en.Wedoany.com Reported - Pennon Group returned to profitability in the fiscal year ending March 31, 2026, driven by increased regulatory revenue and continued investment in its water business in the first year of the AMP8 regulatory cycle, leading to significant earnings growth.

The group, which owns South West Water, Bristol Water, Bournemouth Water, and SES Water, reported a statutory pre-tax profit of £114.4 million, compared to a loss of £72.7 million in 2024/25. Revenue rose 23% to £1.29 billion, and underlying EBITDA increased 55% to £519.2 million. The company said growth was driven by higher regulatory revenue allowances, increased water consumption, and a continued focus on cost management.

Capital investment remained at record levels, with £643.6 million invested during the year, including £588.5 million in Pennon's regulated water businesses, as the company began delivering on its AMP8 commitments.

Newly appointed Chief Executive Keith Haslett, who recently took office, said the company is entering "a new era" but acknowledged that further efforts are needed to improve operational performance. Haslett stated that enhancing operational discipline and capital delivery efficiency is essential to meeting commitments and achieving future standards. He identified operational excellence, performance culture, and technology and innovation as key priorities going forward.

In terms of operational improvements, the company's pollution incident reduction plan led to a 34% year-on-year decrease in pollution incidents, with standardized pollution performance improving by approximately 53%. Storm overflow operations were reduced by 17%, and overflow duration decreased by 25%, despite the South West of England experiencing around 150% of average rainfall in November and December. On water quality performance, SES Water maintained industry-leading standards, while South West Water performed strongly. Water resources reached 98% of target levels by year-end, supported by investments in storage resilience and favorable rainfall patterns. The number of customers supported through affordability tariffs increased by approximately 11% year-on-year, and the company also restored 250 hectares of peatland, engaging over 2,300 people through community and environmental initiatives.

Despite operational improvements, Pennon acknowledged that several regulatory measures fell short of targets in the first year of AMP8. The company reported a net operational delivery incentive (ODI) penalty of approximately £42 million, reflecting performance measures for water and wastewater services during and at the end of the cycle. Exceptional storms, persistent rainfall, and stricter regulatory targets put pressure on operations, with penalties partially offsetting outperformance from financing and total expenditure efficiency gains, resulting in a reported regulatory return on equity (RoRE) of 6.7%. Management stated that near-term operational performance is expected to remain in the net ODI penalty zone, with improvement plans continuing to take effect.

Looking ahead, Pennon said the AMP8 investment program remains central to its growth strategy. The group expects investment to support a roughly 34% increase in regulatory capital value (RCV) over five years, while enhancing resilience, environmental performance, and customer service. Pennon also submitted a proposal to Ofwat for an additional £250 million in investment for asset health projects, which the company said could provide additional growth opportunities while improving long-term resilience. The company stated it remains well-positioned to navigate UK water industry reforms and support the government's upcoming industry transformation plan. Investment in Pennon Power also continues, with two of the company's four renewable energy sites in Fife and Aberdeenshire now fully energized and generating revenue. A broader strategic update is expected by the end of September 2026.

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