Interim performance gives water group confidence to increase investment

North West water and wastewater group United Utilties (UU) said revenues and profits are expected to be higher than the previous year, in a trading update today.

The statement, covering the six months to September 30, said group revenue is expected to be higher than the first half of last year, largely reflecting its allowed regulatory revenue changes.

Underlying operating profit for the first half of 2019/20 is expected to be higher than the first half of 2018/19, largely reflecting the higher revenue and lower infrastructure renewals expenditure.

Current trading is in line with group expectations.

Warrington-based UU said it also has the capacity to commit £350m of additional investment in the business.

It said: “Our strong performance means that we are well placed to deliver against our targets for the current regulatory period.”

The industry operates in five-year periods, regulated by watchdog Ofwat. The current period (AMP6) is approaching its conclusion, and the next five-year period (AMP7) is due to start in 2020.

UU said: “We have committed to sharing with customers the benefit of our anticipated outperformance through a total of £350m of additional investment.

“This includes the £100m of additional investment that we announced in May 2019, 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, it added: “Together with our high level of performance in AMP6 and the outperformance reinvestment we have already committed to, gives us confidence heading into the next regulatory period.

“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%.”

The group will announce its interim results on November 20.