Over the past five years Pennon group (LSE: PNN) The price of shares has dropped by 60%. Today (June 3) the company reported a loss before tax for a budget year 25. But in times of anxiety, sometimes knowledgeable investors may appear. Is it so here?

Making losses

The lower water demand in combination with a record investment program of 650 million GBP caused a loss of 35 million GBP. After taking into account the tax, the loss was 57 million GBP. Like many of his peers, he is struggling with a devastated balance, in which interest costs increased by 23% in 2025.

There are no signs that south -western water, its main commercial name, is such a very tragic financial strait as, for example, Thames water. But the number of recent negative headers was undoubtedly the main factor contributing to the decline in the action.

The main of them was the Bixham water incident last year. The explosion of Cryptosporidium parasites caused the inhabitants to remain without water. He faced severe criticism for both a tardy reaction and a lack of communication with residents.

Increased customer compensation along with the provision of bottled water over an eight -week period cost 21 million GBP. But reputational damage was probably much more significant.

Government review

It is engaging that on the day of its results, the government published a momentary report to the state of the water industry. It consists in what has been known for some time: public trust in the industry is in record minimals.

The final report is expected to be released in the summer, but I have the impression that the bumper dividend payments have been over for some time.

Indeed, we have already seen it with Pennon. The issue of rights in February increased the net debt to 4 billion pounds and divorced existing shareholders. As a result, the dividend was re -awarded 14% lower. However, dividend performance is still vigorous 6.4%. Annual increases will be associated with the consumer price index.

Monopoly

One of the reasons for investing in water companies is revenue stability. As monopolistic activities, Pennon negotiates with a regulator every five years, which he can download. The next control period lasts from 2025-2030.

Ofwat has already announced a significant price escalate. As a result, in a budget year 26 Pennon now expects that profit before income tax, depreciation (EBITDA) will escalate by 66%. In exchange for price increases, infrastructure expenses will escalate.

It caught my attention to examining the summary of the report of the Independent Water Commission.

First of all, he does not recommend the end of privatization. The taxpayer’s cost will simply be too large. Secondly, he strongly criticizes the utilize of five -year reviews, which, he claims, caused the establishment of tiny -term goals in the industry.

The whole industry is now standing at a crossroads. SKOK in accounts during life costs, pollution incidents and no spending on infrastructure forces the government to act. The predictability of future revenues is one of the key reasons to invest. But if the result of the final report is that much long -term cycles are needed that could escalate the entire investment thesis for many investors subject to income.

With such great tiny -term uncertainty, I will not consider the investment in the near future.