Interim profits tumble at Pennon as costs mount

Utility Pennon Group said on Wednesday that half-year profits tumbled after it was hit by higher costs.

The owner of South West Water and Bristol Water said underlying revenues in the six months to 30 September rose 9.3%, to £425m.5m, with return on regulated equity rising to 13.4%.

The FTSE 250 firm said revenues had benefited from growth in non-household demand, contract wins by Pennon Water Services and a full six-month contribution from Bristol Water, which Pennon acquired in June 2021.

But pre-tax profits slumped 74% to £20.9m, with adjusted earnings per share also down 74%, at 7.9p.

Pennon said profits had been hit by a surge in costs, as inflation and interest rates continued to mount. Financing costs jumped to £78.1m from £39.2m a year previously, while power costs were £49m, more than double last year’s £24m.

However, Susan Davy, chief executive, said: "We’re delivering robust fundamentals, executing our strategy and driving long-term sustainable growth.

"In the first half we’ve delivered record levels of investment to support a step change in environmental performance and build resilience for the longer term, having experienced the hottest, driest year since records began."

Pennon said it was increasing its investment in water resilience schemes by £45m, bringing total investment to around £75m.

South West Water is being investigated by regulator Ofwat for possible violations involving its wastewater treatment works. It is one of a number of water companies being investigated for making unpermitted sewage discharges in rivers and the sea. Pennon said it continued to work "openly, constructively and transparently" with the regulator.