Pennon Group PLC (LSE:PNN, OTC:PEGRY) returned to the black in its latest financial as higher regulatory allowances and increased water consumption boosted revenue, though the water group warned operational performance would continue to be weighed down by regulatory penalties.
The owner of South West Water swung to a statutory pre-tax profit of £114.4 million in the year to March, from a loss of £72.7 million before. Revenue rose 23% to £1.3 billion, while underlying pre-tax profit was £135.1 million against a loss of £35.1 million in the previous year.
The improvement was driven by a roughly 25% increase in regulated water revenue, reflecting higher customer bills under the new regulatory settlement and increased consumption. Cost controls also supported earnings.
Pennon invested £643.6 million during the year, including £588.5 million across its regulated water businesses as it began delivering its AMP8 investment programme.
Operational performance remained mixed, with pollution incidents down around 34%, storm overflow use declining 17% and spill duration reduced by about a quarter despite exceptionally wet weather in south-west England.
However, there were £42 million of outcome delivery incentive penalties, which it blamed on severe storms, sustained rainfall and tougher regulatory targets.
New chief executive Keith Haslett, who took over on 1 April, said the group had returned to profitability and begun mobilising its AMP8 programme but acknowledged that "there is more work to do".
He said: "Focusing on operational excellence, driving a performance culture and delivering through technology and innovation will be my key priorities, to improve performance for our customers and the communities we serve."
A strategic update was promised before the end of September.
