United Utilities pre-tax profit down 20% as inflation ramps up finance charges

A hike in inflation-linked debt charges fuelled a £90m surge in financial expense at United Utilities leaving reported profit before tax down 20% year-on-year at £440m for the 12 months to 31 March 2022. Operating profit was up £8m to £610m on the previous 12 months.

Underlying pre-tax income was down £34% at £302m following adjustments for:

• fair value losses on derivatives of £138m – up from £54 in the previous year

• an exceptional £37m profit in the previous year from the disposal of its share in Estonian joint venture AS Tallinna Vesi; and

• a £7.5m decrease in the company’s share of losses at its retail joint venture with Severn Trent, Water plus.

The company reported revenue up £55 million, at £1,863 million, which it said chiefly reflected higher consumption as business activity returned to pre-pandemic levels. Despite hedging heavily its exposure to commodity electricity prices, the company’s energy costs were up 20% to £99.6m

Outperformance on customer Outcome Delivery Incentives (ODIs) at 0.5% brought a net reward of £25m – the company’s highest ever. One-year figure.

In its outlook the company said it had increased its target of cumulative net outperformance against customer Outcome Delivery Incentives by a third to £200 million over AMP7.