United Utilities saw revenue drop by £41 million for the first six months of 2020/21 and said it expects coronavirus to set the company back between £60 million and £110 million.
Steve Mogford, chief executive of the northwest water company, said the drop in revenue in the non-household sector as a consequence of lockdown was balanced by higher domestic consumption.
Mogford told Utility Week the company had made a “great start to the new AMP cycle” thanks to investing performance rewards from AMP6 to get a head start on outcome delivery incentives (ODIs).
The company reported underlying operating profit of £319 million, which was down from £391 million the previous year, reflecting the new price control period and pressures of the pandemic.
Mogford said investment was being brought forward on a number of projects that had been scheduled for later in the period, allowing the company to deliver the outcomes sooner where appropriate.
For a second year UU had no serious pollution incidents and is on track for a four-star evaluation by the Environment Agency.
Mogford said the six months were “broadly a very good start, but the most challenging start to an AMP we have seen”, adding that the fast-track status the company earned for its PR19 business plan kept it on-track.
The company has performed ahead of outcome delivery incentive (ODI) targets and is on track to qualify for around £10 million in ODI outperformance in 2020/21.
Mogford explained that despite the impact of the pandemic the company was continuing to support households that struggle financially. Roughly three times more customers were getting help with their water bill this year than last. The region is one of the most economically deprived areas of the country and was hit hard by the pandemic, with around 5 per cent of domestic customers receiving assistance.
Shareholders spent £7 million to help those billpayers and the communities through charitable donations to local foodbanks.
The company will be reaffirming an interim dividend of 14.41p.
The company’s non-household business joint venture with Severn Trent, WaterPlus, racked up losses of £5.9 million due to the lockdown forcing business customers to cease or reduce trading. The company’s net investment in the JV was reduced to nil at the end of H2 2019/20 as a result of the significant losses for that year.
He said after the first lockdown the business recommenced billing, and saw cashflow resume but admitted the long term impact for the company remains uncertain. He said clarity was needed over Ofwat’s bad debt cap of 2 per cent.
“Let’s see how the situation develops and what can be done. If retailers are struggling then Ofwat and wholesalers will do more,” Mogford said. “We need to take each day as it comes and adapt.”