United Utilities has said that current trading is in line with the group’s expectations for the six months ending 30 September 2014 with the publication of its latest trading update this morning.
The water company said that customer service is continuing to improve, underpinned by good operational and environmental performance.
United Utilities said it remains confident of delivering its 2010-15 regulatory outperformance targets.
On operational performance, United Utilities has delivered significant improvements in customer service over the last few years, supported by a further reduction in customer complaints.
The water company’s asset serviceability performance has been good, with all four major asset classes rated either ‘stable’ or ‘improving’. The good performance has been recognised in Ofwat’s draft determinations in August, with no penalties relating to the service incentive mechanism (SIM) or asset serviceability. This is underpinned by top quartile operational performance, as measured through Ofwat’s key performance indicators and the Environment Agency’s assessment.
United Utilities said its capital delivery performance in AMP5 has been good and planned investment is continuing at high levels. Regulatory capital investment for 2014/15, including infrastructure renewals expenditure, is expected to be similar to the level of investment made in 2013/14.
Underlying operating profit for the first half of 2014/15 is anticipated to be similar to the first half of 2013/14. This principally reflects an allowed regulated price rise offset by the impact of United Utilities’ previously announced special customer discount and the expected increase in depreciation and other cost pressures, including bad debt.
Group net debt at 30 September 2014 is expected to be slightly higher than the position at 31 March 2014. This principally reflects regulatory capital expenditure, payment of the 2013/14 final dividend and payments in relation to interest and taxation, largely offset by operational cash flows. Gearing remains well within Ofwat’s 2010-15 assumed range of 55% to 65% net debt to regulatory capital value, supporting a solid A3 credit rating for United Utilities Water (UUW). The group has financing headroom into 2016.
Commenting on the current 2014 price review process, the firm said it is engaged in detailed dialogue with Ofwat, alongside its on-going discussions with other stakeholders, with a particular focus on the wholesale total expenditure differences between UUW’s business plan and Ofwat’s draft determinations.
UUW is scheduled to submit its response to the regulator by 3 October 2014. Ofwat is expected to publish final determinations on 12 December 2014.
United Utilities will announce its half year results on 26 November 2014.
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