United Utilities will increase its investment in resilience measures from £100 million to £250 million during AMP6 by sharing outperformance to benefit customers.
The company said it aims to deliver value through greater use of innovation and technology alongside its £3.8 billion AMP6 capital investment programme.
In its financial results for the year ended 31 March 2018 published today (24 May), United Utilities reported underlying operating profit of £645.1 million, up from £622.9 million the previous year.
Revenue increased by just under 2 per cent to £1.7 billion, reflected by regulatory revenue changes partly offset by the accounting impact of its non-household joint venture, Water Plus that completed on 1 June 2016.
Reported operating profit was £636.4 million for the period up from £605.5 million.
The company’s profit after tax decreased from 2017, with underlying profit after tax down by £8 million to £305 million and reported profit after tax fell from £433.9 million to £354.6 million.
Its total dividend per ordinary share rose to 39.73p from 38.87p, while its regulatory capital value gearing remained at 61 per cent.
United Utilities said it has a “robust capital structure” and “consistently responsible gearing”.
Steve Mogford, the company’s chief executive, told Utility Week: “We’re really pleased with the year – it’s the third year in the AMP and we’re in a great place with customers.
“We’ve been putting customers first for such a long time now and last month we got the last wave of the SIM [Ofwat’s service incentive mechanism] scores, which put us first in the sector and third overall for the year, so we’re absolutely delighted.” United Utilities received a customer satisfaction score of 4.49.
“It’s about driving a business for the long-term to give customers a service they can rely on that’s resilient and affordable,” Mogford said.
He said the company’s “systems thinking” approach and its use of technology and innovation to “set new benchmarks for the sector is paying off”.
“We’re going to spend the extra investment on resilience measures which will benefit customers going forward and actually contribute to keeping bills down because they won’t have to spend that money in the future.
“It’s a really nice place to be for us in that all the effort in AMP6 is paying off.”
Mogford said one of the “biggest resilience measures” the investment will be used towards includes a project at its Haweswater aqueduct which runs from Haweswater reservoir down through Lancashire and Manchester and serves about two million people.
“It was built in the 50s and we’ve been doing a lot of surveys on it and we know that we’ve got some work to do to maintain the resilience of that asset.”
The company said it has decided – ahead of its business plan submission – to invest in replacing a 1.5km length of that particular aqueduct.
United Utilities will also look for other sites and assets in the business which need replacing to “do stuff early” ahead of AMP7.
“There are loads of projects that we didn’t have in our AMP6 schedule, which we would have traditionally done in AMP7 but we have dragged them forward.”
He added: “One of the reasons we announced the £100 million this early was that we wanted to spend it all in AMP6 and get the benefit of it and so this £250 million we’re scheduling to spend it all in the AMP6 period.”
The company said it is track with its business plan for the next price review and is in a strong position going into PR19, which he said is likely to be “challenging in terms of performance targets and the cost of capital”
“But there’s plenty of opportunities in there as well. I think you have to look at these things as a cup half full rather than a cup half empty. I’m optimistic for the future,” he said.
Ofwat recently set out a reform agenda to rebuild public trust in the water sector. Responding to this, Mogford, said: “This is entirely in line with what a modern, responsible company should be and how they should behave.
“I think, if through what Rachel [Ofwat’s CEO] and the team are doing at Ofwat, we can find better ways of serving customers then we’ll scoop it up and do it.”
Water companies have until 3 September to submit their business plans for PR19.