Increased power costs and emergency repair works contributed to a 27% decrease in United Utilities’ annual profits.
The company reported annual pre-tax profits of £410 million, down by £169 million on 2022’s annual accounts.
Despite the drop in profits, the firm has announced a boosted dividend payment of £310 million to its shareholders, an increase of 4.6% compared with the dividend relating to last year.
Revenue for the past year dipped slightly by 2% to £1.8 billion due to “lower than expected consumption”. However rising operating costs and the impact of operational incidents as a result of extreme weather were blamed for driving the slump in profits.
The company’s annual accounts reveal that power costs were up by £27 million year-on-year, with United Utilities paying more than £130 million for power during the year. The organisation indicated in September that although 90% of its energy was hedged, the impact would be significant.
Materials costs also jumped by more than £40 million to £132 million and the cost of chemicals needed for wastewater treatment rose by £25 million year-on-year.
Labour costs and regulatory fees also increased by £8 million each.
As well as suffering from increased operating costs, United Utilities also spent more money responding to emergency events with nearly £20 million spent on responding to incidents during the year.
The report adds: “Included within operating costs for the year are £8.4 million relating to operational incidents over the dry summer period in 2022, and £11.1 million relating to the group’s response to periods of extreme cold weather over the winter of 2022/23, including a rapid freeze-thaw in December 2022 leading to burst pipes.
“The costs associated with this response include the cost of emergency network repairs, customer compensation where short-term supply interruptions were experienced, and the provision of bottled water.”
The report also states that the rising cost of living has increased “the strain on customers’ ability to pay their bills and therefore cash collection”. It adds: “However, we have 81% of household customers on direct debit and other payment plans and, with the help of proactive engagement, innovative solutions and tailored assistance, we have achieved our best ever performance for cash collection. This has contributed to bad debt remaining at an all time low 1.8% of household revenue.”
Staff costs also increased year-on-year, up £8 million to £192 million.
Despite the financial pressures, United Utilities chief executive Louise Beardmore highlighted the companies strong performance on a number of measures throughout the year.
“Despite a challenging year of cost pressures, we have delivered our best ever performance on a range of measures that matter most to customers, including leakage, water quality and serious pollution incidents,” Beardmore said.
“To help ease cost of living pressures, we have provided financial support to over 330,000 customers so far this regulatory period and have continued to play a key role in the wider economy of the North West, supporting 22,000 jobs across the region.
“I understand and share concerns about the use of storm overflows and I am committed to respond to the challenges we face. We have already achieved a 39% reduction in reported activations since 2020, but we need to go faster and drive a step change in performance.”
The company has the highest proportion of combined sewer networks, and therefore the most overflows in the sector. It faced media criticism for its discharges, but has already met its 2025 reduction goal.
She added: “It is clear that we need to invest in infrastructure, assets and our people to meet new environmental targets and deliver the further performance improvements customers and communities want to see. Along with all my colleagues, we are committed to delivering even better performance and we are looking forward to the opportunity to do so.”
The annual results do not include a breakdown of Beardmore’s renumeration package. With increased pressure on water company bosses to forgo their bonuses, United Utilities has previously said that any bonuses will be closely linked to target-based environmental performance.
Severn Trent also published their annual accounts this week, reporting a modest 1% rise in pre-tax profit and a £6 million rise in its dividend pay out.