Published: 27 November 2025
FTSE 350 water utility Pennon Group plc (LON: PNN) has reported a strong return to profitability in its half‑year 2025/26 results this morning, alongside sharp improvements in pollution performance and a reaffirmed outlook for the full year. [1]
The market has reacted positively: Pennon shares were trading around 3–4% higher in early London dealing after the announcement, according to several market reports. [2]
Key takeaways at a glance
- Back in the black: Statutory profit before tax of £65.9m for H1 2025/26, versus a £38.8m loss a year earlier. [3]
- Top‑line momentum: Revenue up to £658.1m, around a quarter higher year‑on‑year, supported by tariff increases and stronger demand during a hot summer. [4]
- Dividend reset: Interim dividend cash outlay rises to £43.7m, but dividend per share falls to 9.26p after 2025’s rights issue. [5]
- Environmental progress: Pollution incidents cut by about 50% and storm overflow spills reduced by roughly 45% versus last year. [6]
- Guidance held: Pennon still expects underlying EBITDA to grow by ~60% in 2025/26 and is targeting a 7% return on regulated equity (RORE) across the current regulatory period. [7]
Half‑year 2025/26 results: Pennon finally delivers the promised turnaround
Today’s announcement covers the six months to 30 September 2025, Pennon’s first reporting period in Ofwat’s new K8 regulatory cycle (AMP8, the 2025–30 period). [8]
Headline numbers
According to the company’s official release: [9]
- Revenue: £658.1m (H1 2024/25: £527.2m)
- Underlying EBITDA: £254.4m (H1 2024/25: £163.5m)
- Statutory profit before tax: £65.9m (H1 2024/25: £38.8m loss)
- Underlying profit before tax: £65.9m, compared with an underlying loss of £18.6m in the prior period
- Adjusted basic EPS: 14.0p, versus a loss per share last year (restated for the rights issue)
- Capital expenditure: £304.8m, broadly in line with the prior year’s £331.8m
The jump in profitability is driven by:
- Disciplined cost control and restructuring savings, which have significantly lifted margins; [10]
- Higher regulated water revenues, up in the mid‑20s percent range, reflecting price increases and strong demand during the hot summer, partially offset by some revenue being deferred into 2026/27 to smooth customer bills; [11]
- Efficient financing, including £300m of new bond issuance for South West Water at costs below Ofwat’s allowed cost of debt. [12]
External analysts highlight that the numbers landed just shy of some expectations but broadly in line with consensus. A Reuters‑sourced note via Investing.com points out that first‑half revenue of £658.1m was fractionally below one investment bank’s £660m estimate, with underlying EBITDA of £254.4m versus an expected £266m. [13]
Crucially, Pennon has delivered on the promise it made in a September trading update, when it said it remained “on course” to return to profit in 2025/26 despite cost pressures from surging water demand in hot weather. [14]
Dividend: per‑share cut, but higher overall payout after the rights issue
Dividend policy is often a flashpoint for income‑focused water‑utility investors, and Pennon’s latest decision is no exception.
For H1 2025/26, the board has proposed: [15]
- Total interim dividend: £43.7m (H1 2024/25: £42.0m)
- Dividend per share: 9.26p (H1 2024/25: 12.14p, restated for the rights issue)
On the surface, that looks like a dividend cut, and several market reports frame it that way, noting a reduced interim dividend per share following Pennon’s 2025 rights issue. [16]
However, the underlying picture is more nuanced:
- The total cash paid to shareholders has risen modestly year‑on‑year.
- The lower per‑share figure reflects the larger share count post‑rights issue and a policy to grow dividends in line with CPIH inflation, rather than to maintain the old per‑share level at all costs. [17]
From an income‑investor standpoint, Pennon is signalling that balance‑sheet strength and funding its record capital programme take priority, even as it keeps a progressive, inflation‑linked dividend framework.
Upcoming dividend‑related dates, according to Pennon’s financial calendar, include: [18]
- 26 February 2026: Shares to trade ex‑dividend
- 27 February 2026: Record date for the interim dividend
- 3 April 2026: Expected interim dividend payment date
Environmental performance: pollution incidents halved and storm overflows sharply down
Given the intense political and public scrutiny of UK water companies, Pennon’s environmental metrics are central to how today’s results will be judged.
The group highlights a series of improvements over the last 10 months: [19]
- Pollution incidents down by around 50% versus the comparable period last year, driven by its Pollution Incident Reduction Plan.
- Storm overflow spills reduced by about 45%, with interventions that have prevented roughly 6,000 spills in the first half and around 20,000 over the last 18 months.
- Spill duration down by a quarter over the bathing season.
- Bathing water quality at 100% for the fifth consecutive year on a like‑for‑like basis.
These improvements are being linked to sustained record capital investment, early mobilisation of supply chains, and targeted programmes such as “Upstream Thinking”, which has recently picked up industry awards for biodiversity and natural‑capital initiatives. [20]
Earlier in the autumn, Pennon also secured Fair Tax Mark accreditation for the eighth year in a row, and was recognised as an industry leader for its investment in graduates and apprentices—two data points management is using to reinforce its ESG credentials. [21]
Strategy, capex and the K8/AMP8 regulatory backdrop
The current five‑year period (K8 / AMP8) is shaping up to be Pennon’s largest capital‑investment programme ever, focused on four priorities set out in its business plan: [22]
- Ensuring resilient supplies of safe, clean drinking water as summers become hotter and drier;
- Cutting pollution incidents and storm overflows;
- Protecting rivers, coasts and the wider environment;
- Helping customers use less and save more, partly through support tariffs and affordability programmes.
The company says it has invested just over £300m of capex in the first half alone and expects Regulatory Capital Value (RCV) to grow by around 8% this year, rising by more than a third by 2030. [23]
Alongside this, Pennon is:
- Building out Pennon Power, with two of four renewable‑energy sites (Fife and Aberdeenshire) now fully constructed and one already energised; [24]
- Maintaining a targeted 7% real RORE for K8, combining base returns, an equity uplift and outperformance from financing and operational efficiencies; [25]
- Engaging with the UK government’s regulatory reform agenda and Defra’s transition‑planning process, ahead of a forthcoming White Paper on water regulation. [26]
In a trading update back in September, Reuters reported that Pennon expected EBITDA to rise about 60% year‑on‑year in 2025/26 even amid elevated costs, while still delivering on its 7% RORE target—a message repeated and essentially confirmed in today’s outlook statement. [27]
Market reaction and analyst views on PNN today
Share price response
Market coverage this morning indicates that Pennon’s shares moved higher after the results, with multiple outlets citing a 3–4% intraday gain and prices around the mid‑540p range shortly after the market open. [28]
This bounce comes after a difficult multi‑year run for investors; prior analysis in September suggested that Pennon shareholders had lost close to 27% over the last five years, underperforming the broader market. [29]
Broker and media commentary
Today’s coverage paints a broadly constructive but measured picture:
- Morgan Stanley described the half‑year performance as a “small miss” versus its own preview estimates but “broadly in line” with company‑compiled consensus, and reiterated an “equal‑weight” rating with a 620p price target. [30]
- The bank highlighted progress towards Pennon’s targeted 7% real RORE and noted that wastewater outcome‑delivery incentives (ODIs) are expected to be broadly neutral for the year—a notable shift from previous concern areas. [31]
- TipRanks’ AI‑driven analysis labels the stock “Neutral” with an overall score of 68, and flags a Hold‑level analyst consensus with an average price target around 576p. [32]
- Commentaries from DirectorsTalk, ADVFN and others emphasise the swing back to profit, the sharp reduction in pollution incidents, and the scale of the capital programme, while also warning that valuation and regulatory risks remain live issues. [33]
Several analysts also caution that, in the near term, PNN’s share price may be influenced as much by UK gilt yields and the post‑Budget macro backdrop as by company‑specific earnings, given the sector’s bond‑proxy characteristics. [34]
What today’s news means for investors
For investors following Pennon Group, today’s 27 November 2025 half‑year update crystallises a few key themes:
- Execution risk is easing, but not gone. The promised return to profitability has now arrived, backed by solid revenue growth and margin recovery. However, the company is still in the early years of a very ambitious capital programme, with plenty of scope for cost overruns or regulatory disputes. [35]
- Environmental performance is moving the right way. With pollution incidents and storm overflows materially lower, Pennon is starting to shift the narrative from crisis management towards improvement—though watchdogs, media and customers will want to see sustained progress over multiple seasons. [36]
- Income investors face a trade‑off. The per‑share dividend reset after the rights issue underlines that capital investment and balance‑sheet resilience take precedence. The yield case now rests on future growth from a larger regulated asset base, rather than an unchanged per‑share payout. [37]
- Regulation and politics remain critical. The forthcoming water‑sector White Paper, Ofwat’s ongoing PR24 determinations and wider political scrutiny over sewage and bills will heavily influence future returns, even if operational performance continues to improve. [38]
- Valuation is finely balanced. With the stock still well below prior highs but up strongly from its 2024 lows, and with broker targets clustered moderately above the current price, the risk/reward profile looks balanced rather than obviously cheap or expensive, at least based on today’s consensus. [39]
What’s next on the calendar?
Based on the company’s own investor information, key upcoming dates for Pennon include: [40]
- February 2026:
- 26 February – Ordinary shares to trade ex‑dividend
- 27 February – Interim dividend record date
- 4 March 2026: Pennon trading statement
- 2 June 2026: Full‑year 2025/26 results (subject to change)
These milestones, together with the evolving regulatory picture and continued monitoring of environmental metrics, will likely set the tone for how PNN trades into 2026.
This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Always conduct your own research and, where appropriate, consult a regulated financial adviser.
References
1. www.pennon-group.co.uk, 2. uk.investing.com, 3. www.pennon-group.co.uk, 4. www.pennon-group.co.uk, 5. www.pennon-group.co.uk, 6. www.pennon-group.co.uk, 7. www.pennon-group.co.uk, 8. www.pennon-group.co.uk, 9. www.pennon-group.co.uk, 10. www.pennon-group.co.uk, 11. www.pennon-group.co.uk, 12. www.pennon-group.co.uk, 13. uk.investing.com, 14. www.reuters.com, 15. www.pennon-group.co.uk, 16. kalkinemedia.com, 17. www.pennon-group.co.uk, 18. www.pennon-group.co.uk, 19. www.pennon-group.co.uk, 20. www.pennon-group.co.uk, 21. www.pennon-group.co.uk, 22. www.pennon-group.co.uk, 23. www.pennon-group.co.uk, 24. www.pennon-group.co.uk, 25. www.pennon-group.co.uk, 26. www.pennon-group.co.uk, 27. www.reuters.com, 28. uk.investing.com, 29. finance.yahoo.com, 30. uk.investing.com, 31. uk.investing.com, 32. www.tipranks.com, 33. www.directorstalkinterviews.com, 34. uk.investing.com, 35. www.pennon-group.co.uk, 36. www.pennon-group.co.uk, 37. www.pennon-group.co.uk, 38. www.pennon-group.co.uk, 39. www.tipranks.com, 40. www.pennon-group.co.uk
