Here’s why Pennon Group, United Utilities, Severn Trent stocks slumped

British utility companies’ stocks continued their freefall this week as concerns about their margins escalated. Pennon Group’s (LON: PNN) share price tumbled for four straight days and reached its lowest swing since October last year. It has crashed by over 20% from its highest point this month.

UK utilities stocks have plunged

United Utilities (LON: UU) shares has also plummeted for six consecutive days and is hovering at its lowest swing since October. Like Pennon, UU shares have moved into a correction, falling by over 10% from its highest level this month. 

Severn Trent’s (LON: SVT) share price has dived to 2,375p, its lowest swing since April 24th. Other smaller utility companies also dived.

The main reason for the sell-off is that the companies are some of the most affected as the July elections near. In this, according to The Guardian, these firms will receive as little as half of what they requested in their bill increases. This means that they will likely not increase their margins as was expected.

British regulators are concerned that hiking bills too fast will hurt consumers as they deal with the ongoing cost of living crisis. This also explains why regulators have continued pushing energy prices lower in the past few months.

United Utilities vs Pennon Group vs Severn Trent stocks

Thames Water woes have continued

All this is happening at a time when many investors are focusing on the utilities industry because of the Thames Water crisis. Thames, one of the biggest utility companies in the UK, is facing liquidity challenges because of its substantial debt. 

At the same time, the company has been accused of dumping sewage to British rivers. According to the FT, the company dumped over 14 billion liters of sewage into the River Thames in 2023 and the trend is continuing this year. 

Other British utility companies have been accused of dumping record volumes of sewage into British rivers. United Utilities recorded over 97,500 spills in 2023, an increase from 69,200 a year earlier. Pennon Group was recently fined by Ofwat for sewage spilling.

Therefore, most analysts believe that these companies need billions of dollars to improve their ageing infrastructure. This is happening when their earnings are not growing as fast. United Utilities recorded a 8% revenue growth to over £1.9 billion and a 38% drop in net profit to £126 million in 2023.

Pennon Group’s revenue rose by 10% to £907 million and a statutory loss of over £9.1 million. Severn Trent’s revenue jumped to £2.8 billion while its profit for the year rose slightly to £140 million.

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