United Utilities have once again increased their payouts to investors through an increase in the ordinary dividend, but does so at a time inflation squeezes the company’s earnings.

United Utilities reported an increase in revenue to £932.3m in the six months ended 30th September, up from £894.4m in the same period last year.

This helped increase operating profit by 4.4% to £332.8m but underlying earnings per share fell to 28.4p from 29.2p as increased costs on inflation-linked debt eroded the bottom line.

Despite pressure on earnings, United Utilities increases their interim dividend by 0.6% to 14.50p.

“The return to the office meant United Utilities saw overall consumption rise. While fewer people at home meant residential revenue was down, it remained above pre-pandemic levels suggesting this hybrid-homeworking environment will be a net positive for UU,” said Laura Hoy, Equity Analyst at Hargreaves Lansdown.

“However, inflation took a bite out of profits in more ways than one. The group saw core costs rise and is expecting this trend to continue through to the full year. More concerning was an increase in net finance costs. A portion of United Utilities’ debt is linked to inflation, and the sharp increase in consumer prices this year meant it rose substantially. This burden together with a one-time tax charge meant the group’s bottom line was in the red.”

“This isn’t necessarily a long-term trend to worry about. If inflation does ease as many are predicting, this should be a blip on the radar. And in any case the group’s revenues should be inflation linked. However if this new level is sustained it will chip away at United Utilities’ balance sheet.”

United Utilities CEO, Steve Mogford, highlighted the real terms reduction in household bills when taking into consideration inflation and provided comment on their push to net zero by 2030.

“At a time when many families are struggling with a higher cost of living, we have reduced typical water bills forhouseholds in our region by 6 per cent in real terms over the last two years. We’re also offering more help thanever before for vulnerable customers and households that are struggling to pay,” said Steve Mogford.

“Climate change and population growth are challenges we must all confront, and we will continue to invest tomake our services more resilient and strengthen our ability to respond to, and recover from, extreme weather events. Our £2 billion investment programme will also help our region’s economy to grow, generate jobs anddevelop skills in our communities.”

“We’re committed to delivering our six carbon pledges, which will help us achieve our ambition of net zero by 2030. We have already delivered our pledge to source 100 per cent of our electricity from renewable sources. As well as reducing our carbon footprint, we are committed to protecting the natural environment and ensuring no net loss of biodiversity.”

The FTSE 100 gave up ground on Tuesday morning following the announcement of Jay Powell retaining his position as the Chairman of the Federal Reserve and weak commodities prices dragged the index.

Jay Powell’s confirmation for a second term at the Federal Reserve caused concerns monetary policy would tighten faster than if second choice Brainard was to take up the role. This sent the dollar higher, gold lower and drove selling in equities on Tuesday.

Oil prices slipped taking the FTSE 100’s oil majors and the entire index down with it as India and the United States released oil reserves to cool fuel prices, before staging a rebound.

“A slump in the oil price as the US taps into its strategic reserves helped put the FTSE 100 on the back foot on Tuesday,” says AJ Bell investment director Russ Mould.

“The air has been coming out of the market like a slowly deflating balloon over the last week or so but it has accelerated this morning, not helped by a sell-off in US technology stocks overnight.

“This was linked to fears of more rapid tapering of financial stimulus and hikes to interest rates after Jerome Powell was re-nominated for another term as chair of the US Federal Reserve.

“The fourth wave of Covid being endured in parts of Continental Europe is prompting the reintroduction of restrictions and resulting civil unrest, threatening its economic recovery.”

Elsewhere, CRH was the top riser after the construction firm said nine-month sales rose 11% and had a positive view on their outlook.

“CRH continues to perform well with good underlying demand and pricing progress across our key markets,” said CRH Chief Executive, Albert Manifold.

“Our uniquely integrated and solutions-focused business model has supported further margin expansion across our businesses, while our strong cash generation and disciplined approach to capital allocation provides further opportunities to create value for all of our stakeholders.”

“Looking ahead to the remainder of the year, we expect to deliver another record performance for the Group, with full-year EBITDA in excess of $5.25 billion.”