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UPDATE 2-United Utilities profit drops on higher spending
November 23, 2011 / 7:26 AM / 6 years ago

UPDATE 2-United Utilities profit drops on higher spending

* H1 underlying operating profit down about 1 pct to 324.2 mln stg

* Infrastructure renewals expenditure up 38 pct to 66.4 mln stg

* Sees good financial performance over the remainder of the year

* Sets interim dividend of 10.67p, an increase of 6.7 pct

* Shares down 1.5 percent; peers Pennon, Severn Trent also drop

By Adveith Nair

LONDON, Nov 23 (Reuters) - United Utilities, Britain’s largest listed water utility, reported a dip in first-half profits on Wednesday, which it blamed on capital spending.

“We have continued to make high levels of capital investment in our assets in driving the resilience of our network and we remain on course to invest up to 700 million pounds in the full year,” Chief Executive Steve Mogford said on Wednesday.

Regulatory capital investment in the half year was 275 million pounds, including infrastructure renewals expenditure which was up 38 percent at 66.4 million.

The increased spending pushed its underlying pretax profit down 5 percent to 184.9 million pounds, which it said compared with a consensus forecast by analysts of 183.5 million pounds.

Underlying operating profits dropped 1 percent to 324.2 million pounds.

It raised the interim dividend by 6.7 percent to 10.67 pence a share.

Investec analyst Angelos Anastasiou said the results were largely in line with expectations, and added “there is scope for earnings to grow over the next three years.”

While increased spending weighted on profits, the company benefited from a 4.5 percent regulated increase in prices which pushed revenue up 4 percent to 792.7 million pounds.

Separately on Wednesday, industry regulator Ofwat published its consultation on the methodology for setting future price limits for the sector.

“Today’s proposals suggest retaining the RAB, with an allowed return, and five-year price control for the wholesale part of the business,” said analysts at Deutsche Bank, adding that Ofwat suggests a separate price limit for retail to extend retail competition.

“Our initial view is that the publication looks relatively neutral for the sector, with the central proposals broadly in line with expectations,” the analysts added.

The new price limits will be set in 2014.

Shares in United Utilities were down about 1.5 percent at 602 pence. Peers Pennon and Severn Trent, which are due to report results later this week, were also in the red.

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