Inflation ups finance costs at Anglian to halve underlying income before tax

Finance cost increases at Anglian Water cut £40m from the firm’s income leaving interim profit before tax down 50% year on year at £37.4m. The hike in finance costs came almost exclusively from the impact of inflation on index linked borrowing.

Revenue for the six months to 30 September 2017 was up 2.2% to £634.8m driven by price increases, growth in customer numbers and a small increase in consumption per customer, offset by Anglian’s exit from the business market to its sister company Anglian Water Business. Operating profit was up 1.6% to 210.2m reflecting the impact of raised tariffs offset by higher operating expenses and higher depreciation on new assets.

Finance cost were up £41.8m on those at the 2016-17 interim including a £39.9m increase in indexation to £67.1m.

Operating costs were up 2.7% on the same period last year to £275m – reflecting the increase in inflation. Efficiency savings at £7.2m largely offset inflationary increases of £8.3m other increases including every costs, pension charge and maintenance and repair acme to £12.5m. Bad debt charge was reduced by 15% to £13m.

Statutory results, including a fair value gain on financial derivative of £122m following a £238.7m loss in 2016-17 and £96.4m income from in intragroup interest showed a profit before tax of £260m after a £67.5m interim loss in 2016-17.

The company said it was “on track” to a £6.2m net reward at the year end from its Outcome Delivery Incentives.

Sale of the business retail operation bright a £4.6m profit. Cost from the transfer of the business reduced cash flow from operations by £10.7m to £323.3m.

The company paid external dividends of £61.1m and a one-off special payment of £62.2m towards the funding of the transfer of the business retail operation.