United Utilities has today announced full year results for the year to 31 March 2024 – revenues and operating profits have both risen, while the dividend per share has been increased by 9.4%.

The water company said it has delivered robust underlying financial performance this year. Revenue increased 8 per cent, up £145 million, at £1,950 million, mainly driven by the inflation increase allowed as part of its revenue cap.

The revenue increase, partly offset by inflationary increases to costs resulted in underlying operating profit increasing by £77 million to £518 million. However, reported operating profit was £38 million lower than underlying, at £480 million, reflecting an adjusting item in respect of costs associated with a fractured outlet pipe at its Fleetwood Wastewater Treatment Works.

Inflationary pressures on operating costs have resulted in a £41 million increase. The largest increases have been to power and labour costs, where the company incurred an additional £34 million and £13 million respectively. Other costs have been tightly controlled, partly mitigating the inflationary increases and leading to a £6 million cost reduction.

United Utilities commented:

“We have one of the strongest balance sheets in the sector, providing us with future flexibility. During the year, we completed a pension scheme buy-in transaction with Legal & General, covering two-thirds of scheme liabilities and representing a significant milestone in our de-risking journey. Our AMP7 investment requirements are fully pre-funded, and with gearing of 59 per cent and solid credit ratings we approach AMP8 in a strong position.”

Financial highlights flagged up by the water company include:

• Underlying operating profit of £518m, reported operating profit of £480m
• Underlying EPS of 33.3p, up from -1.3p, and reported EPS of 18.6p
• Low level of gearing at 59% and solid credit ratings
• Re-entered the Euro bond market, pricing a €650m 10.25yr green bond - 3.8x oversubscribed
• Liquidity extending into 2026; AMP8 funding underway
• Recommended final dividend of 33.19p, in line with policy

Investment and regulated asset growth

Capex in 2024/25 is expected to be in the range of £850 million to £1.1 billion. United Utilities is expecting to have delivered a number of capital programmes in AMP7 in addition to its base totex (total expenditure) programme. These include the £765 million additional investment programme announced in May 2022, the Accelerated Infrastructure Delivery Project spend and AMP8 transitional investment. Combined with the impact of inflation, the company’s regulated assets are expected to grow at a compound annual growth rate of 4 to 5 per cent across the five years to March 2025.

United Utilities is accelerating c.£400 million of investment brought forward from AMP8 which includes prioritising work on more than 150 storm overflows and implementing accelerated solutions to achieve spill reductions faster.

The board has set a target gearing range for the AMP7 regulatory period of 55 to 65 per cent net debt to regulated capital value. As at 31 March 2024, the utility’s gearing is in the lower half of this range at 59 per cent.

Revenue is expected to increase by around 10 per cent in 2024/25, with around 3 per cent due to inflation and 7 per cent due to timing.

Dividend per share

The Board has proposed a final dividend of 33.19 pence per ordinary share in respect of the year ended 31 March 2024. Final Dividend Per Share for the full year was 49.78p compared to 45.51p for 2023,  an increase of 9.4%. United Utilities said the increase is in line with the group's dividend policy of targeting a growth rate of CPIH inflation each year through to 2025. The 9.4 per cent increase is based on the CPIH element included within allowed regulated revenue for the2023/24 financial year (i.e. the movement in CPIH between November 2021 and November 2022).

The final dividend is expected to be paid on 1 August 2024 to shareholders on the register at the close of business on 21 June 2024.

Louise Beardmore CEO: "we have met or exceeded around 80% of our regulatory targets"

Louise Beardmore, Chief Executive Officer, commented:

"Colleagues have worked exceptionally hard throughout the year to deliver for our customers, communities and the environment. As a result, operational performance has been strong, and I am pleased to report that we have met or exceeded around 80% of our regulatory targets, and we have also been ranked as the number one water and sewerage company for customer service in the independent UK Customer Service Index. In addition, we are providing over 375,000 customers with affordability support against the backdrop of significant increases in the cost of living.

"We take our role in protecting the environment very seriously; our ambitious business plan would see us investing more than ever before to improve services across the five counties of the North West. This would deliver a genuine step-change in infrastructure for the benefit of customers and the environment, and support 30,000 jobs.

"Our finances are robust with one of the lowest levels of gearing in the sector. We are readying our supply chain, and bringing forward around £400 million of AMP8 investment to reduce spills at more than 150 storm overflows, and to accelerate environmental schemes in communities such as Windermere, where we are fast-tracking investment to drive improvements earlier. This is on top of the river health improvements we are already delivering through our Better Rivers programme and accelerated environmental improvements funded through reinvestment of our AMP7 outperformance."