Yorkshire earnings hit by rising operating costs, interest and depreciation

January 7, 2018

 

Yorkshire Water reported interim earnings before interest, tax, depreciation and amortisation up 3.4% to £295.1m on sales up 1.7% to £512.2m for 2017-18. But higher interest, depreciation and operating costs eroded earnings before tax for the period by more than 40% to £31.5m year-on-year.

 

The company reported earnings before interest and tax near unchanged on the same period in the previous year at £148m before an exceptional operational cost of £4.2m related to damage following flooding in December 2015. Net interest costs were up 21% from the same stage in 2016-17 to £116.5m taking interim pre tax profit to £31.5m from £51.9m in the previous first half year. 

 

The increase in interest charges was due to additional debt to finance increased capital and operational expenditures as well as inflation.  Operational costs were 2.4% higher at £367.2m due largely to a £7.8m hike in depreciation costs to £142.5m arising from Yorkshire’s stepped-up capital programme. Capital expenditure was up 3.7% to £182m for the six months.

 

Fair value movements in derivatives produced a net income of £91.9m compared to a £606.3m loss in the first half of 2016-17. Including fair value movements Yorkshire reported interim profit before tax at £119.2m compared to a £553.7m loss at the same stage in the previous year.

 

The company’s regulatory gearing at the endow the report period was 75.1%. The firm reported that  had it not restructured part of its index-linked swaps portfolio to reduce interest costs, its gearing would have been “4.0% lower at 30 September 2017.”

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