United Utilities has today announced a robust set of underlying financial and operational results with the publication of its half year results for the six-month period to 30 September 2023.

The water company is reporting an underlying operating profit of £271 million and reported operating profit of £241 million.

Reported operating profit was £30 million lower at £241 million reflecting an adjusting item in respect of costs associated with a fractured outlet pipe at the utility’s Fleetwood Wastewater Treatment Works. The company explained that “the scale of the activity involved in remediating this failure, and the associated cost was not representative of normal business activity,”

Reported profit before tax decreased by £266 million to £160 million reflecting:

• an £18 million decrease in reported operating profit and a £216 million increase in reported net finance expense (from a £136 million reported net finance income to a £80 million reported net finance expense)
• a £31 million profit on disposal of its subsidiary United Uti lities Renewable Energy Limited (recognised in the previous first half)
• a small increase in the share of losses of joint ventures of £1 million. The group incurred a share of the losses of Water Plus for the six months ended 30 September 2023 of £1.1million. This compares to a share of the profits of Water Plus of £0.2 million for the six months ended 30 September 2022, with the difference largely as a result of the impact of higher interest rates.

UU continues to target an AMP7 net ODI reward of around £200 million

For the current AMP7 regulatory period United Utilities is continuing to target an AMP7 net ODI reward of around £200 million.

United Utilities said its low level of gearing at 59% and solid credit ratings provided the company with future financial flexibility. Its AMP7 funding is in place with liquidity extending into 2026.

Underlying operating costs are expected to be around £60 million higher year-on-year. United Utilities said the increase is largely driven by inflation, with the largest inflationary pressures impacting power, labour, and chemicals costs. The remaining increase reflects the 2023/24 operating cost impact of additional investments, including its Better Rivers programme. Power costs rose from £54.7 million to £74.3 million during the period, a 36% increase compared to the 6 months to 30^th September 2022.

Capital expenditure in 2023/24 is expected to be in the range of £720 million to £800 million. In addition to the AMP7 base programme, this reflects capital expenditure for the year in relation to its additional investment (including Green Recovery and investment supporting the Better Rivers programme), and AMP8 acceleration capital programmes.

Operational highlights flagged up by the company include:

• Forecasting to double its ODI reward this year, in line with guidance at over £50 million
• On track to achieve 4 star status for 2023 in the Environment Agency’s Environmental Performance Assessment
• Going further and faster on tackling overflows, following regulatory approvals to accelerate delivery of infrastructure investment
• Progressing well with leakage programme and forecasting to achieve its best ever performance
• Progressing plans for pioneering carbon-capture facility to be constructed at its head office in Warrington which has recently received planning permission

Louise Beardmore: "we are on track to achieve our best ever year on customer outcome delivery incentives"

Commenting on the results, Louise Beardmore, Chief Executive Officer, said:

"We are announcing a robust set of underlying financial and operational results today, in what has been a busy six months, including submission of our ambitious business plan for 2025-30.

We continue to focus on delivering for our customers, communities and the environment - and creating a stronger, greener and healthier North West. We are providing affordability support to over 350,000 customers - more than ever before - and we are on track to achieve our best ever year on customer outcome delivery incentives. We are doing more to protect and enhance the North West's waterways and natural habitats and we're on course to attain the highest 4-star rating from the Environment Agency for 2023.

Last month, we set out an ambitious £13.7 billion plan for 2025-30, a plan that will transform the delivery of services for customers and the environment in the North West and at the same time supporting 30,000 jobs, 7,000 of which will be new. Our strong balance sheet and liquidity puts us in a great position to deliver it, and we aren't waiting - we have made an early start on overflows, representing £1.2 billion of our proposed programme, and allowing us to press ahead with work to reduce storm overflow spills and deliver the step change we all want to see."

Submitting the AMP8 plan at the start of October, United Utilities said it was proposing the largest investment in the region's water and wastewater infrastructure in over 100 years. Of the £13.7 billion total expenditure across 2025-30, 93% of enhancement spend is driven by statutory requirements.

United Utilities' PR24 submission included the UK's biggest storm overflow spill reduction plan, targeting a 60% reduction int he decade to 2030. As part of the Accelerated Infrastructure DeliveryProject earlier this year, Ofwat gave approval for the company to progress with 154 priority projects during 2023-25, enabling it to progress work on around £200 million worth of projects during 2023-25.

The company also announced a ecommended interim dividend of 16.59p per share, in line with policy.