United Utilities, which came close to implementing a hosepipe ban in the summer of 2018, has indicated that the heatwave is expected to hit its profit.
In a trading update, the water company said current trading is “in line” with the group’s expectations for the year ending 31 March 2019.
Group revenue is expected to be higher than last year, largely reflected by its allowed regulatory revenue changes and underlying operating profit for 2018/19 is likely to be higher than 2017/18.
But the company said its reporting operating profit will be “impacted” by costs relating to the “exceptional period” of dry weather in the summer of 2018, guaranteed minimum pension equalisation and restructuring within the business.
“To provide a more representative view of business performance, operating costs associated with these items will be excluded from the underlying profit measures. These adjusted items are expected to total £52 million for the full year, of which £29 million was recognised in the first half,” the company revealed in a statement.
United Utilities said it was pleased to have been awarded “fast-track” status from Ofwat when the regulator published its initial assessment of the business plans for 2020-25.
“Our plan received the highest grades overall for the sector with Ofwat commending it in many areas including customer engagement, affordability and vulnerability, resilience, innovation and confidence and assurance.
“As a fast-track company, we now have greater clarity with a year to go before the start of the next regulatory period. We will use this time to refine our plan in order to make a flying start to delivering our proposals for AMP7,” the company said.
The company expects a “small increase” in group net debt for results to 31 March 2019 compared with the position as at 30 September 2018, as it continues to “invest in its asset base”.
It said its “responsible approach to financial risk management” continues to deliver benefits including a “strong” balance sheet.
Gearing is “comfortably” within its target range of 55 per cent to 65 per cent, the company said.
Ofwat will publish the draft determinations for companies with fast track plans on 11 April. Final determinations will be published in December.
Pennon, the owner of South West Water said it is on track to “meet expectations” in its water and waste businesses despite revealing it will take a £16 million hit following the collapse of infrastructure partner Interserve.
South West Water was also given fast-track status by Ofwat, along with United Utilities and Severn Trent.
United Utilities is expected to publish its full year results on 23 May, while Pennon’s are due on 30 May 2019.