United Utilities Group Plc · LSE:UU.
United Utilities — FY2024 Earnings Presentation
45 slides from United Utilities's earnings presentation, May 16, 2024
Slide 1: Full year results
Full year results Year ended 31 March 2024 Thursday 16 May 2024
Slide 2: Louise Beardmore, Chief Executive
Louise Beardmore Chief Executive
Slide 3: Overview
Overview Performing well Continue to support Submitted ambitious operationally and customers through plan for AMP8 financially affordability packages Strong track record Financial strength and Already delivering for of delivering for flexibility AMP8 stakeholders United UnitedUtilities Utilities••20
Slide 4: Timeline
Timeline August Early 2024 2025 UU response to DD UUG dividend policy announcement 2 October 12 June Ongoing December April 2023 2024 dialogue 2024 2025 Business plan Draft with Final Start of submission determinations regulators determinations AMP8 United Utilities • 2023/24 full year results4• 4 U
Slide 5: Highlights from our October business plan
Highlights from our October business plan Environmental 60% 32% reduction reduction in internal investment - in storm overflow activations seven-fold increase sewer flooding in the decade to 2030 Strong balance c.£22 £525m sheet average real increase in affordability support – household bills, each
Slide 6: Totex phasing and engineering solutions
Totex phasing and engineering solutions Plan scope discussions ongoing with EA, Ofwat and Defra PR24 Totex (£bn, real) £13.7bn 13.7 37% totex plan real RCV growth (2022/23 prices) 6.5% real CAGR 8.7% nominal CAGR 12.7 Adaptive Planning scenario £12.7bn (real) Business Plan Submission Adaptive Planni
Slide 7: Long-term investment drivers
Long-term investment drivers AMP8 is the start of a 25yr growth programme Tightening Environment Act environmental 2021 Legislative changes standards PFAS1, microplastics Resource Replacement 25 Year adequacy Renewing our infrastructure Plan Investing in long-term resource management Climate change
Slide 8: Setting up for success
Setting up for success Where are we now? AMP7 capital delivery on track Delivered 100% of our Year 4 environmental deliverables Where are we going? AMP8 capital supply chain partners (c.70), first contracts awarded Accelerating c.£400m1 from AMP8 into AMP7 1 c.£200m on our CSO programme as part of J
Slide 9: Accelerated CSO investment
Accelerated CSO investment All Windermere Cargo WwTW solutions in construction Top spilling site in 2022: this year 343 spills >90% reduction Issue identified and in spills since accelerated solution implementation of implemented in just accelerated solution 14 weeks United Utilities • 2023/24 full
Slide 10: Improving our rivers
Improving our rivers Impact on river health by attributable industry (%) Plan to significantly reduce our impact Urban and 18% transport 16% 15% 14% 12% 10% Other 15% 52% Agriculture and 8% rural land 6% management 4% 18% 2% 0% Baseline 2025 2030 Water industry Notes: 1. Based on Environmental Agenc
Slide 11: Operational performance
Operational performance Q United Water for the North West Utilities
Slide 12: Operational performance
Operational performance Strong performance, despite challenges of extreme weather c.80% £34m 12 3 or 4 star EPA consecutive years of our performance our highest ever since records began ‘Green’ on serious commitments delivered Customer ODI reward pollutions 27% 1st 375,000 customers provided with 1.
Slide 13: Operational performance
Operational performance Strong performance, despite challenges of extreme weather Annual rainfall FY23 Annual rainfall FY24 14 named storms since beginning of 2023 Wettest 18 months on record for England (from October 2022 to March 2024) Source: Environment Agency’s Monthly water situation report fo
Slide 14: Wastewater performance
Wastewater performance 3 or 4 star EA EPA rating since records began Higher levels of 12 rainfall and consecutive years storms – ‘Green’ for serious sewer flooding and pollutions storm overflow performance impacted United UnitedUtilities Utilities••2023/24 2023/24full fullyear yearresults results••
Slide 15: Water performance
Water performance Leakage Met leakage target 18 years in a row, delivering 7.1% reduction in AMP7 Water Quality First Over 15,000km -7% programme supported water mains 27% reduction cleaned in drinking to reduce the risk of water discolouration 2019/20 2023/24 complaints 2023/24 based on 3-year roll
Slide 16: Customer performance
Customer performance Household Statutory Bad Debt Ranked 1st WaSC in the UK Customer 4.0% Satisfaction Index (UKCSI) 3.5% 3.0% Supported Cash collection remains over 375,000 strong and 2.5% customers bad debt charge 2.0% through AMP7 with reduced to 1.6% affordability schemes 1.5% 1.0% FY15 FY16 FY1
Slide 17: People
People UK high performance norm levels of engagement at 81% United Utilities named Continuing to Water Industry build tomorrow’s Skills Employer talent – of the Award winning Year 2023 apprentices and young engineers United UnitedUtilities Utilities••2023/24 2023/24full fullyear yearresults results•
Slide 18: ESG performance
ESG performance Environment • EA EPA – 3 or 4 star every year since records began in 2011 E • Peatland restoration – already achieved our 2030 target to restore 1,000 Ha • 100% delivery of our environmental improvement programme in FY24 Social • High level of colleague engagement – in line with UK h
Slide 19: Phil Aspin, Chief Financial Officer
Phil Aspin Chief Financial Officer
Slide 20: Financial highlights
Financial highlights FY21-24 RoRE Revenue 7.9% real £1,950m FY23: £1,804m1 Underlying Operating Profit2 Underlying EPS2 £518m 33.3p FY23: (1.3)p FY23: £441m DPS RCV gearing3 49.78p 59% FY23: 45.51p FY23: 58% 1. FY23 revenue re-presented to reflect a £20.2m re-classification of income in relation to
Slide 21: 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 2.1% at Ma
Slide 22: Return on regulated equity (RoRE)
Return on regulated equity (RoRE) RoRE progression1 AMP7 RoRE FY21-24 7.9% 12.0% 10.0% ODI3 0.5% 8.5% Tax4 1.3% 8.0% 6.0% Financing 3.0% 4.0% Base 2.0% return 4.0% 0.0% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Totex4 -0.6% AMP7 guidance2 Retail -0.3% 6-8% real 3. Excluding per capita consumption
Slide 23: Underlying operating profit
Underlying operating profit £m Revenue: £1,950m 600 Opex • Revenue cap increase: £103m 580 (13) 560 (34) 540 6 (12) Underlying opex: £787m 520 (15) 145 • Inflation increases to staff and 500 518 power costs 480 460 Depreciation: £439m 440 • Increase reflecting growth in 441 420 underlying asset base
Slide 24: Interest, tax and earnings
Interest, tax and earnings Underlying net finance Underlying tax Underlying profit expense FY24: £293m FY24: £7m credit FY24: £227m FY23: £475m FY23: £26m credit FY23: -£8.7m Inflation charge on index-linked ‘Full expensing’ to continue to Underlying EPS of 33.3p debt of £252m (FY23: 520m) provide a
Slide 25: Financial strength
Financial strength RCV1 (£bn) 14.7 14.0 RCV gearing2 Pension position ND/RCV 59% Buy-in transaction covering 2/3 liabilities FY23: 58% FY23 FY24 No further pension deficit repair Net debt (£bn) Funding raised Liquidity 8.8 8.2 c. £1.6bn >£2bn AMP8 funding underway Sufficient liquidity to 2026 FY23 F
Slide 26: Sustainable finance update
Sustainable finance update Recent green bond issuance Over £1.7 billion raised under Sustainable Finance Successfully priced a Framework to date Re-entered the Euro €650m 10.25yr green bond market in bond February Leveraging our green 3.75% coupon credentials Upsized from €500m on Healthy investor t
Slide 27: Technical guidance 2024/25
Technical guidance 2024/25 FY24 y-o-y Revenue expected to increase by c.10%, driven by the Revenue £1,950m inflationary mechanism and the impact of prior period adjustments Underlying operating costs (inc. IRE) £993m Underlying operating costs expected to increase more than inflation due to business
Slide 28: Financial summary
Financial summary Strong investor returns Financial strength • FY21-24 RoRE: 7.9% • RCV Gearing of 59%1 • RCV growth CAGR: 4-5% • Fully funded pension scheme Funding and Liquidity Position Dividend • Liquidity extended into 2026 • FY24 Dividend: 49.78p • Commenced AMP8 funding • Inflation-linked div
Slide 29: Louise Beardmore, Chief Executive
Louise Beardmore Chief Executive
Slide 30: Summary
Summary Performing well Continue to support Submitted ambitious operationally and customers through plan for AMP8 financially affordability packages Financial strength and Determined to drive a Already delivering for flexibility step change AMP8 United UnitedUtilities Utilities••2023/24 2023/24full
Slide 31: 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 32: Supporting information
Supporting information 1. Underlying income statement 8. Statement of financial position 2. Underlying operating costs 9. Reconciliation of net debt 3. Profit before tax reconciliation 10. Financing Performance 4. Profit after tax reconciliation 11. Financing and liquidity 5. Finance expense 12. Deb
Slide 33: Underlying income statement
Underlying income statement Year ended 31 March 2024 2023 Change (%) £m Revenue* 1,949.5 1,804.2 +8.1% Operating expenses* (787.1) (746.3) +5.5% Infrastructure renewals expenditure (205.8) (193.5) +6.4% EBITDA 956.6 864.4 +10.7% Depreciation and amortisation (438.8) (423.6) +3.6% Operating profit 51
Slide 34: Underlying operating costs
Underlying operating costs Year ended 31 March 2024 2023 Change (%) £m Revenue* 1,949.5 1,804.2 +8.1% Employee costs (204.7) (192.2) +6.5% Power (164.3) (130.8) +25.6% Hired and contracted services (108.2) (103.7) +4.3% Materials (65.8) (76.2) -13.8% Chemicals (61.3) (56.5) +8.5% Property rates (82.
Slide 35: Profit before tax reconciliation
Profit before tax reconciliation Year ended 31 March 2024 2023 £m Operating profit 480.2 440.8 Net finance expense (306.1) (215.7) Share of (losses)/profits of joint ventures (4.1) - Profit on disposal of United Utilities Renewable Energy - 31.2 Reported profit before tax 170.0 256.3 Adjustments: Fl
Slide 36: Profit after tax reconciliation
Profit after tax reconciliation Year ended 31 March 2024 2023 £m Reported profit after tax 126.9 204.9 Adjustments: Fleetwood outfall pipe fracture 37.6 - Fair value gains on debt and derivative instruments, 12.9 (259.4) excluding interest on derivatives and debt under fair value option Deferred tax
Slide 37: Finance expense
Finance expense Year ended 31 March 2024 2023 £m Investment income 85.6 47.0 Finance expense (389.3) (262.7) Allowance for expected credit losses – loans to joint venture (2.4) (262.7) (306.1) (215.7) Fair value (gains)/losses on debt and derivative instruments, 12.9 (259.4) excluding interest on de
Slide 38: Finance expense: index-linked debt
Finance expense: index-linked debt Year ended 31 March 2024 2023 £m Interest on index-linked debt (40.8) (38.6) RPI adjustment (£2.4bn debt at Mar-23/4.9% indexation charge; £2.3bn debt at Mar-22/13.4% (115.8) (302.6) indexation charge) – 3 month lag1 CPI adjustment (£1.3bn debt at Mar-23/4.0% index
Slide 39: Derivative analysis
Derivative analysis At 31 March 2024 2023 £m Derivatives - hedging debt (49.4) (20.3) Derivatives - total accretion on inflation-linked swaps (111.2) (85.5) Derivatives - fixing future real interest rates through inflation-linked swaps 123.8 103.3 Derivatives - hedging future nominal interest rates
Slide 40: Statement of financial position
Statement of financial position At 31 Mar 2024 31 Mar 2023 Change (%) £m Property, plant and equipment 13,044.3 12,570.7 +3.8% Retirement benefit surplus 268.0 600.8 -55.4% Other non-current assets 210.6 235.7 -10.7% Cash 1,399.3 340.4 +311.1% Other current assets 348.4 302.5 +15.2% Total derivative
Slide 41: Reconciliation of net debt
Reconciliation of net debt At 31 Mar 2024 31 Mar 2023 £m Cash 1,399.3 340.4 Total derivative assets 382.8 477.1 Gross borrowings (10,001.4) (8,435.4) Total derivative liabilities (280.6) (252.8) Balance sheet net debt (8,499.9) (7,870.7) Exclude: The fair value impact of: Inflation derivatives fixin
Slide 42: 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 9,000 8,000 7,000 2.6% 3.2% 2.5% 2.4% 2.2% 6,000 5,000 4,000 (0.6)% (0.6)% (0.6)% (0.2)% (0.6)% 3,000 2,000 1.3% 1.3% 1.3% 1.4% 1.4% 1,000 - 2020/21 2021/2
Slide 43: Financing and liquidity at 31 March 2024
Financing and liquidity at 31 March 2024 Gross Debt = £10.0bn Liquidity = £2.2bn Other borrowings including EIB & other floating GBP £m lease obligations and short- loans term debt £887.0m Cash and short-term deposits 1,399.3 £207.8m GBP CPI linked bonds and Medium-term committed bank facilities 800
Slide 44: Debt structure at 31 March 2024
Debt structure at 31 March 2024 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 £370m1 United Utilities Water Limited
Slide 45: Term debt maturity profile as at 31 March 2024
Term debt maturity profile as at 31 March 20241 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 forecasts
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