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Highlights

  • Pennon Group's FY24 revenue rose by 10.04% to GBP 907.8 million
  • Underlying EBITDA increased by 9.91% to GBP 338.3 million, primarily driven by South West Water
  • For FY25, South West Water anticipates lower customer demand but expects to achieve cost savings in the second half

Pennon Group PLC (LSE:PNN) is a UK-based company listed on the FTSE 250, specialising in environmental infrastructure and customer services. The company primarily operates through two subsidiaries, one of which is Southwest Water Limited, providing water and wastewater services. PNN has a market cap of GBP 1596.43mn, as of 10 October 2024.

In FY24, Pennon Group's statutory revenue reached GBP 907.8 million, up 10.04% YoY from GBP 825 million in FY23. This revenue growth was largely driven by South West Water, which saw an increase of GBP 28.5 million in its revenue. Additionally, Pennon Water Services reported revenue growth of GBP 15.8 million, bringing its total revenue to GBP 233.8 million, mainly due to new contracts outside of South West Water's service  areas.

The underlying EBITDA also improved, rising by 9.91% from GBP 307.8 million in FY23 to GBP 338.3 million for the year. South West Water was the largest contributor, adding GBP 332.5 million, while Pennon Water Services contributed GBP 7.4 million and SES Water added GBP 3.6 million to the overall increase.

Recent Business Update

According to the company's trading statement dated 26 September 2024, the Competition and Markets Authority (CMA) approved the acquisition of Sutton and East Surrey Group in June. The integration has already achieved 10% of its efficiency targets. Ofwat has described the draft determinations for South West Water and SES as "outstanding," facilitating growth in the Regulatory Capital Value (RCV) and earmarking GBP 75 million for storm overflow projects.

A transformational program is targeting savings of GBP 86 million. For the first half of 2024/25, capital expenditure is projected to be GBP 300 million. The financial results now include SES, which has shown flat operating costs despite lower customer demand. Total non-underlying costs amount to GBP 32 million.

Company Outlook

For FY25, South West Water expects lower customer demand, which will offset the benefits from tariff increases and the addition of new customers. In the second half of the year, operating costs are expected to decrease due to efficiency savings, although high power costs and expenses related to a new digital platform will continue to pose challenges.

Group capital spending is anticipated to remain consistent with the levels seen in the first half of 2024/25. This includes GBP 75 million for storm overflow projects and responses to operational incidents. Financing costs have gone up, but the effective interest rate remains lower than last year.

Price Information

The stock price of PNN has declined by around 12.31% and around 19.29% in the past month and past three months, respectively. The stock’s 52-week low and high price are GBP 543.12 and GBP 775.00, respectively. As of 10 Oct 2024, the stock’s closing price is GBP 548.00.

Image source: EODHD/Others

Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 10 October 2024. The reference data in this report has been partly sourced from EODHD/Others.