REG - United Utilities Grp - Final Results
25/05/2023 07:00
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RNS Number : 5711A United Utilities Group PLC 25 May 2023
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 Underlying(1)
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%
RCV(2) (£m) 14,000 12,725 +10.0%
Net debt (£m) 8,201 7,570 +8.3%
RCV gearing(3) (%) 58% 59% -1%
RoRE(4) (%) 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 CAGR(5)
· 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
Enquiries
Investors and Analysts
Chris Laybutt - Investor Relations and Clean Energy Strategy Director +44 7769 556 858
Anna Oberg - Investor Relations Manager +44 7435 939 112
Media
Gaynor Kenyon - Corporate Affairs Director +44 7753 622 282
Graeme Wilson - Teneo Communications +44 2073 534 200
Results and Strategy Update presentation webcast
We will be hosting a presentation of our results and strategy update to
investors and analysts at 10.00am on Thursday 25 May 2023, at the Rothschild
Sky Pavilion, New Court, St Swithin's Lane, London, EC4N 8AL.
This presentation can be accessed as a webcast here
https://primetime.bluejeans.com/a2m/live-event/zathatwh
(https://urldefense.com/v3/__https:/primetime.bluejeans.com/a2m/live-event/zathatwh__;!!FvJKb9TgAvphWVQ!YT4lCVurbxDoiC4_8TgOXiOAYrn6VlU5ifK1EQtDkaQmS3I6vv0YJcSSWxFm-uRZbYkM3MOXWMxAQNAwshQCJvT3ms6bZvDgwsU$)
The presentation slides will be available on our website shortly before the
presentation commences at the following link:
https://www.unitedutilities.com/corporate/investors/results-and-presentations/full-and-half-year-results/
(https://www.unitedutilities.com/corporate/investors/results-and-presentations/full-and-half-year-results/)
Notes
(1) Underlying measures are defined in the underlying profit section below.
(2) United Utilities Water Limited's adjusted RCV (adjusted for actual spend,
timing differences and including full expected value of AMP7 ex-post
adjustment mechanisms). Prior year figures have been re-presented for
comparative purposes.
(3) RCV gearing calculated as group net debt including loan receivable from
joint venture/United Utilities Water Limited's adjusted RCV (adjusted for
actual spend, timing differences and including full expected value of AMP7
ex-post adjustment mechanisms). Prior year figures have been re-presented for
comparative purposes.
(4) Return on regulated equity
(5) Compound annual growth rate
OPERATIONAL REVIEW
We have delivered our best ever performance for customers, having met or
exceeded more of our performance commitments this year than ever before. We
were once again the top performing listed company for customer satisfaction as
assessed by Ofwat's C-MeX measure. We have provided affordability support to
more than 330,000 households so far in this regulatory period to support
customers who are understandably struggling with cost of living pressures.
We are acutely aware that this is a critical time for the water sector, with
many challenges facing us, especially around river health. We have delivered
significant environmental improvements in recent years in areas such as
improving beaches, reducing pollution and reducing leakage, but we should all
have acted sooner to recognise and address the impact of storm overflows.
In the North West, we have delivered a 39 per cent reduction in reported
activations from storm overflows compared to the 2020 baseline, but there is a
lot more to do and we have ambitious plans to go further and faster to drive a
real step change. This won't happen overnight, it will take sustained effort
and investment over time, but we are committed to acting as fast as we can.
With the support of our regulators we are accelerating investment, making a
start on improvements at one third of the overflows we are targeting in AMP8.
As a result we will be investing a further £200 million in the next two
years.
In October we will be putting forward our business plan with the biggest
environmental improvement programme we will have ever proposed. Along with all
my colleagues, we are looking forward to the opportunity to build a stronger,
greener and healthier North West.
Strengthening our industry-leading affordability support for customers
We are passionate about protecting customers in vulnerable circumstances
through our comprehensive suite of support schemes and an industry-leading
£280 million(1) package of affordability support. The cost of living crisis
has made things even more challenging for deprived communities in our region.
With a growing number of customers asking for help with their water bill, we
have been working hard to increase awareness of available support, the option
of flexible payment plans, and to provide water efficiency advice.
We are determined to play a role in making the North West stronger. This is
the fourth year we have taken a leading role across our region, bringing
together all stakeholders and communities to focus on affordability and
vulnerability issues.
Delivering improvements in performance for customers and the environment
Our operational performance has been strong this year - we have met or
exceeded 83 per cent of our performance commitments, earning a net customer
ODI reward of approximately £25 million. This reflects strong delivery for
customers and the environment in the North West.
Our investment in improving water quality - principally to avoid
discolouration - has supported a 26 per cent improvement in water quality
contacts this year. This is contributing towards our ODI performance,
alongside other water measures such as water service resilience and supporting
the removal of lead pipes from customers' properties.
Reducing leakage is of huge importance for our stakeholders and for us as an
organisation. This year we have delivered our best performance to date against
our performance commitment, resulting in an ODI reward. While we are making
great progress, we recognise we continue to have a high absolute level of
leakage. We are challenging ourselves to go further in reducing leakage - from
our network and in customer properties - as it is critical to helping us
better manage and conserve water resources. Alongside this we have delivered
our largest ever reduction in Per Capita Consumption (PCC), supported by help
and advice to encourage customers to use less water and amplify the link
between heating water and energy bills.
Our basket of measures for avoiding flooding is also delivering a net ODI
reward, and we continue to make great progress in reducing flooding incidents.
We have nearly halved the number of internal sewer flooding incidents since
the start of AMP7. This year's performance includes a 39 per cent reduction in
repeat internal flooding incidents(2). This has been supported by our
investment in Dynamic Network Management (DNM).
In the winter, we experienced a rapid and severe freeze-thaw event that
resulted in burst pipes across the region. Our teams and partners worked
exceptionally hard to minimise the disruption and we deployed significant
resources to sustain services. However, some customers experienced short-term
interruptions to their water supply, leading to an ODI penalty against this
performance commitment and additional costs.
The great service we have delivered for customers has been reflected in
further improvement in our performance against Ofwat's measure of customer
satisfaction, C-MeX. We were the top listed company, ranked fourth of the
water and wastewater companies and fifth out of 17 companies overall. As a
result of this performance we expect to achieve a record £3 million reward.
Customer service is hugely important to us, and are proud to be the first
company ever to receive 100,000 commendations from customers through the WOW!
Awards scheme, where customers provide independent, proactive feedback on the
service we provide.
We look after important urban and rural landscapes and we continue to stretch
ourselves to improve environmental performance, to create a greener North
West. Our environmental performance this year has remained strong. We have
also delivered all of our Water Industry National Environment Programme
(WINEP) schemes by their planned delivery date since the beginning of AMP7,
including 137 schemes in this year alone.
We have also achieved the top, 4 star rating in the Environmental Performance
Assessment from the Environment Agency (EA) in five of the last seven years.
This includes being assessed as an "industry leading" company in the most
recent assessment for 2021. This was a significant achievement given that the
criteria used to assess company performance becomes more challenging each
year. We have consistently improved our performance when it comes to
minimising pollution, having reduced the number of pollution incidents by over
50 per cent in the last decade and achieving zero serious pollution incidents
in three of the last four years.
(1) 50% company funded, over the course of the 2020-25 regulatory period
(AMP7)
(2)These are incidents affecting a customer that has already experienced a
previous incident
Driving a step change in river health
Communities are concerned about the country's rivers and particularly the
impact of storm overflows. We have listened, understand the strength of
feeling and we agree that we need to go further and faster to reduce the
number of storm overflow activations.
Overflows have been a core feature of the sewer network in the UK and around
the world for more than a century. We recognise that the time has come to
change this and a step change is needed. Achieving this will take significant
time and sustained, new investment. The North West has more rainfall and more
combined sewers than elsewhere in the country, as well as a very large
network. We are committed to delivering the changes needed as quickly and
effectively as possible.
Last year, we announced our 'Better Rivers: Better North West' programme,
supported by additional reinvestment of outperformance, to take action to
improve river health across our region. We have made good progress so far and
have delivered a 39 per cent reduction in reported activations compared to the
2020 baseline. This will get progressively tougher as we focus on more
challenging overflows. Key to delivering this is our improvement in monitoring
and operation of storm overflows. We currently monitor 97 per cent of
overflows and will achieve full coverage before the end of this calendar year.
We have also won regulatory support to make an early start on our AMP8
investment. This means we expect to spend £200 million over the final two
years of AMP7, making an early start on improving a third of the overflows
targeted for improvement between now and 2030.
Creating a greener future
We continue to work towards our 2050 net zero ambition, underpinned by
ambitious science-based targets. We are making good progress against our six
carbon pledges, and have reduced our scope 1 and 2 greenhouse gas (GHG)
emissions by a further 1.5 per cent this year. Our peatland restoration and
woodland creation programmes help to protect water and other natural
resources, support nature, and enable recreational access, as well as acting
as natural carbon 'sinks' to help mitigate climate change.
We own and manage 56,000 hectares of land, which provides scope for the
development of renewable and other clean technologies. Having previously
delivered a portfolio of renewable assets across the North West, we are now
moving to the next stage of the journey to net zero. As an initial step, we
are working on plans to develop 150 megawatts of new installed capacity by
2030. This programme could comprise a combination of solar, wind and
batteries, helping to deliver emissions reductions and further improve both
operating and financial resilience.
Supported by a talented, diverse and engaged workforce
Our colleagues are at the heart of our current and future success, and we are
committed to providing a safe and great place to work. Colleague engagement
has been strong this year, and at 82 per cent we scored higher than UK Norm
and Utilities Norm benchmarks. We have recruited record levels of graduates
and apprentices onto our award winning programmes this year, and are proud
that one of our own colleagues has been awarded the UK's apprentice of the
year. We have also launched our new green apprenticeship scheme to recruit 100
apprentices by 2025, who will actively contribute to our environmental
delivery.
The safety of our colleagues has been, and always will be, a top priority for
us, and we are pleased to have delivered sustained year-on-year improvements
in employee accident frequency rates for the last five years. In recognition
of our commitment to health and safety, we have been awarded the Royal Society
for the Prevention of Accidents (RoSPA) gold standard medal for the 11(th)
consecutive year.
We are ranked in the top 100 companies in the Financial Times Inclusive
Leaders Index 2023, having improved on our position from last year, and are
the only UK utility company in the top 100. We are recognised as one of the
top 15 FTSE companies when it comes to women in leadership, having exceeded
the 40 per cent target for Women on Board and Women Leaders set by the FTSE
100 Women Leaders Review.
Building an ambitious future plan
Enhanced environmental standards, population growth and climate change are
driving significant new investment needs. Our plan for the next regulatory
period will be submitted in October with a substantial programme of work
targeting a wide range of customer service and environmental benefits.
Reducing the use of storm overflows is a key component of our plan, which
proposes improvements to over 400 sites by the end of AMP8. We expect this
would represent a reduction of over 70,000 activations per annum, around a 60
per cent reduction against the 2020 baseline. Our plan also includes
investment to reduce phosphorous and address nutrient imbalance, delivery
targets set by the Environment Act 2021, further improving river health in the
North West.
Our proposed programme of work is substantially larger than we have ever
delivered before, and we are already working hard to prepare and mobilise to
deliver this ambitious plan. We have appointed five new area stakeholder
managers, one for each county in our region, who are working on early
engagement with communities and planning approval. We have also brought in
additional experience and knowledge to assist colleagues in our engineering,
capital delivery and commercial teams. Our supply chain will be critical, and
we have appointed an AMP8 mobilisation and organisational readiness partner to
ensure that we have the skills and capabilities to successfully deliver AMP8.
Our engagement with customers shows their support for investment in
environmental improvements, but the recent rises in cost of living are clearly
putting pressure on household budgets and a plan of this size will inevitably
drive an increase in customer bills. We are challenging ourselves to embed the
highest levels of efficiency into the plan and identify the best value
solutions. We also recognise the need to support customers with affordability
challenges and we are planning to strengthen our industry-leading
affordability support package as we head into AMP8.
We are confident that our strong and resilient corporate and financial
structure, together with a highly competent and engaged team, means that we
are well positioned to continue to deliver for all our stakeholders in AMP8
and beyond.
AMP7 FINANCIAL FRAMEWORK
Our five year financial framework captures anticipated performance in the five
years to 31 March 2025. This period aligns with the AMP7 regulatory period.
Investment and regulated asset growth
We expect to deliver a number of capital programmes in AMP7, in addition to
our base totex programme. These include Green Recovery and the recently
approved AMP8 accelerated environmental enhancement programmes. Combined with
the impact of inflation, our regulated assets are expected to grow at a
compound annual growth rate of 4 to 5 per cent across the five years to March
2025.
Return on regulated equity
The return on regulatory equity (RoRE) metric measures returns (after tax and
interest) earned by reference to notional regulated equity. Overall returns
comprise a base return on equity plus a contribution from outcome delivery
incentives, operating efficiency, financing efficiency and customer service.
We currently expect to deliver average returns of between 6 and 8 per cent in
AMP7, on a real RPI/CPIH blended basis.
Balance sheet
The board has set a target gearing range for the AMP7 regulatory period of 55
to 65 per cent net debt to regulated capital value. As at 31 March 2023 our
gearing is in the lower half of this range at 58 per cent.
Dividend policy
The group maintains a dividend policy to target a growth rate of CPIH
inflation each year through to 2025. The annual increase in the dividend is
based on the CPIH element included within allowed regulated revenue for the
current financial year. This is calculated as using the CPIH annual rate from
the November prior (i.e. the 2022/23 dividend is equal to the 2021/22 dividend
indexed for the movement in CPIH between November 2020 and November 2021).
OUTLOOK AND GUIDANCE
ODI rewards
We are targeting a net customer ODI reward of around £200 million in total
over AMP7.
Revenue
Revenue is expected to increase by around £150 million in 2023/24, largely
reflecting the November 2022 CPIH inflation of 9.3 per cent, partially offset
by a £20 million net impact of over/under-recovery during 2022/23 and
2021/22.
Underlying operating costs
Operating costs are expected to be around £60 million higher year-on-year.
This increase is largely driven by inflation, with the largest inflationary
pressures impacting power and labour costs. The remaining increase reflects
the 2023/24 operating cost impact of additional investments, including our
Better Rivers programme.
Underlying net finance expense
Underlying net finance expense is expected to be at least £150 million lower
year-on-year, due to the impact of falling inflation. As at 31 March 2023, we
had £4.5 billion of index-linked debt exposure, giving rise to a £45m swing
in our interest charge for every 1 per cent change in inflation. Our cash
interest in 2022/23 was £102 million and we expect this to be slightly higher
in 2023/24.
Underlying tax
Our current tax charge is expected to be zero in 2023/24, reflecting expected
benefits following the spring budget in relation to "full expensing" and the
50 per cent first year allowances on longer life assets.
Capital expenditure
Capex in 2023/24 is expected to be in the range of £720 million to £800
million. In addition to our AMP7 base programme, this reflects capital
expenditure for the year in relation to our additional investment (including
Green Recovery and investment supporting our Better Rivers programme), and
AMP8 acceleration capital programmes.
FINANCIAL REVIEW
Key financials (£m)
Reported Underlying(1)
2023 2022 % change 2023 2022 % change
Revenue 1,824.4 1862.7 -2.1% 1,824.4 1862.7 -2.1%
Operating expenses (766.5) (665.0) +15.2% (766.5) (665.0) +15.2%
Infrastructure renewals expenditure (193.5) (169.5) +14.2% (193.5) (169.5) +14.2%
Depreciation and amortisation (423.6) (418.2) +1.3% (423.6) (418.2) +1.3%
Operating profit 440.8 610.0 -27.7% 440.8 610.0 -27.7%
Net finance expense (215.7) (168.3) +28.2% (475.1) (306.3) +55.1%
Share of losses of JVs - (1.8) n/a - (1.8) n/a
Profit on disposal of subsidiary 31.2 - n/a - - n/a
(Loss)profit before tax 256.3 (439.3) -n/a (34.3) 301.9 n/a
Tax credit/(charge) (51.4) (496.7) +89.7% 25.6 65.1 -60.7%
(Loss)/profit 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%
RCV(2) (£m) 14,000 12,725 +10.0%
Net debt (£m) 8,201 7,570 +8.3%
RCV gearing(3) (%) 58% 59% -1%
RoRE(4) (%) 11.0% 7.7% +3.3%
( )
(1) Underlying measures are defined in the underlying profit section below
(2) United Utilities Water Limited's adjusted RCV (adjusted for actual spend,
timing differences and including full expected value of AMP7 ex-post
adjustment mechanisms). Prior year figures have been re-presented for
comparative purposes.
(3) RCV gearing calculated as group net debt including loan receivable from
joint venture/United Utilities Water Limited's adjusted RCV (adjusted for
actual spend, timing differences and including full expected value of AMP7
ex-post adjustment mechanisms). Prior year figures have been re-presented for
comparative purposes.
(4) Return on regulated equity
( )
This has been a challenging year for the business. Revenue declined 2 per
cent, mainly driven by lower than expected consumption while underlying
operating profit fell 28 per cent or £169 million, primarily due to the
reduction in revenue and inflationary pressures on core costs, particularly
power and chemicals. The higher inflation has also significantly increased
non-cash interest expense on our index-linked debt, which alongside the lower
operating profit, has resulted in a small underlying loss for the year of £9m
and an underlying earnings per share of minus 1.3 pence.
However, the inflation linkage for both the Regulatory Capital Value (RCV) and
the allowance for total expenditure (Totex), provides additional longer term
value that is not reflected in the income statement. This has contributed to a
robust economic performance, including an increase in our return on regulated
equity of 11.0 per cent. This extra value accruing to the RCV has resulted in
a reduction in RCV gearing to 58 per cent, consistent with our strong balance
sheet and supporting our dividend policy.
Revenue
£m
Year to 31 March 2022 1,862.7
Regulatory revenue 4.6 per cent uplift in line with CPIH inflation partly 69.7
offset by -1.3 per cent real reduction in allowed wholesale revenues
Non-household consumption impact (80.1)
Household consumption impact (22.3)
Other (5.6)
Year to 31 March 2023 1,824.4
Revenue was down £38 million, at £1,824 million, largely reflecting lower
consumption more than offsetting the allowed regulatory revenue increase.
In 2022/23 we had a £70 million increase in the revenue cap due to regulatory
adjustments, incorporating £21 million in relation to ODI rewards earned in
2020/21 and a 4.6 per cent CPIH-linked increase partly offset by 1.3 per cent
real reduction in allowed wholesale revenues as set out in our PR19 Final
Determination.
Non-household revenue has decreased by £80 million compared with last year
and household consumption has decreased by £22 million, as consumption across
both customer groups has changed since charges and tariffs for the year were
set in December 2021. Taking into consideration the regulatory adjustments,
revenue for the year represents a £41 million under-recovery against allowed
revenue, which, under the revenue control, will be recoverable in two years'
time.
Operating profit
£m
Year to 31 March 2022 610.0
Revenue decrease (38.3)
Inflationary increases (80.9)
Extreme weather costs (19.5)
Costs driving ODI performance (4.9)
Other (25.6)
Year to 31 March 2023 440.8
Operating profit at £441 million was £169 million lower than last year,
largely reflecting the decrease in revenue, inflation impacting our core cost
base and the impact of operational incidents as a result of extreme weather
during the year.
Inflationary pressures have impacted input costs resulting in a £81 million
increase. The largest increases have been to power, chemical, labour costs and
regulatory fees, where we have incurred an additional £27 million, £25
million, £8 million and £8 million respectively. We have experienced smaller
inflationary increases to other costs of £13 million, which on a cost base of
£518 million represents an inflationary impact of 3 per cent, which was less
than CPIH inflation.
Our regulatory model allows for indexation of our overall totex allowance
(including capital expenditure) and with average CPIH of 8.9 per cent, we are
managing to contain the inflation impact on overall costs within the totex
inflation allowance.
Extreme weather events adversely impacted not only our ODI performance, but
also drove an adverse operating cost impact of £20 million.
The £5 million of additional expenditure driving improvements to ODI
performance was primarily in relation to infrastructure renewals expenditure
(IRE) investment in Dynamic Network Management (DNM) - our innovative approach
to managing our sewer network - and improving water quality.
The rising cost of living increases the strain on customers' ability to pay
their bills and therefore cash collection. However, we have 81 per cent of
household customers on direct debit and other payment plans and, with the help
of proactive engagement, innovative solutions and tailored assistance, we have
achieved our best ever performance for cash collection. This has contributed
to bad debt remaining at an all time low 1.8 per cent of household revenue.
Profit/(loss) before tax
£m
Underlying - year to 31 March 2022 301.9
Underlying operating profit decrease (169.2)
Underlying net finance expense increase (168.8)
Share of JVs losses decrease 1.8
Underlying loss before tax - year to 31 March 2023 (34.3)
Adjusted items * 290.6
Reported - year to 31 March 2023 256.3
* Adjusted items are set out in the underlying profit table below.
Underlying loss before tax of £34 million compared to a £302 million
underlying profit before tax last year. The £336 million difference reflects
the £169 million reduction in underlying operating profit and a £169 million
increase in underlying net finance expense, partly offset by a decrease in the
share of losses of joint ventures of £2 million. Underlying profit before tax
reflects consistently applied presentational adjustments as outlined in the
underlying profit table below.
Reported profit before tax decreased by £184 million to £256 million
reflecting the £169 million decrease in reported operating profit and a £48
million increase in reported net finance expense, partly offset by a £31
million profit on disposal of our subsidiary United Utilities Renewable Energy
Limited, and a decrease in the share of losses of joint ventures of £2
million.
· Net finance expense
The underlying net finance expense of £475 million was £169 million higher
than last year mainly due to significantly higher inflation resulting in a
£520 million increase in the non-cash indexation on our debt and derivative
portfolio, partly offset by higher capitalised interest of £127 million
(2021/22: £53 million) and higher net pension interest income of £29 million
(2021/22: £14 million).
Cash interest of £102 million was £16 million lower than last year. Cash
interest excludes non-cash items mainly comprising the indexation on our debt
and derivative portfolio, capitalised interest and net pension interest
income.
Reported net finance expense of £216 million was £48 million higher than
last year, reflecting the £169 million increase in the underlying net finance
expense, partly offset by a £123 million increase in net fair value gains on
debt and derivatives (excluding interest on debt and derivatives under fair
value option) from £138 million last year to £261 million this year.
· Joint ventures
In the prior year we recognised a £1.8 million net share of losses from joint
ventures primarily in relation to Water Plus. For the year to 31 March 2023,
Water Plus's financial performance has improved to a breakeven position, and
we therefore recognise neither a share of profit or loss in our income
statement.
Profit/(loss) after tax and earnings per share
PAT Earnings per share
£m Pence/share
Underlying - year to 31 March 2022 367.0 53.8p
Underlying profit before tax decrease (336.2)
Reduction in underlying tax credit (39.5)
Underlying loss after tax - year to 31 March 2023 (8.7) (1.3)p
Adjusted items * 214.0
Reported - year to 31 March 2023 204.9 30.0p
* Adjusted items are set out in the underlying profit section below.
The underlying loss after tax of £9 million is £376 million lower than the
underlying profit after tax of £367 million last year, reflecting the £336
million reduction in underlying profit before tax and a £40 million reduction
in underlying tax credit.
Reported profit after tax is higher at £205 million and reported earnings per
share at 30.0 pence per share with the adjusted items between underlying and
reported profit after tax set out in the underlying profit section below.
· Tax
The group continues to be fully committed to paying its fair share of tax and
acting in an open and transparent manner in relation to its tax affairs and we
are delighted to have retained the Fair Tax Mark independent certification for
a fourth year.
In addition to corporation tax, the group pays significant other contributions
to the public finances on its own behalf as well as collecting and paying over
further amounts for its over 5,000 strong workforce. The total payments for
2022/23 were around £229 million and included business rates, employment
taxes, environmental taxes and other regulatory service fees such as water
abstraction charges.
In the current year, we received a net corporation tax repayment of £1
million which represents an effective cash tax rate of 0 per cent. The key
reconciling item to the headline rate of corporation tax continues to be
allowable tax deductions on capital investment including the temporary capital
allowance 'super deductions'.
The group recognised a current tax credit of £25 million, mainly due to a
prior year adjustment to recognise the utilisation of tax losses previously
assumed to be carried forwards.
The deferred tax charge of £77 million is £486 million lower than last year
primarily due to a £403 million charge in the prior year relating to the
increase in the tax rate from 19 per cent to 25 per cent from 1 April 2023.
There are £171 million of tax adjustments recorded within other comprehensive
income, primarily relating to remeasurement movements on the group's defined
benefit pension schemes. As in the prior year the rate at which the deferred
tax liabilities are measured on the group's defined benefit pension scheme is
35 per cent, being the rate applicable to refunds from a trust.
Dividend per share
The Board has proposed a final dividend of 30.34 pence per ordinary share in
respect of the year ended 31 March 2023. Taken together with the interim
dividend of 15.17 pence per ordinary share, paid in February, this results in
a total dividend per ordinary share for 2022/23 of 45.51 pence. This is an
increase of 4.6 per cent compared with the dividend relating to last year, in
line with the group's dividend policy of targeting a growth rate of CPIH
inflation each year through to 2025. The 4.6 per cent increase is based on the
CPIH element included within allowed regulated revenue for the 2022/23
financial year (i.e. the movement in CPIH between November 2020 and November
2021).
The final dividend is expected to be paid on 1 August 2023 to shareholders on
the register at the close of business on 26 June 2023. The ex-dividend date is
22 June 2023. The election date for the Dividend Reinvestment Plan is 11 July
2023.
Cash flow
Net cash generated from continuing operating activities for year to 31 March
2023 was £788 million, £146 million lower than £934 million last year,
principally due to the reduced revenue of £38 million and inflationary
impacts on costs of £81 million.
The net cash generated from continuing operating activities supports the
dividends paid for the year of £301 million and partially funds some of the
group's net capital expenditure of £690 million, with the balance being
funded by net borrowings and cash and cash equivalents. This forms part of a
£2.0 billion capital programme undertaken in the first three years of the
period, representing 62 per cent delivery of our AMP7 programme. We have been
able to deliver this expenditure effectively, scoring 92.9 per cent against
our Capital Programme Delivery incentive (CPDi) measure this year.
Pensions
As at 31 March 2023, the group had an IAS 19 net pension surplus of £601
million, compared with a surplus of £1,017 million at 31 March 2022. This
£416 million decrease principally reflects a decrease in the value of the
schemes' assets due to changes in financial conditions over the course of the
financial year, as well as experience losses resulting from actual inflation
being higher than assumed at 1 April 2022. This more than offsets the
significant reduction in the schemes' liabilities during the year due to an
increase in the average discount rate since the start of the year and a lower
long term RPI assumption.
Further detail on pensions is provided in note 12 ('Retirement benefit
surplus') of these condensed consolidated financial statements.
Financing
Net debt £m
At 31 March 2022 7,570.0
Cash generated from operations (883.1)
Proceeds from disposal of subsidiary (90.5)
Net capital expenditure 688.9
Indexation 463.4
Dividends 301.2
Interest 102.4
Fair value movements 32.3
Exchange rate movements on bonds and term borrowings 20.6
Other (4.4)
At 31 March 2023 8,200.8
Net debt at 31 March 2023 was £8,201 million, compared with £7,570 million
at 31 March 2022. This comprises gross borrowings with a carrying value of
£8,435 million and net derivative liabilities hedging specific debt
instruments of £106 million net of cash and short-term deposits of £340
million.
Underlying movements in net debt are largely a result of net operating cash
inflows offset by our net capital expenditure, dividends, indexation and cash
interest.
Gearing, measured as group net debt including a £76 million loan receivable
from joint venture divided by UUW's adjusted RCV (adjusted for actual spend,
timing differences and including full expected value of AMP7 ex-post
adjustment mechanisms) regulatory capital value of £14.0 billion, was 58 per
cent at 31 March 2023, slightly lower than the equivalent 59 per cent at 31
March 2022, and remains within our target range of 55 to 65 per cent.
· Cost of debt
As at 31 March 2023, the group had approximately £3.4 billion of RPI-linked
instruments and £0.5 billion of CPI or CPIH-linked instruments held as debt
Including swaps, the group has RPI-linked debt exposure of £3.3 billion at an
average real rate of 1.3 per cent, and £1.2 billion of CPI or CPIH-linked
debt exposure at an average real rate of -0.6 per cent.
A significantly higher RPI inflation charge compared with the same period last
year contributed to the group's average effective interest rate of 8.0 per
cent being higher than the rate of 5.1 per cent last year.
The group has fixed the interest rates on its non index-linked debt in line
with its 10-year reducing balance basis at a net effective nominal interest
rate of 2.2 to 2.9 per cent for the remainder of the AMP7 regulatory period.
· Credit ratings
UUW's senior unsecured debt obligations are rated A3 with Moody's Investors
Service (Moody's), A- with Fitch Ratings (Fitch) and BBB+ with Standard &
Poor's Ratings Services (S&P) and all on stable outlook. United Utilities
PLC's (UU PLC's) senior unsecured debt obligations are rated Baa1 with
Moody's, A- with Fitch and BBB- with S&P, all on stable outlook.
· Debt financing
The group has access to the international debt capital markets through its
£10 billion medium-term note (MTN) programme.
In total over 2020-25, we expect to raise around £2.7 billion to cover
refinancing and incremental debt, supporting our five-year investment
programme. So far in AMP7, we have raised around £1.8 billion, taking
advantage of attractive funding opportunities available and extending our
liquidity out to August 2025.
In the year to March 2023 we raised £638 million of term funding including
new/renewed bank facilities.
Following the year end we issued a further £400m of term funding, with the
proceeds of a £300m sustainable public bond being received on 6 April and
executing a £100m 9 year maturity bilateral loan with one of the group's
relationship banks during April 2023.
· Interest rate management
Long-term sterling inflation index-linked debt provides a natural hedge to
assets and earnings under the regulatory model. At 31 March 2023,
approximately 40 per cent of the group's net debt was in RPI-linked form,
representing around 25 per cent of UUW's regulatory capital value, with an
average real interest rate of 1.3 per cent. A further 15 per cent of the
group's net debt was in CPI or CPIH-linked form, representing around 9 per
cent of UUW's RCV, with an average real rate of -0.6 per cent. The long-term
nature of this funding also provides a good match to the company's long-life
infrastructure assets and is a key contributor to the group's average term
debt maturity profile, which is around 17 years.
Our inflation hedging policy is to target around 50 per cent of net debt to be
maintained in index-linked form. This reflects a balanced assessment across a
range of factors.
Where nominal debt is raised in a currency other than sterling and/or with a
fixed interest rate, the debt is generally swapped to create a floating rate
sterling liability for the term of the debt. To manage exposure to medium-term
interest rates, the group fixes underlying interest costs on nominal debt out
to ten years on a reducing balance basis.
· Liquidity
Short-term liquidity requirements are met from the group's normal operating
cash flow and its short-term bank deposits and supported by committed but
undrawn credit facilities. Our MTN programme provides further support.
At 31 March 2023, we had liquidity out to August 2025, comprising cash and
short-term deposits, plus committed undrawn revolving credit facilities. This
gives us flexibility in terms of when and how further debt finance is raised
to help refinance maturing debt and support the delivery of our capital
investment programme.
Return on Regulated Equity (RoRE)
Reported RoRE for 2022/23 was 11.0 per cent on a real, RPI/CPIH blended basis.
This comprises the base return of 4.0 per cent (including our 11 basis point
fast track reward that we receive in each of the five years of the AMP),
financing outperformance of 4.7 per cent, tax outperformance of 2.5 per cent,
and customer ODI outperformance of 0.5 per cent, partially offset by the total
expenditure (totex) impact on RoRE of -0.8 per cent as a result of our
additional investment to improve operational and environmental performance.
· Totex performance
The totex impact on RoRE of -0.8 per cent, largely reflects the year three
impact of the additional investment we are making outside the scope of our
Final Determination (FD) to improve operational and environmental performance.
This includes, for example, our investment in Dynamic Network Management and
investment as part of our Better Rivers programme.
Our AMP7 business plan was assessed by Ofwat as being amongst the most
efficient in the sector, and our performance improvements over AMP6 meant we
started AMP7 at a totex run rate that supported delivery of the stretching
efficiency challenge in our FD allowance. Our totex allowance increases with
inflation, which helps to mitigate some of the cost pressures experienced this
year, and we continue to exploit technology and innovation to help us deliver
our investment efficiently.
· Customer outcome delivery incentives (ODIs)
Customer ODI outperformance of 0.5 per cent reflects a net reward of £25
million(1). Our customer ODI performance has been strong across the board,
meeting or exceeding 83 per cent of our performance commitments, our best ever
performance. We continue to target a total a cumulative net ODI reward over
this five-year period of around £200 million.
Customer ODI rewards and penalties in AMP7 will be adjusted in revenues on a
two-year lag, therefore the net reward earned this year will be reflected in
an increase to revenues earned in 2024/25 through allowed increases in the
rates charged to customers in that financial year, in accordance with the
regulatory mechanism.
· Tax outperformance
The 2.5 per cent outperformance on tax reflects the current year underlying
tax credit, including capital allowances associated with temporary 'super
deductions'.
· Financing outperformance
We earned financing outperformance this year of 4.7 per cent. We have
consistently issued debt at efficient rates that compare favourably with the
industry average, thanks to our leading treasury management, clear and
transparent financial risk management policies, and ability to act swiftly to
access pockets of opportunity as they arise. This delivered significant
financing outperformance during AMP6 and the rates we have locked-in for AMP7
compare favourably with the price review assumptions. Our financing
outperformance this year has also been supported by the recent high level of
inflation, which increases the benefit of the roughly £3 billion fixed rate
debt we have locked in.
(1) Excluding per capita consumption, which Ofwat will be revisiting at the
next price review once there is a better understanding of the impact of COVID
19 and any enduring effects
Underlying profit
The underlying profit measures in the following table represent alternative
performance measures (APMs) as defined by the European Securities and Markets
Authority (ESMA). These measures are linked to the group's financial
performance as reported in accordance with UK-adopted international accounting
standards and the requirements of the Companies Act 2006 in the group's
consolidated income statement, which can be found below in the Group's
consolidated income section. As such, they represent non-GAAP measures.
These APMs can assist in providing a representative view of business
performance, and may not be directly comparable with similarly titles measures
presented by other companies. The group determines adjusted items in the
calculation of its underlying measures against a framework which considers
significance by reference to profit before tax, in addition to other
qualitative factors such as whether the item is deemed to be within the normal
course of business, its assessed frequency of reoccurrence and its volatility
which is either outside the control of management and/or not representative of
current year performance.
In addition, a reconciliation of the group's average effective interest rate
has been presented, together with a prior period comparison. In arriving at
net finance expense used in calculating the group's effective interest rate,
underlying net finance expense is adjusted to add back net pension interest
income and capitalised borrowing costs in order to provide a view of the
group's cost of debt that is better aligned to the return on capital it earns
through revenue.
Adjusted item Rationale
Adjustments not expected to recur
Profit on disposal of subsidiary This relates to the disposal of the group's subsidiary United Utilities
Renewable Energy Limited, which represents a significant, atypical event and
as such is not considered to be part of the normal course of business.
Consistently applied presentational adjustments
Fair value (gains)/losses on debt and derivative instruments, excluding Fair value movements on debt and derivative instruments can be both very
interest on derivatives and debt under fair value option significant and volatile from one period to the next, and are therefore
excluded in arriving at underlying net finance expense as they are determined
by macro-economic factors which are outside of the control of management and
relate to instruments that are purely held for funding and hedging purposes
(not for trading purposes). Included within fair value movement on debt and
derivatives is interest on derivatives and debt under fair value option. In
making this adjustment it is appropriate to add back interest on derivatives
and debt under fair value option to provide a view of the group's cost of debt
which is better aligned to the return on capital it earns through revenue.
Taking these factors into account, management believes it is useful to adjust
for these fair value movements to provide a more representative view of
performance.
Deferred tax adjustment Management adjusts to exclude the impact of deferred tax in order to provide a
more representative view of the group's profit after tax and tax charge for
the year given that the regulatory model allows for cash tax to be recovered
through revenues, with future revenues allowing for cash tax including the
unwinding of any deferred tax balance as it becomes current. By making this
adjustment, the group's underlying tax charge does not include tax that will
be recovered through revenues in future periods, thus reducing the impact of
timing differences.
Tax in respect of adjustments to underlying profit / (loss) before tax Management adjusts for the tax impacts of the above adjusted items to provide
a more representative view of current year performance.
Underlying profit Year ended Year ended
31 March 2023 31 March 2022
£m £m
Operating profit per published results 440.8 610.0
Underlying operating profit 440.8 610.0
Net finance expense
£m £m
Finance expense (262.7) (187.7)
Investment income 47.0 19.4
Net finance expense per published results (215.7) (168.3)
Adjustments:
Fair value (gains) on debt and derivative instruments, excluding interest on (259.4) (138.0)
derivatives and debt under fair value option
Underlying net finance expense (475.1) (306.3)
£m £m
Share of profits/(losses) of joint ventures - (1.8)
Profit on disposal of business 31.2 -
Adjustments:
Profit on disposal of subsidiary (31.2) -
Underlying profit on disposal of subsidiary - -
Profit before tax per published results 256.3 439.9
Adjustments:
In respect of operating profit - -
In respect of net finance expense (259.4) (138.0)
In respect of profit on disposal of subsidiary (31.2) -
Underlying profit before tax (34.3) 301.9
Profit/(Loss) after tax per published results 204.9 (56.8)
Adjustments:
In respect of profit before tax (290.6) (138.0)
Deferred tax adjustment 76.6 562.5
Tax in respect of adjustments to underlying profit before tax 0.4 (0.7)
Underlying (loss)/profit after tax (8.7) 367.0
Earnings per share
£m £m
Profit/(Loss) after tax per published results (a) 204.9 (56.8)
Underlying (loss) / profit after tax (b) (8.7) 367.0
Weighted average number of shares in issue, in millions (c) 681.9m 681.9m
Earnings per share per published results, in pence (a/c) 30.0 (8.3)
Underlying earnings per share, in pence (b/c) (1.3) 53.8
Dividend per share, in pence 45.51p 43.50p
In arriving at net finance expense used in calculating the group's effective
interest rate, management adjusts underlying net finance expense to add back
pension income and capitalised borrowing costs in order to provide a view of
the group's cost of debt that is better aligned to the return on capital it
earns through revenue.
Year ended Year ended
Average effective interest rate 31 March 2023 31 March 2022
£m £m
Underlying net finance expense (475.1) (306.3)
Adjustments:
Net pension interest income (28.7) (14.3)
Adjustment for capitalised borrowing costs (127.5) (52.7)
Net finance expense for effective interest rate (631.3) (373.3)
Average notional net debt (7,849) (7,368)
Average effective interest rate 8.0% 5.1%
The table below provides a reconciliation between group underlying operating
profit and United Utilities Water Limited (UUW) historical cost regulatory
underlying operating profit (non-GAAP measures) as follows:
Year ended Year ended
31 March 2023 31 March 2022
£m £m
Group underlying operating profit 440.8 610.0
Underlying operating profit not relating to UUW 3.1 (8.3)
UUW statutory underlying operating profit (unaudited) 443.9 601.7
Revenue recognition 9.3 6.2
Capitalised borrowing costs 7.5 7.8
Reclassification of regulatory other income (not included in UUW operating (32.8) (26.9)
profit)
Reversal of the innovation fund 6.4 15.4
Other differences (including non-appointed business) (0.2) (0.8)
UUW regulatory underlying operating profit (unaudited) 434.1 603.1
Return on Regulated Equity (RoRE)
UUW's RoRE, presented on a real return basis:
Year ended AMP7
31 March 2023 To date
Base return 3.97% 3.94%
Totex performance (0.80)% (0.76)%
Customer ODI performance 0.51% 0.46%
Tax performance 2.54% 1.70%
Financing performance 4.74% 2.52%
Reported RoRE2 10.96% 7.86%
PRINCIPAL RISKS AND UNCERTAINTIES
Our approach to risk management
Our overall approach to risk management, including how we identify and assess
risk, the oversight and governance process, and focus on continual improvement
remains unchanged and is detailed in our Annual Report for the year ended 31
March 2023.
Risk profile
The business risk profile is based on the value chain of the company, with the
ten principal risks representing inherent risk areas (primary and supportive)
where value can be gained, preserved or lost relative to the performance,
future prospects or reputation of the company. Underpinning the principal
risks, the profile consists of approximately 100 event-based risks, each of
which is allocated to one of the ten inherent risk areas based on the context
of the event, enabling the company to consider interdependency and correlation
of common themes and control effectiveness. Although the profile remains
relatively static in terms of its headline inherent risk factors, risk
assessments remains dynamic by reflecting new and emerging circumstances.
The common themes are under continuous review, however at present they are:
· Causal factor themes: Asset health; Culture; Demographic change;
Economic conditions; Extreme weather/climate change; Legislative and
regulatory change; and Technology.
· Consequence themes: Colleagues; Customers; Environment; Investors and
Suppliers.
The company's most significant event-based risks
The most significant event-based risks represent the ten highest-ranked risks
by exposure (likelihood of occurrence of the event multiplied by the most
likely financial impact) and those risks which have been assessed as having a
significantly high impact, but low likelihood. Depending on the circumstances,
financial impacts will include loss of revenue, additional or extra cost,
fines, regulatory penalties and compensation. . Reputational impact relative
to our multiple stakeholders and the five non-financial capitals (Human,
Intellectual, Manufactured, Natural and Social) is also assessed, reported and
considered as part of the mitigation.
Summarised below are the top ten ranking risks (1 - 10), and those assessed as
having high impact, but low likelihood (A - E):
1. Price Review 2024 outcome
Risk exposure: The capacity and capability to develop a business plan that
creates value for customers, communities, and the environment that is
sustainable and resilient for the long term relative to the unique
characteristics of the region we serve, in light of multiple influencing
factors - notably changing demographics, climate change and asset health.
Control/mitigation: We have established cross-cutting work streams and theme
owners to identify the products and evidence required for the submission and
we will maintain a close dialogue with Ofwat throughout the process.
Assurance: Extensive customer research and several external providers have
been commissioned for technical optioneering. Second line assurance is
provided through a dedicated price review team and a PR24 programme board.
There is a blend of internal audit and external assurance focused on the
quality of the submission.
2. Failure of the Haweswater Aqueduct
Risk exposure: The Haweswater Aqueduct is a key asset with current low
resilience due to deterioration, with failure potentially resulting in water
quality issues and/or supply interruptions to a large proportion of the United
Utilities customer base.
Control/mitigation: A capital project to replace the tunnel sections of the
aqueduct has already commenced with the completion in November 2020 of one
section. The remaining sections are due to be replaced as part of Haweswater
Aqueduct Resilience Programme (HARP).
Assurance: Technical and geological advice and modelling have been sought
throughout the programme development, with second line assurance including
engineering technical governance. Independent assurance is provided by
internal audits and external assurance over the HARP procurement process.
3. Wastewater network failure
Risk exposure: Blockages, operational issues or inadequate hydraulic capacity
relative to population growth, extreme weather, asset health, and
legal/regulatory change, resulting in unpermitted storm overflow activations,
sewer flooding and environmental damage.
Control/mitigation: Preventative maintenance and inspection regimes, customer
campaigns, sewer rehabilitation program and Better Rivers programme.
Assurance: Second line assurance provided by wholesale assurance, engineering
technical governance and flood review panel. Subject to regular internal
audits and external assurance of regulatory reporting.
4. Totex efficiency challenge
Risk exposure: Totex efficiencies designed for AMP7 are under significant
challenge through a combination of factors including supply chain issues,
inflationary pressures, and additional investment to deliver performance
improvements.
Control/mitigation: Integrated Business Planning (IBP), risk-based investment
prioritisation and the company business planning process all contribute to
efficient delivery of services and the capital programme. In addition, there
are number of executive led initiatives to realise efficiency opportunities.
Assurance: First line assurance is undertaken through monthly price control
meetings, with the strategic programme board, monthly executive performance
review meetings and quarterly business reviews providing second line
governance and assurance. Third line assurance is undertaken through cyclical
internal audits.
5. Cyber
Risk exposure: Data and technology assets compromised due to malicious or
accidental activity, leading to a major impact to key business processes and
operations.
Control/mitigation: Multiple layers of control, including a secure perimeter,
segmented internal network zones, access controls, constant monitoring and
forensic response capability.
Assurance: Security measures reflect multiple sources of threat intelligence.
The security steering group provides second line assurance, with independent
assurance provided by cyclical internal audits and various technical audits by
external specialists.
6. Water sufficiency
Risk exposure: Water sufficiency is one of the most sensitive risks to climate
change, with the increased frequency of hot and dry weather being evidence of
changing circumstances. Extended periods of low rainfall and exceptionally hot
weather impacts, with accompanying increased customer demand, impacts our
water resources which can result in the need to implement water use
restrictions.
Control/mitigation: We produce a Water Resources Management Plan (WRMP) every
five years, which forecasts future demand and water availability under repeats
of historic droughts, adjusted for climate change. A statutory Drought Plan is
also developed every five years, setting out the actions we will take in a
drought situation.
Assurance: The WRMP and Drought Plan are subject to various second and third
line assurance activities prior to publication.
7. Carbon commitments
Risk exposure: The capacity and capability to decarbonise water and wastewater
activity to meet commitments and legal obligations across the various time
horizons of 2030, 2035 and 2050 in light of expected population growth
pressures and uncertainty regarding the required technological advances to
decarbonise operational activity.
Control/mitigation: In the near-term we are creating woodland, restoring
peatland and have initiatives to address process and energy emissions. We are
working with suppliers and industry partners to better understand and optimise
decarbonisation opportunities and pathways.
Assurance: First line assurance by Carbon team using water industry team for
technical support and guidance. Climate change mitigation steering group and
corporate risk framework provides second line assurance. Our Science Based
Targets, energy and carbon reporting are subject to external assurance and
verification.
8. Recycling of biosolids to agriculture
Risk exposure: Represents various impact scenarios including operational
failures, increased restrictions or total ban of recycling biosolids to
agriculture. The risk considers the Environment Agency's interpretation of the
Farming Rules for Water regulations and the increasing threat to recycling a
large proportion of biosolid to land.
Control/mitigation: Treatment, sampling and testing regimes ensure that sludge
meets acceptable standards for application with formal service level
agreements between wastewater and bioresources. We work closely with farmers,
land owners and contractors to ensure regulations such as Farming Rules for
Water and the standard operating procedures are met.
Assurance: Bioresource production planning team undertake first line assurance
against UK Biosolids Assurance Scheme (BAS) accreditation, and other codes of
practice such as the safe sludge matrix which certifies our recycling
activities. Second and third line assurance is also undertaken by the
assurance and internal audit teams respectively.
9. Failure to treat sludge
Risk exposure: Relates to the interdependency between wastewater and
bioresource treatment activity in light of changing demographics, asset health
and legislative/regulatory change such as the Industrial Emissions Directive
(IED) now applying to biological treatment of sewage sludge.
Control/mitigation: We look to maximise our treatment capacity by adopting a
Throughput, Reliability, Availability and Maintainability (T-RAM) approach for
our facilities. We also undertake a digester and tank clean programme, regular
testing and analysis of sludge, and balance capacity and demand through the
bioresource production planning team.
Assurance: Bioresource production planning team undertake first line assurance
against UK Biosolids Assurance Scheme (BAS) accreditation, and other codes of
practice such as the safe sludge matrix which certifies our treatment. Second
and third line assurance is also undertaken by the assurance and internal
audit teams respectively.
10. Credit ratings
Risk exposure: Credit ratings below internal targets, due to deterioration in
financial and/ or operational performance and/or external factors (such as
inflation), resulting in more expensive funding.
Control/mitigation: Continuous monitoring of markets, and the management of
key financial risks within defined policy parameters.
Assurance: Second line assurance provided by financial control and quarterly
business reviews, with oversight provided by the treasury committee. The
treasury function is subject to regular internal audits.
High impact, low likelihood risks
A. Erosion of pension scheme surplus
Risk exposure: The potential for the pension scheme funding to increase
because of life expectancy rates leading to additional contributions.
Control/mitigation: Constant monitoring combined with hedging against interest
rates, inflation and growth asset risk.
Assurance: Policy and oversight is led by the pensions review management
group, taking into account advice from accountancy and law firms. Pension
governance is subject to periodic internal audits.
B. Financial outperformance
Risk exposure: Failure to achieve financial outperformance due to
macro-economic conditions and efficiency challenges, impacting the cost of
debt and delivery of the company business plan.
Control/mitigation: Interest rate and inflation management, ongoing monitoring
of markets and regulatory developments, and sensitivity testing as part of our
company business planning process relative to assumed periods of low inflation
both in isolation and in conjunction with the realisation of severe but
plausible risks.
Assurance: First line assurance is undertaken by the finance team as part of
the company business planning process, with second line assurance undertaken
at monthly executive level meetings. Further oversight is provided by the
group board and treasury committee and third line assurance is provided
through cyclical internal audit reviews.
C. Dam failure
Risk exposure: Uncontrolled release of a significant volume of water from
reservoirs due to flood damage, overtopping, earthquake or erosion leading to
catastrophic impacts downstream.
Control/mitigation: Each reservoir is regularly inspected by engineers. Where
appropriate, risk reduction interventions are implemented through a
prioritised investment programme.
Assurance: Various sources of second line assurance, including supervising
engineers, dam safety group, assurance team and regular board reviews.
Independent assurance is provided by panel engineers and internal audit.
D. Disease pandemic
Risk exposure: Serious illness in a large proportion of the UK population,
with consequences to our workforce, the wider supply chain and macro economy.
Control/mitigation: We have a pandemic contingency plan which is regularly
reviewed and was updated to reflect lessons learned from COVID-19. The plan
includes multi-channel communication with non-pharmaceutical interventions.
Assurance: The assurance team second line assurance, with internal audit
undertaking various reviews.
E. Terrorism
Risk exposure: A significant asset to be compromised by terrorist activity
leading to loss of supply, contamination and/or pollution.
Control/mitigation: A risk-based protection of assets in line with the
Security and Emergency Measures Direction (SEMD) and close liaison with the
Centre for the Protection of National Infrastructure (CPNI), regional counter
terrorist units, local agencies and emergency services.
Assurance: Security measures are reviewed on a regular basis by our internal
asset owners in conjunction with the central security team. Second line
assurance is provided by the cross business security steering group. In
addition, internal audit undertakes cyclical audits with external technical
assurance being delivered by specialists.
Material litigation
The group robustly defends litigation where appropriate and seeks to minimise
its exposure by establishing provisions and seeking recovery wherever
possible. Litigation of a material nature is regularly reported to the group
board. While our directors remain of the opinion that the likelihood of a
material adverse impact on the group's financial position is remote, based on
the facts currently known to us and the provisions in our statement of
financial position, the following three cases are worthy of note:
· In relation to the Manchester Ship Canal Company matter reported in
previous years, a hearing was held in the Court of Appeal in 2022 and the main
additional points raised by MSCC were dismissed, although MSCC were granted
leave to appeal to the Supreme Court. The final appeal was heard in early
March 2023 and the Court's decision is awaited. This may provide further
clarity in relation to the rights and remedies afforded to the parties and
others in relation to discharges by water companies into the canal and other
watercourses;
· As reported in previous years, in February 2009, United Utilities
International Limited (UUIL) was served with notice of a multiparty 'class
action' in Argentina related to the issuance and payment default of a US$230
million bond by Inversora Eléctrica de Buenos Aires S.A. (IEBA), an Argentine
project company set up to purchase one of the Argentine electricity
distribution networks which was privatised in 1997. UUIL had a 45 per cent
shareholding in IEBA which it sold in 2005. The claim is for a non-quantified
amount of unspecified damages and purports to be pursued on behalf of
unidentified consumer bondholders in IEBA. The Argentine Court has recently
scheduled various hearings to receive the testimony of fact witnesses and
experts (starting in May). UUIL will vigorously resist the proceedings given
the robust defences that UUIL has been advised that it has on procedural and
substantive grounds; and
· A Letter Before Action was received by UUW in February 2023 in
respect of potential collective proceedings before the Competition Appeal
Tribunal. We are informed that the Proposed Class Representative (PCR) is
intending to bring a claim on behalf of a class comprising consumers of UUW
(on an opt-out basis) who have allegedly been overcharged for sewerage
services as a result of an alleged abuse of a dominant position. We have been
informed that the PCR also intends to bring the claim against United Utilities
Group PLC, as the ultimate parent company of UUW. Proceedings have not yet
been issued.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This financial report contains certain forward-looking statements with respect
to the operations, performance and financial condition of the group. By their
nature, these statements involve uncertainty since future events and
circumstances can cause results and developments to differ materially from
those anticipated. These forward-looking statements include without limitation
any projections or guidance relating to the results of operations and
financial conditions of the group as well as plans and objectives for future
operations, expected future revenues, financing plans, expected expenditure
and any strategic initiatives relating to the group, as well as discussions of
our business plan and our assumptions, expectations, objectives and resilience
with respect to climate scenarios. The forward-looking statements reflect
knowledge and information available at the date of preparation of this
financial report and the company undertakes no obligation to update these
forward-looking statements. Nothing in this financial report should be
construed as a profit forecast.
Certain regulatory performance data contained in this financial report is
subject to regulatory audit.
This announcement contains inside information, disclosed in accordance with
the Market Abuse Regulation which came into effect on 3 July 2016 and for UK
Regulatory purposes the person responsible for making the announcement is
Simon Gardiner, Company Secretary.
LEI 2138002IEYQAOC88ZJ59
Classification - Full Year Results
Consolidated income statement
Year ended Year ended
31 March 31 March
2023 2022
£m £m
Revenue 1,824.4 1,862.7
Staff costs (192.2) (184.3)
Other operating costs (note 4) (556.4) (461.7)
Allowance for expected credit losses - trade and other receivables (22.7) (23.4)
Other income 4.8 4.4
Depreciation and amortisation expense (423.6) (418.2)
Infrastructure renewals expenditure (193.5) (169.5)
Total operating expenses (1,383.6) (1,252.7)
Operating profit 440.8 610.0
Investment income (note 5) 47.0 19.4
Finance expense (note 6) (262.7) (187.8)
Allowance for expected credit losses - loans to joint ventures - 0.1
Investment income and finance expense (215.7) (168.3)
Share of losses of joint ventures (note 11) - (1.8)
Profit on disposal of business (note (7) 31.2 -
Profit before tax 256.3 439.9
Current tax credit 25.2 65.8
Deferred tax charge (76.6) (562.5)
Tax (note 8) (51.4) (496.7)
Profit/(loss) after tax 204.9 (56.8)
All of the results shown above relate to continuing operations.
Earnings per share (note 9)
Basic 30.0p (8.3)p
Diluted 30.0p (8.3)p
Dividend per ordinary share (note 10) 45.51p 43.50p
Consolidated statement of comprehensive income
Year ended Year ended
31 March 31 March
2023 2022
£m £m
Profit/(loss) after tax 204.9 (56.8)
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges - effective portion of fair value movements (50.6) 106.7
Tax on items recorded within other comprehensive income 12.7 (26.8)
Reclassification of cash flow hedge effectiveness to consolidated income (36.6) -
statement
Tax on reclassification to consolidated income statement 7.0 -
Other comprehensive income that may be reclassified to profit or loss (67.5) 79.9
Items that will not be reclassified to profit or loss in subsequent periods:
Remeasurement (losses)/gains on defined benefit pension schemes (note 12) (445.3) 313.6
Change in credit assumption for debt reported at fair value through profit and 4.8 (4.1)
loss
Cost of hedging - cross currency basis spread adjustment 6.3 -
Tax on items recorded within other comprehensive income 151.5 (109.4)
Other comprehensive income that will not be reclassified to profit or loss (282.7) 200.1
Total comprehensive income (145.3) 223.2
Consolidated statement of financial position
Year ended Year ended
31 March
31 March
2023
2022
£m £m
ASSETS
Non-current assets
Property, plant and equipment 12,570.7 12,147.5
Intangible assets 142.3 160.8
Interests in joint ventures and other investments (note 11) 16.5 16.6
Inventories 1.2 0.4
Trade and other receivables 75.7 81.7
Retirement benefit surplus (note 12) 600.8 1,016.8
Derivative financial instruments 428.6 399.4
13,835.8 13,823.2
Current assets
Inventories 13.1 17.8
Trade and other receivables 190.5 222.7
Current tax asset 98.9 74.4
Cash and short-term deposits 340.4 240.9
Derivative financial instruments 48.5 58.0
691.4 613.8
Total assets 14,527.2 14,437.0
LIABILITIES
Non-current liabilities
Trade and other payables (892.4) (835.2)
Borrowings (note 13) (8,259.0) (7,671.0)
Deferred tax liabilities (2,048.1) (2,148.1)
Derivative financial instruments (243.1) (136.7)
(11,442.6) (10,791.0)
Current liabilities
Trade and other payables (376.7) (365.8)
Borrowings (note 13) (176.4) (308.8)
Provisions (13.1) (13.5)
Derivative financial instruments (9.7) (0.5)
(575.9) (688.6)
Total liabilities (12,018.5) (11,479.6)
Total net assets 2,508.7 2,957.4
EQUITY
Share capital 499.8 499.8
Share premium account 2.9 2.9
Other reserves (note 17) 353.4 416.2
Retained earnings 1,652.6 2,038.5
Shareholders' equity 2,508.7 2,957.4
Consolidated statement of changes in equity
Year ended 31 March 2022
Share capital Share premium account ((1))Other reserves Retained earnings Total
£m £m £m £m £m
At 1 April 2021 499.8 2.9 336.3 2,192.0 3,031.0
Loss after tax - - - (56.8) (56.8)
Other comprehensive income
Remeasurement gains on defined benefit pension schemes (note 12) - - - 313.6 313.6
Change in credit assumption for debt reported at fair value through profit or - - - (4.1) (4.1)
loss
Cash flow hedges - effective portion of fair value movements - - 106.7 - 106.7
Tax on items recorded within other comprehensive income (note 8) - - (26.8) (109.4) (136.2)
Total comprehensive income - - 79.9 143.3 223.2
Dividends (note 10) - - - (295.5) (295.5)
Equity-settled share-based payments - - - 4.8 4.8
Exercise of share options - purchase of shares - - - (6.1) (6.1)
At 31 March 2022 499.8 2.9 416.2 2,038.5 2,957.4
( )
((1))Other reserves comprise the group's cumulative exchange reserve, capital
redemption reserve, merger reserve, cost of hedging reserve, and cash flow
hedging reserve. Further detail of movements in these reserves is included in
note 17.
Year ended 31 March 2023 Share capital Share premium account ((1))Other reserves Retained earnings Total
£m £m £m £m £m
At 1 April 2022 499.8 2.9 416.2 2,038.5 2,957.4
Profit after tax - - - 204.9 204.9
Other comprehensive income
Remeasurement losses on defined benefit pension schemes (note 12) - - - (445.3) (445.3)
Change in credit assumption for debt reported at fair value through profit and - - - 4.8 4.8
loss
Cash flow hedges - effective portion of fair value movements - - (50.6) - (50.6)
Cost of hedging - cross-currency basis spread adjustment - - 6.3 - 6.3
Tax on items recorded within other comprehensive - - 11.1 153.1 164.2
income (note 8)
Reclassification of items recorded directly in equity - - (36.6) - (36.6)
Tax on reclassification to income statement - - 7.0 - 7.0
Total comprehensive income - - (62.8) (82.5) (145.3)
Dividends (note 10) - - - (301.2) (301.2)
Equity-settled share-based payments - - - 4.6 4.6
Purchase of shares to satisfy exercise of share options - - - (6.8) (6.8)
At 31 March 2023 499.8 2.9 353.4 1,652.6 2,508.7
Consolidated statement of cash flows
Year ended Year ended
31 March
31 March
2023
2022
£m £m
Operating activities
Cash generated from operations (note 15) 883.1 1,061.6
Interest paid (118.2) (121.9)
Interest received and similar income 15.8 3.6
Tax paid (10.8) (8.9)
Tax received 17.6 -
Net cash generated from operating activities 787.5 934.4
Investing activities
Purchase of property, plant and equipment (675.9) (609.0)
Purchase of intangible assets (18.1) (19.5)
Grants and contributions received 5.1 1.8
Extension of loans to joint ventures (note 19) 5.0 (13.0)
Proceeds from disposal of investments (note 7) 90.5 -
Net cash used in investing activities (593.4) (639.7)
Financing activities
Proceeds from borrowings net of issuance costs 501.0 173.7
Repayment of borrowings (278.0) (681.8)
Dividends paid to equity holders of the company (note 10) (301.2) (295.5)
Exercise of share options - purchase of shares (6.8) (6.1)
Net cash used in financing activities (85.0) (809.7)
Effects of exchange rate changes (1.3) 1.5
Net increase/(decrease) in cash and cash equivalents 107.8 (513.5)
Cash and cash equivalents at beginning of the year 220.1 733.6
Cash and cash equivalents at end of the year 327.9 220.1
NOTES
1. Basis of preparation and accounting policies
The condensed consolidated financial statements for the year ended 31 March
2023 have been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority.
The condensed consolidated financial statements do not include all of the
information and disclosures required for full annual financial statements and
do not comprise statutory accounts within the meaning of section 434 of the
Companies Act 2006, but are derived from the audited financial statements of
United Utilities Group PLC for the year ended 31 March 2023, for which the
auditors have given an unqualified opinion.
The comparative figures for the year ended 31 March 2022 do not comprise the
group's statutory accounts for that financial year. Those accounts have been
reported upon by the group's auditor and delivered to the registrar of
companies. The report of the auditor was unqualified and did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
The condensed consolidated financial statements have been prepared in
accordance with the requirements of the Companies Act 2006, and with
UK-adopted international accounting standards. They have been prepared on the
going concern basis under the historical cost convention, except for the
revaluation of financial instruments, accounting for the transfer of assets
from customers and the revaluation of infrastructure assets to fair value on
transition to IFRS.
The accounting policies, presentation and methods of computation are prepared
in accordance with International Financial Reporting Standards as adopted by
the United Kingdom, and are consistent with those applied in the audited
financial statement of United Utilities Group PLC for the year ended 31 March
2022.
Going concern
The financial statements have been prepared on the going concern basis as the
directors have a reasonable expectation that the group has adequate resources
for a period of at least 12 months from the date of the approval of the
financial statements and that there are no material uncertainties to disclose.
In assessing the appropriateness of the going concern basis of accounting the
directors have reviewed the resources available to the group in the form of
cash and committed facilities as well as consideration of the group's capital
adequacy, along with a baseline plan that incorporates latest views of the
current economic climate. The directors have considered the magnitude of
potential impacts resulting from uncertain future events or changes in
conditions, and the likely effectiveness of mitigating actions that the
directors would consider undertaking. The baseline position has been subjected
to a number of severe but plausible downside scenarios in order to assess the
group's ability to operate within the amounts and terms (including relevant
covenants) of existing facilities. These scenarios consider: the potential
impacts of increased totex costs, including a significant one-off totex impact
of £500 million arising in the assessment period; elevated levels of bad debt
of £15 million per annum; outcome delivery incentive penalties equivalent to
1.0 per cent of RoRE per annum; and the impact of these factors materialising
on a combined basis. Mitigating actions were considered to include deferral of
capital expenditure; a reduction in other discretionary totex spend; the close
out of derivative asset balances; and the deferral or suspension of dividend
payments.
Consequently, the directors are satisfied that the group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the date of approval of the financial statements, and that the
severe but plausible downside scenarios indicate that the group will be able
to operate within the amounts and terms (including relevant covenants) of
existing facilities. The financial statements have therefore been prepared on
a going concern basis.
Update on critical accounting judgements and key sources of estimation
uncertainty associated with Covid-19 and increases in the cost of living
The group disclosed a number of critical accounting judgements and key sources
of estimation uncertainty in its annual reports and financial statements for
the year ended 31 March 2022. The area most impacted by developments during
the year relates to the group's allowance for expected credit losses in
respect of receivables.
Judgements and estimates have been kept under review during the year to 31
March 2023 in order to ensure that they reflect the most up-to-date
information available, including changes in the broader economic outlook,
particularly the inflationary pressures across most industries and sectors
which have increased the cost of living. These significant increases in the
cost of living have largely superseded the direct effects of the Covid-19
pandemic as the key source of uncertainty. An update on these judgements and
estimates is as follows:
Accounting estimate - allowance for expected credit losses in respect of
household trade receivables:
As a result of the Covid-19 pandemic and more recently ongoing cost of living
pressures, recent years have seen a higher level of uncertainty around how
economic conditions may impact the recoverability of household receivables for
a significant proportion of the Group's customer base. A range of collection
scenarios have been used to inform the allowance for expected credit losses
charged to the income statement during the period. These take account of cash
collection rates in the current year as well as in recent years incorporating
the onset of the Covid-19 pandemic, periods of lockdown, and periods of
recovery, as well as current levels of economic uncertainty in order to
provide a range of views as to how recoverability of household receivables may
be impacted by different conditions.
The group has historically used the average collection evidenced in the
previous two years as a basis for estimating future collection, however cash
collection during the current year has been particularly strong and therefore
may not be reflective of the impact of cost of living challenges experienced
by customers that may impact cash collection in the near future. The two year
look-back period broadly reflects periods of recovery following the Covid-19
pandemic, and so may not provide a representative view of future cash
collection in light of current levels of economic uncertainty. Accordingly, we
have calculated the allowance for expected credit losses based on the average
cash collection history over the last three years, which is considered to give
a more balanced position as it includes periods of relatively strong cash
collection but also periods where cash collection was more challenging during
the Covid-19 pandemic. Recognising the current levels of economic uncertainty
and that it is reasonably possible that cash collection could become more
challenging in the near future, this three year look-back period is considered
to give a reasonable view of what cash collection on a forward-looking basis
could look like.
This supports a charge equivalent to around 1.8 per cent of household revenue
recorded during the period, which is broadly consistent with the position at
31 March 2022.
2. Segmental reporting
The board of directors of United Utilities Group PLC (the board) is provided
with information on a single segment basis for the purposes of assessing
performance and allocating resources. The group's performance is measured
against financial and operational key performance indicators (KPIs), with
operational KPIs aligned to the group's purpose, and financial KPIs focused on
profitability and financial sustainability. The board reviews revenue,
operating profit, and gearing, along with operational drivers, at a
consolidated level. In light of this, the group has a single segment for
financial reporting purposes.
3. Revenue
2023 2022
£m £m
Wholesale water charges 758.1 776.5
Wholesale wastewater charges 914.7 946.3
Household retail charges 83.0 68.9
Other 68.6 71.0
1,824.4 1,862.7
In accordance with IFRS 15, revenue has been disaggregated based on what is
recognised in relation to the core services of supplying clean water and the
removal and treatment of wastewater. Each of these services is deemed to give
rise to a distinct performance obligation under the contract with customers,
though following the same pattern of transfer to the customer who
simultaneously receives and consumes both of these services over time.
Wholesale water and wastewater charges relate to services provided to
household customers and non-household retailers. Household retail charges
relate solely to the margin applied to the wholesale amounts charged to
residential customers. These wholesale charges and the applicable retail
margin are combined in arriving at the total revenues relating to water and
wastewater services provided to household customers. No margin is applied to
wholesale water and wastewater services provided to non-household retailers.
Other revenues comprise a number of smaller non-core income streams including
those relating to energy generation and export, property sales, and those
associated with activities, typically performed opposite property developers,
which impact the group's capital network assets including diversions works to
relocate water and wastewater assets, and activities that facilitate the
creation of an authorised connection through which properties can obtain water
and wastewater services.
4. Other operating costs
2023 2022
£m £m
Materials 132.7 90.8
Power 130.8 99.6
Hired and contracted services 103.7 95.4
Property rates 87.1 90.5
Regulatory fees 36.7 28.4
Insurance 19.7 16.9
Accrued innovation costs 6.1 5.9
Loss on disposal of property, plant and equipment 4.2 3.9
Cost of properties disposed 1.4 3.0
Other expenses 34.0 27.3
556.4 461.7
During the year ended 31 March 2023, the group experienced inflationary
pressures across much of its operating cost base. This was most notable in
relation to materials costs for consumables such as chemicals, and power
costs, which increased by £41.9 million and £31.2 million respectively
compared with the prior year.
Included within operating costs for the year are £8.4 million relating to
operational incidents over the dry summer period in 2022, and £11.1 million
relating to the group's response to periods of extreme cold weather over the
winter of 2022/23, including a rapid freeze-thaw in December 2022 leading to
burst pipes. The costs associated with this response include the cost of
emergency network repairs, customer compensation where short-term supply
interruptions were experienced, and the provision of bottled water.
Research and development expenditure for the year ended 31 March 2023 was
£1.2 million (2022: £1.2 million). In addition, £6.1 million (2022: £5.9
million) of costs have been accrued by United Utilities Water Limited in
relation to the Innovation in Water Challenge scheme operated by Ofwat for
AMP7. These expenses offset amounts recognised in revenue during each year
intended to fund innovation projects across England and Wales as part of an
industry-wide scheme to promote innovation in the sector. The amounts accrued
will either be spent on innovation projects that the group successfully bids
for or will be transferred to other successful water companies in accordance
with the scheme rules.
5. Investment income
2023 2022
£m £m
Interest receivable 18.3 5.1
Net pension interest income (note 12) 28.7 14.3
47.0 19.4
6. Finance expense
2023 2022
£m £m
Interest payable 497.7 330.7
Net fair value gains on debt and derivative instruments (235.0) (142.9)
262.7 187.8
Interest payable is stated net of £127.5 million (2022: £52.7 million)
borrowing costs capitalised in the cost of qualifying assets within property,
plant and equipment and intangible assets during the year. This has been
calculated by applying an average capitalisation rate of 7.9 per cent (2022:
4.2 per cent) to expenditure on such assets as prescribed by IAS 23 'Borrowing
Costs'.
Interest payable includes a £463.5 million (2022: £227.9 million) non-cash
inflation expense in relation to the group's index-linked debt.
In addition to the £262.6 million finance expense, the allowance for expected
credit losses in relation to loans extended to the group's joint venture,
Water Plus, has decreased by £nil million during the current year (2022:
decrease of £0.1 million).
Net fair value gains on debt and derivative instruments includes £31.8
million income (2022:
£33.2 million income) due to net interest on derivatives and debt under fair
value option, and £56.2 million expense (2022: £28.3 million expense) due
to non-cash inflation changes on the group's index-linked derivatives.
Underlying finance expense, which forms part of the group's alternative
performance measures (APMs) is calculated by adjusting net finance expense and
investment income of £215.7 million (2022: £168.3 million) reported in the
Income Statement to exclude the £235.0 million of fair value gains in the
above table, but include £31.8 million income due to net interest on
derivatives and debt under fair value option, and £56.2 million expense due
to non-cash inflation uplift on index-linked derivatives.
7. Disposal of subsidiary
On 29 September 2022 the group sold the entire issued share capital of its
wholly-owned subsidiary United Utilities Renewable Energy Limited (UURE) to
SEEIT Holdco Limited.
Profit on disposal is shown below and included within the group's consolidated
income statement:
2023
£m
Total consideration received 98.5
Total net assets disposed (63.8)
Fees and transaction costs (3.5)
Profit on disposal of subsidiary 31.2
Management does not consider UURE to meet the definition of a discontinued
operation as set out in IFRS 5 'Non-current assets held for sale and
discontinued operations' as it is not considered a separate major line of
business for the group, accounting for around £3.5 million of external
revenue included in the group's consolidated financial statements for part of
the financial year in which UURE was a part of the group (year to 31 March
2022: £3.5 million), with the majority of UURE's revenue relating to a
long-term power purchase agreement with UUW that continues in place following
the disposal. As such, no separate disclosures relating to discontinued
operations have been included in the group's income statement or the notes to
the interim financial statements.
The total consideration received in relation to the disposal of UURE is
reconciled to the net cash income on disposal of the subsidiary per the
consolidated statement of cash flows as follows:
£m
Total consideration received 98.5
Cash and cash equivalents held by UURE disposed of (4.5)
Fees and transaction costs (3.5)
Net cash income on disposal of subsidiary 90.5
8. Tax
During the year ended 31 March 2023 there was a current tax credit of £25.2
million (31 March 2022: £72.5 million) and a deferred tax charge of £32.5
million (31 March 2022: £66.9 million) relating to prior years. The current
year figure mainly relates to the utilisation of tax losses. The prior year
mainly relates to optimising the available tax incentives on our innovation
related expenditure, for multiple earlier years.
The split of the total tax charge between current and deferred tax was due to
ongoing timing differences in relation to deductions on capital investment,
and unrealised gains and losses on treasury derivatives. Going forward, we
expect the total effective tax rate, ignoring non-recurring items such as the
current year rate change adjustment, to remain broadly in line with the
headline rate.
The tax adjustments taken to equity primarily relate to remeasurement
movements on the group's defined benefit pension schemes. As in the prior year
the rate at which the deferred tax liabilities are measured on the group's
defined benefit pension scheme is 35 per cent, being the rate applicable to
refunds from a trust.
9. Earnings per share
Basic and diluted earnings per share are calculated by dividing profit/(loss)
after tax by the weighted average number of shares in issue during the year.
2023 2022
£m £m
Profit/(loss) after tax attributable to equity holders of the company 204.9 (56.8)
Weighted average number of shares in issue in millions
Basic 681.9 681.9
Diluted 684.1 683.8
Earnings per share in pence
Basic 30.0 (8.3)
Diluted 30.0 (8.3)
10. Dividends
2023 2022
£m £m
Dividends relating to the year comprise:
Interim dividend 103.4 98.9
Final dividend 206.9 197.8
310.3 296.7
Dividends deducted from shareholders' equity comprise:
Interim dividend 103.4 98.9
Final dividend 197.8 196.6
301.2 295.5
The proposed final dividends for the years ended 31 March 2023 and 31 March
2022 were subject to approval by equity holders of United Utilities Group PLC
as at the reporting dates, and therefore have not been included as liabilities
in the consolidated financial statements as at 31 March 2023 and 31 March 2022
respectively.
The final dividend of 30.34 pence per ordinary share (2022: 29.00 pence per
ordinary share) is expected to be paid on 1 August 2023 to shareholders on the
register at the close of business on 24 June 2023. The ex-dividend date for
the final dividend is 23 June 2023.
The interim dividend of 15.17 pence per ordinary share (2022: 14.50 pence per
ordinary share) was paid on 1 February 2023 to shareholders on the register at
the close of business on 17 December 2022.
11. Joint ventures and other investments
2023 2022
£m £m
Joint ventures at the start of the year 16.5 -
Additions - 18.3
Share of losses of joint ventures - (1.8)
Joint ventures at the end of the year 16.5 16.5
Other investments - 0.1
Interest in joint ventures and other investments 16.5 16.6
The group's interests in joint ventures mainly comprises its 50 per cent
interest in Water Plus Group Limited (Water Plus), which is jointly owned and
controlled by the group and Severn Trent PLC under a joint venture agreement.
The group also has a 50 per cent interest in Lingley Mere Business Park
Development Company Limited, which is jointly owned and controlled by the
group and Muse Developments Limited under a joint venture agreement.
The group's total share of Water Plus profits for the year was £nil (2022:
£1.8 million share of losses, all of which is recognised in the income
statement). The group incurred a share of the losses of Lingley Mere Business
Park Development Company Limited for the year of £0.4 million (2022: nil),
which have not been recognised as at 31 March 2023. This is unrecognised as
the brought forward carrying amount of the group's interest in the joint
venture is nil.
Additions in the prior year relate to an equity investment in Water Plus
following the conversion of the existing fully drawn facility to equity share
capital as executed on 23 April 2021.
The group recognised a disposal in the year of £0.1 million (2022: £nil) in
its other investments.
Details of transactions between the group and its joint ventures are disclosed
in note 19.
12. Retirement benefit surplus
The main financial assumptions used by the company's actuary to calculate the
defined benefit surplus of the United Utilities Pension Scheme (UUPS) and the
United Utilities PLC Group of the Electricity Supply Pension Scheme (ESPS)
were as follows:
2023 2022
%pa %pa
Discount rate 4.70 2.80
Pension increases 3.40 3.75
Pensionable salary growth (pre-2018 service):
ESPS 3.40 3.75
UUPS 3.40 3.75
Pensionable salary growth (post-2018 service):
ESPS 3.40 3.75
UUPS 2.85 3.20
Price inflation - RPI 3.40 3.75
Price inflation - CPI((1)) 2.85 3.20
Note:
((1))The CPI price inflation assumption represents a single weighted average
rate derived from an assumption of 2.50 per cent pre-2030 and 3.30 per cent
post-2030 (31 March 2022: 2.85 per cent pre-2030 and 3.65 per cent post-2030).
The discount rate is consistent with a high quality corporate bond rate, with
4.70 per cent being equivalent to gilts plus 95 basis points (2022: 2.80 per
cent being equivalent to gilts plus 110 basis points).
In September 2019, the Chancellor of the Exchequer highlighted the UK
Statistics Authority's proposals to change RPI to align with CPIH (Consumer
Prices Index, including housing costs). Plans to reform RPI and bring it in
line with CPIH from 2030 were confirmed on 25 November 2020, though this is
subject to judicial review. Broadly CPIH increases are expected to average
around 1 per cent per annum below RPI in the long term (about the same as
CPI), so this change could have a significant impact on many pension schemes.
In arriving at the company's best estimate for RPI, an inflation risk premium
of 0.2 per cent (2022: 0.2 per cent) has been deducted from the breakeven
inflation rate for the year ended 31 March 2023. The deduction of this 0.2 per
cent inflation risk premium has resulted in a reduction in the fair value of
defined benefit obligations of around £61 million, and therefore an increase
in the net retirement benefit surplus of around £61 million, compared with no
inflation risk premium being deducted. There is no allowance for any change in
the inflation risk premium post 2030 as a result of RPI reform.
The assumption for CPI inflation is set by deducting a 'wedge' from the RPI
inflation assumption to reflect structural differences. For pre-2030 inflation
this wedge has been estimated at 0.9 per cent per annum, reducing to 0.1 per
cent per annum post-2030 given that RPI and CPI are expected to converge. The
impact of this reduction in the post-2030 wedge as a result of the
confirmation of RPI reforms is a circa £7 million increase to the defined
benefit obligation and therefore a decrease in the defined benefit surplus
compared with the wedge remaining at 0.9 per cent per annum after 2030. A
reduction in RPI will result in a reduction to pension scheme liabilities.
However, as the group's pension schemes are hedged for RPI inflation, this
will also result in a comparable reduction to pension scheme assets.
At 31 March 2023, as in the prior year, the base tables used for the mortality
in retirement assumption are the Continuous Mortality Investigation's (CMI)
S3PA (2022: S3PA) year of birth tables, with a scaling factor of 109 per cent
(2022: 109 per cent) and 115 per cent (2022: 115 per cent) for male pensioners
and non-pensioners respectively and 110 per cent (2022: 110 per cent) and 111
per cent (2022: 111 per cent) for female pensioners and non-pensioners
respectively, reflecting the profile of the membership. At 31 March 2023,
future improvements in mortality are based on the extended CMI 2021 (2022: CMI
2021) projection model, with a long-term annual rate of improvement of 1.25
per cent (2022: 1.25 per cent). The long-term annual rate of improvement is a
subjective estimate, and an increase in this rate to 1.50 per cent would have
resulted in a circa £16.5 million increase in the fair value of defined
benefit obligations, and therefore a reduction in the overall retirement
benefit surplus.
The CMI 2022 tables are not expected to be released until the summer of 2023
and have therefore not been incorporated into the mortality assumptions used
in arriving at the 31 March 2023 year-end accounting figures. There remains
considerable uncertainty around the long-term impact and the choice of
appropriate adjustment remains subjective and is limited to the available
parameters within the CMI model. As such, in arriving at mortality assumptions
for 31 March 2023, the group has retained the same assumptions as used for the
31 March 2022.
Although the long-term impacts of the COVID-19 pandemic are not yet fully
known, mortality over 2022 and the early part of 2023 has remained above
pre-pandemic levels. This suggests that the general level of mortality in the
population will be higher than had previously been projected pre-pandemic.
Accordingly, the group has retained its COVID-19 adjustment of a w2021
parameter of 10 per cent within the CMI 2021 projections.
The net pension income before tax in the income statement in respect of the
defined benefit schemes is summarised as follows:
2023 2022
£m £m
Current service cost 6.0 7.5
Curtailments/settlements - -
Administrative expenses 2.5 2.1
Pension expense charged to operating profit 8.5 9.6
Net pension interest credited to investment income (note 6) (28.7) (14.3)
Net pension income credited before tax (20.2) (4.7)
The reconciliation of the opening and closing net pension surplus included in
the statement of financial position is as follows:
2023 2022
£m £m
At the start of the year 1,016.8 689.0
Income recognised in the income statement 20.2 4.7
Contributions 9.1 9.5
Remeasurement (losses)/gains gross of tax (445.3) 313.6
At the end of the year 600.8 1,016.8
The closing surplus at each reporting date is analysed as follows:
2023 2022
£m £m
Present value of defined benefit obligations (2,330.5) (3,018.9)
Fair value of schemes' assets 2,931.3 4,035.7
Net retirement benefit surplus 600.8 1,016.8
The IAS 19 remeasurement loss of £445.3 million (2022: £313.6 million gain)
has largely resulted from an increase to the average discount rate by 1.9 per
cent since the start of the year and a 0.35% decrease to long-term RPI
assumptions have led to significant reduction in the value of the schemes'
defined benefit obligations. This has been offset by a decrease in the fair
value of the schemes' assets due to changes in financial conditions over the
course of the reporting year, as well as experience losses resulting from
actual inflation being greater than previously assumed, including the impact
of pension increases.
The schemes' investment strategies have been designed such that the assets are
fully hedged against the schemes' Technical Provisions funding positions, and
are therefore more than 100% hedged on an IAS19 basis. As a result, increases
in net yields are expected to reduce the Schemes' assets by a greater amount
than the IAS19 liabilities. Further details on the approach to managing
pension scheme risk are set out in the audited consolidated financial
statements of United Utilities Group PLC for the year ended 31 March 2023.
The latest finalised funding valuation was carried out as at 31 March 2021,
and determined that the schemes were fully funded on a low-dependency basis
without any funding deficit that requires additional contributions from the
company over and above those related to current service and expenses.
Member data used in arriving at the liability figure included within the
overall IAS 19 surplus has been based on the finalised actuarial valuation as
at 31 March 2021 for both the group's ESPS and UUPS schemes.
Defined contribution schemes
During the year, the group made £29.2 million (2022: £26.1 million) of
contributions to defined contribution schemes which are included in staff
costs.
13. Borrowings
New borrowings raised during the year ended 31 March 2023 were as follows:
· On 26 April 2022, the group executed a £100 million loan facility,
due April 2030.
· On 29 July 2022, the group executed a £150 million loan facility,
due June 2032.
· On 30 August, the group executed a £135 million loan facility, due
August 2030.
· On 16 December 2022, the group issued a JPY8.5 billion fixed rate
notes, due December 2037. On issue, the JPY bond was immediately swapped to
£51.1 million of principal outstanding.
· On 31 January 2023, the group issued £75 million fixed rate notes as
a fungible increase to £250 million fixed rate notes issued previously, due
February 2038.
On 6 April 2023, the group issued £300 million fixed rate notes, due October
2038.
On 27 April 2023, the group executed a £100 million loan facility, due April
2032.
Notes were issued through private placement under the Euro Medium-Term Note
Programme.
The group entered into two undrawn committed borrowing facilities in the
period, and a further four were renewed, with amounts available under these
facilities totalling £150 million.
Borrowings at 31 March 2023 include £59.5 million in relation to lease
liabilities (2022: £60.9 million), of which £55.9 million (2022: £57.6
million) was classified as non-current and £3.6 million (2022: £3.3 million)
was classified as current.
14. Fair values of financial instruments
The fair values of financial instruments are shown in the table below.
2023 2022
Fair value Carrying value Fair value Carrying value
£m £m £m £m
Financial assets at fair value through profit or loss
Derivative financial assets - fair value hedge 65.4 65.4 156.3 156.3
Derivative financial assets - held for trading 352.0 352.0 190.1 190.1
Derivative financial assets - cash flow hedge 59.7 59.7 111.0 111.0
Investments 0.1 0.1 0.1 0.1
Financial liabilities at fair value through profit or loss
Derivative financial liabilities - fair value hedge (215.3) (215.3) (87.4) (87.4)
Derivative financial liabilities - held for trading (3.4) (3.4) (49.8) (49.8)
Derivative financial liabilities - cash flow hedge (34.1) (34.1) - -
Financial liabilities designated as fair value through profit or loss (361.0) (361.0) (369.9) (369.9)
Financial instruments for which fair value does not approximate carrying value
Financial liabilities in fair value hedge relationships (2,310.1) (2,332.3) (2,511.5) (2,494.0)
Other financial liabilities at amortised cost (5,400.0) (5,742.1) (6,283.7) (5,115.9)
(7,846.7) (8,211.0) (8,844.8) (7,659.5)
The group has calculated fair values using quoted prices where an active
market exists, which has resulted in 'level 1' fair value liability
measurements under the IFRS 13 'Fair Value Measurement' hierarchy of £1,936.1
million (2022: £2,206.6 million) for financial liabilities in fair value
hedge relationships, and £2,541.3 million (2022: £2,383.8 million) for other
financial liabilities at amortised cost.
The £113.0 million decrease (2022: £497.2 million decrease) in 'level 1'
fair value liability measurements primarily reflects the significant rise in
interest rates during the year.
In the absence of an appropriate quoted price, the group has applied
discounted cash flow valuation models utilising market available data, which
are classified as 'level 2' valuations. More information in relation to the
valuation techniques used by the group and the IFRS 13 hierarchy can be found
in the audited financial statements of United Utilities Group PLC for the year
ended 31 March 2023.
The reason for the decrease in the difference between the fair value and
carrying value of the group's borrowings at 31 March 2023 compared with the
position at 31 March 2022 is due to an increase in both the risk free rate and
credit spreads.
15. Cash generated from operations
2023 2022
£m £m
Operating profit 440.8 610.0
Adjustments for:
Depreciation of property, plant and equipment 385.5 377.0
Amortisation of intangible assets 38.1 41.2
Loss on disposal of property, plant and equipment 4.2 3.9
Amortisation of deferred grants and contributions (16.2) (15.8)
Equity-settled share-based payments charge 5.1 4.8
Changes in working capital:
Increase/(decrease) in inventories 3.9 0.1
Decrease in trade and other receivables 27.2 13.2
Increase/(decrease) in trade and other payables (5.5) 24.7
Increase/(Decrease) in provisions (0.4) 2.4
Pension contributions paid less pension expense charged to operating profit 0.4 0.1
Cash generated from operations 883.1 1,061.6
16. Net debt
2023 2022
£m £m
At the start of the year 7,570.0 7,305.8
Net capital expenditure 688.9 626.7
Dividends (note 10) 301.2 295.5
Interest 102.4 118.3
Inflation expense on index-linked debt (note 7) 463.4 227.9
Exchange rate movement on bonds and term borrowings 20.6 4.3
Tax (6.8) 8.9
Non-cash movements in lease liabilities (1.1) 2.4
Extension of loans to joint ventures (5.0) 13.0
Proceeds from disposal of subsidiary (90.5) -
Other 8.5 0.1
Fair value movements 32.3 28.7
Cash generated from operations (note 15) (883.1) (1,061.6)
At the end of the year 8,200.8 7,570.0
Fair value movements includes the indexation credit relating to the group's
inflation swap portfolio of £85.3 million (2022: £29.9 million). The
remaining fair value and foreign exchange movements in the year on the group's
bond and bank borrowings are materially hedged by the fair value swap
portfolio.
Notional net debt totals £8,193.3 million as at 31 March 2023 (2022:
£7,534.3 million). Notional net debt is calculated as the principal amount of
debt to be repaid, net of cash and short-term deposits, taking: the face value
issued of any nominal sterling debt; the inflation accreted principal of the
group's index-linked debt; and the sterling principal amount of the
cross-currency swaps relating to the group's foreign currency debt.
17. Other reserves
Year ended 31 March 2023
Capital redemption reserve Merger reserve Cost of hedging reserve Cash flow hedge reserve Total
£m £m £m £m £m
At 1 April 2022 1,033.3 (703.6) 0.4 86.1 416.2
Changes in fair value recognised in other comprehensive income (50.6) (44.3)
- - 6.3
Amounts reclassified from other comprehensive income to profit and loss - - - (36.6) (36.6)
Tax on items recorded within other comprehensive income - - (1.6) 19.7 18.1
At 31 March 2023 1,033.3 (703.6) 5.1 18.6 353.4
Year ended 31 March 2022
Capital redemption reserve Merger reserve Cost of hedging reserve Cash flow hedge reserve Total
£m £m £m £m £m
At 1 April 2021 1,033.3 (703.6) 0.4 6.2 336.3
Changes in fair value recognised in other comprehensive income 108 108
- - -
Amounts reclassified from other comprehensive income to profit and loss - - - (1.3) (1.3)
Tax on items recorded within other comprehensive income - - - (26.8) (26.8)
At 31 March 2022 1,033.3 (703.6) 0.4 86.1 416.2
The capital redemption reserve arose as a result of a return of capital to
shareholders following the reverse acquisition of United Utilities PLC by
United Utilities Group PLC in the year ended 31 March 2009. The merger reserve
arose in the same year on consolidation and represents the capital adjustment
to reserves required to effect the reverse acquisition.
The group recognises the cost of hedging reserve as a separate component of
equity. This reserve reflects accumulated fair value movements on
cross-currency swaps resulting from changes in the foreign currency basis
spread, which represents a liquidity charge inherent in foreign exchange
contracts for exchanging currencies and is excluded from the designation of
cross-currency swaps as hedging instruments.
The group designates a number of swaps hedging non-financial risks in cash
flow hedge relationships in order to give a more representative view of
operating costs. Fair value movements relating to the effective part of these
swaps are recognised in other comprehensive income and accumulated in the cash
flow hedging reserve.
18. Commitments and contingent liabilities
At 31 March 2023, there were commitments for future capital expenditure
contracted but not provided for of £338.9 million (2022: £292.8 million).
Since 2016, the group has received indications from a number of property
search companies (PSCs) that they intend to claim compensation for amounts
paid in respect of CON29DW water and drainage search reports, which they
allege should have been provided to them either free of charge or for a
nominal fee in accordance with the Environmental Information Regulations. In
April 2020, a group of over 100 PSCs, comprising companies within the groups
that had previously issued notice of intended claims, served proceedings on
all of the water and sewerage undertakers in England and Wales, including
United Utilities Water Limited, for an unspecified amount of compensation.
This is an industry-wide issue, and while the litigation has progressed during
the year it remains in its early stages. The litigation's likely direction and
the quantum of any compensation being claimed is uncertain at this stage,
however, based on the information currently available, the likelihood of the
claim's success is considered to be low, and any potential outflow is not
expected to be material.
The group has credit support guarantees as well as general performance
commitments and potential liabilities under contract that may give rise to
financial outflow. The group has determined that the possibility of any
outflow arising in respect of these potential liabilities is remote and, as
such, there are no contingent liabilities to be disclosed in this regard
(2022: none).
19. Related party transactions
The related party transactions with the group's joint ventures during the
period and amounts outstanding at the period end date were as follows:
2023 2022
£m £m
Sales of services 335.1 363.1
Charitable contributions advanced to related parties 0.2 0.1
Purchases of goods and services (1.3) -
Interest income and fees recognised on loans to related parties 4.7 2.8
Amounts owed by related parties 102.2 116.4
Amounts owed to related parties - -
Sales of services to related parties mainly represent non-household wholesale
charges to Water Plus that were billed and accrued during the period. These
transactions were on market credit terms in respect of non-household wholesale
charges, which are governed by the wholesale charging rules issued by Ofwat.
Charitable contributions advanced to related parties during the year relate to
amounts paid to Rivington Heritage Trust, a charitable company limited by
guarantee for which United Utilities Water is one of three guarantors.
At 31 March 2023, amounts owed by joint ventures, as recorded within trade and
other receivables in the statement of financial position, were £102.2 million
(March 2022: £116.4 million), comprising £26.7 million (March 2022: £28.5
million) of trade balances, which are unsecured and will be settled in
accordance with normal credit terms, and £75.5 million (March 2022: £80.4
million) relating to loans.
Included within these loans receivable were the following amounts owed by
Water Plus:
· £74.4 million (2022: £79.4 million) outstanding on a £95.0 million
revolving credit facility provided by United Utilities PLC, with a maturity
date of December 2026, bearing a floating rate interest rate of the Bank of
England base rate plus a credit margin. This balance comprises £75.5 million
outstanding, net of a £1.1 million allowance for expected credit losses
(2022: £80.5 million net of a £1.1 million allowance for expected credit
losses); and
· £1.4 million (2022: £1.0 million) receivable being the £11.0
million (2022: £10.6 million) fair value of amounts owed in relation to a
£12.5 million unsecured loan note held by United Utilities PLC, with a
maturity date of 28 March 2027, net of a £0.1 million (2022: £0.1 million)
allowance for expected credit losses and £9.5 million of the group's share of
joint venture losses relating to historic periods as the loan note is deemed
to be part of the group's long-term interest in Water Plus. This is a zero
coupon shareholder loan with a total amount outstanding at 31 March 2023 and
31 March 2022 of £12.5 million, comprising a £11.0 million (2022: £10.6
million) receivable representing the present value of the £12.5 million
payable at maturity discounted using an appropriate market rate of interest at
the inception of the loan, and £1.5 million (2022: £1.9 million) recorded as
an equity contribution to Water Plus recognised within interests in joint
ventures.
A further £0.1 million (2022: £1.4 million) of non-current receivables was
owed by other related parties at 31 March 2023.
During the year, United Utilities PLC provided guarantees in support of Water
Plus in respect of certain amounts owed to wholesalers. The aggregate limit of
these guarantees was £48.9 million, of which £26.0 million related to
guarantees to United Utilities Water Limited.
At 31 March 2023, amounts owed to related parties were £nil (March 2022:
£nil).
20. Events after the reporting period
With the exception of the new borrowings and entering into of a new undrawn
committed borrowing facilities as described in note 12, there were no
significant events after the reporting period requiring disclosure or any
adjustments to the financial position, financial performance, or cash flows
reported as at 31 March 2023.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The responsibility statement below has been prepared in connection with the
group's full annual report for the year ended 31 March 2023. Certain parts
thereof are not included within this announcement.
Responsibilities Statement
We confirm that to the best of our knowledge:
- the financial statements have been prepared in accordance with
UK-adopted international accounting standards; give a true and fair view of
the assets, liabilities, financial position and profit or loss of the company
and the undertakings included in the consolidation taken as a whole; and
- the strategic report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
We consider the annual report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the group's position and performance, business model and strategy.
The directors of United Utilities Group PLC at the date of this announcement
are listed below:
Sir David Higgins
Louise Beardmore
Phil Aspin
Alison Goligher
Liam Butterworth
Kath Cates
Michael Lewis
Paulette Rowe
Doug Webb
This responsibility statement was approved by the board and signed on its
behalf by:
Louise Beardmore Phil Aspin
24 May 2023 24 May 2023
Chief Executive Officer Chief Financial Officer
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