Pennon forecasts strong profitability in 2025 as bills rise and regulator actions persist

Pennon, the Exeter-based owner of South West Water and Bristol Water, said it is delivering a return to strong profitability in 2025, even as it faces regulatory penalties and legacy issues from historic wastewater and sewage incidents.

Last year the group posted losses of more than £70 million, driven by restructuring costs and a parasite outbreak in Brixham, South Devon. Ofwat, the sector regulator, this year issued a £24 million enforcement package tied to failures at wastewater treatment works and sewer networks. Bills for Pennon customers rose in April by an average of about 28% to fund essential infrastructure upgrades. Pennon is targeting roughly £3.2 billion of investment by 2030, covering work to build new reservoirs, fix storm overflows, meet its net-zero commitments, and improve services for customers.

Outgoing chief executive Susan Davy told investors on Friday that Pennon is delivering a return to strong profitability in 2025. She said the group has maintained resilient water supplies and continued to improve services for customers despite the pressures of a hot summer, and highlighted tangible environmental gains as pollution incidents and storm overflow spills decline.

Pennon forecasts earnings to rise about 60% year-on-year, factoring revenues deferred into the next financial year. The company’s shares were broadly flat at about 453 pence in early trading, with the stock down roughly 2.8% over the past 12 months and more than 60% over five years.

On the environmental front, the group reported pollution incidents halved in the eight months to August, and storm overflow spills fell by nearly 50% year-on-year, attributing the improvement to targeted interventions and investment in the wastewater network, in part alongside lower rainfall in the South West.

Russ Mould, investment director at AJ Bell, said cleaning up the water-utility sector’s reputation would take time, but the latest results show progress. “Halving pollution and storm overflow spills year-on-year is impressive but also speaks to how acute these problems have been in the past,” he noted. “From a shareholder perspective, the return to profitability is a welcome development given the pressures from the hot weather over the summer,” he added, while acknowledging that legacy issues remain.

Pennon reiterated its long-term plan to invest about £3.2 billion through 2030 to modernize infrastructure, improve storm-water management, advance environmental goals, and enhance customer service. The group’s executive leadership emphasized that while more work lies ahead, the current trajectory reflects measurable improvements in both financial performance and environmental performance, even as regulatory scrutiny continues to shape the near-term outlook for the sector.