United Utilities, the UK’s North-West-based water supply and treatment company, reported on Thursday that their gross debt pile has increased to over £9,148.6 million.
The company’s debt has risen by 9.1% in this half-year.
United Utilities shares had dipped margianlly by around 0.80% at the time of writing as concerns mounted about the group’s dividend.
According to Aarin Chiekrie, equity analyst at Hargreaves Lansdown, “net debt has increased but the balance sheet remains stable for now, but given the group’s ambitious £13.7bn plans to expand and upgrade its assets between 2025 and 2030, United Utilities needs to raise around £5.2bn of cash. That’ll require issuing new debt and will likely push debt levels towards the top of the group’s target range, potentially putting pressure on the group’s generous dividend yield.”
United Utilities’ half-year underlying revenue rose by 6.8% and underlying operating profit grew by 4.9%, to £271.1 million.
Chiekrie further stated that, “inflationary pressures are having an even larger impact on costs, particularly power, labour and chemical costs, meaning profits are growing at a slightly slower rate.”
However adding that, ” United Utilities is on track to deliver its best-ever year in terms of customer outcome delivery incentives, which are effectively bonuses for delivering above and beyond their committed levels of service to customers, which should help offset some of these higher costs”.
Interim dividends are set at 16.59 pence, an increase on last year’s interim dividend of 15.17 pence.
Overflows and ambitious growth targets
The UK’s growing vulnerability to extreme weather events has also affected the company. United Utilities wrote that higher levels of rainfall and storms caused a rapid decline in sewer flooding performance in the first half of the year.
Spills, leaks, and overflows are the water company’s worst enemy and have led to higher costs.
In the first half-year, the company came up with a detailed leak response programme. The goal is to be able to monitor 100% of overflows, the company states.
The company, whose water-provision-based services reach over 350.000 customers in the North-West, further announced that they will continue to stay on track to reach a 4-star rating from the Environmental Protection Agency (EPA) by the end of 2023.
The company recently announced £13.7 billion total expenditure across 2025-30 to help improve its infrastructure.