Water company United Utilities said it expected to report a higher underlying annual earnings, though winter storms and an uncertain economic climate had weighed on its peformance. With regards to Covid-19, the company said it could make affordability schemes available to customers struggling to pay their bills, but noted its revenue was fixed due to regulations, with any shortfalls being recoverable. United Utilities said current trading was in line with its expectations for the year through March. Revenue was expected to rise, largely reflecting allowed regulatory revenue changes. Underlying operating profit was expected to be higher, while underlying infrastructure renewals expenditure in the second half was expected to rise compared to the first half. United Utilities said it had a 'robust liquidity position' extending out for 24 months at the upper end of its policy range. 'This means that we are well protected against financial shocks that may be experienced as a result of the outbreak in the short to medium term,' the company said. 'However, we recognise that there is a significant degree of uncertainty associated with how the current situation develops and we will therefore continue to closely monitor our position and approach.' United Utilities said the UK was hit with storms in February. They were not expected to result in any material incremental costs, but they did cause some service interruptions. Those interruptions would reduce the company's anticipated outcome delivery incentives for the AMP6 regulatory period to a net reward of around £40m, down from around £50m previously. Reported operating profit would be impacted by an accelerated depreciation charge of around £80m in relation to Bioresources assets. The current economic climate had also resulted in an increase in credit spreads, expected to significantly increase the UU Group IFRS pension surplus at 31 March. 'The economic climate is also expected to affect the ability of business customers to pay our joint venture company, Water Plus, and so, despite making good progress on the issues that impacted the underlying operating performance in the first half of the year, its recovery plan is now likely to be far more challenging, take longer and be less certain,' the company said. 'The RPI inflation that is applied to the group's index-linked debt is higher than last year and we therefore expect the underlying net finance expense for 2019/20 to be around £15 million higher than 2018/19,' it added.
+24.20p (+2.68%)delayed 05:00AM
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