (#_ftn2) investment programme to 2030. This
programme is focused on strengthening water resource resilience, improving
environmental performance and upgrading critical infrastructure across the
regions we serve.
Early progress has been made as we continue to work hard towards our
longer-term goals in AMP8. We are securing efficiencies as projects move from
design into delivery and are increasing focus on asset health and base
expenditure to ensure that networks remain resilient, while delivering the
step-change in environmental performance expected during this regulatory
period.
Legal and regulatory proceedings
Whilst we have made good progress in the past year, enforcement undertakings
agreed with Ofwat around our wastewater business and the conclusion of the
Drinking Water Inspectorate's (DWI) prosecution against South West Water for
the 2024 Brixham water quality incident both underline that we must deliver
with greater rigour and discipline. We recognise the impact on both customers
and the environment from these incidents, and that we must do more to live up
to the expectations of the customers and communities we serve. I also
reiterate our unreserved apology for the impact that the Brixham incident had
on customers, their families, and the wider community. It is now vital that
having reflected on the learnings from these situations, we embed improvements
across our operational businesses and take from them a drive to improve our
delivery for customers and better protect the environment as we move forward.
Looking Ahead
The reforms proposed through the Cunliffe Review and the Government's White
Paper signal a new era for the UK water industry, one that places greater
emphasis on transparency, accountability and long-term investment. Delivering
on these expectations requires sustained focus, disciplined execution and
strong collaboration across government, regulators and companies.
Pennon enters this new phase with a refreshed and strengthened leadership, a
clear strategy and the largest investment programme in our history underway.
Our £3.2 billion 8 (#_ftn3) programme that runs to 2030 will deliver
improvements to water quality, environmental performance and infrastructure
resilience across the regions we serve. In addition, we have made a submission
to OFWAT for a further c.£250 million 9 (#_ftn4) of investment, under the
new 'cost change process', which will provide a further growth opportunity
whilst supporting resilience.
This has been a year of progress - but also transition and challenge and that
provides strong foundations for the future. On behalf of the Board, I would
like to thank our colleagues across the Group for their dedication and
professionalism in delivering essential services every day.
With a renewed purpose and a strengthened leadership team, Pennon is well
positioned to deliver for customers, communities, shareholders and the
environment in the years ahead.
GROUP CHIEF EXECUTIVE OFFICER'S INTRODUCTION
I was delighted to join Pennon as Chief Executive in April 2026, at an
important moment both for the Group and for the wider UK water sector.
During my short time with Pennon, I have prioritised meeting colleagues across
the Group, visiting operational and capital delivery sites, and completing
deep dive sessions on our performance. I have learned a great deal and been
struck by the professionalism and commitment of our teams, who deliver
essential services for customers and communities every day.
As Pennon enters a new era under my leadership and transitions into the AMP8
regulatory period, we do so from a solid base. The business has returned to
profitability and has mobilised the largest investment programme in its
history. This programme will deliver significant improvements in water
quality, environmental performance and heightened resilience of the systems on
which our customers depend.
My focus as Chief Executive is clear: to ensure Pennon consistently meets high
standards of operational performance while delivering the ambitious programme
of investment for improved outcomes we have set out with discipline and
efficiency. Whilst we demonstrate industry-leading performance in some areas,
we clearly have work to do on some of our customer-led measures.
Improving environmental performance will be central to that effort, both
through our leading catchment management and biodiversity work and our
operational delivery. We are already seeing tangible progress through the
implementation of our Pollution Incident Reduction Plan and through sustained
investment in our wastewater infrastructure. Building on that progress with
further focus on operational excellence and introducing industry best practice
will be a key priority for the Group and me in the years ahead. We will earn
the trust of our customers, the communities we serve and the shareholders who
invest in the business, by showing our commitment to innovate, transform and
deliver on our promises.
I was also deeply saddened by the impact our business had on customers in the
Brixham area during the 2024 cryptosporidium incident. Whilst I have only
been CEO for a few weeks, it is very clear that we must learn lessons from
this incident and work hard to rebuild trust with the customer and communities
we serve, both in Brixham and beyond. My focus will be on ensuring we drive
improvements in the way we operate, how we communicate and support our
customers, and delivering a step change in our performance for our customers
and the environment.
I am clear that asset health and long-term system resilience will also be
fundamental to delivering reliable services for customers and improving the
environment. The creation of the Chief Asset Officer role, with Ian Christie
joining the Group in May 2026, reflects the importance being placed on
strengthening asset management capability as we deliver our investment plans,
focus on improving operational performance and prepare for future business
plans.
The UK water sector is entering a period of significant change as expectations
of environmental performance, transparency and long-term resilience continue
to rise and the regulatory landscape is reshaped. Pennon is well positioned to
respond and deliver for our stakeholders in this new era, with a clear
strategy, strong regional businesses and a committed workforce.
I am excited and privileged to lead Pennon and look forward to working with
colleagues across the Group to transform our operational practices into
industry leading performance and outcomes across all areas. This will allow us
to build trust and deliver against the expectations of our customers,
communities and stakeholders.
GROUP CHIEF FINANCIAL OFFICER'S REVIEW
The Group has delivered a return to profitability in 2025/26. This is in line
with expectations and reflects the step up in revenue from the first year of
AMP8 coupled with a firm focus on operational costs, despite inflationary and
operational pressures.
Underlying EBITDA^ has increased by 55% year-on-year to £519.2 million
(2024/25: £335.6 million) driven by higher revenue and a focus on cost
control. Whilst the first year of the five-year cycle results in a step up in
the underlying cost base, due to inflationary pressures and regulatory
charges, our integration and efficiency programmes have provided benefit and
the restructuring of the Group, aligned with our strategic priorities, has
allowed increased focus on cost control and driving further efficiencies
throughout the business.
Underlying operating profit more than doubled year-on-year to £325.5 million
(2024/25: £148.5 million), with EBITDA benefits moderated by modestly
increased depreciation charges reflecting the Group's expanding asset base
from the ongoing capital investment programme.
Non-underlying costs of £20.7 million were incurred (2024/25: £37.6 million)
as a result of ongoing restructuring charges, investment in new technology and
costs associated with environmental and legal provisions.
Interest costs also increased, reflecting higher borrowing to support the
regulated capital programme and investment in Pennon Power. This was partially
offset by higher year-on-year interest capitalisation, again stemming from the
ongoing capital programme.
As a result, underlying profit before tax^ was £135.1 million (2024/25: loss
of £35.1 million), whilst statutory profit before tax was £114.4 million
(2024/25: loss of £72.7 million). Statutory profit after tax was £92.6
million (2024/25: loss of £56.8 million).
Our £3.2 billion 10 (#_ftn5) investment programme over the five-year AMP8
period is a core focus across the business, to deliver improvements for
customers and to ensure we improve the resilience and performance of our
assets. We remain focused on delivery, with clear priorities and tight
control. This means delivering outcomes effectively, executing the capital
programme efficiently and building on the momentum we have created this year.
We remain on track to deliver on our Performance Commitment Deliverables
(PCDs) over the five-year period, with a net neutral position at the end of
year one in terms of delivery incentives.
In the first year of AMP8, we have continued to focus on delivering on our
four strategic priorities through our business units, and to focus on
efficiency opportunities across our integrated structures and operations. As
we continue to challenge ourselves to focus our expenditure to deliver
improved outcomes, we are also looking at how we learn from our different
legacy businesses to deliver as efficiently and effectively as we can.
We invested significant levels of capital to deliver network resilience and
enhancements and benefits for the environment and our customers. Our
Group-wide capital investment was £643.6 million^ (2024/25: £652.5 million),
comprising £588.5 million of investment in our water businesses as we focus
on delivering on our AMP8 commitments.
Our expenditure was slightly lower than anticipated as a result of reprofiling
of spend, to ensure robust modelling and clear design across our major
projects, prior to commencing on-site delivery. Across the water business we
have delivered key investments in storm overflow reductions, wastewater
treatment and infrastructure, clean water treatment works, network resilience,
leakage and metering. Outside of the water business we continue to invest in
renewable energy sites, with Pennon Power capital expenditure of £54.1
million in 2025/26.
Our current rate of investment for the Group aligns with that required to
deliver our five-year programme of £3.2 billion 11 (#_ftn6) and which will
deliver 34% growth in our regulatory asset base to 2030. To support this
growth, we are focused on ensuring we have a strong and resilient balance
sheet and we end the first year of the AMP8 period with a Water Group gearing
of 61.8%, well within our gearing policy of 55-65% and within our anticipated
range of 60-65% to 2030 for our Water Group. The continued strong Water Group
performance reflects the benefit of significantly improved operating cash
flows in 2025/26, supporting investment in our capital programme.
Debt funding is also critical for our growth; both South West Water and SES
Water continue to maintain investment-grade credit ratings, enabling access to
competitive financing. During the year, the Group has raised £640 million in
additional funds to support the AMP8 capital programme and expects to continue
to raise this quantum of debt each year through the AMP8 period.
We continue to outperform the regulatory cost of equity. Our RoRE^ in 2025/26
reflects a 6.7% real return to shareholders, outperforming the equity return
allowed by Ofwat of 5.4% as a result of strong financing and totex performance
in year, and offset by challenging ODI performance, as operational performance
was impacted by adverse weather conditions and a step up in targets in the
first year of the five-year period.
Group performance - summary
Revenue Underlying EBITDA
£m £m £m £m
2025/26 2024/25 2025/26 2024/25
South West Water 937.8 737.7 481.7 308.6
SES Water 84.2 82.8 29.0 29.6
Total Water Group 1,022.0 820.5 510.7 338.2
Retail 381.7 320.3 9.9 7.5
Other 25.6 12.8 (1.4) (10.1)
Intra-group (137.9) (105.8) - -
Group 1,291.4 1,047.8 519.2 335.6
Group revenue for 2025/26 was £1,291.4 million (2024/25: £1,047.8 million),
reflecting strong growth across the business.
Water revenue increased by £201.5 million (24.6%), primarily driven by the
benefit of increased regulatory allowances and higher consumption. This uplift
reflects revised tariff structures and enhanced service obligations under the
regulatory framework, supporting our long-term investment and service delivery
plans.
Non-household retail revenue increased by £61.4 million to £381.7 million,
with new contracts outside South West Water regions contributing c.£10.3
million, in addition to tariff increases. This reflects continued progress in
expanding our presence and growing the customer base.
Overall, the Group's underlying EBITDA^ has increased 55% from £335.6 million
to £519.2 million, driven by higher water revenue and a continued focus on
operational efficiency. It also reflects the strength of the business model
and the benefits of our investment in transformation, delivered alongside
managing inflationary and operational cost pressures.
Cost pressures in the period reflected inflationary costs, coupled with a step
up in costs resulting from the new regulatory plan. The impact of both high
summer demand and exceptional winter storms on our operations also led to
higher in-year costs, as we looked to mitigate the impact on customers and the
environment of these conditions, and support and compensate customers - with
increased payments - where our service fell short of expectations. These cost
impacts were partially offset by a focus on our efficiency initiatives and
integration across our regions and businesses, with greater focus on cost
control across our four business units.
Our ongoing commitment to affordability and support schemes for those in need
will be critical going forward, both to support our customers and to ensure we
maintain a strong collections profile. Despite the step up in revenues, cash
collection remained strong across the year. Expected credit loss charges were
£19.5 million (1.5% of revenue), slightly higher than the prior year (0.9%)
but remaining strong within the sector. Our teams continued to focus on both
managing older debt profiles and ensuring effective collection of more recent
billings, despite the increase in tariffs.
Our non-household retail businesses saw a 32.0% increase in EBITDA, with
increase in tariffs added to by a strong focus on gross margin improvement and
cost control.
As a result, underlying profit before tax^ was £135.1 million (2024/25: loss
of £35.1 million) and statutory profit before tax was £114.4 million
(2024/25: loss of £72.7 million) after non-underlying costs of £20.7 million
(2024/25: £37.6 million).
Segmental performance - Water businesses
South West Water
South West Water's revenue for 2025/26 was £937.8 million (2024/25: £737.7
million) driven by regulated tariff increases. Underlying operating costs^ of
£456.1 million (2024/25: £429.1 million) have increased year-on-year by
£27.0 million. This 6.3% increase reflects inflationary cost pressures, plus
the impact of increased regulatory charges, higher bad debt charges linked to
our step up in revenue, increased operational costs resultant from adverse
weather and operational incidents, including £5.7 million in customer
compensation.
Our efficiency programme has delivered benefits, helping to mitigate these
pressures whilst a reduction in commodity costs through our hedging strategy
has resulted in lower year-on-year power prices.
South West Water's underlying EBITDA^ increased by 56.1% to £481.7 million.
Underlying operating profit has more than doubled, reflecting the strong
EBITDA performance, offset by an increase in depreciation charges of £3.7
million compared to last year and in line with our ongoing capital investment
programme.
Net finance costs of £170.1 million (2024/25: £170.6 million), reflect an
effective interest rate of 5.7% 12 (#_ftn7) (2024/25: 5.4%). The year-on-year
decrease of £0.5 million was a result of higher capitalised interest
partially offset by higher debt to fund the ongoing capital programme.
South West Water's statutory profit before tax was £124.2 million (2024/25:
loss of £62.7 million) after non-underlying costs of £15.4 million (2024/25:
£32.4 million).
South West Water's capital expenditure was £563.3 million (2024/25: £588.7
million), reflecting early benefits being delivered to customers and
communities across our regions. We have already invested heavily this year in
storm overflow reductions, our wastewater treatment and infrastructure, new
water treatment works, leakage detection and repair, smart metering, and
replacing lead pipes.
SES Water
SES Water's revenue for 2025/26 was £84.2 million (2024/25: £82.8 million),
EBITDA performance was stable as inflationary cost increases were partially
offset by increased revenue and savings from an operational costs efficiency
programme.
SES Water's capital investment of £25.2 million has focused on network
resilience, leakage detection and repair, lead pipe replacement, and metering.
Segmental performance - Non-household retail
The Group holds interests in two non-household water retailers, Pennon Water
Services (80% ownership) and SES Business Water (100% ownership) which are
reported as the non-household retail segment. Revenue has increased by 19.2%
year-on-year, as a result of tariff increases and new contract wins.
Underlying EBITDA increased by 32.0% year-on-year as a result of revenue
increases, coupled with a strong focus on margin improvements and cost control
within the businesses. The Group also owns 30% of Water2Business, which is
reported under the equity method.
Pennon Water Services (PWS) 13 (#_ftn8)
Pennon Water Services has delivered a strong financial performance for the
year through its continued focus on key strategic initiatives: growing through
long-term contracts in targeted business sectors, good customer retention and
strong control of operating costs despite additional cost pressures.
Overall revenue increased by 21.2% to £305.8 million (2024/25: £252.4
million) through new contract wins and tariff increases across wholesale water
charges.
The business continued to maintain its focus on targeting high-quality,
sustainable customers who will benefit from the value-added services that form
part of PWS' differentiated service proposition. New business wins contributed
£10.3 million additional revenue compared to the prior year.
Operating costs have increased during the year as a result of the pass through
of wholesale water costs; other operating costs remain under tight control
despite inflationary pressures, leading to stable underlying EBITDA
year-on-year.
During the year, Pennon Water Services commenced investment in the
implementation of a new billing system to provide improved automation,
efficient delivery and better customer self-service. This expenditure will
drive efficiencies, support ongoing efficient margins and enable revenue
growth. The implementation costs are separately reported as non-underlying
costs, given the non-recurring element of this programme of work over time.
PWS's statutory profit before tax was £5.3 million (2024/25: £5.4 million)
after non-underlying costs of £1.6 million (2024/25: nil). The underlying
profit before tax in 2025/26 was £6.9 million (2024/25: £5.4 million), an
increase of 27.8% compared to prior year.
SES Business Water
SES Business Water's revenue increased by 11.8% from £67.9 million in 2024/25
to £75.9 million in 2025/26 driven primarily by wholesale tariff increases,
with EBITDA of £0.9 million (2024/25: loss of £0.1 million).
The business continued to focus on stabilising operations, prioritising
portfolio quality and strengthening cash recovery.
Segmental performance - Other
The Other segment comprises the results of Pennon Group plc company and other
Group businesses, including Pennon Power and the ancillary businesses of SES.
The Other segment contributed underlying EBITDA of a loss of £1.4 million
(2024/25 loss of £10.1 million) and an underlying loss before tax of £2.6
million in the year (2024/25: loss of £3.8 million) with non-underlying costs
of £3.7 million (2024/25: £1.5 million) associated with the restructuring
and the closure of an ancillary business acquired as part of the SES Group.
Pennon Power saw an underlying EBITDA increase in 2025/26 of £1.8 million
(increase on £0.3 million loss reported in 2024/25). This has been driven by
revenue and other income of £2.1 million (2024/25: nil).
Share of post-tax profit from associated companies
The Group has a 30% interest in Water2Business Limited (W2B), a water retailer
joint venture with Wessex Water. This investment is accounted for under the
equity method and as the financial performance improves as it has gained
scale, we have recognised £1.0 million of profit after tax in our 2025/26
results (2024/25: £0.8 million), an increase of 25.0%.
Group finance costs (net)
The £7.0 million increase in finance costs (net) was primarily driven by new
and renewed debt facilities (£34.3 million) as we continue to invest record
levels of capital in our water businesses, offset by lower interest rates
(£8.9 million), increased interest receivable (£6.3 million), higher levels
of capitalised interest (£12.8 million), given ongoing investment and other
movements amounting to £0.7 million.
The Group continues to efficiently secure funding through its Sustainable
Financing Framework and to ensure interest rate risk is mitigated in line with
the Group Treasury Policy, this is achieved both through issuing fixed rate
debt issuances and effective interest rate hedging, whilst a further component
of the debt portfolio is index-linked.
Non-underlying items
Non-underlying items^ for 2025/26 were a net charge before tax of £20.7
million (2024/25: net charge of £37.6 million). Non-underlying items are
those that in the Directors' view should be separately identified by virtue of
their size, nature or incidence and where they believe excluding these items
is considered to provide additional useful information on the performance and
the position of the Group as well as enhancing the comparability of
information between reporting periods.
The non-underlying^ charge includes:
· £9.9 million of technological enhancement costs in connection with
the implementation of new customer technology platforms in both South West
Water and Pennon Water Services
· £6.7 million includes costs of settlement of both the DWI's
prosecution in respect of the May 2024 Brixham water quality incident, and the
enforcement undertakings agreed with Ofwat in August 2025 in respect of the
wastewater investigations, together with associated legal fees
· £4.1 million of costs in connection with ongoing restructuring and
reshaping actions
The non-underlying^ charges in the year give rise to a net tax credit of £4.1
million in relation to the above items.
Tax
The overall 2025/26 tax charge for the Group was £21.8 million (2024/25:
credit of £15.9 million). On an underlying basis, the tax charge for 2025/26
for the Group of £25.9 million (2024/25: credit of £7.0 million) consisted
of:
· Deferred tax charge of £25.3 million (2024/25: credit of £7.8
million). This charge primarily arises in relation to capital allowances in
excess of depreciation charged across the Group, largely due to full
expensing. This is partially offset by a current year deferred tax credit in
relation to tax losses carried forward for utilisation in later periods
· Current tax charge of £0.6 million (2024/25: charge of £0.8
million) predominantly relating to prior year items.
There was also a non-underlying current tax credit in the year of £0.8
million (2024/25: credit of £0.5 million) and a deferred tax credit in the
year of £3.3 million (2024/25: £8.4 million) relating to the non-underlying
items.
The Group continues to generate tax losses, all of which are carried forward
for future relief. These tax losses arise as a result of the enhanced capital
allowances available because of full expensing and first year allowances,
pension payments made during recent years where tax relief is now due, and
capitalised interest, which for tax purposes is deductible in the year
incurred.
Given the Group's continued capital investment programme and full expensing
deductions together with 50% first year allowances on long life assets and
integral features, the Group does not expect to generate taxable profits or
make any corporation tax payments for the foreseeable future.
The UK Finance (No.2) Act 2023 introduced the Pillar Two global minimum
effective tax rate of 15%. The legislation implements a domestic top-up tax
and a multinational top-up tax in line with OECD BEPS Pillar Two principles.
The UK is the only jurisdiction in which the Group operates therefore an
assessment of any potential Pillar Two tax exposure has been performed
focusing solely on the application of the UK domestic top-up tax rules. The
assessment performed by the Group, based on country-by-country reporting
principles and financial statements has determined that no top-up tax is
expected to arise.
Earnings per share (basic and diluted)
The Group has recorded a statutory earnings per share of 19.4 pence per share
for the year ended 31 March 2026 (2024/25: loss of 16.1 pence per share). This
includes a net non-underlying^ charge before tax of £20.7 million (2024/25:
£37.6 million) and a net non-underlying tax credit of £4.1 million (2024/25:
charge of £8.9 million).
Our adjusted earnings per share excludes the impact of deferred tax charges
and non-underlying^ items. For the Group, we have generated basic adjusted
earnings per share^ for 2025/26 of 28.3 pence (2024/25: loss of 10.3 pence).
Movement in net debt
The Group's cash flow from operations for 2025/26 was £529.7 million
(2024/25: £233.6 million). Our improved operating cash flows reflect the
higher levels of underlying profitability, benefitting from higher tariffs and
operational efficiencies, added to by improved working capital management,
partially offset by cost pressures from inflation and delivering on our
operational performance commitments.
Net interest payments were £154.6 million (2024/25: £132.0 million) with the
higher payment in 2025/26 driven by increased debt consequent on our ongoing
record levels of capital investment.
Capital investment has resulted in slightly lower cash outflows of £33.9
million to £632.8 million (2024/25: £666.7 million). Capital investment
included £54.1 million (2024/25: £40.7 million) for the investment in Pennon
Power.
Other significant movements in net debt in 2025/26 include payment of our
interim and final dividends for 2024/25 totalling £133.7 million (interim and
final dividends for 2023/24: £126.9 million). In addition, there was non-cash
indexation on our loan instruments totalling £43.3 million (2024/25: £33.4
million).
Pennon Group - summarised net debt flow (£m) 2025/26 flows
Net debt excluding other non-cash indebtedness - 1 April (3,936.2) 14
Opening balance 1 April (4,078.2)
Cash generated from operations 529.7
Corporation tax received 1.0
Net interest paid (154.6)
Capital investment^ (632.8)
Proceeds from dividend forfeiture 1.7
Share Issue transaction costs (5.6)
Ordinary dividends paid (133.7)
Non-cash index-linked accretion (43.3)
Other movements 15 (#_ftn10) 6.9
Closing balance 31 March (4,508.9)
Net debt excluding other non-cash indebtedness - 31 March (4,379.6)(14)
Net debt and liquidity
The Group's net debt at 31 March 2026 was £4,508.9 million (31 March 2025:
£4,078.2 million). This includes fair value adjustments of £96.5 million (31
March 2025: £106.8 million) which are released over the life of the related
debt instruments and other non-cash accounting adjustments of £32.8 million
(31 March 2025: £35.2 million). The Group's net debt position excluding these
adjustments is £4,379.6 million (31 March 2025: £3,936.2 million).
As at 31 March 2026, the Group had £998.3 million of liquidity through a
combination of cash and committed facilities (31 March 2025: £1,036.1
million). This consists of cash and cash deposits of £388.3 million (31 March
2025: £476.1 million), including £55.6 million (31 March 2025: £58.2
million) of restricted funds representing deposits with lessors against future
lease obligations, and £610.0 million (31 March 2025: £560.0 million) of
undrawn committed facilities.
Group debt
Group debt at 31 March 2026 (£m) Gross debt Net debt
Pennon Group Plc 365.3 364.9
Water Group 4,388.6 4,019.3
- South West Water 4,087.5 3,787.3
- SES Water 301.1 232.0
Other Group companies 233.5 214.9
Intercompany borrowing eliminations (219.5) (219.5)
Total adjusted Group (excluding FV and non-cash indebtedness) 4,767.9 4,379.6
Non-cash indebtedness 129.3 129.3
Total Group 4,897.2 4,508.9
During the year, the Group has secured c.£640 million of new debt, through
its diverse portfolio, consisting of:
· £150 million in US private placements with an average maturity of
four years
· £300 million through our inaugural public bond issuances under our
EMTN 16 (#_ftn11) programme
· £190 million of new term loans and leasing with an average maturity
of seven years
In addition to this, a further private placement of £49 million has been
completed post year end.
The Group has secured an additional £320 million in new and renewed revolving
credit facilities since March 2025.
Resulting from the changes above and drawing of new debt during the year,
South West Water(15) gross debt at 31 March 2026 was £4,087.5 million (31
March 2025: £3,815.9 million). The debt has a maturity of up to 31 years with
a weighted average maturity of 12 years.
Water Group net debt at 31 March 2026 is a mix of fixed (£2,763.8 million,
68.7%), floating (£211.4 million, 5.3%) and index-linked borrowings
(£1,044.1 million, 26.0%), which reflects our diverse debt portfolio. Where
appropriate, derivatives are used to fix the rate on floating rate debt.
At 31 March 2026, the Water Group's ( )net debt to RCV ratio stood at 61.8%
(31 March 2025: 61.8%). This reflects a stable position as increasing RCV
offsets in year debt funding of our investment programme.
At 31 March 2026 South West Water's 17 (#_ftn12) net debt to RCV ratio 18
(#_ftn13) stood at 61.9% (31 March 2025: 62.0%). This remains broadly neutral
year-on-year as a result of increasing RCV offsetting in year debt funding of
our investment programme.
South West Water's(17) cost of finance, with an effective interest rate in
2025/26 of 5.7% (2024/25: 5.4%), reflects higher interest rates and the impact
of full year interest charges on new issuances in 2024/25.
SES Water's net debt portfolio predominantly reflects index linked and fixed
rate debt, based on the legacy portfolio acquired at the date of acquisition.
Subsequent to the equity injections in 2024/25, SES Water's gearing levels
relative to RCV remain stable at 60.1%, with recognition from Ofwat of their
improving financial resilience as a result of Pennon's ownership.
The effective interest rate on the SES debt book is 9.0%. This is due to the
high percentage of indexed-linked debt seen in this water only business. Over
a period of time inflation levels will rise and fall, and will directly impact
the rate reported. In addition, as the debt book matures, we anticipate it
will benefit from being part of the wider portfolio of debt and hedging
strategies employed by the wider Group.
Investment grade ratings
The Group, through South West Water, maintains two investment grade credit
ratings with Moody's and Fitch, which was a new licence requirement from April
2025. The Moody's rating remains on negative watch and the Group remains
committed to supporting an investment grade credit rating.
SES Water maintains strong credit ratings with Moody's and S&P, Moody's
upgraded SES in November 2024, in recognition of the benefit gained from being
part of the wider Pennon Group and the subsequent support provided to its
balance sheet in the form of new equity.
Ring fenced borrowing
South West Water's funding is treated for regulatory purposes as ring-fenced.
This means that funds raised by South West Water are not available for other
areas of the Group.
Following its acquisition, SES Water continues to maintain its current Group
structure whilst it operates under its own regulatory licence.
Funding for other parts of the Group, including PWS and Pennon Power, is
predominantly provided by Pennon Group Plc. Pennon will continue to use funds
to support the Group's ongoing operations as appropriate.
Creating economic value in the regulated business
Regulatory Capital Value ^
Regulatory Capital Value (RCV) 31 March 2026
SWB 5,362.6
BRL 756.4
SBB 6,119.0
SESW 386.2
Water Group 6,505.2
The total water business RCV^ of £6,505.2 million reflects the inclusion of
regulatory reconciling items from the PR24 Final Determination and inflation
of 3.5% as at March 2026.
Return on Regulated Equity (RoRE)^
During the year, the water business delivered a RoRE of 6.7% (2024/25: 5.1%)
comprised of financing and totex outperformance, offset by Operational
Delivery Incentive (ODI) underperformance.
Cumulative benefits from the structure of the Group's debt portfolio continue
to support financing performance, providing higher RoRE returns given higher
inflation.
Totex performance reflects lower expenditure in year one of the period than in
the allowances, resulting from both efficiencies gained in delivery of the
capital programme and timing differences over the five-year period.
ODI performance across the South West Water (SBB) in 2025/26 has been
materially impacted by the adverse weather and step up in both performance
outcomes and penalty rates applied at the start of the new regulatory cycle.
RoRE, as calculated below, includes the impact of both ODI (c.£42.0
million 19 (#_ftn14) penalties across both the water and wastewater) and
customer measures of experience (estimated at £11.5 million, subject to final
outcomes from Ofwat). Plans are in place to mitigate and minimise these going
forward through operational interventions and focused investment.
Regulated Return on Equity (RoRE) Water SWB BRL SESW
Group
Base return 5.4% 5.4% 5.4% 5.2%
Financing 1.4% 1.7% 1.3% (2.4%)
Totex 2.0% 2.1% 1.1% 3.5%
ODI (2.1%) (2.3%) (2.0%) (1.0%)
Cumulative RoRE 2025/26 6.7% 6.9% 5.8% 5.3%
Cumulative RoRE 2024/25 5.1% 6.0% 5.1% 4.2%
Contingencies
Ofwat and the Environment Agency (EA) announced an industry-wide investigation
into sewage treatment works on 18 November 2021. On 10 July 2025, Ofwat
announced its findings for South West Water and its decision to accept South
West Water's enforcement package, in lieu of a financial penalty. The agreed
undertakings consist of investing £20 million between 2025-2030 to reduce
spills from specific outflows, establishing a £2 million local fund to tackle
sewer misconnections and providing £2 million of funding through a Nature
Recovery Fund to support environmental groups. The costs in relation to the
£20 million investment will be accounted for as capital when incurred.
On 2 February 2024, summons was received by South West Water from the EA in
relation to water discharge activity at seven locations with a total of 30
charges. The EA have since withdrawn six of these charges relating to one
site. At a hearing on 14 November 2024, South West Water pleaded guilty to
five of the charges. Sentencing was held on 12 and 13 March 2026, although the
value of any fine will not be known until the judgement is handed down on 30
July 2026.
On 23 May 2023, Ofwat announced an investigation into South West Water's
2021/22 operational performance data relating to leakage and per capita
consumption. This operational performance data was reported in South West
Water's Annual Performance Report 2021/22. This report is subject to assurance
processes which include independent checks and balances carried out by an
external technical auditor. The Group continues to work openly and
constructively with Ofwat to comply with the formal notice issued to South
West Water as part of this investigation.
The Group has undertaken its own internal investigation into the data and
third-party experts have concluded the calculations are within a tolerance as
reported, as a result there were no detrimental impacts to customers through
ODIs. The Group recognises opportunities to enhance data quality to improve
the estimation process and these have been shared with Ofwat. Until such time
that an initial response is received, the potential outcome of these
investigations continues to be unknown. Ofwat has a range of options that it
could apply, from closing the investigation with no further action, agreeing
to formal S.19 undertakings, through to fining the Group up to 10% of its
revenue in relation to the regulated drinking water business. Given the wide
range of possible outcomes therefore the potential outcome of this
investigation continues to be unknown, and it is not possible to estimate any
obligations arising from the investigation with any certainty.
Following the Brixham cryptosporidium outbreak in May 2024, legal proceedings
were brought by the Drinking Water Inspectorate (DWI). South West Water
pleaded guilty to the charge of supplying water unfit for human consumption on
4 March 2026, with sentence received on 2 June 2026. The Court levied a fine
of £1.9 million, reflecting the serious impact this incident had on customers
in the area, whilst also recognising the extensive customer support and
remedial actions taken by South West Water. An amount of £1.8 million has
been included within the non-underlying costs for the matters set out above.
Dividends
The Group continues to focus on delivering on its commitments to customers,
shareholders and stakeholders. Around 50% of Pennon's shareholders are
UK-based investors including individuals, pension funds, and charities. Over a
third of the Group's c.3,500 employees (excluding SES Water) are shareholders
and following the second issuance of our unique WaterShare+ initiative, around
80,000 customers are now also shareholders.
In January 2025, the Board announced our dividend policy to 2030 of growing
the base dividend in line with CPIH. As a result, it has recommended a final
dividend of 20.03 pence per share for the year ended 31 March 2026. Together
with the interim dividend of 9.26 pence per share paid on 1 April 2026 this
gives a total dividend per share for the year of 29.29 pence. Pennon offers
shareholders the opportunity to invest their dividend in a Dividend
Reinvestment Plan (DRIP).
The proposed total dividend for 2025/26 has increased by 3.4% year-on-year to
£138.2 million (2024/25: £133.7 million). This reflects an increase in line
with CPIH on the 2024/25 dividend. Current year dividends are covered 3.8
times by underlying EBITDA^ (2024/25: 2.5 times). Pennon Group plc has
sufficient retained earnings and a sustainable balance sheet to support its
stated dividend policy. The strong fundamentals of its principal operating
subsidiary, South West Water Limited, underpin this policy through strong
target RoRE^ and growing RCV^. Dividends are charged against retained earnings
in the year in which they are paid.
Cost change process
In the PR24 Final Determination, Ofwat highlighted a number of areas of
potential cost uncertainty where they would consider 're-opening' the Final
Determination to adjust for the impact of these issues on water company cost
allowances. As a result, in the 2025/26 financial year, Ofwat introduced a
'cost change process' that allows companies to provide submissions to Ofwat
for additional funding in the current regulatory five-year period for specific
areas of investment. These areas include asset health and economic growth
considerations, which will be of relevance in the regions in which the Group
operates.
The first submission was completed for both South West Water and SES Water in
May 2026, with detailed cases and supporting evidence with Ofwat for review.
Whilst the Group's submissions amounted to c.£250 million 20 (#_ftn15) of
additional allowances, in-AMP funding was requested as part of that
submission. The submissions will be subject to review and scrutiny from Ofwat,
and given the nature of certain claims, which are specific to the Group's
coastal region, may require ongoing engagement and discussion before
agreement. We continue to engage positively with Ofwat in this regard and
ensure any additional expenditure is fully supported by our customer research
and engagement through our WaterShare+ customer panels.
Financial Outlook 21 (#_ftn16)
Looking to 2026/27, we anticipate continued strengthening in the Group's
profitability. This results from Water Business revenue continuing to increase
in line with the Final Determination and inflation, leading to an expected
increase of Water Group revenues of c.£50-£70 million. Non-household retail
revenues will increase by c.10% - 15% driven by sector wide tariff increases
and increases in Pennon Power as energy generation increases.
We expect total operating costs across the regulated Water Group to increase
broadly in line with inflation, with efficiencies offsetting cost pressures
from the growth in the asset base. The non-regulated costs are expected to
grow at a faster rate and in line with the wider water tariff increases as
this drives up the wholesale costs they face.
The increase in revenue along with the cost increases set out, are expected to
result in underlying EBITDA^ increasing in 2026/27 by 5% - 10% compared with
2025/26. It is anticipated the Group will remain in net ODI penalty next year.
Depreciation and amortisation charges are expected to increase by c.5% - 10%
as a result of the ongoing capital investment programme.
Overall capital expenditure is expected to be in the range of £620-£700
million driven by investment in the water business as projects progress
through the delivery cycle, which will deliver benefits to customers and
communities across our regions. As the build out of Pennon Power nears
completion the investment here will decrease.
Net debt requirements to support our record AMP8 investment programme, both
from the full year effect of current year financing and into 2026/27 are
expected to increase net finance costs at a Water Group and therefore Group
level, leading to an increase in net interest costs of 10-15%.
TECHNICAL GUIDANCE FOR FY 2026/27
FY 2025/26 Change
Revenue • Water Group revenue c.£50-£70 million higher year-on-year due to £1,291m ▲
allowed revenues
• c.10-15% revenue growth in non-regulated businesses due to tariff
increases and new contract wins.
Operating costs* • 2-5% higher year-on-year within the Water Group due to inflationary £772m ▲
increases
• 15-20% higher year-on-year within the non-regulated businesses as a
results of wholesale cost pass through
EBITDA* • 5-10% higher year-on-year, driven by higher revenues. £519m ▲
Depreciation* • 5-10% increase year-on-year as a result of the ongoing investment £(194)m ▲
programme.
Net interest • Net financing costs at Group level increasing by 10-15% with higher £(191)m ▲
levels of net debt.
Capital expenditure • Expected to be in the range of £620 million - £700 million as £644m ▲
projects progress through the delivery cycle.
• Lower capex in Pennon Power year-on-year.
*Underlying basis
PRINCIPAL RISKS AND UNCERTAINTIES
There continues to be a challenging context for the Group, with continued
public and media focus on the water industry, providing a critical environment
for UK Government to progress the recommendations in the Cunliffe Review
through the 'transition plan'. Negative public sentiment around the sector
remains heightened, with continuing media coverage. In turn, increased
regulatory scrutiny on compliance and performance coupled with rising
expectations of resilience, challenge existing operations and have the
potential to create unfunded obligations for investment.
Whilst 2025 saw a less volatile macroeconomic position, with falling interest
rates and inflation, the current situation, including developments in the
Middle East, are likely to create at least short-term pressures and
uncertainty. Whilst it is unclear for how long these matters will continue,
the impact on supply chains, commodity and chemical costs, as well as wider
interest and inflation rates is likely to create uncertainty over the near
term, increasing risk and pressure on financial performance. The widespread
need for investment across the UK's infrastructure also increasingly puts
pressure on delivery partners in terms of both availability and efficiency and
will need careful management. Availability of funding and maintaining credit
ratings will also be key, in the face of the above challenges and pressures,
as well as on continued concern in the wider market.
The Board has carried out a detailed review of the Group's principal risks in
the context of the Group's strategic objectives and priorities as well as the
external environment within which it operates. This has included:
· Confirming that the Group's risk appetite statements remain
appropriate.
· Receiving and reviewing updates on the Group's principal risks,
including movements in the risk exposure.
· Undertaking horizon scanning of emerging risks and trends.
· Performing deep dive reviews into key risk areas.
· Through the Audit Committee, confirming the effectiveness of the risk
management and internal control framework.
This has resulted in the following material changes to the Group's principal
risks compared with those previously reported:
· The risk of Failure to pay all pension obligations as they fall due
and increased costs to the Group should the defined benefit pension scheme
deficit increase has been assessed as not materially impacting the Group's
strategic priorities due to mitigating actions implemented, and is no longer
considered to be a principal risk.
· The Changes in government policy and changes to regulatory frameworks
principal risks have been combined into a single risk, policy and regulatory
change, reflecting the extent to which policy and regulation in the UK water
sector are interconnected.
Financial Timetable
10 June 2026 Full Year Results 2025/26
16 June 2026 Annual Report and Accounts Published
8 July 2026 Annual General Meeting 2026
8 July 2026 Pennon Q1 Trading Update
23 July 2026* Ordinary shares quoted ex-dividend
24 July 2026* Record date for final dividend
10 August 2026 Final date for receipt of DRIP applications
4 September 2026* Final dividend payment date
1 December 2026 Half Year Results 2026/27
* Subject to obtaining shareholder approval at the 2026 Annual General Meeting
CAUTIONARY STATEMENT IN RESPECT OF FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements relating to the Pennon Group's
operations, performance and financial position based on current expectations
of, and assumptions and forecasts made by, Pennon Group management which may
constitute "forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
identified in this Report by words such as "anticipate", "aim", "believe",
"continue", "could", "due", "estimate", "expect", "forecast", "goal",
"intend", "may", "outlook", "plan", "probably", "project", "remain", "seek",
"should", "target", "will", "would" and related and similar expressions, as
well as statements in the future tense. All statements other than of
historical fact may be forward-looking statements and represent the Group's
belief regarding future events, many of which, by their nature, are inherently
uncertain and outside the Group's control. Various known and unknown risks,
uncertainties and other factors could lead to substantial differences between
the actual future results, financial situation, development or performance of
the Group and the estimates and historical results given herein. Important
risks, uncertainties and other factors that could cause actual results,
performance or achievements of Pennon Group to differ materially from any
outcomes or results expressed or implied by such forward-looking statements
include, among other things, changes in Government policy; regulatory and
legal reform; compliance with laws and regulations; maintaining sufficient
finance and funding to meet ongoing commitments; non-compliance or occurrence
of avoidable health and safety incidents; tax compliance and contribution;
failure to pay all pension obligations as they fall due and increased costs to
the Group should the defined benefit pension scheme deficit increase;
non-recovery of customer debt; poor operating performance due to extreme
weather or climate change; macro-economic risks impacting commodity and power
prices and other matters; poor customer service and/or increased competition
leading to loss of customer base; business interruption or significant
operational failure/incidents; difficulty in recruitment, retention and
development of skills; non-delivery of regulatory outcomes and performance
commitments; failure or increased cost of capital projects/exposure to
contract failures; failure of information technology systems, management and
protection, including cyber risks; and all other risks in the Pennon Group
Annual Report to be published in June 2026. Such forward looking statements
should therefore be construed in light of all risks, uncertainties, and other
factors, including without limitation those identified above, and undue
reliance should not be placed on them. Nothing in this report should be
construed as a profit forecast.
Any forward-looking statements are made only as of the date of this document
and no representation, assurance, guarantee or warranty is given in relation
to them including as to their accuracy, completeness, or the basis on which
they are made. The Group accepts no obligation to revise or update publicly
these forward-looking statements or adjust them as a result of new information
or for future events or developments, except to the extent legally required.
UNSOLICITED COMMUNICATIONS WITH SHAREHOLDERS
A number of companies, including Pennon Group plc, continue to be aware that
their shareholders have received unsolicited telephone calls or correspondence
concerning investment matters which imply a connection to the company
concerned. If shareholders have any concerns about any contact they have
received, then please refer to the Financial Conduct Authority's website
www.fca.org.uk/scamsmart. Details of any share dealing facilities that the
Company endorses will be included in Company mailings.
PENNON GROUP PLC
Consolidated income statement for the year ended 31 March 2026
Before non-underlying items Non-underlying items Total Before non-underlying items Non-underlying items Total
2026
(note 4)
2026
2025
(note 4)
2025
2026
2025
Notes £m £m £m £m £m £m
Revenue 3 1,291.4 - 1,291.4 1,047.8 - 1,047.8
Operating costs
Employment costs (131.3) (4.8) (136.1) (151.1) (11.7) (162.8)
Raw materials and consumables used (40.0) - (40.0) (51.7) (0.2) (51.9)
Other operating expenses (581.4) (15.9) (597.3) (499.7) (25.7) (525.4)
Financial assets impairment (19.5) - (19.5) (9.7) - (9.7)
Earnings before interest, tax, 3 519.2 (20.7) 498.5 335.6 (37.6) 298.0
depreciation and amortisation
Depreciation and amortisation and impairment (193.7) - (193.7) (187.1) - (187.1)
Operating profit/(loss) 3 325.5 (20.7) 304.8 148.5 (37.6) 110.9
Finance income 5 21.9 - 21.9 15.0 - 15.0
Finance costs 5 (213.3) - (213.3) (199.4) - (199.4)
Net finance costs 5 (191.4) - (191.4) (184.4) - (184.4)
Share of post-tax profit from associated companies 1.0 - 1.0 0.8 - 0.8
Profit/(loss) before tax 3 135.1 (20.7) 114.4 (35.1) (37.6) (72.7)
Taxation (charge)/credit 6 (25.9) 4.1 (21.8) 7.0 8.9 15.9
Profit/(loss) for the year 109.2 (16.6) 92.6 (28.1) (28.7) (56.8)
Attributable to:
Ordinary shareholders of the parent 91.5 (57.9)
Non-controlling interests 1.1 1.0
Earnings per ordinary share 7
(pence per share)
• Basic 19.4 (16.1)
• Diluted 19.3 (16.1)
The above results were derived from continuing operations.
PENNON GROUP PLC
Consolidated statement of comprehensive income for the year ended 31 March
2026
Before non-underlying items Non-underlying items Total Before non-underlying items Non-underlying items Total
2026
(note 4)
2026
2025
(note 4)
2025
2026
2025
£m £m £m £m £m £m
Profit/(loss) for the year 109.2 (16.6) 92.6 (28.1) (28.7) (56.8)
Other comprehensive (loss)/income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit obligations (1.5) - (1.5) 3.5 - 3.5
Tax relating to components of other comprehensive income 0.9 - 0.9 (0.9) - (0.9)
Total items that will not be reclassified to profit or loss (0.6) - (0.6) 2.6 - 2.6
Items that may be reclassified
subsequently to profit or loss
Loss on cash flow hedging (6.7) - (6.7) (19.7) - (19.7)
Hedging losses recycled to profit or loss 7.5 - 7.5 15.4 - 15.4
Tax relating to components of other comprehensive income (0.2) - (0.2) 2.4 - 2.4
Total items that may be reclassified 0.6 - 0.6 (1.9) - (1.9)
subsequently to profit or loss
Other comprehensive (loss)/income for the - - - 0.7 - 0.7
year net of tax
Total comprehensive income/(loss) for the year 109.2 (16.6) 92.6 (27.4) (28.7) (56.1)
Total comprehensive income/(loss) attributable to:
Ordinary shareholders of the parent 91.5 (57.2)
Non-controlling interests 1.1 1.1
PENNON GROUP PLC
Consolidated balance sheet at 31 March 2026
2026 2025
Notes £m £m
ASSETS
Non-current assets
Goodwill 179.9 179.9
Other intangible assets 67.5 62.2
Property, plant and equipment 6,297.5 5,841.5
Investment properties 6.3 7.9
Other non-current assets 7.1 8.7
Financial assets at fair value through profit or loss - 0.6
Derivative financial instruments 21.4 22.4
Investments in associated companies 2.8 1.8
Retirement benefit obligations 20.5 22.0
6,603.0 6,147.0
Current assets
Inventories 15.3 12.8
Trade and other receivables 452.4 391.8
Current tax receivable - 0.9
Financial assets at fair value through profit or loss 0.6 -
Derivative financial instruments 9.0 9.8
Cash and cash equivalents 11 332.7 417.9
Restricted funds 55.6 58.2
Retirement benefit assets 11.4 9.2
877.0 900.6
LIABILITIES
Current liabilities
Borrowings 11 (151.2) (257.4)
Financial liabilities at fair value through profit - (0.3)
Derivative financial instruments (0.6) (0.5)
Trade and other payables (422.3) (331.0)
Provisions (6.1) (6.8)
(580.2) (596.0)
Net current assets 296.8 304.6
Non-current liabilities
Borrowings 11 (4,746.0) (4,296.9)
Other non-current liabilities (188.0) (171.3)
Derivative financial instruments (1.9) (1.6)
Deferred tax liabilities (551.9) (530.6)
Provisions (0.4) (0.5)
(5,488.2) (5,000.9)
Net assets 1,411.6 1,450.7
Shareholders' equity
Share capital 9 288.1 288.1
Share premium account 755.1 755.0
Capital redemption reserve 157.1 157.1
Retained earnings and other reserves 207.7 248.0
Total shareholders' equity 1,408.0 1,448.2
Non-controlling interests 3.6 2.5
Total equity 1,411.6 1,450.7
PENNON GROUP PLC
Consolidated statement of changes in equity for the year ended 31 March 2026
Share capital (note 9) Share premium account Capital redemption reserve Retained earnings and other reserves Non-controlling interests Total equity
£m £m £m £m £m £m
At 31 March 2024 174.6 398.2 157.1 431.3 1.4 1,162.6
(Loss)/profit for the year - - - (57.9) 1.1 (56.8)
Other comprehensive income for the year - - - 0.7 - 0.7
Total comprehensive (loss)/income for the year - - - (57.2) 1.1 (56.1)
Transactions with ordinary owners of the parent:
Dividends paid - - - (126.9) - (126.9)
Rights issue* 113.5 377.5 - - - 491.0
Transaction costs arising on rights issue - (20.5) - - - (20.5)
Transaction costs arising on shares issued - (0.2) - - - (0.2)
Adjustments in respect of share-based - - - 2.0 - 2.0
payments (net of tax)
Own shares acquired by the Pennon Employee - - - (1.2) - (1.2)
Share Trust in respect of share options granted
Total transactions with ordinary owners of the parent 113.5 356.8 - (126.1) - 344.2
At 31 March 2025 288.1 755.0 157.1 248.0 2.5 1,450.7
Profit for the year - - - 91.5 1.1 92.6
Total comprehensive income for the year - - - 91.5 1.1 92.6
Transactions with ordinary owners of the parent:
Dividends paid - - - (133.7) - (133.7)
Dividends forfeited - - - 1.7 - 1.7
Transaction costs arising on rights issue - (0.5) - - - (0.5)
Sale of share forfeiture shares - 0.6 - - - 0.6
Adjustments in respect of share-based - - - 2.6 - 2.6
payments (net of tax)
Own shares acquired by the Pennon Employee - - - (2.4) - (2.4)
Share Trust in respect of share options granted
Total transactions with ordinary owners of the parent - 0.1 - (131.8) - (131.7)
At 31 March 2026 288.1 755.1 157.1 207.7 3.6 1,411.6
* On 17 February 2025 the Company completed a rights issue to existing
shareholders on the basis of 13 ordinary shares for every 20 fully paid
ordinary shares held. As a result, 185,928,002 ordinary shares with an
aggregate nominal value of £113.5 million were issued for cash consideration
of £491.0 million. In the year ended 31 March 2025 transaction costs directly
attributable to the rights issue of £20.5 million were incurred and have been
accounted for as a deduction from share premium. In the year ended 31 March
2026 an additional £0.5 million transaction costs directly attributable to
the rights issue have been accounted for as a deduction from share premium.
Cash paid in relation to the transaction costs amounted to £15.4 million in
the year ended 31 March 2025 and £5.6 million in the year ended 31 March
2026.
PENNON GROUP PLC
Consolidated statement of cash flows for the year ended 31 March 2026
2026 2025
Notes £m £m
Cash flows from operating activities
Cash generated from operations 10 529.7 233.6
Interest paid 10 (172.0) (143.1)
Tax received 1.0 3.0
Net cash generated from operating activities 358.7 93.5
Cash flows from investing activities
Interest received 17.4 11.1
Purchase of property, plant and equipment (629.4) (663.1)
Withdrawal/(deposit) of restricted funds 2.6 (20.8)
Purchase of intangible assets (8.1) (5.5)
Proceeds from sale of property, plant and equipment 4.7 1.9
Net cash used in investing activities (612.8) (676.4)
Cash flows from financing activities
Proceeds from issuance of ordinary shares - 491.0
Share issue transaction costs (5.6) (15.4)
Purchase of ordinary shares by the Pennon Employee Share Trust (2.4) (1.2)
Proceeds from new borrowing 569.9 920.0
Repayment of borrowings (305.7) (328.5)
Cash inflows from lease financing arrangements 10 90.0 25.0
Lease principal repayments (45.3) (97.2)
Dividends paid 8 (133.7) (126.9)
Proceeds from dividend forfeiture 1.7 -
Net cash received in financing activities 168.9 866.8
Net (decrease)/increase in cash and cash equivalents (85.2) 283.9
Cash and cash equivalents at beginning of year 11 417.9 134.0
Cash and cash equivalents at end of year 11 332.7 417.9
PENNON GROUP PLC
Notes
1. General information
Pennon Group plc is a public limited company, listed by shares, which is
listed on the London Stock Exchange and incorporated and domiciled in the
United Kingdom. It is registered in the United Kingdom under the Companies Act
2006. The address of the registered office is given on page 41. Pennon Group's
business is operated through its principal subsidiaries. South West Water
Limited provides water and wastewater services in Devon, Cornwall and parts of
Dorset and Somerset and water only services in parts of Dorset, Hampshire,
Wiltshire and Bristol. Sutton and East Surrey Water plc provides water only
services in the South East region. Sutton and East Surrey Water Services
provides water and wastewater retail services to non-household customer
accounts. Pennon Group plc is the majority shareholder of Pennon Water
Services Limited, a company providing water and wastewater retail services to
non-household customer accounts across Great Britain. The Company owns a 30%
share in Water 2 Business Limited, a joint venture with Wessex Water Limited,
operating in the same sector as Pennon Water Services Limited and Sutton and
East Surrey Water Services.
2. Basis of preparation
The Group's financial information has been prepared in accordance with the
recognition and measurement requirements of UK adopted international
accounting standards. It has been prepared on a basis consistent with that
adopted in the previous year. The financial statements have been prepared
under the historical cost convention (except for fair value items, principally
acquisitions, transfer of assets from customers and certain financial
instruments as described in the 2025 Annual Report and Accounts which are
available on the Company website www.pennon-group.co.uk). Whilst the financial
information included in this Preliminary Results Announcement has been
prepared in accordance with the recognition and measurement criteria of IFRS,
this announcement does not itself contain sufficient information to comply
with IFRS. The Preliminary Results Announcement does not constitute the
Company's statutory accounts for the years ended 31 March 2026 and 31 March
2025 within the meaning of Section 435 of the Companies Act 2006 but is
derived from those statutory accounts. The Group's statutory accounts for the
year ended 31 March 2025 have been filed with the Registrar of Companies. The
Group's Financial Statements for the year ended 31 March 2026 were approved by
the Board on 10 June 2026. They have been reported on by the Group's auditors
and will be delivered to the registrar of companies in due course. The report
of the auditors was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The going concern basis has been adopted in preparing these financial
statements. At 31 March 2026 the Group has access to undrawn committed funds
of £610.0 million and cash and cash equivalents and restricted funds of
£388.3 million, totalling £998.3 million. The Group has an expected headroom
of £186.7 million at 30 September 2027.
In making their assessment, the Directors reviewed the principal risks and
considered which risks might threaten the Group's going concern status, to do
this the Group's business plan has been stress-tested. Whilst the Group's risk
management processes seek to mitigate the impact of principal risks,
individual sensitivities against these risks have been identified. These
sensitivities, which are ascribed a value with reference to risk weighting,
factoring in the likelihood of occurrence and financial impact, were applied
to the baseline financial forecast which uses the Group's annual budget for
the financial year ended 31 March 2026, and longer-term strategic business
plan for the remainder of the going concern period to 30 September 2027.
PENNON GROUP PLC
Notes (continued)
2. Basis of preparation (continued)
The risks and sensitivities include consideration of: legislative impacts such
as change in government policy and non-compliance with laws and regulations,
macro-economic impacts such as inflation and interest rate increases and
operational impacts such as ensuring adequate water resources and failure of
operational assets. A combined stress testing scenario has been performed to
assess the overall impact of these individual scenarios impacting the Group
collectively. The combined weighted impact of the risks occurring is a cash
outflow of c.£101.5 million; this value is considered equivalent to an
extreme one-off event that could occur over the 15-month period of the
assessment to 30 September 2027, the probability of such an event happening is
deemed unlikely. Through this testing, it has been determined that none of the
individual principal risks would in isolation, or in aggregate, compromise the
going concern of the Group over the going concern period, the assessment has
been considered by reviewing the impact on the solvency position as well as
debt and interest covenants. In the combined scenario to ensure that the Group
was able to continue as a going concern, additional mitigations could be
deployed to reduce gearing and increase covenant headroom. In the combined
stress test scenario, the Group has sufficient liquidity and covenant headroom
which reflects that no mitigations would be needed by the Group. However, if
required additional mitigations could be deployed to reduce gearing and
increase covenant headroom. Examples of mitigations could include: reduction
in discretionary operational expenditure, deferral of capital expenditure
and/or cancellation of non-essential capital expenditure, reduction in the
amount of dividend payable, and raising additional funding.
We have considered the Group's funding position and financial projections
which take into account a range of possible impacts, including the refinancing
required within and immediately after the going concern assessment period.
Having considered these factors, the Directors have a reasonable expectation
that the Group will meet the requirements of its covenants and has adequate
resources to continue in operational existence for the period to at least the
end of the going concern assessment period of 30 September 2027, and that
there are no material uncertainties to disclose. For this reason, they
continue to adopt the going concern basis in preparing the financial
statements.
In preparing the financial statements, management has considered the impact of
climate change, taking into account the relevant disclosures in the Strategic
Report, including those made in accordance with the recommendations of the
Taskforce on Climate-related Financial Disclosure. The expected environmental
impact of climate change on the water business has been modelled noting that
the physical risks are increasing. It is likely that the Group will need to
invest to protect certain assets such as sewage works and pumping stations
against sea level inundation and these considerations form part of the
planning process for new capital expenditure. Longer term investment, outlined
in the strategic plans, will be needed to manage future risks. To achieve
this, combined regulatory and government support within their policy
frameworks will be essential. Whilst it is estimated additional spend will be
required to manage future risks, the current available information and
assessment did not identify any risks regarding the sufficiency of funds
available to the Group to support this additional spend or any risk that would
require the useful economic lives of assets to be reduced in the year or
identify the need for impairment that would impact the carrying values of such
assets or have any other impact on the financial statements. The impact
assessments will be continuously updated to reflect the latest available
information on the impact of climate change.
PENNON GROUP PLC
Notes (continued)
3. Segmental information
Operating segments are reported in a manner consistent with internal reporting
provided to the Chief Operating Decision-Maker (CODM), which has been
identified as the Pennon Group plc Board. The earnings measures below are used
by the Board in making decisions.
The Group is organised into two operating segments. The water segment
comprises the regulated water and wastewater services undertaken by South West
Water and the regulated water services undertaken by SES Water. The
non-household retail business reflects the services provided by Pennon Water
Services and SESWS. The other segment comprises smaller ancillary business as
well as intermediate holding companies not further separated in reports to the
Board.
Segment assets include goodwill and other intangible assets, property, plant
and equipment, inventories, trade and other receivables and cash and cash
equivalents. Segment liabilities comprise operating liabilities and borrowings
and exclude taxation. The other segment liabilities include the Company's
financing arrangements and Group taxation liabilities. Capital expenditure
comprises additions to property, plant and equipment.
2026 2025
Revenue £m £m
Water 1,022.0 820.5
Non-household retail 381.7 320.3
Other 25.6 12.8
Less intra-segment trading((1)) (137.9) (105.8)
Total underlying revenue 1,291.4 1,047.8
Operating profit before depreciation, amortisation and non-underlying items
(underlying EBITDA)
Water 510.7 338.2
Non-household retail 9.9 7.5
Other (1.4) (10.1)
519.2 335.6
Operating profit before non-underlying items
Water 321.7 153.8
Non-household retail 9.1 7.2
Other (5.3) (12.5)
325.5 148.5
Profit/(loss) before tax before non-underlying items
Water 132.0 (35.6)
Non-household retail 5.7 4.3
Other (2.6) (3.8)
135.1 (35.1)
Profit/(loss) before tax
Water 116.6 (71.7)
Non-household retail 4.1 4.3
Other (6.3) (5.3)
114.4 (72.7)
(1) Intra-segment trading between different segments is under normal market
based commercial terms and conditions. Intra-segment revenue of the other
segment is at cost.
PENNON GROUP PLC
Notes (continued)
3. Segmental information (continued)
All revenue is generated in the United Kingdom. The grouping of revenue
streams by how they are affected by economic factors, as required by IFRS 15,
is as follows:
Year ended 31 March 2026
Water Non-household Other Total
retail
£m £m £m £m
Segment revenue 1,022.0 381.7 25.6 1,429.3
Inter-segment revenue (120.0) (0.2) (17.7) (137.9)
Revenue from external customers 902.0 381.5 7.9 1,291.4
Significant service lines
Water 902.0 - - 902.0
Non-household retail - 381.5 - 381.5
Other - - 7.9 7.9
902.0 381.5 7.9 1,291.4
Year ended 31 March 2025
Water Non-household Other Total
retail
£m £m £m £m
Segment revenue 820.5 320.3 12.8 1,153.6
Inter-segment revenue (100.6) (0.2) (5.0) (105.8)
Revenue from external customers 719.9 320.1 7.8 1,047.8
Significant service lines
Water 719.9 - - 719.9
Non-household retail - 320.1 - 320.1
Other - - 7.8 7.8
719.9 320.1 7.8 1,047.8
The Group's country of domicile is the United Kingdom and this is the country
in which it generates the majority of its revenue.
PENNON GROUP PLC
Notes (continued)
4. Non-underlying items
Non-underlying items are those that in the Directors' view are required to be
separately disclosed by virtue of their size, nature or incidence to enable a
full understanding of the Group's financial performance in the year and
business trends over time. Excluding these items is considered to provide
additional useful information on the performance and the position of the Group
as well as enhancing the comparability of information between reporting
periods. The presentation of results is consistent with internal performance
monitoring.
2026 2025
£m £m
Operating Costs
Restructuring/Transformational costs1 (14.0) (15.8)
Costs of Brixham water quality incident and other regulatory investigations2 (6.7) (21.0)
SES Water Group acquisition costs3 - (0.7)
Renewables projects acquisition related costs4 - (0.1)
Earnings before interest, tax, depreciation and amortisation (20.7) (37.6)
Net tax credit arising on non-underlying items above5 4.1 8.9
Net non-underlying charge (16.6) (28.7)
(1) £4.1 million (2025: £15.8 million) of costs were incurred in
connection with the ongoing restructuring of the Group and £9.9 million of
technological enhancement costs were incurred in connection with the business
transformation of the Group. £4.8 million (2025: £10.9 million) of the total
costs were employment costs. Due to the one-off nature and incidence of the
costs they have been classified as non-underlying.
(2) £6.7 million includes costs of settlement of both the DWI's prosecution
in respect of the May 2024 Brixham water quality incident, and the enforcement
undertakings agreed with Ofwat in August 2025 in respect of the wastewater
investigations, together with associated legal fees. £15.8 million prior year
costs relate to the operating costs for remediation of the Brixham water
quality incidents and include £0.8m of directly attributable employment
costs. Due to the one-off nature and incidence of the costs they have been
classified as non-underlying.
(3) In the prior year the Group incurred expenses of £0.7 million in
connection with the acquisition of SES Water Group. Due to the one-off nature
and incidence of the costs they were classified as non-underlying.
(4) In the prior year expenses in connection with the strategic review of
renewable energy generating investments, not directly attributable to the
intangible assets acquired, totalled £0.1 million. Due to the one-off nature
and incidence of the costs they have been classified as non-underlying.
(5) The net tax credit arising on non-underlying items relates to a deferred
tax credit in respect of tax losses carried forwards. The prior year credit
reflected an £8.9 million current tax credit also in respect of tax losses
carried forwards.
PENNON GROUP PLC
Notes (continued)
5. Net finance costs
2026 2025
Finance costs Finance income Total Finance Finance income Total
costs
£m £m £m £m £m £m
Cost of servicing debt
Bank borrowings and overdrafts (156.8) - (156.8) (138.6) - (138.6)
Interest element of lease payments (48.7) - (48.7) (49.9) - (49.9)
Other finance costs (7.8) - (7.8) (10.9) - (10.9)
Interest receivable - 17.4 17.4 - 11.1 11.1
Amortisation of unamortised hedging amount - 2.3 2.3 - 2.3 2.3
(213.3) 19.7 (193.6) (199.4) 13.4 (186.0)
Notional interest
Retirement benefit obligations - 2.2 2.2 - 1.6 1.6
Net finance costs (213.3) 21.9 (191.4) (199.4) 15.0 (184.4)
In addition to the above, finance costs of £40.5 million (2025: £27.7
million) have been capitalised on qualifying assets included in property,
plant and equipment, at an average borrowing rate of 5.4% (2025: 5.7%).
Other finance costs include £1.1 million (2025: £1.1 million) of dividends
payable on listed preference shares issued by Bristol Water plc, which are
classified as debt.
6. Taxation
Before non-underlying items Non-underlying items Total Before non-underlying items Non-underlying items Total
2026
2026
2025
2025
(note 4) (note 4)
2026
2025
£m £m £m £m £m £m
Analysis of charge/(credit) in year
Current tax charge/(credit) 0.6 (0.8) (0.2) 0.8 (0.5) 0.3
Deferred tax charge/(credit) 25.3 (3.3) 22.0 (7.8) (8.4) (16.2)
Tax charge/(credit) for the year 25.9 (4.1) 21.8 (7.0) (8.9) (15.9)
UK corporation tax is calculated at 25% (2025: 25%) of the estimated
assessable profit for the year.
UK corporation tax for the Group is stated after a credit relating to prior
year current tax of £0.2 million (2025: £0.3 million charge) and a prior
year deferred tax credit of £8.3 million (2025: £0.7 million charge). Of the
prior year deferred tax credit, £8.0 million relates to capital losses that
require recognition on consolidation. This is due to the existence of deferred
tax liabilities arising on the fair value of land acquired through business
combinations. The remaining elements are in respect of capital allowances
claimed in accordance with UK tax legislation.
PENNON GROUP PLC
Notes (continued)
7. Earnings per share
Basic earnings per share are calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year, excluding those held in the employee share trust
which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to include all dilutive potential ordinary shares. The
Group has two types of dilutive potential ordinary shares - those share
options granted to employees where the exercise price is less than the average
market price of the Company's ordinary shares during the year; and the
contingently issuable shares under the Group's Performance and Co-investment
Plan, the Long-term Incentive Plan and the deferred shares element of the
Annual Incentive Bonus Plan, based on performance criteria for the vesting of
the awards.
Potential ordinary shares, as discussed above, that could dilute basic
earnings per share in the future, were not included in the calculation for
statutory earnings per share because they were anti-dilutive for the current
year. The weighted average number of shares and earnings used in the
calculations are detailed in the table below.
2026 2025
Number of shares (millions)
For basic earnings per share 471.8 360.5
Effect of dilutive potential ordinary shares from share options 1.5 -
For diluted earnings per share 473.3 360.5
Basic and diluted earnings per ordinary share
Earnings per ordinary share before non-underlying items and deferred tax are
presented as the Directors believe this measure provides a more useful year on
year comparison of business trends and performance. Deferred tax is excluded
as the Directors believe it reflects a distortive effect of the level of
long-term capital investment. Earnings per share have been calculated as
follows:
2026 2025
Earnings per share (Loss)/profit Earnings per share
Profit after tax
after tax
Basic Diluted Basic Diluted
£m p p £m p p
Statutory earnings attributable to ordinary shareholders of the parent 91.5 19.4 19.3 (57.9) (16.1) (16.1)
Deferred tax (credit)/charge before non-underlying items 25.3 5.4 5.4 (7.8) (2.1) (2.1)
Non-underlying items (net of tax) 16.6 3.5 3.5 28.6 7.9 7.9
Adjusted earnings 133.4 28.3 28.2 (37.1) (10.3) (10.3)
PENNON GROUP PLC
Notes (continued)
8. Dividends
2026 2025
£m £m
Amounts recognised as distributions to ordinary equity holders in the year:
Interim dividend paid for the year ended 31 March 2025: 12.14p (2024: 11.60p) 42.0 40.1
per share
Final dividend paid for the year ended 31 March 2025: 19.43p (2024: 25.07p) 91.7 86.8
per share
133.7 126.9
Proposed dividends
Interim dividend paid for the year ended 31 March 2026: 9.26p (2025: 12.14p 43.7 42.0
per share)
Final dividend paid for the year ended 31 March 2026: 20.03p (2025: 19.43p per 94.5 91.7
share)
138.2 133.7
The proposed interim and final dividends have not been included as liabilities
in these financial statements.
The proposed interim dividend for 2026 was paid on 2 April 2026 and the
proposed final dividend is subject to approval by shareholders at the Annual
General Meeting.
9. Share capital
Allotted, called-up and fully paid
Number of shares
Treasury shares Ordinary shares £m
At 1 April 2024 ordinary shares of 61.05p each 5,628 286,045,323 174.6
For consideration of £21,000, shares issued under the Company's Sharesave - 3,386 -
Scheme
Rights issue - 185,928,002 113.5
At 31 March 2025 ordinary shares of 61.05p each 5,628 471,976,711 288.1
For consideration of £4,000, shares issued under the Company's Sharesave - 6,883 -
Scheme
At 31 March 2026 ordinary shares of 61.05p each 5,628 471,983,594 288.1
PENNON GROUP PLC
Notes (continued)
9. Share capital (continued)
Shares held as treasury shares may be sold, re-issued for any of the Company's
share schemes, or cancelled.
On 17 February 2025 the Company completed a rights issue to existing
shareholders on the basis of 13 ordinary shares for every 20 fully paid
ordinary shares held. As a result, 185,928,002 ordinary shares with an
aggregate nominal value of £113.5 million were issued for cash consideration
of £491.0 million. Transaction costs directly attributable to the rights
issue of £20.5 million were incurred and have been accounted for as a
deduction from share premium. In the year ended 31 March 2026 an additional
£0.5 million of transaction costs directly attributable to the rights issue
have been accounted for as a deduction from share premium.
10. Analysis of the cash flows given in the statement of cash flows
Reconciliation of profit for the year to cash generated from operations:
2026 2025
£m £m
Cash generated from operations
Profit/(loss) for the year 92.6 (56.8)
Adjustments for:
Share-based payments 2.6 2.0
Profit on disposal of property, plant and equipment (3.6) (1.2)
Depreciation charge 190.6 184.7
Amortisation of intangible assets 2.4 2.3
Intangible impairment charge 0.3 1.3
Impairment of investment properties 0.4 -
Share of post-tax profit from associated companies (1.0) (0.8)
Finance income (21.9) (15.0)
Finance costs 213.3 199.4
Taxation charge/(credit) 21.8 (15.9)
Changes in working capital:
(Increase)/decrease in inventories (2.5) 0.4
Increase in trade and other receivables (59.1) (42.5)
Increase/(decrease) in trade and other payables 94.6 (30.5)
(Decrease)/increase in provisions (0.8) 6.2
Cash generated from operations 529.7 233.6
2026 2025
Reconciliation of total interest paid £m £m
Interest paid in operating activities 172.0 143.1
Total interest paid 172.0 143.1
PENNON GROUP PLC
Notes (continued)
11. Net borrowings
2026 2025
£m £m
Cash and cash equivalents 332.7 417.9
Restricted funds 55.6 58.2
388.3 476.1
Borrowings - current
Bank and other current borrowings (118.1) (224.5)
Lease obligations (33.1) (32.9)
Total current borrowings (151.2) (257.4)
Borrowings - non-current
Bank and other non-current borrowings (3,666.2) (3,265.1)
Listed preference shares (12.5) (12.5)
Lease obligations (1,067.3) (1,019.3)
Total non-current borrowings (4,746.0) (4,296.9)
Total net borrowings (4,508.9) (4,078.2)
12. Contingent liabilities
2026 2025
£m £m
Guarantees: Performance bonds 28.8 20.0
Guarantees in respect of performance bonds relate to changes to the collateral
requirements for the non-household retail business with other wholesalers. The
possibility of the bond being required is remote hence the fair value of the
bond is not material.
Other contracted and litigation uncertainties
Ofwat and the Environment Agency (EA) announced an industry-wide investigation
into sewage treatment works on 18 November 2021. On 10 July 2025, Ofwat
announced its findings for South West Water Limited and its decision to accept
South West Water Limited's enforcement package, in lieu of a financial
penalty. The agreed undertakings consist of investing £20 million between
2025-2030 to reduce spills from specific outflows, establishing a £2 million
local fund to tackle sewer misuse and providing £2 million of funding through
a Nature Recovery Fund to support environmental groups. The costs in relation
to the £20 million investment will be accounted for as capital when incurred.
On 2 February 2024 summons was received by South West Water Limited from the
EA in relation to alleged breaches of permits in relation to the illegal water
discharge activity at seven locations with a total of 30 charges. The EA have
since withdrawn six of these charges relating to one site. Sentencing was held
on 12 and 13 March 2026 although the value of any fine will not be known until
the judgement takes place on 30 July 2026.
On 23 May 2023 Ofwat announced an investigation into South West Water
Limited's 2021/22 operational performance data relating to leakage and per
capita consumption. This operational performance data was reported in South
West Water's Annual Performance Report 2021/22. This report is subject to
assurance processes which include independent checks and balances carried out
by an external technical auditor. The Group continues to work openly and
constructively with Ofwat to comply with the formal notice issued as part of
this investigation.
PENNON GROUP PLC
Notes (continued)
12. Contingent liabilities (continued)
The Group has undertaken its own internal investigation into the data and
third-party experts have concluded the calculations are within a tolerance as
reported, as a result there were no detrimental impacts to customers through
Outcome Delivery Incentives (ODI). The Group recognises opportunities to
enhance data quality to improve the estimation process and these have been
shared with Ofwat. Until such time that an initial response is received, the
potential outcome of these investigations continues to be unknown. Ofwat has a
range of options that it could apply from closing the investigation with no
further action, agreeing formal S.19 undertakings, through to fining the Group
up to 10% of its revenue in relation to the regulated drinking water business.
Given the wide range of possible outcomes therefore the potential outcome of
this investigation continues to be unknown, and it is therefore not possible
to estimate any obligations arising from the investigation with any certainty.
Following the Brixham cryptosporidium outbreak in May 2024, legal proceedings
were brought by the Drinking Water Inspectorate (DWI). South West Water
pleaded guilty to the charge of supplying water unfit for human consumption on
4 March 2026, with sentence received on 2 June 2026. The Court levied a fine
of £1.9 million, reflecting the serious impact this incident had on customers
in the area, whilst also recognising the extensive customer support and
remedial actions taken by South West Water. Full provision was recognised in
the 2025/26 financial year for the fine.
The Group establishes provisions in connection with contracts and litigation
where it has a present legal or constructive obligation as a result of past
events and where it is more likely than not an outflow of resources will be
required to settle the obligation and the amount can be reliably estimated.
Where it is uncertain that these conditions are met, a contingent liability is
disclosed unless the likelihood of the obligation arising is remote or the
matter is not deemed material. An amount of £6.7 million has been included in
non-underlying costs in respect of the above.
PENNON GROUP PLC
Pennon Group plc
Registered office:
Peninsula House
Rydon Lane
Exeter
Devon
EX2 7HR
pennon-group.co.uk
Registered
in England: 2366640
PENNON GROUP PLC
Alternative performance measures
Alternative performance measures (APMs) are financial measures used in this
report that are not defined by International Financial Reporting Standards
(IFRS). The Directors believe that these APMs assist in providing additional
useful information on the underlying trends, performance and position of the
Group as well as enhancing the comparability of information between reporting
periods.
As the Group defines the APMs they might not be directly comparable to other
companies' APMs. They are not intended to be a substitute for, or superior to,
IFRS measurements. For the year ended 2025/26, the following APMs were added
to or amended to those presented previously:
• The APM 'Effective interest rate' has been amended and is now
calculated for the Water Group which includes SES Water. Previously this was
for South West Water only.
• The APM 'Effective cash cost of interest rate' has been amended
and is now calculated for the Water Group which includes SES Water. Previously
this was for South West Water only.
(i) Underlying earnings
Underlying earnings are presented alongside statutory results as the Directors
believe they provide a more useful comparison on business trends and
performance. Note 4 in the notes to the financial statements provides more
detail on non-underlying items, and a reconciliation of underlying earnings
for the current year and the prior year is as follows:
Non-underlying items
Underlying earnings Underlying Brixham and regulatory investigations Restructuring / Transformation Statutory results Earnings
reconciliation
per share
31 March 2026
£m £m £m £m p
EBITDA (see below) 519.2 (6.7) (14.0) 498.5
Operating profit/(loss) 325.5 (6.7) (14.0) 304.8
Profit/(loss) before tax 135.1 (6.7) (14.0) 114.4
Taxation (25.9) 0.7 3.4 (21.8)
Profit after tax 92.6
Non-controlling interests (1.1)
Profit after tax attributable 91.5 19.4
to shareholders
Non-underlying items
Underlying earnings Underlying Brixham SES acquisition Renewables acquisition Transformation Statutory results Earnings
reconciliation
per share
31 March 2025
£m £m £m £m £m £m p
EBITDA (see below) 335.6 (21.0) (0.7) (0.1) (15.8) 298.0
Operating profit/(loss) 148.5 (21.0) (0.7) (0.1) (15.8) 110.9
Loss before tax (35.1) (21.0) (0.7) (0.1) (15.8) (72.7)
Taxation 7.0 5.2 - - 3.7 15.9
Loss after tax (56.8)
Non-controlling interests (1.1)
Loss after tax attributable (57.9) (16.1)
to shareholders
(ii) Underlying EBITDA
Underlying EBITDA (earnings before interest, tax, depreciation and
amortisation and non-underlying items) is used to assess and monitor
operational underlying performance.
PENNON GROUP PLC
Alternative performance measures (continued)
(iii) Effective interest rate
A measure of the mean average interest rate payable on net debt associated
with the Water Group which excludes interest costs not directly associated
with net debt. This measure is presented to assess and monitor the relative
cost of financing for the Water Group.
2026 2025
£m £m
Net finance costs before non-underlying items (note 5) 191.4 184.4
Remove: net finance income before non-underlying items not associated with the (1.7) 5.0
Water Group
Net finance costs before non-underlying items associated with the Water Group 189.7 189.4
Net interest on retirement benefit obligations 2.0 1.5
Capitalised interest 34.2 23.3
Non-debt related interest 2.4 (2.2)
Net finance costs for effective interest rate calculation 228.3 212.0
Group net debt (opening) (note 11) 4,078.2 3,844.8
Remove: unamortised hedging adjustment (35.2) (37.5)
Remove: opening net debt not associated with the Water Group (344.9) (238.2)
Opening net debt for calculation 3,698.1 3,569.1
Group net debt (closing) (note 11) 4,508.9 4,078.2
Remove: unamortised hedging adjustment (32.8) (35.2)
Remove: closing net debt not associated with the Water Group (456.8) (344.9)
Add: equity injection from parent company - 380.0
Closing net debt for calculation 4,019.3 4,078.1
Average net debt (opening net debt + closing net debt divided by 2) 3,858.7 3,823.6
Effective interest rate (%) 5.9 5.5
(iv) Effective cash cost of interest
Effective cash cost of interest is calculated on the same basis as the
effective interest cost calculation above, but excludes finance costs that are
not paid in cash, but accrete to the carrying value of debt (principally the
inflationary impact of indexation on index-linked debt).
2026 2025
£m £m
Net finance costs for effective interest rate calculation (as above) 228.3 212.0
Remove non-cash interest accrued (income statement indexation charge) (44.9) (33.4)
Net finance costs for effective cash cost of interest calculation 183.4 178.6
Opening net debt (as above) 3,698.1 3,569.1
Closing net debt (as above) 4,019.3 4,078.1
Average net debt (opening net debt + closing net debt divided by 2) 3,858.7 3,823.6
Effective cash cost of interest (%) 4.8 4.7
PENNON GROUP PLC
Alternative performance measures (continued)
(v) Underlying interest cover
Underlying net finance costs (excluding pensions net interest cost) divided by
operating profit before
non-underlying items.
2026 2025
£m £m
Net finance costs before non-underlying items (note 5) 191.4 184.4
Net interest on retirement benefit obligations (note 5) 2.2 1.6
Net finance costs for interest cover calculation 193.6 186.0
Operating profit before non-underlying items (see 'Underlying earnings' above) 325.5 148.5
Interest cover (times) 1.7 0.8
(vi) Underlying EBITDA dividend cover
Underlying EBITDA for the Group divided by proposed combined interim and final
dividends.
2026 2025
£m £m
Underlying EBITDA (see 'Underlying earnings' above) 519.2 335.6
Proposed dividends (note 8) 138.2 133.7
EBITDA dividend cover (times) 3.8 2.5
(vii) Underlying Group dividend cover
Proposed dividends divided by profit for the year before non-underlying items
and deferred tax
2026 2025
£m £m
Proposed dividends (note 8) 138.2 133.7
Profit/(loss) for the year attributable to ordinary shareholders 91.5 (57.9)
Deferred tax charge/(credit) before non-underlying items (note 6) 25.3 (7.8)
Non-underlying items after tax in profit/(loss) for the year (note 4) 16.6 28.7
Adjusted profit/(loss) for dividend cover calculations 133.4 (37.0)
Group dividend cover (times) 1.0 -
(viii) Capital investment
Property, plant and equipment and intangible asset additions. The measure is
presented to assess and monitor the total capital investment by the Group.
2026 2025
£m £m
Additions to property, plant and equipment 635.5 647.0
Additions and 'other' movements to intangible assets 8.1 5.5
Capital investment 643.6 652.5
(ix) Capital payments
Payments for property, plant and equipment (PPE) and intangible asset and
investment property additions, net of proceeds from sale of PPE, intangible
assets and investment properties. The measure is presented to assess and
monitor the net cash spend on PPE, intangible assets and investment
properties.
2026 2025
£m £m
Cash flow statements: purchase of property, plant and equipment 629.4 663.1
Cash flow statements: purchase of intangible assets 8.1 5.5
Cash flow statements: proceeds from sale of property, plant and equipment and (4.7) (1.9)
investment properties
Capital payments relating to the Group 632.8 666.7
PENNON GROUP PLC
Alternative performance measures (continued)
(x) Return on Regulated Equity (RoRE)
This is a key regulatory metric which represents the returns to shareholders
expressed as a percentage of regulated equity.
Returns are made up of a base return (set by Ofwat, the water business
regulator, at c.5.4% for South West Water and c.5.2% for SES Water for the
period 2025-30) plus Totex outperformance, financing outperformance and PCD
outperformance. Returns are calculated post tax and post sharing (only a
proportion of returns are attributed to shareholders and shown within RoRE).
The four different types of return calculated and added to the base return
are:
· Totex outperformance - Totex is defined below and outperformance
is the difference between actual reported results for the regulated business
compared to the Final Determination (Ofwat published document at the start of
a regulatory period), in a constant price base.
· Financing outperformance - is based on the difference between a
company's actual effective interest rate compared with Ofwat's allowed cost of
debt.
· ODI outperformance - the net reward or penalty a company earns
based on a number of different key performance indicators, again set in the
Final Determination.
· Price control deliverables performance - If the PCD delivery is
delayed, Ofwat applies a Time Value of Money (TVM) adjustment claw back,
delivery dates are set in the Final Determination.
Regulated equity is a notional proportion of regulated capital value (RCV)
which is set by Ofwat at the start of every five-year regulatory period,
adjusted for actual inflation. For 2025-30, the notional equity proportion is
45.0%.
Further information on this metric can be found in South West Water and SES
Water's annual performance report and regulatory reporting, published in July
each year. The most recent can be found at:
www.southwestwater.co.uk/about-us/how-are-we-performing and
www.seswater.co.uk/about-us/publications/our-annual-performance-report
respectively.
(xi) Total Expenditure (Totex)
Operating costs and capital expenditure of the regulated water and wastewater
business (based on the Regulated Accounting Guidelines).
PENNON GROUP PLC
Alternative performance measures (continued)
(xii) Outcome Delivery Incentive (ODIs)
ODIs are designed to incentivise companies to deliver improvements to service
and outcomes based on customers' priorities and preferences. If a company
exceeds these targets a reward can be earned through future higher revenues.
If a company fails to meet them, they can incur a penalty through lower future
allowed revenues.
(xiii) Regulatory Capital Value (RCV)
RCV has been developed for regulatory purposes and is primarily used in
setting price limits.
RCV is widely used by the investment community as a proxy for the market value
of the regulated business and forms part of covenant debt limits.
Shadow RCV reflects the addition of anticipated regulatory adjustments which
amend RCV at the end of a regulatory period. These changes are accrued due to
performance through ODIs, changes in levels of Totex expenditure, changes in
inflation rates and other regulatory adjustments.
(xiv) Water Group Gearing
Calculated as combined closing net debt of South West Water and SES Water over
RCV for 2025/26 and Shadow RCV for 2024/25.
2026 2025
£m £m
Net debt 4,019.3 3,698.3
RCV/Shadow RCV 6,505.0 5,983.1
Water business gearing 61.8% 61.8%
6 (#_ftnref1) Net ODI penalty (in 2022/23 prices) across water and
wastewater for both in-period and end of AMP measures, reflecting adjustments
for items under review with Ofwat and third-party impacts
7 (#_ftnref2) In forecast outturn prices
8 (#_ftnref3) In forecast outturn prices
9 (#_ftnref4) In 2022/23 prices
10 (#_ftnref5) At forecast outturn price
11 (#_ftnref6) At forecast outturn prices
12 (#_ftnref7) A measure of the mean average interest rate payable on net
debt associated with South West Water Limited's group of companies, which
excludes interest costs not directly associated with net debt.
13 (#_ftnref8) Pennon Water Services (PWS) - 80:20 joint venture with South
Staffordshire.
14 (#_ftnref9) Excluding the carrying value of fair value acquisition
adjustments and other non-cash indebtedness
15 (#_ftnref10) Includes unwind of fair value adjustments and other non-cash
indebtedness.
16 (#_ftnref11) Euro Medium Term Note
17 (#_ftnref12) Based on South West Water Group, including Bristol Water
excl. SES (SBB)
18 (#_ftnref13) Based on South West Water Group including Bristol Water
(SBB) net debt/RCV.
19 (#_ftnref14) Net ODI penalty (in 2022/23 prices) across water and
wastewater for both in-period and end of AMP measures, reflecting adjustments
for items under review with Ofwat and third-party impacts
20 (#_ftnref15) In 2022/23 prices
21 (#_ftnref16) All guidance measured on an underlying basis.
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