Renationalisation not a concern at UU

Privatisation’s track record means nationalisation is of little concern to United Utilities, according to chief executive Steve Mogford.

On the back of the company’s strong performance for the six months to 30 September, Mogford told Utility Week the best thing the sector can do is continue delivering high levels of performance.

“Privatisation has delivered huge improvements for customers without any pressures on the public purse. It hasn’t caused people to reflect on whether they compromise on schools or hospitals or police. The track record is there for everyone to see. For us, we’ve just got to get on with life. Our job is to keep delivering those services.

“We have made a major transformation in five years going from one of the worst companies to one of the best and we know there is so much more we can do. We have to keep our heads down and keep working hard on delivering for customers and shareholders.”

The company reported a “strong set of financial results” with revenue up £19 million at £936 million for the six months to 30 September 2019.

Reported operating profit increased by £44 million, to £383 million, reflecting the increase in underlying operating profit and a decrease in adjusted items.

The report said the company is well-positioned following early investment in the previous period and has invested in resilience against both cold and hot, dry weather.

Mogford said the half year results “reflect good progress” on the transformation the company has been delivering over the past five years. He said the company had delivered all it promised and more.

He added the company benefitted from early investment: “We accelerated investment early in the AMP, this means we have delivered performance earlier than we might otherwise have done. This resulted in supply interruptions down by 45 per cent; external down by a third and internal flooding down by 45 per cent.”

As one of three fast-tracked companies for PR19, United Utilities had “a huge amount of certainty at the beginning” of the process that has allowed it to get on and prepare for AMP7 from the beginning of this year.

“At any point in this time investors will be looking and trying to understand what the picture will look like going forward so there will be a level of nervousness but it’s normal in the cycle. We haven’t seen a significant shift in investor sentiment.”

The company was recognised by Ofwat as a strong performer for customer satisfaction in the regulator’s service incentive mechanism (SIM) scores.

“We are really pleased with the progress we are making with customers,” Mogford said. “The Ofwat SIM score we achieved is the best ever customer satisfaction score putting us up a quartile in the sector at the end of the SIM measurement period.”

On affordability Mogford said 120,000 UU customers are receiving support – which is double the number anticipated. The company has seen 83,000 customers register for its priority service scheme to receive additional support if there are disruptions or major incidents.

A cold winter could also pose risks of increased leakage if followed by a rapid thaw, which can cause leakage to increase significantly. “A challenging freeze thaw means we will have to work harder to reach the targets. We have had that over several years and have always managed to reach the targets.”

The company is prepared for the cold weather with tankers of 100 million litres of water to be on demand for customers at risk of supply interruptions. The company has also prepared for drought by adding resilience with boreholes. Old and new boreholes have been added to the network to boost resilience.

The group will pay an interim dividend of 14.20p per ordinary share, up from 13.76p year-on-year, to be paid 01 February 2020. This 3.2 per cent increase was in line with AMP6 growth policy

The group set three key performance indicators, to provide the best service to customers; at the lowest sustainable cost; in a responsible manner.

It also set targets relating to leakage, environment and corporate responsibility as part of its responsible manner. The company met its regulatory leakage target of 463 megalitres per day and believes – in the absence of a severe winter – it will meet it again in 2019/20.

Mogford said of the company’s results: “I’m pleased with the transformation we have achieved over recent years – we’ve delivered better levels of service for customers, a more resilient network and real gains in efficiency. Our focus on innovation, coupled with sustained investment, is helping us to deliver against a challenging set of performance targets, while also protecting and enhancing the environment and supporting our local communities.

“I’m also proud to work alongside such a highly motivated and engaged team of colleagues. We’ve built award-winning apprenticeship and graduate schemes, and underlined our commitment to offer opportunities to people from all backgrounds by becoming an accredited partner of The Social Mobility Pledge.

“We are well prepared for the next regulatory period and are already moving forward with our implementation plans. This, together with the sustainable improvements in performance, gives us confidence that we will continue to create long-term value for all our stakeholders.”