United Utilities Group Plc · LSE:UU.
United Utilities — FY2022 Earnings Presentation
51 slides from United Utilities's earnings presentation, May 26, 2022
Slide 1: Full year results
Dovestone Reservoir Full year results Year ended 31 March 2022 United Utilities Group PLC United Utilities • 2021/22 full year results
Slide 2: Sir David Higgins, Chair
Entwistle Reservoir Sir David Higgins Chair United Utilities • 2021/22 full year results
Slide 3: Steve Mogford, Chief Executive
Liverpool Steve Mogford Chief Executive United Utilities • 2021/22 full year results
Slide 4: Highlights
Highlights 01 03 05 Highest annual £765m total ODI reward of additional Sector leading customer support; £25m AMP7 investment for FY22; increasing driving sustainable c£280m AMP7 ODI guidance performance and of support to by a third to a net contributing to struggling households over AMP7 reward of
Slide 5: c£280m of customer support over AMP7
c£280m of customer support over AMP7 Significant support for customers 50% company funded Supporting over 200,000 households across the 1 North West through extensive affordability schemes Sector leading Sector leading implementation of Open package 2 Banking to streamline eligibility for support pr
Slide 6: Sustained high level of operational performance
Sustained high level of operational performance A sector leading company in Ofwat’s assessment of outcome delivery Industry Sustained high Improving water top performer Overall pollution Continued strong levels of customer quality on reduced by treatment satisfaction; C-MeX and reducing supply 1/3rd
Slide 7: AMP7 investment delivering for stakeholders
AMP7 investment delivering for stakeholders Investment focusing on targeted areas of improvement Dynamic Network Management1 Drinking Water Quality2 Global first application of c£100m investment to Systems Thinking; most holistic improve water taste, smell and deployment of sensing and AI across a a
Slide 8: Increasing AMP7 ODI guidance to £200m
Increasing AMP7 ODI guidance to £200m 2021/22 customer ODI reward ahead of target at £25m; 1/3rd increase in AMP7 ODI guidance to £200m 1 Systems 3 5 Our Strong strategy is Thinking and performance improving investment strategy across all outcomes in this delivering improved measures; meeting AMP an
Slide 9: Sharing outperformance through £400m of additional totex investment
Sharing outperformance through £400m of additional totex investment Responsibly sharing our successes for the benefit of all stakeholders RoRE of £250m new investment to improve 7.9% for FY22 environmental outcomes Responding to new and emerging environmental standards and Strong operational perform
Slide 10: Investing a total of £765m beyond FD allowance over AMP7
Investing a total of £765m1 beyond FD allowance over AMP7 Financial strength and balance sheet headroom to fund Approved incremental base investment (+£50m)2 Subject to existing regulatory mechanisms established at PR19 and £265m Green Recovery e.g. WINEP scheme at Bolton Business case supported inv
Slide 11: Better Rivers, Better North West
Better Rivers, Better North West 28% reduction in spills between 2020 and 2021 Progressively £230m base investment included in FD plus £250m 1 additional investment to accelerate plans reduce our impact on river health Supporting a reduction in the number of 2 recorded spills by at least a third bet
Slide 12: Phil Aspin, Chief Financial Officer
Lake Vyrnwy Phil Aspin Chief Financial Officer United Utilities • 2021/22 full year results
Slide 13: Financial highlights
Financial highlights Return on Revenue Household Underlying Managing regulated equity bad debt operating profit1 inflation impact £1,863m 1.8% £610m c90% power 7.9% real of regulated revenue hedging for (CPIH/RPI blended 2020/21: 2020/21: 2020/21: FY23 basis) £602m £1,808m 2.2% Underlying Dividend S
Slide 14: Return on regulated equity (RoRE) for 2021/22
Return on regulated equity (RoRE) for 2021/22 Reported RoRE of 7.9%; underlying1 RoRE of 7.7% 7.9% RoRE 0.5% customer ODI performance representing net £25m reward 2.7% tax performance including underlying tax credit for 2021/22 as a result of optimising government tax incentives and tax impact of fi
Slide 15: Underlying operating profit
Underlying operating profit £m Cost increases on 8 operating cost base of (17) c£835m (c3.8%) 55 (16) (16) Includes costs directly compensated via ODI (6) 610 602 incentive payments Software as a Service (SaaS) costs previously recognised as fixed asset additions FY21 UOP Revenue COVID-related Drivi
Slide 16: Strong collections performance
Strong collections performance Over 80% on direct debit or other 1 payment plan Current year household cash Comprehensive, data led approach to 2 collections collection remains strong Award winning collections capability; 3 evidencing our best in class approach Household bad debt returned to 1.8% On
Slide 17: Managing inflation impact
Managing inflation impact Totex allowance increases by c£150m for each 1% RCV increases by c£600m for each 1% increase in CPIH over AMP7 increase in CPIH over AMP7 Operating costs Capital programme Interest costs Wage deal agreed for Over 90% of Hedging policy targets FY23 at 4.75% AMP7 base capital
Slide 18: AMP7 power consumption and hedging
AMP7 power consumption and hedging 01 Total FY22 cost 900 of £103.7m1 8% Controlling cost 800 in FY22 at an average 32% 33% rate of £65/MWh Power consumption (GWh) 700 compared with 600 current market rate of 500 At 92% £238/MWh2 £65/MWh at 68% 67% for FY23 400 £60/MWh 300 Price 200 secured in line
Slide 19: Price fixed on over 90% of FY23 power
Price fixed on over 90% of FY23 power Estimated FY23 900 c800 GWh cost of £112m1 800 66 GWh at 8% current market £16m Power consumption (GWh) 700 rate of 600 £238/MWh2 500 400 92% £44m 734 GWh at an average rate of 300 £60/MWh 200 100 0 Use of system FY21 FY22 FY23 FY24 FY25 charge and levies £52m P
Slide 20: Interest, tax and earnings
Interest, tax and earnings Underlying net Underlying Underlying profit finance expense1 tax credit1 after tax1 £306.3m £65.1m £367.0m Equivalent to £173m higher -22% underlying tax 2020/21: than 2020/21 rate £383.0m Higher inflation on Optimising government tax Underlying EPS index-linked debt incen
Slide 21: Financing performance
Financing performance AMP7 average cost of debt 01 03 RPI-linked CPI-linked Fixed 8,000 Liquidity £2.7bn 7,000 extends until c£3.0bn total financing 6,000 2.4% to raise in February 2025 at + CPIH AMP7 5,000 2.4% 4,000 c£1.1bn at 2.4% (0.6)% 5.1% 3,000 c£1.4bn effective c£3.2bn raised so far ‘ intere
Slide 22: c£750m value expected to be received in AMP8
c£750m value expected to be received in AMP8 c£750m1 value carried forward £265m of approved incremental base investment2 in relation to schemes at Bolton, Vyrnwy3 and Green Recovery c£750m value earned in AMP7, to be received in AMP8 50% customer sharing of £500m additional investment4; £250m busin
Slide 23: Investment driving growth
Investment driving growth REGULATORY CAPITAL VALUE 14,500 RCV growth 21.4% 14,000 13,500 7,306 RCV growth 13,000 12.1% 7,401 RCV growth 12,500 5.8% 12,000 Remaining 11,500 within gearing target 11,000 range of 55% - 65% 10,500 1 April 2020 31 March 2021 31 March 2022 31 March 2023 31 March 2024 31 M
Slide 24: Strong balance sheet – net debt and RCV gearing
Strong balance sheet – net debt and RCV gearing RCV gearing of 61% supports stable A3 credit rating with Moody’s Net debt £m 13 9 6 7,570 29 118 7,306 228 296 (1,062) 627 Mar-21 net Operating cash Net capex Dividends Indexation Interest Fair value Extension of Tax Other Mar-22 net debt flow movement
Slide 25: Pensions schemes fully funded and inflation hedged
Pensions schemes fully funded and inflation hedged 1 3 5 Long-term Retirement benefit Latest finalised strategies agreed IFRS surplus of funding valuation for reducing £1bn as at carried out as at investment risk 31 March 2022 31 March 2021 2 4 6 Fully funded Group and on a low trustees Pension sche
Slide 26: 2022/23 full year outlook
2022/23 full year outlook Over-recovery in 2021/22 Revenue c1% y-o-y 4.6% CPIH offset by –1.3% k factor Underlying operating c£50m largely reflecting FY23 opex impact of £765m additional investment c£100m y-o-y c£50m inflationary increases affecting labour, power, chemicals costs and other costs
Slide 27: Financial summary
Financial summary Strong financial performance 7.9% RoRE double our base returns Bad debt position returned to 1.8% Higher inflation causing short term impact on costs but contributing to higher totex allowance, financing outperformance and RCV growth Strong balance sheet with low household debtor r
Slide 28: Steve Mogford, Chief Executive
Liverpool Steve Mogford Chief Executive United United Utilities Utilities • 2021/22half • 2021/22 full year year results results
Slide 29: Strategic direction for UK Water
Strategic direction for UK Water Significant developments ahead of PR24 Water system resilience to climate 1 change and population growth New and emerging requirements could Environment Act requirement to drive significant 2 reduce the adverse impact of storm overflows increases in investment that C
Slide 30: Summary
Summary Supporting customers; £280m package of support over AMP7 Improving operational performance; AMP7 ODI forecast increased to £200m Reported RoRE for 2021/22 of 7.9% Strong financial performance; managing inflation impact Sharing outperformance responsibly for the benefit of all stakeholders Am
Slide 31: Any questions?
Any questions? United Utilities • 2021/22 full year results
Slide 32: Cautionary statement
Cautionary statement This presentation contains certain forward-looking statements with respect to the operations, performance and financial condition of the group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to diffe
Slide 33: Supporting information
Supporting information 1. Revenue 15. AMP7 maturity profile 2. Underlying income statement 16. EIB funding maturity profile 3. Underlying operating costs 17. Financing performance 4. Profit before tax reconciliation 18. Commitment to net zero by 2030 5. Profit after tax reconciliation 6. Finance exp
Slide 34: Revenue
Consumption returned to pre- Revenue pandemic levels faster than £m anticipated Overall revenue higher as business 106 (58) activity returned to 1,859 pre-Covid levels -1.5% k factor, 13 1,863 faster than 0.6% CPIH increase 8 anticipated 1,808 (14) Consumption decreased as anticipated to pre- pandem
Slide 35: Underlying income statement
Underlying income statement Year ended 31 March 2022 2021 Change (%) £m Revenue 1,862.7 1,808.0 +3% Operating expenses (665.0) (618.8) Infrastructure renewals expenditure (169.5) (164.8) EBITDA 1,028.2 1,024.4 +0% Depreciation and amortisation (418.2) (422.3) Operating profit 610.0 602.1 +1% Net fin
Slide 36: Underlying operating costs
Underlying operating costs Year ended 31 March 2022 2021 Change (%) £m Revenue 1,862.7 1,808.0 +3% Employee costs (184.3) (173.5) +6% Power (99.6) (83.6) +19% Hired and contracted services (95.4) (84.7) +13% Materials (90.8) (82.2) +10% Property rates (90.5) (89.4) +1% Regulatory fees (28.4) (28.0)
Slide 37: Profit before tax reconciliation
Profit before tax reconciliation Year ended 31 March 2022 2021 £m Operating profit 610.0 602.1 Investment income and finance expense (168.3) (78.5) Share of losses of joint ventures (1.8) (9.3) Profit on disposal of joint ventures - 36.7 Reported profit before tax 439.9 551.0 Adjustments: Fair value
Slide 38: Profit after tax reconciliation
Profit after tax reconciliation Year ended 31 March 2022 2021 £m Reported profit after tax (56.8) 453.4 Adjustments: Fair value (gains)/losses on debt and derivative instruments, excluding interest on derivatives (138.0) (54.3) and debt under fair value option Deferred tax adjustment 562.5 18.4 Tax
Slide 39: Finance expense
Finance expense Year ended 31 March 2022 2021 £m Investment income 19.4 25.0 Finance expense (187.7) (103.5) (168.3) (78.5) Fair value (gains)/losses on debt and derivative instruments, excluding interest on derivatives and debt under (138.0) (54.3) fair value option Underlying net finance expense (
Slide 40: Finance expense: index-linked debt
Finance expense: index-linked debt Year ended 2022 2021 £m Interest on index-linked debt (35.7) (46.2) RPI adjustment (£2.2bn debt; Jan-22 7.8%, Jan-21 1.4%) – 3 month lag1 (166.9) (37.3) CPI adjustment (£1.1bn debt; Jan-22 5.4%, Jan-21 0.7%) – 3 month lag2 (58.4) (2.4) RPI adjustment (£0.9bn debt;
Slide 41: Derivative analysis
Derivative analysis At 31 March 2022 2021 £m Derivatives hedging debt 198.5 402.7 Derivatives hedging interest rates 10.7 (99.2) Derivatives hedging commodity prices 111.0 6.5 Total derivative assets and liabilities 320.2 310.0 • Derivatives hedging debt; hedge our non index-linked debt into sterlin
Slide 42: Statement of financial position
Statement of financial position At 31 Mar 2022 31 Mar 2021 Change (%) £m Property, plant and equipment 12,147.5 11,799.0 +3% Retirement benefit surplus 1,016.8 689.0 +48% Other non-current assets 259.5 267.9 -3% Cash 240.9 744.1 -68% Other current assets 314.9 254.4 +24% Total derivative assets 457.
Slide 43: Reconciliation of net debt
Reconciliation of net debt At 31 Mar 2022 31 Mar 2021 £m Cash 240.9 744.1 Total derivative assets 457.4 424.7 Gross borrowings (7,979.8) (8,451.8) Total derivative liabilities (137.2) (114.7) Balance sheet net debt (7,418.7) (7,397.7) Exclude the fair value impact of: Interest rate derivatives fixin
Slide 44: Household debtors reconciliation
Household debtors reconciliation As at 31 March 31 March £m 2022 20211 Household net debtors 73.1 77.6 Household accrued income 46.4 69.4 Non household net debtors 1.1 0.6 Non household accrued income 58.2 52.6 Other sundry net debtors 46.1 23.5 Total net debtors (including related parties) 224.9 22
Slide 45: Financing and liquidity at 31 March 2022
Financing and liquidity at 31 March 2022 Gross debt = £7,979.8m Headroom / prefunding = £635.4m £240.3m, Other £369.9m, Yankee borrowings including bonds (USD) lease obligations and £m £487.5m, Other EIB short-term debt loans £329.6m, HKD, JPY and USD bonds £657.0m, GBP Fixed Cash and short-term dep
Slide 46: Debt structure at 31 March 2022
Debt structure at 31 March 2022 United Utilities Group PLC United Utilities Group PLC United Utilities PLC Yankees: • $400m in 28s Baa1 stable; BBB- stable; A- stable7 Euro MTNs: Other debt: United Utilities Water Limited • £300m in 27s • £50m in 32s1 • £100m in 40s1 • £50m in 41s1 • £510m in 56s1 •
Slide 47: Term debt maturity profile as at 31 March 2022
Term debt maturity profile as at 31 March 20221 Average term to maturity of approximately 18 years 1 Future repayments of index-linked debt include RPI/CPI/CPIH market derived forecasts out to 2026, subsequently transitioning to an average annual RPI rate of 3% and an average annual CPI/CPIH rate of
Slide 48: AMP7 maturity profile
AMP7 maturity profile Notes Future repayments of RPI linked debt include market derived forecasts out to 2026, subsequently transitioning to an average annual RPI rate of 3% Light green areas represent EIB debt maturing whereas dark green areas represent other debt maturing. United United Utilities
Slide 49: EIB funding maturity profile
EIB funding maturity profile Notes Future repayments of EIB RPI linked debt include market derived forecasts out to 2026, subsequently transitioning to an average annual RPI rate of 3% United United Utilities Utilities • 2020/21 • 2021/22 half year full year results results • 49
Slide 50: Financing performance
Financing performance Existing debt locked in at rates favourable to the AMP7 allowed cost of embedded debt RPI-linked CPI-linked Fixed Floating 8,000 7,000 2.5% 2.4% 2.2% 2.3% 2.4% 6,000 5,000 4,000 (0.2)% (0.6)% (0.6)% (0.6)% (0.6)% 3,000 1.3% 1.3% 1.3% 1.4% 1.4% 2,000 1,000 - 2020/21 2021/22 2022
Slide 51: Commitment to net zero by 2030
Commitment to net zero by 2030 1 2 3 Commitment 100% 100% Green to meet our renewable Fleet by 2028 science-based electricity by targets (scope 2021 1&2) 4 1,000 5 Planting 1 million trees to 6 Commitment hectares of peat to set science- restoration by create 550 based scope 3 2030 hectares of emi
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