UU's acceleration of its AMP6 programme continues
United Utilities (UU) continues to accelerate its AMP6 capital investment programme this year, the company has announced in its latest trading statement. The accelerated programme will enable it to deliver early customer service and operational benefits, enhance asset resilience and optimise performance under its outcome delivery incentives (ODIs).
Total regulatory capital investment for 2016/17, including infrastructure renewals expenditure, is expected to be around £800M, similar to last year. This continued high level of investment will help UU to maintain and improve services for customers, deliver further environmental benefits and provide a significant contribution to the regional economy.
The company said it has seen continued strong performance in the areas of private sewers and pollution incidents. The modernisation programme at its Davyhulme wastewater treatment works is also progressing well, it added.
In the statement, UU said its current trading is in line with group expectations for the six months ending September 30, 2016.It continued to deliver improvements in operational performance and customer service.
In July, UU attained ‘industry leading company’ status, as measured through the Environment Agency’s annual assessment, and earlier this month it retained its Dow Jones Sustainability Index ‘World Class’ rating for the ninth consecutive year. The company said it was also encouraged by Ofwat’s 2016/17 first wave service incentive mechanism (SIM) qualitative score, which shows further improvement in customer satisfaction compared with last year.
The company said it also continues to invest in its ‘systems thinking’ approach, which integrates the use of its assets, leverages data intelligence and employs new work processes and technology to support operational performance enhancement. It will roll out additional new capability this year, supporting its drive for further improvement.
Group revenue is expected to be slightly lower than the first half of last year, reflecting the accounting impact of UU’s Water Plus business retail joint venture, which completed on June 1, 2016, partly offset by its allowed regulatory revenue changes.
Underlying operating profit for the first half of 2016/17 is expected to be marginally higher than the first half of 2015/16. It is anticipated that infrastructure renewals expenditure (IRE) in the first half of 2016/17 will be slightly lower than the first half of last year. In line with UU’s planned capital investment phasing, the company expects an increase in IRE in the second half of 2016/17, compared with the first half of the year.
As the company continues to invest in its asset base, group net debt at September 30, 2016 is expected to be slightly higher than the position at March 31, 2016. This principally reflects regulatory capital expenditure, payment of the 2015/16 final dividend and payments in relation to interest and tax, largely offset by operational cash flows. Gearing remains 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. The group has financing headroom into 2018.
UU will announce its half year results November 23, 2016.
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