Pennon Group pre-tax earnings down 85% as exceptional items add to cost hikes

Pennon Group reported an 85% year-on-year fall in profit before tax to £3.2m for the six months to 30 September 2023.

Underlying profit before tax was £9.1m – a 60% reduction – reflecting an 11.2% hike in operating costs for the period to £224.9m, a 6.7% increase in depreciation and amortisation to £82.6m, net interest raised 3.5% to £77.4m and discounting non-underlying (exceptional) costs of £5.9m.

These exceptional costs were identified as: £1.8m to address issues arising from cost arising from securing water resources during severe drought conditions recognised in the previous half year; £3.6m related to the transformation of South West Water following the acquisition of Bristol Water; and £0.5m in expenses connected to the acquisition of four renewable power generation investments.

Group net interest charges for the group were up 3.5% to £77.3m.

Group operating profit was down 11.6% at £85.9%.while revenue ticked up 5.4% to £448.6m. Group capital investment for the half year was up 86.7% at £266.3m.

The group’s South West Water subsidiary reported a half-year profit before tax down 94% from the same point last year to £1.2m reflecting a 13.3% jump in energy costs to £55.2m and a 9% increase in other operating costs to £155.5m with the business’ share of exceptional costs at £5.4m. Revenue at the company was up 4% to £377.8m with operating profit off 10.5% to £87.5m

The business retail arm Pennon Water Services reported profit before tax up 54% to £1.7m on a revenue increase of 8.7% to £117.6m