United Utilities predicts operating profit growth despite dry-spell cost hike

United Utilities has predicted growth in its underlying operating profit at the half-year mark despite a hike in operating costs arising from the exceptional period of dry weather in the summer. The company said it expected to see revenue up from the first half-year “reflecting our allowed regulatory revenue changes.”

United said: “the underlying operating profit for the first half of 2018/19 is expected to be higher than the first half of 2017/18, despite underlying infrastructure renewal expenditure being higher,” with the operating costs associated with the dry summer being an adjusted item.

It announced its current trading as “in line with the group’s expectations” for the six months ending 30 September 2018.

United said it it expected underlying net finance expense for the first half of 2018/19 to be some £30 million lower than for the first half last year. It attributed the expected decrease largely to the impact on its index-linked debt of lower retail price index inflation.

It said the most recent UK Customer Service Index placed United Utilities top among all water and wastewater companies for customer satisfaction. And it forecast that were its performance under the Service Incentive Mechanism measure to continue it would be eligible for a reward under the scheme in AMP6.

In its business plan for AMP7 which United recently submitted to Ofwat, it proposed a 10.5% real-terms price reduction between 2020 and 2025, along with better service, increased resilience, and long-term investment.

The company will report its interim results on 21 November 2018.