United Utilities Group Plc · LSE:UU.
United Utilities — H1 2022/23 Earnings Presentation
43 slides from United Utilities's earnings presentation, Nov 23, 2022
Slide 1: Half year results
Half year results Six months ended 30 September 2022 United Utilities Group PLC Rivington United Utilities • 2021/22 reservoir full year results
Slide 2: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2021/22 full year results Dovestone
Slide 3: Highlights
Highlights 01 03 05 Effectively AMP7 Supporting managing ODI guidance of customers our water network £200m, through to deliver a almost five times largest assistance reliable and higher than package resilient water AMP6 in the sector supply Strong and Highest 4* Significant sustainable rating AMP8 i
Slide 4: Helping customers in difficult times
Helping customers in difficult times Helping more than 200,000 North West households through 1 c£280m package of support1 in AMP7 2 Innovative uses of technology including Open Banking to help customers access support tariffs 3 Strong supporter of the CCW’s national social tariff proposal 150% compa
Slide 5: Operational excellence driving value
Operational excellence driving value Sustainable improvements across water, wastewater and customer service delivering improved ODI outcomes 1 3 5 Highest Investment in Investment in 4* rating river health water quality from the EA helping to supporting for 2021; reduce reported lowest levels of 5th
Slide 6: Effective management of our water system
Effective management of our water system Investment in water system delivering resilience Despite some areas Utilised our receiving less than half of sophisticated water longer term average resource planning rainfall in July and system August No customer Managed our restrictions combined system need
Slide 7: Better Rivers, Better North West
Better Rivers, Better North West Our ambitious commitments to improve river health Delivering environmental improvements through £230m 1 AMP7 FD investment and £250m additional investment1 Delivered a 29% reduction in reported spills last year 2 against a 2020 baseline and making further progress th
Slide 8: Significant AMP8 environmental programme
Significant AMP8 environmental programme Environment Act 2021 creating significant drivers for capital investment 1 2 3 c60%1 of investment Reduce spill Reduce Address required to frequency from phosphate from nutrient deliver 40% storm overflows wastewater imbalance Government treatment storm overf
Slide 9: Phil Aspin, Chief Financial Officer
Phil Aspin Chief Financial Officer United Utilities • 2021/22 full year results Ullswater
Slide 10: Financial highlights
Financial highlights Revenue Household Underlying Underlying bad debt and reported EPS1 operating profit1 £919m 1.8% (1.8)p of regulated revenue £259m H1 2021/22: H1 2021/22: Reported EPS: H1 2021/22: 1.8% £333m 51.8p £932m Interim Strong Strong Managing dividend balance sheet liquidity position inf
Slide 11: Strong collections performance
Strong collections performance Strong growth in direct debit volumes 1 Strong current year household cash collection Number of customers on direct debit 81% on direct debit or payment plans 2,300,000 2 2022/23 2,250,000 2021/22 Utilising data to optimise customer payment 3 behaviour, including nudge
Slide 12: Underlying operating profit
Underlying operating profit £m Largely increased power, chemical Infrastructure renewals costs and expenditure in relation regulatory fees to investments in DNM 333 and water quality; to be recovered through ODI (13) improvements Includes £19m adverse consumption impact (36) which will be (9) recove
Slide 13: Inflation impact
Inflation impact Tight cost management and regulatory mechanisms mitigate rising costs Effective management Regulatory mitigation Wage deal for current year RCV indexed to inflation with the agreed at 4.75% economic benefit slightly exceeding the in year impact of non-cash cost 98% of AMP7 base capi
Slide 14: Power consumption and hedging
Power consumption and hedging 01 03 05 High Driving Effective mitigation energy efficiency hedging policy of risk for FY23 Optimising how 70%2 hedged for with estimated and when we use FY24 and 2/3rds2 consumption energy hedged for FY25 96%2 hedged Controlling Self- cost Generation in FY23 at an & P
Slide 15: Finance expense
Finance expense Underlying net Reported net FY23 finance expense1 finance income guidance3 c£165m £267m £(136)m non-cash increase year-on-year FY22: £306m £132m higher Including net fair value Stable cash interest than H1 2021/22 gains2 of £403m FY22: £118m Reflects Higher Higher benefit of non-cash
Slide 16: Robust financing position
Robust financing position Strong Benefiting liquidity position from front loading debt issuances Over £1bn of £350m liquidity as at Sep-22 1.875% 2042 bond Liquidity through £250m to Feb-25 Track record 1.75% 2038 bond of outperforming debt index1 at issuance Typically outperform by 50-100 bps 1 Cha
Slide 17: Strong balance sheet
Strong balance sheet Higher inflation RCV gearing of 60% supports a sector-leading stable A3 and AMP7 credit rating with Moody’s investments driving RCV 54 growth Net debt 198 £m (91) 12,436 290 (84) 7,829 AMP7 nominal RCV growth1 27.5% 7,570 331 AMP7 exit RCV: £15.1bn Gearing to trend towards lower
Slide 18: Strong balance sheet – resilient pension position
Strong balance sheet – resilient pension position 1 Retirement 3 Robust benefit policies; IFRS surplus of successfully £824m as at navigated recent 30 September challenging market 2022 conditions 2 4 Fully Headroom funded for pension further schemes de-risking United United Utilities Utilities • 202
Slide 19: 2022/23 full year outlook
2022/23 full year outlook Lower consumption; £34m expected to be recovered in FY25 Revenue c1% y-o-y 4.6% CPIH offset by –1.3% k factor Underlying operating c£80m inflationary increases affecting power, chemicals c£130m y-o-y and other costs costs c£50m other increases, including £30m scope refl
Slide 20: Financial summary
Financial summary Robust financial position Managing near-term impact of inflation - regulatory mechanisms provide mitigation through higher totex allowance and RCV growth Robust cash collection and stable bad debt position Strong balance sheet; sustainable gearing and leading pension position Unite
Slide 21: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2021/22 full year results Dovestone
Slide 22: Summary
Summary Supporting customers In difficult times Systems Thinking driving sustainable performance improvements; supporting our AMP7 ODI target of £200m Delivering a reliable and resilient water supply Improving river health through Better Rivers plan Successfully navigating current macro- economic ch
Slide 23: Any questions?
Any questions? United Utilities • 2022/23 half year results
Slide 24: 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 25: Supporting information
Supporting information 1. Revenue 16. Term debt maturity profile 2. Underlying income statement 17. AMP7 maturity profile 3. Underlying operating costs 18. EIB funding maturity profile 4. Profit before tax reconciliation 5. Profit after tax reconciliation 6. Finance expense 7. Finance expense: index
Slide 26: Revenue
Revenue £m 30 Overall consumption (38) Includes £19m adverse lower than predicted consumption impact 1,859 which will be recovered as we had predicted in FY25 a slower return to pre-pandemic levels 932 13 (18) 919 4.6% CPIH increase, -1.3% k factor Full year 2022/23 revenue expected to be c1% lower
Slide 27: Underlying income statement
Underlying income statement Six months ended 30 September 2022 2021 Change (%) £m Revenue 919.3 932.3 -1% Operating expenses (361.8) (309.3) Infrastructure renewals expenditure (92.2) (82.6) EBITDA 465.3 540.4 -14% Depreciation and amortisation (206.8) (207.6) Operating profit 258.5 332.8 -22% Net f
Slide 28: Underlying operating costs
Underlying operating costs Six months ended 30 September 2022 20211 Change (%) £m Revenue 932.3 932.3 -1% Staff costs (95.2) (89.1) +7% Materials (61.7) (40.7) +52% Power (54.7) (38.2) +43% Hired and contracted services (48.7) (43.4) +12% Property rates (45.7) (46.5) -2% Regulatory fees (18.3) (14.5
Slide 29: Profit before tax reconciliation
Profit before tax reconciliation 30 Sep 2022 30 Sep 2021 31 Mar 2022 £m Operating profit 258.5 332.8 610.0 Net finance income/(expense) 136.4 (118.3) (168.3) Share of profits/(losses) of joint ventures 0.2 (1.8) (1.8) Profit on disposal of subsidiary 31.2 - - Reported profit before tax 426.3 212.7 4
Slide 30: Profit after tax reconciliation
Profit after tax reconciliation 30 Sep 2022 30 Sep 2021 31 Mar 2022 £m Reported profit/(loss) after tax 353.0 (216.2) (56.8) Adjustments: Fair value (gains)/losses on debt and derivative instruments, excluding interest on derivatives (403.0) (15.9) (138.0) and debt under fair value option Profit on
Slide 31: Finance expense
Finance expense Six months ended 30 September 2022 2021 £m Investment income 19.1 9.2 Finance income/(expense) 117.3 (127.5) 136.4 (118.3) Fair value (gains)/losses on debt and derivative instruments, excluding interest on derivatives and debt under (403.0) (15.9) fair value option Underlying net fi
Slide 32: Finance expense: index-linked debt
Finance expense: index-linked debt Six months ended 30 September 2022 2021 £m Interest on index-linked debt (13.1) (17.1) RPI adjustment 3 month lag1 – (Sep-22: c£2.3bn debt, 8.0% charge; Sep-21 c£2.2bn debt; 3.7% charge) (181.2) (79.5) CPI adjustment 3 month lag2 – (Sep-22: c£1.1bn debt, 6.6% charg
Slide 33: Finance expense: inflation forecasts
Finance expense: inflation forecasts FY23 HY 2022/23 H1 2021/22 FY 2021/22 guidance Cash interest £55m £58m £118m c£165m Non-cash indexation £290m £103m £256m non-cash increase Non-cash capitalisation £(63)m £(21)m £(53)m year-on-year of borrowing costs FY22: £306m Pension interest income £(14)m £(7
Slide 34: Derivative analysis
Derivative analysis At 30 September 2022 2021 £m Derivatives hedging debt (30.1) 417.3 Derivatives hedging interest rates 360.3 (93.6) Derivatives hedging commodity prices 290.0 48.1 Total derivative assets and liabilities 620.2 371.8 • Derivatives hedging debt; hedge our non index-linked debt into
Slide 35: Statement of financial position
Statement of financial position At 30 Sep 2022 31 Mar 2022 Change (%) £m Property, plant and equipment 12,321.2 12,147.5 +1% Retirement benefit surplus 823.5 1,016.8 -19% Other non-current assets 240.2 259.5 -7% Cash 532.2 240.9 +121% Other current assets 315.8 314.9 +0% Total derivative assets 911.
Slide 36: Reconciliation of net debt
Reconciliation of net debt At 30 Sep 2022 31 Mar 2022 £m Cash 532.2 240.9 Total derivative assets 911.0 457.4 Gross borrowings (8,263.8) (7,979.8) Total derivative liabilities (290.8) (137.2) Balance sheet net debt (7,111.4) (7,418.7) Exclude the fair value impact of: Interest rate derivatives fixin
Slide 37: Raising finance efficiently
Raising finance efficiently Typically outperform the index by 50-100 bps UU issuances (incl. fees) vs iBoxx yield less 15bps (1 April 2020 to 31 October 2022) 7.00 6.00 5.00 4.00 Yield (%) 3.00 2.00 1.00 0.00 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 Apr 21 May 21 Jun 21
Slide 38: 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 (0.6)% (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 39: Financing and liquidity at 30 September 2022
Financing and liquidity at 30 September 2022 Gross debt = £8,263.8m Headroom / prefunding = £1,015.1m £234.7m, Other borrowings including £384.7m, Yankee £850.6m, EIB & other lease obligations and bonds (USD) floating GBP loans short-term debt £m £501.8m, EUR, HKD, £563.7m, GBP Fixed JPY and USD bon
Slide 40: Debt structure at 30 September 2022
Debt structure at 30 September 2022 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 • £150m in 57s1 • EIB RP
Slide 41: Term debt maturity profile as at 30 September 2022
Term debt maturity profile as at 30 September 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 rat
Slide 42: 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 43: EIB funding maturity profile
EIB funding maturity profile 700.00 600.00 500.00 400.00 £m 300.00 200.00 100.00 - To 31 Mar 2025 2025-30 2030-35 2035-40 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 Utilitie
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