United Utilities PLC
26 March 2008
UNITED UTILITIES TRADING UPDATE
United Utilities PLC today issues an update on trading for the year ending 31
March 2008. The company will announce its preliminary results on 3 June 2008.
Commenting on the group's trading position, Philip Green, Chief Executive,
said:
"The group is on track to deliver results in line with our expectations for the
year ending 31 March 2008.
"We are focused on building on the operational and customer service
improvements already achieved and I am pleased to report that we remain on
course to meet the tougher leakage target set by Ofwat for 2007/08."
Regulated activities
The regulated business is expected to deliver good underlying operating profit
growth for the year ending 31 March 2008. This growth is primarily a result of
allowed price rises to fund major investment in the company's assets on behalf
of its customers and the environment.
United Utilities has agreed a revised sludge programme with Ofwat and
cumulative capital expenditure, covering the period April 2005 to March 2008,
is now broadly in line with regulatory assumptions. The company is in the peak
phase of its capital investment programmes, with capital expenditure for the
year, including infrastructure renewals expenditure, expected to be over £800
million.
United Utilities Water met its economic level of leakage rolling target in 2006
/07 for the first time in five years. The company has maintained a strong focus
on operational performance and is on track to meet a tougher 2007/08 leakage
target of 465 megalitres per day, which represents year on year improvement.
The group's business improvement initiatives continue to progress well and the
company remains confident of meeting its regulatory efficiency targets and
delivering its outputs across the 2005-10 period.
Non-regulated activities
Underlying operating profit in the non-regulated business is expected to be
broadly in line with the prior year. This reflects the first year contribution
from the Electricity North West contract, offset by the expected reduction in
contribution from the Southern Water contract consistent with its planned
capital expenditure profile.
The group has a clear growth strategy for its non-regulated business, applying
its core skills on an asset-light basis in four target markets: UK utility
outsourcing, UK municipal solid waste treatment, the Gulf region and Australia.
In line with this strategy, United Utilities sold its small facilities
management operations to Europa Facility Holdings Limited in February 2008.
Other activities
United Utilities Property Solutions continues to perform well. Its operating
profit contribution is anticipated to be slightly lower than the previous year,
reflecting the varying nature of profit generation in this business, and is
expected to largely offset the group's central costs.
Other financial
United Utilities continues to benefit from a robust liquidity position,
augmented by approximately £1.5 billion of long-dated index-linked funding. In
addition, since 30 September 2007 the group has further enhanced its liquidity
by arranging or extending the maturity date of £500 million of committed
medium-term bank credit facilities. Furthermore, the European Investment Bank
has announced that it is currently appraising a new £400 million term loan for
United Utilities Water PLC to support the remainder of its 2005-10 capital
investment programme.
Borrowings, net of cash and short term deposits, are expected to show a
significant reduction from the half year position, following the receipt of
proceeds from the sale of the electricity distribution assets. This reduction
in net borrowings is expected to be short-term since the group intends to
return £1.5 billion to shareholders, as outlined in its 2007/08 half year
results announced on 29 November 2007. Details of the return will be published
in the circular scheduled to be issued in June 2008, with the first return of
value expected in August 2008.
The underlying tax charge for the year is expected to be around 30%. This
reflects the full provision for deferred tax and is before adjusting for the
impact of the reduction in corporation tax rate from 30% to 28% with effect
from April 2008. After adjusting deferred tax for this rate reduction, the
overall tax charge is expected to be around 12%.
The company is forecasting a one-off deferred tax charge in 2008/09 relating to
the abolition of industrial buildings allowances. This one-off adjustment is
anticipated to be over £200 million and is likely to result in a significant
increase in the effective tax rate for the year ending 31 March 2009.
Restructuring costs of around £12 million are expected for 2007/08, the
majority of which relate to the non-regulated business.
United Utilities' contacts:
Philip Green, Chief Executive +44 (0)1925 237000
Tim Weller, Chief Financial Officer +44 (0)1925 237000
Gaynor Kenyon, Communications Director +44 (0)7753 622282
Rob Hughes, Investor Relations Manager +44 (0)7747 446571
Tulchan Communications
Dominic Fry and Peter Hewer +44 (0) 20 7353 4200
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