Pennon shares slipped on Tuesday after the water supplier revealed the impact of higher costs after parasites were found in Devon’s water supply and rebased its dividend following a £490m rights issue.

The group swung to a loss despite revenues increasing 15%, as non-underlying costs of £37.6m related to restructuring and the breakout of parasite cryptosporidium in Devon wiped out any profits for the group.

Pennon shares were down 2% at the time of writing.

Although the group recorded a loss in the last year, there are some reasons to be optimistic. The company will benefit from higher water bills that promise to help support Pennon’s ambitious, yet overdue, upgrade of its water systems.

“Pennon managed to keep revenue streaming in last year, with the acquisition of SES Water helping the full-year total float 15% higher to £1.0bn. And with Pennon accepting the regulators’ price review, customers’ bills look set to continue growing. Markets are currently forecasting this year’s total to buoy to a new high-water mark of £1.2bn, up a further 14%,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“The top line growth should help to fund Pennon’s mammoth investment plans, with the group required to spend £3.2bn fixing and upgrading its water networks over the five years to March 2030. Pennon’s made good early progress in this area, with record levels of capital expenditure last year as public scrutiny on the sector has been mounting due to pollution of rivers and lakes. While it was pleasing to see early progress on this front, with the overall number of pollution incidents falling year on year, the increased investment weighed on profitability last year.”

Water companies aren’t the most exciting companies at the best of times, and the increased regulatory pressures and requirements to upgrade the systems make the sector just a little less attractive.

In addition, Pennon has created problems for itself with the parasite problem, and analysts highlight the difficulties the group is having shaking this off.

“The Brixham water incident, which involved parasites being found in the Devon water supply have hit the firm reputationally and may well still see further repercussions down the line as a result. Add to that a dividend cut and the investment case sees more risks appearing for less reward. High debt, regulatory scrutiny, and reduced income will temper enthusiasm, and this is evident when looking at the trajectory of shares,” said Adam Vettese, market analyst at eToro.

Pennon cut its dividend to 31.57p from 36.67p during the year due to a rebase of the payout following a rights issue.

The FTSE 100 was trading broadly flat on Monday as Babcock led a recovery following a soft start to the week.

London’s leading index is trading up 7 points at the time of writing after falling as much as 30 points in early trade. Donald Trump’s erratic approach to trade policies was again the main detractor from investor sentiment, but strength in the defence sector helped steady the ship after the UK government outlined plans to boost defence spending.

“Donald Trump has upset markets once again,” said Russ Mould, investment director at AJ Bell. 

“Doubling import taxes on steel and aluminium, and aggravating China once again, mean we face a situation where uncertainty prevails. Trump’s continuous moving of the goal posts is frustrating for businesses, governments, consumers and investors.”

However, markets are approaching a stalemate with Donald Trump’s trade policies, with the threat they pose not going away, but doubts they will ever be enacted offsetting concerns about their potential impact on the global economy.

“We’re back in a situation of one step forward, two steps back, but there do appear to be expectations that more concessions will be struck,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Investors are getting used to aggressive statements being rolled back, so much so the TACO trade theory has rippled through Wall Street, which stands for ‘Trump Always Chickens Out’. But there’s no guarantee that the US President won’t follow through with more onerous restrictions, given he’s stayed steadfast to his pledge to bring more manufacturing back to the US.”

Beyond Trump’s latest volley of threats, investors in defence stocks welcomed the UK government’s commitment to increasing defence spending to 2.5% of GDP in the near term.

“The defence sector was in demand ahead of the UK government setting out its plans to protect the country and support allies. Babcock, BAE Systems and Rolls-Royce were among the stocks in positive territory as investors targeted an industry with a clear earnings tailwind,” Russ Mould explained.

Babcock was the top riser as traders positioned for a boost in spending on its submarines. Babcock currently supports the UK’s entire nuclear submarine fleet, accounting for more than a third of the group’s total revenue.

Anglo American was the top faller after announcing the demerger of Valterra. Anglo American shares were down 11% in London.

MicroSalt shares rose on Monday after the producer of low-sodium salt announced final results and a dramatic increase in the pace and size of orders from one of the world’s largest snack food companies.

The company has secured repeat purchase orders totalling over 57 metric tonnes from major international food and beverage companies across North America. Although the snack food business remains nameless, the scale of the orders narrows down the pool of companies to just a handful of leading consumer companies.

MicroSalt has also announced the successful development of its new premium product line targeting the quick service restaurant sector, which promises to open up further revenue channels.

MicroSalt has established regular supply relationships with the nameless food giant, securing orders across Mexico (44 metric tonnes), Canada (7.3 metric tonnes), and the United States (5.9 metric tonnes). These recurring monthly orders began in the fourth quarter of 2024 and have continued throughout 2025.

The timing of the orders means the impact on FY24 numbers was negligible, and the financial report for last year is representative of a MicroSalt engaged in R&D, not the rapidly scaling company MicroSalt appears to be today.

The company has undergone significant testing of its products with its customers. The subsequent decision to reformulate product lines to include MicroSalt would not have been taken lightly and is difficult to reverse. This will support MicroSalt revenues for the foreseeable future.

Premium product targets the restaurant market

The company’s research and development efforts have yielded MicroSalt Premium, a patent-pending product specifically designed for quick service and fast service restaurants. The new product addresses bulk density requirements for the foodservice channel, with particular focus on the French fry market, which represents over 2 billion servings annually in the United States alone. It’s difficult to make a reliable revenue projection for the successful penetration of MicroSalt Premium, but it could run into the millions, potentially tens of millions.

The company said the premium product line has already gained significant commercial interest and is currently in final consideration for rollout with a leading international brand during the third quarter of 2025.

Record-breaking sales performance

First-quarter 2025 bulk sales reached 98 metric tonnes, representing a new company record and establishing three consecutive quarters of growth. Notably, bulk revenue in the first quarter alone exceeded total bulk revenue for the entire 2024 financial year by 42%.

For the year ended 31 December 2024, MicroSalt reported revenue of $0.75 million, compared to $0.6 million in 2023, with the increase primarily driven by business-to-consumer sales before the material ramp-up in bulk orders commenced in the fourth quarter. Analysis of the results issued today is purely academic, given the step change in order flow at the end of the period.

The company reaffirmed its guidance of revenue exceeding $2.5 million for 2025. This doesn’t include the launch of the French fry-focused MicroSalt Premium later this year.

“This has been a transformational year for MicroSalt. Following our successful IPO, and with continued evidence of the timeliness and essential nature of MicroSalt’s products, we are now a recognised and preferred choice for product reformulation globally,” said Rick Guiney, CEO of MicroSalt.

“MicroSalt’s progress is reflected in the material improvement in revenue generation during Q4 2024 that continued into the early months of 2025, driven by recurring orders from one of the world’s largest snack food businesses. The repeat nature of orders and the work undertaken to date to reformulate some of the world’s leading snack food brands provide us with clear revenue visibility and the ability to reaffirm 2025 revenue guidance of at least $2.5 million.”

MicroSalt shares were 5% higher at 65p at the time of writing, valuing the company at £33m. Interestingly, MicroSalt’s founding firm, Tekcapital, has a 69% stake now worth £22m, more than Tekcapital’s entire market cap.