United Utilities steers EPS in line with guidance and smooths inflation-linked debt impacts
United Utilities has issued a short pre-close update ahead of its full-year results for the year to 31 March 2026. The headline: underlying earnings per share (EPS) are expected to land around 100 pence, in line with prior guidance, before an accounting tweak that will also lift underlying EPS by about 5 pence.
The company is also doubling down on cost discipline and has locked in power prices well into next winter, which should keep energy volatility at bay. There is an investor site tour in Manchester on 1 July for those who want a closer look.
EPS guidance: steady at around 100 pence
United Utilities expects underlying EPS for 2025/26 to be around 100 pence, consistent with previous guidance and signalling no surprises on the core P&L trajectory. “Underlying” typically strips out one-off items to present a cleaner view of trading performance.
That stability matters in a sector where regulation and input costs can swing results. It suggests the business has executed broadly to plan into the year end.
Accounting change to inflation-linked debt: lower volatility, +5p to EPS
The big technical change is an updated estimation technique for inflation-linked debt. In plain English: the company is changing how it recognises the inflation uplift on debt that’s tied to inflation, spreading unusually high or low inflation impacts over the remaining life of the debt rather than taking the full hit (or boost) immediately.
- Purpose: reduce volatility in the income statement.
- Timing: applied in the 2025/26 full-year results.
- Expected effect: cut underlying net finance expense by approximately £35m and lift underlying EPS by around 5 pence.
My read: this is a sensible move that should make earnings more predictable from year to year. It aligns the accounting more closely with economic reality over the life of the instruments. It is an accounting estimation change; the RNS does not state any cash impact.
Investors should note the optics: reported underlying EPS will be higher by roughly 5 pence due solely to this methodology shift. When you compare year-on-year performance, keep this like-for-like adjustment in mind.
Operating costs unchanged and energy hedging locked in
Underlying operating cost guidance is unchanged, which is reassuring given the wider inflation backdrop. The company highlights “disciplined and prudent” energy hedging as part of its financial risk management framework.
Crucially, electricity hedges were executed proactively during benign market conditions in Q3 and Q4, leaving coverage levels comfortably above policy minimums:
- Fully hedged for Summer 2026.
- Over 90% hedged for Winter 2026/27.
That takes a major cost variable largely out of the equation for the next two seasons. In addition, the regulatory true up mechanism introduced for AMP8 – the sector’s five-year price control period – provides further protection against future commodity price moves. In short, even if energy prices swing, there is a regulatory backstop to help smooth the impact.
Why this update matters
There are three takeaways for shareholders and would-be investors:
- Earnings visibility is improving. The accounting change should dampen inflation-driven swings in finance costs, which in turn should make EPS steadier through the cycle.
- Cost risk is controlled for the near term. With Summer 2026 fully hedged and Winter 2026/27 more than 90% hedged, energy price shocks look unlikely to derail margins.
- Guidance discipline. Reiterating around 100 pence of underlying EPS before the accounting change shows the operational engine is tracking expectations.
On balance, this is a positive, low-drama update. The only note of caution is interpretative: the ~5 pence EPS uplift comes from an accounting methodology shift, not from an operational windfall. It improves quality and comparability going forward, but investors should adjust mentally when benchmarking against prior periods.
What could move the dial next
There are a few watch items as we head into results season:
- Disclosure detail: the full-year numbers should break out the impact of the accounting change clearly. Look for sensitivity analysis or restated comparatives to aid year-on-year comparisons.
- Cash metrics: while today’s update focuses on underlying EPS and finance expense, keep an eye on cash flow, net debt and interest cover when results land. The RNS does not disclose these today.
- Energy beyond Winter 2026/27: hedging levels after this period are not disclosed. Any colour on 2027/28 and policy ranges would help frame medium-term cost risk.
Key numbers at a glance
| Underlying EPS guidance (2025/26, before accounting change) | Around 100 pence |
| Accounting change effect – underlying net finance expense | Reduction of approximately £35m |
| Accounting change effect – underlying EPS | Increase of around 5 pence |
| Underlying operating cost guidance | Unchanged |
| Electricity hedging – Summer 2026 | Fully hedged |
| Electricity hedging – Winter 2026/27 | Over 90% hedged |
| Regulatory protection (AMP8) | True up mechanism provides further protection against commodity price movements |
| Investor site tour | Manchester, 1 July |
My bottom line
This reads like a tidy end-of-year check-in: guidance intact, volatility management improved, and energy costs well hedged. The accounting change is technical but helpful for smoothing results and boosting comparability, with a clear – and disclosed – uplift to underlying EPS and a lower underlying finance charge.
From here, the full-year print will need to show the building blocks behind that ~100 pence EPS, spell out the accounting impacts in detail, and update on any moving parts in AMP8. For now, United Utilities looks to be keeping the ship steady while reducing the chop in the reported numbers – a combination most income-minded investors will welcome.
