Water group pledges to help customers through pandemic crisis

Water and wastewater group United Utilities (UU) said it will work to help customers through the current difficult period brought on by the coronavirus pandemic.

In a trading update ahead of its full year results on May 22, the Warrington-based company said: “We offer some of the sector’s most innovative affordability schemes and will continue to make these available to customers experiencing difficulty in the current economic climate.”

It added: “We have enacted our robust contingency plans in response to the COVID-19 outbreak.

“These are designed to protect our employees so that we can continue to provide a great public service to customers.

“Our revenues are fixed under the regulatory revenue control for the next five years, with shortfalls in any year being recoverable in later years.

“In addition we have a robust liquidity position extending out for 24 months which is at the upper end of our policy range.

“This means that we are well protected against financial shocks that may be experienced as a result of the outbreak in the short to medium term.

“However, we recognise that there is a significant degree of uncertainty associated with how the current situation develops and we will therefore continue to closely monitor our position and approach.”

The group said current trading is in line with the group’s expectations for the year ending March 31, 2020.

It said it ends AMP6 – its sixth five-year regulatory period awarded by regulator Ofwat – as a high-performing company having delivered sustainable improvements in service, resilience and efficiency for customers over the past 10 years, adding: “We expect to deliver further improvements in AMP7 and beyond.

“We have invested £100m over the last 12 months to accelerate planned improvements and achieve a flying start to the period.”

Throughout February 2020 the UK experienced a succession of severe Winter storms, but UU said they did cause some service interruptions that will reduce its anticipated Outcome Delivery Incentives (ODIs) for AMP6 to a net reward of around £40m from around £50m previously.

UU said group revenue is expected to be higher than last year, largely reflecting its allowed regulatory revenue changes.

Underlying operating profit for 2019/20 is expected to be higher than 2018/19. Underlying infrastructure renewals expenditure in the second half of 2019/20 is expected to be higher than the first half of the year.

Reported operating profit will be impacted by an accelerated depreciation charge of around £80m in relation to Bioresources assets. However, to provide a more representative view of business performance, this accelerated depreciation will be excluded from the underlying profit measures.

The current economic climate has resulted in an increase in credit spreads which is expected to significantly increase the UU Group IFRS pension surplus at March 31, 2020.

UU said: “We expect group net debt at March 31, 2020 to be broadly flat compared with the position as at September 30, 2019.”

And it added: “Our responsible approach to financial risk management continues to deliver benefits including a strong balance sheet and gearing comfortably within our target range of 55% to 65% net debt to RCV, supporting a solid A3 credit rating for United Utilities Water with Moody’s.”