23 May 2002
for the Year Ended 31 March 2002
Delivering Value and Growth
Profit before tax* from continuing operations - increased by 11 per cent to £328 million
Licensed multi-utility operations - cost saving target increased to £480 million
Asset management services - sales up by 95 per cent to £386 million and operating profit* up by 49 per cent to £31 million
£225 million metering services contract win provides further boost for asset management services
Customer management outsourcing - sales increased by 34 per cent to £283 million with improving operating margin
Telecommunications - turnover increased by 30 per cent to £155 million
Total dividend for the year of 47.0 pence, an increase of 2 per cent - dividend cover* of 1.1 times * Unless otherwise stated, amounts and percentage movements throughout this document relating to the profit and loss account are stated before goodwill amortisation and exceptional items.
Chief Executive John Roberts said: "United Utilities' strategy for delivering growth and efficiency, based on our core competencies of asset management and customer management, has progressed well during the year. We've increased our cost savings target in licensed multi-utility operations and achieved substantial growth in our support services businesses, which now contribute around a third of the group's revenues. "In licensed multi-utility operations we have raised our target for cost savings over the five-year period from £450 million to £480 million, representing an £80 million outperformance of our regulatory targets. This increased target demonstrates the value of our multi-utility strategy, which is delivering synergy savings through operating and maintaining electricity, water and wastewater networks in the same geographical area. These benefits include rationalisation of depots, offices and IT systems, and merging management teams to create a more integrated multi-utility. "The operations management contract with Welsh Water, which was the first of its kind in the UK water industry, is exceeding our expectations. The proportion of Welsh Water's capital maintenance programme managed by United Utilities has been increased, providing additional growth in turnover. Furthermore, the operational changes that we have implemented have improved overall service levels to their best ever in Welsh Water. "With sales in excess of £86 million, we have consolidated our position as the market leader in the progressively deregulated metering and connections market. This position will be further substantially boosted by the recently signed £225 million five-year contract for meter installation and maintenance with British Gas Trading Limited. "Vertex has now substantially completed its transition from internal service provider to an outsourcer specialising in managing customer relationships for its external clients. Less than a quarter of its order book is now derived from United Utilities. The C$300 million ten-year contract with Hydro One, the Ontario-based energy utility, is particularly significant as it represents the largest contract secured to date through the alliance with Cap Gemini Ernst & Young UK. It also offers an excellent opportunity to leverage Vertex's experience, gained through privatisation in the UK market, to the newly deregulating Canadian utilities market. "As anticipated, our telecommunications business, Your Communications, moved to being EBITDA positive on a month-by-month basis by the end of the year. It is expected to become progressively more financially self-sufficient, as revenues increase further, and the level of capital expenditure reduces next year. We remain firmly focused on driving the business towards profitability." Commenting on the outlook for United Utilities, John Roberts said: "Looking ahead, we believe that the utility market will continue to be reshaped as a result of financial restructuring, regulatory change and commercial pressures. Further consolidation will take place as companies look to outsource their less efficient operations, and develop areas in which they have a competitive advantage. We intend to capitalise on such outsourcing opportunities using our core skills of asset management and customer management. United Utilities Contract Solutions now has the track record to benefit from further outsourcing opportunities as utilities restructure. Vertex is well placed to take advantage of increasing volumes in the UK and North America, with our strategic partnership with Cap Gemini Ernst & Young UK providing an additional marketing channel. "2002/03 will be the most challenging year so far in the current regulatory period, with no real price increases in our water business and a real price cut of 3 per cent in our electricity business. At the same time our capital programmes will accelerate as construction contracts are let under framework agreements. However, further progress in implementing cost reduction initiatives, and continued growth in our support services businesses, mean that we expect to deliver satisfactory results this year. "We've been encouraged by Ofwat's actions to make the regulatory process more transparent and improve communications with the capital markets. However, we would welcome further debate amongst stakeholders about the length of review periods. Whilst the current five-year review period may be appropriate for service and efficiency targets, a longer review period for capital programmes may reflect better the long-term nature of investment requirements within the industry." In conclusion, the Chairman, Sir Richard Evans, said: "I am very pleased with the progress that the group has made on delivering efficiency, through multi-utility synergies in its licensed businesses, and deploying its core skills of asset management and customer management in growth markets. The board has confidence in the group's performance and its prospects, and remains committed to its progressive dividend policy. This is reflected in the proposed increase of 2 per cent in the final dividend." -o0o- For further information: John Roberts, Chief Executive 020 7307 0300 Simon Batey, Finance Director 20 7307 0300 Simon Bielecki, Investor Relations Manager 01925 237033 Alan Price, Head of Corporate and Financial Communications 020 7307 0300 A presentation to investors and analysts will commence at 8.30 am on Thursday, 23 May 2002 at the City Presentation Centre, Chiswell Street, London EC4. The presentation, together with further information on United Utilities, will be available later in the day on our web site at: http://www.unitedutilities.com. Photographs for media use supporting these results can be downloaded via http://www.newscast.co.uk.