United increases cash flow from water rises

United Utilities, the perennially talked-about bid target, yesterday had good news for interested parties as the UK's largest-listed water company said it was making more money after hitting households with price rises.

United said revenues for the six months to October will be higher than the same time a year ago as the industry regulator, Ofwat, allowed it to hike customers' bills by an average 6.15 per cent.

But it admitted that revenue growth had been stymied by penny-pinching Britons switching to water meters and by downturn-struck businesses using less water.

United also warned that its higher revenues would be "largely balanced" by higher depreciation costs and spending on sewers.

"The increase is slightly below the allowed regulated price rise, principally reflecting the ongoing impact of customers switching to meters and continued lower commercial volumes," United said.

It added that it would benefit from a £50m deferred tax credit after a cut to corporation tax.

The stock has been the focus of City bid chatter for months, with analysts at Bank of America-Merrill Lynch this week reporting: "We believe a bid from a consortium seems more feasible … the names mentioned look plausible to us given infrastructure appetite."

The shares, which have risen by 20 per cent this year, rose 3p to 730p.