United Utilities intends to seek shareholder support at its AGM in July 2022 for the introduction of a new climate change measure in its long-term incentive plan that aligns with its previously announced carbon pledges.

The announcement comes in the water company’s latest trading update ahead of publication of its full year results on 26 May 2022.

“We have a strong track record of ensuring executive remuneration is directly linked to ESG performance”, the update says.

According to the update, current trading is in line with the group’s expectations for the year ending 31 March 2022.

The update says United Utilities’ pollution performance continues to be sector leading – the company has delivered a 31 per cent reduction in incidents in the first year of the AMP and expects to have maintained the high level of performance in the current year.

Protecting the environment

Commenting on its work to protect the environment, the company said:

“We are determined to play our part in tackling the problem of river pollution, which is why we are on track with the investment of almost £900 million in AMP7 to improve the quality of our region’s rivers and seas.

“The Environment Act sets out important requirements about the progressive reduction to the

adverse impacts of discharges to rivers. Building on our track record of delivering environmental

improvements, such as no serious pollution incidents for two consecutive years, we are making good

progress implementing plans to improve our rivers and waterways”

In 2021 recorded levels of spill volume and spill frequency from United Utilities’ storm overflows were around 25 per cent lower than reported in 2020. The company is continuing to roll out additional monitoring capability, further improving measurement and identifying potential operational improvements.

Earlier this month the utility launched its plan for “Better Rivers: Better North West ” to improve river health and recreation in AMP7. The four-point plan contains a series of commitments, most of which will be delivered over the next three years, including:

• asset improvement
• enhanced data monitoring and sharing
• greater innovation
• more use of nature-based solutions

The update says this activity will enable United Utilities to be “better positioned” as it plans for AMP8 and that the company is “committed to securing the investment necessary to modernise the North West’s sewer system.”

Group revenue is expected to be higher than last year, largely reflecting higher consumption from business customers. Overall, the net increase in revenue is expected to be around 3 per cent.

Underlying operating profit for 2021/22 is expected to be broadly the same as in 2020/21 as higher revenue is broadly offset by higher underlying operating costs, largely as a result of inflationary increases in core costs.

United Utilities expects the underlying net finance expense for 2021/22 to be around £175 million higher than 2020/21 - largely due to higher inflation applied to the group’s index-linked debt.

However, with inflation at a 30-year high, the water company said it “will benefit from higher indexation increasing the regulatory capital value of the regulated business at the year-end, as well as increasing future revenues.”

The update says that as a result of the impact of capital allowances, including temporary super deductions available for the current year, together with the expected agreement of prior years’ tax matters as part of the group’s normal processes of ensuring the right amount of tax is paid, United Utilities would expect an underlying tax credit for 2021/22 of around £60 million.

According to the group, its responsible approach to financial risk management continues to deliver benefits, including a strong balance sheet, a stable IFRS pension surplus and gearing within its target range supporting a solid A3 credit rating with ratings analyst firm Moody’s.