Water Plus JV causes United Utilities’ revenue to drop

United Utilities has reported a drop in revenue of £4 million as a result of the Water Plus joint venture approved earlier this year.

The company reported revenue of £853 million in the six months to September 2016. It said this decrease was expected, and reflected the accounting impact of its JV. It was partly offset by the firm’s allowed regulatory revenue changes.

“The JV completed on 1 June 2016 and, from that date, its contribution is no longer included within operating profit and is, instead, included within the share of profits of joint ventures line in the income statement,” United Utilities (UU) said in its report. “However, as expected, due to start-up costs, our Water Plus JV made a small loss of £0.9 million in the first half of 2016/17.”

UU’s underlying operating profit was up £4 million, at £313 million. The firm said this reflects the new regulated price controls, lower infrastructure renewals expenditure, a small decrease in depreciation, and a small decrease in the remaining cost base.

Meanwhile, underlying profit before tax was down £16 million to £189 million, as the £4 million increase in underlying operating profit was “more than offset” by a £19 million increase in underlying net finance expense.

UU’s total regulatory capital investment in the first half of the year, including £73 million of infrastructure renewals expenditure, was £383 million – in line with its plans to accelerate the 2015-20 investment programme. The company said it remains “on track” to deliver a total of around £800 million of regulatory capital investment for the full year.

It has invested an additional £37 million in non-regulated projects, principally solar power, over the last 18 months. This was part of the company’s wider plan to invest more than £100 million between 2015 and 2020, “subject to acceptable returns”.

UU chief executive Steve Mogford said: “The acceleration of our capital investment programme continues to deliver early customer service and operational benefits. We have invested £383 million in the first half of this year and remain on track to invest around £800 million for the full year.

“Our systems thinking approach to running the business continues to drive innovation into our operations and we are rolling out further capability this year, including new process technology.”

He added: “Overall, we are encouraged by our progress in the early part of this regulatory period. We have a robust financial position and are confident that we can deliver our targets for both customers and shareholders.”