- 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.’