United Utilities trading in line as it continues to meet AMP6 targets

United Utilities updated the market on its trading on Wednesday, ahead of its interim results, reporting that it was currently in line with its expectations for the six months ending 30 September.

The FTSE 100 water and wastewater company said it was “high performing” in Asset Management Period (AMP) 6, reporting that its strategy of accelerating investment into the early years of the regulatory period, together with its innovation culture, was delivering “enhanced levels of service and resilience” for customers and sustainable improvements in efficiency.

It said its strong performance meant that it was well placed to deliver against its targets for the remainder of AMP6, with no material change to prior guidance on its overall level of regulatory outperformance.

“We have committed to sharing with customers the benefit of our anticipated outperformance through a total of £350m of additional investment,” the board said in its statement.

“This includes the £100m of additional investment that we announced in May, targeting areas where we have the opportunity to deliver improved performance earlier in AMP7, and we are progressing well with this programme of spend.”

Looking ahead to AMP7, United Utilities said the fast-track status it was awarded had provided early clarity, which it had used to refine and move forward with its AMP7 implementation plans.

That, together with the company’s high level of performance in AMP6 and the outperformance reinvestment it had already committed to, gave the United Utilities board confidence heading into the next regulatory period, it added.

“We continue to engage constructively with Ofwat and await the final determinations to be published on 11 December.”

On the financial front, the company said group revenue was expected to be higher than the first half of last year in its interim results, largely reflecting its allowed regulatory revenue changes.

Underlying operating profit for the first half was anticipated to be higher year-on-year as well, which the board said reflected the higher revenue and lower infrastructure renewals expenditure it saw.

It said it expected a small share of losses of joint ventures.

The retail price index inflation that is applied to the group's index-linked debt was higher for the first half of the year, the board cautioned, and as a result it expected the underlying net finance expense for the first half to be just over £10m higher than the first half of last year.

“We expect group net debt to increase by around £250m at 30 September compared with the position as at 31 March,” the board added.

“This largely reflects the prepayment of around £100 million in April 2019 of the agreed deficit recovery contributions in relation to the group's defined benefit pension schemes, the impact of IFRS16 which results in the recognition of a £55m lease liability included in net debt, and the group's ongoing investment in its asset base.

“Our responsible approach to financial risk management continues to deliver benefits including a strong balance sheet, pension schemes that are now fully funded on a self-sufficiency basis and gearing comfortably within our target range of 55% to 65% net debt-to-regulatory capital value, supporting a solid A3 credit rating for United Utilities Water with Moody's.”

United Utilities said it was expecting to release its interim results for the six months ended 30 September on 20 November.