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United Utilities Group PLC said Thursday increased finance expenses have eaten into annual profit, despite growth in revenue, with costs expected to rise further this coming year.
In the year ended March 31, the Warrington, England-based water and wastewater company said revenue edged up 3.0% to £1.86 billion from £1.81 billion a year prior.
This was mainly driven by higher non-household consumption as business activity levels normalised, the firm said, with non-household revenue up by £106 million. However, household consumption fell by £58 million, due to a tough comparator as people were locked down at home through the warm weather of late spring in 2020.
Pretax profit dropped 20% to £439.9 million from £551.0 million. It posted a loss per share of 8.3 pence, swinging from an EPS of 66.5p.
Shares in United Utilities fell 8.3% to 1,020.50 pence each in London on Thursday morning.
The utility said a £90 million increase in net finance expenses has more than offset the £8 million increase in operating profit and the £8 million decrease in the share of loss from joint ventures.
The firm proposed a final dividend of 29.0p, which would bring the total for the year to 43.5p. The sum is an increase of 0.6% from the previous year's payout, which is in line with the company's policy of targeting a growth rate matching inflation of the consumer price index, including owner occupiers' housing costs, each year through to 2025.
For the year ahead, the utility expects revenue to grow by around 1%, which largely reflects CPIH inflation of 4.6% in November 2021. It expects underlying operating costs to increase by £100 million as labour, chemicals and other costs increase, as well as the cost of additional investment. Underlying finance expenses are also forecast to grow by a further £150 million.
‘Our improving performance together with an environment of higher inflation is yielding a greater level of outperformance, and so we will be investing an additional £400 million to improve the service we provide to customers and to accelerate the delivery of environmental outcomes,’ said Chief Executive Officer Steve Mogford.
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