TIDMUU.
RNS Number : 1612X
United Utilities Group PLC
22 November 2017
United Utilities Group PLC
22 November 2017
HALF Year RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2017
Customer focus delivers further improvements
-- A leading company for customer satisfaction
-- Doubling the number of customers receiving help with affordability over AMP6
Investing for customers, the environment and driving operational
performance
-- Accelerated investment delivering improved operational performance
-- Sector leading on environmental performance for another year
-- Systems Thinking driving efficiency and resilience; leading position heading into PR19
-- Good performance on ODIs
Financial performance in line with expectations
-- Underlying operating profit of GBP344.0m (reported operating profit of GBP341.8m)
-- Interim dividend in line with AMP6 growth policy
-- Sector leading, low risk pension position through effective hedging
Key financials
Six months ended
--------------------------- ----------------------------
30 September 30 September
Continuing operations 2017 2016
--------------------------- ------------- -------------
Revenue GBP876.0m GBP853.0m
--------------------------- ------------- -------------
Underlying operating GBP344.0m GBP312.5m
profit(1)
--------------------------- ------------- -------------
Reported operating profit GBP341.8m GBP303.6m
--------------------------- ------------- -------------
Underlying profit after GBP160.1m GBP151.5m
tax(1)
--------------------------- ------------- -------------
Reported profit after GBP197.4m GBP202.6m
tax
--------------------------- ------------- -------------
Interim dividend per
ordinary share (pence) 13.24p 12.95p
--------------------------- ------------- -------------
Net regulatory capital GBP394.4m GBP383.5m
spend
--------------------------- ------------- -------------
RCV gearing(2) 61% 62%
--------------------------- ------------- -------------
(1) Underlying profit measures have been provided to give a more
representative view of business performance and are defined in the
underlying profit measure tables
(2) Regulatory capital value or RCV gearing calculated as group
net debt/United Utilities Water's shadow RCV (outturn prices)
Steve Mogford, Chief Executive Officer, said:
"This has been a strong first half performance in which we have
delivered further value for customers and shareholders.
"We continue to put customers first, achieving significant
further improvements in customer satisfaction, and positioning us
as a leader in our sector. This is a significant achievement in a
region seeing some of the highest levels of deprivation in the
country. Average bills are set to reduce in real terms over the ten
year period to 2020 and we expect to double the number of customers
we help through our award winning affordability schemes over
AMP6.
"Our innovative Systems Thinking approach to running the
business is delivering increasingly efficient and resilient
services. By investing earlier than our original plans for this
regulatory period we are accelerating the delivery of value to
customers and shareholders, and positioning the business as sector
leading as we approach the next regulatory cycle.
"As we turn our attention to the next price review for the
period 2020 to 2025, we are engaging with customers across our
region to understand their needs and preferences and to formulate
plans that best satisfy those needs. Affordability will be key,
balanced against resilience to climate change and population growth
in our region."
For further information on the day, please contact:
+44 (0) 7753 622
Gaynor Kenyon - Corporate Affairs Director 282
+44 (0) 7500 087
Robert Lee - Head of Investor Relations 704
Sam Chiene / Peter Hewer - Tulchan +44 (0) 2073 534
Communications 200
A presentation to investors and analysts starts at 9.00am on
Wednesday 22 November 2017, at the Auditorium, Deutsche Bank,
Winchester House, 1 Great Winchester Street, London, EC2N 2DB.
The presentation can be accessed via a live listen in conference
call facility by dialling:
UK toll: +44 (0) 333 300 0804 / UK toll free: +44 (0) 800 358
9473
Participant PIN 25837389#
For international dial in numbers:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
A recording of the call will be available from Thursday 23
November 2017 at the following link:
https://www.unitedutilities.com/corporate/investors/financial-news/latest-financial-news/
This results announcement and the associated presentation will
be available on the day at:
http://corporate.unitedutilities.com/investors.aspx
KEY OPERATIONAL PROGRESS
We have sustained our industry leading customer service,
operational performance and environmental performance, meeting the
needs of stakeholders and building momentum to take into the next
regulatory review and beyond.
-- Sustained improvement in customer satisfaction - sustained
improvement in customer satisfaction with year on year improvement
reinforcing our position as the leading listed company against
Ofwat's qualitative service incentive mechanism (SIM). In the first
half of 2017/18 we have achieved a further 22 per cent reduction in
complaints against the same period last year and a 48 per cent
reduction in stage two complaints. Our digital transformation
continues to allow us to interact effectively with customers using
their preferred channel. We have around 750,000 customers
registered for our improved online account management capability,
enabling them to interact with us digitally for many of their
transactions.
-- Effective acceleration and delivery of investment plan -
acceleration of our 2015-20 investment programme continues to
deliver customer service, operational and environmental benefits,
enhance resilience, and optimise performance under our ODIs. Our
acceleration of investment has been achieved with continued highly
effective and efficient capital delivery across our large and
diverse capital programme, meeting our upper quartile efficiency
targets for AMP6. This is reflected in our internal time, cost and
quality index measure, or TCQi, which continues to track above 90
per cent so far this year.
-- Sector leading operational and environmental performance - in
July, we achieved Industry Leading Company status for the second
year as measured through the Environment Agency's (EA) annual
assessment, and were one of only two companies to retain this
status. Our performance against the Drinking Water Inspectorate's
(DWI) metrics continues to improve, with our best ever performance
for 2016, comparing favourably with our peers. This is particularly
pleasing given the historical issues we have faced due to the
legacy nature of our asset base.
-- Innovation through Systems Thinking - exploiting innovation
and our Systems Thinking approach is continuing to transform the
way we run our business, and is on track to deliver GBP100 million
of savings in our business plan. We are progressively moving
greater capability into our Integrated Control Centre, facilitating
a more proactive and predictive approach to monitoring our assets
and networks. This central control reduces the level of reactive
work, thereby improving performance and efficiency, and helps
minimise the customer impact of any incidents.
-- Strong environmental, social & governance (ESG)
credentials - we have retained our World Class rating in the Dow
Jones Sustainability Index for the tenth consecutive year, a very
good achievement in light of the ever evolving standards. In
addition, we were winners of the 'Water Team of the Year' award at
the Utilities & Telecoms Awards 2017 recognising best practice
in debt management. We are very proud of our record and for the
recognition we received for our efforts in this important area.
-- Delivering shareholder value through regulatory
outperformance - the low cost of debt we have already locked in
places us in a strong position to deliver on our target of
minimising our cost of debt compared to Ofwat's industry allowed
cost for the 2015-20 period. We are making good progress,
implementing initiatives to deliver over GBP600 million of
efficiencies to meet our totex allowance. Our progress in the first
half of 2017/18 gives us confidence in delivering our target of a
cumulative net ODI outcome over the 2015-20 period of between a
GBP30 million reward and a GBP50 million penalty. If there are no
surprises during the winter, we hope to reduce the downside risk
further when we provide an update at our full year results next
May.
-- Prepared for PR19 - alongside our engagement with Ofwat, we
continue to conduct extensive engagement with customers as we
develop and shape our business plan submission. Our current leading
operational performance and customer satisfaction places us in a
good position heading into the next regulatory review.
Financial overview
The group has delivered a good set of financial results for the
six months ended 30 September 2017.
-- Revenue - revenue was up GBP23 million, at GBP876 million,
reflecting our allowed regulatory revenue changes and income from
property sales partly offset by the accounting impact of our Water
Plus JV, which completed on 1 June 2016. Our income from property
sales was GBP13 million higher in the first half of 2017/18
compared with the same period last year but is expected to be
broadly similar to last year for the full year.
-- Operating profit - underlying operating profit was up GBP32
million, at GBP344 million. This reflects the GBP23 million
increase in revenue and a GBP16 million decrease in total costs
offset by a GBP7 million increase in depreciation. Reported
operating profit was up GBP38 million, at GBP342 million, impacted
by the same movements as underlying operating profit as well as
slightly reduced profit in the first half of last year due to one
off costs associated with storms and the setting up of our Water
Plus JV.
-- Capex - total net regulatory capital investment in the first
half of the year, including GBP70 million of infrastructure
renewals expenditure, was GBP394 million, in line with company
plans. We remain on track to deliver a total of around GBP800
million of regulatory capex for the full year. This includes the
first GBP20 million of the additional GBP100 million of investment
that we announced in May to improve resilience for customers, which
was not originally included in the PR14 regulatory settlement. Our
five-year regulatory capex programme is cGBP3.6 billion including
this additional investment in resilience.
-- Profit before tax - underlying profit before tax was up GBP5
million, at GBP194 million, as the increase in underlying operating
profit, alongside a GBP3 million increase in our share of joint
venture profits, was largely offset by a GBP29 million increase in
the underlying net finance expense. The increase in the underlying
net finance expense was mainly due to the impact of higher RPI
inflation on our index-linked debt. Reported profit before tax was
GBP242 million, reflecting fair value movements and other adjusting
items as outlined in the underlying profit measures tables.
-- Profit after tax - underlying profit after tax was up by GBP9
million, at GBP160 million. Reported profit after tax was higher at
GBP197 million, mainly reflecting fair value movements.
-- Capital structure - the group has a robust capital structure
with gearing of 61 per cent as at 30 September 2017 (measured as
group net debt to 'shadow' regulatory capital value, or RCV). Our
shadow RCV adjusts for actual spend and was GBP11.0 billion as at
30 September 2017. This gearing level is comfortably within our
target range of 55 per cent to 65 per cent, supporting a solid
investment grade credit rating. United Utilities Water Limited
(UUW) has long-term credit ratings of A3 from Moody's, and was
upgraded one notch in the period to A- from Standard & Poor's,
both on stable outlook.
-- Financing headroom - the group benefits from headroom to
cover its projected needs into 2019, enhanced by the recent raising
of new finance. At 30 September 2017, the group had headroom of
GBP331 million consisting of cash and committed funding. This
headroom provides good flexibility in terms of when and how further
debt finance is raised to help refinance maturing debt and support
the delivery of our regulatory capital investment programme.
-- Dividend - the Board has proposed an interim dividend of
13.24 pence per ordinary share, an increase of 2.2 per cent, in
line with our policy of targeting an annual growth rate of at least
RPI inflation through to 2020.
KEY PERFORMANCE INDICATORS
United Utilities aims to deliver long-term shareholder value by
providing:
-- The best service to customers;
-- At the lowest sustainable cost;
-- In a responsible manner.
We have a number of KPIs within each of these strategic themes
to help measure and drive performance.
Best service to customers
-- Service incentive mechanism (SIM) - having been the most
improved company on SIM during the 2010-15 regulatory period, our
target is to move towards the upper quartile in the
medium-term.
Qualitative: Ofwat has undertaken two surveys in the first half
of the year. In the first survey we scored 4.36 points, compared to
4.33 points in the first survey of 2016/17 (higher score is
better). In the second survey we scored 4.44 points, which is above
the industry average of 4.38 points, with customers rating us
highly for billing and wastewater services.
Quantitative: the quantitative assessment measures customer
contacts, and performance is assessed on both an absolute and
relative basis. Whilst relative performance can only be assessed in
full following the end of each financial year, when the other
companies publish their respective results, on absolute performance
for the first half of 2017/18, we achieved a score of 34 points,
improving on the first half of 2016/17 when our score was 40 points
(lower score is better).
-- Outcome delivery incentives (ODIs) - we have 19 wholesale
financial ODIs and, as outlined previously, the risk is skewed to
the downside, with ten attracting a penalty only.
We were pleased to deliver a cumulative net reward of GBP9.2
million for the first two years of the current regulatory period,
exceeding our initial expectations. Whilst a number of our ODI
measures are susceptible to one-off events and, on the whole, our
ODI targets get tougher each year, our progress in the first half
of 2017/18 gives us confidence in delivering our target of a
cumulative net ODI outcome over the 2015-20 period of between a
GBP30 million reward and a GBP50 million penalty. If there are no
surprises during the winter, we hope to reduce the downside risk
further when we provide an update at our full year results next
May.
Lowest sustainable cost
-- Financing outperformance - the low cost of debt we have
already locked-in places us in a strong position to deliver our
target of minimising our cost of debt compared with Ofwat's
industry allowed cost for the 2015-20 period.
-- Total expenditure (totex) performance - although our totex
allowance for the 2015-20 period is challenging, we are
implementing a range of initiatives and are confident of meeting
our target of delivering our promises to customers within the
cumulative 2015-20 wholesale totex final determination allowance.
Progress in the first half of the five-year regulatory period has
been good and we remain on track to meet the target for the full
five-year period.
-- Household retail cost to serve - overall, it will be very
challenging to meet the regulatory assumptions for household retail
costs. This is primarily due to Ofwat's price review methodology at
PR14 which made no allowance for inflation in the household retail
business and, in our view, made insufficient allowance for dual
service (water and wastewater) companies. The regulatory
assumptions for household retail costs become progressively tougher
as we move through the 2015-20 period. Our target is to minimise
our costs compared with Ofwat's revenue allowance. We are
continuing with our strong focus on this target and will provide an
update for 2017/18 at our full year results next May.
Responsible manner
-- Leakage - although leakage is included within our outcome
delivery incentives, we intend to continue publishing our leakage
position separately, as we consider it to be an important measure
from a responsible business perspective. We delivered an excellent
performance in 2016/17, meeting our regulatory leakage target of
463 megalitres per day, and remain on track to meet it again in
2017/18.
-- Environmental performance - on the Environment Agency's
latest annual assessment, published in July 2017, we were awarded
Industry Leading Company status across the range of operational
metrics for the second successive year. This indicates we were in
joint first position amongst the nine water and sewerage companies
assessed, and aligns with our medium-term goal of being an upper
quartile company on a consistent basis.
-- Corporate responsibility - United Utilities has a strong
focus on operating in a responsible manner and is the only UK water
company to have a World Class rating as measured by the Dow Jones
Sustainability Index. In 2017/18, United Utilities has retained its
World Class rating for the tenth consecutive year.
FINANCIAL PERFORMANCE
United Utilities delivered a good set of financial results for
the six months ended 30 September 2017.
Revenue
Revenue was up GBP23 million, at GBP876 million, reflecting our
allowed regulatory revenue changes partly offset by the impact of
our Water Plus JV, which completed on 1 June 2016.
With regard to Ofwat's revenue correction mechanism, relating to
the 2014/15 financial year, we have cGBP9 million to return to
customers. As we have previously indicated, we propose to return
the GBP9.5 million to customers through revenue reductions of cGBP3
million in 2017/18, cGBP3 million in 2018/19 and cGBP3 million in
2019/20, to help aid a smoother bill profile.
Separately, consistent with Ofwat's annual wholesale revenue
forecasting incentive mechanism (WRFIM), we will also be reducing
2017/18 revenue by GBP7 million and 2018/19 revenue by GBP4
million. This is due to actual volumes being higher than our
assumptions in both 2015/16 and 2016/17 respectively.
Operating profit
Underlying operating profit at GBP344 million was GBP32 million
higher than the first half of last year. This reflects our allowed
regulatory revenue changes, a small reduction in infrastructure
renewals expenditure, and a small reduction in the remaining cost
base, partly offset by a small increase in depreciation and the
accounting impact of our Water Plus JV. The JV completed on 1 June
2016 and, from that date, its contribution is no longer included
within operating profit and is, instead, included within the share
of profits of joint ventures line in the income statement.
Reported operating profit increased by GBP38 million, to GBP342
million, reflecting the increase in underlying operating profit,
along with a reduction in adjusted items. Adjusted items for the
first half of 2017/18 included GBP1 million of restructuring costs
and GBP1 million of costs relating to market reform. Adjusted items
in the first half of last year amounted to GBP9 million, including
GBP5 million of restructuring costs and GBP3 million of market
reform costs.
Investment income and finance expense
The underlying net finance expense of GBP155 million for the
first half of 2017/18 was GBP29 million higher than the first half
of last year, mainly due to the impact of higher RPI inflation on
the group's index-linked debt, particularly on the portion of
index-linked debt with a three-month lag.
Interest on non index-linked debt of GBP48 million was GBP7
million lower than the first half of last year, due to the lower
rates locked in on our interest rate swaps. The indexation of the
principal on our index-linked debt amounted to a net charge in the
income statement of GBP83 million, compared with a net charge of
GBP45 million in the first half of last year. As at 30 September
2017, the group had approximately GBP3.7 billion of index-linked
debt at an average real rate of 1.3 per cent.
The higher RPI inflation charge compared with last year
contributed to the group's average underlying interest rate of 4.8
per cent being higher than the rate of 4.1 per cent for the six
months ended 30 September 2016. The average underlying interest
rate represents the underlying net finance expense divided by
average debt.
Reported net finance expense of GBP105 million was lower than
the GBP168 million expense in the first half of 2016/17. This GBP63
million decrease principally reflects a change in the fair value
gains and losses on debt and derivative instruments, from a GBP55
million loss in the first half of 2016/17 to a GBP35 million gain
in the first half of 2017/18.
The fair value gain in the first half of 2017/18 is due to the
increase in market interest rates, impacting our derivatives
hedging interest rates, partially offset by a loss on our fair
value option debt and associated swaps. Losses in the first half of
the prior year were largely due to a decrease in market interest
rates, impacting our derivatives hedging interest rates. The group
uses swaps to fix interest rates on a substantial proportion of its
debt to better match the financing cash flows allowed by Ofwat at
each price review. The group has fixed the substantial majority of
its non index-linked debt for the 2015-20 regulatory period.
Profit before tax
Underlying profit before tax was GBP194 million, GBP5 million
higher than the first half of last year, as the GBP32 million
increase in underlying operating profit, alongside a GBP3 million
increase in profits from joint ventures, was largely offset by the
GBP29 million increase in underlying net finance expense. This
underlying measure reflects the adjusted items, as outlined in the
operating profit section above, and other items such as fair value
movements in respect of debt and derivative instruments, as
outlined in the underlying profit measures tables.
Reported profit before tax significantly increased by GBP84
million to GBP242 million, due in most part to the fair value
movements, as outlined in the underlying profit measures tables,
and the increase in reported operating profit, partly offset by a
GBP21 million profit in the first half of 2016/17 on disposal of
the non-household retail business.
Tax
In addition to corporation tax, the group pays and bears further
annual economic contributions, typically of around GBP140 million
per annum, in the form of business rates, employer's national
insurance contributions, environmental taxes, and other regulatory
service fees such as water abstraction charges.
In the first half of 2017/18, we paid corporation tax of GBP20
million, which represents an effective cash tax rate on underlying
profits of 10 per cent, which is 9 per cent lower than the headline
rate of corporation tax of 19 per cent. Consistent with prior
years, the key reconciling item to the headline rate was allowable
tax deductions on capital investment. We have expressed the
effective cash tax rate in terms of underlying profits as this
measure excludes fair value movements on debt and derivative
instruments and thereby enables a medium-term cash tax rate
forecast. We would expect the average cash tax rate on underlying
profits through to the end of the current regulatory period in
March 2020 to be around 10-15 per cent. The key risk to sustaining
this rate is any unexpected changes in tax legislation or practice
and, as necessary, we would actively engage with the relevant
authorities in order to manage this risk.
The current tax charge was GBP24 million in the first half of
2017/18, compared with GBP7 million in the corresponding period
last year. There was a current tax charge of GBP2 million in the
first half of 2017/18, compared with a current tax credit of GBP14
million in the first half of 2016/17, following agreement of prior
years' tax matters; in addition to UK tax, the prior year figure
also included the release of a provision in relation to agreed
historic overseas tax matters.
In the first half of 2017/18, the group recognised a deferred
tax charge of GBP21 million, compared with a charge of GBP6 million
in the first half of the previous year, the main difference being
in relation to the net fair value movements on debt and derivative
instruments. In addition, in the first half of 2016/17 the group
recognised a deferred tax credit of GBP57 million relating to the
enacted reduction in the headline rate of corporation tax to 17 per
cent from 1 April 2020.
The total tax charge for the first half of 2017/18 was GBP45
million, compared to a total tax credit of GBP44 million for the
first half of last year. For both periods, the total underlying tax
effective rate was in line with the headline rate (currently at 19
per cent) and, subject to any legislative or tax practice changes,
we would expect this to continue for the medium-term.
Profit after tax
Underlying profit after tax of GBP160 million was GBP9 million
higher than the first half of last year, principally reflecting the
GBP5 million increase in underlying profit before tax and the
reduction in the headline rate of corporation tax to 19 per cent.
Reported profit after tax at GBP197 million was lower than the
GBP203 million in the first half of the previous year, as the GBP84
million increase in the reported profit before tax was more than
offset by the GBP89 million higher tax charge, largely associated
with the enactment of the reduction in corporation tax giving rise
to a GBP57 million deferred tax credit in the first half of last
year.
Earnings per share
Underlying earnings per share increased from 22.2 pence to 23.5
pence. This underlying measure is derived from underlying profit
after tax. Basic earnings per share decreased from 29.7 pence to
28.9 pence, for the same reasons that caused the reduction in
reported profit after tax.
Dividend per share
The Board has proposed an interim dividend of 13.24 pence per
ordinary share in respect of the six months ended 30 September
2017. This is an increase of 2.2 per cent compared with the interim
dividend relating to last year, in line with the group's dividend
policy of targeting a growth rate of at least RPI inflation each
year through to 2020. The inflationary increase of 2.2 per cent is
based on the RPI element included within the allowed regulated
revenue increase for the 2017/18 financial year (i.e. the movement
in RPI between November 2015 and November 2016).
The interim dividend is expected to be paid on 1 February 2018
to shareholders on the register at the close of business on 22
December 2017. The ex-dividend date is 21 December 2017.
In light of the Financial Reporting Lab's report entitled
'Disclosure of dividends - policy and practice', which provided
best practice guidance, we have enhanced our dividend policy
disclosure as outlined below.
-- Dividend policy - a growth rate target of at least RPI inflation each year through to 2020.
-- Policy period - the dividend policy aligns with the five-year
regulatory period which runs from 1 April 2015 to 31 March
2020.
-- Policy approval process - the dividend policy was considered
and approved by the United Utilities Group Board in January 2015,
as part of a comprehensive review of the 2015-20 regulatory final
determination in the context of a detailed business planning
process, with due regard for the group's financial metrics, credit
ratings and long-term financial stability, and is reviewed at least
annually.
-- Distributable reserves - as at 30 September 2017, the company
had distributable reserves of GBP3,172 million. The total external
dividends relating to the 2016/17 financial year amounted to GBP265
million. The company's distributable reserves support almost 12
times this annual dividend.
-- Financing headroom - supporting the group's cash flow, United
Utilities adopts a funding/liquidity headroom policy of having
available resources to cover at least the next 15 months of
projected cash outflows on a rolling basis.
-- Cash flows from subsidiaries - the directors consider that
the group's principal operating subsidiary, United Utilities Water
Limited, has sufficient resources to pay dividends to United
Utilities Group PLC for the duration of the current dividend policy
period to support the external payment of dividends to
shareholders.
-- Financial stability - the water industry has invested
significant capital since privatisation in 1989 to improve services
for customers and provide environmental benefits, a large part of
which is driven by legislation. Water companies have typically
raised borrowings to help fund the capital investment programme.
Part of total expenditure is additive to the regulatory capital
value, or RCV, on which water companies earn a return allowed by
the economic regulator, Ofwat. RCV gearing is useful in assessing a
company's financial stability in the UK water industry, and is one
of the key credit metrics that the credit rating agencies focus on.
United Utilities has had a relatively stable RCV gearing level over
the last five years, always comfortably within its target range of
55 per cent to 65 per cent, supporting a solid A3 credit rating for
UUW with Moody's. RCV gearing at 30 September 2017 was 61 per cent
and the movement in net debt is outlined in the cash flow section
below.
-- Dividend sustainability - in approving the policy, the Board
is satisfied that across the current regulatory period the
projected dividend is adequately covered by underlying profit after
tax. Separately, the executive directors' long-term remuneration
plan is directly linked to a measure of sustainable dividends.
Whilst specific targets are not disclosed in advance, for
commercial sensitivity reasons, there is a major focus on the
creation of strong earnings that ensure the sustainability of
dividends.
-- Viability statement - the dividend policy is underpinned by
the group's long-term viability statement (contained within the
group's annual report and financial statements). Assurance
supporting this statement is provided by the review of: the group's
key financial measures; the key credit financial metrics; the
group's liquidity position; the contingent liabilities of the
group; and the key risks of the group together with the associated
mitigating actions.
-- Annual dividend approval process - the group places
significant emphasis on strong corporate governance, and before
declaring interim and proposing final dividends the United
Utilities Group Board undertakes a comprehensive assessment of the
group's key financial metrics.
-- Policy sustainability
2015-20
the policy is considered by the Board to be robust
to reasonable changes in assumptions such as
inflation, opex, capex and interest rates;
extreme economic, regulatory, political or operational
events, which could lead to a significant deterioration
in the group's financial metrics during the policy
period, may present risks to policy sustainability;
2020-25
a dividend policy for the 2020-25 period will
be formulated after Ofwat announces the outcome
of the regulatory price review (currently expected
in December 2019).
Cash flow
Net cash generated from continuing operating activities for the
six months ended 30 September 2017 was GBP412 million, compared
with GBP420 million in the first half of last year. The group's net
capital expenditure was GBP329 million, principally in the
regulated water and wastewater investment programmes. This excludes
infrastructure renewals expenditure which is treated as an
operating cost under IFRS. Cash flow capex differs from regulatory
capex, since regulatory capex is based on the capital work that is
done in the period, rather than actual cash spent.
Net debt including derivatives at 30 September 2017 was GBP6,709
million, compared with GBP6,579 million at 31 March 2017. This
increase reflects regulatory capital expenditure, payments of
dividends, interest and tax, the inflationary uplift on
index-linked debt, and loans to joint ventures, partly offset by
operating cash flows.
Fair value of debt
The group's gross borrowings at 30 September 2017 had a carrying
value of GBP7,428 million. The fair value of these borrowings was
GBP8,622 million. This GBP1,194 million difference principally
reflects the significant fall in real interest rates, compared with
the rates at the time we raised a portion of the group's
index-linked debt.
Debt financing and interest rate management
Gearing, measured as group net debt divided by UUW's shadow
(adjusted for actual spend) regulatory capital value, was 61 per
cent at 30 September 2017. This is the same gearing as at 31 March
2017 and remains comfortably within our target range of 55 per cent
to 65 per cent.
UUW has long-term credit ratings of A3/A- and United Utilities
PLC's (UU PLC) debt securities are rated Baa1/BBB from Moody's
Investors Service (Moody's) and Standard & Poor's (S&P)
Ratings Services respectively. Both Moody's and S&P have the
group's ratings on a stable outlook.
The group has access to the international debt capital markets
through its EUR7 billion euro medium-term note (EMTN) programme.
The EMTN programme does not represent a funding commitment, with
funding dependent on the successful issue of the notes.
Cash and short-term deposits at 30 September 2017 amounted to
GBP88 million. Over 2015-20 we have financing requirements
totalling around GBP2.5 billion to cover refinancing and
incremental debt, supporting our five-year investment programme,
and we have now raised over GBP1.8 billion of this requirement.
In April 2016 UUW signed a GBP250 million index-linked term loan
facility with the EIB to support the delivery of UUW's AMP6
investment programme. As at 30 September 2017 GBP175 million had
been drawn down, and the remaining GBP75 million was drawn down in
October 2017. This is an amortising facility with an average loan
life of 10 years and a final maturity of 18 years from draw
down.
In October 2017 UUW's financing subsidiary, United Utilities
Water Finance PLC (UUWF), raised cGBP104 million of term funding
via the issue of EUR 28 million and HKD 830 million private
placement notes off our EMTN programme, with 15-year and 10-year
maturities respectively.
In response to Ofwat's decision to transition away from RPI
inflation linkage, we have also increased the CPI-linkage in our
debt portfolio further with an innovative switch, replacing some
existing long-dated RPI-linked notes with two long-dated CPI-linked
notes. This brings our total CPI-linked debt issuance to GBP165
million, cementing UU's place as leader in this fledgling market
following issuing the first CPI-linked notes by a UK utility last
year.
In addition, since March 2017, the group has renewed GBP50
million of committed bank facilities out to 2022 and extended a
further GBP100 million also out to 2022. The group has headroom to
cover its financing needs into 2019.
Long-term borrowings are structured or hedged to match assets
and earnings, which are largely in sterling, indexed to UK retail
price inflation, and subject to regulatory price reviews every five
years.
Long-term sterling inflation index-linked debt provides a
natural hedge to assets and earnings. At 30 September 2017,
approximately 55 per cent of the group's net debt was in
index-linked form, representing around 34 per cent of UUW's RCV,
with an average real interest rate of 1.3 per cent. The long-term
nature of this funding also provides a good match to the group's
long-life infrastructure assets and is a key contributor to the
group's average term debt maturity profile, which is around 20
years.
Where nominal debt is raised in a currency other than sterling
and/or with a fixed interest rate, the debt is generally swapped to
create a floating rate sterling liability for the term of the debt.
To manage exposure to medium-term interest rates, the group fixes
underlying interest costs on nominal debt out to ten years on a
reducing balance basis. This is supplemented by fixing
substantially all remaining floating rate exposure across the
forthcoming regulatory period around the time of the price control
determination.
In line with this, the group has fixed interest costs for
substantially all of its floating rate exposure over the 2015-20
period, locking in an average annual interest rate of around 3.3
per cent (inclusive of credit spreads).
Liquidity
Short-term liquidity requirements are met from the group's
normal operating cash flow and its short-term bank deposits, and
supported by committed but undrawn credit facilities. The group's
EUR7 billion EMTN programme provides further support.
Available headroom at 30 September 2017 was GBP331 million,
consisting of cash and committed funding.
United Utilities believes that it operates a prudent approach to
managing banking counterparty risk. Counterparty risk, in relation
to both cash deposits and derivatives, is controlled through the
use of counterparty credit limits. United Utilities' cash is held
in the form of short-term money market deposits with prime
commercial banks.
United Utilities operates a bilateral, rather than a syndicated,
approach to its core relationship banking facilities. This approach
spreads maturities more evenly over a longer time period, thereby
reducing refinancing risk and providing the benefit of several
renewal points rather than a large single refinancing
requirement.
Pensions
As at 30 September 2017, the group had an IAS 19 net pension
surplus of GBP220 million, compared with a net pension surplus of
GBP248 million at 31 March 2017. This GBP28 million reduction
mainly reflects the impact of a decrease in credit spreads over the
period. In contrast, the scheme specific funding basis does not
suffer from volatility due to inflation and credit spread
movements, as it uses a fixed inflation assumption via a blend of
the inflation market hedged rate and the inflation funding
mechanism, along with a prudent, fixed credit spread assumption.
Therefore, the recent inflation and credit spread movements have
not had a material impact on the deficit calculated on a scheme
specific funding basis or the level of deficit repair
contributions.
Further detail on pensions is provided in note 10 ('Retirement
benefit surplus') of these condensed consolidated financial
statements.
Underlying profit
The underlying profit measures in the following table represent
alternative performance measures (APMs) as defined by the European
Securities and Markets Authority (ESMA). These measures are linked
to the group's financial performance as reported under
International Financial Reporting Standards (IFRSs) as adopted by
the European Union in the group's consolidated income statement. As
such, they represent non-GAAP measures.
These APMs have been presented in order to provide a more
representative view of business performance. The group determines
adjusted items in the calculation of its underlying measures
against a framework which considers significance by reference to
profit before tax, in addition to other qualitative factors such as
whether the item is deemed to be within the normal course of
business, its assessed frequency of reoccurrence and its volatility
which is either outside the control of management and/or not
representative of current year performance.
Adjusted item Rationale
---------------------- --------------------------------------------------
Flooding incidents Two significant flooding incidents
in the year ended 31 March 2016 caused
extensive damage to localised parts
of our infrastructure, resulting in
significant levels of remedial operating
expenditure and a large claim under
the group's insurance cover. Management's
view is that these were significant
and infrequent events and, as such,
were not part of the normal course
of business.
---------------------- --------------------------------------------------
Non-household The group has incurred significant
retail market costs since the year ended March 2015
reform in preparation for the non-household
retail market opening to competition
in April 2017. This represents a one-off
event and as such, is not considered
part of the normal course of business.
---------------------- --------------------------------------------------
Restructuring The group has incurred restructuring
costs costs in the past in relation to a
number of discrete events which can
cause volatility in the reported results.
Management adjusts internally for these
costs to provide an underlying view
of performance which it views as being
more representative of the normal course
of business and more comparable period
to period.
---------------------- --------------------------------------------------
Net fair value Fair value movements on debt and derivatives
losses on debt can be both very significant and volatile
and derivative from one period to the next. These
instruments movements are determined by macro-economic
factors which are outside the control
of management and these instruments
are purely held for funding and hedging
purposes (not for trading purposes).
Taking these factors into account,
management believe it is useful to
adjust for this to provide a more representative
view of performance.
---------------------- --------------------------------------------------
Interest on swaps Net fair value losses on debt and derivative
and debt under instruments includes interest on swaps
fair value option and debt under fair value option. In
adjusting for the former, it is appropriate
to add back interest on swaps and debt
under fair value option to provide
a view of the group's costs of debt
which is better aligned to the return
on capital it earns through revenue.
---------------------- --------------------------------------------------
Net pension interest This item can be very volatile from
(income)/ expense one period to the next and it is a
direct function of the extent to which
the pension scheme is in an accounting
deficit or surplus position. Management
believe it is useful to adjust for
this to provide a more representative
view of performance which is better
aligned to the return on capital it
earns through revenue.
---------------------- --------------------------------------------------
Capitalised borrowing The accounting standards allow for
costs the capitalisation of borrowing costs
in the cost of qualifying assets. Management
believe it is appropriate to adjust
for these significant costs to provide
a representative cost of borrowings
and current year performance which
is better aligned to the return on
capital it earns through revenue.
---------------------- --------------------------------------------------
Profit on disposal This relates to the disposal of the
of business group's non-household retail business
during the year ended 31 March 2017
which represents a significant one-off
event and, as such, is not considered
part of the normal course of business.
---------------------- --------------------------------------------------
Deferred tax The deferred tax impact from changes
credit-change to the corporation tax rate announced
in tax rate by HMRC represent both significant
and volatile impacts which are outside
the control of management. Management
adjust for this to provide a more representative
view of current year performance.
---------------------- --------------------------------------------------
Agreement of The agreement of prior years' current
prior years' and deferred tax matters can be significant,
current and deferred volatile and often related to final
tax matters settlement with tax authorities of
numerous prior year periods. Management
adjust for this to provide a more representative
view of the tax charge/credit in relation
to current year performance.
---------------------- --------------------------------------------------
Tax in respect Management adjust for the tax impacts
of adjustments of the above adjusted items to provide
to underlying a more representative view of current
profit before year performance.
tax
---------------------- --------------------------------------------------
Operating profit
Six months Six months
ended ended
30 September 30 September
2017 2016
GBPm GBPm
Operating profit per published
results 341.8 303.6
Flooding incidents in 2015 (net
of insurance proceeds recognised) (0.1) 0.9
Non-household retail market reform 1.0 3.4
Restructuring costs 1.3 4.6
Underlying operating profit 344.0 312.5
--------------- ---------------
Net finance expense
GBPm GBPm
Finance expense (109.8) (174.6)
Investment income 5.2 6.6
--------------- ---------------
Net finance expense per published
results (104.6) (168.0)
Adjustments:
Net fair value losses/(gains)
on debt and derivative instruments (34.5) 54.8
Interest on swaps and debt under
fair value option 8.8 8.5
Net pension interest income (3.3) (4.8)
Capitalised borrowing costs (21.2) (15.9)
Underlying net finance expense (154.8) (125.4)
---------------
Profit before tax
GBPm GBPm
Profit on disposal of non-household
retail business - 20.9
Share of profits of joint ventures 5.1 1.9
Profit before tax per published
results 242.3 158.4
Adjustments:
Flooding incidents in Dec 15
(net of insurance proceeds recognised) (0.1) 0.9
Non-household retail market reform 1.0 3.4
Restructuring costs 1.3 4.6
Profit on disposal of non-household
retail business - (20.9)
Net fair value losses/(gains)
on debt and derivative instruments (34.5) 54.8
Interest on swaps and debt under
fair value option 8.8 8.5
Net pension interest income (3.3) (4.8)
Capitalised borrowing costs (21.2) (15.9)
Underlying profit before tax 194.3 189.0
--------------- ---------------
Profit after tax
GBPm GBPm
Underlying profit before tax 194.3 189.0
Reported tax credit/(charge) (44.9) 44.2
Deferred tax credit - change
in tax rate - (57.1)
Agreement of prior years' current
and deferred tax matters 1.6 (14.3)
Tax in respect of adjustments
to underlying profit before tax 9.1 (10.3)
---------------
Underlying profit after tax 160.1 151.5
--------------- ---------------
Earnings per share
GBPm GBPm
Profit after tax per published
results (a) 197.4 202.6
Underlying profit after tax (b) 160.1 151.5
Weighted average number of shares
in issue, in millions (c) 681.9m 681.9m
Earnings per share per published
results, in pence (a/c) 28.9p 29.7p
Underlying earnings per share,
in pence (b/c) 23.5p 22.2p
PRINCIPAL RISKS AND UNCERTAINTIES
As a business our strategy is to deliver value by providing the
best service to customers, at the lowest sustainable cost and in a
responsible manner. In doing so, the group is exposed to a range of
internal and external risks of varying types which can impact upon
these strategic themes. We therefore maintain a risk management
framework to continually identify, assess and manage risks.
All parts of the group use the same risk management framework,
ensuring consistency of approach. The framework includes: an
embedded governance and reporting process; an assessment and
management process which is aligned to ISO 31000: 2009; and a
central database, tools and guidance to further support
consistency, embedment and continuous improvement.
Leaders within the group's individual business areas and
functions are responsible for the assessment and management of
risk, including the identification and escalation of new/emerging
circumstances, and monitoring and reporting on risk and control
effectiveness. All event types (strategic, financial, operational,
compliance and hazard) are considered in the context of their
potential impact on the delivery of our business objectives. The
assessment is based on the likelihood of an event occurring and the
financial and reputational impact should the event occur. The
assessment takes into account a gross position (without controls or
assuming that all controls fail), a current position (benefiting
from existing controls), and a targeted position where further
mitigation is required to meet objectives or obligations.
The resulting risk profile is reported to the Group Board twice
a year. The report focuses on the ten principal risks to ensure
that the Group Board review the key risks that "could" threaten the
business plan, future performance, solvency and liquidity of the
company, and ultimately affect the interest and investment of
stakeholders (including shareholders). These principal risks were
set out on pages 48-49 of the 2017 United Utilities Group PLC
Annual Report and Financial Statements and are: (1) Political and
regulatory; (2) Compliance; (3) Water service; (4) Wastewater
service; (5) Retail and commercial; (6) Financial; (7) Programme
delivery; (8) Resource; (9) Security; and (10) Health, safety and
environmental.
In addition to consideration of the potential impact and
mitigation of each principal risk, the biannual report to the Group
Board highlights individual risks that underpin each one, enabling
the Group Board to understand the nature of more specific events in
order of exposure (likelihood x impact). From this initial
overview, the report illustrates the ten highest ranked risks
across the whole profile, the top ten operational risks (both based
on likelihood x impact), a further five risks (Group and
operational) due to the potential severity of their impact, and
risks and issues that fall outside these categories but are
included due to their potential reputational impact or new/emerging
circumstances.
This approach is in line with the principles of the UK Corporate
Governance Code and involves reporting to the Group Board for each
full and half year statutory accounting period, allowing the Board
to:
-- determine the nature and extent of the principal risks it is
willing to take in achieving its strategic objectives;
-- continuously monitor and oversee the management of those
risks, and provide challenge to executive management where
appropriate;
-- express an informed opinion on the long term viability of the company; and
-- monitor risk management and internal control systems and review their effectiveness.
Our risk profile currently consists of over 200 event-based
risks. By their nature, these will include all combinations of high
to low likelihood and high to low impact. Heat maps are typically
used in various managerial and group reports, either as a method to
collectively evaluate the extent of multiple risks within a certain
profile, or to evaluate the effectiveness of mitigation for a
single risk relative to the initial gross position.
Key features and developments
Political and regulatory risk remains a key features of the
Group's risk profile. This includes increased pressure at the next
price review regarding increased efficiency, reduced customer bills
and the introduction of competition to various elements of our
business, and the potential renationalisation of the industry.
Another key feature is the nature and extent of operational risk
and the supply of essential services. This includes the reliable
supply of clean safe drinking water, the removal and treatment of
wastewater in a manner that does not cause pollution or the
flooding of properties, and the customer service provision that
adds value to household customers and treats non-household
retailers on a level playing field. In addition to the day-to-day
operational focus, greater emphasis is being placed on the long
term resilience and sustainability of assets.
Associated with the above is the risk posed by the social
environment and natural hazards that constantly place greater
strain on the system. Population growth and climate change are
recognised as the sector's biggest challenges, with significant and
permanent implications on the water cycle and the long-term
sustainability of the water and wastewater service including: water
abstraction; supply and treatment capability; drainage and sewer
capacity; and wastewater treatment and discharge efficiency and
effectiveness.
Material Litigation
There continue to be two ongoing pieces of material litigation
worthy of note, as outlined on page 47 of the 2017 United Utilities
Group PLC Annual Report and Financial Statements. However, based on
the facts currently known to us and the provisions in our statement
of financial position, our directors remain of the opinion that the
likelihood of these having a material adverse impact on the group's
financial position is remote.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This financial report 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 differ materially from those
anticipated. The forward-looking statements reflect knowledge and
information available at the date of preparation of this financial
report and the company undertakes no obligation to update these
forward-looking statements. Nothing in this financial report should
be construed as a profit forecast.
Certain regulatory performance data contained in this financial
report is subject to regulatory audit.
This announcement contains inside information, disclosed in
accordance with the Market Abuse Regulation which came into effect
on 3 July 2016 and for UK Regulatory purposes the person
responsible for making the announcement is Simon Gardiner, Company
Secretary.
LEI 2138002IEYQAOC88ZJ59
Classification - Half Year Results
Consolidated income statement
Six months ended Six months Year ended
30 September ended 31 March
2017 30 September 2017
2016
GBPm GBPm GBPm
Revenue 876.0 853.0 1,704.0
------------------- --------------- ------------
Employee benefits expense (note 3) (74.4) (78.2) (151.9)
Other operating costs (note 4) (205.2) (222.3) (435.1)
Other income 1.7 1.6 4.2
Depreciation and amortisation expense (185.3) (178.0) (364.9)
Infrastructure renewals expenditure (71.0) (72.5) (150.8)
------------------- --------------- ------------
Total operating expenses (534.2) (549.4) (1,098.5)
------------------- --------------- ------------
Operating profit 341.8 303.6 605.5
Investment income (note 5) 5.2 6.6 13.7
Finance expense (note 6) (109.8) (174.6) (202.7)
------------------- --------------- ------------
Investment income and finance expense (104.6) (168.0) (189.0)
Profit on disposal of business - 20.9 22.1
Share of profits of joint ventures 5.1 1.9 3.8
Profit before tax 242.3 158.4 442.4
Current tax charge (24.4) (6.5) (31.5)
Deferred tax charge (20.5) (6.4) (35.2)
Deferred tax credit - change in tax rate - 57.1 58.2
Tax (note 7) (44.9) 44.2 (8.5)
Profit after tax 197.4 202.6 433.9
------------------- --------------- ------------
All of the results shown above relate
to continuing operations.
Earnings per share (note 8)
Basic 28.9p 29.7p 63.6p
Diluted 28.9p 29.7p 63.5p
Dividend per ordinary share (note 9) 13.24p 12.95p 38.87p
Consolidated statement of comprehensive income
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016
GBPm GBPm GBPm
Profit after tax 197.4 202.6 433.9
Other comprehensive income
Remeasurement losses on defined
benefit pension
schemes (note 10) (52.4) (83.8) (76.7)
Tax on items taken directly
to equity (note 7) 9.4 18.0 17.3
Foreign exchange adjustments 0.7 4.1 3.7
--------------- ---------------
Total comprehensive income 155.1 140.9 378.2
--------------- --------------- ------------
Consolidated statement of financial position
30 September 30 September 31 March
2017 2016 2017
GBPm GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 10,589.0 10,196.2 10,405.5
Intangible assets 192.3 179.8 187.7
Interests in joint ventures 78.3 70.2 75.2
Investments 7.8 9.1 9.0
Trade and other receivables 131.6 51.7 112.3
Retirement benefit surplus
(note 10) 219.8 214.8 247.5
Derivative financial instruments 418.3 937.6 731.0
--------------- --------------- -----------
11,637.1 11,659.4 11,768.2
--------------- --------------- -----------
Current assets
Inventories 19.6 29.2 22.4
Trade and other receivables 284.6 337.2 303.9
Current tax asset 7.6 7.8 7.1
Cash and short-term deposits 87.6 237.4 247.8
Derivative financial instruments 331.4 0.3 76.7
730.8 611.9 657.9
--------------- --------------- -----------
Total assets 12,367.9 12,271.3 12,426.1
--------------- --------------- -----------
LIABILITIES
Non-current liabilities
Trade and other payables (611.5) (567.3) (589.3)
Borrowings (note 11) (6,778.2) (7,014.5) (7,058.4)
Deferred tax liabilities (1,047.3) (998.0) (1,031.5)
Derivative financial instruments (111.0) (328.3) (235.5)
-----------
(8,548.0) (8,908.1) (8,914.7)
--------------- --------------- -----------
Current liabilities
Trade and other payables (342.0) (365.2) (323.0)
Borrowings (note 11) (649.6) (302.4) (326.1)
Provisions (22.8) (18.6) (26.5)
Derivative financial instruments (7.1) (6.7) (14.2)
(1,021.5) (692.9) (689.8)
--------------- --------------- -----------
Total liabilities (9,569.5) (9,601.0) (9,604.5)
--------------- --------------- -----------
Total net assets 2,798.4 2,670.3 2,821.6
--------------- --------------- -----------
EQUITY
Share capital 499.8 499.8 499.8
Share premium account 2.9 2.9 2.9
Cumulative exchange reserve (1.3) (1.6) (2.0)
Merger reserve 329.7 329.7 329.7
Retained earnings 1,967.3 1,839.5 1,991.2
Shareholders' equity 2,798.4 2,670.3 2,821.6
--------------- --------------- -----------
Consolidated statement of changes in equity
Six months ended 30 September 2017
Share Share Cumulative Merger Retained Total
capital premium exchange reserve earnings GBPm
GBPm account reserve GBPm GBPm
GBPm GBPm
At 1 April 2017 499.8 2.9 (2.0) 329.7 1,991.2 2,821.6
Profit after tax - - - - 197.4 197.4
Other comprehensive
income
Remeasurement losses
on defined benefit
pension schemes
(note 10) - - - - (52.4) (52.4)
Tax on items taken
directly to equity
(note 7) - - - - 9.4 9.4
Foreign exchange
adjustments - - 0.7 - - 0.7
Total comprehensive
income - - 0.7 - 154.4 155.1
----------------------------- --------- --------- ----------- --------- ---------- --------
Dividends (note
9) - - - - (176.7) (176.7)
Equity-settled share-based
payments - - - - 1.2 1.2
Exercise of share
options - purchase
of shares - - - - (2.8) (2.8)
----------------------------- --------- --------- ----------- --------- ---------- --------
At 30 September
2017 499.8 2.9 (1.3) 329.7 1,967.3 2,798.4
----------------------------- --------- --------- ----------- --------- ---------- --------
Six months ended 30 September 2016
Share Share Cumulative Merger Retained Total
capital premium exchange reserve earnings GBPm
GBPm account reserve GBPm GBPm
GBPm GBPm
At 1 April 2016 499.8 2.9 (5.7) 329.7 1,878.8 2,705.5
Profit after tax - - - - 202.6 202.6
Other comprehensive
income
Remeasurement losses
on defined benefit
pension schemes
(note 10) - - - - (83.8) (83.8)
Tax on items taken
directly to equity
(note 7) - - - - 18.0 18.0
Foreign exchange
adjustments - - 4.1 - - 4.1
Total comprehensive
income - - 4.1 - 136.8 140.9
----------------------------- --------- --------- ----------- --------- ---------- --------
Dividends (note
9) - - - - (174.8) (174.8)
Equity-settled share-based
payments - - - - 1.1 1.1
Exercise of share
options - purchase
of shares - - - - (2.4) (2.4)
----------------------------- --------- --------- ----------- --------- ---------- --------
At 30 September
2016 499.8 2.9 (1.6) 329.7 1,839.5 2,670.3
----------------------------- --------- --------- ----------- --------- ---------- --------
Year ended 31 March 2017
Share Share Cumulative Merger Retained Total
capital premium exchange reserve earnings GBPm
GBPm account reserve GBPm GBPm
GBPm GBPm
At 1 April 2016 499.8 2.9 (5.7) 329.7 1,878.8 2,705.5
Profit after tax - - - - 433.9 433.9
Other comprehensive
income/(expense)
Remeasurement losses
on defined benefit
pension schemes
(note 10) - - - - (76.7) (76.7)
Tax on items taken
directly to equity
(note 7) - - - - 17.3 17.3
Foreign exchange
adjustments - - 3.7 - - 3.7
Total comprehensive
income - - 3.7 - 374.5 378.2
----------------------------- --------- --------- ----------- --------- ---------- --------
Dividends (note
9) - - - - (263.1) (263.1)
Equity-settled share-based
payments - - - - 3.4 3.4
Exercise of share
options - purchase
of shares - - - - (2.4) (2.4)
----------------------------- --------- --------- ----------- --------- ---------- --------
At 31 March 2017 499.8 2.9 (2.0) 329.7 1,991.2 2,821.6
----------------------------- --------- --------- ----------- --------- ---------- --------
Consolidated statement of cash flows
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016
GBPm GBPm GBPm
Operating activities
Cash generated from operations
(note 14) 499.4 517.4 1,018.1
Interest paid (71.1) (77.5) (161.0)
Interest received and similar
income 3.5 1.7 4.9
Tax paid (20.2) (21.9) (42.4)
Tax received - - 1.2
Net cash generated from
operating activities 411.6 419.7 820.8
-------------- --------------
Investing activities
Purchase of property, plant
and equipment (323.5) (315.0) (672.4)
Purchase of intangible assets (15.7) (29.8) (52.4)
Proceeds from sale of property,
plant and equipment 0.2 0.8 4.1
Grants and contributions
received 10.5 14.3 29.0
Loans to joint ventures (12.6) (46.0) (109.0)
Investment in joint ventures - (10.0) (13.5)
Proceeds from disposal of
non-household retail business 6.5 4.1 3.3
Dividends received from
joint ventures 3.4 5.4 5.4
Proceeds from investments 0.6 0.4 0.9
--------------
Net cash used in investing
activities (330.6) (375.8) (804.6)
--------------
Financing activities
Proceeds from borrowings 129.1 505.4 736.2
Repayment of borrowings (178.0) (341.9) (448.7)
Dividends paid to equity
holders of the company (note
9) (176.7) (174.8) (263.1)
Exercise of share options
- purchase of shares (2.8) (2.4) (2.4)
Net cash (used in)/generated
from financing activities (228.4) (13.7) 22.0
-------------- -------------- ------------
Net (decrease)/increase
in cash and cash equivalents (147.4) 30.2 38.2
Cash and cash equivalents
at beginning of the period 220.3 182.1 182.1
-------------- -------------- ------------
Cash and cash equivalents
at end of the period 72.9 212.3 220.3
-------------- -------------- ------------
NOTES
1. Basis of preparation and accounting policies
The condensed consolidated financial statements for the six
months ended 30 September 2017 have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and International Accounting Standard 34 'Interim
Financial Reporting' (IAS 34).
The accounting policies, presentation and methods of computation
are consistent with those applied in the audited financial
statements of United Utilities Group PLC for the year ended 31
March 2017 and are prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union (EU).
No new accounting standards, interpretations or amendments have
been adopted during the six months ended 30 September 2017.
As at the date of approval of the condensed financial statements
the relevant major accounting standards that were in issue but not
yet effective were IFRS 9 'Financial Instruments', IFRS 15 'Revenue
from Contracts with Customers', and IFRS 16 'Leases'. The directors
anticipate that the group will adopt these standards on their
effective date. Further detail of the expected impact of adopting
these standards can be found in the group's annual report and
financial statements for the year ended 31 March 2017. Detailed
transition work in relation to each of these new standards remains
ongoing.
The condensed consolidated financial statements do not include
all of the information and disclosures required for full annual
financial statements, do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006, and should be
read in conjunction with the group's annual report and financial
statements for the year ended 31 March 2017.
The comparative figures for the year ended 31 March 2017 do not
comprise the group's statutory accounts for that financial year.
Those accounts have been reported upon by the group's auditor and
delivered to the registrar of companies. The report of the auditor
was unqualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report, and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
Going concern
The directors have a reasonable expectation that the group has
adequate resources for a period of at least 12 months from the date
of approval of the condensed financial statements, and have
therefore assessed that the going concern basis of accounting is
appropriate in preparing the condensed financial statements and
that there are no material uncertainties to disclose. This
conclusion is based upon a review of the resources available to the
group, taking account of the group's financial projections together
with available cash and committed borrowing facilities as well as
consideration of the group's capital adequacy, consideration of the
primary legal duty of United Utilities Water Limited's economic
regulator to ensure that water and wastewater companies can finance
their functions, and any material uncertainties. In reaching this
conclusion, the Board has considered the magnitude of potential
impacts resulting from uncertain future events or changes in
conditions, the likelihood of their occurrence, and the likely
effectiveness of mitigating actions that the directors would
consider undertaking.
2. Segmental reporting
The Board of Directors of United Utilities Group PLC (the Board)
is provided with information on a single segment basis for the
purposes of assessing performance and allocating resources. The
Board reviews revenue, underlying operating profit, operating
profit, assets and liabilities, regulatory capital expenditure, and
regulatory capital value gearing at a consolidated level. In light
of this, the group has a single segment for financial reporting
purposes and therefore no further detailed segmental information is
provided in this note.
3. Employee benefits expense
Included within employee benefits expense were GBP1.3 million
(30 September 2016: GBP4.6 million, 31 March 2017: GBP10.1 million)
of restructuring costs.
Employee benefits expense is stated net of GBPnil (30 September
2016: GBP3.1 million, 31 March 2017: GBP4.0 million) costs
recharged under transitional service agreements at nil margin to
Water Plus, a joint venture established between the group and
Severn Trent PLC.
4. Other operating costs
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016 GBPm
GBPm GBPm
Hired and contracted services 47.7 51.0 101.5
Property rates 42.6 47.2 91.6
Materials 33.2 37.4 67.7
Power 31.9 33.2 68.7
Regulatory fees 14.9 17.4 28.6
Charge for bad and doubtful
receivables 14.8 17.7 29.9
Cost of properties disposed 7.7 0.1 8.6
Legal and professional
expenses 2.2 3.6 6.5
Loss on disposal of property,
plant and equipment 2.2 1.9 3.3
Operating leases payable 2.0 2.4 4.4
Third party wholesale charges - 3.0 3.0
Impairment of property,
plant and equipment - - 0.2
Amortisation of deferred
grants and contributions (3.1) (3.1) (6.7)
Compensation from insurers (3.5) (7.6) (12.3)
Other expenses 12.6 18.1 40.1
205.2 222.3 435.1
--------------- --------------- -------------
As a result of two significant flooding incidents caused by
Storms Desmond and Eva in December 2015, there were GBP3.4 million
(30 September 2016: GBP8.5 million, 31 March 2017: GBP13.8 million)
of expenses incurred during the period, comprising GBP2.2 million
(30 September 2016: GBP7.3 million, 31 March 2017: GBP11.1 million)
of operating costs, GBP1.2 million (30 September 2016: GBP0.3
million, 31 March 2017: GBP2.5 million) of infrastructure renewals
expenditure and GBPnil (30 September 2016: GBP0.9 million, 31 March
2017: GBP0.2 million) impairment of property, plant and equipment.
Insurance compensation of GBP3.5 million (30 September 2016: GBP7.6
million, 31 March 2017: GBP12.3 million) relating to the flooding
incidents has been recognised as part of a final settlement of the
insurance claim. The group does not expect there to be any further
recovery of the flooding incident costs under its insurance cover
in the year ending 31 March 2018, though a small level of
additional cost is expected to be incurred in relation to the
incidents as further remedial work is undertaken.
In addition, there were GBP1.0 million (30 September 2016:
GBP3.4 million, 31 March 2017: GBP5.8 million) of market reform
restructuring costs incurred preparing the business for open
competition in the non-household retail market.
Total other operating costs are stated net of GBP0.9 million (30
September 2016: GBP6.7 million, 31 March 2017: GBP14.5 million) of
costs recharged to Water Plus at nil margin under transitional
service agreements.
5. Investment income
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016 GBPm
GBPm GBPm
Interest receivable 1.9 1.8 3.5
Net pension interest income
(note 10) 3.3 4.8 10.2
--------------- --------------- -------------
5.2 6.6 13.7
--------------- --------------- -------------
6. Finance expense
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016 GBPm
GBPm GBPm
Interest payable 144.3 119.8 227.0
Net fair value (gains)/losses
on debt and derivative
instruments (34.5) 54.8 (24.3)
--------------- --------------- -------------
109.8 174.6 202.7
--------------- --------------- -------------
Interest payable is stated net of GBP21.2 million (30 September
2016: GBP15.9 million, 31 March 2017: GBP29.2 million) borrowing
costs capitalised in the cost of qualifying assets within property,
plant and equipment and intangible assets during the period.
Interest payable includes an GBP83.0 million (30 September 2016:
GBP45.4 million, 31 March 2017: GBP80.7 million) non-cash,
inflation uplift charge in relation to the group's index-linked
debt.
Net fair value (gains)/losses on debt and derivative instruments
includes GBP8.8m income (30 September 2016: GBP8.5 million, 31
March 2017: GBP15.4 million) due to net interest on swaps and debt
designated at fair value.
7. Tax
The total effective tax rate for the current period was in line
with the headline rate of 19 per cent. After adjusting for prior
year tax adjustments, non-taxable business disposals, and deferred
tax credits for changes in the headline rate of tax, the total
effective tax rate for prior periods was similarly in line with the
headline rate. The split of the total tax charge between current
and deferred tax was due to ongoing timing differences in relation
to tax deductions on capital investment, pension contributions, and
unrealised gains and losses on treasury derivatives.
The tax adjustments taken to equity primarily relate to
remeasurement movements on the group's defined benefit pension
schemes.
8. Earnings per share
Basic and diluted earnings per share are calculated by dividing
profit after tax by the weighted average number of shares in issue
during the period. The weighted average number of shares in issue
as at 30 September 2017 for the purpose of the basic earnings per
share was 681.9 million (30 September 2016: 681.9 million, 31 March
2017: 681.9 million) and for the diluted earnings per share was
683.0 million (30 September 2016: 682.9 million, 31 March 2017:
683.0 million).
9. Dividends
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016 GBPm
GBPm GBPm
Dividends relating to
the period comprise:
Interim dividend 90.3 88.3 88.3
Final dividend - - 176.7
-------------- -------------- ------------
90.3 88.3 265.0
-------------- -------------- ------------
Dividends deducted from shareholders'
equity comprise:
Interim dividend - - 88.3
Final dividend 176.7 174.8 174.8
-------------- -------------- ------------
176.7 174.8 263.1
-------------- -------------- ------------
At March 2017, the proposed final dividend was GBP176.8 million
although the final dividend amount actually paid was GBP176.7
million. This difference is due to a higher than anticipated number
of shares purchased cum-dividend to satisfy the dividend
reinvestment plan. Dividends in relation to these shares are
waived.
The interim dividends for the six months ended 30 September 2017
and 30 September 2016, and the final dividend for the year ended 31
March 2017, have not been included as liabilities in the respective
condensed consolidated financial statements at 30 September 2017
and 30 September 2016, and the consolidated financial statements at
31 March 2017, because they were approved after the reporting
date.
The interim dividend of 13.24 pence per ordinary share (2016:
interim dividend of 12.95 pence per ordinary share, final dividend
of 25.92 pence per ordinary share) is expected to be paid on 1
February 2018 to shareholders on the register at the close of
business on 22 December 2017. The ex-dividend date for the interim
dividend is 21 December 2017.
10. Retirement benefit surplus
The main financial assumptions used by the company's actuary to
calculate the defined benefit surplus of the United Utilities
Pension Scheme (UUPS) and the United Utilities PLC Group of the
Electricity Supply Pension Scheme (ESPS) were as follows:
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2017 2016 2017
% p.a. % p.a. % p.a.
Discount rate 2.7 2.3 2.55
Pensionable salary growth
and pension increases 3.4 3.3 3.40
Price inflation 3.4 3.3 3.40
Mortality in retirement is assumed to be in line with the
Continuous Mortality Investigation's (CMI) S2PA (30 September 2016:
S1NA, 31 March 2017: S2PA) year of birth tables, with scaling
factor of 108 per cent for males and 102 per cent for females (30
September 2016: one-year age rating for males in the UUPS only, 31
March 2017: same as 30 September 2016), reflecting actual mortality
experience; and CMI 2016 (30 September 2016: CMI 2014, 31 March
2017: CMI 2015) long-term improvement factors, with a long-term
annual rate of improvement of 1.75 per cent (30 September 2016 and
31 March 2017: 1.75 per cent).
The net pension expense before tax in the income statement in
respect of the defined benefit schemes is summarised as
follows:
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016 GBPm
GBPm GBPm
Current service cost 14.0 10.2 19.7
Curtailments/settlements 0.2 1.7 3.1
Administrative expenses 1.2 1.6 2.7
Pension expense charged
to operating profit 15.4 13.5 25.5
Net pension interest income
credited to investment
income (note 5) (3.3) (4.8) (10.2)
-------------- -------------- -----------
Net pension expense charged
before tax 12.1 8.7 15.3
-------------- -------------- -----------
The reconciliation of the opening and closing net pension
surplus included in the statement of financial position is as
follows:
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016 GBPm
GBPm GBPm
At the start of the period 247.5 275.2 275.2
Expense recognised in the
income statement (12.1) (8.7) (15.3)
Contributions paid 36.8 32.1 64.3
Remeasurement losses gross
of tax (52.4) (83.8) (76.7)
-------------- -------------- -----------
At the end of the period 219.8 214.8 247.5
-------------- -------------- -----------
The closing surplus at each reporting date is analysed as
follows:
30 September 30 September 31 March
2017 2016 2017
GBPm GBPm GBPm
Present value of defined
benefit obligations (3,487.9) (3,762.0) (3,615.5)
Fair value of schemes'
assets 3,707.7 3,976.8 3,863.0
------------- ------------- ----------
Net retirement benefit
surplus 219.8 214.8 247.5
------------- ------------- ----------
In the six month period ended 30 September 2017 the discount
rate has increased by 0.15 per cent, which comprises a 0.25 per
cent increase in swap yields and a 0.10 per cent decrease in credit
spreads over the period. The GBP52.4 million remeasurement loss has
largely resulted from a reduction in credit spreads, offset by a
favourable impact from updating mortality assumptions. Further
details on the approach to managing pension scheme risk are set out
in the audited consolidated financial statements of United
Utilities Group PLC for the year ended 31 March 2017.
Member data used in arriving at the liability figure included
within the overall IAS 19 surplus has been based on the finalised
actuarial valuation as at 31 March 2016 for both the group's ESPS
and UUPS schemes.
11. Borrowings
New borrowings raised during the six month period ended 30
September 2017 were as follows:
-- On 21 July 2017 the group drew down GBP100.0 million against
its GBP250.0 million term loan facility signed in April 2016 with
the European Investment Bank. This floating rate loan is structured
on an amortising basis with final repayment in July 2035.
New borrowings raised following the six month period ended 30
September 2017, which have not been recognised in the statement of
financial position at that date, were as follows:
-- On 2 October 2017 the group drew down the remaining GBP75.0
million against its existing GBP250.0 million term facility signed
in April 2016 with the European Investment Bank. This floating rate
loan is structured on an amortising basis with final repayment in
October 2035.
-- On 4 October 2017 the group issued HKD 830.0 million fixed
interest rate notes due October 2027.
-- On 5 October 2017 the group issued GBP32.0 million CPI
index-linked notes due October 2048 and GBP33.0 million CPI
index-linked notes due October 2057. The issue of these notes is
connected to the partial close out of GBP50.0 million RPI
index-linked notes due April 2043 with a nominal value of GBP30.0
million (carrying value GBP41.3 million) at a fair value of GBP64.4
million. The purchase of the RPI index-linked notes results in a
GBP23.1 million fair value loss, which has not been recognised in
the income statement for the period ended 30 September 2017.
-- On 6 October 2017 the group issued EUR 28.0 million fixed
interest rate notes due October 2032.
The notes were issued through private placement under the Euro
medium-term note programme.
12. Fair values of financial instruments
The fair values of financial instruments are shown in the table
below.
30 September 30 September 31 March
2017 2016 2017
Fair Carrying Fair Carrying Fair Carrying
value value value value value value
GBPm GBPm GBPm GBPm GBPm GBPm
Available for sale financial
assets
Investments 7.8 7.8 9.1 9.1 9.0 9.0
Financial assets at
fair value through profit
or loss
Derivative financial
assets - fair value
hedge 543.1 543.1 694.9 694.9 591.1 591.1
Derivative financial
assets - held for trading 206.6 206.6 243.0 243.0 216.6 216.6
Financial liabilities
at fair value through
profit or loss
Derivative financial
liabilities - fair value
hedge (5.7) (5.7) - - - -
Derivative financial
liabilities - held for
trading (112.4) (112.4) (335.0) (335.0) (249.7) (249.7)
Financial liabilities
designated as fair value
through profit or loss (367.7) (367.7) (379.6) (379.6) (375.5) (375.5)
Financial instruments
for which fair value
does not approximate
carrying value
Financial liabilities
in fair value hedge
relationships (2,492.1) (2,449.8) (2,631.3) (2,609.9) (2,544.6) (2,522.4)
Other financial liabilities
at amortised cost (5,761.8) (4,610.3) (5,567.4) (4,327.4) (5,682.8) (4,486.6)
---------- ---------- ---------- ---------- ---------- ----------
(7,982.2) (6,788.4) (7,966.3) (6,704.9) (8,035.9) (6,817.5)
---------- ---------- ---------- ---------- ---------- ----------
The group has calculated fair values using quoted prices where
an active market exists, which has resulted in 'level 1' fair value
liability measurements under the IFRS 13 'Fair value measurement'
hierarchy of GBP1,708.1 million (30 September 2016: GBP2,162.4
million, 31 March 2017: GBP1,766.1 million) for financial
liabilities in fair value hedge relationships and GBP2,253.7
million (30 September 2016: GBP1,669.0 million, 31 March 2017:
GBP937.9 million) for other financial liabilities at amortised
cost.
The GBP1,257.8 million increase (30 September 2016: GBP372.0
million increase, 31 March 2017: GBP755.4 million reduction) in
'level 1' fair value liability measurements is largely due to an
increase in the number of observable quoted bond prices in active
markets at 30 September 2017. In the absence of an appropriate
quoted price, the group has applied discounted cash flow valuation
models utilising market available data, which are classified as
'level 2' valuations. More information in relation to the valuation
techniques used by the group and the IFRS 13 hierarchy can be found
in the audited financial statements of United Utilities Group PLC
for the year ended 31 March 2017.
13. Net debt
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2017
2017 2016 GBPm
GBPm GBPm
At the start of the period 6,578.7 6,260.5 6,260.5
Net capital expenditure 328.5 329.7 691.7
Dividends (note 9) 176.7 174.8 263.1
Interest 67.6 75.8 156.1
Loans to joint ventures 12.6 46.0 109.0
Inflation uplift on index-linked
debt (note 6) 83.0 45.4 80.7
Fair value movements (52.9) 34.9 (9.9)
Tax 20.2 21.9 41.2
Other (6.4) 5.0 4.4
Cash generated from operations
(note 14) (499.4) (517.4) (1,018.1)
--------------- --------------- -------------
At the end of the period 6,708.6 6,476.6 6,578.7
--------------- --------------- -------------
Net debt comprises borrowings, net of cash and short-term
deposits and derivatives.
Fair value movements includes net fair value gains on debt and
derivative instruments of GBP34.5 million (30 September 2016:
GBP54.8 million loss, 31 March 2017: GBP24.3 million gain) less net
payments on swaps and debt designated at fair value of GBP18.4
million (30 September 2016: GBP19.9 million net payment, 31 March
2017: GBP14.4 million net receipt).
During the period the group paid GBP106.8 million in settlement
of certain interest rate swap liabilities (30 September 2016 and 31
March 2017: received GBP70.0 million on settlement of a cross
currency swap asset) as part of an exercise to better align the
existing hedging profile with the group's target hedge ratios and
to manage swap counterparty positions to facilitate future treasury
activity. This payment is included within 'Repayment of borrowings'
in the statement of cash flows.
14. Cash generated from operations
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2017 2016 2017
GBPm GBPm GBPm
Operating profit 341.8 303.6 605.5
Adjustments for:
Depreciation of property,
plant and equipment 172.5 164.5 336.2
Amortisation of intangible
assets 12.8 13.5 28.7
Impairment of property,
plant and equipment - - 0.2
Loss on disposal of property,
plant and equipment 2.2 1.9 3.3
Loss on disposal of intangible
assets - - 0.5
Amortisation of deferred
grants and contributions (3.1) (3.1) (6.7)
Equity-settled share-based
payments charge 1.2 1.1 3.4
Other non-cash movements (1.6) (1.4) (3.0)
Changes in working capital:
Decrease in inventories 2.9 0.1 6.9
Decrease in trade and other
receivables 3.7 43.6 71.1
(Decrease)/increase in trade
and other payables (8.0) 8.7 (0.6)
(Decrease)/increase in provisions (3.6) 3.5 11.4
Pension contributions paid
less pension expense charged
to operating profit (21.4) (18.6) (38.8)
------------- ------------- ----------
Cash generated from operations 499.4 517.4 1,018.1
------------- ------------- ----------
15. Commitments and contingent liabilities
At 30 September 2017 there were commitments for future capital
expenditure contracted but not provided for of GBP325.8 million (30
September 2016: GBP425.8 million, 31 March 2017: GBP336.9
million).
Details of the group's contingent liabilities were disclosed in
the audited financial statements of United Utilities Group PLC for
the year ended 31 March 2017. There have been no significant
developments relating to contingent liabilities in the period ended
30 September 2017.
16. Related party transactions
The related party trading transactions with the group's joint
ventures during the period and amounts outstanding at the period
end date were as follows:
Represented*
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBPm GBPm GBPm
Sales of services 264.9 159.8 404.3
Purchases of goods and
services 0.2 0.3 0.7
Costs recharged at nil
margin under transitional
service agreements 0.9 9.8 18.5
Interest income and fees
recognised on loans to
related parties 1.2 1.0 2.6
Amounts owed by related
parties 179.9 111.4 163.5
Amounts owed to related
parties 3.4 1.8 12.1
* Amounts relating to sales of services and costs recharged at
nil margin under transitional service agreements have been
represented to provide additional detail in respect of these
balances.
Sales of services to related parties during the period mainly
represent non-household wholesale charges billed and accrued during
the period. These transactions were on the group's normal trading
terms in respect of non-household wholesale charges, which are
governed by the wholesale charging rules issued by Ofwat.
At 30 September 2017 amounts owed by joint ventures, as recorded
within trade and other receivables in the statement of financial
position, were GBP179.9 million (30 September 2016: GBP111.4
million, 31 March 2017: GBP163.5 million), comprising GBP51.6
million of trade balances, which are unsecured and will be settled
in accordance with normal credit terms, and GBP128.3 million
relating to loans. Included within these loans receivable were the
following amounts owed by Water Plus:
-- GBP100.0 million outstanding on a GBP100.0 million revolving
credit facility provided by United Utilities Water Limited, which
is guaranteed by United Utilities PLC, with a maturity date of 30
September 2019, bearing a floating interest rate of LIBOR plus a
credit margin;
-- GBP9.0 million receivable being the fair value of amounts
owed in relation to a GBP12.5 million unsecured loan note held by
United Utilities PLC, with a maturity date of 28 March 2027. This
is an interest-free shareholder loan with a total amount
outstanding at 31 March 2017 of GBP12.5 million, comprising the
GBP9.0 million receivable held at fair value, and GBP3.5 million
recorded as an equity contribution to Water Plus recognised within
interests in joint ventures;
-- GBP3.1 million outstanding on a GBP19.6 million unsecured
amortising loan note held by United Utilities PLC, with a final
maturity date of 30 November 2017, bearing a floating interest rate
of LIBOR plus a credit margin. Repayments received on this loan
note represent part of the proceeds received on disposal of the
group's non-household retail business for the year ended 31 March
2017; and
-- GBP12.5 million outstanding on a GBP20.0 million revolving
credit facility provided by United Utilities PLC, with a maturity
date of 30 September 2019, bearing a floating interest rate of
LIBOR plus a credit margin.
A further GBP3.7 million (30 September 2016: GBP2.6 million, 31
March 2017: GBP3.3 million) of non-current receivables was owed by
other related parties at 30 September 2017.
No expense or allowance has been recognised for bad and doubtful
receivables in respect of the amounts owed by related parties (30
September 2016 and 31 March 2017: GBPnil).
During the period, United Utilities PLC provided guarantees in
support of Water Plus in respect of certain amounts owed to
wholesalers. The aggregate limit of these guarantees was GBP42.5
million, of which GBP24.0 million related to guarantees to United
Utilities Water Limited.
At 31 March 2017, amounts owed to joint ventures were GBP3.4
million (30 September 2016: GBP1.8 million, 31 March 2017: GBP12.1
million). The amounts outstanding are unsecured and will be settled
in accordance with normal credit terms.
17. Events after the reporting period
With the exception of the activity after the reporting date
relating to the group's borrowings as documented in note 11, there
were no material events arising after the reporting date that
required recognition or disclosure in the condensed financial
statements for the period ended 30 September 2017.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
Responsibilities Statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the EU;
-- the interim management report includes a fair review of the information required by:
- DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have
occurred during the first six months of the financial
year and their impact on the condensed set of financial
statements; and a description of the principal
risks and uncertainties for the remaining six months
of the year; and
- DTR 4.2.8R of the Disclosure and Transparency Rules,
being related party transactions that have taken
place in the first six months of the current financial
year and that have materially affected the financial
position or performance of the entity during that
period; and any changes in the related party transactions
described in the last annual report that could
do so.
The directors of United Utilities Group PLC at the date of this
announcement are listed below:
Dr John McAdam
Steve Mogford
Stephen Carter
Mark Clare
Steve Fraser
Alison Goligher
Russ Houlden
Brian May
Paulette Rowe
Sara Weller
This responsibility statement was approved by the Board and
signed on its behalf by:
Steve Mogford Russ Houlden
21 November 2017 21 November 2017
Chief Executive Officer Chief Financial Officer
INDEPENDENT REVIEW REPORT TO UNITED UTILITIES GROUP PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2017 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated statement of financial position, the
consolidated statement of changes in equity, the consolidated
statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2017 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
William Meredith
for and on behalf of KPMG LLP
Chartered Accountants
St Peter's Square
Manchester
M2 3AE
21 November 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BIBDBUBDBGRB
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