The costs of dealing with its recent cryptosporidium crisis will cost United Utilities around £25 million, according to its latest trading update for the six months ending 30 September 2015 published this morning.

The water company had to issue a ‘boil water’ notice in August to over 300,000 properties, approximately 10% of its customer base. In addition to paying compensation to customers, United Utilities also deployed extensive additional resources, including enhanced UV treatment, to restore the water quality to the appropriate standards. Full service was finally restored in early September.

The update says:

“Customer satisfaction is a key area of focus and so we were very disappointed that a significant water quality incident occurred this summer in parts of the Lancashire region, and we are continuing to investigate the cause.”

Commenting on its operational performance, United Utilities said it has delivered significant improvements in customer service over recent years and in 2014/15 achieved top quartile operational performance, as measured through Ofwat key performance indicators and the Environment Agency’s assessment. The group said its ‘systems thinking’ approach, which integrates the use of assets, leverages data intelligence and employs technology and new work processes, is supporting its drive for continuous improvement.

On capital delivery, the group has made a good start to AMP6, according to the update. Regulatory capital investment for 2015/16, including infrastructure renewals expenditure, is expected to be around £800 million.

On financial performance, the group said current trading is in line with expectations. Group revenue is expected to be similar to the first half of last year, as the impact of lower regulated revenue for 2015/16 is offset by slightly higher non-regulated sales.

Underlying operating profit for the first half of 2015/16 is in line with management expectations, albeit lower than the first half of 2014/15.  United Utilities attributed the fall to the new regulated price controls, an expected increase in depreciation and other costs, partly offset by a reduction in bad debts and regulatory fees. 

Reported operating profit in the first half of the year will be impacted by customer compensation and one-off costs, totalling around £25 million, related to the cryptosporidium incident.  In addition, restructuring costs of around £5 million, including costs relating to business retail market reform, have been incurred in the first half of the year. 

United Utilities will announce its half year results on 25 November 2015.