South West Water owner hails ‘strong return to profitability’ as household bills rise

Water group Pennon expects a ‘strong return to profitability’ this year, despite paying out millions of pounds to settle historic wastewater and sewage issues.

The group, whose regional operators include South West Water and Bristol, saw losses swell to more than £70million last year as the result of restructuring costs and the financial impact of a parasite outbreak in Brixham, South Devon.

And this year has seen Pennon take another regulatory hit after industry watchdog Ofwat slapped South West Water with a £24million enforcement package in response to a ‘range of failures’ related to its wastewater treatment works and sewer networks.

But outgoing chief executive Susan Davy told investors on Friday that Pennon is ‘delivering a return to strong profitability’ in 2025.

It comes after Pennon customers saw bills surge by an average of 28 per cent in April to help fund essential infrastructure upgrades.

The Exeter-headquartered firm is targeting £3.2billion of investment by 2030, incorporating work to build new reservoirs, fix storm overflows, meet its net zero commitments, and improve services for customers.

Outgoing Pennon boss Susan Davy said the group is ‘delivering a return to strong profitability’ in 2025

Pennon forecasts earnings to soar by 60 per cent year-on-year, taking into account revenues deferred into the next financial year.

That’s despite higher costs sparked by the hottest summer on record, as the group maintained ‘resilient’ water supplies despite high demand.

Pennon also cheered progress on its environmental credentials, with pollution incidents halving in the eight months to August.

Storm overflow spills are also down by nearly 50 per cent year-on-year, according to the group, thanks to ‘interventions and investment in our wastewater network, alongside lower rainfall year on year in the South West’.

Davy said: ‘We’re driving real improvements for our customers and communities whilst delivering a return to strong profitability. Despite the pressures of a hot summer, we’ve maintained resilient water supplies and continued to improve services for our customers.

‘Whilst there is more to do, our pollution reduction plans are delivering tangible benefits, halving the number of pollutions and spills from storm overflows, reducing our impact on the environment.’

Pennon shares were broadly flat at 453.4p in early trading. They are down roughly 2.8 per cent over the last 12 months and more than 60 per cent over the last five years. 

Russ Mould, investment director at AJ Bell, said: ‘Cleaning up the water utility sector’s reputation would probably take more H2O than can be found in Rutland Water, the UK’s largest reservoir, but the latest results from South West Water owner Pennon demonstrate some signs of progress.

‘Managing to halve pollution and storm overflow spills year-on-year is impressive but also speaks to how acute these problems have been in the past.

‘It is notable that Pennon still has legacy issues to address over wastewater incidents and last year’s water parasite outbreak in Devon.

‘From a shareholder perspective, the return to profitability is welcome and a decent achievement given the pressures from the hot weather over the summer.’

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