UK's Pennon returns to annual profit; CEO warns of operational work ahead

June 10 (Reuters) - British water utility Pennon Group returned to annual profit on Wednesday, but its new CEO warned operational discipline must improve after extreme weather and rising performance targets resulted in regulatory penalties. 

The owner of South West Water posted an adjusted profit before tax of £135.1 million ($180.95 million) for the year ended March 31, after a £35.1 million loss the prior year, as regulated water revenues jumped around 25% on higher tariffs and consumption.

Here are some details:

• "Improving operational discipline and capital delivery will be important to meet the commitments we have made," Chief Executive Keith Haslett said in a statement.

• Net operational penalty of around £42 million resulted from exceptional storms and sustained rainfall, coupled with stepped-up performance targets and penalty rates at the start of the new five-year regulatory cycle.

• Pennon said its financial performance will continue to improve through increased revenues and ongoing focus on cost management.

• The company forecast higher revenues for 2026/27 and said it expects core profit to rise 5-10% year on year.   

• "We are well positioned for anticipated changes in the water sector and stand ready to support the government's Transition Plan," the company said, adding that a strategic update would follow before September-end.  

• The company reported capital expenditure of £643.6 million in the reported year, including £588.5 million in its water businesses, as part of a record £3.2 billion investment programme running to 2030.

• Pennon's 2025/2026 revenue also rose to £1.29 billion, compared with £1.05 billion from a year ago.

($1 = 0.7466 pounds)

(Reporting by Ankita Bora and DhanushVignesh Babu in Bengaluru; Editing by Rashmi Aich)