Pennon trading statement: funding underpinned for AMP8

Pennon Group last week issued a trading update for the year ending 31 March, confirming its readiness to tackle its AMP8 challenges.

The company flagged lower customer demand and inflationary cost pressures for the second half of the year. EBITDA would therefore be broadly flat compared to the first half. Customer demand will be trued up in AMP8 under regulatory mechanisms. Management said inflationary costs have been offset by the company’s reshaping and restructuring programme. At its recent Capital Markets Day, Pennon confirmed this programme will deliver c£86m of annualised savings in AMP8. It recorded a non-underlying cost for establishing this programme, to which was added the final c£36m cost relating to the Brixham water supply incident.

Pennon’s capital expenditure continues at a steady run rate for the current year reflecting transitional expenditure and finalisation of investment for the current five-year period, AMP7. Despite earlier management optimism that Pennon could increase its Environmental Performance Assessment score, the company now seems unlikely to improve on its 2* status, as it remains challenged by pollution incidents. It reported positive progress though. It is one of only five companies in the industry to reduce storm overflow releases year on year, with bathing beach releases during the bathing season down by 21% since 2020.

On funding, Pennon raised c.£1.3bn in 2024/25 via a rights issue, public bonds, private placements and other funds to underpin its £3.2bn capital investment programme. Compared to many of its peers it is well prepared for AMP8.