22 May 2003
for the Year Ended 31 March 2003
SUPPORT SERVICES BUSINESSES DRIVE PROFIT GROWTH
- £330 million profit* before tax - growth driven by performance of support services businesses
- Infrastructure management** - operating profit* increased by 96 per cent to £59 million
- Business process outsourcing** - operating profit* increased by 33 per cent to £19 million
- Support services businesses - order book now almost £4.5 billion
- Licensed multi-utility operations - capital programme ahead of regulatory output schedule
- Telecommunications - business turnover increased by 22 per cent to £133 million
- Total dividend for the year of 47.6 pence, an increase of 1.3 per cent
* 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. ** Infrastructure management and business process outsourcing are the new names for asset management services and customer management outsourcing, reflecting the development of these businesses into wider markets. Chief Executive John Roberts said: "Our support services businesses have made significant progress during the year and enabled us to grow profit overall. This has been achieved despite the anticipated reductions in profits in licensed multi-utility operations, reflecting regulatory price profiles and the commissioning of new assets. Particularly pleasing is our continued success in securing contracts in key target markets - the utility and public sectors, where we can directly apply the experience we've gained from our regulated businesses. "In infrastructure management we've seen a substantial increase in profit as the period of start-up costs which accompanied last year's growth in turnover has come to an end, and our £225 million contract with British Gas Trading has been mobilised. United Utilities has also been named as one of the preferred bidders to partner Scottish Water in the delivery of its four-year £1.8 billion capital investment programme. This would represent the third ground-breaking utility outsourcing contract won by United Utilities, following our successes with Welsh Water and British Gas Trading. The business' order book now stands at nearly £2.5 billion, of which 75 per cent is in the United Kingdom. "Vertex, our business process outsourcing business, has continued to grow operating profit and margins, despite mobilisation costs associated with the Westminster City Council and the Department for Work and Pensions contracts, both of which commenced successfully during the second half of the year. Operating margins have increased by 70 per cent over the last two years, standing at over 6 per cent for the full year. "The sales mix in our telecommunications business, Your Communications, continues to change away from premium rate services to higher margin business sales, which increased by 22 per cent during the year. With the network building phase completed, net cash investment in the business fell to around £25 million, compared to £45 million in the previous year. As capital investment requirements continue to fall we're targeting this business to be a net cash contributor to the group, on a post-tax basis, in 2003/04. "Our licensed multi-utility operations business is on track to meet its £480 million operating cost saving target over the 2000-05 period. Whilst the capital programme in our water business, which requires us to deliver around 1,200 outputs by 2005, is currently ahead of schedule, the next two years will be challenging as the programme peaks both in terms of investment and delivery of outputs." Commenting on the outlook for United Utilities, John Roberts said: "With allowed real price increases of nearly nine per cent over the next two years we expect to see operating profits in our water business improve. The next year should also see greater clarity emerging for our regulated businesses as the environmental and economic regulators formulate their views on the next periodic reviews. For the water business, we're looking for more certainty from the government on the scale and pace of future quality programmes, and their funding. "By 2005 the water industry will have had fifteen years of incentive based regulation, which means the scope for future efficiency improvements is diminished. Consequently, new funding for further quality improvements will principally have to come from customers and the capital markets. The industry will have to work closely with the water regulator to balance the desire for further substantial quality improvements against affordable price increases for customers, and the returns required to attract new funding for the industry. "For the electricity business, the government's commitment to green energy will increase the number of generators directly connected to distribution networks. This will lead to additional capital investment as the industry responds to the regulator's challenge to "Rewire Britain". We're working with the regulator to find mechanisms which will encourage the capital markets to provide funding to meet this challenge. "The outlook for our support services businesses is promising. They account for a growing proportion of operating profits, and now have a combined order book of nearly £4.5 billion, principally from the utility and public sectors in the United Kingdom. We will continue to advance the organic growth of these businesses by applying our core skills of business process management and infrastructure management to carefully selected growth markets." "We're now at a stage where consistency in our strategy is starting to bear fruit. It is a strategy we don't intend to change."
In conclusion the Chairman, Sir Richard Evans, said: "I'm pleased with the group's success in growing its non-regulated income and achieving efficiencies in its licensed business. The board's confidence in the group's performance is reflected in its proposed increase in the final dividend." For further information, please contact: John Roberts, Chief Executive: 020 7307 0300 Simon Batey, Finance Director: 020 7307 0300 Simon Bielecki, Investor Relations Manager: 020 7307 0300 Alan Price, Head of Corporate and Financial Communications: 020 7307 0300 A presentation to investors and analysts will commence at 10.15 am on Thursday, 22 May 2003 in the Ayres room at the offices of Deutsche Bank, Winchester House, 1 Great Winchester Street, London, EC2N 2DB. The presentation can also be accessed via a one-way listen in conference call facility, by dialing: + 44 (0) 20 7162 0183, and quoting United Utilities. This recording will be available for 7 days following the presentation, on +44 (0) 20 8288 4459, access code 339322. 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. Photographs for media use supporting these results can be downloaded via http://www.vismedia.co.uk.
Preliminary results 2003 webcast (html0kb)