- Flags higher interest and other costs in year ahead

- Dividend 0.6% higher year-on-year

- Full-year profit down 20%

Full-year results from water and wastewater outfit United Utilities (UU.) revealed the company is not immune to the challenges posed by rising prices – undermining its appeal as a stock which can provide inflation protection.

The company, which owns and operates water infrastructure in the North West, reported a 3% increase in revenue to £1.86 billion for the 12 months to 31 March supported by a rise in consumption by businesses as we emerged from the pandemic.

Household consumption fell materially though as people were no longer stuck at home and pre-tax profit was down 20% to £439.9 million. The shares fell 8.5% to £10.19 in response.

INFLATION-LINKED INTEREST COSTS

The company was hit by higher inflation-linked interest costs and it flagged an increase in underlying operating costs of £100 million in the year ahead as the cost of labour, chemicals and other items goes up.

Finance costs are also expected to go up by another £150 million in the period. RBC analyst Alexander Wheeler noted the company has a higher proportion of index-linked debt than its peers.

The dividend was a smidge higher year-on-year at 43.5p. The company pledged £400 million of additional investment in service improvements and environmental initiatives as well as putting aside £280 million to support vulnerable customers.

Chief executive Steve Mogford commented: ‘Financial performance has again been good, demonstrating resilience in a challenging environment and, together with the sustainable improvements in our performance, is delivering value for our stakeholders today.’

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Issue Date: 26 May 2022