United Utilities has said it will review and adapt its plans for AMP7 with staff safety and supporting customers at the forefront, against the “challenging backdrop” of coronavirus.
Chief executive Steve Mogford paid tribute to the “incredible team” at UU for their hard work for the company and its customers since the outbreak of coronavirus.
“We will focus on the safety of our people and support for our customers over any short-term impact on our financial and operational targets,” Mogford said, as part of the company’s full year financial results statement.
He added that the company fully intends to play a part in the recovery of the north west economy as the full extent of the economic and social repercussions is realised.
As reported earlier in the week, UU’s joint venture with Severn Trent Water Plus was already struggling prior to the current crisis. The non-household water retail market has suffered with many customers being forced to close their businesses since lockdown. UU said its share of losses for the year totalled £51 million, of which £14 million were identified as underlying losses and £32 million losses arising as a result of coronavirus.
The organisation anticipated that administration costs are likely to rise because of measures taken related to coronavirus. It also expects sources of income and funding will be impacted and for greater uncertainty over returns and debt and equity markets that could make raising finances more difficult.
UU also noted the continued perceptions of legitimacy of the sector that, despite the imminent threat of renationalisation being benched with Labour’s election loss in December, continues to attract increased scrutiny from parliament, regulators and customers.
UU said it had already incurred significant costs resulting from the pandemic including incremental expected credit losses on household and non-household customer income because of increases in unemployment as well as businesses closing due to coronavirus.
Mogford said the business could reflect with pride on the recently ended AMP cycle in which the company achieved £350 million of outperformance, to be reinvested into environmental and customer projects.
During the past year – to 31 March – UU saw revenue up by £41 million to £1.9 billion while underlying operating profits rose £59 million to £744 million. The company made £722 million of capital investment in 2019/20 including £184 million available from outperformance rewards.
For the five years 2015-20 the company’s total capex investment was just under £4 billion. During the period, the group worked with a single engineering partner and four construction and design partners with work allocated early to deliver efficiencies.
Fast-tracked UU began re-investing its outperformance payments from AMP6 over the past year to put the business in a strong position for the new investment period. It has already begun implementing its plans and invested £100 million from its outperformance, which the company said has given confidence for AMP7.
It reached its regulatory leakage target for 2019/20 of 463 megalitres per day and has invested some of the outperformance reinvestment from last year to further improve leakage rates. UU was set a target of 15 per cent reduction in leakage for the coming five-year period.
The company said its focus on customers had delivered a 70 per cent overall drop in complaints.
The company was placed fourth for customer service in the recently launched C-Mex – which replace the SIM score metrics for measuring how the sector serves and is perceived by billpayers.
A final dividend of 28.40 pence per share will be paid for 2019/20, which has grown 3.2 per cent in line with policy. For future dividends, UU said it will review the policy as a “clearer picture of the post covid-19 economic environment emerges.”