United Utilities miss expectations as profits fall to £205m

 
Madeline Ratcliffe
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Water
Price regulation has hit the water company's profits (Source: Getty)

The UK's largest water company, United Utilities, reported disappointing half year results today, for the six months to the end of September. Its share price was down 0.5 per cent this morning, to 953.25p, having shot up initially to 963p.

The figures

Revenues slipped to £857m from £859.4m this time last year.

Pre-tax profits fell to £205m, down £17m from £222m last year, feeling the impact of the regulator Ofwat's new price controls, which came into effect earlier this year.

Analysts at BNP Paribas and Societe Generale had been expecting profits to be nearer £212m.

The group said the profits fall was offset by lower financing costs, which reduced by £18m, mainly thanks to the impact of low RPI inflation on the group's debt.

Interim dividend was raised, however, to 12.81p a share, from 12.56p last year, an increase of two per cent and the company said it was targeting dividend growth at least in line with inflation through until 2020.

Why it's interesting

The company said in its September trading update its profits would be hit by paying £25m in compensation and other costs after its Preston water supply was contaminated by a microbe over the summer, which left 300,000 households without water safe enough to drink.

The compensation figure was not increased in these results, and the company is looking to move on from the incident. It said it was "disappointed customers in parts of Lancashire were inconvenienced" and the company is "working closely with the Drinking Water Inspectorate on the incident who will issue its report in due course".

The company also announced it was accelerating its investment programme, and expected to spend around £800m in the 2015-16 financial year, as part of its five-year £3.5bn spending plan. It also said it would invest over £100m in new solar projects.

What United Utilities said

Steve Mogford, chief executive, said:

“Our strong performance across 2010-15 means that we enter the next five-year period with good momentum. We were delighted to end last year as one of the top water and wastewater companies, as measured by Ofwat’s recently published KPIs and the Environment Agency’s latest assessment.

“Our progress over the first six months of this new regulatory period underpins our confidence that our targets remain tough but within reach. We are well placed to deliver further value for customers, shareholders and the environment underpinned by a robust capital structure and good credit ratings.”

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