United Utilities Group PLC
23 November 2022
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022
Investment strategy and Systems Thinking delivering for customers…
· Investment in sophisticated real time planning and integrated network has enhanced our water supply resilience
· Additional investment announced in May driving 21% reduction in water quality contacts
· Dynamic Network Management investment helping to deliver lowest ever levels of sewer flooding
· On track to deliver leakage target; helped by early investment, latest innovations and detection techniques
· Sector leading customer support package with c£280m support in AMP7 helping more than 200,000 households
· Strong supporter of the CCW’s1 proposal for a national social tariff to help customers right across the country
· Investing in the North West’s future, with our biggest ever intake of graduates and apprentices
…and the environment
· Awarded highest 4-star environmental rating in the EA’s annual assessment for the fifth time in seven years
· Progressing with Better Rivers programme; 29% reduction in spills2 last year and further improvement this year
· Supporting the Government’s ambitious environmental targets with investment plans enabling an early start
· Environmental programmes for AMP8 and beyond expected to drive significant increases in sector investment
Operational and financial resilience
· Strong capital programme delivery with 98% of AMP7 base programme let and 65% already delivered
· Power commodity prices locked-in on 96% of FY23 forecast consumption; at an average rate of £85/MWh
· Effective cost management helping to mitigate inflation impact; RCV and totex allowance indexed to inflation
· Cash collection remains strong with household bad debt stable at 1.8% in the first half of the year
· Lower consumption drives improved PCC performance, and £19m impact on revenue will be recovered in FY25
· On track to deliver £30m ODI reward for FY23; targeting c£200m for AMP7, almost five times our AMP6 reward
· Earnings mainly impacted by higher inflation on index-linked debt; underlying EPS3 of -1.8p, down from 28.4p
· Inflation supporting AMP7 nominal RCV growth of 27.5%4 and FY23 RoRE in excess of 7.9% earned in FY22
· Strong balance sheet; sector-leading credit rating and improved gearing5 at 60% benefitting from RCV inflation
· Pension position resilient to recent market challenges, with headroom for further de-risking
· Dividend in line with AMP7 policy, supported by strong operational and financial performance
Key financials
| Six months ended | ||
| 30 September 2022 | 30 September 2021 | |
| Revenue | £919.3m | £932.3m |
| Reported and underlying operating profit3 | £258.5m | £332.8m |
| Reported earnings per share (pence) | 51.8p | (31.7)p |
| Underlying earnings per share3 (pence) | (1.8)p | 28.4p |
| Interim dividend per ordinary share (pence) | 15.17p | 14.50p |
| Net regulatory capital spend | £334.5m | £303.2m |
| RCV gearing5 | 60% | 62% |
1 Consumer Council for Water
2 As reported against a 2020 baseline
3 Underlying measures are defined in the ‘underlying profit’ tables
4 Includes returns to be received as revenues in AMP8 and inflation assumptions based on a consensus from a selection of banks and HM Treasury
5 Regulatory capital value (RCV) gearing calculated as group net debt/United Utilities Water Limited’s shadow (adjusted for actual spend and timing difference) RCV
Steve Mogford, Chief Executive Officer, said:
“We continue to focus on the areas that matter most to our stakeholders, delivering sustainable operational improvements for customers and the environment, demonstrating financial resilience and improving regulatory performance, all while providing sector-leading affordability support.
“The North West is home to many of the most deprived communities across the country, and many people are deeply worried about the rising cost of living, which is why we work hard to help customers who are struggling to pay their bills. £280 million of affordability support is being provided to more than 200,000 households between 2020 and 2025, reflecting both customer social tariffs and company contributions. We believe that affordability support should not be a postcode lottery, which is why we are a strong supporter of the Consumer Council for Water’s proposal for a national social tariff to help households with their water bills.
“During what has been a difficult macro environment we have shown both operational and financial resilience. While we have not been immune to the impact of inflation, we are well placed compared to many as a result of our tight cost management, effective hedging strategy, and regulatory mechanisms providing further mitigation to rising costs.
“Our responsible, long term approach to investing and deployment of Systems Thinking is delivering sustainable improvements and creating long-term value for our stakeholders. We are improving water quality, have achieved our lowest ever level of sewer flooding, and are on track to meet our leakage reduction target. The Environment Agency has recognised our efforts again by awarding us the highest 4-star ranking for our performance in its latest assessment – the fifth time we have received this status in the last seven years. Storm overflows are a huge area of focus for us, and for the sector, and our Better Rivers, Better North West programme sets out a clear plan of action to reduce their use and improve the environment. It’s a big task but we are already making progress having reduced reported spills by 29% last year and making further progress this year.
“There is more that we would like to be able to do. The Environment Agency recently identified new statutory requirements that companies will be required to deliver in the next regulatory period, AMP8, and beyond. While we are strong supporters of this ambitious programme of environmental improvements, the rate of change must consider affordability and deliverability, and we are working with regulators to determine the pace of investment. Our resilient financial position, supported by our Systems Thinking approach, sees us well placed to deliver more for all our stakeholders for the long term.”
Enquiries
For further information on the day, please contact:
| Gaynor Kenyon – Corporate Affairs Director | +44 (0) 7753 622 282 |
| Anna Oberg – Investor Relations Manager | +44 (0) 7435 939 112 |
| Graeme Wilson – Tulchan Communications | +44 (0) 2073 534 200 |
Presentation webcast and conference call details
We will be hosting a live virtual presentation at 9.00am on Wednesday 23 November 2022, which can be accessed via the following link:
http://www.unitedutilitiestv.live/
The presentation slides will be available on our website shortly before the presentation commences at the following link:
Following conclusion of the presentation a recording will be available from our website.