Building a stronger, greener, healthier North West
25 May 2023: United Utilities today announces Full Year results for the period to 31 March 2023.
Louise Beardmore, Chief Executive Officer, said:
“As the new CEO, it is an honour and privilege to lead United Utilities. I am very clear about our ambition to build a stronger, greener, healthier North West on behalf of customers, communities and the environment. Despite a challenging year of cost pressures, we have delivered our best ever performance on a range of measures that matter most to customers, including leakage, water quality and serious pollution incidents. To help ease cost of living pressures, we have provided financial support to over 330,000 customers so far this regulatory period and have continued to play a key role in the wider economy of the North West, supporting 22,000 jobs across the region.
I understand and share concerns about the use of storm overflows and I am committed to respond to the challenges we face. We have already achieved a 39% reduction in reported activations since 2020, but we need to go faster and drive a step change in performance. We have won support from regulators and are able to make an early start on over £900 million of investment. This will allow us to commence work now on one third of the overflows we are targeting in our AMP8 plans.
In October we will be putting forward an ambitious plan for the next regulatory period, including our biggest environmental programme yet, targeting a significant improvement in storm overflow performance. It is clear that we need to invest in infrastructure, assets and our people to meet new environmental targets and deliver the further performance improvements customers and communities want to see. Along with all my colleagues, we are committed to delivering even better performance and we are looking forward to the opportunity to do so.”
Key financials (£m) – Year ended 31 March
| Reported | Underlying1 | ||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | ||
| Revenue | 1,824.4 | 1862.7 | -2.1% | 1,824.4 | 1,862.7 | -2.1% | |
| Operating profit | 440.8 | 610.0 | -27.7% | 440.8 | 610.0 | -27.7% | |
| Profit/(loss) before tax | 256.3 | 439.9 | -41.7% | (34.3) | 301.9 | -111.4% | |
| Profit/(loss) after tax | 204.9 | (56.8) | n/a | (8.7) | 367.0 | n/a | |
| EPS (pence) | 30.0 | (8.3) | n/a | (1.3) | 53.8 | n/a | |
| 2023 | 2022 | % change | |
| Total DPS (pence) | 45.51 | 43.50 | +4.6% |
| Net regulatory capex (£m) | 693.9 | 644.5 | +7.7% |
| RCV2 (£m) | 14,000 | 12,725 | +10.0% |
| Net debt (£m) | 8,201 | 7,570 | +8.3% |
| RCV gearing3 (%) | 58% | 59% | -1% |
| RoRE4 (%) | 11.0% | 7.7% | +3.3% |
2022/23 Financial highlights
· Revenue in line with guidance -2% to £1,824m largely reflecting lower consumption more than offsetting the allowed regulatory revenue increase. Around £40m of the reduction will be recoverable in two years’ time under the revenue control.
· Underlying operating profit of £441m, down from £610m driven by lower revenue and the inflationary impact on operating costs, in particular procurement of electricity and chemicals.
· Underlying EPS of -1.3p, down from 53.8p due to the impact of inflation on debt indexation and the operating result.
· Return on regulated equity (RoRE) +3% to 11.0% real for 2022/23, reflecting strong financing, customer ODI and tax outperformance which more than outweighed total expenditure (totex) underperformance driven by additional investment in service and environmental improvements.
· Strong balance sheet with RCV +10.0% to £14.0bn and RCV gearing at 58%, slightly lower than the prior year equivalent 59% and within our target range of 55-65%.
· ODI reward in line with guidance at approximately £25m for FY23.
· Recommended final dividend of 30.34p, to bring full year dividend to 45.51p, up +4.6% in line with policy.
Performance highlights
· Best performance to date against our leakage performance commitment, with average leakage over the last three years at its lowest ever level and earning a customer ODI reward for the year.
· 39% reduction in reported activations from storm overflows compared to our 2020 baseline, with monitoring in place on 97% of overflows and on track to achieve full coverage by end of calendar year.
· Won support from regulators to bring forward c.£200m of AMP8 investment for key environmental improvements in the region. Accelerated infrastructure delivery project allows us to make an early start on improving a third of the overflows targeted for improvement between now and 2030.
· Remain sector leader in reducing serious pollution incidents, achieving zero in 2022/23 and zero in 3 of the last 4 years. Remain the only company in the sector to achieve zero serious pollution incidents in consecutive years.
· 4 star performance in the Environment Agency’s most recent Environmental Performance Assessment, meaning “industry leading” status achieved in 5 of the last 7 years.
· Internal sewer flooding reduced by 46% during the current regulatory period, with 39% fewer repeat incidents this year demonstrating benefits of successful implementation of Dynamic Network Management.
· Best water quality performance, posting 26% improvement in water quality contacts. Investment in water quality, principally to avoid discolouration, contributes to ODI performance.
· Provided affordability support to more than 330,000 households so far in this regulatory period with our industry leading financial assistance support, helping customers to manage the rising cost of living.
· 83% of ODI performance commitments delivered for the year.
Outlook for current regulatory period
· Forecasting to achieve an AMP7 average real RoRE of 6-8%
· Expect to deliver AMP7 asset growth of 4-5% nominal CAGR5
· Continue to target AMP7 total net ODI reward of around £200m
· Targeting dividend growth in line with CPIH
· Policy to target 55-65% net debt / RCV gearing