Pennon Group plc has returned to profitability in the half year ended 30 September 2025, with a statutory profit before tax of £65.9 million, compared to a loss of £38.8 million in H1 2024/25, according to the interim results for the Group published today.

Susan Davy, Group Chief Executive Officer, commented:

"We have made a robust start to the first half of 2025/26 and the new K8 regulatory period. With a strong return to profitability and disciplined cost control, we are on track financially and growing sustainably.

Focused on our customers' priorities, we are delivering step change improvements in our wastewater business, with pollution incidents halved compared to last year. This reflects our operational focus and continued momentum of record capital investment over the last two years, thanks to the early mobilisation of our supply chain.

Our strong balance sheet and funding approach position us well to deliver our largest ever capital programme through K8, focused on the four priorities that matter most to our customers - ensuring the availability of safe, clean drinking water as summers become hotter and drier, tackling pollutions and storm overflows, protecting the environment and supporting customers to use less and save more.

As the only water company to have received three successive outstanding business plan ratings, we understand what we do each day really matters. That's why my brilliant colleagues are firmly focused on ensuring we deliver on our five-year plan for the communities we serve, the places they call home, recognising there is always more to do."

Operational review – Group has made fast start to AMP8

The operational review by Susan Davy says the Group has made a fast start with over 60% of the AMP8 five-year capital delivery programme now in progress - more than 1,000 schemes are now underway. The 'amplify' strategic delivery alliance is fully mobilised - 23 frameworks have been up and running since 2024 with efficiencies being realised as major projects move from design to construction, with c.£100 million of totex outperformance identified. The Group is already securing strong efficiencies, helping to offset inflationary and operational pressures.

The capital delivery supply chain partnership’s work on over 1,000 deliverables , represents around one-third of AMP8 investment. 100% of Pennon’s Year 1 WINEP schemes are also underway with delivery partners, and all water and wastewater schemes remain on track. Strong efficiencies are being secured as projects progress from design into delivery, with c.£100 million of totex^ outperformance identified.

Operational highlights

• Pollutions Incident Reduction Plan (PIRP) driving results with pollution incidents in 2025 reducing by c.50%, and a proactive approach which has reduced repeat pollutions by c.75%
• Storm overflow spills cut by c.45%, supported by interventions that avoided c.6,000 spills, bringing a total of c.20,0006 spills avoided over 18 months
• Improvements reflect the early impact of long-term pollution reduction plan, strengthening pumping station resilience, increasing storm storage, separating surface water from the sewer system, and optimising flows across the network.
• Overall, 2025/26 Outcome Delivery Incentives in wastewater are tracking to be net neutral - a first for South West Water since ODIs were introduced.
• Spill duration down by a quarter over the bathing season and 100% bathing water quality for the fifth consecutive year
• Water resources position has remained strong through the hot summer, thanks to strategic planning and investment following the 2022 drought, although changing weather fronts have tested the networks
• SES Water remains top performer for water quality, South West Water upper quartile, Bristol remains above average
• Investment in Pennon Power has continued with two of four sites, Fife and Aberdeenshire, fully constructed with Aberdeenshire now energised.
• Changing weather fronts have tested networks, increasing the number of bursts.Whilst customer impacts mitigated on 70% of these, it has been challenging for the operational teams with water supply interruptions performance in South West Water dominated by a one-off, unforeseen incident at Dousland.
• Despite the 15% increase in activity, leakage held at 2024/25 levels and targeting improvements in the second half of the year.
• Leakage delivery plans include actions to address not just reported leakage, but also upstream losses (water lost before reaching end user) including a greater numbers of mains repairs.
• Group remain on target for year end mains replacement performance across all operating areas.
• Continuing to support customers with bill affordability, with a c.20% increase in customers on one or more of support tariffs
• £20 million investment in CREWW, which continues to lead the way with a state-of-the-art microplastics lab, researching issues including micro-plastics in sewage sludge, to future fibres and plastics in clothes

Group Chief Financial Officer Review

Laura Flowerdew, Group Chief Financial Officer, says the Group has delivered a strong return to profitability in the first half of the 2025/26 financial year.

Group revenue increased by 24.8% to £658.1 million (H1 2024/25: £527.2 million), primarily driven by the benefit of increased regulatory revenue allowances (net of c.£20 million of revenue reprofiled into 2026/27 customer bills) and higher consumption.

Group operating costs rose by 11.0% year on year to £403.7 million (H1 2024/25: £363.7 million), principally reflecting wholesale water costs in the retailers (across their national customer base) increasing by c.22%, with operating costs for the Water Group rising broadly in line with inflation.

Financial highlights during the period include:

• Strong return to profitability for H1 2025/26, with statutory profit before tax of £65.9 million (H1 2024/25: loss of £38.8 million)
• Step change in underlying EBITDA as a result of disciplined cost management, with savings being released from the restructuring and efficiency programmes
• Regulated water revenue up c.26% year on year, driven by tariff increases and higher demand over the hot summer months, net of reprofiled Final Determination revenue into 2026/27 customer bills
• Continued efficient financing, with £300 million new bond issuances in South West Water demonstrating strong outperformance against the allowed cost of debt
• On track for Return on Regulated Equity (RORE) of 7%4, underpinned in 2025/26 by efficient financing, with efficiencies in capital programme offsetting other cost pressures
• Strong start to AMP8 capital investment programme, with £304.8 million of capital investment across the Group in H1 - in line with expectations
• Interim dividend of £43.7 million (2024/25: interim dividend £42.0 million), resulting in a dividend per share basis of 9.26p.
• Pennon Group gearing at 30 September 2025 of 63.2%, comfortably within policy parameters, with Water Group gearing at 59.8%, and South West Water at 60.1%.
• Both South West Water and SES Water continue to maintain strong investment-grade credit ratings, enabling access to competitive financing.

Looking ahead – “fully supportive” of Government's regulatory reform agenda

Looking ahead, the Group says it is fully supportive of the Government's regulatory reform agenda, and is actively engaged in Defra's Transition Planning process.

Pennon also supports the direction towards a more streamlined, outcomes-focused performance framework. The Group says a smaller number of clearer incentives, aligned to the priorities that matter most for customers and the environment, will help strengthen transparency and provide a more stable basis for long-term investment.

“Achieving national goals on water quality, resilience and asset health will require sustained, long-term capital investment, underpinned by a regulatory regime that recognises risk and enables a fair and stable return. We strongly support this direction,” Pennon says.

The Group expect the reforms to deliver:

• Clear long-term direction for UK water
• New single regulator and supervisory regime
• Customer focused
• Clear plans for improving water quality
• Securing water resilience
• A fair deal for investors, balancing risk and reward.