United Utilities sees FY profits lowered by price controls

United Utilities said underlying operating profit for 2015/16 would be in line with management expectations, albeit lower than 2014/15, reflecting new regulated price controls and other costs.

United added profits would also be hit by an expected increase in infrastructure renewals expenditure (IRE), depreciation, employee and other operating costs, partly offset by a reduction in bad debts and regulatory fees. IRE is expected to be around £20 million higher than last year.

Current trading is in line with the group's expectations for the year ending 31 March 2016, United added.

It said reported operating profit would be impacted by additional costs and asset impairments incurred in relation to the floods in the North of England in December 2015, although these charges should be largely offset by insurance proceeds.

"In addition, as outlined previously, we incurred costs of around £25m relating to the water quality incident last summer, which were recognised in the first half of the 2015/16 financial year," United said in a trading update.

"Costs relating to business retail market reform are expected to be around £10m for the full year, of which £5m was recognised in the first half. To provide a more representative view of business performance, these adjusting items will be excluded from the underlying profit measures."