Pennon Group Plc
🇬🇧 PNN.LSE · London · GB00BNNTLN49
Utilities
GBX 554.50 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
62.2
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 554.50 ÷ 8.92 = 62.2
TTM period through: 2025-09-30
Forward P/E (estimated): 15.3
Based on analyst estimates
Reference: Provider P/E (Trailing): 110.9
Yield (Fwd)
5.23%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 4.80%
Net Debt/EBITDA (TTM)
13.0x
Latest quarter: 16.5x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2025-09-30
Latest quarter (2025-09-30): 16.5x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (Fwd)
325.1%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Announced dividend / actual earnings (TTM)
Payout (TTM): 292.4%
Cash Flow Payout (TTM): 62.3%
FCF Coverage (TTM): -2.04x
ROE
2.6%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
16.7x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
Summary
Pennon Group operates a natural monopoly as a UK water utility, but severe financial and operational issues overshadow its defensive characteristics. The company is burdened by an unsustainable Net Debt/EBITDA ratio of 13.0x, negative free cash flow, and a history of significant dividend cuts, including an impending proposed cut of 34.7%. Given the persistent fundamental deterioration and high leverage, the stock is not recommended for new positions, as the risks far outweigh the current yield.
Sector Context
Pennon Group operates as a regulated UK water utility, providing essential water and wastewater services to regional customers. While water utilities traditionally offer defensive, inflation-linked returns and natural monopolies, they are highly capital-intensive and face strict environmental and regulatory oversight, requiring robust balance sheets to manage necessary infrastructure upgrades.
Temporary Opportunity Identified
Recent quarters have been heavily impacted by specific events, including a cryptosporidium water quality incident, environmental compliance costs, and related restructuring expenses.
📊 Strategy Analysis
- • Operates as a regulated utility providing essential water services with a natural regional monopoly.
- • Revenues have shown short-term growth in recent quarters, despite long-term historical declines.
⚠ What to Watch
- • Severe balance sheet deterioration with Net Debt/EBITDA at 13.0x and Debt/Equity of 3.58x, far exceeding safe thresholds even for capital-intensive utilities.
- • Fundamental decline evidenced by negative Free Cash Flow (-£117.9M) and a 7-year earnings CAGR of -64.9% (excluding loss years).
- • Highly unsustainable dividend profile, highlighted by a TTM payout ratio of 281%, a 92.4% cut in 2023, and an announced upcoming proposed cut of 34.7%.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-04-05
Disclaimer: This information is for educational purposes only. Not financial advice.