United Utilities: Firm is ‘on track’ but warns water company expects full-year revenue dip

United Utilities raised its interim dividend to 14.41p per ordinary share on Wednesday, but warned of a dip in revenues for the full year. 

The FTSE-100 firm,  which supplies customers from Cheshire to the Scottish border,  said it saw underlying pre-tax profits for the six months to September 30 fall by 12.7% to £213 million. 

It forecast a full-year revenue in the range of £1.75 billion to £1.80 billion, down from  revenues of £1.85 billion recorded last year.

United, the UK's third-largest listed water company,  said the forecast reflected the recent 5.2% cut in bills imposed on the firm by regulator Ofwat.

The company said the forecast also reflects "the net impact of COVID-19 on both household and non-household consumption".

It said bad debt from struggling customers had been "stable in the first half at 1.8%" despite the pandemic.

Chief executive, Steve Mogford, said: "Average customer bills have reduced by 7 per cent in real terms this year but we recognise that for many in our region, these are still challenging times.

"Despite the pandemic, our operational performance in this first year of the new regulatory period is on track.  

"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."

William Ryder, equity analyst at Hargreaves Lansdown, said: "The impact of the pandemic was relatively limited as a fall in business consumption was largely offset by an increase from households.

"While bad debts may increase going forward if customers struggle to pay their bills, management doesn’t think existing provisions are likely to be exceeded."

He added: "Overall this was a reasonable set of results, and if United Utilities can invest efficiently, this new regulatory period could still be a positive one for the group.”

Shares were up 3.8% in early trading.