Warrington-based water giant United Utilities said on Thursday its underlying operating profit fell from £732.1 million to £602.1 million as revenue slipped 2.8% to £1.80 billion in the year to March 31, 2021.

The company said reported profit before tax increased £248 million to £551 million boosted by “a £37 million profit on the disposal of our Tallinn joint venture and the impact in the prior year of our £32 million share of Water Plus losses arising as a result of Covid-19.”

Net debt at March 31, 2021, was £7.306 billion, compared with £7.361 billion at March 31, 2020.

The board has proposed a final dividend of 28.83p per share, bringing the full year payment to 43.24p — a 1.5% increase on last year.

William Ryder, Equity Analyst at Hargreaves Lansdown, said: “Increased household demand over lockdowns offset lower demand in the non-household sector.

“But United Utilities has still reported a substantial fall in underlying operating profit — to be expected under the new regulatory regime.

“The regulator is demanding lower prices, and combined with lower inflation, this has dragged revenue down.

“Operating costs also increased thanks to higher investment.

“The new regime calls for even more investment, and while this will increase regulatory capital and thus allowable financial returns, it’s still a drain on cash.

“But despite the challenges, United Utilities is still a regulated monopoly, and the group has made a good start against its Outcome Delivery Incentives.

“This ought be enough to support the dividend going forward, which will be the main concern for investors.”

In its outlook and 2021-22 full-year guidance, United Utilities said revenue is expected to be marginally lower, underlying operating costs are expected to be marginally higher, and underlying finance expense is expected to be higher.

It said its capital expenditure in 2021-22 is expected to be in the range of £625 million to £675 million.