03 December 2003
for the Six Months Ended 30 September 2003
IMPROVED PERFORMANCES ACROSS ALL BUSINESSES DRIVE PROFIT GROWTH
- Profit before tax* - increased by 4.4 per cent to £171 million
- Licensed multi-utility operations - innovative rights issue and IDoK ahead of next review period
- Business process outsourcing - operating profit* increased by 41 per cent to £12 million
- Infrastructure management - operating profit* increased by 14 per cent to £32 million
- Telecommunications - turnover increased by 10 per cent to £87 million
- Interim dividend per ordinary share of 14.43 pence, an increase of 2.6 per cent (post rights issue)
* Unless otherwise stated, amounts and percentage movements throughout this document relating to the profit and loss account are stated before goodwill amortisation and exceptional items (see note 3). Chief Executive John Roberts said: "I'm pleased to report that improved performances across all of our businesses have contributed to profit growth in the first half of the year. This maintains our record of continuously improving profit throughout the current regulatory period. "During the period, the extent of the future investment demands for our licensed multi-utility operations business became clearer, principally driven by European Union directives. The funding requirements of our regulated businesses drove our decision to raise £1 billion from our shareholders, through an innovative two-stage rights issue. The resolution approving the issue of new equity was passed at our EGM with 98.2 per cent of votes cast in favour. 91.3 per cent of the Initial A Shares were taken up and the balance was successfully placed in the market at a premium. "Recently we received Ofwat's draft decision on our Interim Determination of K ("IDoK") application, which recognises additional costs which were not predicted by Ofwat when prices were set at the last periodic review. In its draft determination, Ofwat proposed that United Utilities Water be allowed to increase real prices by a further 3.7 per cent, to a total real increase of 8.2 per cent, in 2004/05. Ofwat has also confirmed our concerns with regard to the value for money on part of the capital programme dealing with unsatisfactory intermittent discharges. As it's unlikely that this issue will be resolved by next week, when Ofwat release their final IDoK determination, recognition of these costs will probably be deferred until AMP4. "Our support services businesses continue to make significant progress, with operating profit from these businesses tripling since 2000. Vertex, our business process outsourcing business, has had a particularly pleasing six months, having seen a substantial increase in operating profit as the start-up costs associated with our major public sector contracts with Westminster City Council and the Department for Work and Pensions, have come to an end. Operating margins also improved, to 6.8 per cent, having almost doubled in the last three years. "In addition, Vertex has achieved some notable renewals and extensions of contracts in the period. For example, it has signed a nine-year contract with Powergen, which replaces its previous contract with TXU Europe, and has recently agreed terms for an extended range of customer management services to Vodafone. "United Utilities Contract Solutions has continued to grow operating profit. The Scottish Water contract, which involves the management of the delivery of new capital expenditure in Scotland, mainly to improve environmental standards, commenced in the summer, and further confirms our position as the leading player in the UK outsourced utility infrastructure market. "Our telecommunications business, Your Communications, continues to be on track to be a net cash contributor to the group on a post-tax basis this year. We've had continued success in growing sales, which increased by 10 per cent compared to the corresponding period last year, and reducing operating losses, which have fallen as we've increased turnover and controlled operating costs." Commenting on the outlook for United Utilities, John Roberts said: "We expect that operating profits in our water business will benefit significantly from an expected allowed real price increase of at least 8.2 per cent next year. Our support services businesses are also set to grow, as they benefit from recent contract wins and renewals with Scottish Water, Powergen and Vodafone. "The next year will also provide greater clarity for our water and electricity businesses as we enter the final stages of the periodic review process. The challenge for both regulators now is to meet the requirements of all stakeholders. In particular they need to balance the desire for environmental improvements with prices for customers which represent value for money. "We welcome the increased transparency Ofwat has brought to the review process. This has served to reduce regulatory uncertainty, which can only help to improve the industry's access to capital markets over the longer term. In light of Ofwat's recent announcements, we continue to expect that the water review will provide acceptable returns for shareholders, with the potential for further upside from regulatory outperformance." In conclusion, the Chairman, Sir Richard Evans, said: "I'm pleased that the business has moved forward significantly over the past six months, by delivering on key strategic objectives. In line with our promise to maintain dividends in real terms, the board has decided to increase the interim dividend, after adjusting for the rights issue, by 2.6 per cent. The board is also pleased that shareholders demonstrated their support for the group's management and prospects, through their take-up of the rights issue." For further information on the day, please contact: John Roberts - Chief Executive 020 7307 0300 Simon Batey - Finance Director 020 7307 0300 Simon Bielecki - Investor Relations Manager 07810 157649 Evelyn Brodie - Head of Corporate and Financial Communications 020 7307 0309 A presentation to investors and analysts will commence at 9.00 am on Wednesday, 3 December 2003, at the City Presentation Centre, 4 Chiswell Street, London, EC1Y 4UP. The presentation can also be accessed via a one-way listen in conference call facility, by dialing: + 44 (0) 20 7162 0191, and quoting United Utilities. This recording will be available for 7 days following the presentation, on +44 (0) 20 8288 4459, access code 272690. The presentation, together with further information on United Utilities, will be available later in the day on our web site at: http://www.unitedutilities.com and on Bloomberg at: UUIR, where a multimedia version is available. Photographs for media use supporting these results can be downloaded via http://www.vismedia.co.uk.
Interim Report 2003 (pdf2743kb)
Interim results 2003 webcast (html0kb)