REG - United Utilities Grp - Final Results
15/05/2025 07:00
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RNS Number : 7248I United Utilities Group PLC 15 May 2025
2024/25 FULL YEAR RESULTS STATEMENT
15 May 2025: United Utilities today announces full year results for the year
to 31 March 2025.
Louise Beardmore, Chief Executive Officer, said:
"We have delivered another strong set of results for customers, communities
and the environment in the North West. Our focus on performance has seen us
meet or surpass around 80 per cent of our performance targets over the last
five years, the best performance of any water company.
"Our long-term strategy of investment helped us cut spills per storm overflow
by 24 per cent last year, a total of 20,000 fewer spills and the biggest
year-on-year reduction in the sector. We are one of only three companies to
have achieved our customer targets for services provided to families,
businesses and housing developers every year, and at the same time we have
helped more than 400,000 households in the North West with affordability
support since 2020.
"Looking to the future, we have already started work on our ambitious £13
billion plan for the next five years - the biggest investment in improving
water and wastewater infrastructure in more than a century. We're proud our
plans will deliver a huge boost to customers and communities across the North
West, supporting 30,000 jobs and creating an estimated £35 billion of
economic value for the region."
Key financials - year ended 31 March
Reported Underlying(1)
£m 2025 2024 % change 2025 2024 % change
Revenue 2,145.2 1,949.5 +10.0% 2,145.2 1,949.5 +10.0%
Operating profit 631.5 480.2 +31.5% 633.8 517.8 +22.4%
Profit before tax 355.0 170.0 +108.8% 338.6 220.5 +53.6%
Profit after tax 264.7 126.9 +108.6% 338.3 227.3 +48.8%
EPS (pence) 38.8 18.6 +108.6% 49.6 33.3 +48.9%
2025 2024 % change
DPS (pence) 51.85 49.78 +4.2%
Net regulatory capex (£m) 1,082.7 737.1 +46.9%
RCV(2) (£m) 15,367 14,664 +4.8%
Net debt (£m) 9,345 8,763 +6.7%
RCV gearing(3) (%) 60% 59% +1%
RoRE(4,5) (%) 1.1% 7.5% -6.4%
Operational highlights
● Top quartile performer, meeting or beating around 80 per cent of targets over
the AMP, the highest average performance in the industry(6)
● Cumulative ODI rewards of £129 million for AMP7, on a real post-tax basis
having earned a reward in every year of the AMP
● 39 per cent reduction in spills from overflows since 2020, with almost 20,000
fewer spills than last year and 31 per cent lower duration, despite continued
high levels of rainfall
● 4 star 'industry leading' EPA rating for 2023, having achieved the top 3 and 4
star ratings in every year of the EA's Environmental Performance Assessment to
date
● Consistently strong performance against the MeX's, one of only three companies
achieving a reward in both CMeX and DMeX in every year, and the third highest
CMeX reward in AMP7
● Helped 414,000 customers with affordability support in the last five years,
and around 540,000 customers registered to receive tailored support through
Priority Services
● Highly committed colleagues, with 87 per cent engagement scoring 7 points
higher than the UK high performance norm
Financial highlights
● Underlying operating profit of £634m, reported operating profit of £632m
● Underlying EPS of 49.6p, up from 33.3p, and reported EPS of 38.8p
● Low level gearing at 60% and fully equity funded for AMP8, with robust credit
ratings
● Liquidity extending into 2027
● Recommended final dividend of 34.57p, in line with policy
● Capital investment of £1,083m, a 47 per cent increase on prior year
AMP8 financial framework
● Targeting to outperform the regulatory contract by at least 100 bps
● Capital investment of around £9 billion
● RCV growth guidance of c.7% nominal compound annual growth rate
● Targeting dividend growth in line with CPIH
● Maintain gearing within target range of 55-65%
Results presentation and Q&A
There is a presentation outlining our full year results available on our
website, and there will be a live Q&A session with management at 10:30am
UK/ 11:30am CET.
Zoom link:
https://us06web.zoom.us/j/86923795894?pwd=4OgY6XK14ljE0BBnOH1R4ZLnwU1zAd.1
(https://urldefense.com/v3/__https:/us06web.zoom.us/j/86923795894?pwd=4OgY6XK14ljE0BBnOH1R4ZLnwU1zAd.1__;!!FvJKb9TgAvphWVQ!akAW_eV0eyFISX8oYVDvTdC_k7iD_JZKZWffGWQWDJFny7rnte-RoQkxxdcRjPMYe8h-o6uEoK3WM3FOw82MtTVP$)
Meeting ID: 869 2379 5894
Passcode: 583997
Enquiries
Investors and Analysts
Chris Laybutt - Investor Relations and Clean Energy Strategy Director +44 7769 556 858
Jennifer Platt - Investor Relations Manager +44 7733 064 907
Media
Gaynor Kenyon - Corporate Affairs Director +44 7753 622 282
Graeme Wilson - Teneo Communications +44 207 260 2700
Notes
(1) Underlying measures are defined in the tables within the Underlying Profit
section
(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)
(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)
(4) Return on regulated equity
(5) Prior year restated to reflect post intervention PCC performance due to
the impact of COVID-19 and recalculated tax allowances, in line with Ofwat's
information notice published on 31(st) March 2025
(6) Highest average over the first four years of AMP7, year five performance
for peers will be known in July-25
( )
OPERATIONAL REVIEW
We have delivered a strong performance over the course of AMP7, making
significant improvements and outperforming the regulatory contract. This year,
we accepted the final determination for AMP8, which will see the largest
investment in more than 100 years, helping us to deliver this step change in
performance for customers, communities and the environment.
We have, for some time, been preparing for AMP8 - building new capability,
using an innovative five-county approach, and undertaking early supplier
onboarding. Alongside our strong track record, this gives us confidence that
we can successfully deliver our ambitious investment programme.
While all eyes are firmly looking ahead, as we conclude another busy year and
close out AMP7 I want to reflect on the great progress we have made over the
last five years.
Delivering improvements for customers
We are the only UK water and sewage company to earn the Service Mark with
Distinction from the Institute of Customer Service, the Chartered Institute of
Credit Management excellence in credit management, and the BSI kitemark for
inclusive service, maintaining our focus on service excellence for all
customers.
We have maintained our position as the leading listed company on Ofwat's
measure of customer satisfaction, C-MeX, and we have earned a reward against
this metric in each year and the third highest reward across AMP7,
demonstrating consistently strong performance for household customers. We also
perform strongly on housing developer and business retailer satisfaction,
D-MeX and BR-MeX, meeting our targets since reporting began and expecting to
place in an upper quartile position for both.
We have been driving improvements in water quality across the region, with a
29 per cent reduction in customer contacts over AMP7, achieving our lowest
ever levels. This has been helped by our company-wide culture-change programme
(Water Quality First), as well as some significant targeted investment in
infrastructure.
We have recently reached the halfway point in our eight-year project upgrading
the Vyrnwy Aqueduct to improve water quality for a million customers, which
has been delivered on time and within budget. We also have a number of key
strategic projects underway through AMP8 to deliver further improvements to
water quality.
We saw periods of particularly intense rainfall in the winter of 2024, and the
unprecedented heavy rainfall over the New Year caused a number of rivers to
burst their banks and the collapse of part of the Bridgewater Canal, resulting
in significant flooding. We took part in a multi-agency emergency response
alongside emergency services, the Environment Agency (EA) and local councils,
helping to minimise the impact and assist those affected.
This naturally impacted our weather-responsive wastewater performance measures
- particularly sewer flooding and pollutions - but despite the heavy rainfall
and challenging targets, we continue to deliver improvements, with internal
sewer flooding 19 per cent lower than last year and our lowest ever level of
sewer blockages. We have consistently been one of the strongest performers at
minimising pollution, and the only company to have achieved 'green' status on
serious pollution incidents in the EA's Environmental Performance Assessment
(EPA) every year since it began.
As well as improving our service for customers, we remain focused on
supporting those experiencing affordability or vulnerability challenges. We
have helped 414,000 customers with affordability support in the last five
years, and around 540,000 customers are registered to receive additional
tailored support through our Priority Services offering.
Driving improvements for the environment
Protecting and enhancing the natural environment remains a top priority, and
we are really pleased to have consistently been one of the strongest
performers in the EPA. We have achieved the upper ratings (3-star "good" and
4-star "industry-leading") every year so far, earning the top 4-star rating in
six of the last nine years, including the latest assessment for 2023. As
measurement standards continue to tighten, we are committed to doing more.
Rivers have been an area of particular focus, with improvements delivered
through our AMP7 commitments, and the fast start we have made on tackling
spills from storm overflows. Between the additional AMP7 investment,
accelerating delivery of our Better Rivers programme, and AMP8 investment we
have brought forward targeting some of the highest spilling sites, we have
made big strides.
2024 saw almost 20,000 fewer spills than 2023 and a 31 per cent reduction in
duration. Despite the intense periods of rainfall during the year, spills per
overflow are down 39 per cent since 2020. While excellent progress and
exceeding our target of a one-third reduction by 2025, there remains a long
way to go and our industry-leading AMP8 spill reduction programme will help us
deliver an even bigger step change.
We are at our lowest level of leakage in the North West. This year we have
increased our find and fix rates by 70 per cent, using satellite imagery and
AI capability to find and trace more leaks than ever before. This has been
supported by a new 'no dig' repair capability, which has proven extremely
reliable in trials in the last six months - increasing the speed to fix and
reducing the costs of repair, both of which are key areas of focus as we drive
further improvements against our stretching AMP8 targets.
The work we have been doing on our lowest bill guarantee - helping customers
to reduce their bills and consumption by better understanding their usage,
with targeted communications and water efficiency home audits - has helped to
identify areas of high usage and internal leaks. Once fixed, this has helped
reduce per capita consumption, where we are performing in the upper quartile.
We have made excellent progress with our carbon pledges, and scope 1 and 2
greenhouse gas emissions are down around 10.5 per cent since 2020. We have
completed 3,000 hectares of peatland restoration, surpassing our 2030 target,
and planted more than 640,000 trees in the last five years. We use 100 per
cent renewable electricity, with 23 per cent generated by us or with partners,
and have over 400 all-electric vehicles. We are the only UK water company
taking part in the 'Electric Freightway' project, with four electric HGVs
powered by renewable electricity generated at our Manchester Bioresource
Centre.
Maintaining strong regulatory performance
Our AMP7 performance commitment targets were stretching, but we have met or
beaten around 80 per cent of them across AMP7. This includes strong
performance across a range of water, wastewater, bioresources and customer
measures. While we are pleased with our progress overall, we still have work
to do in some areas, such as volatile weather-impacted measures like internal
sewer flooding where, despite delivering a reduction of around 20 per cent, we
fell short of the very stretching 73 per cent target.
As a result of the significant improvements we have delivered for customers
and the environment, we have earned a cumulative net ODI reward of £129
million for AMP7, and a cumulative return on regulated equity (RoRE) of 6.1
per cent, outperforming the 4 per cent base return.
This strong track record, improving further on the outperformance we delivered
in AMP6, demonstrates our continuous improvement and position as one of the
best performing companies in the sector. This, alongside the investment we
have made during AMP7 on targeted areas such as storm overflows, sets us up
very well for another strong performance in AMP8.
Doing the right thing
We are committed to delivering these and future improvements in the best way
possible for customers, the environment, colleagues, the North West, and all
of our stakeholders.
We continue to prioritise providing a safe and great place to work. Colleague
engagement of 87 per cent is seven points higher than the high performing
norm. We have strong retention, successful graduate and apprentice schemes,
and a continued focus on training, development, health, safety and wellbeing.
Delivering as we go forward will depend on great people, and I am proud to
know that we have such a highly engaged team with the right skills to help us
ensure long-term success, with 91 per cent of our colleagues proud to work at
United Utilities.
Spending money wisely is so important, and we are pleased that our capital
delivery programme incentive - a key performance measure focused on
efficiency, quality, delivery on time, and carbon impact - is very high at
over 99 per cent. We work in strategic partnerships, leveraging opportunities
and resources to accomplish more together, and we have directly invested more
than £21 million in local communities during AMP7.
We continue to perform in the upper quartile across a range of trusted ESG
indices, make use of our sustainable finance framework to raise efficient debt
linked to environmental improvements, and have retained the Fair Tax Mark for
six consecutive years.
Stepping into AMP8
In January 2025, we accepted the final determination set out by the economic
regulator, Ofwat, concluding the price review process for the 2025-30 period
(AMP8).
This gives us certainty over our performance targets and allowed investment
levels for the next five years, enabling us to focus on progressing what will
be the largest investment in water and wastewater infrastructure in more than
a century, helping us to build a stronger, greener and healthier North West.
Stronger - Our investment plans will support 30,000 jobs, both directly and
indirectly through our supply chain, enabling strong economic growth across
the region and creating an estimated £35 billion of economic value for the
North West. Our county-based approach is enabling increased transparency and
helping us to address the specific needs, priorities and opportunities in each
of these unique communities. Our plans include significant improvements to
resilience, such as increasing power resilience with backup batteries
installed at key sites to avoid loss of service during power cuts on the grid,
and protecting sites at risk from coastal and river erosion.
Greener - Environmental improvement is one of the biggest drivers of the
larger investment programme for AMP8, and we will be delivering significant
enhancements. We are also finalising a number of nature pledges in addition to
our climate change ambitions, and using more nature-based solutions in AMP8
than ever before. Our industry-leading investment in storm overflows will help
us deliver the sector-highest targeted reduction in spills in the decade to
2030, and we are going further to protect and improve bathing waters and river
water quality, including enhancing our wastewater treatment and working with
others to reduce phosphorus levels. We are also targeting significant
reductions in leakage, sewer flooding, and pollution incidents, as well as
targeting zero serious pollution incidents.
Healthier - We will deliver significant improvements for customers, including
improving drinking water quality for 2 million customers. We are targeting
significant reductions in customer contacts about water quality, water supply
interruptions, and unplanned outages, helping to deliver a better and more
resilient service every day. With bill increases necessary to deliver the step
change that everyone wants to see, affordability is more important than ever,
particularly in the North West. As well as delivering efficiently with the
third-lowest projected bill in England by 2030, we are doubling our
industry-leading affordability support, and will be helping one in six
households across the North West by 2030.
Our £13 billion investment will help us to deliver a step change on the
things that matter most to customers, communities and the environment -
improving water quality, delivering significant environmental improvements,
supporting jobs and the local economy, while doubling affordability support
for those struggling to pay.
With compound annual asset base growth of around 7 per cent taking our AMP8
closing regulatory capital value (RCV) to over £21 billion, AMP8 marks the
beginning of a higher growth phase, with capital expenditure more than double
what it has been over the last five years. This growth stems from a number of
long-term investment drivers, including the Environment Act 2021, tightening
environmental standards, renewal and replacement of ageing infrastructure,
long-term resource management, resilience to climate change, and net zero
targets.
We are well placed to deliver this step-up in investment, given the strong
financial position we have as we enter AMP8. Our balance sheet strength and
relatively low gearing mean we have the ability to fund our plans without
needing recourse to equity, and our excellent historic performance on
financing and investment-grade credit ratings position us well to maintain
highly efficient debt costs.
It is not just the level of investment and asset growth that is new for AMP8.
Returns have been reset with a higher base and we will see a number of
changes, including many to the outcome delivery incentive (ODI) regime. There
will be a more focused set of performance commitments overall, with the
balance shifting to more common (across the industry) and fewer bespoke
(individual to a company), meaning more comparability and common areas of
focus across the industry.
Ofwat has also introduced new price control deliverables (PCDs) for AMP8 to
monitor the delivery of enhancement programmes, and a new outcome adjustment
mechanism (OAM) designed to protect both companies and customers in the event
that sector performance against common performance commitments is materially
different than expected when setting targets.
We are well prepared for AMP8. Alongside our strong financial position, we
have been building new capabilities and skills within the organisation and
leadership team, engaging early with the supply chain and undertaking
significant onboarding ahead of the start of the new period. This gives us
confidence that we can successfully deliver for all our stakeholders.
We developed five plans tailored for each of the North West counties,
addressing their individual and unique needs, challenges and opportunities.
Engaging with customers and stakeholders in this localised way helped us to
secure strong customer support for our plans, and our approach is providing
more transparency and insight about our services than ever before. This is not
restricted to the planning stage - we have structured our delivery teams
across the five counties, with dedicated stakeholder managers for each, to
help ensure effective delivery.
With such a large programme to deliver, supply chain readiness and efficiency
continue to be high priorities. We undertook extensive early supply chain
engagement as part of our business planning process, and we have already
onboarded more than 100 AMP8 delivery partners.
We have a number of tools and techniques to improve our efficiency further.
This includes increased use of standardised solutions to minimise design
requirements and benefit from economies of scale. It also includes our 'runway
model' approach to capital delivery, where we will use multiple delivery
pathways (or 'runways'), using a wider range of suppliers matched to the
specifics of each job. This will help to reduce contractor indirect costs,
with a more efficient allocation and pricing of risk, and also gives us access
to a wider pool of contractors and the ability to use more small local
businesses.
The final determination may have only been published in December and accepted
in January, but we have already begun work on delivery, making a fast start on
achieving the huge improvements that we have set out to achieve over the next
five years. We are already seeing the fruits of that labour coming through, as
we have ended AMP7 with significant improvements in areas such as reducing
spills from storm overflows.
We are well placed, we are ready, and we are committed to driving a real step
change for the North West.
Regulatory framework
The Water (Special Measures) Act was passed in February this year,
strengthening the power of water industry regulators, and Ofwat is now
consulting on this legislation. We have responded and await the outcome of
this consultation. We share the Government's ambition for a step-change in
environmental performance, and our significant investment plans for AMP8 will
help us to achieve this.
In October 2024, the government launched an independent commission into the
water sector and its regulation with broad terms of reference to review the
regulatory framework, the regulators and incentives that govern the water
industry model and strategic water planning. It also required consideration of
the conditions needed in the private regulated model to attract the investment
required to improve environmental performance, bring more accountability,
rebuild public trust and confidence, and secure a resilient, innovative water
sector and framework that will "work for decades to come".
The commission has launched a call for evidence and is expected to report back
to the Government in the summer of 2025 with a set of recommendations. The
company has contributed fully towards the evidence‑gathering process.
FINANCIAL FRAMEWORK
Upon acceptance of the final determination for the five years to 31 March 2030
(the AMP8 regulatory period), we have updated our financial framework.
Investment and regulated asset growth
Our regulated assets grew at a compound annual growth rate of 5.2 per cent
across the five years to March 2025 (AMP7). Our capital programme for the five
years to March 2030 (AMP8) is significantly larger, due to a number of
long-term investment drivers, meaning we expect to see our regulated assets
grow at a higher compound annual growth rate of around 7 per cent.
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, price control deliverables, operating efficiency, financing and
tax efficiency and customer service. We currently aim to outperform the
regulatory contract by at least 100 bps.
Capital investment
Capital investment is forecast to be approximately £9 billion across the 5
years to March 2030, representing an uplift of around £5 billion compared to
AMP7.
Balance sheet
The board has maintained a target gearing range of 55 to 65 per cent net debt
to regulated capital value. As at 31 March 2025, our gearing is comfortably in
the middle of this range at 60 per cent.
Dividend policy
The group maintains a dividend policy to target a growth rate of CPIH
inflation each year, having increased the dividend at least in line with
inflation for the last 15 years. 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 2024/25 dividend is equal to the 2023/24 dividend
indexed for the movement in CPIH between November 2022 and November 2023).
FY26 OUTLOOK AND GUIDANCE
ODIs
We are forecasting to incur a net customer ODI penalty for 2025/26,
recognising the introduction of new measures in AMP8, with performance
improvements expected to be progressive.
Revenue
Revenue is expected to increase to between £2.5 billion and £2.6 billion in
2025/26 in line with the final determination, adjusted for inflation.
Underlying operating costs
Underlying operating costs are expected to decrease, with higher costs
associated with inflation and growth in the asset base, more than offset by
lower IRE due to a more granular asset recognition, resulting in the greater
component of network expenditure being capitalised.
Depreciation
With continued growth in our asset base and the impact of a more granular
asset recognition, depreciation is expected to increase by around £50 million
year on year.
Underlying net finance expense
Underlying net finance expense is expected to increase by around £50 million
year on year, due to increased debt requirements to fund the step up in
investment in AMP8. As at 31 March 2025, we had £4.7 billion of index-linked
debt exposure, giving rise to a £47 million swing in our annual interest
charge for every 1 per cent change in inflation.
Underlying tax
Our current tax charge is expected to be nil in 2025/26, reflecting expected
benefits in relation to 'full expensing' and the 50 per cent first year
allowances on longer life assets.
Capital expenditure
Capex in 2025/26 is expected to be over £1.5 billion.
FINANCIAL REVIEW
Key financials (£m) - year ended 31 March
Reported Underlying(1)
2025 2024 % change 2025 2024 % change
Revenue 2,145.2 1,949.5 +10.0% 2,145.2 1,949.5 +10.0%
Operating expenses (857.7) (810.7) +5.8% (857.0) (787.1) +8.9%
Infrastructure renewals expenditure (191.1) (219.8) -13.1% (189.5) (205.8) -7.9%
Depreciation and amortisation (464.9) (438.8) +5.9% (464.9) (438.8) +5.9%
Operating profit 631.5 480.2 +31.5% 633.8 517.8 +22.4%
Net finance expense (265.7) (306.1) -13.2% (284.4) (293.2) -3.0%
Share of losses of JVs (10.8) (4.1) +163.4% (10.8) (4.1) +163.4%
Profit before tax 355.0 170.0 +108.8% 338.6 220.5 +53.6%
Tax (charge)/credit (90.3) (43.1) +109.5% (0.3) 6.8 n/a
Profit after tax 264.7 126.9 +108.6% 338.3 227.3 +48.8%
EPS (pence) 38.8 18.6 +108.6% 49.6 33.3 +48.9%
( )
2025 2024 % change
DPS (pence) 51.85 49.78 +4.2%
Net regulatory capex (£m) 1,082.7 737.1 +46.9%
RCV(2) (£m) 15,367 14,664 +4.8%
Net debt (£m) 9,345 8,763 +6.7%
RCV gearing(3) (%) 60% 59% +2.4%
RoRE(4,5) (%) 1.1% 7.5% -6.4%
( )
(1) Underlying measures are defined in the tables within the Underlying Profit
section
(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).
(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).
(4) Return on regulated equity
(5) Prior year restated to reflect post intervention PCC performance due to
the impact of COVID-19 and recalculated tax allowances in line with Ofwat's
information notice published on 31(st) March 2025
We delivered strong underlying financial performance this year. Revenue
increased 10 per cent due to regulatory adjustments, including the 4.2 per
cent CPIH-linked increase allowed as part of our revenue cap. This revenue
increase, partly offset by higher costs as a result of growth in the
underlying asset base and inflationary pressures resulted in underlying
operating profit of £634 million, a 22 per cent increase compared to the
prior year. Reported operating profit was slightly lower than underlying at
£632 million, reflecting an adjusting item in respect of the residual costs
associated with a fractured outlet pipe at our Fleetwood Wastewater Treatment
Works in June 2023.
Non-cash interest expense on our index-linked debt declined, resulting in an
underlying profit after tax of £338 million and an underlying earnings per
share of 49.6 pence. Reported profit after tax was lower at £265 million,
with reported earnings per share of 38.8 pence per share. Adjusted items
between underlying and reported are set out within the Underlying Profit
section.
Our balance sheet remains one of the strongest in the sector, and we are fully
equity funded for AMP8. With RCV gearing at 60% alongside robust credit
ratings, we have financing flexibility as we approach AMP8.
Following the significant financial challenges from inflation over the prior
two financial years, it is reassuring to see the company's underlying earnings
per share return to levels more commensurate with the start of the AMP7
periods and regulatory assumptions more broadly, as the effect of regulatory
revenue increases, which lag the cost impact, take effect.
Revenue
£m
Year to 31 March 2024 1,949.5
Regulatory revenue impact 185.8
Other impacts 9.9
Year to 31 March 2025 2,145.2
Revenue was up £196 million, at £2,145 million, with £186 million
attributable to regulatory adjustments. Adjustments include a 4.2 per cent
CPIH-linked increase to the revenue cap as well as reconciliation adjustments
for under-recovery in prior years, partially offset by 1.5 per cent real
reduction in allowed wholesale revenues as set out in our PR19 final
determination.
Other revenue impacts largely reflect favourable consumption.
Operating profit
£m
Underlying - year to 31 March 2024 517.8
Revenue increase 195.7
Increase to asset base (37.2)
Inflationary impact (31.0)
Investment in performance (7.7)
Other (3.8)
Underlying operating profit - year to 31 March 2025 633.8
Adjusted items* (2.3)
Reported - year to 31 March 2025 631.5
* Adjusted items are set out within the Underlying Profit section.
Underlying operating profit at £634 million was £116 million higher than
last year, largely reflecting the increase in revenue. Underlying operating
costs have increased by £80 million compared to the prior year, largely
reflecting an increase in costs associated with growth in the underlying asset
base and inflationary pressures, as well as additional investment in
performance ahead of AMP8.
Reported operating profit was lower at £632 million, reflecting lower
adjusted items as detailed within the Underlying Profit section.
Our industry-leading affordability schemes, combined with effective credit
collection practices and utilisation of technology, have meant that current
year cash collection has been strong. Our bad debt position remains stable at
1.5 per cent of statutory revenue.
Profit before tax
£m
Underlying - year to 31 March 2024 220.5
Underlying operating profit increase 116.0
Underlying net finance expense reduction 8.8
Share of JVs losses increase (6.7)
Underlying profit before tax - year to 31 March 2025 338.6
Adjusted items * 16.4
Reported - year to 31 March 2025 355.0
* Adjusted items are set out within the Underlying Profit section.
Underlying profit before tax of £339 million compared to a £221 million
underlying profit before tax last year. The £118 million increase reflects
the £116 million increase in underlying operating profit, a £9 million
reduction in underlying net finance expense, partially offset by a £7 million
increase in the share of losses of joint ventures.
Reported profit before tax is £16 million higher, reflecting adjustments
outlined within the Underlying Profit section.
Net finance expense
£m
Underlying - year to 31 March 2024 293.2
Reduction in non-cash indexation on debt and derivatives (90.2)
Increase in net interest payable on debt, derivatives and cash 55.5
Reduction in capitalised interest 12.5
Reduction in pension interest income 15.7
Other (2.3)
Underlying net finance expense - year to 31 March 2025 284.4
Adjusted items * (18.7)
Reported - year to 31 March 2025 265.7
* Adjusted items are set out within the Underlying Profit section.
Underlying net finance expense of £284 million was £9 million lower than the
prior year, reflecting lower inflation applied to our index-linked debt
resulting in a £90 million decrease in non-cash indexation on our debt and
derivative portfolio, partly offset by a reduction in capitalised interest and
pension interest income, as well as an increase in cash interest.
Cash interest has increased by £46 million, primarily reflected the increase
in debt largely due to the accelerated funding ahead of AMP8.
Reported net finance expense was £19 million lower than underlying net
finance expense, reflecting adjustments outlined within the Underlying Profit
section.
● Joint ventures
The group incurred a share of the losses of Water Plus for the year ended 31
March 2025 of £11 million, all of which has been recognised in the income
statement compared to a share of the losses of Water Plus of £4 million for
the year ended 31 March 2024. This increase is mainly due to data cleanse
activities performed by Water Plus during the year, which has informed its
assessment of the recoverability of customer receivables resulting in a higher
bad debt charge.
Profit after tax and earnings per share
PAT Earnings per share
£m Pence/share
Underlying - year to 31 March 2024 227.3 33.3
Underlying profit before tax increase 118.1
Reduction in underlying tax credit (7.1)
Underlying profit after tax - year to 31 March 2025 338.3 49.6
Adjusted items * (73.6)
Reported - year to 31 March 2025 264.7 38.8
* Adjusted items are set out within the Underlying Profit section.
The underlying profit after tax of £338 million was £111 million higher than
the prior year, reflecting the £118 million increase in underlying profit
before tax, partially offset by a £7 million reduction in underlying tax
credit.
Reported profit after tax was lower at £265 million and reported earnings per
share at 38.8 pence per share with the adjusted items between underlying and
reported set out within the Underlying Profit section.
● Tax
We continue to be fully committed to paying our fair share of tax and acting
in an open and transparent manner in relation to our tax affairs and are
delighted to have retained the Fair Tax Mark independent certification for a
sixth year.
The group makes significant contributions to the public finances on its own
behalf as well as collecting and paying over further amounts for its over
6,000 strong workforce. The total payments for 2024/25 were around £257
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 £6.4
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 full expensing
introduced by HMRC in 2023.
The group recognised a current tax debit of £0.4 million, mainly due to a
prior year adjustment in relation to claims for research and development UK
tax allowances on our innovation-related expenditure, in respect of multiple
prior years. It reflects an additional claim submitted during the year along
with adjustments relating to ongoing enquiries from the tax authorities in
relation to these claims.
For the year to 31 March 2025, we recognised a deferred tax charge of £90
million, compared with £49 million last year.
The total effective tax rate, excluding prior year adjustments was 26 per cent
for the year to 31 March 2025 compared with the headline rate of 25 per cent.
There are £7.9 million of tax adjustments recorded within other comprehensive
income, primarily relating to remeasurement movements on the group's defined
benefit pension schemes. The rate at which the deferred tax liabilities are
measured on the group's defined benefit pension scheme is 25 per cent, being
the rate applicable to refunds from a trust.
Dividend per share
The Board has proposed a final dividend of 34.57 pence per ordinary share in
respect of the year ended 31 March 2025. This is an increase of 4.2 per cent
compared with the dividend last year, in line with the group's dividend policy
of targeting a growth rate of CPIH inflation each year. The 4.2 per cent
increase is based on the CPIH element included within allowed regulated
revenue for the 2024/25 financial year (i.e. the movement in CPIH between
November 2022 and November 2023).
The final dividend is expected to be paid on 1 August 2025 to shareholders on
the register at the close of business on 20 June 2025. The ex-dividend date
for the final dividend is 19 June 2025.
A dividend reinvestment plan (DRIP) is provided by Equiniti Financial Services
Limited. The DRIP enables the company's shareholders to elect to have their
cash dividend payments used to purchase the company's shares. More information
can be found at www.shareview.co.uk/info/drip
(https://urldefense.com/v3/__http:/www.shareview.co.uk/info/drip__;!!FvJKb9TgAvphWVQ!ZQcXqVPW7-CX6Mu2eJ844HadQqtQxFVhRWSvtDb2G_pkAJ6eNPrgzFZFKed_52ajmgKBNPFW-6xBGoefNhMz9Hbe1mP4vZAU_wSb$)
. The closing date for DRIP elections is 11 July 2025.
The ISIN for UUG is GB00B39J2M42 and the TIDM is UU.
Cash flow
Net cash generated from operating activities for the year to 31 March 2025 was
£918 million, £173 million higher than £745 million last year, principally
due to increased revenue. The net cash generated from continuing operating
activities supports the dividends paid of £344 million and partially funds
some of the group's net capital expenditure of £988 million, with the balance
being funded by net borrowings and cash and cash equivalents.
The group's consolidated statement of cash flows can be within these condensed
consolidated financial statements.
Pensions
As at 31 January March 2025, the group had an IAS 19 net pension surplus of
£302 million, compared with a surplus of £268 million at 31 March 2024. This
£34 million increase has been driven mainly by £19 million of remeasurement
gains, as an increase in the discount rate assumption and changes in the
demographic assumptions following the triennial valuation reduce the defined
benefit obligation by more than the value of the schemes assets.
Further detail on pensions is provided in note 11 ('Retirement benefit
surplus') of these condensed consolidated financial statements.
Financing
Net debt £m
At 31 March 2024 8,762.7
Cash generated from operations (1,082.7)
Net capital expenditure 987.8
Dividends 344.1
Indexation 161.7
Interest 171.0
Fair value movements (20.8)
Exchange rate movements on bonds and term borrowings (13.2)
Other* 34.9
At 31 March 2025 9,345.5
* Other items include c.£27m of non-cash movements in respect of lease
liabilities.
Net debt at 31 March 2025 was £9,345 million, compared with £8,763 million
at 31 March 2024. This comprises gross borrowings with a carrying value of
£10,789 million, net derivative liabilities hedging specific debt instruments
of £99 million and total indexation on inflation swaps of £131 million, and
is net of cash and bank deposits of £1,673 million.
Gearing, measured as group net debt including a £74 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) of £15.4 billion, was 60 per cent at 31 March 2025,
slightly higher than the 59 per cent at 31 March 2024 and still comfortably
within our target range.
● Cost of debt
As at 31 March 2025, the group had approximately £3.5 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 £3.4 billion at an
average real rate of 1.4 per cent, and £1.3 billion of CPI or CPIH-linked
debt exposure at an average real rate of -0.6 per cent.
A lower RPI inflation charge compared with last year contributed to the
group's average effective interest rate of 4.0 per cent being lower than the
rate of 4.7 per cent last year. More information on this can be found later in
the document.
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 3.5 per cent for the current financial year.
● Credit ratings
UUW's senior unsecured debt obligations are rated Baa1 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. Debt issued by
UUW's financing subsidiary, United Utilities Water Finance PLC, is guaranteed
by UUW and is therefore rated in line with UUW. United Utilities PLC's senior
unsecured debt obligations are rated Baa2 with Moody's, BBB+ 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 the year to March 2025, we raised c.£1.4 billion of term funding,
comprising of a 27-year £350 million sustainable public bond in May, a
EUR175 million tap of a 9.8 year green bond in August, a £150 million tap of
a 21.4-year public bond in September, a £75 million tap of a 13.4 year public
bond in September, an 11-year NOK1.5 billion bond in October, and an 8 year
EUR650 million green public bond in February. In addition, in the year to
March 2025 we entered into £75 million of new relationship bank revolving
credit facilities, entered into £250 million of new liquidity facilities,
increased the amount of existing facilities by £75 million and extended the
maturity date on £150 million of existing facilities by a further year.
● 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 2025,
approximately 37 per cent of the group's net debt was in RPI-linked form,
representing around 22 per cent of UUW's regulatory capital value, with an
average real interest rate of 1.4 per cent. A further 14 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 approximately 15 years.
Our AMP7 inflation hedging policy has been to target around 50 per cent of net
debt to be maintained in index-linked form. We have taken the opportunity to
consider the appropriateness of this policy for AMP8 and have decided to
transition to a lower target of 33 per cent. This continues to reflect a
balanced assessment across a range of factors and aligns more closely with
Ofwat's notional company assumption and our listed peers. Transition to the
new policy target will happen progressively over the period, given the
significant financing requirements for AMP8.
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 2025, we had liquidity extending out to 2027, comprising cash and
bank 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 ongoing capital
investment programme.
Return on Regulated Equity (RoRE)
Average RoRE for AMP7 was 6.1 per cent on a real, RPI/CPIH blended basis. In
addition to the base return of 4.0 per cent (including our 11 basis point fast
track reward that we received in each of the five years of the AMP), we
delivered 2.1 per cent of outperformance comprising:
● Financing outperformance
We earned financing outperformance over the AMP of 2.8 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.
● Tax outperformance
Outperformance on tax largely reflects the impact of allowable tax deductions
on capital investment including full expensing introduced in 2023. Tax
outperformance of 2.0 per cent across AMP7 has been updated to reflect
recalculated tax allowances published by Ofwat in March 2025, which resulted
in a downwards adjustment of 0.6 per cent on average, leading to a net
outperformance of 1.4 per cent.
● Customer outcome delivery incentives (ODIs)
Customer ODI outperformance of 0.5 per cent reflects a net reward in each year
of AMP7, exceeding c.80 per cent of our performance commitments across the 5
years. Significant rainfall in 2023 and 2024 naturally had an impact on our
weather responsive wastewater measures, but we have performed well in water,
customer and bioresources, achieving net rewards in each of these areas. As a
result of COVID-19, Ofwat published updated PCC performance models in March
2025, which resulted in a modest upward adjustment.
Customer ODI rewards and penalties are applied to revenues with a two-year
lag. As we are at the end of the AMP7 regulatory period, the payments earned
in 2024/25 reporting year will be reflected in adjustments to revenues during
AMP8.
● Totex performance
The totex impact on RoRE of -2.2 per cent reflects the combined impact of
previously announced investment programmes, and further accelerated investment
brought forward from AMP8, to deliver environmental improvements (including
"Better Rivers: Better North West") and to improve service for customers
(including Dynamic Network Management and Drinking water quality
improvements). This has been further increased by inflationary pressures on
costs, most notably on power and chemicals and the impact of isolated events
across AMP7 such as the freeze-thaw incident in FY23 and the fractured pipe
outlet in Fleetwood last year. The current year impact is higher as a result
of phasing of the additional investment.
● Retail performance
The retail impact on RoRE of -0.4 per cent reflects a small underperformance
in household retail resulting from the impacts of cost of living and
inflationary cost pressures.
After accounting for the impact of inflation we've seen on returns across the
5-year period, nominal returns reached an average of 11.5 per cent.
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 later in this document. 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 titled measures
presented by other companies. The group determines adjusted items in the
calculation of its underlying measures against a framework that 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
Fleetwood outfall pipe fracture In June 2023, the group suffered a large-scale outfall pipe fracture at a
major wastewater treatment works at Fleetwood. The specific nature of this
incident, and the activity involved in remediating this failure was unlike
anything that would be typically experienced. As such, the associated costs,
which were incurred across both operating expenditure and infrastructure
renewals expenditure, were not representative of normal business activity and,
therefore, the costs are excluded in arriving at underlying operating profit.
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 31 March
2025 2024
£m £m
Operating profit per published results 631.5 480.2
Fleetwood outfall pipe fracture 2.3 37.6
Underlying operating profit 633.8 517.8
Net finance expense
£m £m
Finance expense (371.9) (391.7)
Investment income 106.2 85.6
Net finance expense per published results (265.7) (306.1)
Adjustments:
Fair value gains/(losses) on debt and derivative instruments, excluding (18.7) 12.9
interest on derivatives and debt under fair value option
Underlying net finance expense (284.4) (293.2)
£m £m
Share of (losses) of joint ventures (10.8) (4.1)
Profit before tax per published results 355.0 170.0
Adjustments:
In respect of operating profit 2.3 37.6
In respect of net finance expense (18.7) 12.9
Underlying profit before tax 338.6 220.5
Profit after tax per published results 264.7 126.9
Adjustments:
In respect of profit before tax (16.4) 50.5
Deferred tax adjustment 90.0 48.9
Tax in respect of adjustments to underlying profit before tax (0.0) 1.0
Underlying profit after tax 338.3 227.3
Earnings per share
£m £m
Profit after tax per published results (a) 264.7 126.9
Underlying profit after tax (b) 338.3 227.3
Weighted average number of shares in issue, in millions (c) 681.9m 681.9m
Earnings per share per published results, in pence (a/c) 38.8 18.6
Underlying earnings per share, in pence (b/c) 49.6 33.3
Dividend per share, in pence 51.85p 49.78p
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 31 March
2025 2024
£m £m
Underlying net finance expense (284.4) (293.2)
Adjustments:
Net pension interest income (12.9) (28.6)
Adjustment for capitalised borrowing costs (68.5) (81.0)
Net finance expense for effective interest rate (365.8) (402.8)
Average notional net debt(1) (9,057) (8,504)
Average effective interest rate 4.0% 4.7%
Effective interest rate on index-linked debt 4.3% 6.2%
Effective interest rate on other debt 3.8% 2.9%
( )
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 2025 31 March 2024
£m £m
Group underlying operating profit 633.8 517.8
Underlying operating profit not relating to UUW 3.7 6.1
UUW statutory underlying operating profit (unaudited) 637.5 523.9
Revenue recognition 1.3 (1.1)
Capitalised borrowing costs 13.6 11.2
Reclassification of regulatory other income (not included in UUW operating (31.1) (32.2)
profit)
Reversal of the innovation fund 8.3 6.5
Other differences (including non-appointed business) 1.4 (1.0)
UUW regulatory underlying operating profit (unaudited) 631.0 507.3
Return on Regulated Equity (RoRE)
UUW's RoRE, presented on a real return basis:
Year ended AMP7
31 March 2025
Base return 4.0% 4.0%
Financing performance 2.1% 2.8%
Tax performance 2.0% 1.4%
Customer ODI performance 0.5% 0.5%
Totex performance -6.9% -2.2%
Retail performance -0.6% -0.4%
RoRE 1.1% 6.1%
1 Notional net debt is calculated as the principal amount of debt to be
repaid, net of cash and bank deposits, taking: the face value issued of any
nominal sterling debt, the inflation accreted principal on the group's index
linked debt, and the sterling principal amount of the cross currency swaps
relating to the group's foreign currency debt.
PRINCIPAL RISKS AND UNCERTAINTIES
Our approach to risk management
Our approach to risk management, including how we identify and assess risk,
the oversight and governance process and focus on continual improvement
remains largely unchanged from last year as described in our Annual Report.
Risk profile
A key feature of the business risk profile is inherent risk areas. These are
categories of risk that are based on the value chain of the company,
reflecting the interrelationship of the primary (water service and wastewater
service including Bioresources), and supportive activities or areas of
responsibility such as finance, supply chain, environment and health and
safety where value can be gained, preserved or lost. As a result, the inherent
risk areas support the identification and/or gap analysis of all types of
risks, facilitate analysis of correlation and interdependency, and provide the
platform for determining risk appetite and tolerance, which in turn helps us
to articulate our direction and priorities to support decision-making around
risk and resilience. Underpinning the inherent risk areas are approximately
100 company's objectives and obligations, and cover core elements of the
production lines, systems, networks and activities across the business. Each
event-based risk remains dynamic by reflecting new and emerging circumstance
relative to the ever-changing external threats and internal vulnerabilities.
We have identified a number of common causal and consequence themes that
relate to multiple risks. This allows us to understand correlating risk
enabling us to take a holistic view of the strengths, weaknesses and gaps in
our controls, and to consider the short, medium and long-term implications of
risks materialising. Categorisation indicates seven causal themes and six
consequence themes:
● Causal themes: asset health; climate change/extreme weather; culture;
demographic change; economic conditions; legislative and regulatory change;
and technology and data.
● Consequence themes: environmental impact; investors; non-compliance; people;
service delivery; and suppliers.
Our principal risks
In January 2024, the FRC published a revised UK Corporate Governance Code (the
code), with the most significant change being in respect of Provision 29 which
relates to the board monitoring the risk management and internal control
framework. In accordance with the revised code, the board will make a
declaration of the effectiveness of material controls from financial year
2026/27, which will supplement the existing annual assessment of risk
management and internal control systems. As we take steps in preparation for
the material controls declaration we have renewed our definition of which
event-based risks, individually or collectively, are to be considered as a
principal risk:
● Material impact risks - risks, which in the maximum worst case, have severe
one-off financial and non-financial impacts; and
● Significant long-term risks - risks with significant exposure (likelihood of
occurrence of the event multiplied by the most likely financial impact over
the long-term after consideration of the current control environment).
Our principal risks therefore represent those risks which, in a remote but
plausible scenario, could initiate corporate failure (material impact risks)
and those risks which are likely to have a significant long-term impact on
company value if they were to crystallise. As our definition of material
impact risks highlights those risks that have the most significant impact (if
they crystallise in the worst case), it naturally identifies risks which place
significant reliance on mitigating controls. Therefore, our future material
controls declaration will be in respect of the key controls which mitigate our
material impact risks.
A. Strategic aqueduct failure
Risk exposure: We own and operate nine aqueducts, which transfer water from
major treatment works and large service reservoirs to the wider network. Asset
deterioration and damage (caused by third party or natural event) are key risk
factors to water supply and/or quality relative to large proportions of our
customer base. The Haweswater aqueduct is the most significant asset of this
type and currently has the lowest level of resilience.
Control/mitigation: We are committed to delivering a resilient supply of
water. Material controls are:
● Rehabilitation/restoration: Current initiatives include the Haweswater
Aqueduct Resilience Programme and Vyrnwy Aqueduct Modernisation Programme.
● Contingency plans: Plans to minimise environmental damage and deploy
alternative supply options.
Other controls include protective easements, inspections, and monitoring of
flow, pressure and turbidity via sensors and alarms.
Governance: Water quality first board; and Water price control.
Assurance: Engineering team technical reviews; Assurance team reviews; and
cyclical internal audits.
B. Treatment and transportation of wastewater
Risk exposure: We own and operate network and treatment assets to collect and
treat wastewater before it is safely returned to the environment. Risk factors
to the hydraulic and operational capacity include: population growth; extreme
weather (amplified by climate change); increased surface runoff due to
residential and commercial developments; improper or harmful use of the sewer
systems; and inherent asset health issues. Consequential failure, now subject
to tightening legislation, can result in unpermitted storm or emergency
overflow activations, sewer flooding and environmental damage.
Control/mitigation: We focus on providing reliable and resilient wastewater
services. Material controls are:
● Serviceability: Desilting, cleaning and maintenance of sewers and wet wells.
● Maintenance: Inspection, servicing, repair and replacement of assets due to
proactive and reactive activity.
● Dynamic Network Management: Proactive decision making and action driven by
machine learning system monitoring of strategically placed sensors.
● Licence to operate: Training and competence.
Other controls include customer awareness, trade effluent management and
emergency response. In addition, our Better Rivers programme focuses on
improving river water quality and reducing spills from storm and emergency
overflow operation.
Governance: Wastewater Price control; Flood committee; and Pollution
committee.
Assurance: Assurance team reviews; and cyclical internal audits.
C. Cyber
Risk exposure: As we continue to develop our digital capability, we become
more reliant on connected technology, not only in the way we operate, but also
the way in which we communicate with our customers and the wider community.
Cyber incidents continue to grow in all industries with a constantly changing
threat landscape. The potential for data and technology assets to be
compromised is a key risk to business processes and operations.
Control/mitigation: We employ a multi-layer control environment with the
material controls being:
● Infrastructure access controls: Perimeter and internal firewalls, and
intrusion detection systems.
● System access controls: Restrictions to systems, data and internet usage.
● Point protection: Anti-malware suite and mail gateway service which includes
malware detection, transmission protocols, and endpoint actions.
● Monitoring and response: Capability to identify and respond to threats via our
Security Operation Centre.
Other controls include awareness training and business continuity plans.
Governance: Security steering group.
Assurance: Security team reviews; annual internal audit; and external reviews.
D. Water availability
Risk exposure: Water availability is a long-term risk for the UK relative to
climate change and increased demand from population growth and increasing
industrial usage. It is one of the most sensitive risks to climate change with
lower-than-average rainfall and changing seasons affecting water resources,
while extended periods of hot weather increases evaporation and demand. Both
the environment and the capacity to supply water can be affected with the
potential for water use restrictions to be implemented. Changing environmental
legislation on abstraction and compensation is also a factor.
Control/mitigation: We are committed to the sustainability and resilience of
water resources. Material controls are:
● Strategy: Our Water Resources Management Plan (WRMP) takes account of climate
and demographic change over short, medium and long-term horizons.
● Production planning: Proactive activity to balance water availability and
production capacity against forecast demand.
● Contingency plan: The Drought Plan sets out the actions we will take in a
drought situation.
Other controls include abstraction and leakage management, and water
efficiency programmes.
Governance: Water quality first board; and Water price control
Assurance: Assurance team reviews; and internal audits.
E. Treasury risk
Risk exposure: We are inherently exposed to liquidity, market, credit and
capital risk due to our debt financing, cash and derivative holdings, defined
benefit pension scheme and a significant annual commodity spend, notably
energy. Risk factors include market fluctuations, cost or revenue shocks,
process or system errors or failures (internal or counterparty), and company
or sector poor performance. Impacts can be conflated and range significantly
relating to wholesale revenue, the group's Regulatory Capital Value, the cost
of debt, goods and services, cash-flow issues, defaults, breach of covenants,
inability to access debt or cash deposits and ultimately insolvency.
Control/mitigation: We have a robust and prudent approach to financial risk
management. Material controls are:
● Approved limits: Interest, inflation, commodity exposure limits, and credit
rating and financial ratio tolerance levels.
● Control of work: A management system that includes authorisation, transaction
parameters, segregation of duties and supervision.
● Licence to operate: Training and competence.
Other controls include company business planning and monitoring of both
internal and counterparty performance. The banking resolution regime also
provides protection in the event of bank failures.
Governance: Operational compliance review; Executive performance meeting; and
Treasury committee.
Assurance: Cyclical internal audit.
F. Dam failure
Risk exposure: We own and operate a fleet of over 100 dams and service
reservoirs, many of which fall under statutory regulations due to their
significant capacity. The integrity of all dams is fundamental to water
availability, and the safety of society and property downstream. Flood damage,
overtopping, earthquake or erosion could, in remote circumstances, result in
an uncontrolled release of a significant volume of water with catastrophic
implications.
Control/mitigation: Focusing on maintaining extremely low probabilities of
individual dam failure, material controls are:
● Portfolio Risk Assessment (PRA): Assessment of individual dams in the context
of societal risk.
● Inspections: Regular monitoring by catchment teams and Supervising Engineers.
● Remedial work: Fixes based on PRA or statutory requirements "in the interest
of safety" (ITIOS).
Other controls include ground maintenance to manage vegetation and erosion,
and contingency plans.
Governance: Dam safety group.
Assurance: Assurance team reviews; cyclical internal audits; Panel engineer
inspections.
G. Terrorism
Risk exposure: The water industry is classed as one of 13 'Critical National
Infrastructure' (CNI) sectors which are defined as facilities, systems, sites,
information, people, networks and processes, necessary for a country to
function and upon which daily life depends. Within this definition, a number
of specific UU assets are assigned a CNI or 'National Infrastructure' (NI)
designation which, although deemed as remote, could if compromised, lead to
severe economic and social consequences.
Control/mitigation: We employ a multi-layered approach in accordance with the
Security and Emergency Measures Direction (SEMD) of the Water Industry Act.
Material controls are:
● Physical access controls: These include gates, fences, security guards, CCTV
and access control systems.
● Monitoring and response: Security alarm management via our Integrated Control
Centre.
Other controls include the physical hardening of assets based on priority and
operational site inspections.
Governance: Security steering group.
Assurance: Security team reviews; Assurance team reviews; cyclical internal
audits; and external reviews.
H. Failure to treat water
Risk exposure: Threats to water treatment include asset health, process
failure and the contamination (natural, chemical or biological) of raw water.
Climate change is a key factor of raw water contamination due to intensifying
catchment erosion and runoff, more frequent wildfires and increasing algal
bloom which can produce taste and odour problems. Failure to treat water can
lead to non-compliance with regulatory standards, rejection of water by
consumers for aesthetics or, in extreme cases, public health issues.
Control/mitigation: We are committed to providing wholesome drinking water.
Material controls are:
● Sampling & testing: Occurs across the entire system to ensure water is
safe and compliant.
● Sensors & alarms: Monitors deviations from acceptable levels with alarm
triggered response.
● Maintenance: Inspection, servicing, repair and replacement of assets due to
proactive and reactive activity.
● Licence to operate: Training and competence.
Other controls include an end-to-end risk assessment process, contingency
plans, and the monitoring of the regulatory position on emerging contaminants.
Governance: Water quality first board; and Water price control.
Assurance: Scientific service team reviews; Assurance team reviews; and
cyclical internal audits.
I. Process safety
Risk exposure: Our activities include chemical, biological and physical
processes that are inherently hazardous, with the storage of toxic and
explosive gases across multiple sites (two of which fall under the Control of
Major Accident Hazard (COMAH) regulations). An unintentional release of
chemicals, energy, or other potentially dangerous materials (including steam)
during these day-to-day activities could, in the worst case, have a serious
effect people, plant/equipment and the environment.
Control/mitigation: We are committed to improving health and safety
performance, with process safety being a primary area of focus. Material
controls are:
● Control of work: A management system that includes authorisation, isolation
and permit to work.
● Management of change: Risk assessment and safe, effective implementation of
changes.
● Maintenance: Inspection, servicing, repair and replacement of assets due to
proactive and reactive activity.
● Licence to operate: Training and competence.
Other controls include monitoring through sensors and alarms and
emergency/contingency plans.
Governance: Process safety group; and Health & safety board.
Assurance: H&S team reviews; Assurance team reviews; and cyclical internal
audit.
J. Misstatement of reported information
Risk exposure: We are bound by legislation and regulation to provide statutory
financial accounts and regulatory reports to demonstrate financial health,
performance, compliance with legal and regulatory requirements, and provide
information to stakeholders for their ongoing interest and/or investment in
the company. Failure to provide accurate and/or complete information is
reputationally damaging and, depending on the nature of any misstatement or
misreport, could accrue significant penalties and additional scrutiny.
Control/mitigation: We are committed to reporting in an open, compliant and
transparent way. Material controls are:
● Financial controls: A management system including journal procedures,
analytical reviews and control accounts.
● Regulatory reporting framework: A set of principles relating to reporting
criteria, accountabilities, data capture, governance and assurance.
● Validation: The identification of potential errors and reconciliation of
financial parameters.
Other controls include accounting policies, schedules, risk assessment and
management of queries.
Governance: Executive performance meetings; Audit committee; Compliance
committee.
Assurance: Financial control team review; Regulation and compliance team
review; internal audits; and external audit.
K. Fraud
Risk exposure: The scale of UU's operations presents multiple opportunities
for fraud to be perpetrated from inside and outside of the company,
potentially impacting us, our stakeholders and third parties. Fraud can be
committed by individuals or groups with examples including false
representation, unauthorised disclosure of personal information, the supply of
inferior products / false invoices and misuse or theft of company property.
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduced a
new corporate offence for failure to prevent fraud, which can carry an
unlimited fine.
Control/mitigation: We are committed to preventing fraud. Material controls
are:
● Control of work: A management system that includes authorisation, delegated
authority, segregation of duties, supervision and data protection procedures.
● System access controls: Restrictions to systems, data and internet usage.
● Procurement & purchasing standards: Strict procedures to procure services
and purchase goods.
● Verification: Checks on invoices, bills and refunds.
Other controls include awareness training, confidential reporting and a fraud
risk assessment.
Governance: Security steering group; Whistleblowing committee; Audit
committee; and Group board.
Assurance: Departmental review; cyclical internal audit; and external review.
L. Recycling of biosolids
Risk exposure: Wastewater treatment generates significant quantities of sludge
which is subsequently treated to produce biosolids, the majority of which are
recycled to agriculture as the most practical environmental option. A
reduction in the landbank could have significant implications to strategy and
operations with a total loss being the worst-case scenario. Threats include:
the quality of biosolids; changes in public or political perception; changes
in regulations associated with emerging contaminants and climate change;
and/or the willingness of farmers or landowners to receive biosolids.
Control/mitigation: Treatment, sampling and testing ensures that quality
standards are met, and we work closely with farmers, landowners and
contractors to ensure compliance with regulations (notably the Biosolids
Assurance Scheme). We are also investing in our sludge treatment assets to
ensure capacity, reliability and environmental compliance is upheld. In
addition, we continue to work closely with regulators to influence policy. We
are also developing contingency plans should regulation change in the near
term, with a notified item included in the final determination enabling an
interim determination (IDOK) if significant investment is required to develop
alternative disposal outlets before 2030.
Governance: Bioresource team review of BAS compliance; and Executive
performance meetings.
Assurance: Assurance team reviews; cyclical internal audit; and external BAS
audits.
M. Programme delivery
Risk exposure: The capital programme involves significant investment in the
development and improvement of point and linear assets through a series of
projects to improve water supply and wastewater services. Delivery to time,
cost and quality is under constant challenge due to ongoing exposure to
natural hazards and the capacity and capability of third parties, partners and
internal resource. This risk is amplified by the significant scale of the
capital programme across this and future asset management periods (AMPs)
coupled with challenging cost allowances and performance commitments.
Control/mitigation: Our capital programme operating model involves multiple
construction and design partners, and a large supplier base, providing both
efficiency and resilience. With strong emphasis placed on safety and the
environment, we adopt a supplier relationship management framework to manage
contracts and performance, a runway approach for project allocation, and
category management for the supply of products and materials. Performance is
measured through our capital programme delivery incentive and monitoring
performance commitment deliverables. For operations a transformation programme
is in development with five clear areas of focus within an agreed
prioritisation framework.
Governance: Project management office; Capital investment committee; and
Executive performance meetings.
Assurance: Assurance team reviews; and cyclical internal audit.
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 financial
statements, the following three cases are worthy of note:
● In relation to the Manchester Ship Canal Company matter reported in previous
years, the Supreme Court issued a ruling in July 2024 that overturned a number
of rulings in lower courts that had previously gone in UUW's favour. This
latest Supreme Court ruling provided 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, and brought the long-running
litigation to a close. Specifically, the ruling clarified that common law
claims in nuisance/trespass may be brought by MSCC (and those with proprietary
rights in watercourses/water bodies) against water and wastewater companies
where the relevant legal thresholds for bringing a claim have been met. No
such common law nuisance/trespass claims have been received by UUW to date
from either MSCC or any third party, with the likely receipt of any such
claims, and their potential success and any financial implications, being
unclear at the reporting date.
● 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 Electrica de Buenos Aires S.A. (IEBA), an Argentine
project company set up to purchase one of the Argentine electricity
distribution networks that 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 scheduled
various hearings to receive the testimony of fact witnesses and experts
(starting in May 2023 and ongoing). UUIL will vigorously resist the
proceedings given the robust defences that UUIL has been advised that it has
on procedural and substantive grounds.
● As disclosed in the group's annual report for the year ended 31 March 2024,
collective proceedings in the Competition Appeal Tribunal ('CAT') were issued
on 8 December 2023 against United Utilities Water Limited ('UUW') and United
Utilities Group PLC on behalf of approximately 5.6 million domestic customers
following an application by the Proposed Class Representative ('PCR'),
Professor Carolyn Roberts. The PCR alleges that customers have collectively
paid an overcharge for sewerage services during the claim period as a result
of UUW allegedly abusing a dominant position by providing misleading
information to regulatory bodies. The estimated total aggregate amount the PCR
is claiming against UUW (including interest) for household customers is at
least £141 million. On 7 March 2025, the CAT unanimously concluded that
claims could not proceed on the basis that the claims brought forward are
excluded by section 18(8) of the Water Industry Act 1991. Subsequently, the
PCR has applied to the CAT for permission to appeal the decision at the Court
of Appeal. If permission is granted, this could result in an appeal towards
the end of 2025 or in 2026. UUW believes the claim is without merit and will
robustly defend it, should the certification decision be overturned on appeal.
Separate letters before action were issued on 20 December 2024 in relation to
similar claims in respect of non-household customers, however it is not clear
how these will proceed following the CAT's decision not to certify the claims
brought in respect of domestic customers.
FINANCIAL CALENDAR
Date Event
13 January 2025 Payment of 2024/25 interim dividend to shareholders
29 January 2025 Q3 Trading update
15 May 2025 Announcement of full year results for the year ending 31 March 2025
19 June 2025 Capital Markets Day
19 June 2025 Ex-dividend date for 2024/25 final dividend
20 June 2025 Record date for 2024/25 final dividend
11 July 2025 DRIP election date for 2024/25 final dividend
18 July 2025 Annual General Meeting
01 August 2025 Payment of 2024/25 final dividend to shareholders
13 November 2025 Announcement of half year results for the six months ending 30 September 2025
18 December 2025 Ex-dividend date for 2025/26 interim dividend
19 December 2025 Record date for 2025/26 interim dividend
12 January 2026 DRIP election date for 2025/26 interim dividend
2 February 2026 Payment of 2025/26 interim dividend to shareholders
A dividend reinvestment plan (DRIP) is provided by Equiniti Financial Services
Limited. The DRIP enables the company's shareholders to elect to have their
cash dividend payments used to purchase the company's shares. More information
can be found at www.shareview.co.uk/info/drip
(https://urldefense.com/v3/__http:/www.shareview.co.uk/info/drip__;!!FvJKb9TgAvphWVQ!ZQcXqVPW7-CX6Mu2eJ844HadQqtQxFVhRWSvtDb2G_pkAJ6eNPrgzFZFKed_52ajmgKBNPFW-6xBGoefNhMz9Hbe1mP4vZAU_wSb$)
.
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
2025
2024
£m £m
Revenue (note 3) 2,145.2 1,949.5
Other income 17.5 18.8
Staff costs (224.1) (205.1)
Other operating costs (note 4) (630.6) (602.4)
Allowance for expected credit losses - trade and other receivables (20.5) (22.0)
Depreciation of property, plant and equipment (435.7) (406.1)
Amortisation of intangible assets (29.2) (32.7)
Infrastructure renewals expenditure (191.1) (219.8)
Total operating expenses (1,513.7) (1,469.3)
Operating profit 631.5 480.2
Investment income (note 5) 106.2 85.6
Finance expense (note 6) (371.9) (389.3)
Allowance for expected credit losses - loans to joint ventures - (2.4)
Investment income and finance expense (265.7) (306.1)
Share of losses of joint venture (note 10) (10.8) (4.1)
Profit before tax 355.0 170.0
Current tax (charge)/credit (0.4) 5.8
Deferred tax charge (89.9) (48.9)
Tax (note 7) (90.3) (43.1)
Profit after tax 264.7 126.9
Earnings per share (note 8)
Basic 38.8p 18.6p
Diluted 38.7p 18.6p
Dividend per ordinary share (note 9) 51.85p 49.78p
All of the results shown above relate to continuing operations.
Consolidated statement of comprehensive income
Year ended Year ended
31 March
31 March
2025
2024
£m £m
Profit after tax 264.7 126.9
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods:
Cash flow hedges - effective portion of fair value movements 8.6 (63.0)
Tax on items recorded within other comprehensive income (2.2) 15.8
Reclassification of cash flow hedge effectiveness to consolidated income (1.3) 1.8
statement
Tax on reclassification to consolidated income statement 0.3 (0.5)
5.4 (45.9)
Items that will not be reclassified to profit or loss in subsequent periods:
Remeasurement losses on defined benefit pension schemes (note 11) 18.6 (368.5)
Change in credit assumption for debt reported at fair value through profit and 1.9 0.7
loss
Cost of hedging - cross currency basis spread adjustment 3.6 4.8
Tax on items recorded within other comprehensive income (6.0) 151.1
18.1 (211.9)
Total comprehensive income 288.2 (130.9)
Consolidated statement of financial position
Year ended Year ended
31 March
31 March
2025
2024
£m £m
ASSETS
Non-current assets
Property, plant and equipment 13,873.0 13,044.3
Intangible assets 105.8 124.5
Interests in joint ventures (note 10) 1.6 12.4
Trade and other receivables 73.6 73.7
Retirement benefit surplus (note 11) 302.3 268.0
Derivative financial instruments 329.3 361.5
14,685.6 13,884.4
Current assets
Inventories - properties held for resale 2.7 3.0
Inventories - other 21.9 18.5
Trade and other receivables 282.0 226.8
Current tax asset 93.3 100.1
Cash and short-term deposits 1,672.6 1,399.3
Derivative financial instruments 11.4 21.3
2,083.9 1,769.0
Total assets 16,769.5 15,653.4
LIABILITIES
Non-current liabilities
Trade and other payables (1,063.8) (957.9)
Borrowings (note 12) (10,326.5) (9,345.8)
Deferred tax liabilities (2,028.4) (1,930.6)
Derivative financial instruments (275.0) (255.2)
(13,693.7) (12,489.5)
Current liabilities
Trade and other payables (577.2) (413.3)
Borrowings (note 12) (462.1) (655.6)
Provisions (19.0) (13.5)
Derivative financial instruments (17.6) (25.4)
(1,075.9) (1,107.8)
Total liabilities (14,769.6) (13,597.3)
Total net assets 1,999.9 2,056.1
EQUITY
Share capital 499.8 499.8
Share premium account 2.9 2.9
Other reserves (note 16) 319.2 311.1
Retained earnings 1,178.0 1,242.3
Shareholders' equity 1,999.9 2,056.1
Consolidated statement of changes in equity
Year ended 31 March 2025
Share capital Share premium account ((1))Other reserves Retained earnings Total
£m £m £m £m £m
At 1 April 2024 499.8 2.9 311.1 1,242.3 2,056.1
Profit after tax - - - 264.7 264.7
Other comprehensive income
Remeasurement gains on defined benefit pension schemes (note 11) - - - 18.6 18.6
Change in credit assumption for debt reported at fair value through profit or - - - 1.9 1.9
loss
Cash flow hedges - effective portion of fair value movements - - 8.6 - 8.6
Cost of hedging - cross-currency basis spread adjustment - - 3.6 - 3.6
Tax on items recorded within other comprehensive income (note 7) - - (3.1) (5.1) (8.2)
Reclassification of items recorded directly in equity - - (1.3) - (1.3)
Tax on reclassification to income statement - - 0.3 - 0.3
Total comprehensive income - - 8.1 280.1 288.2
Dividends (note 9) - - - (344.1) (344.1)
Equity-settled share-based payments - - - 4.7 4.7
Exercise of share options - purchase of shares - - - (5.0) (5.0)
At 31 March 2025 499.8 2.9 319.2 1,178.0 1,999.9
( )
Year ended 31 March 2024
Share capital Share premium account ((1))Other reserves Retained earnings Total
£m £m £m £m £m
At 1 April 2023 499.8 2.9 353.4 1,652.6 2,508.7
Profit after tax - - - 126.9 126.9
Other comprehensive income
Remeasurement losses on defined benefit pension schemes (note 11) - - - (368.5) (368.5)
Change in credit assumption for debt reported at fair value through profit or - - - 0.7 0.7
loss
Cash flow hedges - effective portion of fair value movements - - (63.0) - (63.0)
Cost of hedging - cross-currency basis spread adjustment - - 4.8 - 4.8
Tax on items recorded within other comprehensive income (note 7) - - 14.6 152.3 166.9
Reclassification of items recorded directly in equity - - 1.8 - 1.8
Tax on reclassification to income statement - - (0.5) - (0.5)
Total comprehensive income - - (42.3) (88.6) (130.9)
Dividends (note 9) - - - (320.0) (320.0)
Equity-settled share-based payments - - - 2.1 2.1
Exercise of share options - purchase of shares - - - (3.8) (3.8)
At 31 March 2024 499.8 2.9 311.1 1,242.3 2,056.1
((1))Other reserves comprise the group's 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 16.
Consolidated statement of cash flows
*Restated
Year ended Year ended
31 March
31 March
2025
2024
£m £m
Operating activities
Cash generated from operations (note 14) 1,082.7 865.4
Interest paid (263.5) (175.6)
Interest received and similar income 92.5 50.7
Tax received 6.4 4.6
Net cash generated from operating activities 918.1 745.1
Investing activities
Purchase of property, plant and equipment (988.5) (749.5)
Purchase of intangible assets (9.5) (14.6)
Grants and contributions received 9.2 27.9
Proceeds from disposal of property, plant and equipment 1.1 4.8
Repayment of loans to joint ventures (note 18) 0.5 -
Placement of deposits with maturity greater than three months (768.7) (445.0)
Receipt of deposits with maturity greater than three months 768.7 445.0
Net cash used in investing activities (987.2) (731.4)
Financing activities
Proceeds from borrowings net of issuance costs 1,339.3 1,610.0
Repayment of borrowings (631.4) (248.5)
Dividends paid to equity holders of the company (note 9) (344.1) (320.0)
Exercise of share options - purchase of shares (5.0) (3.8)
Net cash generated from financing activities 358.8 1,037.7
Net increase in cash and cash equivalents 289.7 1,051.4
Cash and cash equivalents at beginning of the year 1,379.3 327.9
Cash and cash equivalents at end of the year 1,669.0 1,379.3
*The consolidated statement of cash flows for the year ended 31 March 2024 has
been restated so as to show, within investing activities, the gross cash
outflows and inflows arising from the placement and receipt of deposits with
maturity greater than three months from the placement date. For the year ended
31 March 2024 these balances were previously presented on a net basis, and as
such were not included on the face of the statement of cash flows.
NOTES
1. Basis of preparation and accounting policies
The condensed consolidated financial statements for the year ended 31 March
2025 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 2025, for which the
auditors have given an unqualified opinion.
The comparative figures for the year ended 31 March 2024 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
2025.
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 £400 million arising in the assessment period; debt being
refinanced as it matures at 1 per cent above the forward projections of
interest rates; 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
The group discloses 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 2025. 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 2025 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. An update on these judgements and
estimates is as follows:
Accounting estimate - allowance for expected credit losses in respect of
household trade receivables: Recent years have seen a high level of
uncertainty as to how economic conditions may impact the recoverability of
household receivables for a significant proportion of the group's customer
base. We are mindful that increased energy prices, higher interest rates and
other inflationary pressures may adversely impact some customers'
affordability.
A range of collection scenarios have been used to inform the allowance for
expected credit losses and the charge 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 periods which include the impacts of
Covid-19 recovery and more recent cost of living pressures, to provide a range
of views as to how recoverability of household receivables may be impacted.
The group continues to use the average cash collection over the preceding
three years as a basis for estimating future collection, which is consistent
with the prior year. This look-back period includes periods of relatively
strong cash collection but also periods where cash collection has been more
challenging, particularly due to recent cost of living pressures, and thus
incorporates the variability of factors that can impact collection over the
life of the receivable. 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.
The forward-looking assessment in the prior year resulted in the release of a
significant portion of the management overlay which had previously been
recognised in light of the uncertainty arising initially from the onset of the
Covid-19 pandemic, as described within the Annual Report for the year ended 31
March 2020, and subsequently maintained to address the collection risk arising
from recent cost of living pressures and the associated adverse impact on
customer affordability. A review of cash collection performance in the prior
year led to an increase in the modelled provisioning rates, and in the current
year the remaining overlay has been released as the provision rates are
considered to be appropriate without requiring an additional subject overlay.
Together, this supports a charge equivalent to around 1.5 per cent of
household revenue recorded during the period, which is slightly lower than the
position at 31 March 2024.
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
2025 2024
£m £m
Wholesale water charges 897.7 819.9
Wholesale wastewater charges 1,113.7 990.8
Household retail charges 90.5 93.1
Other 43.3 45.7
2,145.2 1,949.5
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,
although following the same pattern of transfer to the customer who
simultaneously receives and consumes both of these services over time.
Other revenues comprise a number of smaller non-core income streams, including
property sales and income from activities, typically performed opposite
property developers, which impact the group's capital network assets. This
includes diversion 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
2025 2024
£m £m
Power 154.5 164.3
Materials 144.1 127.1
Hired and contracted services 133.5 128.7
Property rates 89.9 82.0
Regulatory fees 44.8 39.3
Insurance 14.5 13.3
Accrued innovation costs 8.0 6.0
Loss on disposal of property, plant and equipment 4.0 6.7
Other expenses 37.3 35.0
630.6 602.4
In June 2023, the group experienced a significant outfall pipe fracture at a
major wastewater treatment works at Fleetwood, for which the remediation and
associated activity resulted in costs of £37.6 million being incurred during
the year to 31 March 2024, with a further £2.3 million incurred during the
year to 31 March 2025. These costs have been presented as an adjusting item in
arriving at the group's underlying operating profit position as included in
its alternative performance measures.
Of the £2.3 million costs incurred in the year to 31 March 2025, £0.7
million of operating costs are included in the above total, with £1.6 million
included within infrastructure renewal expenditure.
In addition to the costs relating to the incident at Fleetwood, other
operating costs have increased compared with the same period in the prior
year. This increase is predominantly due to inflationary pressures on our cost
base as well as additional investment in performance ahead of AMP8, partially
offset by cost control efficiencies.
Research and development expenditure for the year ended 31 March 2025, was
£0.6 million (2024: £0.7 million). In addition, £8.0 million (2024: £6.0
million) of costs have been accrued during the year 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
2025 2024
£m £m
Interest receivable 93.3 57.0
Net pension interest income (note 11) 12.9 28.6
106.2 85.6
6. Finance expense
2025 2024
£m £m
Interest payable 372.3 379.8
Net fair value (gains)/losses on debt and derivative instruments (0.4) 9.5
371.9 389.3
Interest payable is stated net of £68.5 million (2024: £81.0 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 5.4 per cent (2023:
6.1 per cent) to expenditure on such assets as prescribed by IAS 23 'Borrowing
Costs'.
Interest payable includes a £142.2 million (2024: £225.9 million) non-cash
inflation expense in relation to the group's index-linked debt.
In addition to the £372.3 million finance expense, the allowance for expected
credit losses in relation to loans extended to the group's joint venture,
Water Plus, has not changed during the current year (2024: £2.4 million
increase).
Net fair value losses on debt and derivative instruments includes £1.3
million income (2024:
£29.3 million income) due to net interest on derivatives and debt under fair
value option, and £19.6 million expense (2024: £25.9 million expense) due to
non-cash inflation uplift 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 £265.7 million (2024: £306.1 million) reported in
the Consolidated Income Statement to exclude the £0.4 million of fair value
gains (2024: £9.5 million of fair value losses) in the above table, but
include £1.3 million (2024: £29.3 million) income due to net interest on
derivatives and debt under fair value option, and £19.6 million (£25.9
million) expense due to non-cash inflation uplift on index-linked derivatives.
7. Tax
During the year ended 31 March 2025 there was a current tax charge of £0.4
million (2024: credit of £5.8 million) and a deferred tax credit of £2.4
million (2024: charge of £4.6 million) relating to prior years. The current
year figure mainly relates to claims for the available tax incentives on our
innovation related expenditure, for multiple earlier years. It reflects an
additional claim submitted during the year along with adjustments relating to
ongoing enquiries from the tax authorities in relation to these claims. The
prior year mainly relates to the utilisation of tax losses which were
previously being carried forward.
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 current tax asset recognised in the statement of financial position
reflects the amount of tax expected to be recoverable based on judgements made
regarding the application of tax law, and the status of negotiations with, and
enquiries from, tax authorities.
The tax adjustments taken to equity primarily relate to remeasurement
movements on the group's defined benefit pension schemes. The rate at which
the deferred tax liabilities are measured on the group's defined benefit
pension scheme is 25 per cent (2024: 25 per cent), being the rate applicable
to refunds from a trust.
8. 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.
2025 2024
£m £m
Profit after tax attributable to equity holders of the company 264.7 126.9
Weighted average number of shares in issue in millions
Basic 681.9 681.9
Diluted 683.6 683.5
Earnings per share in pence
Basic 38.8 18.6
Diluted 38.7 18.6
9. Dividends
2025 2024
£m £m
Dividends relating to the year comprise:
Interim dividend 117.8 113.1
Final dividend 235.7 226.3
353.5 339.4
Dividends deducted from shareholders' equity comprise:
Interim dividend 117.8 113.1
Final dividend 226.3 206.9
344.1 320.0
The proposed final dividends for the years ended 31 March 2025 and 31 March
2024 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 2025 and 31 March 2024
respectively.
The final dividend of 34.57 pence per ordinary share (2024: 33.19 pence per
ordinary share) is expected to be paid on 1 August 2025 to shareholders on the
register at the close of business on 20 June 2025. The ex-dividend date for
the final dividend is 19 June 2025.
The interim dividend of 17.28 pence per ordinary share (2024: 16.59 pence per
ordinary share) was paid on
13 January 2025 to shareholders on the register at the close of business on 29
November 2024.
10. Interests in joint ventures
2025 2024
£m £m
Joint ventures at the start of the year 12.4 16.5
Share of losses of joint ventures (10.8) (4.1)
Joint ventures at the end of the year 1.6 12.4
The group's interests in joint ventures 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's total share of Water Plus losses for the year was £10.8 million
(2024: £4.1 million), all of which is recognised in the income statement.
Details of transactions between the group and its joint ventures are disclosed
in note 18.
11. 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:
2025 2024
%pa %pa
Discount rate 5.70 4.80
Pension increases 3.20 3.25
Pensionable salary growth (pre-1 April 2018 service):
ESPS 3.20 3.25
UUPS 3.20 3.25
Pensionable salary growth (post-1 April2018 service):
ESPS 3.20 3.25
UUPS 2.75 2.80
Price inflation - RPI 3.20 3.25
Price inflation - CPI((1)) 2.75 2.80
Note:
((1)) The CPI price inflation assumption represents a single weighted average
rate derived from an assumption of 2.30 per cent pre-2030 and 3.00 per cent
post-2030 (2024: 2.35 per cent pre-2030 and 3.05 per cent post-2030).
The discount rate is consistent with a high quality corporate bond rate, with
5.10 per cent being equivalent to gilts + 60bps (2024: 4.30 per cent being
equivalent to gilts + 50bps).
The IAS 19 remeasurement gain of £18.6 million (2024: £368.5 million loss)
reported in the statement of changes in equity has largely resulted from
actuarial gains arising from changes in financial assumptions, predominantly
due to the increase in the discount rate. The significant remeasurement loss
in the prior year was predominantly as a result of the purchase of bulk
annuity policies as part of a buy-in transaction undertaken in July 2023; a
premium of circa £220 million was paid in excess of the present value of
liabilities covered, which was reflective of the reduction in the schemes'
risk profile. The remaining portion of the loss arose as the schemes are more
than 100 per cent hedged on an IAS 19 basis, which resulted in a greater
reduction of the schemes' assets than the defined benefit obligations as a
result of yield rises.
In line with previous reporting periods, mortality assumptions continue to be
based on the latest available Continuous Mortality Investigation's (CMI)
mortality tables. As at 31 March 2025, these assumptions are based on the
CMI2023 base tables with a 1.25% p.a. rate of improvement, and factoring in a
w-parameter weighting of 20% to take account of the continued repercussions of
the Covid-19 pandemic in the medium term, including pressures on the NHS,
delayed diagnoses of chronic conditions, disrupted treatment within the health
care system and more deaths at home, as opposed to in hospitals and care
homes. A scaling factor of 109 per cent (2024: 109 per cent) and 111 per cent
(2024: 115 per cent) for male pensioners and non-pensioners respectively and
109 per cent (2024: 110 per cent) and 105 per cent (2024: 111 per cent) for
female pensioners and non-pensioners respectively, is applied reflecting the
profile of the membership. Compared against the base tables used for previous
year-end mortality assumptions (CMI S4PA), the Core CMI2023 model sees a small
increase in life expectancies. It should be noted, however, that post buy-in
any changes in the life expectancy assumptions for insured members are offset
by a corresponding change in the value of the buy-in bulk annuity policies on
an IAS 19 basis. At 31 March 2025, future improvements in mortality are based
on the extended CMI 2023 (2024: CMI 2022) projection model, with a long-term
annual rate of improvement of 1.25 per cent (2024: 1.25 per cent).
The net pension income before tax in the income statement in respect of the
defined benefit schemes is summarised as follows:
2025 2024
£m £m
Current service cost 2.5 2.8
Past service cost - (4.6)
Administrative expenses 4.0 4.0
Pension expense charged to operating profit 6.5 2.2
Net pension interest credited to investment income (note 5) (12.9) (28.6)
Net pension income credited before tax (6.4) (26.4)
The reconciliation of the opening and closing net pension surplus included in
the statement of financial position is as follows:
2025 2024
£m £m
At the start of the year 268.0 600.8
Income recognised in the income statement 6.4 26.4
Contributions 9.3 9.3
Remeasurement gains/(losses) gross of tax 18.6 (368.5)
At the end of the year 302.3 268.0
The closing surplus at each reporting date is analysed as follows:
2025 2024
£m £m
Fair value of schemes' assets 2,308.6 2,552.4
Present value of defined benefit obligations (2,006.3) (2,284.4)
Net retirement benefit surplus 302.3 268.0
Over the year to 31 March 2025, the balance sheet surplus has increased from
£268m to £302m. This increase is driven largely by changes in financial
conditions, in particular the widening of credit spreads since the previous
year-end, which all else equal reduces the Defined Benefit Obligation ('DBO')
by less than the value of the assets, a modest membership experience gain to
reflect the updated triennial valuations and updates to the mortality base
tables and future improvement assumptions. This increase has been partially
offset by other factors, in particular, the schemes being more than 100%
hedged on the IAS19 basis has meant the assets have fallen more than the DBO
as a result of gilt yield rises.
The latest finalised funding valuation was carried out during the year, as at
31 March 2024, and determined that the schemes were fully funded on a
low-dependency basis without any funding deficit that requires additional
contributions from the group over and above those related to current service
and expenses.
The results of the latest funding valuation at 31 March 2024 have been used to
inform the group's best estimate assumptions to use in calculating the defined
benefit pension obligation reported on an IAS 19 basis at 31 March 2025. The
results of the funding valuation have been adjusted to take account of
experience over the period, changes in market conditions, and differences in
the financial and demographic assumptions. The present value of the defined
benefit obligation, and the related current service costs, were measured using
the projected unit credit method.
Member data used in arriving at the liability figure included within the
overall IAS 19 surplus has been based on the finalised actuarial valuations as
at 31 March 2024 for both UUPS and ESPS. As part of each actuarial valuation,
and more frequently as required by the trustees, member data is reassessed for
completeness and accuracy and to ensure it reflects any relevant changes to
benefits entitled by each member.
Defined contribution schemes
During the year, the group made £36.7 million (2024: £32.4 million) of
contributions to defined contribution schemes, which are included in employee
benefits expense.
12. Borrowings
New borrowings raised during the year ended 31 March 2025, all of which were
issued under the Euro Medium-Term Note Programme, were as follows:
● On 28 May 2024, the group issued £350 million fixed rate notes, due May 2051.
● On 5 August 2024, the group issued EUR175 million fixed rate notes as a
fungible increase to the EUR650m notes, due May 2034. On issue, the EUR bond
was immediately swapped to £147.4 million of principal outstanding.
● On 5 September 2024, the group issued £150 million fixed rate notes as a
fungible increase to the £250 million fixed rate notes, due January 2046.
● On 13 September 2024, the group issued £75 million fixed rate notes as a
fungible increase to the £325 million fixed rate notes, due February 2038.
● On 3 October 2024, the group issued NOK1.5 billion fixed rate notes, due
October 2035. On issue, the NOK bond was immediately swapped to £106.3
million of principal outstanding.
● On 27 February 2025, the group issued EUR650 million fixed rate notes due
February 2033. On issue, the EUR bond was immediately swapped to £538.6
million of principal outstanding.
During the year, extensions to six existing undrawn committed borrowing
facilities were approved, with amounts available under these facilities
totalling £200 million. Three new facilities totalling £325 million, and a
total £75 million increase to three existing facilities, were entered into
during the period.
Borrowings at 31 March 2025 include £83.2 million in relation to lease
liabilities (2024: £59.2 million), of which £78.0 million (2024: £56.2
million) was classified as non-current and £5.2 million (2024: £3.0 million)
as current.
13. Fair values of financial instruments
The fair values of financial instruments are shown in the table below.
2025 2024
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 43.3 43.3 74.7 74.7
Derivative financial assets - held for trading 295.7 295.7 298.9 298.9
Derivative financial assets - cash flow hedge 1.7 1.7 9.2 9.2
Financial liabilities at fair value through profit or loss
Derivative financial liabilities - fair value hedge (245.9) (245.9) (232.2) (232.2)
Derivative financial liabilities - held for trading (17.6) (17.6) (4.5) (4.5)
Derivative financial liabilities - cash flow hedge (29.1) (29.1) (43.9) (43.9)
Financial liabilities designated as fair value through profit or loss (330.2) (330.2) (338.9) (338.9)
Financial instruments for which fair value does not approximate carrying value
Financial liabilities in fair value hedge relationships (3,816.8) (3,797.2) (3,459.0) (3,414.6)
Other financial liabilities at amortised cost (5,833.7) (6,661.2) (5,785.5) (6,247.9)
(9,932.6) (10,740.5) (9,481.2) (9,899.2)
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 £3,447.9
million (2024: £3,158.5 million) for financial liabilities in fair value
hedge relationships, and £2,171.1 million (2024: £2,573.4 million) for other
financial liabilities at amortised cost.
The £112.9 million decrease (2024: £1,254.5 million decrease) in 'level 1'
fair value liability measurements primarily reflects widening of credit
spreads offset by debt issuances in 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 2025.
The reason for the increase in the difference between the fair value and
carrying value of the group's borrowings at 31 March 2025 compared with the
position at 31 March 2024 is due to the widening of credit spreads.
14. Cash generated from operations
2025 2024
£m £m
Operating profit 631.5 480.2
Adjustments for:
Depreciation of property, plant and equipment 435.7 406.1
Amortisation of intangible assets 29.2 32.7
Loss on disposal of property, plant and equipment 4.0 6.7
Amortisation of deferred grants and contributions (19.8) (17.4)
Equity-settled share-based payments charge 4.7 2.1
Pension contributions paid less pension expense charged to operating profit (3.0) (7.1)
Changes in working capital:
Increase in inventories (3.1) (7.2)
Increase in trade and other receivables (54.7) (26.9)
Increase/(Decrease) in trade and other payables 52.7 (4.2)
Increase in provisions 5.5 0.4
Cash generated from operations 1,082.7 865.4
15. Net debt
2025 2024
£m £m
At the start of the year 8,762.7 8,200.8
Net capital expenditure 987.8 731.4
Dividends (note 9) 344.1 320.0
Interest 171.0 124.8
Inflation expense on index-linked debt and swaps (note 6) 161.7 251.9
Exchange rate movement on bonds and term borrowings (13.2) (35.2)
Tax (6.5) (4.6)
Non-cash movements in lease liabilities 27.2 3.8
Repayment of loans to joint ventures (0.5) -
Other 14.7 0.1
Fair value movements (20.8) 35.1
Cash generated from operations (note 14) (1,082.7) (865.4)
At the end of the year 9,345.5 8,762.7
Fair value movements include the indexation credit relating to the group's
inflation swap portfolio of £130.8 million (2024: £111.3 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 £9,413.0 million as at 31 March 2025 (2024:
£8,727.4 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.
16. Other reserves
Year ended 31 March 2025
Capital redemption reserve Merger reserve Cost of hedging reserve Cash flow hedge reserve Total
£m £m £m £m £m
At 1 April 2024 1,033.3 (703.6) 8.7 (27.3) 311.1
Changes in fair value recognised in other comprehensive income - - 3.6 8.6 12.2
Amounts reclassified from other comprehensive income to profit and loss - - - (1.3) (1.3)
Tax on items recorded within other comprehensive income - - (0.9) (1.9) (2.8)
At 31 March 2025 1,033.3 (703.6) 11.4 (21.9) 319.2
Year ended 31 March 2024
Capital redemption reserve Merger reserve Cost of hedging reserve Cash flow hedge reserve Total
£m £m £m £m £m
At 1 April 2023 1,033.3 (703.6) 5.1 18.6 353.4
Changes in fair value recognised in other comprehensive income - - 4.8 (63.0) (58.2)
Amounts reclassified from other comprehensive income to profit and loss - - - 1.8 1.8
Tax on items recorded within other comprehensive income - - (1.2) 15.3 14.1
At 31 March 2024 1,033.3 (703.6) 8.7 (27.3) 311.1
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.
17. Commitments and contingent liabilities
At 31 March 2025, there were commitments for future capital expenditure and
infrastructure renewals expenditure contracted, but not provided for, of
£125.3 million (2024: £342.7 million).
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
(2024: none).
In November 2021, Ofwat and the Environment Agency ('EA') launched separate
industry-wide investigations into how companies manage their wastewater
assets.
In July 2024 Ofwat announced that it is opening an enforcement case under
which it will investigate UUW following detailed analysis of the company's
environmental performance and data about the frequency of spills from storm
overflows. At the same time, Ofwat opened similar enforcement cases
investigating three other companies in the sector. Having already opened
enforcement cases against the other seven companies, all 11 water and
wastewater companies in England and Wales are now formally within the scope of
Ofwat's enforcement activities. If a company is found to have breached its
legal obligations this could result in a financial penalty of up to 10 per
cent of relevant wastewater turnover (which in UUW's case would be around
£100 million), and/or a requirement to rectify any obligations deemed to be
required as a consequence of those findings. Ofwat has proposed penalties for
three companies to date, ranging from 5 per cent to 9 per cent of relevant
wastewater turnover, of which one company has agreed an enforcement package
worth 6 per cent of its relevant wastewater turnover. UUW has received and
responded to a notice under s203 of the Water Industry Act 1991 requesting
information relating to the performance and operation of its wastewater
assets, and continues to fully comply with Ofwat through the investigation
process. Ofwat stated that whilst it has concerns with the sector that it must
investigate, the opening of enforcement cases does not automatically imply
that companies have breached their legal obligations or that a financial
penalty will necessarily follow. To date Ofwat has not given a firm indication
of the expected timeframe for its ongoing investigation, or any subsequent
action.
Similarly, the EA has made a number of data requests and undertaken site
visits as part of its ongoing industry-wide investigation, with which the
group continues to fully comply. This investigation is focused on
environmental permit compliance at wastewater treatment works and wastewater
networks, with the EA having a number of enforcement options open to it if it
concludes that companies have breached their permit conditions and/or
illegally polluted the environment. These include the potential for criminal
prosecution and unlimited fines. As with the Ofwat investigation, this remains
ongoing.
As disclosed in the group's financial results for the half-year ended 30
September 2024, collective proceedings in the Competition Appeal Tribunal
('CAT') were issued on 8 December 2023 against United Utilities Water Limited
('UUW') and United Utilities Group PLC on behalf of approximately 5.6 million
domestic customers following an application by the Proposed Class
Representative ('PCR'), Professor Carolyn Roberts. The PCR alleges that
customers have collectively paid an overcharge for sewerage services during
the claim period as a result of UUW allegedly abusing a dominant position by
providing misleading information to regulatory bodies. The estimated total
aggregate amount the PCR is claiming against UUW (including interest) for
household customers is at least £141 million. On 7 March 2025, the CAT
unanimously concluded that claims could not proceed on the basis that the
claims brought forward are excluded by section 18(8) of the Water Industry Act
1991. Subsequently, the PCR has appealed to the CAT in respect of this
decision. UUW believes the claim is without merit and will robustly defend it,
should the certification decision be overturned on appeal. Separate letters
before action were issued on 20 December 2024 in relation to similar claims in
respect of non-household customers, however it is not clear how these will
proceed following the CAT's decision not to certify the claims brought in
respect of domestic customers.
18. 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:
2025 2024
£m £m
Sales of services 338.8 334.4
Charitable contributions advanced to related parties 0.2 0.2
Purchases of goods and services 1.5 -
Interest income and fees recognised on loans to related parties 5.9 5.6
Amounts owed by related parties 101.0 100.8
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 2025, amounts owed by joint ventures, as recorded within trade and
other receivables in the statement of financial position, were £101.0 million
(2024: £100.8 million), comprising £27.4 million (2024: £27.1 million) of
trade balances, which are unsecured and will be settled in accordance with
normal credit terms, and £73.6 million (2024: £73.7 million) relating to
loans.
Included within these loans receivable were the following amounts owed by
Water Plus:
● £71.4 million (2024: £72.3 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 £75.0 million
outstanding, net of a £3.6 million allowance for expected credit losses
(2024: £75.5 million net of a £3.2 million allowance for expected credit
losses); and
● £2.2 million (2024: £1.4 million) receivable being the £11.7 million (2024:
£11.3 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 £nil (2024: £0.4 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 2025 and 31 March 2024 of £12.5
million, comprising a £11.7 million (2024: £11.3 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 £0.8 million (2024: £1.2 million) recorded as an equity
contribution to Water plus recognised within interests in joint ventures.
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 2025, amounts owed to related parties were £nil (March 2024:
£nil).
19. Events after the reporting period
On 3 April 2025, United Utilities Water Limited acquired 100 per cent of the
share capital of Trafford Property Limited, a special purpose vehicle holding
land adjacent to the group's Davyhulme Wastewater Treatment Works site, for
£20 million. This transaction is accounted for as an asset acquisition rather
than a business combination, as the transaction falls outside the scope of
IFRS 3 'Business Combinations'. The cost of the acquisition is allocated
entirely to the company's land asset and approximates the land's fair value at
the date of acquisition. As the acquisition occurred after the reporting
period, no adjustments have been made to the financial statements as at 31(st)
March 2025.
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 2025. 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
Clare Hayward
Michael Lewis
Doug Webb
This responsibility statement was approved by the board and signed on its
behalf by:
Louise Beardmore Phil Aspin
14 May 2025 14 May 2025
Chief Executive Officer Chief Financial Officer
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