United Utilities has published its half yearly financial report for the six months ended 30 September 2010.

The Board said that results were slightly ahead of management expectations, describing underlying operating profit of £328 million as reflecting the new AMP5 regulatory settlement. Revenue from continuing operations fell by £24 million to £762 million, which United Utilities said reflected a real price decrease in its regulated business. Underlying operating profit decreased by 5% to £328 million.

Capital expenditure in the regulated water and wastewater business amounted to £307 million during the half year, including infrastructure renewals expenditure. The company said the level of spend was consistent with its planned investment profile for the initial phase of the 2010-15 period and it had made good early progress in the delivery of outputs.

Earlier this month, United Utilities completed its non-regulated disposal programme - over the last four years, the company has reshaped its portfolio from a group with a wide-ranging set of activities and interests, such as telecommunications, business process outsourcing, gas and electricity distribution, metering and international utility operations into a regulated UK water and wastewater business.

Operational performance

Improving operational performance is a top priority for the group which has now revised its key operational and service measures for the new regulatory period. KPIs in the areas of customer satisfaction, relative efficiency and leakage are continuing with new measures introduced to cover serviceability, environmental performance and corporate responsibility. The company said that when Ofwat’s new service incentive mechanism (SIM) had been fully implemented this would also be included as a key performance measure.

United Utilities is currently on track to meet its  regulatory leakage target for the fifth consecutive year. The company has also improved its position in the area of wastewater non-infrastructure in Ofwat’s 2009/10 serviceability assessment from a “marginal” rating to a “stable” rating and, as a result, all four asset classes are now “stable”.

On environmental performance, the company is introducing an Environment Agency measure that incorporates a broad range of areas including pollution. halved the number of serious pollution incidents has been halved over the last few years.

The group has a strong focus on corporate responsibility and is the only UK water company to have a “World Class” rating, as measured by the Dow Jones Sustainability Index. United Utilities said its target was to retain this status each year.
Efficiency initiatives

In 2009 the company undertook a comprehensive review of the business, enabling it to develop extensive efficiency plans which are now being implemented. United Utilities said it was streamlining its processes and that new supplier contracts would both deliver significant savings and help improve operational and capital efficiency.

Commenting on the results, Philip Green, Chief Executive, said:

"We have made a good start to the new regulatory period and I am pleased to report results slightly ahead of our expectations.  The board has declared an interim dividend for 2010/11 of 10 pence per share with the intention of paying a total dividend of 30 pence per share for the year, consistent with our policy.

"Over the last four years, United Utilities has reshaped its portfolio and is now a focused regulated UK water and wastewater company. Earlier this month, we completed our non-regulated disposal programme, providing the opportunity to focus further on improving the performance of our core business.

"With the programme of actions we are implementing, we are confident of delivering outperformance over the 2010-15 period with financing outperformance already secured.  We have continued to make high levels of investment in our water and wastewater assets, with capital expenditure of over £300 million in the half year, providing further benefits for customers, shareholders and the environment.

"We are close to completing our West East Link water pipeline, a project costing over £120 million, which connects Merseyside and Greater Manchester.  This is one of the largest projects of its kind undertaken and will improve further the water supply and demand balance in our region.

"United Utilities has a robust capital structure and the business should benefit from predictable regulated revenue streams over the next five years.  The group's well defined dividend policy, with a growth target of two per cent per annum above inflation through to 2015, provides clarity for shareholders."