Pennon water flips to a loss after parasite outbreak
Losses at water company Pennon widened significantly as the group struggled to pay millions to fix a parasite outbreak that led to diarrhoea.
Today, the South West Water owner said its underlying profit before tax had jumped from £19.1m in profit the first half of last year to £18.6m in losses.
The results were in line with management expectations, Pennon said, and attributed rising losses to a £16m cost to return quality water supplies to Brixham after the parasite outbreak, and £4m in restructuring costs.
Diarrhoea-causing cryptosporidium was found in a reservoir in May, leading thousands of households to boil their drinking water for eight weeks. The company was forced to clean and flush its water network 27 times, as well as replacing sections of its grid.
Revenue at the water company jumped significantly to £527m, thanks to the acquisition of Sutton and East Surrey Group, which completed earlier this year.
Despite a jump in revenue from the acquisition, the new business was also loss-making, with Pennon saying it was focusing “on reducing interest costs and right sizing the cost base to improve profitability”.
The group has also ramped up its spending on capital expenditure, rising from £266m last year to £332m. However, its capitalise expenditure run rate was slightly lower than the second half than last year.
“Water companies are rightly being challenged to do more for customers today and invest more for the future,” said Pennon chief executive Susan Davy.
“We continue to lead the way in helping customers to use less and save more with a range of money saving campaigns and pilots. Whilst that’s led to lower wholesale water business revenues, it’s the right thing to do.”
As sewage increasingly leaked into British rivers, Davy raked in a bumper £860,000 pay packet last year, up from £534,000 the year before.
“Our financial position remains resilient to the challenges ahead, with good liquidity and a diversified debt portfolio,” added Davy.
Pennon is one of the most shorted companies in the UK. 5.5 per cent of the company’s stock is shorted by six different funds, making it the fourth most-shorted stock, beaten by only Ocado, Abrdn and Diversified Energy Company.