Pennon owns water and sewerage companies in the South West of England and water-only companies around Bristol and in Surrey. It returned to profit in 2025/26 as a record investment programme began to lift its allowed revenues, but weather and operating failures cost it about £42m in penalties. On 7 October 2026 it asked shareholders for £550m, its third equity raise since January 2024. The latest close, on 21 October 2026, was 333.4p, against 726.5p at the end of October 2023.
Water for five regions, paid for by a regulator's price deal
Pennon supplies water and takes away wastewater through South West Water in Devon and Cornwall, and supplies water in Bournemouth and the Isles of Scilly. It also owns Bristol Water and Sutton and East Surrey (SES) Water. The Group has four business lines: Water Services, Wastewater Services, Pennon Power and Retail Services.
Ofwat, the regulator, sets how much these businesses may charge over each five-year period. The current period, called AMP8 or K8, runs from 2025 to 2030. Profit depends on how much the businesses spend against their allowances, how cheaply they borrow, and whether they hit service targets. Missed targets bring penalties (outcome delivery incentives, ODIs). Pennon's profit measure is Return on Regulated Equity (RoRE).
Two smaller arms sit alongside. Pennon Water Services and Water2Business sell water to business customers. Pennon Power is building four solar sites to meet part of the Group's own electricity needs. 10 Jun 2026 27 Nov 2025 3 Jun 2025 26 Sep 2025
Buying Sutton and East Surrey, funded by shareholders
Pennon had already bought Bristol Water. In January 2024 it agreed to buy SES Water for £89m of equity, on an enterprise value (equity plus debt taken on) of £380m. It raised £180m from shareholders at 730p a share to pay for it. The company expected the deal to add to earnings from 2024/25 and to deliver £11m a year of savings. The competition regulator cleared it in June 2024 after Pennon offered undertakings. 10 Jan 2024 3 May 2024 14 Jun 2024
The loss year and a bigger raise
Trouble arrived in 2024. A drinking-water incident in Brixham cost about £21m to put right, and the Group spent about £17m restructuring itself. Customers also used less water, which cut revenue. Finance costs rose from £150m to £184m as capital spending stayed near £650m a year. The 2024/25 loss before tax was £72.7m.
Ofwat's final price decision came in December 2024. Pennon accepted it in January 2025 and launched a £490m rights issue at 264p to fund a record £3.2bn programme to 2030. It said it would grow the dividend per share by inflation (CPIH) from a rebased level. Shareholders took up 92.6% of the new shares, and the rest were placed at 460p. The dividend per share for 2024/25 was 31.57p, against 36.67p a year earlier. 3 Jun 2025 19 Dec 2024 29 Jan 2025 18 Feb 2025
Profit returns, but the weather and the targets bite
Higher allowed revenue and cost cuts lifted underlying EBITDA (operating profit before depreciation) by 55% in 2025/26, to £519m. Statutory profit before tax was £114m. Management had said in November 2025 that it expected about 60%. The March 2026 trading update said profit would come in at the lower end of expectations.
The shortfall came from operations. Five named storms and about 150% of average rainfall in November and December hit the South West. In November 2025 the company had aimed for a net-neutral ODI position in wastewater. It ended the year with a net operational penalty of about £42m across water and wastewater. RoRE was 6.7% against a 7% target. Pollution incidents fell about 34%, but the provisional 2025 Environment Agency rating is 1 star. In 2023 the company had set 4 stars for 2025 as its goal. 27 Nov 2025 10 Mar 2026 10 Jun 2026 21 May 2024 25 Mar 2024
Investment ahead of returns, and delivery that lagged the promises
Two causes explain most of the record. First, Pennon has spent heavily ahead of the revenue to pay for it, and shareholders have funded part of that. Equity raises of £180m, £490m and now £550m came alongside a dividend per share that fell from 36.67p to 31.57p and is to be cut again.
Second, operating delivery has fallen short of what management set out. The 4-star environmental goal became a provisional 1 star. The neutral wastewater ODI target became a net penalty. The Brixham incident led to a prosecution by the Drinking Water Inspectorate, and the enforcement package with Ofwat is worth £24m of investment, which replaced a £19m penalty. Management's own words for 2025/26 were that there is more work to do on operations and capital delivery. 3 Jun 2025 10 Jun 2026 10 Jul 2025 7 Oct 2026 21 May 2024
A new chief executive and a reshaped Board
Susan Davy, chief executive for 18 years, announced her retirement in July 2025 and stepped down in December 2025. She is treated as a good leaver. The CFO changed twice in 2023 and 2024, with Laura Flowerdew taking the role in July 2024. Chair David Sproul served as executive chair, backed by a temporary operating committee, until Keith Haslett joined from Affinity Water on 1 April 2026.
Haslett has named operational excellence, a performance culture and technology as his priorities. A new Chief Asset Officer, Ian Christie, joined in May 2026. Andrew Haines, formerly of Network Rail, became senior independent director. Earlier, the company cut its cost base and put about 35% more staff on the front line. 11 Jul 2025 9 Dec 2025 2 Oct 2025 10 Feb 2026 10 Jun 2026 3 Jun 2025
A reset, a third raise and a lower share price
On 7 October 2026 management set out an operational reset. It plans about £1bn of extra capital investment, taking AMP8 spending to about £3.6bn. It raised £550m through a 7-for-15 rights issue at 250p, a 35.5% discount to the theoretical ex-rights price. The 2026/27 dividend is rebased to about £125m, an implied cut of about 30% in dividend per share. The 2025/26 dividend was £138m.
The shares closed September at 458p. The latest close, on 21 October, was 333.4p. BlackRock was the largest disclosed holder at 6.5% on its latest filing. 7 Oct 2026 10 Jun 2026
What management expects, and what still has to be proved
The company says the plan will grow the regulated capital value (RCV, the asset base on which returns are earned) by over 40% across AMP8. In January 2025 it had said 34%. It also says it will keep a prudent capital structure to March 2030 and grow dividend per share by CPIH from the rebased level. The 7% RoRE target, stated in January 2025, stands against 6.7% delivered in the first year. All four Pennon Power sites are due to be running by the end of FY27, generating the equivalent of 40% of Group consumption.
Ofwat's approval in August 2026 of £190m of extra investment is one step. Its provisional allowance of £230m on the cost-change process is another. The company has not said how the two relate. Ofwat's final decision is due by 15 December 2026. The company also says it expects the Environment Agency prosecutions to conclude during 2026. Open questions: can operations improve enough to end net penalties, and will the extra spending earn its allowed returns? 7 Oct 2026 13 Aug 2026 10 Mar 2026 26 Sep 2025 29 Jan 2025
Written by AI from Pennon Group's own announcements since Oct 2023 · every paragraph links to its sources