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Profits fall at water giant United Utilities

Published 26/05/2016

Profits at United Utilities have dropped
Profits at United Utilities have dropped

Water firm United Utilities has seen its profits squeezed following demands from the regulator to drive down prices.

The company saw underlying operating profits drop 9% to £604 million in the year to March 31, while underlying pre-tax profits also slipped 9% to £408 million.

It said the fall reflected moves to step up its infrastructure spending and the new price controls from Ofwat, which ensure a 5% drop in the average water bill over a five-year period to 2020.

But Britain's largest publicly -listed water supplier managed to boost full-year revenues by £10 million to £1.73 billion, thanks to higher-than-expected volumes and a rise in non-regulated sales.

The firm said it would increase the total dividend by 2% to 38.45p. Shares were down more than 1%

Chief executive Steve Mogford said the company had "exceeded its expectations" in the face of a "tough set of targets".

He added: "We are confident that we can build on our strong operational and environmental performance and improve further as we progress through this new regulatory period.

"We are accelerating our 2015-20 capex programme and substantial investment in our assets will continue, driving benefits for our customers and the environment.

"Our progress over the first year of this new regulatory period underpins our confidence in delivering our targets."

The firm said it was making headway with plans to launch Water Plus, a joint venture between United Utilities and Severn Trent which will supply water to businesses.

United - which provides water and sewerage services for around seven million people in north-west England - said it was also planning to invest £100 million in renewable energy projects from 2015 to 2020.

George Salmon, equity analyst at Hargreaves Lansdown, said: "I nvestors can expect the company to focus primarily on delivering that promise of RPI-linked dividend growth, although this is the company's aspiration and is not guaranteed."

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