Water warning on energy cost
NORTHUMBRIAN Water Group today warned a “dramatic increase” in energy prices will add more than £8m to its costs, but has pledged not to pass it on to customers.
The update came as the company reported better than expected pre-tax profits of £170.3m in the year to March 31 - up 15.2% on the previous year.
Margins were boosted by a 6.1% rise in water revenues after the firm was allowed to increase tariffs to support future capital investment programmes.
Managing director John Cuthbert said consumers would see their bills increase “only at the rate of inflation”, at least until March 2010.
He said: “We are pretty pleased with the results, which were at the top end of analysts’ expectations. We have benefited from falling energy prices in the wholesale market, but these are likely to increase in 2008-2009.
“This impact will feed its way through to next year’s numbers.”
He added that the burgeoning waste water and flood protection markets could bring further opportunities to boost revenues.
“Regulatory outputs have been delivered, although sewer flooding continues to be a challenge as a result of the increasing incidence of severe localised storms,” he said.
“Results from customer research continue to place us in a strong position within the sector.
“In the last three or four years we have experienced a lot of flooding in the North-east in particular. We already run various schemes on Teesside and we also have a waste water plant in Scotland.”
Operating costs in the company’s water arm were £1.4m lower than estimates given to regulator Ofwat in 2004, but Northumbrian said a retreat in energy prices during 2007-2008 reversed in recent months, with prices almost doubling on February 2007.
Profit on ordinary activities before interest for the year was £277.8m - a rise of £30.1m on the previous year - while operating costs increased by £6.8m (1.8%) to £392.6m. A full year ordinary dividend of 12.07 pence per share was announced, a rise of 7.1%.
Despite the strong results, however, the company’s share price nudged down four points this morning to 334.75p.
The group provides water and sewerage services to around 2.6m people in the North and water services to 1.7m in Essex and Suffolk.
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