United Utilities’ key measures of revenue and operating profit fell in the 2023FY after lower consumption hit the top line and rising prices eroded operating profit.
United Utilities’ recorded an operating profit of £441m in the year to 31st March, down from £610m in the same period a year ago. The company blamed falling profits on the rising price of electricity and chemicals.
Despite the dismal performance in the full year, United Utilities shares were around 1% higher at the time of writing on Thursday. The stock has sold off into the release of the results suggesting the poor performance was expected by investors.
“United Utilities appear to have a leak in their profit pipeline as we saw operating profits take a tumble. In return for providing a reliable and affordable water supply to North West England, the regulator allows the group to earn an acceptable return. The only issue is, high levels of inflation are really taking their toll on costs. Coupled with lower revenues as customers are actively being encouraged to save water, it’s no surprise to see profits dry up,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
“But falling revenues should only be a temporary problem, since over the medium term the group’s able to increase its prices alongside inflation. And if the amount of water it bills its customers for falls below a certain threshold, the regulator will pay United Utilities the difference. But these funds are only received two years later. So in the short term, we’re seeing cash flows and earnings that are feeling the impact of rising costs and declines in water usage.”
United Utilities increased its full-year dividend 4.6% to 45.51p.