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United Utilities' revenue falls with lower prices

By This Is Money
Updated: 05:26 EDT, 26 May 2011

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United Utilities praised the 'extraordinary efforts' of staff who battled extreme winter weather to ensure the company met its annual leakage target.

Reflection of the times: Ofwat five-year price review resulted in a 4% reduction in United's prices

Regulator Ofwat has the power to fine firms that fail to meet leakage targets, and between Christmas and New Year United received 40,000 calls reporting burst pipes - ten times the usual level - in a 'unprecedented' period for the firm.

But with potential penalties for up to 10% of its turnover, the North West Water owner said it met its 2010/11 benchmark of 464 megalitres a day.

Today's annual results also highlighted the impact of Ofwat's recent five-year price review, which resulted in a 4% reduction in United's prices in real terms during the last financial year.

Revenues from its regulated operations fell 4% as a result to £1.48bn in the year to March 31, while operating profits dipped 17% to £580m. The cost of infrastructure renewals and property rates also impacted on the figure.

Despite the 'tough' Ofwat settlement, the Warrington-based group has claimed it is well positioned for the five-year regulatory period after embarking on a cost-cutting drive and winning union backing for changes to its pension scheme which reduce the deficit and also future funding costs.

Chief executive Steve Mogford, who took the helm in March, said the company had made good progress in the early part of the five-year regulatory period.

He went on to praise the 'outstanding commitment' of staff who helped the company meet its leakage target with minimum customer disruption.

'Despite a year of extreme weather conditions, we have demonstrated resilience, continued to serve our customers and, thanks to the extraordinary efforts of our employees, met our leakage target,' he said.

The company's operations cover a population of 7m people and 3.2m households and businesses in North West England. Bottom-line pre-tax profits were £327.1m, against £408.7m a year earlier.

It is also close to completing its West End Link water pipeline, a £120m project connecting Merseyside and Greater Manchester.

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