United Utilities reconfirms guidance as heavy rainfall hits performance

United Utilities confirmed its full-year earnings guidance in a trading statement issued on Wednesday that provided little in the way of new information to investors.

The company did note heavy rainfall would lead to lower Outcome Delivery Incentive (ODI) payments to the tune of around £25m, although this is not considered material to overall performance.

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Early gains in United Utilities shares turned to losses as the session progressed with the stock down 0.9% at the time of writing.

The factors influencing United Utilities’ earnings, such as inflation and the weather, are largely out of their control, and investors will welcome guidance for the full year being maintained.

“United Utilities is handling the pressure of an uncertain macroeconomic backdrop well. Operations are in good shape with no updates to full-year guidance which calls for revenue to rise by around £150mn from a base of £1.8bn, largely driven by inflation-linked increases in the group’s revenue cap, as well as an uplift in consumer consumption levels,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

United Utilities’ update was released amid pressures on the water industry following a series of sewage scandals, which could lead to potential fines for the companies involved. United Utilities, however, has a strong track record of high performance and favourable outcomes on the regulatory front.

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“Over the last 10 years, United Utilities has stood out in the UK water utility market as a strong performer. Alongside Severn Trent, United Utilities has broadly delivered on its performance metrics targets that are set and enforced by Ofwat on a five-year basis, and as such, has been rewarded healthily in the form of straight cash through ODIs (outcome delivery incentives). United Utilities did, however, recently lose its 4* EPA rating but has completed 67% of its AMP7 environmental improvement program, and is currently on track to attain the highest 4-star rating in the Environment Agency’s Environmental Performance Assessment (EPA) for 2023. Today’s results reinforce this strong track record,” said Louis Knight, Analyst at Third Bridge.

United Utilities will release their full-year earnings on 16th May.

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