United Utilities' profit drops on lower revenue

The FTSE 100 company predicted annual revenue falling by up to £110m caused by lower water use during the Covid-19 crisis.

Underlying pretax profit for the six months to the end of September fell to £174m from £207.2m a year earlier as revenue dropped 4.4% to £894.4m. Reported pretax profit rose to £162m from £158.6m.

The water and waste company for North West England increased its dividend to 14.41p a share from 14.20p and reiterated its intention to increase the payout in line with CPIH inflation, which includes mortgage costs.

The main effect on revenue was price controls introduced for the AMP7 regulatory period, leading to a 7% reduction in average household bills in the current year. Non-household revenue fell by £40m as premises closed during the Covid-19 crisis, more than offsetting a £26m rise in household revenue with people locked down or working from home.

United Utilities said the impact on non-household revenue would be similar in the second half but that household revenue would be less positive because the first half benefited from hot weather. Revenue for the year to the end of March 2021 will be between £60m and £110m lower than the year before, it predicted.

Volume impact of between £10m and £60m is recoverable in two years' time, the company said.

Chief Executive Steve Mogford said: "We now have a clearer understanding of the impact of Covid-19 on our business which remains robust and supported by a strong balance sheet. This, together with a stabilised inflation outlook supported by central bank policy and government actions, gives us the confidence to reaffirm our responsible AMP7 dividend policy of growth in line with CPIH inflation."