Pennon Group plc (PNN) AI Stock Analysis

• Market Cap: £2.41B
• Dividend Yield: 6.6%
• Average Volume (3M): 1.10M
• Price to Earnings (P/E): ―
• Beta (1Y): 0.95
• Revenue Growth: 19.50%
• EPS Growth: N/A
• Country: UK
• Employees: 4,000
• Sector: Utilities
• Sector Strength: 65
• Industry: Regulated Water
• EPS (TTM): 0.14
• Shares Outstanding: 471,974,670
• 10 Day Avg. Volume: 857,521
• 30 Day Avg. Volume: 1,097,750
• PEG Ratio: -0.06
• Price to Book (P/B): 0.88
• Price to Sales (P/S): 1.22
• P/FCF Ratio: -2.23
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: £586.00
• Price Target Upside: 13.35% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 7
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 67 Neutral
• Price Target: 586.00p ▲(13.35% Upside)

Pennon Group's overall stock score reflects a mix of strengths and challenges. The most significant factor is the company's financial performance, which shows revenue growth but also highlights profitability and leverage concerns. Technical analysis indicates positive momentum, while the high P/E ratio suggests potential overvaluation. The earnings call and corporate events provide optimism with strong operational achievements and strategic initiatives.

Positive Factors

Revenue Growth

The significant revenue growth driven by higher tariffs and increased customer consumption indicates strong market demand and effective pricing strategy, supporting long-term financial stability.

Operational Successes

Operational improvements in pollution reduction enhance environmental compliance and sustainability, strengthening the company's reputation and operational efficiency.

Environmental Gains and Innovation

Commitment to environmental improvements and innovation in renewable energy projects positions the company as a leader in sustainable practices, aligning with long-term regulatory and market trends.

Negative Factors

Profitability Challenges

Declining net income and negative profit margins indicate pressure on profitability, which may hinder the company's ability to reinvest and grow sustainably over the long term.

Rising Debt Levels

Increased leverage poses financial stability risks, potentially limiting financial flexibility and increasing vulnerability to economic downturns or interest rate hikes.

Cash Flow Challenges

Negative free cash flow and declining operating cash flow highlight liquidity issues, which could impact the company's ability to fund operations and capital expenditures without additional financing.

Pennon Group plc Business Overview & Revenue Model

Company Description

Pennon Group Plc provides clean water and wastewater services in the United Kingdom. It provides water and wastewater services for customers in Cornwall, Devon, and parts of Dorset and Somerset; water-only services in the areas of Dorset, Hampshire, and Wiltshire; and water and wastewater retail services to non-household customers in Great Britain. The company also offers regulated water to approximately 1.2 million customers in the Bristol region. It serves approximately 50 million household and non-household customers. The company was incorporated in 1989 and is based in Exeter, the United Kingdom.

How the Company Makes Money

Pennon Group generates revenue primarily through its regulated water and wastewater services, which involve charging customers for the provision and treatment of water and the disposal of wastewater. This revenue is essentially driven by customer billing based on usage and is regulated by the UK's water regulator, Ofwat, which sets price limits that the company can charge. Additionally, the group earns income from commercial services offered through Pennon Water Services, which includes consultancy and efficiency optimization for businesses looking to manage their water use more effectively. Significant partnerships with local authorities and businesses enhance its operational capacity and revenue potential, while ongoing investments in infrastructure and sustainability initiatives aim to reduce costs and improve service delivery, contributing positively to overall earnings.

Pennon Group plc Financial Statement Overview

Summary

Pennon Group is experiencing revenue growth, but profitability challenges are evident with declining net income and margins. The balance sheet shows increasing leverage, which could impact financial stability. Cash flow concerns arise from negative free cash flow, although operating cash flow generation is a strength. The company needs to address profitability and leverage for improved financial health.

Income Statement

The company has shown a positive revenue growth trend, with a notable increase in total revenue from £624.1 million in 2021 to £1.048 billion in 2025. However, the net income has significantly declined, leading to a negative net profit margin in recent years. Gross profit margin remains strong, but declining EBIT and EBITDA margins indicate pressure on operational efficiency.

Balance Sheet

The debt-to-equity ratio has increased over the years, reflecting higher leverage, which could pose risks if not managed properly. The return on equity has suffered due to net losses, and while the equity ratio remains stable, the increasing liabilities are a concern.

Cash Flow

Operating cash flow has declined, and free cash flow is negative, indicating cash flow challenges. The company's increased capital expenditures are affecting free cash flow. However, the ability to generate operating cash flow relative to net income is a positive aspect.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	917.90M	1.05B	906.80M	797.20M	792.30M	624.10M
Gross Profit	702.10M	995.90M	856.00M	506.70M	532.30M	411.60M
EBITDA	337.30M	302.90M	319.90M	261.00M	368.60M	310.50M
Net Income	43.40M	-57.90M	-9.50M	100.00K	15.40M	79.50M
Balance Sheet
Total Assets	7.38B	7.05B	6.23B	5.19B	5.34B	6.42B
Cash, Cash Equivalents and Short-Term Investments	489.00M	417.90M	145.40M	165.40M	519.00M	2.92B
Total Debt	4.87B	4.54B	3.97B	3.13B	3.20B	2.85B
Total Liabilities	6.02B	5.60B	5.07B	4.06B	4.06B	3.44B
Stockholders Equity	1.36B	1.45B	1.16B	1.12B	1.27B	2.98B
Cash Flow
Free Cash Flow	-258.55M	-575.10M	-450.00M	-173.70M	25.90M	15.90M
Operating Cash Flow	181.95M	93.50M	148.90M	157.50M	254.90M	206.20M
Investing Cash Flow	-596.20M	-676.40M	-658.00M	-330.50M	-639.60M	3.44B
Financing Cash Flow	764.50M	866.80M	510.80M	-180.60M	-2.02B	-1.43B

Pennon Group plc Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 517.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:PNN, the sentiment is Positive. The current price of 517 is below the 20-day moving average (MA) of 523.27, above the 50-day MA of 514.84, and above the 200-day MA of 476.91, indicating a neutral trend. The MACD of 5.36 indicates Positive momentum. The RSI at 48.09 is Neutral, neither overbought nor oversold. The STOCH value of 7.96 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:PNN.

Pennon Group plc Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NG	76 Outperform	£56.78B	18.56	7.87%	4.23%	-9.52%	35.74%
SSE	74 Outperform	£20.81B	17.45	9.92%	3.06%	1.78%	-50.72%
UU	72 Outperform	£8.19B	30.92	20.43%	4.41%	15.76%	254.82%
SVT	71 Outperform	£8.34B	36.17	17.41%	4.58%	10.68%	35.18%
PNN	67 Neutral	£2.41B	-36.04	2.50%	6.60%	19.50%	―
CNA	66 Neutral	£8.21B	-35.94	-5.95%	2.91%	-4.82%	-123.58%
Sector *	66 Neutral	$17.65B	18.10	5.60%	3.62%	6.62%	11.55%

Pennon Group plc Corporate Events

Pennon Group Updates Euro Medium Term Note Programme

Pennon Group plc has announced the publication of a Supplementary Prospectus related to its GBP 2.5 billion Euro Medium Term Note Programme. This update is crucial for stakeholders as it reflects the company’s ongoing financial strategies and commitments, potentially impacting its market positioning and investor relations.

Pennon Group Announces Total Voting Rights and Capital Structure

Pennon Group plc has announced its total voting rights and capital structure as of November 30, 2025. The company has an issued share capital of 471,980,296 ordinary shares, with 5,628 shares held in treasury, resulting in a total of 471,974,668 voting rights. This information is crucial for shareholders to determine their notification obligations under the FCA’s Disclosure Guidance and Transparency Rules.

Pennon Group Reports Strong Return to Profitability and Environmental Progress

Pennon Group plc reported a strong return to profitability for the first half of 2025/26, with significant improvements in financial performance driven by disciplined cost control and strategic investments. The company has halved pollution incidents and reduced storm overflow spills, reflecting its commitment to environmental sustainability. With a robust balance sheet, Pennon is well-positioned to execute its largest-ever capital program, focusing on water availability, pollution control, and customer support. The company continues to engage with regulatory reforms and aims for a 7% return on regulated equity, supported by efficient financing and operational efficiencies.

Pennon Group Executives Increase Stake in Company

Pennon Group plc announced that its Group Chief Executive Officer, Susan Jane Davy, and Group Chief Financial Officer, Laura Flowerdew, have both made purchases of ordinary shares as part of the company’s Share Incentive Plan. These transactions, conducted on the London Stock Exchange, reflect the executives’ commitment to aligning their interests with those of the shareholders and demonstrate confidence in the company’s future performance.

Pennon Group Announces Total Voting Rights and Capital Structure

Pennon Group plc announced its total voting rights and capital structure as of 31 October 2025, with an issued share capital consisting of 471,980,296 ordinary shares and 5,628 shares held in treasury. This information is crucial for shareholders to determine their notification requirements under the FCA’s Disclosure Guidance and Transparency Rules.

Pennon Group Executives Increase Stake in Company through Share Incentive Plan

Pennon Group plc announced that its Group Chief Executive Officer, Susan Jane Davy, and Group Chief Financial Officer, Laura Flowerdew, have both purchased shares as part of a Share Incentive Plan. This transaction, conducted on the London Stock Exchange, reflects the executives’ commitment to aligning their interests with those of the shareholders, potentially strengthening stakeholder confidence in the company’s leadership.

Pennon Group Appoints Sir Andrew Haines as Non-Executive Director

Pennon Group Plc has announced the appointment of Sir Andrew Haines as a Non-Executive Director, effective from November 1, 2025. Sir Andrew brings a wealth of experience from the UK’s transport and regulatory sectors, having previously served as Chief Executive of Network Rail. His leadership in complex, customer-focused organizations and understanding of regulated industries is expected to be invaluable as Pennon embarks on its largest investment program aimed at enhancing services for customers and communities.

Pennon Group Announces Executive Share Awards Under Long-Term Incentive Plan

Pennon Group plc announced a conditional award of shares to its CEO, Susan Jane Davy, and CFO, Laura Flowerdew, under the company’s 2025 Long-Term Incentive Plan. The awards, which vest after three years based on performance criteria, reflect the company’s commitment to aligning executive compensation with long-term performance goals, potentially impacting its operational focus and stakeholder interests.

Pennon Group Appoints Keith Haslett as New CEO

Pennon Group plc has announced the appointment of Keith Haslett as the new Chief Executive Officer, succeeding Susan Davy. Haslett, who brings extensive experience from Affinity Water and other major water companies, is expected to join in 2026 and aims to drive customer service improvements and ambitious investment programs. This leadership change is anticipated to bolster Pennon’s operational excellence and shareholder value, continuing the growth trajectory established under Davy’s leadership.

Pennon Group Updates Share Capital and Voting Rights

Pennon Group plc announced its total voting rights and capital structure as of September 30, 2025, with an issued share capital of 471,979,034 ordinary shares, out of which 5,628 shares are held in treasury. This update is crucial for shareholders to determine their notification requirements under the FCA’s Disclosure Guidance and Transparency Rules.

Pennon Group Reports Strong Start to Fiscal Year with Focus on Sustainability and Profitability

Pennon Group PLC has reported a robust start to the fiscal year 2025/26, with strong profitability despite challenges posed by a hot summer. The company has made significant progress in reducing pollution and storm overflow spills, while maintaining resilient water supplies. Financial performance is on track, with an expected 60% increase in EBITDA and a target return on regulated equity (RORE) of 7%. The company is also advancing its renewable energy projects, with two sites set to generate power by October, contributing to 40% of the Group’s energy consumption by FY27.

Pennon Group Executives Invest in Share Incentive Plan

Pennon Group plc announced transactions involving its Group Chief Executive Officer, Susan Jane Davy, and Group Chief Financial Officer, Laura Flowerdew, who both purchased shares to be included in the company’s Share Incentive Plan. These transactions, conducted on the London Stock Exchange, reflect the executives’ commitment to the company’s growth and alignment with shareholder interests.

Pennon Group Issues GBP 300 Million Fixed-Rate Notes

Pennon Group plc has announced the issuance of GBP 300 million in fixed-rate notes due 2031 through its subsidiary, South West Water Finance Plc. This financial move under its Euro Medium Term Note Programme is expected to bolster the company’s financial standing and support its long-term strategic objectives.