United Utilities hits targets as Ofwat final determination looms

26th Nov 2014 07:07

Half-year results for United Utilites showed modest improvements in revenues and profits, as the water company expressed confidence about the forthcoming new regulatory pricing structure after submitting a plan for lower prices.Revenue rose 1.6% to £859.4m in the six months to 30 September, with underlying operating profit up 1% to £343.1m helped by a lower underlying net finance expense, while earnings per share rose 4.5% to 25.8p.The interim dividend was hiked 4.6% to 12.56p per share as expected.Chief executive Steve Mogford highlighted significant improvements in customer service and a strong operational performance measured in regulator Ofwat's latest key performance indicators report.Ofwat's ratings represented an upper quartile performance, in respect of the 10 water and sewerage companies, with the Environment Agency's latest assessment also putting UU in its upper quartiles with the lowest number of serious pollution incidents in England.The company is developing a new operating model for its wholesale business that employs technology and new work processes aimed to deliver improved customer satisfaction and operational efficiency and will support its drive to meet Ofwat's upper quartile efficiency challenge.After regulator Ofwat's draft determination for the new regulatory period earlier in the year disallowed a massive £990m of proposed costs from UU's business plan, the company responded recently that it had "challenged its efficiency plans" and set "more stretching targets beyond those contained in the original business plan" which would cut average household bills by 4.1% in real terms over the 2015-20 period.This would mean, it said, that customers would benefit from below inflation growth in average household bills for the decade to 2020 if Ofwat's final determination on 12 December shows its agreement.Mogford added: "The next regulatory period will place more emphasis on operational performance. Our significant improvements and the foundations we have built provide a solid platform for the future."