Last checked at 28 Sep 2018 07:00
United Utilities Group PLC
28 September 2018
UNITED UTILITIES TRADING UPDATE
United Utilities announces the following trading update ahead of its interim results on 21 November 2018. Current trading is in line with the group's expectations for the six months ending 30 September 2018.
A high performing, responsible company
Through our customer focus, utilisation of technology and emphasis on innovation, United Utilities is delivering sector leading customer service and environmental performance.
We are the top performing water and wastewater company against the Drinking Water Inspectorate's (DWI's) overall drinking water quality metric and third against the DWI's new Compliance Risk Index. Our wastewater business has retained 4* status for the third consecutive year against the Environment Agency's annual assessment.
Customer satisfaction has also continued to rise with the most recent UK Customer Service Index placing United Utilities top among all water and wastewater companies. This follows our strong performance against Ofwat's Service Incentive Mechanism (SIM) measure and a continuation of this trend should make us eligible for a SIM reward in AMP6.
Prolonged period of dry weather
Earlier this year, the UK experienced a prolonged period of extreme hot and dry weather resulting in exceptional demand from customers. To safeguard continuity of supplies to customers and protect our water resources, we expect to invest an additional £80 million during the current financial year, comprising £40 million of operating costs and infrastructure renewals expenditure (IRE) and £40 million of capital expenditure. These measures together with the cooler and wetter weather in August avoided the need for any water restrictions.
Our plans for AMP7 and beyond
On 3 September, we submitted our business plan to Ofwat setting out how we intend to meet the needs of customers and other stakeholders for AMP7. Our plan proposes a 10.5 per cent real terms price reduction between 2020 and 2025, whilst also delivering higher standards of service, increasing resilience, delivering innovation and investing for the long term.
Financials
Group revenue is expected to be higher than the first half of last year, reflecting our allowed regulatory revenue changes.
We anticipate the operating costs associated with the exceptional dry weather period to be an adjusted item and therefore underlying operating profit for the first half of 2018/19 is expected to be higher than the first half of 2017/18, despite underlying IRE being higher.
The RPI inflation that is applied to the group's index-linked debt is lower for the first half of the year and we therefore expect the underlying net finance expense for the first half of 2018/19 to be around £30 million lower than for the first half last year.
As the company continues to invest in its asset base, we expect a small increase in group net debt at 30 September 2018 compared with the position as at 31 March 2018.
Our responsible approach to financial risk management continues to deliver benefits including a strong balance sheet, a stable IFRS pension surplus and gearing comfortably within our target range of 55 per cent to 65 per cent net debt to RCV, supporting a solid A3 credit rating for United Utilities Water with Moody's.
United Utilities contacts:
Gaynor Kenyon, Corporate Affairs Director +44 (0) 7753 622282
Robert Lee, Head of Investor Relations +44 (0) 1925 237033
Graeme Wilson, Tulchan Communications +44 (0) 20 7353 4200
LEI 2138002IEYQAOC88ZJ59
Classification - Trading update