Pennon Group PLC on Thursday said that it expects operating costs in the second half of the year to be lower, after suffering a £16 million impact from the cryptosporidium water quality incident in Brixham, Devon.

Pennon is an Exeter, England-based water utility company.

For the period to September 26, the firm noted a number of operational achievements, including the resolution of a cryptosporidium water quality incident in Devon, and progress on its WaterFit storm overflow investment.

The Brixham water quality incident, nevertheless, incurred non-underlying costs of around £16 million. These included enhanced customer compensation, provision of bottled water over an eight-week period and ‘extensive interventions’ to clean and filter the network.

On a more positive note, Pennon celebrated approval from the UK Conduct & Market Authority in June for its acquisition of Sutton and Surrey East Group, a water supply company. Integration of the company is now underway, with 10% of Pennon’s ‘efficiency target’ already secured.

Accordingly, Pennon’s first half results - which come out on November 27 - will reflect the inclusion of SES Group.

On a like-for-like basis, interim revenue was impacted by lower customer demand, while operating costs are broadly flat, with continuing elevated power costs offset by efficiency savings.

Looking ahead, Pennon said that the outlook for South West Water sees a continuation of ‘lower customer demand, offsetting tariff increases and new customer numbers’.

‘Despite continued elevated power costs and the costs of the new digital customer services platform, operating costs in the second half of the year are expected to be lower, benefitting from targeted efficiency savings’, the firm added.

Shares in Pennon Group were trading 1.8% lower at 589.00 pence each in London on Thursday morning.

Copyright 2024 Alliance News Ltd. All Rights Reserved.