REG - Pennon Group PLC - Half Year Results 2025/26
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RNS Number : 1919J Pennon Group PLC 27 November 2025
27 November 2025
Pennon Group plc
Half Year Results 2025/26
Pennon Group plc ('Pennon' or the 'Group') today announces its results for the
half year ended 30 September 2025.
Susan Davy, Group Chief Executive Officer, commented:
"We have made a robust start to the first half of 2025/26 and the new K8
regulatory period. With a strong return to profitability and disciplined cost
control, we are on track financially and growing sustainably.
Focused on our customers' priorities, we are delivering step change
improvements in our wastewater business, with pollution incidents halved
compared to last year. This reflects our operational focus and continued
momentum of record capital investment over the last two years, thanks to the
early mobilisation of our supply chain.
Our strong balance sheet and funding approach position us well to deliver our
largest ever capital programme through K8, focused on the four priorities that
matter most to our customers - ensuring the availability of safe, clean
drinking water as summers become hotter and drier, tackling pollutions and
storm overflows, protecting the environment and supporting customers to use
less and save more.
As the only water company to have received three successive outstanding
business plan ratings, we understand what we do each day really matters.
That's why my brilliant colleagues are firmly focused on ensuring we deliver
on our five-year plan for the communities we serve, the places they call home,
recognising there is always more to do."
FINANCIAL PERFORMANCE
H1 2025/26 H1 2024/25
Revenue £658.1m £527.2m
Underlying EBITDA^ £254.4m £163.5m
Underlying profit/(loss) before tax^ £65.9m (£18.6m)
Non-underlying items before tax(1) - (£20.2m)
Profit/(loss) before tax - statutory £65.9m (£38.8m)
Profit/(loss) after tax - statutory £57.3m (£30.0m)
Earnings/(loss) per share
Adjusted basic EPS^ 14.0p (5.5p)(2)
Basic EPS 12.1p (8.8p)(2)
Dividend per share(3) 9.26p 12.14p
Capital expenditure £304.8m £331.8m
Financial highlights for H1 2025/26
· Strong return to profitability for H1 2025/26, with statutory profit
before tax of £65.9 million (H1 2024/25: loss of £38.8 million)
· Step change in underlying EBITDA as a result of disciplined cost
management, with savings being released from the restructuring and efficiency
programmes
· Regulated water revenue up c.26% year on year, driven by tariff
increases and higher demand over the hot summer months, net of reprofiled
Final Determination revenue into 2026/27 customer bills
· Continued efficient financing, with £300 million new bond issuances
in South West Water demonstrating strong outperformance against the allowed
cost of debt
· On track for Return on Regulated Equity^ (RORE) of 7%(4), underpinned
in 2025/26 by efficient financing, with efficiencies in capital programme
offsetting other cost pressures
· Strong start to our K8 capital investment programme, with £304.8
million of capital investment across the Group in H1 - in line with
expectations, as programmes continue momentum from K7 run rate
· Interim dividend of £43.7 million (2024/25: interim dividend £42.0
million), resulting in a dividend per share basis of 9.26p.
Operational highlights
· Pollutions Incident Reduction Plan (PIRP) driving results with
pollution incidents in 2025 reducing by c.50%(5), and our proactive approach
has reduced repeat pollutions by c.75%
· Storm overflow spills cut by c.45%(5), supported by interventions
that avoided c.6,000 spills, bringing a total of c.20,000(6) spills avoided
over 18 months
· Spill duration down by a quarter over the bathing season and 100%
bathing water quality for the fifth consecutive year(7)
· Water resources position has remained strong through the hot summer,
thanks to strategic planning and investment following the 2022 drought,
although changing weather fronts have tested the networks
· SES remains top performer for water quality, South West Water upper
quartile, Bristol remains above average
· Our award-winning Upstream Thinking programme continues to expand and
deliver impact and was recognised with two major industry awards this half
year:
o Biodiversity Challenge Award for Water Management (CIRIA)
o Natural Capital Initiative of the Year (Water Industry Awards)
· Investment in Pennon Power has continued with two of our four sites,
Fife and Aberdeenshire, fully constructed with Aberdeenshire now energised
· Continuing to support our customers with bill affordability, with a
c.20% increase in customers on one or more of our support tariffs(8). Cash
collections remain robust, with debt charges as a percentage of revenue
broadly stable
· Launched our £5 million Better Futures Fund.
Outlook
· We are fully supportive of the Government's regulatory reform agenda,
and we are actively engaged in Defra's Transition Planning process. We look
forward to the publication of the forthcoming White Paper
· In FY 2025/26, we are returning to profitability, with Group
underlying EBIDTA expected to increase by c.60%(9) year on year
· First year investment underpinning growth in RCV^ of c.8% this year
rising by over a third by 2030
· Targeting K8 7% Return on Regulated Equity, underpinned by efficient
financing for FY 2025/26
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 adjusted for by virtue of their size, nature or
incidence to enable a full understanding of financial performance (note 5)
(2) Restated to reflect the bonus element of the rights issue commenced in
January 2025 in accordance with IAS 33
(3) Dividend policy of CPIH. The proposed interim dividend for 2025/26 is
increased by 4.1% reflecting an increase in line with CPIH. Dividend per share
reflects the share issuance post rights issue with H1 2024/25 restated on this
basis.
(4) 7% RORE - 5.1% base returns, 0.3% enhanced uplift to cost of equity, 1.6%
outperformance
(5) Reduction over 10 months to October 2025 compared with October 2024
(6) Cumulative spills avoided, reflecting impact of wetter weather in 2024
(7) On a like for like basis excluding those beaches designated in 2024
(8) Since H1 2024/25
(9) Assuming normalised demand in the second half of the year
Results presentation
A presentation of the Half Year 2025/26 results hosted by Susan Davy, Group
Chief Executive Officer and Laura Flowerdew, Group Chief Financial Officer,
will be available at 08:00am (GMT) today, 27 November 2025. This will be
followed by a live Q&A session at 08:45am (GMT). The presentation and
Q&A session can be accessed here:
www.pennon-group.co.uk/investor-information
(https://eur03.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.pennon-group.co.uk%2Finvestor-information&data=05%7C02%7Cccnash%40pennon-group.co.uk%7C82c2d186f6c94700c0e808dc7742b4d2%7C25d26f64e15045878705aefeb42a308c%7C0%7C0%7C638516375577033350%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=M75mZgIdqvj9YSpU7kDbKzTsK3LzyIzXsIeS4WdeNSQ%3D&reserved=0)
For further information, please contact:
Institutional equity investors and analysts
Sarah Heald - Chief Strategy, Regulatory Affairs and IR Officer 01392 443 364
James Murgatroyd - FGS 020 7251 3801
Global
Institutional debt investors
Chris Tregenna - Group 01392 44 3055
Treasurer
Retail investors
Link Asset 0371 664 9234
Services
GROUP CHIEF EXECUTIVE OFFICER'S REVIEW
The first half of 2025/26 marked a strong return to profitability and progress
in delivering for our customers, communities and the environment.
Water companies continue to face high expectations from the public, regulators
and government. Pennon is meeting these expectations head-on across all the
geographies we serve, the Isles of Scilly, Devon and Cornwall, Bournemouth,
Bristol and Sutton and East Surrey. We are delivering improved services today,
while investing in the long-term resilience and performance our regions need
for the future. Whilst there is always more to do, our performance in the
first half demonstrates Pennon's ability to lead through regulatory change and
deliver sustainable growth.
Our Pennon retail businesses continue to deliver for business customers and
are profitable. Pennon Power is continuing its build out of four sites, with
Aberdeenshire recently energised and Fife in final commissioning.
A strong start to K8, focused on delivery and efficiency
Our performance this half year reflects the work we have done to reset the
business over the last 18 months, reshaping our organisation, strengthening
governance, and putting more resources on the frontline than ever before.
These actions, together with the benefits of our operational efficiency
programme, are driving a material improvement in financial performance. We are
on track to deliver a c.60% 10 increase in underlying EBITDA year on year and
we are progressing well with our record capital programme. We are already
securing strong efficiencies, helping to offset inflationary and operational
pressures. This positions us well to meet our 7% underlying RORE target for
K8, supported by our efficient financing strategy and continued strong
liquidity, bolstered by our £300 million bond issuance in September.
We have made a strong start on our five-year capital delivery programme with
more than 1,000 schemes underway. Our 'amplify' strategic delivery alliance is
fully mobilised, and efficiencies are being realised as major projects move
from design to construction. Having ramped up expenditure during K7, we have
made a fast start with over 60% of the K8 Price Control Delivery programme in
progress.
Resilient water supplies through a hot summer
This summer brought unusually hot and dry conditions, increasing demand for
water across our five geographical regions. Thanks to the investments we made
following the 2022 drought, including new treatment capacity, repurposing
former quarries and mines as resilient resource hubs, and targeted network
upgrades, we have been able to maintain robust water supplies without
restrictions.
While higher demand has put pressure on parts of the network, contributing to
increases in leakage and interruptions, we have responded quickly with
targeted interventions, enhancing monitoring and network re-zoning. Safe,
clean drinking water remains our customers' top priority. We have strengthened
our quality assurance framework across all areas, expanding our "Quality
First" culture and training programme, and investing in additional monitoring
capabilities. Our teams continue to work closely with the Drinking Water
Inspectorate (DWI) to embed learning and ensure resilience for the future.
Pollutions halved and storm overflow spills reduced by 45%
We know customers expect to see visible progress on the environment. Pollution
incidents in our wastewater network have halved year on year and storm
overflow spills have significantly reduced by c.45%. These improvements
reflect the early impact of our long-term pollution reduction plan,
strengthening pumping station resilience, increasing storm storage, separating
surface water from the sewer system, and optimising flows across the network.
This progress also means we are targeting to achieve a net neutral Outcome
Delivery Incentive (ODI)^ position in Wastewater Services this year, a first
for South West Water since ODIs were introduced.
Supporting customers and keeping bills affordable
We continue to support more customers than ever before through our
affordability schemes. As bills rise to fund record investment, we remain
absolutely focused on ensuring those who need help receive it, and on helping
all customers use less water and save more through metering, efficiency
campaigns and targeted tariff designs.
The introduction of profiling tariffs this year has helped smooth customer
bills and manage affordability, while regulatory mechanisms ensure reprofiled
revenue is recovered in 2026/27 11 .
Our people and culture
Everything we deliver is built on the commitment of our colleagues. Our teams
have responded with professionalism and resilience throughout a period of
intense operational pressure, particularly during the hot summer months. I
would like to thank each of them. Their dedication to serving our communities
continues to inspire me every day.
As we embed our new operating model, with clear business lines for Water
Services, Wastewater Services, Pennon Power and Retail Services, we are
building a culture of accountability, technical excellence and customer focus
across the Group.
Well positioned for the future
We enter the second half of the year with strong momentum:
· Tangible environmental improvements
· A return to profitability underway
· A stable and efficient financing position to deliver on the K8 growth
period
· A major capital programme delivering at pace
· Clear progress on customer priorities
· A clear and resilient regulatory platform for K8.
While there is always more to do, the progress we have made demonstrates the
impact of our reshaping and the commitment of our people. We remain absolutely
focused on delivering for the customers and communities we serve, today and
for the long term.
Making progress on what matters most to customers, delivering on our four
priorities
We remain resolutely focused on our customer's key priorities. With record
levels of investment to come across K8, we are focused on tackling the use of
storm overflows at our beaches and reducing pollutions, protecting water
quality and enhancing resilience, driving environmental gains and supporting
our customers in making sure their bills are as affordable as they can be,
whilst delivering improved services.
Reducing pollutions and tackling the use of storm overflows
We are delivering a step change in our wastewater performance. In 2024, South
West Water was confirmed as the only company to reduce pollution incidents,
and we have made significant improvements since. In 2025 incidents have
reduced by half 12 , as a result of our Pollution Incident Reduction Plan
delivering benefits across our five pillars. Our proactive approach has
reduced repeat pollutions by c.75% in 2025. Using the EA's EPA metric of total
pollution incidents per kilometre of main, we are on track to have improved
our position for 2025 by two thirds.
In the South West, internal sewer flooding incidents have reduced by over 70%
since 2020 and c.12,000 smart network sensors using AI are now helping us
detect developing issues earlier and shift from reactive to preventative
intervention, supported by CREWW, our partnership with the University of
Exeter.
We are also resolutely focused on delivering against our 15-year programme to
2040 to reduce the use of storm overflows. Whilst rainfall has returned to
more 'normal levels', our interventions have avoided an estimated 6,000 spills
this year (c.20,000 13 over 18 months) with total storm overflow spills
reducing by c.45% over the year to date - and we have been targeting our
highest spilling sites, making gains across the region.
Over the bathing water season spills have remained consistent, maintaining a
c.20% reduction over the regulatory period, and we have seen a c.25% reduction
in the duration of these spills. Our long-term storm overflow target of fewer
than 10 spills per overflow per year by 2040 remains on track a decade early.
Our existing bathing waters have also achieved 100% 14 compliance this year.
Overall, 2025/26 ODIs in wastewater are tracking to be net neutral - a first
for South West Water since these were introduced and a demonstration of the
growing momentum and capabilities we have built.
Protecting water quality and enhancing water resilience
The top priority for our customers is safe, clean drinking water across all of
our regions and we have been investing to enhance resilience and protect water
quality.
For Water Services across our geographical regions, H1 2025/26 has been
dominated by the record hot, dry spring and summer seasons.
The resultant increased demand put our water resources under increased
pressure this year. Despite this, we ended the peak season in a better
position than many other areas with all of our operating areas having avoided
imposing usage restrictions on our customers despite higher household
consumption for the first half of the year.
The changing weather fronts have tested our networks, increasing the number of
bursts. Whilst the customer impacts have been mitigated on 70% of these, it
has been challenging for the operational teams with water supply interruptions
performance in South West Water dominated by a one-off, unforeseen incident at
Dousland. Despite the 15% increase in activity, we have held leakage at
2024/25 levels and are targeting improvements in the second half of the year.
Our leakage delivery plans include actions to address not just reported
leakage, but also upstream losses (water lost before reaching end user)
including a greater numbers of mains repairs. We remain on target for year end
mains replacement performance across all operating areas.
We are never complacent about water quality. SES remains the top performer in
the industry with South West Water upper quartile across the water and
sewerage companies. Whilst Bristol is above average, we are confident that we
can do even more as we share best practice. We continue to roll out our
successful Quality First culture and training programme in Bristol, with plans
to replicate in SES.
Driving environmental gains
A healthy environment is important for our region, and in the face of climate
change, ecological decline and greater recreational use of rivers and seas,
customers and stakeholders rightly tell us that they expect environmental
leadership from us as a priority.
During this half year, our Peatland Programme has been delivering impactful
restoration and engagement, including over 350 volunteer hours contributed to
vegetation and invertebrate monitoring, 50 stakeholder events engaging
regulators and partners, and planned restoration of over 300 hectares
involving over 15 stakeholders.
Our award-winning catchment management programme, which has worked in c.95% of
our catchments with over 2,000 farms across 144,610 hectares of land,
restoring c.5,000 hectares of peatland, is leading the way for biodiversity
gains as well as continuing to help the way others manage their land, improve
water quality, biodiversity and climate resilience.
Our Upstream Thinking Programme, which has just celebrated its 15(th) year,
has been recognised with two major industry awards during this half year:
· Biodiversity Challenge Award for Water Management (CIRIA)
· Natural Capital Initiative of the Year (Water Industry Awards)
Since we completed our baseline in 2020/21, we have achieved a c.45% reduction
in emissions 15 . With our commitment to Net Zero, our investment in Pennon
Power has continued with two of our four sites, Fife and Aberdeenshire, fully
constructed with Aberdeenshire recently energised and the Fife site (including
the co-located 60 MWh battery storage unit) is in final commissioning. The
remaining two sites are scheduled to be operational by Q2 2026/27. Pennon
Power has contractual protections against the delays incurred at Fife. By
2030, these sites will be generating the equivalent of c.40% 16 of current
energy consumption. Equity returns are expected to be in the range of 11% to
15% 17 .
Our £20 million investment in CREWW, continues to lead the way with our
state-of-the-art microplastics lab, researching some of the most important
challenges facing the sector and society, from micro-plastics in sewage
sludge, to future fibres and plastics in clothes. And as we look to support
the removal of 40,000 lead pipes, supporting the commitment to be lead free by
2050.
Supporting affordability, delivering for customers
This half year has been defined by both increased customer contact and
heightened sensitivity to affordability, following bill price rises introduced
for our customers and across the wider industry. Understandably, many
customers have reached out to discuss their bills and, for some, to seek
support in managing payments.
In response to this, we have bolstered our front-line capacity with additional
resources to ensure customers can reach us more quickly and receive the right
support. This has helped us reduce call waiting times and improve speed to
answer. We continue to invest in our new billing system and customer
platforms, using AI to improve the customer and contact experience.
We continue to provide tailored help to those who need it most, with over
164,000 customers supported through affordability and payment-assistance
schemes - a c.20% increase from H1 2024/25. This number that continues to grow
as we extend our reach and partnerships with local authorities and community
organisations. This is also coupled with our largest ever package of support
of over £200 million to 2030, to help those who are struggling to pay,
including providing proactive transfers onto support tariffs where needed.
Additionally, our Priority Services Register now has 266,000 customers
registered to receive tailored support meaning one in seven households across
our Group are now listed. Cash collections remain robust, with debt charges as
a percentage of revenue broadly stable.
Over this half year, South West Water hosted 290 drop-in sessions, engaging
with over 5,000 customers, with other regions contributing additional sessions
and footfall. Customer engagement events were another major success, with
South West Water reaching customers through 12 major events, and many smaller
ones across our regions.
To provide further support to our communities, Pennon has launched the £5
million Better Futures Fund which has benefitted over 55,000 people to date.
£2.5 million of the fund will go towards alleviating hardship, with the
remaining £2.5 million for community groups involved with physical activity,
education, health and wellbeing, and positive environmental impacts.
We also continue to be fully committed to listening to and engaging with our
customers through our WaterShare+ programme, which gives customers both a
voice and a stake in how our business is run. Regular customer panels, chaired
by independent members and attended by executive leaders, and engagement
sessions are held across all our regions including our customer AGM in
Bournemouth. These sessions give customers the opportunity to share their
views on our performance and record investment plans. With nearly 100,000
shares now issued, and an ambition to reach one in ten customers as
shareholders by 2030, WaterShare+ remains a unique way of deepening trust,
transparency and accountability across Pennon.
Record investment and growth for K8
By accepting our Final Determination early, we secured funding certainty,
raised equity from our investors and moved straight into K8 mobilisation. We
have delivered a strong start to investment in K8, with £304.8 million in the
first half of 2025/26 which is on track and in-line with our expected early
phase of investment. This is being supported by our capital delivery supply
chain partnership 'amplify' through which we have over 1,000 deliverables
mobilised, representing around one-third of K8 investment, focused on
resilience, environmental outcomes and customer experience.
By partnering with amplify, we have secured some of the best talent and
organisations across a range of suppliers and local partners to help deliver
our largest ever capital programme efficiently. 23 frameworks have been up and
running since 2024, delivering a combination of hundreds of transformative and
targeted interventions shaped by our customers' priorities. Our £760 million
Turning the Tide initiative, a transformative environmental programme, is
already underway focused on tackling storm overflows at our region's bathing
beaches - with the major project in Dawlish soon to complete.
100% of our Year-1 WINEP 18 schemes are also underway with our delivery
partners, and all water and wastewater schemes remain on track. Strong
efficiencies are being secured as projects progress from design into delivery,
with c.£100 million of totex^ outperformance identified.
Our investment in Pennon Power of £25.2 million during this half year
reflects the accelerated progress across the sites and the ongoing commitment
to deliver the Group's Net Zero targets, as well as offsetting energy price
volatility across the Group once sites reach operation.
Shaping and supporting regulatory reform
This is a year of significant change for our sector, with the Independent
Water Commission's Final Report in the Summer setting a clearer and more
coherent long-term direction for how the water system should be planned,
regulated and governed. The Commission's recommendations aim to deliver a more
transparent, accountable, and outcomes-focused framework that can support the
scale of environmental and resilience investment the country now requires.
Pennon has been closely engaged throughout the review process, shaping
proposals that support long-term system planning, stronger alignment across
sectors and a regulatory environment that is both rigorous and investable. We
welcome the ambition to create a framework that provides clarity over the long
term while maintaining high standards of performance and accountability.
The process of moving from recommendation to implementation is now underway.
Government has already outlined early commitments, including steps towards
establishing a new single regulator bringing together Ofwat and the Drinking
Water Inspectorate, with water functions from the Environment Agency and
Natural England, the creation of a statutory water ombudsman, greater
transparency through enhanced monitoring, a regional element in the new
regulator and a commitment to investability. These initial developments signal
positive momentum and provide early clarity for companies and investors as the
new arrangements take shape.
We also support the direction towards a more streamlined, outcomes-focused
performance framework. A smaller number of clearer incentives, aligned to the
priorities that matter most for customers and the environment, will help
strengthen transparency and provide a more stable basis for long-term
investment.
A core theme of the Commission's work is the need to restore confidence in the
sector's investment framework. Achieving national goals on water quality,
resilience and asset health will require sustained, long-term capital
investment, underpinned by a regulatory regime that recognises risk and
enables a fair and stable return. We strongly support this direction. Through
Water UK, and directly with Government and regulators, we are working
constructively to support transition planning and ensure that the emerging
arrangements deliver a system that is investable, aligned with long-term
priorities and able to support delivery at pace.
We expect the reforms to deliver:
· Clear long-term direction for UK water
· New single regulator and supervisory regime
· Customer focused
· Clear plans for improving water quality
· Securing water resilience
· A fair deal for investors, balancing risk and reward.
Pennon remains well positioned to play a leading role as the sector enters
this next phase of reform, while continuing to invest for customers,
communities and the environment.
K8 reporting frameworks - a more holistic view of performance
Under the EA's recently announced EPA guidance for 2026-2030, the sector will
see a significant increase in reportable pollution incidents due to the
changes made. In particular, South West Water's underlying operational
performance will be better reflected under the new and balanced methodology.
The newly refreshed Water Company Performance Report (WCPR), which categorises
companies as leading/average/lagging, also provides a clearer comparison
across companies, and reflects a broader range of performance measures - not
just ODIs. SES Water is expected to return to 'average' after last year's
one-off event, demonstrating the framework recognises credible recovery and
sustained improvement.
Our people
With a history and heritage built up over many years, we continue to learn,
innovate and grow. Everyone who works at Pennon is fiercely proud of our
heritage in the water sector, with generations of fathers, sons, mothers and
daughters, who have dedicated their lives to water, and I am extremely proud
of our brilliant teams. It's not always been easy for them with a sector in
the spotlight. As President of the Institute of Water, I was therefore
delighted to host our 80(th) anniversary celebration in Plymouth in September,
showcasing the best of what we do across Pennon, and marking eight decades of
developing our people and the sector.
Our c.3,600 talented colleagues don't just bring water to life every day; we
drive economic growth, and break down barriers to opportunity, supporting
livelihoods in the areas we serve. As one of the largest private employers in
the South West, and across the Group, leadership is all about making this a
great place to work, and a safe place to work. Our Glassdoor external
assessments are now tracking towards best-in-class levels. Our health and
safety track record has improved for the past five years, as we focus on
making sure everyone who works for us and with us, goes home safe every single
day, through our Home Safe culture programme, and with our lowest ever
LTIFR 19 rate, which has halved over the last five years.
Our partnerships with the wider supply chain and our 'amplify' alliance more
than doubles our workforce and plays a critical role in the regions too. As
a living wage employer, we continue to invest in skills and jobs, with our
earn and learn approach and have just been awarded platinum status member of
the 5% club for the second year running. With our 680 apprenticeship and
graduate placements we are well on with our own target of 1,000 by 2030. We
are focused on making sure we have the talent and trained colleagues we need
across the sector for our record investment and delivery.
GROUP CHIEF FINANCIAL OFFICER'S REVIEW
The Group has delivered a strong return to profitability in the first half of
the 2025/26 financial year, consistent with the expectations outlined in our
September Trading Statement. This performance reflects the strength of our
core operations, the impact of regulatory outcomes, and the disciplined
execution of our integration and operational efficiency agenda despite ongoing
inflationary and cost pressures.
Group revenue increased by 24.8% to £658.1 million (H1 2024/25: £527.2
million), primarily driven by the benefit of increased regulatory revenue
allowances (net of c.£20 million of revenue reprofiled into 2026/27 customer
bills) 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.
Group operating costs rose by 11.0% year on year to £403.7 million (H1
2024/25: £363.7 million), principally reflecting wholesale water costs in the
retailers (across their national customer base) increasing by c.22%, with
operating costs for the Water Group rising broadly in line with inflation.
Underlying EBITDA increased by 55.6% to £254.4 million (H1 2024/25: £163.5
million), demonstrating the operational leverage achieved through revenue
growth and cost discipline.
Depreciation and amortisation rose modestly to £95.8 million (H1 2024/25:
£94.0 million), reflecting the Group's expanding asset base from the ongoing
capital investment programme.
Net financing costs increased to £93.4 million (H1 2024/25: £88.6 million),
reflecting higher levels of borrowing to support the K8 capital programme and
strategic investment in Pennon Power.
As a result, the Group reported a statutory profit before tax of £65.9
million, a step change from the £38.8 million statutory loss before tax
reported in H1 2024/25.
Our integration and operational efficiency programmes continue to deliver
material benefits. As of 30 September 2025, we have fully delivered our target
efficiencies and operational benefits, supported by efficiencies achieved
through the integration of both Bristol Water and SES Water, and the reshaping
of the Group to right size and right source the skills and delivery capability
we need to meet our ambitious plans to 2030.
Capital expenditure during the period totalled £304.8 million, reflecting our
commitment to delivering improved services, network resilience, and
environmental outcomes across our regions. This includes £25.2 million
invested in Pennon Power, supporting our renewable energy and decarbonisation
strategy. Our Water Group investments are aligned with our K8 delivery roadmap
and underpin our ability to meet our stretching performance commitments.
Pennon Group gearing, based on net debt (excluding other non-cash
indebtedness) at 30 September 2025 and expected shadow RCV at 31 March 2026,
was 63.2%, comfortably within our policy parameters whilst our Water Group
gearing remained strong at 59.8%, and South West Water at 60.1%.
Both South West Water and SES Water continue to maintain strong
investment-grade credit ratings, enabling access to competitive financing. In
September, South West Water successfully executed a 6-year £300 million bond
issuance in the public sterling market, providing 109 basis points of
outperformance against the iBoxx, further strengthening our liquidity position
and funding capacity. Total new borrowings to September 2025 across the Group
totalled £515 million.
In line with Pennon's 2025-2030 dividend policy of CPIH, the Board has
declared an interim dividend of 9.26 pence per share for the half year ended
30 September 2025 (H1 2024/25: 12.14 pence per share, restated 20 (#_ftn11)
). This reflects our continued confidence in the Group's financial strength
and long-term value creation strategy.
Group performance - summary
Revenue Underlying EBITDA
£m £m £m £m
H1 2025/26 H1 2024/25 H1 2025/26 H1 2024/25
South West Water 479.2 371.3 245.0 150.7
SES Water 39.3 41.6 11.5 15.3
Total Water Group 518.5 412.9 256.5 166.0
Retail* 135.8 110.0 3.4 4.6
Other 3.8 4.3 (5.5) (7.1)
Group 658.1 527.2 254.4 163.5
*includes water segment wholesale elimination
The Group's revenue for H1 2025/26 was £658.1 million (H1 2024/25: £527.2
million) an increase of 24.8% year on year. Water Group revenue increased by
£105.6 million or 25.6%, driven by the positive impact of the Final
Determination, which was accepted at the start of the calendar year for both
South West Water and SES Water, net of c.£20 million allowed revenues
reprofiled into 2026/27. These regulatory changes have provided a stable
platform for growth and a reset for the K8 regulatory period. Non-household
retail revenue increased by £25.8 million to £135.8 million.
Overall, the Group's underlying EBITDA has increased 55.6% from £163.5
million to £254.4 million. This has been supported by the increase in Water
Group revenue and continued focus on operational efficiency, underscoring the
resilience of our business model and the benefits of strategic investment in
transformation initiatives.
Cash collections across the Group have remained robust during the financial
year. Expected credit loss charges for H1 2025/26 of £9.0 million (H1
2024/25: £6.5 million) for the Group (1.4% of revenue) are broadly in line
with previous levels (H1 2024/25: 1.2%), reflecting effective management of
customer debt, despite the increase in tariffs, and our ongoing commitment to
affordability and support schemes for those in need.
The Group reported a statutory profit before tax of £65.9 million (H1
2024/25: loss of £38.8 million) with £nil non-underlying items (H1 2024/25:
£20.2 million). The Group recognised an underlying profit before tax of
£65.9 million (H1 2024/25: underlying loss of £18.6 million).
Segmental performance - Water businesses
The Water Group has seen revenue increase by 25.6% in H1 2025/26 from £412.9
million to £518.5 million. This growth reflects tariff increases resultant
from the commencement of the K8 regulatory period, coupled with higher year on
year customer usage, offset by customers choosing to move to metered supply
and tariff impacts being managed across the five year regulatory cycle.
Underlying operating costs for the Water Group amounted to £262.0 million in
H1 2025/26 (H1 2024/25: £246.9 million) an increase year on year 6.1%. This
increase reflected inflationary cost pressures of c.4% (in-line with
inflation), and additional one-off costs of c.£9 million including c.£4.0
million in customer compensation from the Dousland water supply incident. Our
efficiency programme has delivered benefits, helping to mitigate these
pressures whilst hedging of power prices has resulted in lower year on year
power prices.
The Water Group's underlying EBITDA increased by 54.5% year on year to £256.5
million.
Underlying operating profit for the Water Group has more than doubled, up
115.5% to £162.5 million (H1 2024/25: £75.4 million) reflecting the improved
EBITDA performance, offset by an increase in the depreciation charges of £3.4
million compared to last year, in line with our ongoing capital investment
programme.
Net finance costs of the Water Group in H1 2025/26 of £94.6 million (H1
2024/25: £89.9 million), reflect an effective interest rate^ of 5.6% (H1
2024/25: 5.4%) The year on year increase of £4.7 million was as a result of
higher debt, funding the ongoing capital programme, partially offset by lower
interest rates.
The Water Group's statutory profit before tax was £67.9 million (H1 2024/25:
loss of £34.0 million) after non-underlying items of £nil (H1 2024/25:
£19.5 million), marking a significant improvement in financial performance.
The Water Group's capital expenditure in H1 2025/26 was £279.2 million (H1
2024/25: £315.8 million), a continuation of the high levels of investment
required during K8.
Segmental performance - Non-household retail
Our non-household retailers, Pennon Water Services 21 and SES Business Water,
have seen a total revenue increase of 23.5% to £135.8 million 22 (H1
2024/25: £110.0 million) in line with underlying tariff increases across
wholesale water charges. This has resulted in increased market engagement by
customers, with our retailers focusing on providing strong customer service
and continuing to target high quality, sustainable customers to retain
existing and new customers.
Operating costs have increased during the half year due to the underlying
wholesale increases; other operating costs remain under control despite cost
pressures from rising employee and supplier costs.
During the half year, Pennon Water Services incurred additional spend
regarding IT system enhancement work, which will drive efficiencies and
improved customer service once in place. As a result, non-household retail
EBITDA has decreased this half year period to £3.4 million (H1 2024/25: £4.6
million).
The businesses continue to maintain focus on targeting high quality,
sustainable customers who will benefit from the value-added services, with new
annualised contract wins of c.£9.1 million secured during the first half of
the year.
Segmental performance - Other
The Other segment comprises the result of Pennon Group plc company and other
Group businesses, including the ancillary businesses of SES. The Other segment
contributed an underlying loss before tax of £3.5 million in H1 2025/26 (H1
2024/25: loss before tax of £6.7 million) with non-underlying items of £nil
(H1 2024/25: £0.7 million).
Group finance costs (net)
Net financing costs of £93.4 million (H1 2024/25: £88.6 million) reflect an
increase of £4.8 million year on year, this is primarily due to a £21.4
million increase relating to new debt facilities, offset by lower inflation
and interest rates (£12.6 million), increased interest receivable as a result
of higher cash levels (£5.2 million) and capitalised interest has remained
stable as we continue to invest at the same run rate for our capital programme
(£12.6 million) (H1 2024/25: £12.1 million).
Net financing costs for the Water Group (£94.6 million) reflect the
decreasing inflation rates offset by increased levels of borrowing in South
West Water. If the indices on index-linked borrowings had been on average 1.0%
higher/lower, with all other variables held constant, this would equate to a
c.£7.0 million increase/reduction in the interest charge.
South West Water continues to secure funding through its Sustainable Financing
Framework and to ensure at least 85% of its interest rate risk is mitigated in
line with the Group Treasury Policy, which is achieved both through issuing
fixed rate debt and effective interest rate hedging, with a further element
being index-linked.
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 £0.7 million of profit after tax in our H1 2025/26
results (H1 2024/25: £0.5 million), an increase of 40.0%.
Responsible approach to tax
We are proud of our responsible approach to tax and continue to be fully
committed to paying our fair share of tax and acting in an open and
transparent manner in relation to our tax affairs.
The Group is pleased to confirm it has once again maintained the Fair Tax Mark
accreditation, having been the first water company to achieve this status in
the UK. This is the eighth year in succession that the Group has been awarded
the accreditation. Achieving the Mark demonstrates that we are paying the
right amount of Corporation Tax at the right time and applying the gold
standard of transparency.
The overall H1 2025/26 tax charge for the Group was £8.6 million (H1 2024/25:
credit of £8.8 million). On an underlying basis, the tax charge for H1
2025/26 for the Group of £8.6 million (H1 2024/25: credit of £3.9 million)
consisted of:
· Deferred tax charge of £8.7 million (H1 2024/25: credit of £4.0
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 credit of £0.1 million (H1 2024/25: charge of £0.1
million) relating solely to prior year items.
There was a non-underlying deferred tax charge in the year of £nil (H1
2024/25: credit of £4.9 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 for
the foreseeable future and therefore does not expect to make any corporation
tax payments in the immediate future.
Earnings per share
The Group has recorded a statutory earnings per share of 12.1 pence per share
for the half year ended 30 September 2025 (H1 2024/25: loss of 8.8 pence per
share, restated 23 ), reflecting the improved financial performance of the
Group year on year.
Our adjusted earnings per share excludes the impact of deferred tax charges
and non-underlying items. For the Group, we have generated adjusted earnings
per share for H1 2025/26 of 14.0 pence (H1 2024/25: loss of 5.5 pence per
share, restated(23)).
Movement in Net debt
Pennon Group - summarised net debt flow (£m) H1 2025/26 flows
Net debt excluding other non-cash indebtedness - 1 April (3,936.2)
Opening balance 1 April - statutory basis (4,078.2)
Cash generated from operations 261.5
Corporation tax received 1.0
Net interest paid (95.4)
Capital investment^ (285.4)
Share Issue transaction costs net of share forfeitures (3.8)
Ordinary dividends paid (133.7)
Proceeds from dividend forfeiture 1.7
Non-cash index-linked accretion (6.6)
Other movements 24 (0.4)
Closing balance 30 September - statutory basis (4,339.3)
Net debt excluding other non-cash indebtedness - 30 September (4,201.6)
The Group's cash flow from operating activities for H1 2025/26 was £261.5
million (H1 2024/25: £125.4 million).
Net interest payments in H1 2025/26 were £95.4 million (H1 2024/25: £60.5
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 capital expenditure cash outflows in H1
2025/26 of £285.4 million (H1 2024/25: £355.9 million).
Other significant movements in net debt in H1 2024/25 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) and £6.6 million (H1 2024/25:
£7.1 million) of non-cash indexation on our loan instruments.
Net debt
The Group's net debt on a statutory basis at 30 September 2025 was £4,339.3
million (31 March 2025: £4,078.2 million). This includes acquisition-related
fair value adjustments of £106.6 million (31 March 2025: £109.8 million)
which are released over the life of the related debt instruments and other
non-cash accounting adjustments of £31.1 million (31 March 2025: £32.2
million). The Group's net debt position excluding these adjustments is
£4,201.6 million (31 March 2025: £3,936.2 million).
Robust liquidity and flexible funding strategy
Group debt at 30 Sept 2025 (£m) Gross debt Net debt
Pennon Group Plc 347.0 298.7
Water Group 4,347.2 3,870.5
South West Water 25 4,076.0 3,652.9
SES Water 271.2 217.6
Other Group companies 212.3 190.1
Intercompany borrowing eliminations (157.7) (157.7)
Total adjusted Group (excluding FV and hedging) 4,748.8 4,201.6
Non-cash indebtedness 26 137.7 137.7
Total Group net debt - statutory basis 4,886.5 4,339.3
As at 30 September 2025, the Group had £1,107.2 million of cash and committed
facilities (31 March 2025: £1,036.1 million). This consists of cash and cash
deposits of £547.2 million (31 March 2025: £476.1 million), including £58.4
million (31 March 2025: £58.2 million) of restricted funds representing
deposits against future obligations, and £560.0 million (31 March 2025:
£560.0 million) of undrawn committed facilities.
Since 31 March 2025, the Group has secured £515 million of new debt, through
its diverse portfolio of debt, consisting of:
· £150 million in private placements with an average maturity of c.5
years
· £300 million in public bond issuances under our EMTN 27 programme
· £65 million of new term loans and leasing with an average maturity
of 6 years (currently undrawn).
An additional £85 million of new and renewed revolving credit facilities have
been signed to support the prefunding position - these remain undrawn.
The bond issuance continues to utilise our £2.5 billion EMTN programme, which
allows us to issue funding across the forthcoming regulatory period to fund
the growth in the business and improvement in services reflected in our
Business Plan.
Pennon Group company raised a further £150 million to support the Group and
refinance a loan facility, whilst the market remains challenging for
non-operating company financing, the financing reflects the support available
to the business and the level of understanding of the sector by debt
investors.
Resulting from the changes above coupled with drawdowns of new debt during the
year, South West Water gross debt at 30 September 2025 was £4,076.0 million
(31 March 2025: £3,815.9 million). The debt has a maturity of up to 32 years
with a weighted average maturity of 12 years.
South West Water net debt at 30 September 2025 is a mix of fixed/swapped
(£2,641.2 million, 72.3%), floating (£234.3 million, 6.4%) and index-linked
borrowings (£777.4 million, 21.3%), which reflects our diverse debt
portfolio. Where appropriate, derivatives are used to fix the rate on floating
rate debt.
At 30 September 2025, the Water Group net debt to RCV stood at 59.8% with an
average cost of debt of 5.6%.
South West Water's net debt to RCV ratio 28 stood at 60.1% (31 March 2025:
62.0%). This is due to the increase in RCV in the current year, consequent on
capital investment, whilst net debt has benefitted from stronger operating
cashflows, offset by ongoing capital investment. South West Water's cost of
finance, with an effective interest rate in 2025/26 of 5.5% (31 March 2025:
5.4%), continues to benefit from the diverse portfolio of debt, providing over
160 basis points of outperformance in H1 2025/26.
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 have reduced to 55.9%, 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 8.2%. As a material component
of this debt book is index linked, it is anticipated this rate will decrease
as UK inflation rates reduce. In addition, over time, as the legacy debt
matures, we anticipate it will also benefit from being part of the diverse
debt portfolio and hedging strategy employed by the wider Group.
Return on Regulated Equity (RORE)
We continue to target a return on regulated equity of 7% over the five year
period, and are on track to deliver in the current year through efficient
financing costs 29 , with totex benefits offsetting potential ODI penalties.
Dividends
In January 2025, the Board announced our dividend policy to 2030 of growing
the base dividend in line with CPIH. As a result, a final dividend of 19.43
pence per share was declared for the year ended 31 March 2025. For H1 2025/26,
the Board are recommending an interim dividend of 9.26 pence per share.
The proposed interim dividend for 2025/26 is increased by 4.1% year on year to
£43.7 million (2024/25: £42.0 million). This reflects an increase in line
with CPIH. The comparison on a per share basis reflects the new shares issued
under our rights issue commenced in January 2025. Current year interim
dividends are covered 5.8 times by underlying EBITDA (2024/25: 3.9 times).
Pennon Group plc has substantial 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
with its strong RORE and growing RCV. Dividends are charged against retained
earnings in the year in which they are declared.
TECHNICAL GUIDANCE FOR FY 2025/26
FY 2024/25 Change
Revenue* • Regulated Water Group revenue increasing by £185-£210 million £1,047.8m ▲
• Non-household retailers' revenue increase in line with sector wide
tariff increases
• Pennon Power first revenues from H2, following energisation
Operating costs* • Operating costs in the Water business stabilising in line with (£712.2m) ▲
inflation, with upward cost pressures offset by operational efficiency
programmes.
• Non-household retailer costs increased in-line with as sector wide
wholesale charge increases
EBITDA* • Group EBITDA increasing by c.60% 30 (#_ftn21) year on year £335.6m ▲
Depreciation* • Increase by c.5-10% as a result of ongoing investment programme and (£187.1m) ▲
as Pennon Power projects are commissioned
Net interest • Financing costs (net) increase with new debt, offset by lower (£184.4m) ▲
inflation and interest rates
Capital expenditure • £710-740 million Group wide capital investment £652.5m ▲
• Front loaded Water Group investment over K8 to deliver early
benefits
• Ongoing construction for Pennon Power projects, with Aberdeen
energisation
RORE* • Targeting 7% over K8 (including 30bps uplift for enhanced K8 6.0% ▲
Business Plan)
• On track for RORE in FY 2025/26 supported by financing
outperformance
• Totex efficiency offsetting the impact of ODIs over 2025/26
*Underlying basis
PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risks
During the year, there have been continued sector specific and broader
geopolitical developments that have created an environment of continued
heightened risk and uncertainty. Notwithstanding that from a regulatory
perspective there is certainty as a result of the PR24 Final Determination,
there remains continued focus on the financeability of the broader sector as
well as ongoing government-commissioned reviews of the sector, the impact of
global trade wars and of the continued war in Ukraine impacting operational
costs and energy prices.
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.
The Group's principal risks are:
Law, Regulation and Finance
1. Changes in Government policy
2. Changes in regulatory frameworks and requirements
3. Non-compliance with laws and regulations
4. Inability to secure sufficient finance and funding, within
our debt covenants, to meet ongoing commitments
5. Non-compliance or occurrence of an avoidable health and
safety incident
6. Failure to pay all pension obligations as they fall due and
increased costs to the Group should the defined benefit pension scheme deficit
increase
Market and Economic Conditions
7. Macro-economic near-term risks impacting on inflation,
interest rates and power prices
Operating Performance
8. Failure to secure, treat and supply clean drinking water
9. Failure to improve wastewater performance resulting in
environmental commitments not being delivered
10. Failure to provide excellent service or meet the needs and
expectations of our customers and communities
11. Inability to attract and retain staff with the skills to
deliver the Group's strategy
Business Systems and Capital Investment
12. Insufficient capacity and resilience of the supply chain to
support the delivery of the Group's operational and capital programmes in K8
13. Inadequate technological control or cyber-attack results in a
breach of the Group's assets, systems and data
Financial Timetable
26 February 2026 Ordinary shares quoted ex-dividend
27 February 2026 Record date for interim dividend
March 2026 Pennon Trading Statement
9 March 2026 Final date for receipt of DRIP applications
3 April 2026 Interim dividend payment date
2 June 2026 Full Year Results 2025/26
June 2026 Annual Report and Accounts Published
July 2025 Annual General Meeting 2026
July 2025 Pennon Q1 Trading Update
July 2025* Ordinary shares quoted ex-dividend
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 published in June 2025. 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 half year ended 30 September 2025
Unaudited
Before non-underlying items Non-underlying items (note 5) half year ended 30 September 2025 Total Before non-underlying items Non-underlying items (note 5) half year ended 30 September 2024 Total
half year
half year
half year
half year ended 30 September 2024
ended 30 September 2025
ended 30 September 2025
ended 30 September 2024
Notes £m £m £m £m £m £m
Revenue 4 658.1 - 658.1 527.2 - 527.2
Operating costs
Employment costs (75.9) - (75.9) (79.6) (0.9) (80.5)
Raw materials and consumables used (31.9) - (31.9) (26.3) (0.2) (26.5)
Trade receivables impairment (9.0) - (9.0) (6.5) - (6.5)
Other operating expenses (286.9) - (286.9) (251.3) (19.1) (270.4)
Earnings before interest, tax, 4 254.4 - 254.4 163.5 (20.2) 143.3
depreciation and amortisation
Depreciation and amortisation (95.8) - (95.8) (94.0) - (94.0)
Operating Profit 4 158.6 - 158.6 69.5 (20.2) 49.3
Finance income 6 10.0 - 10.0 7.9 - 7.9
Finance costs 6 (103.4) - (103.4) (96.5) - (96.5)
Net finance costs 6 (93.4) - (93.4) (88.6) - (88.6)
Share of post-tax profit from associated companies 0.7 - 0.7 0.5 - 0.5
Profit / (loss) before tax 4 65.9 - 65.9 (18.6) (20.2) (38.8)
Taxation (charge) / credit 7 (8.6) - (8.6) 3.9 4.9 8.8
Profit / (loss) for the period 57.3 - 57.3 (14.7) (15.3) (30.0)
Attributable to:
Ordinary shareholders of the parent 57.2 - 57.2 (15.0) (15.3) (30.3)
Non-controlling interests 0.1 - 0.1 0.3 - 0.3
Earnings / (loss) per ordinary share 8
(pence per share)*
- Basic 12.1 (8.8)
- Diluted 12.1 (8.8)
* Earnings per ordinary share restated for 2024, see note 8
The Group activities above are derived from continuing activities.
The notes on pages 28 to 45 form part of this condensed half year financial
information.
PENNON GROUP PLC
Consolidated statement of comprehensive income for the half year ended 30
September 2025
Unaudited
Before non-underlying items Non-underlying items (note 5) half year ended 30 September 2025 Total Before non-underlying items Non-underlying items (note 5) half year ended 30 September 2024 Total
half year
half year
half year
half year ended 30 September 2024
ended 30 September 2025
ended 30 September 2025
ended 30 September 2024
£m £m £m £m £m £m
Profit / (loss) for the period 57.3 - 57.3 (14.7) (15.3) (30.0)
Other comprehensive (loss) / income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit (11.5) - (11.5) 14.4 - 14.4
obligations (note 16)
Income tax on items that will not be reclassified 2.7 - 2.7 (3.6) - (3.6)
Total items that will not be (8.8) - (8.8) 10.8 - 10.8
reclassified to profit or loss
Items that may be reclassified subsequently
to profit or loss
Loss on cashflow hedging* (8.1) - (8.1) (18.0) - (18.0)
Hedging losses recycled to profit and loss* 3.8 - 3.8 8.1 - 8.1
Income tax on items that may be reclassified 1.1 - 1.1 2.6 - 2.6
Total items that may be reclassified (3.2) - (3.2) (7.3) - (7.3)
subsequently to profit or loss
Other comprehensive (loss) / income for the period net of tax (12.0) - (12.0) 3.5 - 3.5
Total comprehensive income / (loss) for the period 45.3 - 45.3 (11.2) (15.3) (26.5)
Total comprehensive income / (loss) attributable to:
Ordinary shareholders of the parent 45.2 - 45.2 (11.5) (15.3) (26.8)
Non-controlling interests 0.1 - 0.1 0.3 - 0.3
*Movements on cash flow hedges were presented net in 2024, the presentation
has been restated to present as gross, see note 2 for further detail.
The notes on pages 28 to 45 form part of this condensed half year financial
information.
PENNON GROUP PLC
Consolidated balance sheet at 30 September 2025
Unaudited Audited
30 September 2025 31 March
2025
ASSETS Notes £m £m
Non-current assets
Goodwill 179.9 179.9
Other intangible assets 17 62.9 62.2
Property, plant and equipment 17 6,063.0 5,849.4
Other non-current assets 7.8 8.7
Financial assets at fair value through profit and loss - 0.6
Derivative financial instruments 19.3 22.4
Investments in associated companies 2.5 1.8
Retirement benefit assets 16 8.5 22.0
6,343.9 6,147.0
Current assets
Inventories 13.1 12.8
Trade and other receivables 461.5 391.8
Current tax receivable - 0.9
Financial assets at fair value through profit and loss 0.2 -
Derivative financial instruments 7.2 9.8
Cash and cash equivalents 14 488.8 417.9
Restricted funds 14 58.4 58.2
Retirement benefit assets 16 11.1 9.2
1,040.3 900.6
LIABILITIES
Current liabilities
Borrowings 14 (224.9) (257.4)
Financial liabilities at fair value through profit and loss - (0.3)
Derivative financial instruments (0.8) (0.5)
Trade and other payables 18 (413.4) (331.0)
Provisions (1.2) (6.8)
(640.3) (596.0)
Net current assets 400.0 304.6
Non-current liabilities
Borrowings 14 (4,661.6) (4,296.9)
Other non-current liabilities 18 (178.2) (171.3)
Derivative financial instruments (2.9) (1.6)
Deferred tax liabilities (535.5) (530.6)
Provisions (0.6) (0.5)
(5,378.8) (5,000.9)
Net assets 1,365.1 1,450.7
Shareholders' equity
Share capital 10 288.1 288.1
Share premium account 11 755.6 755.0
Capital redemption reserve 12 157.1 157.1
Retained earnings and other reserves 161.7 248.0
Total shareholders' equity 1,362.5 1,448.2
Non-controlling interests 2.6 2.5
Total equity 1,365.1 1,450.7
The notes on pages 28 to 45 form part of this condensed half year financial
information.
PENNON GROUP PLC
Consolidated statement of changes in equity for the half year ended 30
September 2025
Unaudited
Share capital Share premium account (note 11) Capital redemption reserve Retained earnings and other reserves Non-controlling interests Total equity
(note 10)
(note 12)
£m £m £m £m £m £m
At 1 April 2024 174.6 398.2 157.1 431.3 1.4 1,162.6
(Loss) / profit for the period - - - (30.3) 0.3 (30.0)
Other comprehensive income for the period - - - 3.5 - 3.5
Total comprehensive loss for the period - - - (26.8) 0.3 (26.5)
Transactions with equity shareholders:
Dividends paid - - - (126.9) - (126.9)
Adjustments in respect of share-based - - - 1.1 - 1.1
payments (net of tax)
Own shares acquired by the Pennon Employee - - - (1.2) - (1.2)
Share Trust in respect of Share options
Transaction costs arising on shares issued - (0.2) - - - (0.2)
Total transactions with equity shareholders - (0.2) - (127.0) - (127.2)
At 30 September 2024 174.6 398.0 157.1 277.5 1.7 1,008.9
Unaudited
Share Share premium account (note 11) Capital redemption reserve Retained earnings and other reserves Non-controlling interests Total equity
capital
(note 10) (note 12)
£m £m £m £m £m £m
At 1 April 2025 288.1 755.0 157.1 248.0 2.5 1,450.7
Profit for the period - - - 57.2 0.1 57.3
Other comprehensive loss for the period - - - (12.0) - (12.0)
Total comprehensive income for the period - - - 45.2 0.1 45.3
Transactions with equity shareholders:
Dividends paid - - - (133.7) - (133.7)
Dividends forfeited - - - 1.7 - 1.7
Adjustments in respect of share-based - - - 1.3 - 1.3
payments (net of tax)
Own shares acquired by the Pennon Employee - - - (0.8) - (0.8)
Share Trust in respect of Share options
Sale of Share forfeiture shares - 0.6 - - - 0.6
Total transactions with equity shareholders - 0.6 - (131.5) - (130.9)
At 30 September 2025 288.1 755.6 157.1 161.7 2.6 1,365.1
The notes on pages 28 to 45 form part of this condensed half year financial
information.
PENNON GROUP PLC
Consolidated statement of cash flows for the half year ended 30 September 2025
Unaudited
Half year ended 30 September 2025 Half year
ended 30 September
2024
Notes £m £m
Cash flows from operating activities
Cash generated from operations 13 261.5 125.4
Interest paid (103.1) (64.6)
Tax received 1.0 3.0
Net cash generated from operating activities 159.4 63.8
Cash flows from investing activities
Interest received 7.7 4.1
Purchase of property, plant and equipment (285.0) (352.1)
Deposit of restricted funds (0.2) (0.7)
Purchase of intangible assets (1.9) (4.7)
Proceeds from sale of property, plant and equipment 1.5 0.9
Net cash used in investing activities (277.9) (352.5)
Cash flows from financing activities
Purchase of ordinary shares by the Pennon Employee Share Trust (0.8) (1.2)
Proceeds from share forfeitures 0.6 -
Share issue transaction costs (4.4) -
Proceeds from new borrowings 502.4 655.1
Repayment of borrowings (158.8) (246.9)
Cash inflows from lease financing arrangements - 25.0
Lease principal repayments (including net recoverable VAT paid / recovered) (17.6) (13.4)
Dividends paid 9 (133.7) (126.9)
Proceeds from dividend forfeiture 1.7 -
Net cash received from financing activities 189.4 291.7
Net increase in cash and cash equivalents 70.9 3.0
Cash and cash equivalents at beginning of period 14 417.9 134.0
Cash and cash equivalents at end of period 14 488.8 137.0
The notes on pages 28 to 45 form part of this condensed half year financial
information.
PENNON GROUP PLC
Notes to condensed half year financial information
1. General information
Pennon Group plc is a company registered in the United Kingdom under the
Companies Act 2006. The address of the registered office is given on page 45.
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 ("SES
Water") provides water only services in the South East region. Sutton and
South East Surrey Water Services ("SESWS") provides water and wastewater
retail services to non-household customer accounts. Pennon Group 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, operating in the same sector as Pennon Water
Services Limited and SESWS.
This condensed half year financial information was approved by the Board of
Directors on 26 November 2025.
The financial information for the period ended 30 September 2025 does not
constitute statutory accounts within the meaning of section 435 of the
Companies Act 2006. The statutory accounts for 31 March 2025 were approved
by the Board of Directors on 3 June 2025 and have been delivered to the
Registrar of Companies. The independent auditor's report on these financial
statements was unqualified and did not contain a statement under section 498
of the Companies Act 2006.
2. Basis of preparation
This condensed half year financial information has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct Authority,
and UK adopted IAS 34 'Interim financial reporting'. This condensed half year
financial information should be read in conjunction with the Pennon Group plc
Annual Report and Accounts for the year ended 31 March 2025, which were
prepared in accordance with UK-adopted international accounting standards and
in conformity with the requirements of the Companies Act 2006.
Restatements
In the prior period movements on cash flow hedges were presented net in the
statement of comprehensive income, the presentation has been amended to show
the gross values in relation to the loss on cash flow hedging (half year ended
30 September 2024: £18.0 million) and hedging gains recycled to profit or
loss (half year ended 30 September 2024: £8.1 million).
Going concern
The going concern basis has been adopted in preparing the condensed half year
financial information (interim accounts). 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 most recent forecast for FY 2025/26, and
longer-term strategic business plan for the remainder of the going concern
period to 28 February 2027. 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.£100.7
million, this value is considered equivalent to an extreme one-off event that
could occur by 28 February 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.
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
2. Basis of preparation (continued)
However, if required examples of additional mitigations that could be used
include; a 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 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 28 February 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.
This condensed half year financial information has been reviewed, but not
audited, by the independent auditor pursuant to the Auditing Practices Board
guidance on the 'Review of Interim Financial Information'.
The preparation of the half year financial information requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. The significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty are consistent with those that
applied to the consolidated financial statements for the year ended 31 March
2025.
3. Accounting policies
The accounting policies adopted in this condensed half year financial
information are consistent with those applied and set out in the Pennon Group
plc Annual Report and Accounts for the year ended 31 March 2025, except for
the estimation of income tax (see note 7) and are in accordance with IFRS and
interpretations of the IFRS Interpretations Committee expected to be
applicable for the year ending 31 March 2026 in issue which have been adopted
by the UK.
New standards or interpretations which were mandatory for the first time in
the year beginning 1 April 2025 did not have a material impact on the net
assets or results of the Group. New standards or interpretations due to be
adopted from 1 April 2026 are not expected to have a material impact on the
Group's net assets or results.
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
4. 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 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 segment (business retail) 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.
Half year ended 30 September 2025 Unaudited
Water Non-household retail Other Eliminations Group
£m £m £m £m £m
Revenue 518.5 196.1 9.9 (66.4) 658.1
Employment Costs (64.0) (4.7) (7.2) - (75.9)
Raw materials and consumables used (31.0) - (0.9) - (31.9)
Other operating costs (167.0) (188.0) (7.3) 66.4 (295.9)
Operating Profit before depreciation, amortisation and before non-underlying 256.5 3.4 (5.5) - 254.4
items (Underlying EBITDA)
Depreciation and amortisation (94.0) (0.2) (1.6) - (95.8)
Operating Profit before non-underlying items 162.5 3.2 (7.1) - 158.6
Finance income 10.8 0.3 5.0 (6.1) 10.0
Finance costs (105.4) (2.0) (2.1) 6.1 (103.4)
Share of post-tax profit from associated companies - - 0.7 - 0.7
Profit before tax and non-underlying items 67.9 1.5 (3.5) - 65.9
Non underlying items - - - - -
Profit before tax 67.9 1.5 (3.5) - 65.9
Half year ended 30 September 2024 Unaudited
Water Non-household retail Other Eliminations Group
£m £m £m £m £m
Revenue 412.9 160.8 10.8 (57.3) 527.2
Employment Costs (65.7) (6.9) (7.0) - (79.6)
Raw materials and consumables used (23.7) - (2.6) - (26.3)
Other operating costs (157.5) (149.3) (8.3) 57.3 (257.8)
Operating Profit before depreciation, amortisation and before non-underlying 166.0 4.6 (7.1) - 163.5
items (Underlying EBITDA)
Depreciation and amortisation (90.6) (0.1) (3.3) - (94.0)
Operating Profit before non-underlying items 75.4 4.5 (10.4) - 69.5
Finance income 6.1 0.1 5.9 (4.2) 7.9
Finance costs (96.0) (2.0) (2.7) 4.2 (96.5)
Share of post-tax profit from associated companies - - 0.5 - 0.5
Loss before tax and non-underlying items (14.5) 2.6 (6.7) - (18.6)
Non underlying items (19.5) - (0.7) - (20.2)
Loss before tax (34.0) 2.6 (7.4) - (38.8)
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
4. Segmental information (continued)
Intra-segment trading between different segments is under normal market based
commercial terms and conditions. Intra-segment revenue of the other segment is
reflected as a cost.
Factors such as seasonal weather patterns can affect sales volumes, income and
costs in the water segments.
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:
Unaudited
Six months ended 30 September 2025 UK total
Water Non-household Other Total
retail
£m £m £m £m
Segment revenue 518.5 196.1 9.9 724.5
Inter-segment revenue (60.1) - (6.3) (66.4)
Revenue from external customers 458.4 196.1 3.6 658.1
Significant service lines
Water 458.4 - - 458.4
Non-household retail - 196.1 - 196.1
Other - - 3.6 3.6
458.4 196.1 3.6 658.1
Unaudited
Six months ended 30 September 2024 UK total
Water Non-household Other Total
retail
£m £m £m £m
Segment revenue 412.9 160.8 10.8 584.5
Inter-segment revenue (50.8) (0.1) (6.4) (57.3)
Revenue from external customers 362.1 160.7 4.4 527.2
Significant service lines
Water 362.1 - - 362.1
Non-household retail - 160.7 - 160.7
Other - - 4.4 4.4
362.1 160.7 4.4 527.2
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 to condensed half year financial information (continued)
5. 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 period and
business trends over time. The presentation of results is consistent with
internal performance monitoring. There were no non-underlying items in H1
2025/26. Non-underlying items for the previous half year 2024/25, are as
follows;
Unaudited
Half year ended 30 September 2025 Half year ended 30 September 2024
£m £m
Operating Costs
Restructuring / transformational costs((1)) - (3.7)
Costs associated with water quality incident((2)) - (16.3)
Acquisition costs((3)) - (0.2)
Earnings before interest, tax, depreciation and amortisation - (20.2)
Non-underlying tax credit - 4.9
Net non-underlying charges - (15.3)
(1) In the period to 30 September 2024, £3.7 million of costs were incurred in
connection with the business transformation.
(2) £16.3 million of costs were incurred in the 6 months to 30 September 2024,
following a water quality incident in May 2024, these included enhanced
customer compensation, provision of bottled water over an eight-week period,
and extensive interventions to clean and filter the network.
(3) The Group incurred expenses of £0.1 million in the half year ended 30
September 2024 in relation to the costs of acquisition of SES and £0.1
million of expenses in connection with the acquisition of four renewable power
generation investments.
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
6. Net finance costs
Unaudited
Half year ended Half year ended
30 September 2025
30 September 2024
Finance costs Finance income Total Finance Finance income Total
costs
£m £m £m £m £m £m
Cost of servicing debt
Bank borrowings and overdrafts (73.4) - (73.4) (66.4) - (66.4)
Interest element of lease payments (25.9) - (25.9) (25.1) - (25.1)
Other finance costs (4.1) - (4.1) (5.0) - (5.0)
Interest receivable - 7.7 7.7 - 5.9 5.9
Net gains on derivative financial instruments - 1.2 1.2 - 1.2 1.2
(103.4) 8.9 (94.5) (96.5) 7.1 (89.4)
Notional interest
Retirement benefit obligations - 1.1 1.1 - 0.8 0.8
Net finance costs (103.4) 10.0 (93.4) (96.5) 7.9 (88.6)
In addition to the above, finance costs of £12.6 million have been
capitalised on qualifying assets included in property, plant and equipment (H1
2024/25: £12.1 million).
Other finance costs include £0.5 million (H1 2024/25: £0.5 million) of
dividends payable on listed preference shares issued by Bristol Water, which
are classified as debt.
7. Taxation
Unaudited
Before non-underlying items Non-underlying items (note 5) half year ended 30 September 2025 Total Before non-underlying items half year ended 30 September 2024 Non-underlying items (note 5) half year ended 30 September 2024 Total
half year
half year
half year ended 30 September 2024
ended 30 September 2025
ended 30 September 2025
£m £m £m £m £m £m
Analysis of charge
Current tax (credit) / charge (0.1) - (0.1) 0.1 - 0.1
Deferred tax charge / (credit) 8.7 - 8.7 (4.0) (4.9) (8.9)
Tax charge / (credit) for the period 8.6 - 8.6 (3.9) (4.9) (8.8)
UK corporation tax is calculated at 25% (H1 2024/25: 25%) of the estimated
assessable profit for the year. The tax charge for September 2025 and
September 2024 has been derived by applying the anticipated effective annual
tax rate to the first half year profit before tax.
Tax on amounts included in the consolidated statement of comprehensive income,
or directly in equity, is included in those statements respectively.
The effective tax rate for the period for the group, including prior year
adjustments but before the impact of non-underlying items was an effective
charge of 13.1% (H1 2024/25: charge of 21.0%).
The effective tax rate for the period for the group including prior year
adjustments and the impact of non-underlying items for the period ended 30
September 2025 was a charge of 13.1% (H1 2024/25: charge of 22.7%).
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
8. 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.
Basic and diluted earnings per share figures and the weighted average number
of shares for the comparative period have been restated and adjusted for the
bonus factor of 1.21 to reflect the bonus element of the rights issue which
commenced in January 2025, in accordance with IAS 33 Earnings per Share.
Amounts as originally stated at 30 September 2024 were (10.6)p basic and
diluted earnings per share, (6.6)p basic and diluted adjusted earnings per
share and 285.9 million weighted average number of shares.
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 prior
year. The weighted average number of shares and earnings used in the
calculations are detailed in the table below.
Unaudited
Half year ended 30 September 2025 Half year ended 30 September 2024
(restated)
Number of shares (millions)
For basic earnings per share 471.9 345.9
Effect of dilutive potential ordinary shares from share options 1.2 -
For diluted earnings per share 473.1 345.9
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 changes in
corporation tax rates and the level of long-term capital investment. Earnings
per share have been calculated as follows:
Unaudited
Half year ended Half year ended
30 September 2025
30 September 2024
(restated)
Profit Earnings per share Loss Earnings per share
after tax Basic Diluted after tax Basic D
i
l
u
t
e
d
£m p p £m p p
Statutory earnings 57.2 12.1 12.1 (30.3) (8.8) (8.8)
Deferred tax before non-underlying items 8.7 1.9 1.8 (4.0) (1.1) (1.1)
Non-underlying items (net of tax) - - - 15.3 4.4 4.4
Adjusted earnings before non-underlying items 65.9 14.0 13.9 (19.0) (5.5) (5.5)
and deferred tax
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
9. Dividends
Amounts recognised as distributions to ordinary equity holders in the period: Unaudited
Half year ended 30 September 2025 Half year ended 30 September 2024
£m £m
Interim dividend paid for the year ended 42.0 40.1
31 March 2025: 12.14 pence (2024: 11.60 pence restated) per share
Final dividend paid for the year ended 91.7 86.8
31 March 2025: 19.43 pence (2024: 25.07 pence restated) per share
133.7 126.9
In the six months to 30 September 2025 the 2024/25 interim and final dividends
were paid resulting in a cash outflow of £133.7 million.
Unaudited
Half year ended 30 September 2025 Half year ended 30 September 2024
£m £m
Proposed interim dividend for the year ended
31 March 2026: 9.26 pence per share (31 March 2025: 12.14 pence restated)
43.7 42.0
The proposed interim dividend has not been included as a liability in this
condensed half year financial information. The proposed interim dividend for
the year ending 31 March 2026 will be paid on 3 April 2026 to shareholders on
the register on 31 January 2026.
Proposed dividends per share for the 30 September 2024 comparative period have
been restated and adjusted for the bonus factor of 1.21 to reflect the bonus
element of the rights issue which commenced in January 2025, in accordance
with IAS 33 Earnings per Share and as detailed in note 8.
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
10. Share capital
Allotted, called up and fully paid:
1 April 2024 to 30 September 2024 Unaudited
Number of shares
Treasury shares Ordinary shares £m
At 1 April 2024 ordinary shares of 61.05 pence each 5,628 286,045,323 174.6
For consideration of £21,000, shares issued in - 3,386 -
respect of the Company's Sharesave Scheme
At 30 September 2024 ordinary shares of 61.05 pence each 5,628 286,048,709 174.6
1 April 2025 to 30 September 2025 Unaudited
Number of shares
Treasury shares Ordinary shares £m
At 1 April 2025 ordinary shares of 61.05 pence each 5,628 471,976,711 288.1
For consideration of £7,000, shares issued in - 2,323 -
respect of the Company's Sharesave Scheme
At 30 September 2025 ordinary shares of 61.05 pence each 5,628 471,979,034 288.1
Shares held as treasury shares may be sold, re-issued for any of the Company's
share schemes, or cancelled.
The weighted average market price of the Company's shares at the date of
exercise of share scheme options during the period was 488 pence (H1 2024/25:
625 pence - pre the rights issue which commenced in January 2025).
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
11. Share premium account
Unaudited
1 April 2024 to 30 September 2024 £m
At 1 April 2024 398.2
Shares issued under the Sharesave Scheme -
398.2
Less: Transaction costs arising on share issues (0.2)
At 30 September 2024 398.0
1 April 2025 to 30 September 2025
At 1 April 2025 755.0
Sale of Share forfeiture shares 0.6
755.6
At 30 September 2025 755.6
12. Capital redemption reserve
Unaudited
1 April 2024 to 30 September 2024 £m
At 1 April 2024 and 30 September 2024 157.1
1 April 2025 to 30 September 2025
At 1 April 2025 and 30 September 2025 157.1
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
13. Cash flow from operating activities
Reconciliation of (loss)/profit for the period to net cash generated from Unaudited
operations:
Half year ended 30 September 2025 Half year ended 30 September 2024
£m £m
Cash generated from operations
Profit / (loss) for the period 57.3 (30.0)
Adjustments for:
Share-based payments 1.3 1.1
Profit on disposal of property, plant and equipment (0.8) (0.5)
Depreciation charge 94.5 91.9
Amortisation of intangible assets 1.3 2.1
Share of post-tax profit from associated companies (0.7) (0.5)
Finance income (10.0) (7.9)
Finance costs 103.4 96.5
Taxation charge / (credit) 8.6 (8.8)
Changes in working capital:
(Increase) / decrease in inventories (0.3) 0.2
(Increase) / decrease in trade and other receivables (69.0) 5.7
Increase / (decrease) in trade and other payables 81.4 (24.4)
Decrease in provisions (5.5) -
Cash generated from operations 261.5 125.4
Unaudited
Half year ended 30 September 2025 Half year ended 30 September 2024
Total interest paid £m £m
Interest paid in operating activities 103.1 64.6
Total interest paid 103.1 64.6
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
14. Net borrowings
Unaudited Audited
Half year ended 30 September 2025 Year ended 31 March 2025
£m £m
Cash and cash equivalents 488.8 417.9
Restricted funds 58.4 58.2
547.2 476.1
Borrowings - current
Bank and other current borrowings (167.4) (224.5)
Lease obligations (57.5) (32.9)
Total current borrowings (224.9) (257.4)
Borrowings - non-current
Bank and other non-current borrowings (3,662.8) (3,265.1)
Listed preference shares (12.5) (12.5)
Lease obligations (986.3) (1,019.3)
Total non-current borrowings (4,661.6) (4,296.9)
Total net borrowings (4,339.3) (4,078.2)
Restricted funds are deposited with lessors or held for bond interest, are
available for access, subject to being replaced by an equivalent valued
security.
Lease liabilities include liabilities that are subject to secured financing
arrangements and lease liabilities under IFRS 16.
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
14. Net borrowings (continued)
The movements in net borrowings during the periods presented were as follows:
Unaudited
Net cash/ (borrowings) at 1 April 2024 Cash Transfer between non-current and current Other non-cash movements Net cash/ (borrowings) at 30 September 2024
flows (restated)
£m £m £m £m £m
Bank and other current borrowings (188.8) 147.0 (76.1) 1.2 (116.7)
Current lease obligations (51.9) 38.5 (82.0) (29.8) (125.2)
Bank and other non-current borrowings (2,691.8) (555.2) 76.1 1.8 (3,169.1)
Listed preference shares (12.5) - - - (12.5)
Non-current lease obligations (1,071.2) (25.0) 82.0 (4.2) (1,018.4)
Total financing liabilities (4,016.2) (394.7) - (31.0) (4,441.9)
Less:
Cash and cash equivalents 134.0 3.0 - - 137.0
Restricted funds 37.4 0.7 - - 38.1
Net borrowings (3,844.8) (391.0) - (31.0) (4,266.8)
Net cash/ (borrowings) at 1 April 2025 Cash Transfer between non-current and current Other non-cash movements Net cash/ (borrowings) at 30 September 2025
flows
£m £m £m £m £m
Bank and other current borrowings (224.5) 103.8 (47.2) 0.5 (167.4)
Current lease obligations (32.9) 38.8 (35.9) (27.5) (57.5)
Bank and other non-current borrowings (3,265.1) (447.4) 47.2 2.5 (3,662.8)
Listed preference shares (12.5) - - - (12.5)
Non-current lease obligations (1,019.3) - 35.9 (2.9) (986.3)
Total financing liabilities (4,554.3) (304.8) - (27.4) (4,886.5)
Less:
Cash and cash equivalents 417.9 70.9 - - 488.8
Restricted funds 58.2 0.2 - - 58.4
Net borrowings (4,078.2) (233.7) - (27.4) (4,339.3)
The Group has entered into covenants with lenders and, while terms vary, these
typically provide for limits on gearing and interest cover. The Group has been
in compliance with its covenants during the year to date. Other non-cash
movements for the Group in the period includes the increase in borrowings from
interest which is rolled into the amount repayable.
An unamortised hedging adjustment was reclassified from fair value through
profit and loss to borrowings in the year ended 31 March 2025 and the prior
year restated. The 30 September 2024 values in the above table also reflect
this adjustment to allow for comparison between periods. The total of the
unamortised hedging adjustment as at 30 September 2024 was £33.3 million
reflected in Bank and other current borrowings (£2.5 million) and Bank and
other non-current borrowings (£30.8 million).
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
15. Fair value disclosure for financial instruments
Fair value of financial instruments carried at amortised cost.
Financial assets and liabilities which are not carried at an amount which
approximates to their fair value are:
Unaudited Audited
Half year ended Year ended
30 September 2025
31 March 2025
Book value Fair value Book value Fair value
£m £m £m £m
Non-current borrowings:
Bank and other loans 3,662.8 3,383.3 3,265.1 3,079.1
Leases 986.3 930.1 1,019.3 1,007.4
Other non-current borrowings 12.5 18.5 12.5 18.5
Non-current borrowings 4,661.6 4,331.9 4,296.9 4,105.0
Valuation hierarchy of financial instruments carried at fair value
The Group uses the following hierarchy for determining the fair value of
financial instruments by valuation technique:
× quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1)
× inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2)
× Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (level 3)
The fair value of financial instruments not traded in an active market (level
2, for example over-the-counter derivatives) is determined by using valuation
techniques. A variety of methods and assumptions are used based on market
conditions existing at each balance sheet date. Quoted market prices or dealer
quotes for similar instruments are used for long term debt. Other techniques,
such as estimated discounted cash flows, are used to determine fair value for
the remaining financial instruments. The fair value of interest rate swaps is
calculated as the present value of the estimated future cash flows.
The Group's financial instruments are valued principally using level 2
measures:
Unaudited Audited
Half year ended 30 September 2025 Year ended 31 March 2025
£m £m
Level 2 inputs
Assets
Derivatives used for cash flow hedging 25.2 31.8
Derivatives used for fair value hedging 1.3 0.4
Total assets 26.5 32.2
Liabilities
Derivatives used for cash flow hedging (3.7) (2.1)
Total liabilities (3.7) (2.1)
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
16. Retirement benefit assets
Defined benefit schemes
All the Group's defined benefit pension schemes are closed to future accrual.
The principal actuarial assumptions were the rate used to discount schemes'
liabilities and expected return on scheme assets with the same rate of 5.8%
(H1 2024/25: 5.1%) and the inflation assumption of 2.9% (H1 2024/25: 3.1%).
Unaudited
Half year ended Half Year ended
30 September 2025
30 September 2024
Present value of obligation Fair value of plan assets Total Present value of obligation Fair value of plan assets Total
£m £m £m £m £m £m
At beginning of period (673.3) 704.5 31.2 (774.2) 800.8 26.6
Amounts recognised in the 74.3 (74.5) (0.2) (18.6) 18.3 (0.3)
income statement
Remeasurements through other (8.5) (3.0) (11.5) 27.6 (13.2) 14.4
comprehensive income
Company contributions 0.1 - 0.1 0.1 - 0.1
Benefits and expenses paid 22.6 (22.6) - 23.7 (23.7) -
At end of period (584.8) 604.4 19.6 (741.4) 782.2 40.8
Recognition of surplus on principal pension scheme
In accordance with IAS 19 'Employee Benefits' the value of the net pension
scheme surplus that can be recognised in the statement of financial position
is restricted to the present value of economic benefits available in the form
of refunds from the scheme or reductions in future contributions. In respect
of the Group's principal pension scheme, PGPS, the surplus has been recognised
as the Group believes that ultimately it has an unconditional right to a
refund of any surplus assuming the full settlement of the plan's liabilities
in a single event, such as a scheme wind up.
Bristol Water
The overall surplus includes a net surplus of c.£11.1 million (30 September
2024 (c.£9.4million) relating to the Bristol Water Section of the Water
Companies Pension Scheme (WCPS). The planned buy-out of the Section was
completed on the 11 July 2025. The section's assets and liabilities were
remeasured prior to settlement using actuarial assumptions at this date. The
assets and liabilities were both reduced by £92.6 million resulting in a net
£nil income statement settlement charge. An actuarial gain of £2.7 million
was recognised in other comprehensive income for the period 1 April 2025 to 11
July 2025.
The Group believes that it has an unconditional right to a refund of the
remaining surplus and that the gross pension surplus can be recognised. This
benefit is now only available as a refund. Under UK tax legislation a tax
deduction of 25% is applied to a refund from a UK pension scheme, before it is
passed to the employer. This tax deduction has been applied to restrict the
value of the surplus recognised for this scheme. The process to wind up the
scheme continues, and the Trustee has indicated its intention to return the
surplus to the Company. The remaining assets relating to the Bristol Water
Section are recognised as a current asset on the balance sheet.
Sutton and East Surrey Water
The Group believes that it has an unconditional right to a refund of surplus
and that the gross pension surplus can be recognised. This benefit is only
available as a refund as no additional defined pension benefits are being
earned. Under UK tax legislation a tax deduction of 25% (2025: 25%) is applied
to a refund from a UK pension scheme, before it is passed to the employer.
This tax deduction has been applied to restrict the value of the surplus
recognised for this scheme.
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
16. Retirement benefit assets (continued)
In June 2023, the High Court handed down a decision (Virgin Media Limited v
NTL Pension Trustees II Limited and others) which potentially has implications
for the validity of amendments made by schemes, including the PGPS and other
Group defined benefit schemes, which were contracted-out on a salary-related
basis between 6 April 1997 and the abolition of contracting-out in 2016. This
decision was upheld by the Court of Appeal in August 2024. There is potential
for legislative intervention following industry lobbying efforts that may
retrospectively validate certain rule amendments that would otherwise be held
void where the requirements of section 37 were not met. However, the Company
has engaged with the relevant Trustee for PGPS and other Group defined benefit
schemes who have confirmed that based on the governance processes in place and
reviews of significant deed changes during the period in question, these
bodies have no reason to believe that the relevant requirements were not
complied with in relation to the Schemes with regard to the relevant period in
question. Given that there is no indication of non-compliance with the
relevant requirements, the PGPS and other Group defined benefit schemes'
valuation as at 30 September 2025 does not reflect potential additional
liabilities arising from the Virgin Media case.
17. Capital expenditure
Unaudited Audited
Half year ended 30 September 2025 Year ended 31 March 2025
£m £m
Property, plant and equipment
Additions 302.9 647.0
Assets adopted at fair value 7.1 17.4
Net book value of disposals (0.7) (0.7)
Intangible assets
Additions 1.9 5.5
Net book value of disposals - -
Capital commitments
Contracted but not provided for the Group 210.0 167.9
18. Trade and other payables & other non-current liabilities
Unaudited Audited
Half year ended 30 September 2025 Year ended 31 March 2025
£m £m
Trade and other payables - current
Trade payables 194.0 138.8
Contract liabilities 59.5 46.7
Other tax and social security 5.6 2.6
Accruals 63.8 54.4
Other payables 90.5 88.5
413.4 331.0
Other non-current liabilities
Contract liabilities 178.2 171.3
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
19. Contingencies and Financial Guarantee
Financial Guarantee
Unaudited Audited
Half year ended 30 September 2025 Year ended 31 March 2025
£m £m
Performance bonds 27.5 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.
Contingency
Other contractual 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 and its decision to accept South
West Water's enforcement package, in lieu of a financial penalty. The agreed
undertakings result in investment and funding worth £24 million to be
delivered over the period to 2030. These investments will provide improvements
for both customers and the environment alongside our K8 plans to tackle all
storm overflows at our bathing and shellfish waters and our highest spilling
sites. The EA investigation is ongoing, the outcome of the investigation
continues to be unknown, and it is not possible to estimate any obligations
arising from the investigation with any certainty.
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 Outcome Delivery Incentives (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.
On 2 February 2024 summons were received by South West Water Limited from the
EA in relation to alleged non permitted discharges at 7 locations with a total
of 30 charges. The EA have since withdrawn 6 of these charges relating to 1
site. At subsequent hearings, South West Water pleaded guilty to the remaining
charges and the sentencing for all 24 charges is due to take place in March
2026.
On 7 September 2025 the Drinking Water Inspectorate (DWI) issued SWW with a
court summons in relation to the cryptosporidium outbreak of May 2024,
proceedings are due to take place in early 2026. There are a range of possible
outcomes, it is therefore not possible to estimate any obligation arising from
this case with any certainty at this stage.
PENNON GROUP PLC
Notes to condensed half year financial information (continued)
19. Contingencies and Financial Guarantee (continued)
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.
20. Related party transactions
Group companies entered into the following transactions with joint ventures
which were not members of the Group. Bristol Wessex Billing Services Limited
("BWBSL") and Water 2 Business Limited ("Water 2 Business") are joint venture
investments of Bristol Water plc.
Transactions with joint ventures Unaudited
Half year ended 30 September 2025 Half year ended 30 September 2024
£m £m
Sales to Water 2 Business 15.6 15.0
Purchases from BWBSL 2.2 2.0
Balances with joint ventures Unaudited Audited
Half year ended 30 September 2025 Year ended 31 March 2025
£m £m
Trade and other receivables
Water 2 Business (including loan receivable of £7.8million, 8.0 10.9
2025: £8.7million)
BWBSL - 0.2
Trade and other payables
BWBSL 1.5 1.6
Pennon Group plc
Registered office:
Peninsula House
Rydon Lane
Exeter
Devon
EX2 7HR
pennon-group.co.uk
Registered
in England: 2366640
PENNON GROUP PLC
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors named below confirm on behalf of the Board of Directors that
this unaudited condensed half year financial information has been prepared in
accordance with UK adopted IAS 34 "Interim financial reporting" and to the
best of their knowledge the interim management report herein includes a fair
review of the information required by DTR 4.2.4, DTR 4.2.7R and DTR 4.2.8R of
the Disclosure and Transparency Rules, being an indication of important events
that have occurred during the period and their impact on the unaudited
condensed half year financial information; a description of the principal
risks and uncertainties for the remaining six months of the current financial
year; and the disclosure requirements in respect of material related party
transactions.
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial information may differ from legislation in
other jurisdictions.
The Directors of Pennon Group plc at the date of the signing of this
announcement and statement are:
Andrea Blance
Dorothy Burwell
Jonathan Butterworth
Susan Davy
Iain Evans
Laura Flowerdew
Andrew Haines
David Sproul
Loraine Woodhouse
For and on behalf of the Board of Directors who approved this half year report
on 26 November 2025.
L Flowerdew
Group Chief Financial Officer
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. The following APMs have been added or amended to those
presented previously:
· Group dividend cover and EBITDA dividend cover are not presented
in the half year APM disclosure. These ratios represent a measure of full year
adjusted profit and dividend performance and cannot be calculated on a
comparable basis using half year adjusted profits and the interim dividend.
· Underlying Return on capital employed is not presented in the
half year APM disclosure. This ratio represents the total of underlying
operating profit by capital employed (net debt plus total equity invested).
· The effective interest rate calculation 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 useful comparison on business trends and performance.
Note 5 in the notes to the condensed half year financial information provides
more detail on non-underlying items, and a reconciliation of underlying
earnings for the current year and the prior year is as follows:
Underlying earnings reconciliation Underlying Non-underlying items Statutory results Earnings
per share
30 September 2025
£m £m £m p
EBITDA (see below) 254.4 - 254.4
Operating profit 158.6 - 158.6
Profit before tax 65.9 - 65.9
Taxation (8.6) - (8.6)
Profit after tax 57.3
Non-controlling interests (0.1)
Profit after tax attributable to shareholders 57.2 12.1
Non-underlying items
Underlying earnings reconciliation Underlying Restructuring / transformational costs Costs associated with water quality event in Brixham Acquisition costs Statutory results Earnings
per share
30 September 2024
(restated)
£m £m £m £m £m p
EBITDA (see below) 163.5 (3.7) (16.3) (0.2) 143.3
Operating profit 69.5 (3.7) (16.3) (0.2) 49.3
Loss before tax (18.6) (3.7) (16.3) (0.2) (38.8)
Taxation 3.9 0.8 4.1 - 8.8
Loss after tax (30.0)
Non-controlling interests (0.3)
Loss after tax attributable to shareholders (30.3) (8.8)
PENNON GROUP PLC
Alternative performance measures (continued)
(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.
(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.
H1 2026 H1 2025
£m £m
Net finance costs before non-underlying items (note 6) 93.4 88.6
Remove: net finance income before non-underlying items not associated with the 1.2 1.3
Water Group
Net finance costs before non-underlying items associated with the Water Group 94.6 89.9
Net interest on retirement benefit obligations associated with the Water Group 1.1 0.8
Capitalised interest (note 6) 9.7 10.3
Non-debt related interest 1.1 (0.8)
Net finance costs for effective interest rate calculation 106.5 100.2
Group net debt (opening) (note 14) 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 14) 4,339.3 4,266.8
Remove: unamortised hedging adjustment (34.0) (36.3)
Remove: closing net debt not associated with the Water Group (434.9) (383.9)
Closing net debt for calculation 3,870.4 3,846.6
Average net debt (opening net debt + closing net debt divided by 2) 3,784.3 3,707.9
Effective interest rate (%) 5.6 5.4
(iv) Effective cash cost of interest
Effective cash cost of interest for South West Water Limited's group of
companies is based on 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).
H1 2026 H1 2025
£m £m
(restated)
Net finance costs for effective interest rate calculation (as above) 96.7 89.0
Remove non-cash interest accrued (income statement indexation charge) (10.5) (12.6)
Net finance costs for effective cash cost of interest calculation 86.2 76.4
Opening net debt (as above) 3,811.7 3,294.7
Closing net debt (as above) 3,652.9 3,561.3
Average net debt (opening net debt + closing net debt divided by 2) 3,732.3 3,428.0
Effective cash cost of interest (%) 4.6 4.5
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.
H1 2026 H1 2025
£m £m
Net finance costs after non-underlying items 93.4 88.6
Net interest on retirement benefit obligations 1.1 0.8
Net finance costs for interest cover calculation 94.5 89.4
Operating profit before non-underlying items 158.6 69.5
Underlying Interest cover (times) 1.7 0.8
(vi) 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.
H1 2026 H1 2025
£m £m
Additions to property, plant and equipment 302.9 327.1
Additions to intangible assets 1.9 4.7
Capital investment 304.8 331.8
(vii) Capital payments
Payments for property, plant and equipment (PPE) and intangible asset
additions net of proceeds from sale of PPE and intangible assets. The measure
is presented to assess and monitor the net cash spend on PPE and intangible
assets.
H1 2026 H1 2025
£m £m
Cash flow statements: purchase of property, plant and equipment 285.0 352.1
Cash flow statements: purchase of intangible assets 1.9 4.7
Cash flow statements: proceeds from sale of property, plant and equipment (1.5) (0.9)
Capital payments 285.4 355.9
PENNON GROUP PLC
Alternative performance measures (continued)
(viii) 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 (see ix) 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 three 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
· PCD 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.
(ix) Total Expenditure (Totex)
Operating costs and capital expenditure of the regulated water and wastewater
business (based on the Regulated Accounting Guidelines).
(x) Outcome Delivery Incentive (ODI)
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.
(xi) 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.
(xii) Water Group Gearing
Gearing of the combined water business. Calculated as combined closing net
debt of South West Water's Group of companies and SES Water over RCV.
H1 2026 H1 2025
£m £m
Net debt 3,870.5 3,808.9
RCV 6,469.0 5,916.0
Water business gearing 59.8% 64.4%
INDEPENDENT REVIEW REPORT TO PENNON GROUP PLC
REPORT ON THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Our conclusion
We have reviewed Pennon Group Plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half Year Results of
Pennon Group Plc for the 6 month period ended 30 September 2025 (the
"period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Consolidated balance sheet as at 30 September 2025;
· the Consolidated income statement and Consolidated statement of
comprehensive income for the period then ended;
· the Consolidated statement of cash flows for the period then
ended;
· the Consolidated statement of changes in equity for the period
then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Results of Pennon
Group Plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
RESPONSIBILITIES FOR THE INTERIM FINANCIAL STATEMENTS AND THE REVIEW
Our responsibilities and those of the directors
The Half Year Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
PENNON GROUP PLC
INDEPENDENT REVIEW REPORT TO PENNON GROUP PLC (continued)
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Bristol
26 November 2025
10 Assuming normalised demand in the second half of the year
11 c.£20 million of regulatory revenue reprofiled into 2026/27 customer
bills
12 Reduction over 10 months to October 2025 compared with October 2024
13 Cumulative spills avoided, reflecting impact of wetter weather in 2024
14 On a like for like basis excluding those beaches designated in 2024
15 2020/21 baseline emissions of 130,050 tCO2e compared to a 2024/25 outturn
of 71,242 tCO2e. Total consists of all Market-based Scope 1 and Scope 2
emissions and some Scope 3 emissions (grid electricity transmission and
distribution, business travel and outsourced operational activities), by the
regulated water businesses only, covering six of the seven greenhouse gas
emissions
16 Group energy requirements excluding SES, including battery storage
17 Based on 55% assumed leverage, pre-tax, 7-9% unleveraged pre-tax returns
18 Water Industry National Environment Programme - as agreed with the
Environment Agency and Ofwat
19 Lost Time Injury Frequency Rate
20 Dividend per share reflects the share issuance post rights issue with H1
2024/25 restated on this basis.
21 Pennon Water Services (PWS) - 80:20 joint venture with South
Staffordshire.
22 £196.1 million excluding water segment wholesale elimination of £60.3
million (H1 2024/25: £160.8 million excluding water segment wholesale
elimination of £50.8 million).
23 Restated to reflect the bonus element of the rights issue commenced in
January 2025 in accordance with IAS 33
24 Includes unwind of fair value adjustments
25 Based on South West Water Group, including Bristol Water
26 Including acquisition related fair value adjustments and unamortised
hedging adjustment
27 Euro Medium Term Note
28 Based on South West Water group including Bristol Water net debt/shadow
RCV forecast at 31 March 2026
29 Based on allowed return of 3.15% plus CPIH, compared with actual
effective interest rate forecast for the full year
30 Assuming normalised demand in the second half of the year
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