Return to work lifts United Utilities’ revenue forecasts but water firm warns inflation is keeping costs high
- Water utilities firm forecasts half-yearly revenues to be 4% higher
- Non-household demand has bounced back as workers return to the office
- But the firm’s performance was hampered by rising costs due to inflation
One of the UK’s largest water utilities companies has forecast higher-than-expected profits for the first half of its financial year, with the firm buoyed by higher demand as workers return to the office.
United Utilities, which provides services to more than seven million customers in the North West, said it expects half-yearly revenue to rise by around 4 per cent from the £898million it reported for the six months to the end of September 2020.
It told shareholders that while household consumption ‘remains high as many customers continue to work from home’, this has been boosted by ‘consumption from businesses…[returning] to pre-Covid levels as restrictions are lifted’.
Household demand has also remained strong as many people continue to work from home
UK water utilities have been hampered by a collapse in non-household consumption and rising defaults in the early stages of the pandemic, but this pressure has eased since Covid-19 restrictions began to be lifted in the summer.
However, United Utilities flagged that improved revenues had been partly offset by ‘underlying operating costs, largely as a result of inflationary increases in our core costs’.
The firm also faces a one-time tax bill of £380million, owing to new legislation, while it also expects a small uplift in net debt as a result of increased infrastructure investments.
United Utilities shares are down by around 0.7 per cent in morning trading at 1,001p. It remains up 9.7 per cent year-to-date.
Commenting on the results, equity analyst at Hargreaves Lansdown Laura Hoy said: ‘The question now is whether this surge in demand is a permanent one and if inflation will continue to weigh on results or dissipate as expected.
‘We suspect the rising costs are here to stay in the near-term, so UU will have to wait out the storm a bit longer. With a working from home hybrid model seemingly the new normal, an increase in demand could also stick around to see UU through a period of temporary inflation.’