United Utilities Group Plc · LSE:UU.
United Utilities — H1 2023/24 Earnings Presentation
39 slides from United Utilities's earnings presentation, Nov 16, 2023
Slide 1: Half year results
Half year results Six months ended 30 September 2023 Thurs 16 November 2023 The new UU Thurs 25 May 2023
Slide 2: Louise Beardmore, Chief Executive
Louise Beardmore Chief Executive
Slide 3: Today's agenda
Today’s agenda 1. PR24 business plan submission highlights 2. Operational performance 3. Financial performance Q&A United Utilities • 2023/24 half year results • 3
Slide 4: PR24: Business Plan Submission Highlights
PR24: Business Plan Submission Highlights
Slide 5: Highlights of our business plan submission
Highlights of our business plan submission £13.7bn 37% 63 - 65% totex plan real RCV growth average gearing1 (2022/23 prices) 6.5% real CAGR without recourse to equity 8.7% nominal CAGR A3/A- c.£22 £525m credit rating average real increase in affordability support – household bills, each year (2022/2
Slide 6: Timeline
Timeline Ongoing engagement Early 2025 with Ofwat, EA, CCW UUG dividend and DWI on business policy plans announcement 2 October May/June December April 2025 2023 2024 2024 Start of Business Draft Final AMP8 plan determinations determinations submission United UnitedUtilities Utilities••2023/24 2023/
Slide 7: Operational performance
Operational performance United U utilities Water for the North West
Slide 8: Water performance
Water performance Continue to put water quality first, ahead of target and glidepath on reducing water quality contacts Leakage on track Strong with a detailed programme water supply levels enabling us to fix more as we approach the leaks; forecasting to achieve winter our best ever performance this
Slide 9: Wastewater performance
Wastewater performance Storm overflow spills 60 On track for Higher levels of 59 55 4 star rating rainfall & storms 50 impacted in the sewer flooding Average number of spills per overflow 45 EA’s EPA performance in the 40 42 for 2023 first half 35 35 28-30 Expect to deliver a On track to have 30 fur
Slide 10: Customer performance
Customer performance Ranked 1st WaSC and Over 370,000 4th Utility company households on our out of 30 in the UK Priority Services Customer Satisfaction Register Index (UKCSI) Supported over Cash collection remains 350,000 customers so strong and bad debt far in AMP7 with charge stable affordability
Slide 11: ESG performance
ESG performance Environment • Delivery of AMP7 environmental improvement programme – 67% complete E • EA EPA – on track for the highest 4 star rating in 2023 • Net zero – supporting development of a pioneering carbon-capture facility at our HQ Social • Graduates and apprentices – welcomed our larges
Slide 12: ODI performance
ODI performance Highest Consistently performer in achieved FY23: 83% c.80% of performance of performance commitments met or commitments during beaten AMP7 so far On track to double Reiterate AMP7 our FY23 reward: guidance: over £50m £200m forecast net customer total ODI reward1 ODI reward1 for FY24
Slide 13: Operational summary
Operational summary Further reductions in average Strong water quality On track for 4* EPA rating spills per overflow forecast performance for this year Over 350,000 customers Continued strong track Over £50m ODI reward supported so far this AMP record on ESG forecast for FY24 United UnitedUtilities
Slide 14: Phil Aspin
Phil Aspin FoR ; N N N Ss Water for the North West Q United Utilities
Slide 15: Financial highlights
Financial highlights Revenue Underlying operating profit1 Reported operating profit1 £982m £271m £241m HY22/23: HY22/23: HY22/23: £919m £259m £259m Underlying EPS1 Interim DPS RCV gearing2 13.2p 16.59p 59% HY22/23: HY22/23: HY22/23: (1.8)p 15.17p 58% 1. Underlying profit measures are reconciled to r
Slide 16: AMP7 financial framework
AMP7 financial framework Framework unchanged from full year RoRE1,2 6 – 8% real RCV Growth1,3 4 – 5% CAGR Moody’s A3 / stable Dividend Growth Growing in line with CPIH Fitch A- / stable Standard & Poor’s Strong Balance Sheet Policy target 55 – 65% gearing BBB+ / stable 1. Based on CPIH of 3.9% at Ma
Slide 17: Underlying operating profit
Underlying operating profit Revenue: £982m 13 Power • Revenue cap increase: £53m £m • FY24 guidance: up c.£150m 10 Labour 6 Chemicals Power: £74m (36) 63 7 Other • FY23: £131m • FY24 guidance: up c.£20m (7) (5) (3) Chemicals: £32m 271 • FY23: £57m 259 • FY24 guidance: costs stabilising FY24 Opex & I
Slide 18: Interest, tax and earnings
Interest, tax and earnings Underlying net finance Underlying tax Underlying profit/(loss) expense after tax HY23/24: £180m HY23/24: nil HY23/24: £90.3m HY22/23: £267m HY22/23: £4m charge HY22/23: £(12.2)m Inflation charge on index-linked ‘Full expensing’ to continue to Underlying EPS of 13.2p debt o
Slide 19: Financial flexibility
Financial flexibility RCV1 (£bn) RCV gearing2 Pension position 14.4 14.0 59% Buy-in transaction covering 2/3rds of our liabilities & HY22/23: 58% representing a significant milestone in our de-risking journey FY23 H1 23/24 Net debt (£bn) Funding raised Liquidity 8.2 8.5 c. £750m c. £800m Now fully p
Slide 20: Financial summary
Financial summary Solid financial result Strong funding and liquidity position • Underlying operating profit: £271m • AMP7 financing requirements fully funded • FY24 guidance reiterated • Liquidity extended into 2026 Financial Flexibility Dividend • RCV Gearing of 59%1 • HY23/24 Interim Dividend: 16
Slide 21: Summary
Summary Ambitious and high quality Financial flexibility Backed by a strong track PR24 business plan record driven by low level of gearing, an affordable, financeable, solid credit ratings and fully of delivering for stakeholders deliverable plan funded pension scheme Delivering in AMP7 Already star
Slide 22: 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 23: Supporting information
Supporting information 1. Technical guidance 2023/24 9. Finance expense: index-linked debt 2. AMP7 additional investment 10. Derivative analysis 3. Outcome Delivery Incentives 11. Statement of financial position 4. Underlying income statement 12. Reconciliation of net debt 5. Underlying operating co
Slide 24: Technical guidance 2023/24
Technical guidance 2023/24 FY23 y-o-y Expected to increase by around £150m, largely reflecting Revenue £1,824m CPIH inflation of 9.4%, partially offset by £20m net impact of over/under-recovery in FY23 and FY22 Expected to be around £60m higher, largely driven by Underlying operating costs £960m inf
Slide 25: Outcome Delivery Incentives
Outcome Delivery Incentives Net ODI Rewards PRE-TAX Tax Impact POST-TAX £m (real, 2017-18) AMP7 Year ending Mar-20211 £21m £5m £26m Year ending Mar-20222 £25m £8m £33m Year ending Mar-20232 £25m £8m £33m Year ending Mar-20242 >£50m >£15m >£65m Total AMP7 Guidance c.£200m c.£65m c.£265m 1. Effective
Slide 26: AMP7 additional investment
AMP7 additional investment Approved incremental base investment Subject to existing regulatory mechanisms Accelerated Infrastructure Project established at PR19 and Green Recovery In April 2023, Ofwat gave draft approval to bring e.g. WINEP scheme at Bolton £265m forward c.£200m of AMP8 investment f
Slide 27: Underlying income statement
Underlying income statement Six months ended 30 September 2023 2022 Change (%) £m Revenue 982.0 919.3 +7% Operating expenses (401.3) (361.8) Infrastructure renewals expenditure (96.2) (92.2) EBITDA 484.5 465.3 +4% Depreciation and amortisation (213.4) (206.8) Operating profit 271.1 258.5 +5% Net fin
Slide 28: Underlying operating costs
Underlying operating costs Six months ended 30 September 2023 2022 Change (%) £m Revenue 982.0 919.3 +7% Employee costs (104.5) (95.2) +10% Power (74.3) (54.7) +36% Hired and contracted services (51.4) (48.7) +6% Materials (67.8) (61.7) +10% Property rates (42.0) (45.7) -8% Regulatory fees (18.9) (1
Slide 29: Profit before tax reconciliation
Profit before tax reconciliation Six months ended 30 September 2023 2022 £m Operating profit 240.6 258.5 Net finance (expense)/ income (79.5) 136.4 Share of (losses)/profits of joint ventures (1.1) 0.2 Profit on disposal of United Utilities Renewable Energy - 31.2 Reported profit before tax 160.0 42
Slide 30: Profit after tax reconciliation
Profit after tax reconciliation Six months ended 30 September 2023 2022 £m Reported profit after tax 116.8 353.0 Adjustments: Fair value gains on debt and derivative instruments, (100.2) (403.0) excluding interest on derivatives and debt under fair value option Deferred tax adjustment 43.2 69.0 Flee
Slide 31: Finance expense
Finance expense Six months ended 30 September 2023 2022 £m Investment income 40.4 19.1 Finance (expense)/income (120.0) 117.3 (79.6) 136.4 Fair value (gains)/losses on debt and derivative instruments, (100.2) (403.0) excluding interest on derivatives and debt under fair value option Underlying net f
Slide 32: Finance expense: index-linked debt
Finance expense: index-linked debt Six months ended 30 September 2023 2022 £m Interest on index-linked debt (4.6) (13.1) RPI adjustment (£2.4bn debt at Mar-23/3.9% charge for 6 months to Sep-23; (91.5) (181.2) £2.3bn debt at Mar-22/8.0% charge for 6 months to Sep-22) – 3 month lag1 CPI adjustment (£
Slide 33: Derivative analysis
Derivative analysis At 30 September 2023 2022 £m Derivatives hedging debt (112.4) (30.1) Derivatives hedging interest rates 295.9 360.3 Derivatives hedging commodity prices (0.3) 290.0 Total derivative assets and liabilities 183.2 620.2 • Derivatives hedging debt; hedge our non index-linked debt int
Slide 34: Statement of financial position
Statement of financial position At 30 Sep 2023 31 Mar 2023 Change (%) £m Property, plant and equipment 12,823.9 12,570.7 +2% Retirement benefit surplus 268.9 600.8 -55% Other non-current assets 225.7 235.7 -4% Cash 828.8 340.4 +143% Other current assets 379.1 302.5 +25% Total derivative assets 488.4
Slide 35: Reconciliation of net debt
Reconciliation of net debt At 30 Sept 2023 31 Mar 2023 £m Cash 828.8 340.4 Total derivative assets 488.4 477.1 Gross borrowings (9,148.6) (8,435.4) Total derivative liabilities (305.2) (252.8) Balance sheet net debt (8,136.6) (7,870.7) Exclude the fair value impact of: Interest rate derivatives fixi
Slide 36: 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 2.2% 2.6% 2.9% 7,000 2.5% 2.4% 6,000 5,000 4,000 (0.6)% (0.6)% (0.6)% (0.2)% (0.6)% 3,000 1.3% 1.3% 1.3% 1.4% 1.4% 2,000 1,000 - 2020/21 2021/22 2022
Slide 37: Financing and liquidity at 30 September 2023
Financing and liquidity at 30 September 2023 Gross Debt = £9,148.6m Other borrowings including EIB & other floating GBP Headroom / prefunding = £1464.6m lease obligations and short- loans term debt £908.4m £202.0m £m GBP CPI linked bonds and loans GBP fixed bonds £501.5m £2,679.3m Cash and short-ter
Slide 38: Debt structure at 30 September 2023
Debt structure at 30 September 2023 United Utilities Group PLC United Utilities Group PLC United Utilities PLC Yankees: • $400m in 28s on-lent at issue to UU Water Baa1 stable; BBB- stable; A- stable7 Euro MTNs: Other debt: • £300m in 27s • £100m in 40s1 • £510m in 56s1 • EIB RPI-linked loans £395m1
Slide 39: Term debt maturity profile as at 30 September 2023
Term debt maturity profile as at 30 September 20231 Average term to maturity of approximately 17 years 3,500 3,000 2,500 £m 2,000 1,500 1,000 500 0 2020-25 2025-30 2030-35 2035-40 2040-45 2045-50 2050-55 2055-60 Years 1 Future repayments of index-linked debt include RPI/CPI/CPIH market derived forec
United Utilities Group — H1 2023/24 Earnings Presentation on 6ix