United Utilities Group PLC
24 September 2014
UNITED UTILITIES TRADING UPDATE
Current trading is in line with the group's expectations for the six months
ending 30 September 2014. Customer service continues to improve, underpinned by
good operational and environmental performance. The company remains confident
of delivering its 2010-15 regulatory outperformance targets.
Operational performance
United Utilities has delivered significant improvements in customer service
over the last few years and we continue to make progress, supported by a
further reduction in customer complaints. Our asset serviceability performance
has been good, with all four major asset classes rated either `stable' or
`improving'. This 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.
Capital delivery
Our capital delivery performance in this regulatory period has been good and
planned investment is continuing at high levels, as we invest to maintain and
improve services for customers and deliver further environmental benefits. This
capital programme also makes a significant contribution to the regional
economy, providing new investment and supporting employment. Regulatory capital
investment for 2014/15, including infrastructure renewals expenditure, is
expected to be similar to the high level of investment we made in 2013/14.
Financials
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 the previously announced special
customer discount and the expected increase in depreciation and other cost
pressures, including bad debt. The underlying net finance expense for the first
half of 2014/15 is anticipated to be slightly lower than the first half of last
year, primarily reflecting the impact of lower RPI inflation on our
index-linked debt.
As the company continues to invest in its asset base, 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. This
supports a solid A3 credit rating for United Utilities Water (UUW). The group
has financing headroom into 2016.
Accounting change
From 1 April 2014, a change under IFRS11 impacts the accounting treatment of
the group's investment in Tallinn Water (moving from proportional consolidation
to equity accounting). As a result, the prior year financial statements will be
re-presented to reflect this, reducing underlying operating profit for the
first half of 2013/14 by around £4 million, but with minimal impact on
underlying profit before tax.
Price review 2014
As part of the 2014 price review process, on 29 August 2014, Ofwat published
its draft determinations for UUW covering the period 1 April 2015 to 31 March
2020. UUW is engaged in detailed dialogue with Ofwat, alongside its on-going
discussions with other stakeholders, with 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.
United Utilities contacts:
Gaynor Kenyon, Corporate Affairs Director +44 (0) 7753 622282
Darren Jameson, Head of Investor Relations +44 (0) 7733 127707
Peter Hewer/Martin Pengelley, Tulchan Communications +44 (0) 20 7353 4200
