Profits hit by £25 million due to water bug, says United Utilities
City Index September 23, 2015 10:36 PM
<p>The company will pay compensation to 300,000 households after a parasite was discovered in the water supply last month.</p>
United Utilities has predicted that its profits will be hit by around £25 million this year, after paying compensation to up to 300,000 homeowners in Lancashire.
In August, customers had to boil their tap water after a microbial parasite called cryptosporidium was discovered in the water supply. The bug, which was found at a treatment works in early August, can cause diarrhoea and abdominal cramps.
People in Blackpool, Chorley, Fylde, Preston, South Ribble and Wyre were affected and had to boil their drinking water for more than two weeks while the company dealt with the problem.
Not enough clarity
At the time, South Ribble MP Seema Kennedy criticised how the utilities company responded to the incident, saying that there should be more clarity about when the water supply would be safe again.
"This situation has now been going on for 18 days and I keep asking United Utilities when is an end date in sight because people need to plan," she said on August 24th.
"At the beginning, we had this notice and we thought it would be a matter of a couple of days or a week," she added.
United Utilities said it was grateful for the patience of its customers, and the firm started sending out compensation – between £50 and £60 per household earlier this month.
In a trading update, the firm said: "We deployed extensive additional resources, including enhanced UV treatment, to restore the water quality to the high standards expected as quickly as possible, and full service was restored in early September."
The company added: "We recognise the inconvenience this placed on many of our customers and are very grateful for their patience and understanding."
According to analysts, United Utilities may also be facing regulatory performance penalties, which would add to the costs already incurred dealing with the problem and paying out the compensation.
The firm, which is the UK's largest listed water company and provides water and sewerage services for around seven million people in north-west England. On Wednesday (September 23rd), shares in the company were up 1.77 per cent to 892.00 at 16:10 BST.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.