United Utilities reveals £25m profits hit after compensation payout

Water firm United Utilities revealed a £25 million profits hit after it had to pay out compensation to hundreds of thousands of customers affected by the discovery of a parasitic bug in supplies.

The company started sending out cheques for compensation payments ranging from £50 to £60 earlier this month to 300,000 households in Lancashire - representing 10% of its customers.

In a trading update, United said that operating profit in the first half of its financial year ending on September 30 would be affected by customer compensation and one-off costs totalling around £25 million relating to the incidents.

Analysts have said the group will also face regulatory performance penalties in addition to these costs - though there was no mention of these in the latest statement. These are expected to be in the low single-digit millions.

United said: "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."

Homes and businesses in parts of the county were first warned to boil their water before use on August 6 after traces of the microbial parasite cryptosporidium was found in a water treatment works in Preston.

The company said: "We recognise the inconvenience this placed on many of our customers and are very grateful for their patience and understanding. We are in the process of paying compensation."

United said underlying operating profit for the first half was in line with expectations though lower than in the prior year, reflecting new regulated price controls.

Last October, the firm said it planned to cut household bills by 4.1% in real terms over the 2015-2020 period after its initial strategy for a 2.3% fall was given the thumbs-down by regulator Ofwat.

The group said in its latest update that reported operating profit for the first half would be hit by the "water quality incident" as well as restructuring costs of around £5 million.

United provides water and sewerage services for around seven million people in north west England.