United Utilities Group PLC United Utilities Trading Update (7000A)
27 September 2022 - 08:00AM
UK Regulatory
TIDMUU.
RNS Number : 7000A
United Utilities Group PLC
27 September 2022
United Utilities Group PLC
27 September 2022
UNITED UTILITIES TRADING UPDATE
United Utilities announces the following trading update ahead of
its half year results on 23 November 2022.
At the group's full year results in May, we provided detailed
guidance on the 2022/23 financial outlook. Since then, the
increasing inflationary environment and higher power prices have
resulted in somewhat higher cash operating costs and increased
non-cash indexation on the group's index-linked debt. Further
details, together with updated revenue guidance are provided in the
financial performance section below.
Inflation and cost of living
We recognise the increasing cost of living challenges for
customers and continue to offer support through our extensive range
of affordability schemes. With GBP280 million of support available
over AMP7 we expect to help over 200,000 households to reduce the
burden of debt.
Continued strong environmental performance
In July, we retained our top-ranking 4 star status as measured
through the Environment Agency's annual assessment of environmental
performance for 2021. We work extremely hard to maintain a high
level of environmental performance and continue to lead the sector
on minimising pollution incidents.
We have a long-standing commitment to protect and enhance the
environment and have invested over GBP1.25 billion to improve our
region's bathing waters and GBP1.2 billion to reduce the impact of
sewer spills over the last three decades. This year we published
our road map to better river health in the North West and will
invest GBP230 million over AMP7 to improve 184km of rivers. In May
2022 we committed to invest a further GBP250 million over and above
our AMP7 allowance to improve environmental outcomes.
Delivering our ESG commitments
Earlier this month, we were delighted to win the EMEA
Sustainability Reporting of the Year award in Environmental
Finance's inaugural Sustainable Company Awards and have recently
retained an MSCI ESG rating of AA for the eighth year running.
Over the next eight weeks we will be releasing a series of short
videos leading up to our half year results presentation, with the
first introductory video made available today. They will help to
bring to life some examples of how we are using innovative
solutions to tackle sustainability challenges. The first video can
be viewed at unitedutilities.com/corporate/responsibility/ .
Financial performance
We maintain our existing AMP7 guidance on regulatory performance
provided at our full year results in May 2022. We are maintaining
our ODI guidance for the year, although performance against
particular measures can be sensitive to weather and one-off events
during the year, and particularly during the winter months.
Due to moderately lower than forecast consumption, group revenue
for the first half of 2022/23 is expected to be around 1 per cent
lower than the first half of last year. We expect this lower
consumption to continue into the second half of the year and
therefore full year group revenue is expected to be lower than the
guidance that we gave in May.
We previously guided to around GBP100 million increase in
underlying operating costs for the 2022/23 financial year, with
around half in relation to previously announced additional
investment and half inflationary cost increases. Inflationary
increases in our input costs, particularly on chemicals and power,
are now expected to be somewhat higher than the forecast used to
derive this guidance. We actively manage the impact of inflation on
our cost base and while we are in a strong position for 2022/23
with wage deals agreed and the majority of our power consumption
hedged. As highlighted at our full year results, we started the
year with around 10 per cent of unhedged consumption exposed to
market rates. As a result of these factors, underlying operating
costs are now expected to be GBP65 million higher for the first
half of 2022/23 leading to a lower underlying operating profit than
the first half of last year. We expect these factors to also impact
the second half of the year, however we continue to closely monitor
the impact of ongoing volatility in power costs and await clarity
on the impact of the Energy Bill Relief Scheme for non-household
customers. Our regulatory determination for AMP7 allows for
inflation through CPIH indexation of the RCV and the totex
allowance. This provides mitigation of non-cash indexation on the
group's index-linked debt and mitigation against higher cash
operating costs over time.
We expect the underlying net finance expense for the first half
of 2022/23 to be around GBP135 million higher than the first half
of last year, largely as a consequence of higher inflation rates.
Cash interest is expected to remain stable when compared with the
first half of last year.
As a result of the impact of capital allowances, including the
temporary super deductions available for the current year, we would
expect an underlying tax charge close to GBPnil for both the first
half of the year and the full year.
We expect an increase in group net debt at 30 September 2022
compared with the position as at 31 March 2022. This largely
reflects the impact of higher inflation leading to a higher
indexation of principal on our index-linked debt along with the
group's ongoing investment in its asset base, partly offset by the
expected receipt of proceeds in relation to the previously
announced sale of our renewable energy business United Utilities
Renewable Energy Limited.
Our responsible approach to financial risk management continues
to deliver benefits, including a strong balance sheet and gearing
within our target range. This supports a solid A3 credit rating for
United Utilities Water with Moody's and our AMP7 dividend
policy.
United Utilities contacts:
Gaynor Kenyon, Corporate Affairs
Director +44 (0) 7753 622 282
Anna Oberg, Investor Relations
Manager +44 (0) 7 435 939 112
Graeme Wilson, Tulchan Communications +44 (0) 2073 534 200
LEI 2138002IEYQAOC88ZJ59
Classification - Trading update
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