24 May 2001
for the year ended 31 March 2001
A strategy to deliver growth and efficiency
- Asset management services - £450 million Welsh Water contract win boosts sales next year by over 50 per cent
- Customer management outsourcing - sales in Vertex set to double over next three years based on £1.4 billion order book and strategic partnership with Cap Gemini Ernst & Young UK
- Licensed multi-utility operations - £50 million planned outperformance against five-year regulatory cost savings target, principally as a result of multi-utility synergies
- Telecommunications - turnover increased by 50 per cent to £120 million
- Profit before tax and exceptional items of £310 million
- Total dividend of 46.1 pence, an increase of 2 per cent - dividend cover of 1.2
Chief Executive John Roberts said: 'This has been a year of substantial progress for United Utilities. We are pursuing a focused strategy and have reorganised the group to deliver both growth and efficiency. The operations management contract with Welsh Water and Vertex's strategic partnership with Cap Gemini Ernst & Young UK mean that an increasing proportion of our revenues will come from the support service activities that we are targeting to grow. We have excellent opportunities to expand in growth markets, and I am determined that we will sustain our current pace of progress. 'Vertex's current order book has been secured at good margins and will sustain annual turnover in excess of £300 million, of which around two-thirds will be external to the group, when the contracts now secured are fully up and running. With an order book of £1.4 billion, it is now a major player in the customer management outsourcing market. The partnership with Cap Gemini Ernst & Young UK adds substantially to the marketing channels available for its customer management operations and it is already developing prospects in new sectors. 'We have also made considerable progress in developing what is now a broadly-based asset management services business which will have sales next year of around £300 million. The £450 million four-year contract with Welsh Water makes the group the largest manager of water and wastewater assets in the UK. By adding substantially, in a contiguous region, to the scale of our existing domestic water operations, we should be able to achieve significant economies of scale. 'Our green energy activities, which we acquired during the year from Hyder and form part of our asset management services business, are well-positioned to exploit the UK government's commitment to renewable generation. Thirteen schemes will be commissioned this year, bringing the total number of commissioned projects to over 80 by 31 March 2002. We have also secured a £60 million opportunity to develop offshore wind generation at Scarweather Sands, South Wales, one of the 18 projects announced by the UK government last month. 'The development of our telecommunications business, now renamed Your Communications, remains on track. It again delivered significant growth of 50 per cent in turnover. Following its success in the broadband wireless access licence auction, the business is leading the industry in the commercial deployment of this technology. Given the current environment in the telecommunications sector, the focus of the business is firmly on growth in value-added sales and progress towards profitability. Our objective remains to maximise the value we realise for shareholders from this business. 'I have been encouraged by comments made in recent months by the Director General of Ofwat about the benefits of shareholder pressure in achieving efficiency improvements. He has expressed the view that the current shareholder-owned model has worked well and is delivering efficiency gains for the benefit of customers and shareholders, and that a company would need to have good reasons to change that model. United Utilities remains committed to its current equity-based structure as the most effective means of delivering efficiency. 'Thus far, our efficiency programme is in line with our plans, and we have raised our target for cost savings over the five-year period from £400 million to £450 million. The additional savings will come principally from multi-utility synergies such as simplified management structures, more effective use of IT and further property rationalisation. These savings will be achieved progressively over the next four years and our efforts will not stop there. In addition, we have identified a number of innovative and imaginative initiatives from which we are targeting significant savings in the AMP3 capital programme of the water and wastewater business. I believe that this is the positive, constructive response that incentive-based regulation demands.' Commenting on the outlook for United Utilities, John Roberts added: 'I believe that our strategy for growth and efficiency, exploiting our core skills of multi-utility asset management and customer management, is already creating additional value for shareholders. We have excellent opportunities to expand further in the rapidly growing markets that we are targeting - the management of both utility networks and customers. We have two businesses - United Utilities Contract Solutions and Vertex - that not only have the required skills but also are now major players in those markets. Our Welsh Water success puts us at the forefront of developments in the water industry as it changes its shape. In our licensed businesses, we are on track to deliver the cost reductions needed to meet our regulatory targets and we're targeting additional multi-utility synergies of £50 million so far.' In conclusion, the Chairman, Sir Richard Evans, said: 'I am very pleased with the progress that the new management team has made in reshaping and re-energising the group to exploit the opportunities to deploy our core skills in growth markets. This is a logical route to pursue to create shareholder value. The board's confidence in the group's performance is reflected in its recommendation to increase the final dividend.'
For further information:
John Roberts, Chief Executive: 020 7307 0300 Simon Batey, Finance Director: 020 7307 0300 Paul Deehan, Investor Relations Manager: 01925 237000 Alan Price, Group Media Relations Manager: 020 7307 0300 A presentation to investors and analysts will commence at 9.00 am on Thursday, 24 May 2001 at the City Presentation Centre, Chiswell Street, London EC4. The results and audio presentation, together with further information on United Utilities, can be found on our web site at: www.unitedutilities.com. Press photographs are available at www.newscast.co.uk". Click here to view the full press release. The release is in PDF format. In order to open this format you will need the Acrobat Reader.