United Utilities profits spike 10 per cent after "strong" start to the year

Oliver Gill
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North West Water merged with Norweb in 1995 to form United Utilities (Source: Getty)

The boss of water giant United Utilities today hailed a "strong" six months, as the firm posted a 10 per cent growth in profits.

Shares in the FTSE 100 firm edged slightly up in opening trading.

United Utilities was boosted by a combination of regulatory changes, property sales and cutting costs.

“This has been a strong first-half performance in which we have delivered further value for customers and shareholders," chief executive Steve Mogford said.

Revenue for the six months to the end of September rose from £853m to £876m, with operating profit jumping from £303.6m to £341.8m.

Mogford said average customer bills are set to reduce "in real terms" until 2020 and the firm expects to double its customer base.

Read more: FTSE 100 finishes on a flat note as Sky flies while United Utilities slumps

He added:

Our innovative Systems Thinking approach to running the business is delivering increasingly efficient and resilient services. By investing earlier than our original plans for this regulatory period we are accelerating the delivery of value to customers and shareholders, and positioning the business as sector leading as we approach the next regulatory cycle.

“As we turn our attention to the next price review for the period 2020 to 2025, we are engaging with customers across our region to understand their needs and preferences and to formulate plans that best satisfy those needs. Affordability will be key, balanced against resilience to climate change and population growth in our region.”

Former publicly-owned firm North West Water merged with Norweb in 1995 to form United Utilities. It is currently Britain's largest listed water firm.

United Utilities increased its dividend by just over two per cent to 13.24p per share. This morning, the firm's stock rose 0.4 per cent and was trading at 781.5p shortly before 9am.

What the analysts said

Hargreaves Lansdown equity analyst George Salmon said:

The prospect of higher interest rates has contributed to United Utilities losing the premium rating it has enjoyed over the last few years.

With both the dividend and £3.7bn of debt linked to inflation, finance costs are looking more weighty. However, it shouldn’t be forgotten that revenues are also tied to inflation, so unless the group scores a major operational own-goal, the dividend should continue to look rock-solid.

That makes the prospect of an inflation-linked income, from a yield of over 5 per cent, alluring to income-seeking investors.

Read more: United Utilities expects higher profits and revenue as investment grows

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