United Utilities has announced it is trading in line with group expectations and on course to see a slight increase in revenue on last year’s £1.7 billion, with “moderately higher” underlying profits than 2017’s £662 million.
And in its trading update to the stock market yesterday the company, currently preparing to submit its PR19 business plan to Ofwat in September setting out its 2020-2025 spending, said it was confident of meeting its AMP7 commitments.
The solid performance from the Moody’s A3-rated north west utilities giant comes despite an uncertain background for the sector, with increased regulatory scrutiny and political volatility.
United Utilities says its “responsible approach” to financial risk management continues to deliver benefits, including “a strong balance sheet, a stable pension surplus and gearing comfortably within its target range of 55 per cent to 66 per cent net debt to regulatory capital value” (expected to increase by around £400 million due to RPI).
It is a gearing position likely to chime well with the regulator, following Ofwat chairman Jonson Cox’s recent calls for highly leveraged companies to take urgent action on maintaining financial resilience.
The update also points to further improvements in customer satisfaction over the year with “a step change” in performance since the start of AMP6.
Cost of the company’s index-linked debt is expected to be around £40 million higher for 2017/18 than last year whilst, due to continued investment in its asset base, a small increase in group net debt is expected at the end of this month compared with September 2017.
Full year results for 2017/18 will be released on 24 May.
Following the news, at the time of writing, United Utilities’ share price had risen by 8 per cent (53 pence per share).
In a statement to Utility Week today, Steve Mogford, CEO of United Utilities, said the company continued to put customers at the heart of everything it did and had further improved customer satisfaction over the year – a point reflected in its best-ever score against Ofwat’s qualitative Service Incentive Mechanism (SIM) measure, ending the year as the leading company in the sector.
“This is a significant achievement in our region where we have some of the highest levels of deprivation in the country and which has seen us increase the reach of our financial assistance schemes and enhance the services offered to customers in vulnerable situations.
“As we develop our plans for the next price review period, we are engaging with customers to better understand their continuing needs and priorities. We are on track to submit our business plan later this year and are confident it will deliver against Ofwat’s key themes.
“Our use of innovation and our Systems Thinking approach to running the business is delivering increasingly efficient and resilient services. This approach is central to our long-term vision and strategy and will help deliver long-term value for customers, the environment and for shareholders.”