United Utilities has issued a profit warning after being hit by lower consumption and higher costs.
The North West water company added that its half-year revenue is now forecast to be about 1% lower than for the same period in 2021. It also said its full-year revenue is also expected to be lower than previous guidance.
United Utilities posted a revenue of £932.3m for the six months to September 30, 2021, while its full-year revenue, for the 12 months to March 31, 2022, was £1.9bn.
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In May it forecast that its underlying operating costs would be around £100m for the year.
However, in a new statement, it said: "Inflationary increases in our input costs, particularly on chemicals and power, are now expected to be somewhat higher than the forecast used to derive this guidance.
"We actively manage the impact of inflation on our cost base and while we are in a strong position for 2022/23 with wage deals agreed and the majority of our power consumption hedged.
"As highlighted at our full-year results, we started the year with around 10% of unhedged consumption exposed to market rates.
"As a result of these factors, underlying operating costs are now expected to be £65m higher for the first half of 2022/23 leading to a lower underlying operating profit than the first half of last year.
"We expect these factors to also impact the second half of the year, however we continue to closely monitor the impact of ongoing volatility in power costs and await clarity on the impact of the Energy Bill Relief Scheme for non-household customers.
"Our regulatory determination for AMP7 allows for inflation through CPIH indexation of the RCV and the totex allowance.
"This provides mitigation of non-cash indexation on the group's index-linked debt and mitigation against higher cash operating costs over time."
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