United Utilities has posted strong performance in its pre-close trading update ahead of its full year results on 27 May 2021.

Current trading is in line with the group’s expectations for the year ending 31 March 2021.

The water company said it has continued to perform strongly during the Covid-19 pandemic and to deliver excellent operational performance. United Utilities is on track to record its lowest ever level of leakage and the interruptions to water supply to customers has more than halved in the last 12 months.

The statement says performance in relation to serious pollution incidents is the best in the sector with zero incidents for two consecutive years and United Utilities is also on track to achieve the industry leading four star rating with the Environment Agency in its annual assessment for 2020.

The company expects to achieve a reward of up to £20 million against our customer outcome delivery incentives (ODIs) for this year.

A digital utility

Through our unique Systems Thinking approach we make extensive use of technology, automation and machine intelligence in order to deliver better performance for customers and the environment. For example, hi-tech sensors in our pipe network allow us to spot potential leaks early and deal with them – reducing the risk of serious disruption for customers, as well as expensive repair work, further down the line. Since 2014, our purpose built technical training academy has provided skills development and certification to over 2,500 people and through the integration of our new digital skills academy, we ensure that we have the in-house skills to develop and deploy breakthrough technologies at pace and efficiently. The deployment of Systems Thinking is delivering tangible benefits to all our stakeholders.

Financial resilience

Cash collection from our household customer base remains strong. Although the pace and scale of the economic recovery from the Covid-19 pandemic remains uncertain, our extended social tariff and extensive range of financial assistance schemes underpin our confidence in our ability to limit any ongoing impact.

Group revenue is expected to be lower than last year, mainly reflecting the reduction in our allowed regulatory revenue, with lower consumption from businesses as a result of Covid-19 largely offset by higher consumption from households. Overall, the net reduction in revenue is expected to be around 3 per cent.

Underlying operating profit for 2020/21 is expected to be lower than 2019/20 largely reflecting the lower revenue and higher infrastructure renewals expenditure (IRE).

Earlier this year United Utilities announced the sale of the company’s 35.3 per cent stake in Tallinn Water (AS Tallinna Vesi) for cash consideration of €100.26 million. Given the one-off nature of this transaction, the profit generated on disposal will be excluded from the underlying results, the update says.

In the business retail sector, in November 2020, business water retailer Water Plus, United Utilities’ joint venture with Severn Trent, agreed a £70 million financing facility with Royal Bank of Scotland (RBS) and reduced the balance drawn on its facilities with United Utilities and Severn Trent.

To provide a robust platform from which Water Plus can make a strong recovery as its business customers emerge from the Covid-19 pandemic, United Utilities expect to convert £32.5 million of existing working capital loans from United Utilities to Water Plus into long term fixed capital.

The update says the utility’s responsible approach to financial risk management continues to deliver benefits, including a strong balance sheet, a stable IFRS pension surplus and gearing within its target range supporting a solid A3 credit rating for United Utilities Water with Moody’s.