United Utilities is continuing to deliver a strong financial and operational performance, according to its latest set of half year financial results for the period ended 30th September 2019 published this morning.
Image: Steve Mogford, United Utilities CEO
Reporting on its operational transformation over AMP6, the company said its unique Systems Thinking approach had delivered a step change in performance, with continuing strong performance expected to lift net wholesale ODI outperformance to around £50 million. The firm is also on track to deliver totex outperformance of around £100 million against its AMP6 scope.
United Utilities RCV gearing has risen from 60% to 62%, primarily reflecting the one-off impact of £103 million of accelerated pension deficit repair contributions and a £55 million lease liability. United Utilities’ pension schemes are now fully funded on a self-sufficiency basis.
Well prepared for AMP7
The water company said its fast-track status had provided clarity to move forward with its implementation plans for the 2020-2025 AMP7 investment programme – with £100 million of £350 million of outperformance reinvestment for flying start already committed.
The company has also achieved locked-in efficiencies through network delivery transformation and the selection of its capital delivery partners. United Utilities has already appointed two partners as preferred bidders for over £300 million of its AMP7 capital delivery programme and has also already committed to the £100 million of additional outperformance reinvestment targeting AMP7 performance.
The utility said its innovative Systems Thinking approach is transforming the way it runs the business, its relationship with customers and its use of technology.
“By looking at the bigger picture and understanding how everything is connected, we are able to predict performance to deliver enhanced levels of service and resilience along with sustainable improvements in efficiency.” United Utilities said.
It was also “confident of outperforming against all areas of the regulatory contract for AMP6”, including delivering its AMP6 scope for around £100 million less than the Final Determination totex assumption and a cumulative net outperformance of around £50 million against its Outcome Delivery Incentives (ODIs) for AMP6.
Highlighting its “long track record of sharing outperformance”, the firm said it had delivered additional investment of £350 million for AMP6 and over £600 million across AMPs 5 and 6.
United Utiliities’ revenue was up £19 million, at £936 million, largely reflecting its allowed regulatory revenue changes. The firm said its underlying operating profit was up £24 million at £392 million, reflecting the revenue increase and a £13 million reduction in infrastructure renewals expenditure (IRE) - partly offset by an £8 million increase in depreciation.
The Board has proposed the payment of an interim dividend of 14.20 pence per ordinary share, an increase of 3.2 per cent, in line with its policy of targeting an annual growth rate of at least RPI inflation through to 2020.
Key financials for the six months ended 30 September 2019 (figures for same period in 2018 in brackets) were:
- Revenues £935.5m (£916.4m in 2018)
- Reported operating profit £383.0m (£339.1m)
- Underlying operating profit £391.7m (£367.8m)
- Reported profit after tax £158.6m (£212.5m)
- Underlying profit after tax £198.2m (£196.9m)
- Interim dividend per ordinary share (pence) 14.20p (13.76p)
- Net regulatory capital spend £323.0m (£392.7m)
Commenting on the results, Steve Mogford, Chief Executive Officer, said:
"Our customers are at the heart of everything we do - our customer satisfaction scores are consistently among the best in the water sector. Since 2010 we have reduced the average household bill by 10% in real terms, while improving customer service and supporting thousands of vulnerable households.
"I'm pleased with the transformation we have achieved over recent years - we've delivered better levels of service for customers, a more resilient network and real gains in efficiency. Our focus on innovation, coupled with sustained investment, is helping us to deliver against a challenging set of performance targets, while also protecting and enhancing the environment and supporting our local communities.”
United Utilities was “well prepared for the next regulatory period and already moving forward with implementation plans”, he added.
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