3rd Jun 2008 07:00
STRONG OPERATIONAL AND FINANCIAL PERFORMANCE CAPITAL PROGRAMME ON TRACK
Preliminary results* for the year ended 31 March 2008
‚£m (except dividends) Year ended % Change 31 March 31 March 2008 2007
Operating profit from continuing 663.2 642.1 +3% operations Underlying operating profit from 677.2 630.6 +7% continuing operations** Profit before tax from continuing 478.3 502.3 -5% operations Underlying profit before tax from 475.6 407.5 +17% continuing operations** Total dividends per ordinary share 46.67 44.93 +3.9% (pence) Basic earnings per share (pence) Year ended
31 March 2008 31 March 2007 Continuing operations 47.3 40.9
Continuing and discontinued operations 103.3 49.4 *Contribution from United Utilities Electricity, facilities managementoperations, industrial liquid waste operations and telecoms and the profits orlosses on disposal of each of these operations are treated as discontinuedoperations in these results. Results from continuing operations for the yearended 31 March 2007 have therefore been re-presented
**Underlying operating profit from continuing operations and underlying profit before tax from continuing operations are defined in the underlying profit measure table
* Underlying operating profit** up 7% to ‚£677 million
* Completed sale of United Utilities Electricity for a substantial premium to
its regulatory asset value
* Proposed ‚£1.5 billion return of value to shareholders scheduled for August
* Capital expenditure in regulated activities up 45% to ‚£826 million and in
line with regulatory assumptions * Focus on core skills delivers operational improvements: outperformed tougher leakage target
* Enhanced liquidity: pre-funded for capital investment programmes through to
2010
* Extended major outsourcing contracts with Southern Water and British Gas
Trading
Commenting, Philip Green, Chief Executive, said:
"We have had a successful year. We sold United Utilities Electricity for asubstantial premium to its regulatory asset value, addressed the portfolio andcapital structure of the group and announced a new dividend policy. We remainon course to return ‚£1.5 billion to shareholders and I am pleased to reportanother good set of financial results."We are on track to deliver our regulatory capital programme and have spent ‚£826 million on our infrastructure during the year. Our focus on improvingoperational performance is delivering results. We have improved the level ofcustomer service we are providing and for the second year running have achievedOfwat's leakage target."We are confident of delivering a strong financial performance over theremainder of this regulatory period and continued investment in our assets willhelp to raise environmental standards further and improve the service we offerto customers."
For further information on the day, please contact:
Philip Green - Chief Executive +44 (0) 20 7307 0300 Tim Weller - Chief Financial Officer +44 (0) 20 7307 0300 Gaynor Kenyon - Communications Director +44 (0) 7753 622282 Darren Jameson - Head of Investor Relations +44 (0) 7733 127707 Dominic Fry/Tom Murray - Tulchan Communications +44 (0) 20 7353 4200 A presentation to investors and analysts starts at 9.00 am on Tuesday 3 June2008, at the Auditorium, Deutsche Bank, Winchester House, 1 Great WinchesterStreet, London, EC2N 2DB. The presentation can be accessed via a one-way listenin conference call facility by dialling: +44 (0) 20 7162 0025. A recording ofthe call will be available for seven days following 3 June 2008 on +44 (0) 207031 4064, access code 795933.
The presentation, with further information on United Utilities, will be available at 9.00 am on the day at: http://www.unitedutilities.com.
CHIEF EXECUTIVE'S REVIEW
Financial performance
United Utilities has delivered a good financial performance in the year ended31 March 2008. Underlying profit before tax** increased by 17% to ‚£476 millionand underlying operating profit** was up by 7% to ‚£677 million.
The group is pre-funded for its capital investment programme through to 2010. We recently improved our liquidity position by enhancing our committed medium-term bank facilities. This provides us with increased flexibility in terms of when and how we raise further debt finance.
Our regulated activities have delivered strong growth in the period withoperating profit up 5%, an increase of 8% on an underlying basis**. This growthprimarily reflects the regulated price increase which supports high levels ofessential investment in our infrastructure. This investment enables us todeliver better service for customers and make environmental improvements.Capital investment in our regulated water and wastewater operations, includinginfrastructure renewals expenditure, amounted to ‚£826 million during the year.This is 45% higher than last year as we are now in the peak phase of ourcurrent capital expenditure programme. We have agreed a new strategy with Ofwatfor processing and disposing of sewage sludge, based on increasing capacity atan existing site rather than developing a new site. Our capital investmentprogramme has been re-profiled to reflect this agreement and we are now broadlyin line with regulatory assumptions. This new strategy will reduce our carbonfootprint compared with the original solution.
Our business improvement initiatives are delivering cost savings and we remain confident of delivering our regulatory outputs and meeting our efficiency targets across this price review period.
In our non-regulated activities, underlying operating profit** was slightlyhigher than the prior year reflecting the first time inclusion of the resultsof the outsourcing contract with Electricity North West. We have a strong orderbook worth over ‚£6 billion in revenue and we were pleased to announce recentlythat we have extended the contract with Southern Water through to March 2015.In January we also agreed an 18 month extension to our metering contract withBritish Gas Trading to June 2010. In addition, we have recently been selectedas preferred bidder by Townsville City Council in Australia to undertake itswater supply upgrade project.
Sale of United Utilities Electricity, capital structure and ‚£1.5 billion return to shareholders
Following the sale of United Utilities Electricity (UUE) and the review of thegroup's capital structure, as outlined in our half year results published on 29November 2007, the Board intends to return to shareholders a total of ‚£1.5billion or 170 pence per share. We expect to issue a circular that containsfurther details of the corporate restructuring and the proposed ‚£1.5 billionreturn on 6 June. The return of value to shareholders is scheduled for August2008. The Board is targeting a credit rating of A3 for United Utilities WaterPLC and, following the return of value, is anticipating a group net debt toregulatory capital value gearing level towards the upper end of Ofwat's range(55% to 65% for the 2005-10 price control period) by 2010.
Operational performance
Improving operational performance is an integral part of our vision to be aworld class operator of utility infrastructure. We continue to make goodprogress. The business outperformed its 2007/08 leakage target of 465megalitres per day, a tougher target than the previous year, underlining ourcommitment to higher performance. We are also pleased to report a 60% reductionin the number of serious pollution incidents compared with two years ago. Wehave continued to remove properties from our sewer flooding register and havenow achieved a net reduction of 32% over the last two years and remain oncourse to achieve our medium term target of a 50% reduction.Since 2005, we have closed the operational efficiency gap to the most efficientwater companies and this has been reflected in Ofwat's recent relativeefficiency assessments. Improving customer service is a key area for us andsince 2005 we have markedly improved customer satisfaction levels from below50% to 73%. We believe there are more improvements to come.
Climate change and sustainability
United Utilities takes a long-term view of its operations and we see mitigationof and adaptation to climate change as key elements of our future plans. Wewere pleased to note Ofwat's increased focus on climate change andsustainability in its recently published methodology document relating to thenext price review.Our carbon action plan is progressing well through schemes which, in additionto helping the environment, also contribute to improving the efficiency of thegroup. These schemes include increasing the efficiency of our pumping stationsand using our wastewater processes to generate electricity and heat.Adaptation to climate change and flooding risk is now of increasing importanceand will influence investment in the water industry in both the short and longterm. We are actively involved in deliberations with our regulators ahead ofthe next price review and would expect significant levels of capital investmentto continue beyond 2010.Outlook
We are building on the performance improvements already achieved supported byour focus on core skills. The key elements of our strategy are to continue toimprove operational performance, successfully execute our capital investmentprogramme and meet our efficiency targets, prepare for the next water pricereview and deliver our non-regulated growth strategy. The Board expects UnitedUtilities to continue to deliver a strong financial performance over theremainder of this regulatory period, underpinned by allowed price rises to fundsubstantial investment in our networks.OPERATING PERFORMANCEREGULATED ACTIVITIESFinancial highlights
* Regulated revenue increased by 7% to ‚£1,416 million
* Regulated operating profit increased by 5% to ‚£612 million, with underlying
operating profit** up 8%
Revenue from regulated activities increased by 7% to ‚£1,416 million,principally as a result of an allowed price increase of 8.3% (includinginflation), offset to a small extent by lower water consumption and tradeeffluent volumes and retrospective claims by unmetered customers. The increasein price supports the investment of significant sums in improving the company'sinfrastructure which provides vital clean water and wastewater services tocustomers.Reported operating profit for the year increased by 5%. After adjusting for anumber of one-off items in the current and prior years (as outlined in theunderlying profit measures table), underlying operating profit** for the yearincreased by 8% to ‚£614 million. This growth in underlying profit primarilyreflects the allowed price increase offset by a higher depreciation expense asa consequence of increased capital spend and growth in infrastructure renewalsexpenditure which was 19% higher than the prior year, in line with the plannedprofile of the renewals programme.Capital investment in the period, including ‚£120 million of infrastructurerenewals expenditure, was ‚£826 million. This represents a 45% increase inexpenditure compared with the prior year and reflects the peak phase of thecompany's 2005-10 investment programme. A revised strategy on processing anddisposing of sewage sludge has recently been agreed with Ofwat. After adjustingfor this strategy, cumulative capital expenditure on water and wastewaterassets was broadly in line with regulatory assumptions as at 31 March 2008. Thebusiness remains on course to meet its regulatory efficiency targets anddeliver its outputs across the 2005-10 period.It is likely that there will be additional investment, mainly in respect ofunsatisfactory intermittent discharge (UID) projects that were not part ofUnited Utilities' 2005-10 regulatory contract. A large proportion of thisinvestment, if endorsed by Defra and Ofwat, is expected to fall into the2010-15 period and be considered as part of the forthcoming price review.United Utilities estimates that the additional funding likely to be required tocomplete this UID programme, which is designed to meet statutory obligationsand deliver environmental benefits, could be in the order of ‚£700 million.
Operational performance
United Utilities has a vision to be a world class operator of utilityinfrastructure and is targeting an upper quartile position among UK watercompanies on key operational measures in the medium term. The businesscontinues to upgrade its infrastructure and replaced 650 kilometres of watermains during 2007/08. The company supplies a high quality of drinking water,with a mean zonal compliance water quality performance of 99.94% for the year.United Utilities was ranked first among the UK's water and sewerage companiesin 2006/07 by Ofwat for both water and sewerage in its most recent assetserviceability assessment, reflecting the company's long-term stewardship ofits assets.
United Utilities is making good progress against its key performance indicators and remains on course to meet its targets:
* Relative efficiency - United Utilities has closed the operational
efficiency gap to the most efficient water companies over the last two
years. For the water service, the company has narrowed the gap from 16% to
12% and for the wastewater service from 27% to 18% (based on United
Utilities' internal estimates). This is reflected in Ofwat's 2006/07
assessment of United Utilities as band B for the water service and band C
for the wastewater service and represents a one band improvement for both
services over the two-year period.
* Security of water supply - United Utilities outperformed the tougher
economic level of leakage rolling target of 465 megalitres per day, as set
by Ofwat for 2007/08. This is the second consecutive year that United
Utilities has met or outperformed its leakage target. In addition, there
were no water restrictions on customers during the year. * Pollution - one water and eight wastewater Category 1&2 incidents were recorded in 2007 compared with the base position of two water and 21 wastewater incidents in 2005. The business has again outperformed its target of a 50% reduction in the medium term
* Sewer flooding - United Utilities continues to remove properties from the
sewer flooding register. It has set a medium term target of reducing the
number of properties on this register by 50% compared with a start point of
641 properties in 2005/06. This target is based on properties at risk of
experiencing at least one sewer flooding incident in ten years. Further
progress has been made in 2007/08 with 434 properties now on the register.
This represents a 32% reduction over the last two years and the business
remains on track to meet its medium term target.
* Overall customer satisfaction - Good progress was made in 2007/08 and 73%
of United Utilities' water and wastewater customers surveyed who had made
an enquiry were satisfied with the overall service they received. This
compares with a start point satisfaction level of less than 50% in 2005.
These satisfaction levels are based on a comprehensive independent survey
conducted on behalf of United Utilities each month. Going forward, the business has a strong focus on resolving customer queries on the first contact which should improve customer satisfaction and lower the cost of service.
Although United Utilities has delivered real progress, there is more to do inimproving operational performance. During 2007/08 there was a higher level ofsewer flooding incidents influenced by adverse weather conditions. Thistogether with environmental underperformance at our Fleetwood wastewatertreatment works will lead to a lower Overall Performance Assessment (OPA) scorefrom Ofwat for 2007/08, compared with the prior year.
Efficiency initiatives
United Utilities is confident of meeting its regulatory efficiency targets despite increasing cost pressures in areas such as power and property rates.
The company's principal efficiency initiatives include an integratedperformance management project, which increases remote operational sitemanagement and optimises chemical and power usage, and its asset improvementprogramme which is improving the efficiency of operational pumps. These schemesare key elements of United Utilities' plan to mitigate its carbon emissions,alongside its combined heat and power assets which recycle energy generatedfrom wastewater treatment processes.Other key initiatives include a workforce management project, which is designedto improve data systems, deliver more efficient field operations and enhancecustomer service, and supply chain management which has now been centralisedand is delivering procurement economies. There is a strong drive to improvecustomer service and the business is focusing on reducing the number ofcustomer queries, improving staff productivity, implementing improved cashcollection procedures and enhancing the overall customer experience.
Regulatory developments
Strategic Direction Statement
Consistent with its approach to longer term asset planning, in December 2007United Utilities published its strategic direction statement (SDS) whichconsiders the needs of the North West region out to 2035. The SDS enables thecompany to set its plans for the next price review period (2010-15) in thislonger term context, develop sustainable solutions and respond to futurechallenges.
The six key elements identified in the SDS are:
* Responsible long-term stewardship of networks. This includes protecting
health and the environment, improving the company's understanding of
network performance and investing in research and new technology with clear
efficiency and service benefits.
* Listening and responding to the views of customers and other stakeholders.
Ensuring that the company's plans meet the changing needs and priorities of
customers and other stakeholders and provide good value for money. United
Utilities recently undertook a substantial customer survey which identified
key areas where customers are willing to pay for improvements including
supply interruptions, sewer flooding, odour and reductions in greenhouse
gas emissions. Customer priorities can help shape future investment programmes, aligning expenditure to those areas that customers consider most important.
* Making water resources more sustainable and resilient. This means improving
both our own and customers' water efficiency, ensuring the company enhances
and protects its network and developing water resources to help address increasing drought risk and meet supply and demand requirements. * An integrated approach to drainage to reduce flooding risk. Storm water
volumes entering the sewer system need to be reduced and the government's
proposal to transfer responsibility for private sewers from householders to
water companies will facilitate a more integrated approach to this
challenge.
* Reduce the group's carbon impact. The company aims to halve its greenhouse
gases by 2035, supported by achieving energy neutrality for its wastewater
operations.
* Bills to rise, on average, no faster than incomes. United Utilities
believes that the water and wastewater services it provides are already of
good value, but there will be future upward pressure on costs.
The implications of climate change on drought and flood risk are set to featurestrongly in United Utilities' plans for decades to come and these implicationswill be incorporated in the company's forthcoming price review submission. Theimportance of this is recognised by the government which intends to publish adraft Floods and Water Bill for consultation later in the year.
2009 water price review
United Utilities' preparations for the forthcoming price review are welladvanced and the company is in active deliberations with its regulators andother key stakeholders. In March 2008, Ofwat published its methodology for the2009 water price review which will set price limits for the five year periodstarting 1 April 2010. In many respects, the methodology is similar to thatused in previous price reviews but United Utilities is pleased to note theincreased focus on the issues of climate change and sustainability.Following the outcome of the group's recent capital structure review, the Boardannounced that it will be targeting an A3 credit rating for United UtilitiesWater PLC which it believes best mirrors Ofwat's assumptions for the 2005-10regulatory period. The Board believes this to be an appropriate investmentgrade rating to allow the company to raise finance to fund its substantialcapital investment programmes.United Utilities believes that Ofwat should ensure that companies can at leastmaintain an A3 rating and should consider recent developments in the creditmarkets. The raising of debt finance is particularly important given the likelyscale of investment that is still required in the water industry to replace andrefurbish ageing infrastructure, address flooding risk and climate change anddeliver further statutory environmental obligations and customer priorities.United Utilities believes significant investment will be required during thenext price review period (2010-15) and beyond.United Utilities has been consistent in its approach that the regulator shouldconsider both short and long term economic data in the price review. Sub-primedebt problems and US recession fears have seen higher risk premiums on the costof debt and difficulties experienced by the monoline credit insurance industryhave implications for the raising of further index-linked debt.
NON-REGULATED ACTIVITIES
Financial highlights
* Non-regulated revenue increased by 30% to ‚£949 million
* Non-regulated underlying operating profit** marginally increased to ‚£62
million
Non-regulated revenue in the year increased by 30% to ‚£949 million comparedwith the prior year, reflecting the contribution from the first year of theelectricity distribution outsourcing contract. Underlying operating profit**was slightly higher than last year. This reflects the first time inclusion ofcontribution from the group's electricity outsourcing activities, partly offsetby the expected reduction in contribution from the Southern Water contractwhere the investment profile peaked in 2006/07. Reported operating profit wasdown 19% compared with 2006/07 reflecting ‚£12 million of restructuring costs,principally relating to the company's planned efficiency delivery in its gasand electricity outsourcing activities.
Business update
The non-regulated business incorporates the former United Utilities ContractSolutions' activities and applies the core utility skills of the regulatedbusiness through outsourcing contracts. United Utilities holds major water andwastewater utility outsourcing contracts, working on behalf of Dwr Cymru WelshWater, Southern Water and Scottish Water and is the leading utilityinfrastructure outsourcing company in the UK. United Utilities also has threeScottish PFI operations and currently operates in Bulgaria, Estonia, Poland,the Philippines and Australia.United Utilities holds the only outsourced contracts to operate electricity andgas distribution networks in the UK, working on behalf of Electricity NorthWest and Northern Gas Networks (NGN). United Utilities' electricity outsourcingcontract extends through to 2015 and is projected to generate revenues ofaround ‚£1.5 billion over the eight-year period, with the potential for thecontract to be extended by a further five years to 2020. United Utilities alsohas a 15% stake in NGN, which provides a steady income stream.In addition, United Utilities has a meter installation contract with BritishGas Trading which was extended to 30 June 2010 earlier this year, building on agood performance on the contract to date. Furthermore, this provides anenhanced revenue stream to United Utilities through rental income from meterownership. Last month, the group was also awarded a three-year contract toprovide the Greater Manchester Waste Disposal Authority with water, electricityand gas connections to 27 sites across the Manchester region. Whilst this is arelatively small contract, it is a useful addition to the contract portfolio.
United Utilities has a strong order book worth over ‚£6 billion in revenue which secures long-term income streams for the group. This was further enhanced through the recent extension of the contract with Southern Water, which now runs through to 31 March 2015. Overall, the business is pleased with its performance across the contract portfolio, reinforced by positive feedback received from its customers during the year.
The group continues to seek opportunities to grow its non-regulated business byapplying its core skills where it identifies opportunities to generateadditional shareholder value with little impact on the risk profile of thegroup. In addition to the UK utility outsourcing market, United Utilities iscurrently focusing business development resources on specific opportunities inthe UK municipal solid waste treatment market, Australia and thefast-developing Gulf region.In line with its business development strategy, United Utilities was recentlynamed preferred bidder for the water supply upgrade project in Townsville,Australia. The project involves upgrading the water facilities in Townsvilleand designing, building and operating two water treatment plants. Facilitiesare due to be completed and operational by mid-2010 and upon award, UnitedUtilities expects to hold a 20-year operations and maintenance contract with aminimal equity investment requirement. The project forms part of a AUD$300million water and sewerage infrastructure programme in Townsville.
OTHER ACTIVITIES
Operating profit from other activities for the year ended 31 March 2008 was ‚£1million. This segment includes central costs and the contribution from UnitedUtilities Property Solutions (UUPS). UUPS is the property sales and managementbusiness of United Utilities PLC and it made an operating profit of ‚£19 millionin the year. It owns a land and property portfolio and is expected to continueto deliver a positive contribution for the next few years, although due to thenature of the business, profits may not follow a smooth profile.
FINANCIAL PERFORMANCE
Revenue and operating profit from continuing operations
Revenue from continuing operations rose 19% to ‚£2,363 million, reflecting the allowed price rise in the regulated business and the first year of the electricity distribution outsourcing contract in the non-regulated business.
Group operating profit from continuing operations increased by 3% to ‚£663million, with group underlying operating profit from continuing operations** upby 7%. This increase was underpinned by a strong performance in the regulatedbusiness.
Investment income and finance expense
Finance expense of ‚£332 million was ‚£74 million higher than in the prior year.This expense included a ‚£43 million fair value loss on debt and derivativeinstruments, whereas the prior year included a ‚£26 million fair value gain.This volatility in financing expense reflects the fact that, in order to hedgethe interest cost implicit in the regulatory contracts, the group fixesinterest rates for the duration of each five-year review period for themajority of its debt using interest rate swaps. IAS 39 limits the use of hedgeaccounting for these commercial hedges, thereby increasing the potentialvolatility of the income statement. In addition, the impact of changes incredit spread on debt accounted for at fair value through profit or loss canresult in significant additional volatility. However, this volatility has nocash flow impact. Interest expense on swaps (on a pre-IAS 39 basis) and debtunder the fair value option was ‚£42 million, ‚£16 million lower than the prioryear.Investment income was ‚£147 million, compared with ‚£118 million in the prioryear partly reflecting the higher level of cash held following the sale of UUE.The underlying cost of net borrowing for continuing operations of ‚£207 millionis lower than the prior year and reflects a lower average net debt and areduction in the group's average net borrowing rate from around 6.3% to 5.8%.The group redeemed a ¢â€š¬1 billion 6.625% bond in November 2007 which has servedto reduce the underlying cost of net borrowings, partly offset by the impact ofhigher inflation on the index-linked debt. However, the higher inflation rateswill result in increased allowed revenues and growth in the regulatory capitalvalue of United Utilities Water since both of these are linked to the UK retailprice index (RPI).Profit before taxation
Profit before taxation decreased by 5% to ‚£478 million. Adjusting for theimpact of restructuring costs, other one-off items, fair value movements inrespect of debt and derivative instruments and the expected short-term interestbenefit associated with the cash proceeds from the sale of UUE, underlyingprofit before taxation** was ‚£476 million, 17% ahead of the year ended 31
March2007.TaxationThe current tax charge relating to continuing operations is ‚£89 million and thecurrent tax effective rate is 19% compared with 11% in the prior year. Theincrease in current tax primarily relates to the fair value movement inderivatives, and is matched by an equal and opposite movement in deferred tax,resulting in no net impact on the total effective rate. Deferred tax has beencalculated after taking into account the reduction in the corporation tax ratefrom 30% to 28% with effect from April 2008. The deferred tax credit oncontinuing operations arising from the restatement of the opening deferred taxliability is ‚£82 million. The overall deferred tax credit relating tocontinuing operations is ‚£27 million compared with a deferred tax charge in theprior year of ‚£90 million.Excluding the impact of the change in corporation tax rate, the total taxcharge relating to continuing operations would be ‚£144 million or 30%, comparedwith a ‚£144 million charge or 29% in the prior year. A total tax charge of ‚£62million relating to continuing operations has been recognised for the yearended 31 March 2008.The company is forecasting a one-off deferred tax charge in 2008/09 relating tothe abolition of industrial buildings allowances. This one-off adjustment isanticipated to be over ‚£200 million and is likely to result in a significantincrease in the effective tax rate for the year ended 31 March 2009; howeverthe cash impact will be spread over a period of approximately 20 years.
Discontinued operations
UUE, which principally comprised the group's electricity distribution assets,is treated as a discontinued operation in the results for the year ended 31March 2008. In the period 1 April 2007 to 19 December 2007, profit after taxgenerated from UUE was ‚£122 million compared with ‚£119 million for the yearended 31 March 2007. The profit on disposal of UUE amounted to ‚£371 million.United Utilities had previously announced its intention to dispose of itsindustrial liquid waste operations and facilities management operations in linewith its strategy to focus on its core skills. The contribution from theseoperations has therefore also been treated as discontinued. In 2007/08, thegroup completed the disposal of its industrial liquid waste operations to GroupTradebe, the parent company of Advanced Waste Solutions Limited, and itsfacilities management operations were sold to Europa Facility Holdings Limited.In the period 1 April 2007 to 26 October 2007, a loss after tax of ‚£0.1 millionwas recorded from the group's industrial liquid waste operations compared witha profit after tax of ‚£1.7 million for the year ended 31 March 2007. Thefacilities management operations made a profit after tax of ‚£1.3 million forthe period 1 April 2007 to 22 February 2008 compared with a profit after tax of‚£3.4 million for the year ended 31 March 2007. These results have all beenincluded within discontinued operations in the consolidated income statement.United Utilities sold its 22.63% stake in THUS Group plc earlier in thefinancial year, which completed its exit from the telecoms sector. The ‚£10million loss on disposal of the stake in THUS Group plc is treated as anadjustment to the consideration arising on the disposal of Your Communicationsand so both the loss and the group's share of THUS' results prior to disposalare disclosed as discontinued operations.
Earnings per share
Basic earnings per share relating to continuing operations increased by 16% to 47.3 pence.
Dividends per share and future dividend policy
The Board is proposing a final dividend of 31.47 pence per ordinary share inrespect of the year ended 31 March 2008. Taken together with the interimdividend of 15.20 pence per ordinary share, the total proposed dividend for2007/08 is 46.67 pence per ordinary share. This is an increase of 3.87%,consistent with the group's previous policy of growing dividends in line withinflation (based on the issued share capital prior to the share reductionassociated with the ‚£1.5 billion proposed return of value to shareholders, assummarised on page 15 of this announcement). The inflationary increase is basedon the RPI element included within the allowed regulated price increase inUnited Utilities Water for the 2007/08 financial year (i.e. the movement in RPIbetween November 2005 and November 2006).
The proposed final dividend is expected to be paid on 8 August 2008 to shareholders on the register at the close of business on 27 June 2008. The ex-dividend date for the final dividend is 25 June 2008.
As announced at the group's half year results on 29 November 2007, the Boardhas outlined a new dividend policy which will apply from 2008/09 to reflect therevised composition and earnings profile of the group. In light of the sale ofUUE and the proposed ‚£1.5 billion return of value to shareholders, the dividendper share from 2008/09 will be reduced by 30% compared with the proposed 2007/08 dividend per share. Thereafter, the group's revised dividend policy isintended to target a sustainable and growing level of dividends. The new targetreal growth rate of RPI+2% will be applied from 2009/10 to the 2008/09 dividendper share.Cashflow
Cash generated from the group's continuing operations for the year ended 31March 2008 was ‚£877 million compared with ‚£811 million in the prior year. Highlevels of capital expenditure continue, principally in the regulated water andwastewater investment programmes. The group's net capital expenditure onproperty, plant and equipment for 2007/08 was ‚£630 million, excludinginfrastructure renewals expenditure which is included as an operating cost inthe income statement under IFRS.Cash and short-term deposits at 31 March 2008 amounted to ‚£1,811 million which,inclusive of medium term committed bank facilities and net of short-term debt,results in total available liquidity of ‚£2,494 million. During the year UnitedUtilities redeemed a ¢â€š¬1 billion 6.625% bond from existing cash resourcesprimarily generated from issuances of index-linked debt.The group retains an excellent pre-funded position for its capital investmentprogrammes through to 2010 and enhanced its liquidity further by arranging orextending the maturity dates of ‚£500 million of committed medium-term bankcredit facilities since 30 September 2007. Furthermore, the group is indiscussions with the European Investment Bank, with which it has along-standing relationship, regarding a new ‚£400 million term loan for UnitedUtilities Water PLC.Net debt, including derivatives at 31 March 2008 was ‚£2,903 million, a decreaseof ‚£741 million compared with 31 March 2007 (after adjusting for ‚£482 millionof net debt relating to discontinued operations which has exited the group).This movement principally reflects the receipt of cash proceeds from the salesof UUE and the group's stake in THUS Group plc, plus cashflow from operatingactivities, offset by expenditure on the regulated water and wastewater capitalinvestment programmes and payments of interest, tax and dividends. Thisreduction in net borrowings is expected to be short-term since the groupintends to return ‚£1.5 billion to shareholders, as outlined in its 2007/08 halfyear results announced on 29 November 2007. Details of the return will bepublished in the circular scheduled to be issued on 6 June, with the return ofvalue expected in August 2008.Gearing (net borrowings divided by the regulatory capital value) decreased to39% at 31 March 2008, compared with 52% at 31 March 2007. Following theproposed ‚£1.5 billion return to shareholders, gearing will increase and isexpected to move United Utilities towards the upper end of Ofwat's assumedrange of 55% to 65% by the end of this regulatory review period. The Board willcontinue to target an A3 credit rating for United Utilities Water PLC.In the year ended 31 March 2008, the group issued a total of ‚£185 million oflong-term, index-linked notes through its multi-issuer euro medium-term noteprogramme. This comprised a ‚£50 million issue at a real interest rate of 1.702%with a 50.5 year maturity, a ‚£100 million issue at a real interest rate of1.585% with a 50 year maturity and a ‚£35 million issue at a real interest rateof 1.66% with a 30 year maturity.
United Utilities now has index-linked funding totalling approximately ‚£1.5 billion, including indexation of the principal. However as a result of the current economic climate and the uncertainty in the monoline insurance sector, the group sees limited opportunity for further index-linked debt issuance.
The principal amount of the index-linked borrowings is adjusted to trackmovements in RPI. This form of liability is a good match for the group'sregulated assets, which are also linked to RPI, and delivers a cashflow benefitto United Utilities since compensation for inflationary risk is provided viaadjustment to the principal rather than through regular cash payments.
Underlying profit
In considering the results for the year, the directors have adjusted thegroup's statutory measures for fair value movements on debt and derivativeinstruments and those significant items identified as non-recurring. Operatingprofit and profit before taxation from continuing operations are reconciled tounderlying operating profit from continuing operations and underlying profitbefore taxation from continuing operations as follows:Continuing operations Regulated Non- Other
Total
Operating profit for the year ended 31 regulated
March 2008 ‚£m ‚£m ‚£m ‚£m ----- ----- ----- ----- Operating profit per published results 611.6 50.6 1.0 663.2 ----- ----- ----- ----- Restructuring costs 2.6 11.6 (0.2) 14.0 ----- ----- ----- ----- Underlying operating profit 614.2 62.2 0.8 677.2 ----- ----- ----- ----- Continuing operations Regulated Non- Other Total
Operating profit for the year ended 31 regulated
March 2007 ‚£m ‚£m ‚£m ‚£m(Re-presented) ----- ----- ----- ----- Operating profit per published results 581.0 62.6 (1.5) 642.1 ----- ----- ----- ----- Restructuring costs 5.3 0.3 5.0 10.6 Settlement claims*** (27.6) (3.0) - (30.6) Ofwat transfer pricing fine 8.5 - - 8.5 ----- ----- ----- ----- Total adjustments (13.8) (2.7) 5.0 (11.5) ----- ----- ----- ----- Underlying operating profit 567.2 59.9 3.5 630.6 ----- ----- ----- ----- Continuing operations Re-presentedProfit before taxation Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£m ----- -----
Profit before taxation per published results 478.3
502.3 ----- ----- Operating profit adjustments (see above) 14.0
(11.5)
Fair value losses / (gains) on debt and derivative 42.7 (26.0)instruments Interest on swaps and interest on debt under fair value (41.7) (57.3)option
Interest associated with cash proceeds from UUE sale**** (17.7)
- ----- ----- ----- -----
Underlying profit before taxation 475.6
407.5 ----- -----Notes***During the prior year, the group's regulated and non-regulated activitiesbenefited from one-off credits worth ‚£27.6 million and ‚£3.0 millionrespectively. These credits were in respect of settlement of claims made by thegroup against contractors and the end of the statutory period of potentialclaims against the group. Although such claims are a regular occurrence in theongoing business of United Utilities, these particular claims were unusual insize.***\* The interest associated with the cash proceeds from the sale of UUE hasbeen deducted to provide a more representative view of underlying performance.Since the group intends to return ‚£1.5 billion to shareholders later in theyear, the cash proceeds from the sale are expected to result in a short-termnet debt and interest reduction.
‚£1.5 billion return of value to shareholders
As a result of the sale of UUE and the review the group's capital structure, outlined in its half year results published on 29 November 2007, the Board intends to return to shareholders a total of ‚£1.5 billion or 170 pence per share. This substantial total return is analysed in the table below.
Proposed return of value to shareholders ‚£m Pence per
share#
Net equity proceeds from sale## 1,050 119 Additional return to create more efficient 450 51
capital structure
Total proposed return via B share scheme 1,500 170
# Based on 880 million ordinary shares in issue at the time the sale was agreed
## ‚£1,782 million sale price less UUE net debt of ‚£686 million at fair value atthe date of disposal, including United Utilities' group debt apportioned to theelectricity business, and transaction costs of ‚£46 millionThe proposed return of value will be in the form of a redeemable B share schemeproviding shareholders (other than shareholders in certain overseasjurisdictions) with a choice of receiving the return as capital or income andthe option to spread the return over two financial years.In order to implement the B share scheme and increase the group's distributablereserves, the company intends to propose a change to its corporate structure.The proposed change, which is subject to court and shareholder approval,involves a scheme of arrangement to introduce a new parent company above UnitedUtilities PLC. The reserves created by the implementation of the new structurewill be available for the proposed return of value and the declaration offuture dividends.The scheme of arrangement will involve the new parent company acquiring all ofthe shares in United Utilities PLC and issuing new shares. This will comprisethe issue of new ordinary shares and redeemable B shares to facilitate thereturn of value. The number of new ordinary shares issued will be reduced fromthe existing number of ordinary shares, commensurate with the return of value,with a view to aiding comparability of share price and earnings per sharebefore and after the return of value. Following the implementation of the newstructure, United Utilities' shareholders will hold shares in the new parentcompany equivalent to their previous percentage holding in United UtilitiesPLC. The new structure will be implemented at the same time as the return ofvalue.The necessary steps to achieve the above corporate restructuring are expectedto be completed during the summer, enabling the return of value to take placein August 2008.Indicative return timetable6 June 2008 Circular expected to be posted to shareholders June/July 2008 Court meeting and general meeting for scheme of arrangement to create new parent company 25 July 2008 Annual general meeting (AGM)
July/August 2008 Issue of redeemable B shares, listing of new parent
company and issue of new parent company ordinary shares 8 August 2008 Payment of 2007/08 final dividend under current policy August 2008 Return of value - first option to redeem B shares February 2009 Payment of 2008/09 interim dividend under new policy April 2009 Return of value - all remaining B shares redeemed
The circular, which will detail the process and timetable for the return ofvalue and the creation of the new parent company, is expected to be issued on 6June. The creation of the new parent company will require court approval andshareholder approval at a general meeting. Details of the general meeting willbe contained in the circular.Consolidated income statement Re-presented Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£m Continuing operations Revenue 2,362.9 1,986.7 ----- ----- Other income 21.3 8.9 Employee benefits expense (317.5) (254.1) Depreciation and amortisation expense (248.2) (221.3) Infrastructure renewals expenditure (120.1) (101.2) Other operating costs (1,035.2) (776.9) ----- ----- Total operating expenses (1,699.7) (1,344.6) ----- ----- Operating profit 663.2 642.1 Investment income (note 2) 146.7 118.3 Finance expense (note 3) (331.6) (258.1) ----- ----- Investment income and finance expense (184.9) (139.8) ----- ----- Profit before taxation 478.3 502.3 Taxation (note 4) (62.0) (143.9) ----- -----
Profit for the year from continuing operations 416.3 358.4
Discontinued operations Profit for the period from discontinued 492.9 75.1operations (note 5) ----- ----- Profit for the year 909.2 433.5 ----- ----- Earnings per share from continuing and discontinued operations (note 6) Basic 103.3p 49.4p Diluted 103.2p 49.2p Earnings per share from continuing operations (note 6) Basic 47.3p 40.9p Diluted 47.3p 40.7p Dividend per ordinary share (note 7) 46.67p 44.93pConsolidated balance sheet Re-presented 31 March 31 March 2008 2007 ‚£m ‚£m ASSETS Non-current assets Property, plant and equipment 7,591.8 8,894.6 Goodwill 2.3 5.0 Other intangible assets 85.3 115.5 Investments 155.5 202.4 Trade and other receivables 28.2 21.6 Retirement benefit surplus - 61.3
Derivative financial instruments 44.3 15.2
----- ----- 7,907.4 9,315.6 ----- ----- Current assets Inventories 63.3 62.8 Trade and other receivables 456.2 418.2 Cash and short-term deposits 1,810.5 2,403.3
Derivative financial instruments 99.0 61.0
----- ----- 2,429.0 2,945.3 ----- ----- Total assets 10,336.4 12,260.9 ----- ----- LIABILITIES Non-current liabilities Trade and other payables (125.5) (414.3) Borrowings (3,788.9) (4,854.9)
Retirement benefit obligations (101.2) -
Deferred tax liabilities (1,164.0) (1,550.5) Provisions (18.7) (30.4)
Derivative financial instruments (53.2) (173.5)
----- ----- (5,251.5) (7,023.6) ----- ----- Current liabilities Trade and other payables (771.9) (749.2) Borrowings (878.4) (1,509.5)
Current income tax liabilities (66.9) (168.0) Provisions (21.0) (8.5) Derivative financial instruments (136.7) (67.3)
----- ----- (1,874.9) (2,502.5) ----- ----- Total liabilities (7,126.4) (9,526.1) ----- ----- Total net assets 3,210.0 2,734.8 ----- ----- EQUITY
Capital and reserves attributable to equity
holders of the company Share capital 881.6 879.8 Share premium account 1,429.3 1,421.9 Revaluation reserve 158.8 158.8 Treasury shares (0.3) (0.3) Cumulative exchange reserve 7.6 (4.2) Other reserves 58.1 24.3 Retained earnings 674.9 254.5 ----- ----- Shareholders' equity 3,210.0 2,734.8 ----- -----Consolidated cashflow statement Re-presented Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£m Operating activities Cash generated from operations 876.9 810.8 Interest paid (299.9) (341.8) Interest received and similar income 119.1 99.8 Tax paid (98.6) (17.8) ----- ----- Net cash generated from operating activities 597.5 551.0(continuing operations) Net cash generated from operating activities 99.5 204.3(discontinued operations) ----- ----- 697.0 755.3 Investing activities Disposal of investments 0.6 - Disposal of associated company 75.8 - Disposal of subsidiaries 1,152.7 206.4 Net cash outflow from group reorganisation (15.0) - Purchase of property, plant and equipment (644.5) (548.5) Purchase of other intangible assets (25.3) (5.0) Proceeds from sale of property, plant and 15.0 27.0equipment ----- ----- Net cash generated from/(used in) investing 559.3 (320.1)activities (continuing operations) Net cash used in investing activities (161.0) (125.1)(discontinued operations) ----- ----- 398.3 (445.2) Financing activities Proceeds from issue of ordinary shares 9.2 18.5 Cash (used in)/proceeds from structured (170.1) 81.4financing Proceeds from borrowings 1,068.9 1,600.8 Repayment of borrowings (2,297.2) (821.0)
Dividends paid to equity holders of the company (400.4) (387.3)
Dividends received from discontinued operations 100.0 36.0
----- -----
Net cash (used in)/generated from financing (1,689.6) 528.4 activities (continuing operations)
Net cash (used in)/generated from financing (190.1) 51.9 activities (discontinued operations)
----- ----- (1,879.7) 580.3 Effects of exchange rate changes (continuing 148.9 6.4operations) ----- ----- Net (decrease)/increase in cash and cash (383.9) 765.7equivalents (continuing operations) Net (decrease)/increase in cash and cash (251.6) 131.1equivalents (discontinued operations) ----- ----- (635.5) 896.8 ----- -----
Cash and cash equivalents at beginning of the 2,340.7 1,443.9 year
----- -----
Cash and cash equivalents at end of the year 1,705.2 2,340.7
----- -----Consolidated statement of recognised income and Year ended Year endedexpense 31 March 31 March 2008 2007 ‚£m ‚£m
Actuarial (losses)/gains on defined benefit (126.4) 46.5 pension schemes
Revaluation of investments 34.9 8.9 Fair value (losses)/gains on cashflow hedges (1.5) 2.8 Foreign exchange adjustments 11.8 (6.4) Tax on items taken directly to equity 35.8 (14.8) ----- ----- Net (expense)/income recognised directly in (45.4) 37.0equity Profit for the year 909.2 433.5 ----- ----- Total recognised income and expense for the 863.8 470.5year ----- -----Reconciliation of movements in consolidated Year ended Year endedequity 31 March 31 March 2008 2007 ‚£m ‚£m Total net income recognised for the year 863.8 470.5 Dividends (400.4) (387.3) New share capital issued 9.2 18.5 Other movements 2.6 2.2 ----- ----- Net increase in equity for the year 475.2 103.9
Opening equity attributable to equity holders 2,734.8 2,630.9 of the company*****
----- -----
Closing equity attributable to equity holders 3,210.0 2,734.8 of the company
----- -----
***** ‚£2,630.9 million in respect of the opening balance for the year ended 31 March 2007 includes ‚£1.7 million in relation to minority interests
Cash generated from continuing operations Re-presented Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£m Profit before taxation from continuing 478.3 502.3operations Adjustment for investment income and finance 184.9 139.8expense ----- ----- Operating profit from continuing operations 663.2 642.1 Adjustments for:
Depreciation of property, plant and equipment 226.0 213.8
Amortisation of other intangible assets 22.2 7.5 Profit on disposal of property, plant and (5.7) (3.4)equipment Equity-settled share-based payments charge 2.6 3.9 Other non-cash movements 3.9 - Changes in working capital: (Increase)/decrease in inventories (4.1) 4.0 Increase in trade and other receivables (81.3) (66.6) Increase in provisions and payables 50.1 9.5 ----- ----- Cash generated from continuing operations 876.9 810.8 ----- -----Segmental analysis by class of business Continuing operations Re-presented Year ended Year ended 31 March 31 March 2008 2007 Revenue ‚£m ‚£m Regulated activities 1,416.3 1,320.8 Non-regulated activities 949.2 729.2 Other activities 41.3 53.0 ----- ----- 2,406.8 2,103.0 Inter-segment revenue (43.9) (116.3) ----- ----- External revenue 2,362.9 1,986.7 ----- -----Continuing operations Re-presented Year ended Year ended 31 March 31 March 2008 2007 Operating profit/(loss) ‚£m ‚£m Regulated activities 611.6 581.0 Non-regulated activities 50.6 62.6 Other activities 1.0 (1.5) ----- ----- 663.2 642.1 ----- -----For management purposes, the group is organised into two principal operatingdivisions, being regulated and non-regulated activities. These divisions formthe basis on which the above primary segment information is reported.The regulated activities segment previously included the results of UnitedUtilities Electricity (UUE). Following the sale of UUE, which principallycomprised the group's electricity distribution assets, on 19 December 2007, theresults of this business are treated as discontinued and are not included inthe continuing operations regulated activities segment (see note 5). Theregulated segment therefore only includes the regulated results of UnitedUtilities Water PLC.The non-regulated activities segment previously included the contribution fromthe group's industrial liquid waste and facilities management operations.Following the sale of these operations on 26 October 2007 and 22 February 2008respectively, these non-regulated activities are also treated as discontinued(see note 5). The non-regulated continuing operations segment therefore relatesto the group's utility outsourcing contracts in the United Kingdom andoverseas.In April 2007, the operations and maintenance of UUE's assets was outsourcedunder an Asset Services Agreement to United Utilities Electricity ServicesLimited (UUES), a newly incorporated group company. UUES' results from thisdate are reported within continuing operations as part of the non-regulatedactivities segment. The results of UUE, including those for the year ended 31March 2007, when UUE operated its own assets, have been reported in full asdiscontinued.In addition, the other activities segment previously included some residualactivities associated with UUE, but not related to regulated electricitydistribution. These residual activities were sold, along with UUE, and hencehave been treated as discontinued and are no longer included in the continuingoperations other activities segment. The other activities segment thereforeincludes the results of United Utilities Property Solutions Limited, the parentcompany and other group holding companies.
NOTES
1. Basis of preparation
The results for the year ended 31 March 2008 have been prepared on the basis of accounting policies consistent with those set out in the annual report to shareholders for the year ended 31 March 2007.
The financial information set out in this statement relating to the year ended31 March 2008 does not constitute statutory accounts for that period as definedin section 240 of the Companies Act 1985. Statutory accounts for 2008 will bedelivered to the Registrar of Companies following the company's annual generalmeeting. The auditors have reported on those accounts; their report isunqualified and does not contain a statement under either section 237(2) or (3)of the Companies Act 1985.The financial information set out in this statement relating to the year ended31 March 2007 does not constitute statutory accounts for that period. Fullstatutory accounts of United Utilities PLC in respect of that financial periodwhich received an unqualified audit opinion and did not contain a statementunder either section 237(2) or (3) of the Companies Act 1985, have beendelivered to the Registrar of Companies.The group adopted IFRS 7 `Financial Instruments: Disclosures' during the yearended 31 March 2008 and accordingly the comparative results for the year ended31 March 2007 have been re-presented to reflect the revised disclosurerequirements.The comparative results for the year ended 31 March 2007 have been re-presentedto reflect the disclosure of United Utilities Electricity, the group'sindustrial liquid waste and facilities management operations and its associatewithin discontinued operations (see note 5).The comparatives for the year ended 31 March 2007 have also been re-presentedto reflect the removal of the category for current asset investments from thebalance sheet. Properties previously held as current asset investments are nowclassified as inventories as the directors' believe this provides a fairerpresentation of the nature of these assets.The comparatives for the year ended 31 March 2007 have also been re-presentedto incorporate within equity a category for other reserves to includerevaluation of investments and fair value gains/(losses) on cash flow hedgesand the associated tax on these items. The amounts were previously disclosedwithin retained earnings but are now classified within other reserves as thedirectors believe this provides a fairer presentation of these items.The comparatives have been re-presented for retirement benefits to reflect thegroup's participation in the Northern Gas Networks Pension scheme. The grouprecorded a related deferred tax asset and investment offsetting the impact onnet assets at 31 March 2007 to ‚£nil.2. Investment income Re-presented Year ended Year ended 31 March 2008 31 March 2007 ‚£m ‚£m
Interest receivable on short-term bank 67.8 69.8deposits held at amortised cost Foreign exchange gains on forward contracts 55.4 30.9
----- ----- 123.2 100.7
Expected return on pension schemes' assets 128.6 92.5 Interest cost on pension schemes' obligations (105.1) (74.9)
----- ----- Net pension interest income 23.5 17.6 ----- ----- 146.7 118.3 ----- -----3. Finance expense Re-presented Year ended Year ended 31 March 2008 31 March 2007 ‚£m ‚£m Interest payable (288.9) (284.1) Fair value (losses)/gains on debt and (42.7) 26.0derivative instruments ----- ----- (331.6) (258.1) ----- -----
As previously reported, the group follows a policy of economic hedging itsinterest rate and currency exposures, with particular regard to the five-yearregulatory period. Including the interest element of swaps and interest on debtunder the fair value option within interest payable, as opposed to within fairvalue (losses)/gains, and adjusting for the reclassification of interest incomeand expenditure associated with the group's defined benefit pension schemes,would give an economic underlying cost of net borrowings of ‚£207.4 million
(2007: ‚£240.7 million): Re-presented Year ended Year ended 31 March 2008 31 March 2007 ‚£m ‚£m Finance expense (331.6) (258.1) Fair value losses/(gains) 42.7 (26.0) Add back interest on swaps and debt under fair (41.7) (57.3)value option ----- ----- Underlying interest payable (330.6) (341.4) Investment income 146.7 118.3
Adjustment for net pension interest income (23.5) (17.6) ----- ----- Underlying cost of net borrowings (207.4) (240.7)
----- -----4. Taxation Re-presented Year ended Year ended 31 March 2008 31 March 2007 ‚£m ‚£m Current taxation: UK corporation tax (108.9) (84.6) Foreign tax (2.7) (3.1) Prior year adjustments 23.0 34.1 ----- ----- (88.6) (53.6) Deferred taxation: Current year (37.5) (73.0) Prior year adjustments (17.6) (17.3) Change in taxation rate 81.7 - ----- ----- 26.6 (90.3) ----- ----- (62.0) (143.9) ----- -----5. Discontinued operationsIn line with its declared strategy of concentrating on its core skills ofmanaging water, wastewater, electricity and gas networks, the group completedthe disposal of United Utilities Electricity (UUE) to North West ElectricityNetworks Limited on 19 December 2007 for a total enterprise value of ‚£1,782million.The group continues to seek opportunities to grow its non-regulated business byapplying its core skills where it identifies opportunities to generateadditional shareholder value with little impact on the risk profile of thegroup. In addition to the UK utility outsourcing market, United Utilities iscurrently focusing business development resources on specific opportunities inthe UK municipal solid waste treatment market, Australia and thefast-developing Gulf region. In line with this strategy, the group sold itsindustrial liquid waste and facilities management operations and made its finalexit from the telecoms sector during the year. On 26 October 2007, the
group sold its industrial liquid waste operations to Group Tradebe for consideration of ‚£3.7 million and on 22 February 2008, the group completed the sale of its facilities management operations to Europa Facility Holdings Limited for consideration of ‚£9.0 million.
The group sold its 22.63 per cent stake in THUS Group plc on 19 June 2007 forconsideration of ‚£75.8 million, which completed United Utilities' exit from thetelecoms sector. The sale is treated as an adjustment to consideration arisingon the disposal of Your Communications and, as such, both the loss on disposaland the group's share of THUS' results prior to the disposal are disclosedwithin discontinued operations.
On 26 March 2007, the group sold the Vertex business to a consortium of US-based private equity firms.
The results of UUE, the group's industrial liquid waste and facilitiesmanagement operations and its share of results from its associate have beendisclosed, along with the profit/(loss) on disposal, as discontinued operationsin the group's financial statements. The detailed trading results and theprofit/(loss) on disposal of each discontinued operation are shown below.Cashflows in relation to discontinued operations are separately disclosed inthe group's cashflow statement.There is no tax charged on the profits resulting from the disposal of thediscontinued operations during the year ended 31 March 2008 as these were taxexempt sales of shares. Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£m United Utilities Electricity 493.0 118.5 Industrial liquid waste (5.0) 1.7 Facilities management 10.4 3.4
Telecoms (including loss on disposal of THUS (5.5) 18.7Group plc shares of ‚£10.0 million)
Vertex - (67.2) ----- -----
Profit for the year from discontinued operations 492.9 75.1 ----- -----
United Utilities Electricity
Period ended Year ended 19 December 31 March 2007 2007 ‚£m ‚£m Total external revenue 223.7 315.4
Depreciation and amortisation (10.0) (64.2)
Other operating expenses (60.4) (72.3) ----- ----- Operating profit 153.3 178.9
Investment income and finance expense (17.1) (31.2)
----- ----- Profit before taxation 136.2 147.7 Taxation on profit (14.4) (29.2) ----- -----
Profit for the period/year from discontinued 121.8 118.5operations ----- ----- Profit on disposal of discontinued operations 371.2 ----- Total profit for the period from discontinued 493.0
operations ----- Industrial liquid waste Period ended Year ended 26 October 31 March 2007 2007 ‚£m ‚£m Total external revenue 5.3 16.0
Depreciation and amortisation (0.2) (2.4)
Other operating expenses (5.2) (11.5) ----- ----- Operating (loss)/profit (0.1) 2.1
Investment income and finance expense - 0.3 ----- ----- (Loss)/profit before taxation (0.1) 2.4
Taxation on (loss)/profit - (0.7) ----- -----
(Loss)/profit for the period/year from (0.1) 1.7discontinued operations ----- ----- Loss on disposal of discontinued operations (4.9) ----- Total loss for the period from discontinued (5.0)
operations ----- Facilities management Period ended Year ended 22 February 31 March 2008 2007 ‚£m ‚£m Revenue External sales 5.7 4.9 Intra-group sales 21.6 38.4 ----- ----- Total revenue 27.3 43.3
Depreciation and amortisation (0.1) (0.6)
Other operating expenses (26.4) (38.3) ----- ----- Operating profit 0.8 4.4
Investment income and finance expense 0.5 0.5
----- ----- Profit before taxation* 1.3 4.9 Taxation on profit - (1.5) ----- -----
Profit for the period/year from discontinued 1.3 3.4operations ----- ----- Profit on disposal of discontinued operations 9.1 ----- Total profit for the period from discontinued 10.4 operations ----- * Profit before taxation includes profit generated from intercompany trading of‚£0.2 million in the period ended 22 February 2008 and ‚£4.1 million in the
yearended 31 March 2007.Vertex Period ended 26 March 2007 ‚£m Revenue External sales 303.4 Intra-group sales 89.5 ----- Total revenue 392.9
Depreciation and amortisation (14.2)
Other operating expenses (363.7) ----- Operating profit 15.0
Investment income and finance expense 4.2
----- Profit before taxation* 19.2 Taxation on profit (5.9) -----
Profit for the period from discontinued operations 13.3 -----
Loss on disposal of discontinued operations before taxation (65.1) and assumption of deferred contingent consideration
Assumption of deferred contingent consideration (13.5) ----- Loss on disposal of discontinued operations before taxation (78.6) Taxation on loss on disposal of discontinued operations (1.9) ----- Total loss for the period from discontinued operations (67.2) -----
* Profit before taxation for the period ended 26 March 2007 includes profit generated from intercompany trading of ‚£8.7 million.
6. Earnings per share
Basic earnings per share and diluted earnings per share have been calculated bydividing profit for the year by the following weighted average number of sharesin issue: Basic Diluted million million Year ended 31 March 2008 880.4 880.6 Year ended 31 March 2007 876.8 880.6The difference between the weighted average number of shares used in the basicand the diluted earnings per share calculations represents those ordinaryshares deemed to have been issued for no consideration on the conversion of allpotential dilutive ordinary shares in accordance with IAS 33 `Earnings perShare'.
The basic and diluted earnings per share for the year are as follows:
Re-presented Year ended Year ended 31 March 31 March 2008 2007
From continuing and discontinued operations
Basic 103.3p 49.4p Diluted 103.2p 49.2p From continuing operations Basic 47.3p 40.9p Diluted 47.3p 40.7p 7. Dividends Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£m
Dividends relating to the year comprise:
Interim dividend 133.8 128.3 Final dividend 277.4 266.6 ----- ----- 411.2 394.9 ----- ----- Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£m
Dividends deducted from shareholders' equity:
Final dividend 266.6 259.0 Interim dividend 133.8 128.3 ----- ----- 400.4 387.3 ----- -----
The final dividend of 31.47 pence per ordinary share (2007: final dividend of30.30 pence per ordinary share) will be paid on 8 August 2008 to shareholderson the register at the close of business on 27 June 2008. The ex-dividend datefor the final dividend is 25 June 2008.The interim dividend of 15.20 pence per ordinary share (2007: interim dividendof 14.63 pence per ordinary share) was paid on 11 February 2008 to shareholderson the register at the close of business on 21 December 2007.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This preliminary results statement contains certain forward-looking statementswith respect to the operations, performance and financial condition of thegroup. By their nature, these statements involve uncertainty since futureevents and circumstances can cause results and developments to differmaterially from those anticipated. The forward-looking statements reflectknowledge and information available at the date of preparation of thispreliminary results statement and the company undertakes no obligation toupdate these forward-looking statements. Nothing in this preliminary resultsstatement should be construed as a profit forecast.
Certain regulatory performance data contained in this announcement is subject to regulatory audit.
mapperRelated Shares:
United Utilities