1H results were in line with expectations with underlying operating profit up 6.5% at £392m (INVe £386m, consensus £388m) and underlying EPS of 29.1p up 0.7% (INVe 29.4p, consensus 28.9p). The interim dividend of 14.2p is in line with UU’s dividend policy (INVe 14.16p), while net debt of £7.3bn was in line with our estimate. The pending PR19 final determinations for AMP7, expected on 16th December, are arguably the most important issue facing UU, and we are of the opinion that the messaging had a slightly more positive tone on ODIs (Figures 2-3 overleaf) and totex (Figures 6-7), supported by a reiteration of the ‘flying start’ narrative (Figures 4-5). Our valuation is based on an 11% premium to FY21E RCV, supported by our analysis which has UU outperforming on financing and totex in AMP7, but we do not assume any ODI outperformance. The latter represents an additional source of value if the progress can be sustained, and the regulatory settlement is not overly penal. UU’s IFRS pension surplus has moved up to a £699m surplus at 1H20 versus £484m at FY19. The final acceleration of deficit payments accounts for £103m of the difference, but the net shift is worth c.16p on our SOTP (we use a full IFRS approach, see Figure 8), and something we will consider when updating numbers post final determinations. We model a 5% nominal WACC in our AMP7 estimates, and understand that UU’s board will meet in January to discuss Ofwat’s package. The dividend policy (we assume no cut in FY21E) and a capital markets day are set to follow the board decision.