TIDMUU.
RNS Number : 9699T
United Utilities Group PLC
20 November 2019
United Utilities Group PLC
20 November 2019
half Year RESULTS FOR THE six monthsED 30 september 2019
Delivering responsibly in the North West for customers and other
stakeholders
-- Improving customer service while reducing average household
bills by 10% in real terms since 2010
-- Sector leading approach to affordability, supporting over
120,000 customers in vulnerable circumstances
-- Delivering a GBP3.9bn AMP6 investment programme, creating
long-term value for all our stakeholders
-- Long track record of sharing outperformance with additional investment of GBP350m in AMP6
-- Strong ESG credentials across a number of leading indices
Operational transformation over AMP6
-- Our unique Systems Thinking approach has delivered a step change in performance
-- Continuing strong performance expected to lift net wholesale
ODI outperformance to around GBP50m
-- Recognised by Ofwat as a strong performer for customer
satisfaction - achieving upper quartile SIM scores
-- On track to deliver totex outperformance of around GBP100m against our AMP6 scope
Strong financial performance
-- Interim dividend in line with AMP6 growth policy
-- Pension schemes fully funded on a self-sufficiency basis
-- Robust capital structure providing resilience and future financial flexibility
Well prepared for AMP7
-- Fast-track status has provided clarity to move forward with
our implementation plans for 2020-2025
-- GBP100m of GBP350m outperformance reinvestment for flying start already committed
-- Locked-in efficiencies through network delivery
transformation and selection of capital delivery partners
-- Strong performance and outperformance reinvestment gives
confidence heading into the next regulatory period
Key financials
Six months ended
30 September 2019 30 September 2018
------------------ ------------------
Revenue GBP935.5m GBP916.4m
------------------ ------------------
Reported operating profit GBP383.0m GBP339.1m
------------------ ------------------
Underlying operating profit(1) GBP391.7m GBP367.8m
------------------ ------------------
Reported profit after tax GBP158.6m GBP212.5m
------------------ ------------------
Underlying profit after tax(1) GBP198.2m GBP196.9m
------------------ ------------------
Interim dividend per ordinary
share (pence) 14.20p 13.76p
------------------ ------------------
Net regulatory capital spend GBP323.0m GBP392.7m
------------------ ------------------
RCV gearing(2,3) 62% 60%
------------------ ------------------
(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 below
(2) Regulatory capital value (RCV) gearing calculated as group
net debt/United Utilities Water's shadow RCV (outturn prices)
(3) RCV gearing has increased primarily reflecting the one-off
impact of GBP103m of accelerated pension deficit repair
contributions and a GBP55m lease liability recognised under
IFRS16
Steve Mogford, Chief Executive Officer, said:
"Our customers are at the heart of everything we do - our
customer satisfaction scores are consistently among the best in the
water sector. Since 2010 we have reduced the average household bill
by 10 per cent in real terms, while improving customer service and
supporting thousands of vulnerable households.
"I'm pleased with the transformation we have achieved over
recent years - we've delivered better levels of service for
customers, a more resilient network and real gains in efficiency.
Our focus on innovation, coupled with sustained investment, is
helping us to deliver against a challenging set of performance
targets, while also protecting and enhancing the environment and
supporting our local communities.
"I'm also proud to work alongside such a highly motivated and
engaged team of colleagues. We've built award-winning
apprenticeship and graduate schemes, and underlined our commitment
to offer opportunities to people from all backgrounds by becoming
an accredited partner of The Social Mobility Pledge.
"We are well prepared for the next regulatory period and are
already moving forward with our implementation plans. This,
together with the sustainable improvements in performance, gives us
confidence that we will continue to create long-term value for all
our stakeholders."
For further information on the day, please contact:
Gaynor Kenyon - Corporate Affairs Director +44 (0) 7753 622 282
Robert Lee - Head of Investor Relations +44 (0) 7500 087 704
Graeme Wilson - Tulchan Communications +44 (0) 2073 534 200
A presentation to investors and analysts starts at 9.00am on
Wednesday 20 November 2019, at the Auditorium, Deutsche Bank,
Winchester House, 1 Great Winchester Street, London, EC2N 2DB.
The presentation can be accessed via a live webcast facility at
the following link:
https://www.investis-live.com/united-utilities/5db86d9fef68be120009efdb/nnbn
The presentation can be accessed via a live listen only call
facility by dialling:
UK toll: +44 (0)20 3936 2999
Passcode: 924832
The webcast will be available on demand from Thursday 21
November 2019 at the following link:
https://www.unitedutilities.com/corporate/investors/Reports-and-presentations/full-and-half-year-results/
This results announcement and the associated presentation will
be available on the day at:
https://www.unitedutilities.com/corporate/investors/Reports-and-presentations/full-and-half-year-results/
OPERATIONAL OVERVIEW
We have transformed the operational performance of the business
and are now one of the leading companies in the sector. Our
performance is benefiting from our deeply embedded approach to
innovation and the investment that we accelerated into the early
years of the current regulatory period, supplemented by additional
outperformance reinvestment. This has delivered sustainable
improvements in service, resilience and efficiency and provides a
strong platform for the next regulatory period.
-- Sustained improvement in customer satisfaction - our
performance against Ofwat's Service Incentive Mechanism (SIM) has
improved significantly since its introduction at the start of AMP5.
We now score in the upper quartile for the sector and finished
third overall in 2018/19. This performance is mirrored across other
indices and through awards and accreditations we receive for our
great performance in customer service, collections and debt
management, and complaint handling.
-- Innovation through Systems Thinking - our innovative Systems
Thinking approach is transforming the way that we run the business,
our relationship with customers and our use of technology. By
looking at the bigger picture and understanding how everything is
connected, we are able to predict performance to deliver enhanced
levels of service and resilience along with sustainable
improvements in efficiency.
-- Operational transformation delivered responsibly - we have
transformed the operational performance of the business to be one
of the leading companies in the sector. This has been achieved in a
sustainable and responsible manner and supported by a strong
balance sheet and resilient capital structure. We are therefore
well placed to continue to deliver long-term value for all our
stakeholders into the future.
-- Delivering shareholder value through regulatory
outperformance - we are confident of outperforming against all
areas of the regulatory contract for AMP6. 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 with Ofwat's
industry assumed cost for the 2015-20 period. We are confident of
delivering our AMP6 scope for around GBP100 million less than the
Final Determination totex assumption and a cumulative net
outperformance of around GBP50 million against our Outcome Delivery
Incentives (ODIs) for AMP6. By putting customers at the heart of
everything we do, we have delivered strong performance on customer
satisfaction and have outperformed on SIM in AMP6.
-- Sharing outperformance - we have a long track record of
sharing outperformance, with additional investment of GBP350
million for AMP6 and over GBP600 million across AMPs 5 and 6.
-- Strong environmental, social & governance (ESG)
credentials - we have achieved our World Class rating in the Dow
Jones Sustainability Index for thirteen consecutive years, and
perform well against a range of other ESG indices. We retained our
self-assurance status with Ofwat for reporting, the highest
category available and the only company in the sector to have held
this status for three consecutive years. In July, we were delighted
to be the first water company in the FTSE 100 to secure the Fair
Tax Mark, recognising our responsible track record and consistent
commitment to paying our fair share of tax and acting in an open
and transparent manner in relation to our tax affairs.
-- Prepared for AMP7 - our fast-track status has provided us
with clarity to move forward with our AMP7 implementation plans. We
have appointed two capital delivery partners as preferred bidders
for over GBP300 million of our AMP7 capital delivery programme and
have already committed to the GBP100 million of additional
outperformance reinvestment targeting AMP7 performance. This,
together with our strong performance in AMP6, gives us confidence
heading into AMP7.
Financial overview
The group has delivered a strong set of financial results for
the six months ended 30 September 2019.
-- Revenue - revenue was up GBP19 million, at GBP936 million,
largely reflecting our allowed regulatory revenue changes.
-- Operating profit - underlying operating profit was up GBP24
million, at GBP392 million. This reflects the GBP19 million
increase in revenue and a GBP13 million reduction in infrastructure
renewals expenditure (IRE) partly offset by an GBP8 million
increase in depreciation. Reported operating profit was up GBP44
million, at GBP383 million, impacted by the same movements as
underlying operating profit as well as the impact of one off costs
of GBP25 million associated with the extreme hot and dry weather
incurred in the prior year.
-- Capex - total net regulatory capital investment in the first
half of the year was GBP323 million including GBP68 million of IRE.
We are on track to deliver a total of around GBP700 million for the
full year, including around GBP190 million of the GBP350 million
additional investment of outperformance sharing which was not
anticipated at the time of the PR14 settlement. Our five-year AMP6
regulatory capex programme is around GBP3.9 billion including this
additional investment.
-- Profit before tax - underlying profit before tax was up GBP4
million, at GBP244 million, largely reflecting the increase in
underlying operating profit partly offset by an GBP11 million
increase in the underlying net finance expense and a GBP6 million
share of losses of joint ventures compared with a GBP3 million
share of profits in the first half of last year. 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 GBP195 million, reflecting fair value movements and
other adjusting items as outlined in the underlying profit measures
tables below.
-- Profit after tax - underlying profit after tax was up by GBP1
million, at GBP198 million. Reported profit after tax was lower at
GBP159 million, mainly reflecting fair value movements.
-- Capital structure - the group has a robust capital structure
with gearing of 62 per cent as at 30 September 2019 (measured as
group net debt to 'shadow' regulatory capital value, or RCV). Our
shadow RCV adjusts for actual spend and was GBP11.9 billion as at
30 September 2019. 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 on stable outlook from
Moody's, A- on negative outlook from Standard & Poor's and a
senior debt rating of A- on stable outlook from Fitch.
-- Financing headroom - the group benefits from headroom to
cover its projected needs into 2021, enhanced by the recent raising
of new finance. At 30 September 2019, the group had headroom of
GBP716 million consisting of cash and undrawn committed funding,
and having taken account of debt maturities due in the next 12
months. This headroom provides 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
14.20 pence per ordinary share, an increase of 3.2 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.
Ofwat has now completed the four year measurement period in AMP6
for SIM. In the fourth and final year, we scored 87.6 points on a
combined basis, incorporating both qualitative and quantitative
assessments. This was our highest ever score and resulted in us
finishing third out of 18 companies in the sector overall.
Our four year average score across the AMP6 measurement period
was 85.4 points resulting in us finishing seventh in the sector
overall and reflecting our mid-ranking start to the period. Our
performance in AMP6 is a further improvement on our AMP5
performance and as a consequence, we are eligible for a SIM
outperformance payment of at least GBP6 million - we expect to be
advised of the full amount in our PR19 Final Determination.
-- Outcome delivery incentives (ODIs) - we have 19 wholesale
financial ODIs, ten of which are structured to provide the
potential to earn a reward for good performance or for us to be
penalised for poor performance. The other nine wholesale financial
ODIs are structured in order to protect customers in key areas and
do not offer a reward for good performance, only a penalty for poor
performance.
We were pleased to deliver cumulative net outperformance of
GBP21.4 million for the first four 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 strong performance to
date coupled with continued targeted investment, alongside our
Systems Thinking and innovative approach to the way we operate,
gives us confidence that we will achieve cumulative net ODI
outperformance over the 2015-20 period of around GBP50 million.
This reflects a continuation of our strong performance into the
final year of AMP6 together with an anticipated GBP22.5 million
outperformance payment in relation to our West Cumbria project that
is only secured when the final milestone is delivered in
2019/20.
Lowest sustainable cost
-- Financing outperformance - the low cost of debt we have
already locked in places us in a strong position to deliver
significant financing outperformance for the 2015-20 regulatory
period compared with the industry allowed cost.
-- Total expenditure (totex) performance - our totex allowance
for the 2015-2020 regulatory period represented a significant
challenge compared with the costs originally submitted as part of
our business plan. We have not only closed the gap to our allowance
but we are also confident of outperforming that allowance by around
GBP100 million. This has been achieved through a combination of
driving efficiency into our capital programme and through Systems
Thinking.
-- Household retail cost to serve - we continue to deliver
against a challenging benchmark set for AMP6. Our target is to
minimise our costs compared with our revenue allowance. We are
continuing with our strong focus on this target and will provide an
update for 2019/20 at our full year results next May.
Responsible manner
-- Leakage - although leakage is included within our ODIs, we
intend to continue publishing our leakage position separately, as
we consider it to be an important measure from a responsible
business perspective. In 2018/19 we again met our regulatory
leakage target of 463 megalitres per day and, absent a severe
winter, we believe that we can meet it again in 2019/20.
-- Environmental performance - in the Environment Agency's
latest assessment, published in July 2019, we were awarded three
stars (out of four) across a range of operational metrics. This is
lower than our performance in the previous year where we were
awarded the industry leading four star status for the third
consecutive year. Our lower score in the most recent assessment was
primarily the result of a slight deterioration of performance
against the delivery of our National Environment Programme where
two projects were delivered late. The two projects were delayed due
to unforeseen issues with land purchase, planning difficulties and
complex interactions with a flood risk scheme. We have since made
good progress with delivery and we are now operating the relevant
assets in line with their new Environmental Permit requirements. We
also brought forward the delivery of two other major schemes to
offset the environmental impact. Overall, our performance, earning
industry leading four star status in three of the last four years
is in line with our medium-term goal of being an upper quartile
company on a consistent basis.
-- Corporate responsibility - we have a strong focus on
operating in a responsible manner and we are the only UK water
company to have a World Class rating as measured by the Dow Jones
Sustainability Index. For 2018/19, we achieved our World Class
rating for the thirteenth consecutive year. We also demonstrate a
very strong performance across a number of leading corporate
responsibility indices and report these publicly on our website -
for example, we have been named in the FTSE4Good Index every year
for the last 17 years, and reconfirmed as part of the Euronext
Vigeo Index UK 20.
FINANCIAL PERFORMANCE
United Utilities delivered a strong set of financial results for
the six months ended 30 September 2019.
Revenue
Revenue was up GBP19 million, at GBP936 million, largely
reflecting our allowed regulatory revenue changes.
Consistent with Ofwat's annual wholesale revenue forecasting
incentive mechanism (WRFIM), we are reducing revenue by GBP14
million in 2019/20 (outturn prices). This consists of two
components; firstly reflecting actual volumes being higher than our
original assumptions during AMP6, and secondly a reduction relating
to the 2014/15 "AMP5 blind year", which is GBP5 million in
2019/20.
Operating profit
Underlying operating profit at GBP392 million was GBP24 million
higher than the first half of last year. This reflects our allowed
regulatory revenue changes and a GBP13 million decrease in IRE
partly offset by an GBP8 million increase in depreciation. In
relation to the remaining underlying costs, the impact of a credit
in the prior year resulting from the settlement of an historical
commercial claim has been offset by a property rates refund in the
first half of this year and smaller net reductions across the rest
of the cost base.
Reported operating profit increased by GBP44 million, to GBP383
million, reflecting the increase in underlying operating profit and
a decrease in adjusted items. The only adjusted item impacting
operating profit in the first half of 2019/20 is GBP9 million of
restructuring costs. Adjusted items in the first half of last year
amounted to GBP29 million, including GBP25 million of costs
associated with the extreme hot and dry weather in the summer of
2018 and GBP4 million of restructuring costs.
Investment income and finance expense
The underlying net finance expense of GBP142 million for the
first half of 2019/20 was GBP11 million higher than the first half
of last year, driven by the higher RPI inflation on the group's
index-linked debt, and the impact of new debt and interest rate
swaps traded since September 2018.
Interest of GBP46 million on non index-linked debt was GBP7
million higher than the first half of last year, due to a higher
level of debt following new issuances and associated interest rate
swaps traded in the period, resulting in a higher level of interest
payable. The indexation of the principal on our index-linked debt
amounted to a net charge in the income statement of GBP71 million,
compared with a net charge of GBP67 million in the first half of
last year. As at 30 September 2019, the group had approximately
GBP3.5 billion of RPI-linked debt at an average real rate of 1.4
per cent, and GBP0.5 billion of CPI-linked debt at an average real
rate of 0.2 per cent.
The higher RPI inflation charge compared with last year
contributed to the group's average underlying interest rate of 4.0
per cent being higher than the rate of 3.8 per cent for the six
months ended 30 September 2018. The average underlying interest
rate represents the underlying net finance expense divided by
notional average net debt as defined in note 17 ('Net debt') of
these condensed consolidated financial statements.
Reported net finance expense of GBP182 million was higher than
the GBP83 million expense in the first half of 2018/19. This GBP99
million increase principally reflects a change in the fair value
gains and losses on debt and derivative instruments, from a GBP44
million gain in the first half of 2018/19 to a GBP63 million loss
in the first half of 2019/20.
The fair value loss in the first half of 2019/20 is due to
losses on our derivatives hedging interest rates impacted by a
decrease in market interest rates, partially offset by net interest
receivable on derivatives and debt designated at fair value. Gains
in the first half of the prior year were largely due to due to
gains on our derivatives hedging interest rates impacted by an
increase in market interest rates, and net interest receivable on
derivatives and debt designated at fair value. The group uses swaps
to fix interest rates on a substantial proportion of its debt to
better match the financing cash flows assumed 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 GBP244 million, GBP4 million
higher than the first half of last year. This reflects the GBP24
million increase in underlying operating profit, partly offset by
the GBP11 million increase in underlying net finance expense and a
GBP6 million share of losses of joint ventures compared with a GBP3
million profit in the first half of last year. At March 2019 we
reported how our joint venture, Water Plus, had suffered a
deterioration in its working capital position due to billing data
issues stemming from the market opening in April 2017. These issues
have continued to result in a challenging operating environment for
Water Plus, resulting in a GBP9.3 million share of loss in the
first half of the current year compared with a GBP0.7 million share
loss in the first half of last year.
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 below.
Reported profit before tax decreased by GBP65 million to GBP195
million, largely reflecting the GBP44 million increase in reported
operating profit more than offset by a GBP99 million increase in
reported net finance expense including fair value movements.
Tax
The group continues to be fully committed to paying its fair
share of tax and acting in an open and transparent manner in
relation to its tax affairs and we were delighted to be the first
water company in the FTSE 100 to secure the Fair Tax Mark in July
this year.
In addition to corporation tax, the group makes further
contributions to the public finances, typically of around GBP200
million per annum, in the form of business rates, employer's
national insurance contributions, environmental taxes, other
regulatory service fees such as water abstraction charges as well
as employment taxes on behalf of our 5,000 strong workforce.
In the first half of 2019/20, we paid GBP49 million of
corporation tax, which represents an effective cash tax rate on
underlying profits of 20 per cent which is higher than the normal
rate of around 11 per cent primarily due to paying four rather than
the usual two quarterly tax instalments payments in the first half
of 2019/20, as we transition to the new quarterly instalment
regime. After adjusting for these one off additional payments, the
key reconciling items to the headline rate of corporation tax
(currently at 19 per cent) continue to be allowable tax deductions
on capital investment and pension payments, these being deductions
put in place by successive governments to encourage such investment
and thus reflecting responsible corporate behaviour in relation to
taxation.
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 facilitates more
accurate medium-term cash tax rate forecasting.
As well as the payments, we also received a repayment of
corporation tax of GBP16 million which relates to agreement of
prior years' UK tax matters.
The current tax charge was GBP24 million in the first half of
2019/20, compared with GBP29 million in the corresponding period
last year.
In the first half of 2019/20, the group recognised a deferred
tax charge of GBP12 million in the income statement, compared with
a charge of GBP18 million in the first half of the previous
year.
The total tax charge recognised in the income statement for the
first half of 2019/20 was GBP37 million, compared to a total tax
charge of GBP47 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
further legislative or tax practice changes, we would expect this
to continue for the medium-term.
Profit after tax
Underlying profit after tax of GBP198 million was GBP1 million
higher than the first half of last year, principally reflecting the
GBP4 million increase in underlying profit before tax.
Reported profit after tax decreased by GBP54 million to GBP159
million, principally reflecting the GBP65 million decrease in the
reported profit before tax.
Earnings per share
Underlying earnings per share increased from 28.9 pence to 29.1
pence. This underlying measure is derived from underlying profit
after tax.
Basic earnings per share decreased from 31.2 pence to 23.3
pence, for the same reasons that caused the decrease in reported
profit after tax.
Dividend per share
The Board has proposed an interim dividend of 14.20 pence per
ordinary share in respect of the six months ended 30 September
2019. This is an increase of 3.2 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 3.2 per cent is
based on the RPI element included within the allowed regulated
revenue increase for the 2019/20 financial year (i.e. the movement
in RPI between November 2017 and November 2018).
The interim dividend is expected to be paid on 3 February 2020
to shareholders on the register at the close of business on 20
December 2019. The ex-dividend date is 19 December 2019.
Our dividend policy targets a growth rate of at least RPI
inflation each year through to 2020, with further details set out
below.
-- 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 2019, the company
had distributable reserves of GBP3,124 million. The total external
dividends relating to the 2018/19 financial year amounted to GBP282
million. The company's distributable reserves support over 11 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 Ofwat sets an assumed return component of
the company's revenue controls. 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 ten 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 2019 was 62 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
o The policy is considered by the Board to be robust to
reasonable changes in assumptions such as inflation, opex, capex
and interest rates.
o 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
o 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).
Other comprehensive income
During the period other comprehensive income included the effect
of a change in the rate at which deferred tax liabilities arising
on the group's defined benefit pension schemes are measured. See
note 8 of the condensed consolidated financial statements for
further details.
Cash flow
Net cash generated from continuing operating activities for the
six months ended 30 September 2019 was GBP364 million, compared
with GBP438 million in the first half of last year. The GBP74
million reduction is largely attributable to the accelerated
payment in April 2019 of GBP103 million of the agreed deficit
recovery contributions in relation to the group's defined benefit
pension schemes.
The group's net capital expenditure was GBP321 million,
principally in the regulated water and wastewater investment
programmes. This excludes IRE which is treated as an operating cost
under IFRS. Cash flow capex differs from regulatory capex, since
regulatory capex includes IRE and is based on the capital work that
is done in the period, rather than actual cash spent.
Net debt including derivatives at 30 September 2019 was GBP7,346
million, compared with GBP7,067 million at 31 March 2019. This
GBP279 million increase reflects regulatory capital expenditure,
payments of dividends, interest and tax, the prepayment of GBP103
million of pension deficit recovery contributions, the impact of
IFRS16 which results in the recognition of a GBP55 million lease
liability included within net debt and the inflationary uplift on
index-linked debt, partly offset by operating cash flows.
Fair value of debt
The group's gross borrowings at 30 September 2019 had a carrying
value of GBP8,513 million. The fair value of these borrowings was
GBP9,987 million. This GBP1,474 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 62 per
cent at 30 September 2019. This is slightly higher than the 61 per
cent we reported as at 31 March 2019 and remains comfortably within
our target range of 55 per cent to 65 per cent.
UUW's senior unsecured debt obligations are rated A3 on stable
outlook from Moody's Investor Service Limited (Moody's), A- on
negative outlook from S&P Global Ratings Europe Limited
(S&P) and A- on stable outlook from Fitch Ratings Ltd (Fitch).
United Utilities PLC's (UU PLC's) senior unsecured debt obligations
are rated Baa1 on stable outlook from Moody's, BBB on negative
outlook from S&P and A- on stable outlook from Fitch.
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 2019 amounted to
GBP622 million. Over 2015-20 we had a financing requirement
totalling around GBP2.5 billion to cover refinancing and
incremental debt, supporting our five-year investment programme,
and we have raised all of this requirement.
In June 2019, UUW's financing subsidiary, United Utilities Water
Finance PLC (UUWF), raised GBP250 million fixed rate notes in the
public bond market with a 14-year maturity.
UUW remains one of the sector leaders in the issuance of
CPI-linked debt having previously created CPI-linkage in its debt
portfolio of GBP365 million, in response to Ofwat's decision to
transition away from RPI inflation linkage. In July 2019, the
CPI-linkage was increased to around GBP465 million through UUWF
increasing the amount outstanding on a public bond with a maturity
date in February 2031 by an additional GBP100 million, and
simultaneously swapping the cash flows to CPI-linkage.
In addition, since March 2019, the group has signed GBP50
million of new committed bank facilities, renewed a further GBP50
million for an initial five-year term and extended a further GBP50
million by one year out to 2024. The group has headroom to cover
its financing needs into 2021.
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 2019,
approximately 48 per cent of the group's net debt was in RPI-linked
form, representing around 30 per cent of UUW's RCV, with an average
real interest rate of 1.4 per cent. A further 6 per cent of the
group's net debt was in CPI-linked form, representing around 4 per
cent of UUW's RCV, with an average real interest rate of 0.2 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 just under 20 years.
Our inflation hedging policy is to target around 50 per cent of
net debt to be maintained in index-linked form reflecting a
balanced assessment across a range of factors.
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. Historically, this was 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 nominal debt for the
current financial year, locking in an average annual interest rate
of around 2.9 per cent nominal (inclusive of credit spreads).
Recognising Ofwat's intention to apply debt indexation for new
debt raised during the 2020-25 regulatory period, we will retain
the hedge to fix underlying interest costs on nominal debt out to
ten years on a reducing balance basis, but we will no longer
supplement this with the additional 'top up' hedge at the start of
each new regulatory period.
The adoption of the new leasing standard, IFRS 16, during the
period, has resulted in an increase in statutory net debt of GBP55
million as a result of lease liabilities being brought onto the
balance sheet. As corresponding right-of-use assets have also been
brought onto the balance sheet, the group's net asset position has
not been materially impacted by the adoption of the new standard.
Ofwat have indicated that they will allow for an uplift to the RCV
in recognition of the new standard's impact, meaning that gearing
is not expected to be significantly impacted in the longer
term.
Liquidity
Short-term liquidity requirements are met from the group's
normal operating cash flows, and cash and short-term bank deposits,
supported by committed but undrawn credit facilities. The group's
EUR7 billion EMTN programme provides further support.
Available headroom at 30 September 2019 was GBP716 million,
consisting of cash, short-term deposits and committed bank
facilities, net of short-term debt as well as committed facilities
and term debt falling due within 12 months.
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 2019, the group had an IAS 19 net defined
benefit pension surplus of GBP699 million, compared with a net
pension surplus of GBP484 million at 31 March 2019. This GBP215
million increase is as a result of a significant fall in gilt
yields in the period and the acceleration of GBP103 million of
deficit repair contributions to the group's defined benefit
schemes. These payments represent the final acceleration of deficit
repair contributions set out in the schedules of contributions
agreed with the schemes' trustees as part of the 31 March 2018
valuation process, and reduce the pension scheme deficit repair
contributions due from the company down to GBPnil. The scheme
specific funding basis does not suffer from volatility due to
credit spread movements, as it uses a prudent, fixed credit spread
assumption and is hedged for inflation and interest rates. Any
inflation and credit spread movements have therefore not had a
material impact on the pensions position calculated on a scheme
specific funding basis.
Further detail on pensions is provided in note 13 ('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
Dry weather event An extreme period of hot and dry weather during
the summer of 2018 led to significant strain being
placed on our water resources and network and
as a result our reservoir levels ran extremely
low. Activities were carried out to safeguard
supplies, generating significant costs which would
not have been incurred under normal conditions.
Given the severity of this unusually dry weather,
this event is not considered part of the normal
course of business.
---------------------------------------------------------
Restructuring costs The group has incurred restructuring 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 losses/(gains) Fair value movements on debt and derivatives can
on debt and derivative be both very significant and volatile from one
instruments period to the next. These 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 derivatives Net fair value gains on debt and derivative instruments
and debt under fair includes interest on derivatives and debt under
value option fair value option. In adjusting for the former,
it is appropriate to add back interest on derivatives
and debt under fair value option to provide a
view of the group's cost 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 one period
income 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 Accounting standards allow for the capitalisation
costs 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.
---------------------------------------------------------
Tax in respect of Management adjust for the tax impacts of the above
adjustments to underlying adjusted items to provide a more representative
profit before tax view of current year performance.
---------------------------------------------------------
Operating profit Six months ended Six months ended
30 September 30 September
2019 2018
GBPm GBPm
Operating profit per published results 383.0 339.1
Dry weather - 25.0
Restructuring costs 8.7 3.7
Underlying operating profit 391.7 367.8
----------------- -----------------
Net finance expense
GBPm GBPm
Finance expense (193.9) (90.7)
Investment income 11.7 7.8
Net finance expense per published results (182.2) (82.9)
----------------- -----------------
Adjustments:
Net fair value losses/(gains) on debt
and derivative instruments 62.6 (43.7)
Interest on swaps and debt under fair
value option 10.1 18.7
Net pension interest income (6.8) (4.5)
Adjustment for capitalised borrowing costs (25.7) (18.5)
Underlying net finance expense (142.0) (130.9)
----------------- -----------------
Profit before tax
GBPm GBPm
Share of (losses)/profits of joint ventures (5.7) 3.4
Profit before tax per published results 195.1 259.6
Adjustments:
Dry weather - 25.0
Restructuring costs 8.7 3.7
Net fair value losses/(gains) on debt
and derivative instruments 62.6 (43.7)
Interest on swaps and debt under fair
value option 10.1 18.7
Net pension interest income (6.8) (4.5)
Capitalised borrowing costs (25.7) (18.5)
Underlying profit before tax 244.0 240.3
----------------- -----------------
Profit after tax
GBPm GBPm
Underlying profit before tax 244.0 240.3
Reported tax charge (36.5) (47.1)
Tax in respect of adjustments to underlying
profit before tax (9.3) 3.7
Underlying profit after tax 198.2 196.9
----------------- -----------------
Earnings per share
GBPm GBPm
Profit after tax per published results
(a) 158.6 212.5
Underlying profit after tax (b) 198.2 196.9
Weighted average number of shares in issue,
in millions (c) 681.9m 681.9m
Earnings per share per published results,
in pence (a/c) 23.3p 31.2p
Underlying earnings per share, in pence
(b/c) 29.1p 28.9p
Interim dividend per share 14.20p 13.76p
PRINCIPAL RISKS AND UNCERTAINTIES
In delivering our group-wide activity we are faced with a range
of risks which can threaten the quality of the services we provide,
introduce delays and ultimately increase cost and damage the
reputation of the group. We anticipate and mitigate these risks
through an embedded risk management framework which includes:
-- A consistent and reliable enterprise-wide risk management process;
-- A governance and reporting structure which enables the board
to oversee and direct the control of risk;
-- Definition of risk appetite by the board with an overarching
general risk appetite supplemented where appropriate by specific
risk appetites for certain risks;
-- An ISO 31000:2018 aligned assessment and mitigation process; and
-- Policies, practical guidance and training programmes to
enable our people to identify, quantify and manage risk
effectively.
Our risk identification and management activities are continuous
and ongoing, with each functional and operational area responsible
for assessing, articulating and controlling relevant risks.
This includes horizon scanning of the internal and external
business environment, to identify and review new and emerging risks
that could lead to a future impact or emerging circumstances of
existing risk that could affect the exposure in the short to medium
term.
Risk events are assessed in their current state for the
likelihood of occurrence based on the level of threat and the
vulnerability of controls, together with the financial and
reputational impacts should the identified events materialise.
Where we are not satisfied that the current state is consistent
with our general risk appetite, or where it could present an
unacceptable risk in relation to a specific risk appetite, we
determine an appropriate risk exposure as a target state and
develop further mitigating controls to deliver this position within
an appropriate time frame.
In order to maintain adequate oversight of risk, there are
various steering groups and governance forums that focus on
individual risks which then escalate and share progress to the
group audit and risk board either directly or via the operational
risk and resilience board.
A complete oversight of our enterprise wide profile is presented
every six months to the group board to highlight the nature and
extent of the current risk exposure with focus on the most
significant risks relative to the group's principal risks. These
principal risks were set out on pages 72-75 of the 2019 United
Utilities Group PLC Annual Report and Financial Statements and are:
(1) Political and regulatory; (2) Conduct and Compliance; (3) Water
service; (4) Wastewater service; (5) Retail and commercial; (6)
Financial; (7) Supply Chain and Programme delivery; (8) Resource;
(9) Security; and (10) Health, safety and environmental. They
reflect the categories of risks that define business activity or
contributing factors where value can be lost or gained and could
have a material impact on the business model, future performance,
solvency or liquidity of the group. In each case the nature and the
extent of exposure is highlighted together with the extent of
management/mitigation. To ensure relevance with the current
environment, issues or areas of uncertainty are also
illustrated.
Reports to the board highlight major risks based on 1) the
highest impact business risks across the group and 2) the highest
impact operational risks. These comprise the 10 highest scoring
risks assessed on the basis of likelihood and financial impact for
each of the two categories. In addition, the report covers risks
which were scored highly for the severity of their impacts in their
current state (net of control effectiveness) but remote on
likelihood. The board report also highlights risks where there
could be significant reputational impact or which relate to
significant new or emerging risks or issues, but which are not
encompassed within the other reported categories.
Our approach is in accordance with the UK Corporate Governance
Code and incorporates reporting to the group board for every full
and half year statutory accounting period. This enables the board
to:
-- Determine the nature and extent of the principal risks it is
willing to take in achieving its strategic objectives;
-- 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.
Key developments
Ofwat's Initial Assessment of Plans (IAP) following the price
review submission recognised our leading approach to risk and
resilience. Our approach is a combination of top down assessment,
where we consider the impacts on strategic delivery, and a bottom
up assessment where we consider localised operational performance,
asset health and operational hazards. We have an established
approach for the two elements, but continue to drive improved
maturity through various initiatives which focus on improved
appreciation of related data and information to understand our
long-term risk profile, to support decision making and to deliver a
cost-effective and proportionate risk management response which
drives resilience.
These initiatives include:
-- Continuation of our focus on cross-business consideration of
strategic and tactical risks, for example an in-depth cyber risk
assessment that took place throughout the year and Brexit
contingency planning as covered below;
-- Improvement of our maturity in relation to risk appetite - we
have commenced reporting against a general risk appetite boundary
and, where appropriate, specific risk appetite boundaries enabling
more targeted discussions over the last year (an approach we intend
to continue to develop and embed);
-- Development of the assessment and reporting of the full
distribution of impacts, including possible maximum and minimum
outcomes as well as more likely occurrences. This supports our
focus on long-term resilience and tests our response and recovery
plans and expectations;
-- Ongoing development of our operational risk and asset
planning process to prioritise investment and operational
management through the identification of risks and issues and
monitoring of strategic performance requirements; and
-- An assurance-based strategy within the engineering and
programme management team introducing programme and portfolio risk
responsibilities and improving capability by focusing on reliable
risk information, ownership and learning from risk events.
Profile features
Our risk profile, which currently consists of around 100
event-based risks, is enterprise wide, covering risk across the
entire group and considering both internal and external drivers. By
their nature, these risks will include many combinations of high to
low likelihood and high to low impact.
Political and regulatory risk and uncertainty feature
prominently within the profile, notably with the outcome of PR19
being delivered this calendar year. The possibility of
'renationalisation' is a key area of uncertainty as is the opening
up to competition of upstream markets (including the current focus
on possible competition in bioresources and water abstraction) and
the potential for competition covering domestic retail
activities.
Our operations continue to be substantially UK-based, but the
potential impacts of Brexit remain under review and have been
reported to the group board. In common with other UK companies, a
significant issue is the uncertainty surrounding the effects of any
Brexit deal that the UK Government may ultimately deliver and the
possibility of a no-deal Brexit. Our review has considered the
availability of European funding, the availability of critical
goods (including chemicals and spare parts) through our supply
chain, the price of goods and services due to tariff changes,
exchange rate changes and potential inflationary shifts outside
current predicted parameters, the effect to the labour resource of
both the company and our delivery partners and our ability to
collect cash were there to be an economic downturn. For each of
these consequences, the impact assessment considers a range of
possible scenarios and we have developed a contingency plan (in
collaboration with key stakeholders including Water UK and Defra)
which has involved discussing the implications of Brexit, including
the no-deal scenario, with our key suppliers and capital delivery
partners, as well as considering mitigation measures such as
stockpiling and using alternative suppliers, a large proportion of
which is already built into our multi-party frameworks.
Following the launch of non-household retail competition in
April 2017, we have continued to monitor our operations in the
market to review compliance risks and to ensure that we continue to
operate in a manner that complements and promotes the 'level
playing field'.
From an operational risk perspective, the potential for
penalties against Ofwat's outcome delivery incentive mechanism
and/or environmental fines continue to be key features of evolving
exposure. Reputationally, our core operations/service provision
(notably water service) and health, safety and environmental risks
have the highest focus for monitoring and reviewing control
effectiveness based on the potential impact should the risk event
occur.
We continue to adapt to and plan for climate change and its
significant and permanent impacts on the water cycle, our
operations and the broader operating environment. This includes
consideration of the long-term sustainability of water and
wastewater services such as water abstraction, drinking water
supply and treatment capability, drainage and sewer capacity,
wastewater treatment and its discharge efficiency and
effectiveness. The recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD) support and reinforce
the need to consider climate related risks and uncertainties. These
continue to be factored into risk management and the likely effects
of future changes are a critical consideration in our long and
medium-term risk, operational and financial planning. Our water
service and wastewater service risks also reflect current key risks
including the potential for extreme weather and climate change.
Emerging risks and issues
We monitor the internal and external business environment, to
identify and review new and emerging risks to our strategy or
operations and emerging circumstances of existing risk that could
affect our risk exposure in the short to medium term. If new and
emerging risks or circumstances are too far into the future or we
lack sufficient detail to make a reliable quantification, they are
summarised as a watching brief and reported to the corporate
responsibility committee and to the board in the six-monthly
reporting cycle. New and emerging risks of note are climate change,
water scarcity, plastics and biosolids.
Material litigation
The group robustly defends litigation where appropriate and
seeks to minimise its exposure by establishing provisions and
seeking recovery wherever possible. Litigation of a material nature
is regularly reported to the group board.
Beyond that reported in previous years on the Argentina
multiparty 'class action' and the Manchester Ship Canal Company
matters (to which there have been no material developments), there
is nothing specific to report on material litigation.
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 ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Revenue (note 3) 935.5 916.4 1,818.5
------------------ ------------------ ------------
Employee benefits expense (note
4) (82.0) (80.0) (169.6)
Other operating costs (note 5) (205.2) (220.7) (449.3)
Other income 2.0 2.0 3.6
Depreciation and amortisation expense (199.3) (191.0) (393.2)
Infrastructure renewals expenditure (68.0) (87.6) (175.1)
------------------ ------------------ ------------
Total operating expenses (552.5) (577.3) (1,183.6)
------------------ ------------------ ------------
Operating profit 383.0 339.1 634.9
Investment income (note 6) 11.7 7.8 17.1
Finance expense (note 7) (193.9) (90.7) (222.5)
------------------ ------------------ ------------
Investment income and finance expense (182.2) (82.9) (205.4)
Share of profits/(losses) of joint
ventures (note 11) (5.7) 3.4 6.7
Profit before tax 195.1 259.6 436.2
Current tax charge (24.1) (28.9) (38.8)
Deferred tax charge (12.4) (18.2) (34.0)
Tax (note 8) (36.5) (47.1) (72.8)
Profit after tax 158.6 212.5 363.4
------------------ ------------------ ------------
All of the results shown above relate to continuing
operations.
Earnings per share (note 9)
Basic 23.3p 31.2p 53.3p
Diluted 23.2p 31.1p 53.2p
Dividend per ordinary share (note
10) 14.20p 13.76p 41.28p
Consolidated statement of comprehensive income
Re-presented*
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Profit after tax 158.6 212.5 363.4
Other comprehensive income
Items that may be reclassified to profit
or loss in subsequent periods:
Cash flow hedge effectiveness 1.5 13.3 0.4
Tax on items taken directly to equity
(note 8) (0.3) (2.3) (0.1)
Foreign exchange adjustments 1.7 0.7 (0.8)
Other comprehensive income that may
be reclassified to profit or loss 2.9 11.7 (0.5)
Items that will not be reclassified
to profit or loss in subsequent periods:
Remeasurement gains/(losses) on defined
benefit pension schemes (note 13) 105.9 (43.3) 73.0
Change in credit assumptions for debt
reported at fair value through profit
or loss 5.7 2.6 6.6
Cost of hedging - cross currency basis
spread adjustment 1.5 0.1 (2.2)
Tax on items taken directly to equity
(note 8) (145.1) 7.4 (13.1)
Other comprehensive income that will
not be reclassified to profit or loss (32.0) (33.2) 64.3
Total comprehensive income 129.5 191.0 427.2
-------------- -------------- ------------
*These comparatives have been re-presented to better reflect the
impact of adopting IFRS 9 and IFRS 15. (See note 1 for further
details).
Consolidated statement of financial position
Re-presented*
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 11,359.1 10,944.3 11,153.4
Intangible assets 196.1 212.0 202.7
Interests in joint ventures (note
11) 69.8 77.0 79.0
Non-current assets held for sale 11.7 - -
(note 12)
Investments 0.1 11.5 11.5
Trade and other receivables 138.3 143.4 148.1
Retirement benefit surplus (note
13) 698.7 326.3 483.9
Derivative financial instruments 601.1 443.7 387.8
--------------- --------------
13,074.9 12,158.2 12,466.4
--------------- -------------- -----------
Current assets
Inventories 16.2 14.3 14.9
Trade and other receivables 264.8 284.9 249.5
Current tax asset 25.5 6.3 16.4
Cash and short-term deposits 621.6 259.6 339.3
Derivative financial instruments 94.7 163.6 101.3
-----------
1,022.8 728.7 721.4
--------------- -------------- -----------
Total assets 14,097.7 12,886.9 13,187.8
--------------- -------------- -----------
LIABILITIES
Non-current liabilities
Trade and other payables (736.2) (667.8) (697.3)
Borrowings (note 14) (7,782.0) (7,143.7) (7,115.6)
Deferred tax liabilities (1,303.7) (1,113.3) (1,146.0)
Derivative financial instruments (137.4) (70.5) (66.1)
-----------
(9,959.3) (8,995.3) (9,025.0)
--------------- -------------- -----------
Current liabilities
Trade and other payables (323.8) (338.5) (321.2)
Borrowings (note 14) (730.5) (563.1) (700.2)
Provisions (19.4) (19.5) (16.8)
Derivative financial instruments (13.8) (3.7) (13.8)
-----------
(1,087.5) (924.8) (1,052.0)
--------------- -------------- -----------
Total liabilities (11,046.8) (9,920.1) (10,077.0)
--------------- -------------- -----------
Total net assets 3,050.9 2,966.8 3,110.8
--------------- -------------- -----------
EQUITY
Share capital 499.8 499.8 499.8
Share premium account 2.9 2.9 2.9
Other reserves (note 18) 342.4 352.4 338.3
Retained earnings 2,205.8 2,111.7 2,269.8
-----------
Shareholders' equity 3,050.9 2,966.8 3,110.8
--------------- -------------- -----------
*These comparatives have been re-presented to better reflect the
impact of adopting IFRS 9 and IFRS 15. (See note 1 for further
details).
Consolidated statement of changes in equity
Six months ended 30 September 2019
Share
Share premium (1) Other Retained
capital account reserves earnings Total
GBPm GBPm GBPm GBPm GBPm
At 1 April 2019 499.8 2.9 338.3 2,269.8 3,110.8
Profit after tax - - - 158.6 158.6
Other comprehensive income/(expense)
Remeasurement gains on defined
benefit pension schemes (note
13) - - - 105.9 105.9
Change in credit assumption
for debt reported at fair value
through profit or loss - - - 5.7 5.7
Cash flow hedge effectiveness - - 1.5 - 1.5
Cost of hedging - cross currency
basis spread adjustment - - 1.5 - 1.5
Tax on items taken directly
to equity (note 8) - - (0.6) (144.8) (145.4)
Foreign exchange adjustments - - 1.7 - 1.7
Total comprehensive income - - 4.1 125.4 129.5
-------------------------------------- --------- --------- ------------ ---------- --------
Dividends (note 10) - - - (187.7) (187.7)
Equity-settled share-based payments - - - 0.2 0.2
Exercise of share options -
purchase of shares - - - (1.9) (1.9)
-------------------------------------- --------- --------- ------------ ---------- --------
At 30 September 2019 499.8 2.9 342.4 2,205.8 3,050.9
-------------------------------------- --------- --------- ------------ ---------- --------
Six months ended 30 September 2018
Share
Share premium (1) Other Retained
capital account reserves earnings Total
Re-presented* GBPm GBPm GBPm GBPm GBPm
At 31 March 2018 499.8 2.9 327.9 2,120.3 2,950.9
Adjustment on initial adoption
of IFRS 9 - - 12.7 (12.7) -
Adjustment on initial adoption
of IFRS 15 - - - 5.9 5.9
At 1 April 2018 499.8 2.9 340.6 2,113.5 2,956.8
Profit after tax - - - 212.5 212.5
Other comprehensive income/(expense)
Remeasurement losses on defined
benefit pension schemes (note
13) - - - (43.3) (43.3)
Change in credit assumption
for debt reported at fair value
through profit or loss - - - 2.6 2.6
Cash flow hedge effectiveness - - 13.3 - 13.3
Cost of hedging - cross currency
basis spread adjustment - - 0.1 - 0.1
Tax on items taken directly
to equity (note 8) - - (2.3) 7.4 5.1
Foreign exchange adjustments - - 0.7 - 0.7
Total comprehensive income - - 11.8 179.2 191.0
-------------------------------------- --------- --------- ------------ ---------- --------
Dividends (note 10) - - - (180.6) (180.6)
Equity-settled share-based payments - - - 1.6 1.6
Exercise of share options -
purchase of shares - - - (2.0) (2.0)
-------------------------------------- --------- --------- ------------ ---------- --------
At 30 September 2018 499.8 2.9 352.4 2,111.7 2,966.8
-------------------------------------- --------- --------- ------------ ---------- --------
*These comparatives have been re-presented to better reflect the
impact of adopting IFRS 9 and IFRS 15. (See note 1 for further
details).
Year ended 31 March 2019
Share
Share premium (1) Other Retained
capital account reserves earnings Total
GBPm GBPm GBPm GBPm GBPm
At 31 March 2018 499.8 2.9 327.9 2,120.3 2,950.9
Adjustment on initial adoption of
IFRS 9 - - 12.7 (12.7) -
Adjustment on initial adoption of
IFRS 15 - - - 5.9 5.9
At 1 April 2018 499.8 2.9 340.6 2,113.5 2,956.8
Profit after tax - - - 363.4 363.4
Other comprehensive income/(expense)
Remeasurement gains on defined benefit
pension schemes (note 13) - - - 73.0 73.0
Change in credit assumption for debt
reported at fair value through profit
or loss - - - 6.6 6.6
Cash flow hedge effectiveness - - 0.4 - 0.4
Cost of hedging - cross currency basis
spread adjustment - - (2.2) - (2.2)
Tax on items taken directly to equity
(note 8) - - 0.3 (13.5) (13.2)
Foreign exchange adjustments - - (0.8) - (0.8)
Total comprehensive income - - (2.3) 429.5 427.2
---------------------------------------- --------- --------- ---------- ---------- --------
Dividends (note 10) - - - (274.4) (274.4)
Equity-settled share-based payments - - - 4.0 4.0
Exercise of share options - purchase
of shares - - - (2.8) (2.8)
---------------------------------------- --------- --------- ---------- ---------- --------
At 31 March 2019 499.8 2.9 338.3 2,269.8 3,110.8
---------------------------------------- --------- --------- ---------- ---------- --------
(1) Other reserves comprise the group's cumulative exchange
reserve, merger reserve, cost of hedging reserve, and cash flow
hedging reserve. The cost of hedging and cash flow hedging reserves
were included as separate components of equity for the first time
in the year ended 31 March 2019 as a result of the group's adoption
of IFRS 9 'Financial Instruments'.
Further detail of movements in these reserves is included in
note 18.
Consolidated statement of cash flows
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Operating activities
Cash generated from operations (note
16) 465.2 507.1 995.5
Interest paid (72.4) (66.2) (143.0)
Interest received and similar income 4.5 3.3 7.3
Tax paid (49.0) (6.0) (27.5)
Tax received 15.8 - -
Net cash generated from operating
activities 364.1 438.2 832.3
-------------- -------------- ------------
Investing activities
Purchase of property, plant and
equipment (328.0) (302.6) (622.3)
Purchase of intangible assets (13.1) (13.3) (39.9)
Proceeds from sale of property,
plant and equipment 0.3 1.2 2.1
Grants and contributions received 19.5 17.2 35.2
Loans to joint ventures 9.9 (6.0) (6.0)
Dividends received from joint ventures 4.9 2.3 2.2
Proceeds from investments 0.5 0.6 1.0
-------------- --------------
Net cash used in investing activities (306.0) (300.6) (627.7)
-------------- --------------
Financing activities
Proceeds from borrowings 475.2 120.7 568.4
Repayment of borrowings (64.2) (337.5) (668.6)
Dividends paid to equity holders
of the company (note 10) (187.7) (180.6) (274.4)
Exercise of share options - purchase
of shares (1.9) (2.0) (2.8)
Net cash generated from/(used in)
financing activities 221.4 (399.4) (377.4)
-------------- -------------- ------------
Net increase/(decrease) in cash
and cash equivalents 279.5 (261.8) (172.8)
Cash and cash equivalents at beginning
of the period 324.6 497.4 497.4
-------------- -------------- ------------
Cash and cash equivalents at end
of the period 604.1 235.6 324.6
-------------- -------------- ------------
NOTES
1. Basis of preparation and accounting policies
The condensed consolidated financial statements for the six
months ended 30 September 2019 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 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 2019.
The comparative figures for the year ended 31 March 2019 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.
The comparative figures included in the consolidated statement
of comprehensive income, consolidated statement of financial
position, and consolidated statement of changes in equity for the
six months ended 30 September 2018 have been re-presented to better
reflect the impact of adopting IFRS 9 'Financial Instruments' and
IFRS 15 'Revenue from Contracts with Customers' and ensure
consistency with the 31 March 2019 audited financial statements.
This has resulted in a GBP13.9 million cost of hedging reserve
being recorded at 30 September 2018, of which GBP13.8 million
relates to a reclassification from retained earnings to the cost of
hedging reserve at 1 April 2018 on adoption of IFRS 9, and GBP0.1
million relates to basis spread adjustments during the six months
ended 30 September 2018. Further details of this cost of hedging
reserve are included in note 18. In addition to this, the impact of
a GBP3.3 million reduction in deferred tax liabilities on adoption
of IFRS 15 has been reflected in the re-presented consolidated
statement of financial position and consolidated statement of
changes in equity for the six months ended 30 September 2018.
The accounting policies, presentation and methods of computation
are prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU) and are
consistent with those applied in the audited financial statement of
United Utilities Group PLC for the year ended 31 March 2019 with
the exception of the adoption of IFRS 16 'Leases'. Adoption of this
standard is in line with expectations set out in the March 2019
group financial statements.
Impact of newly adopted standards
IFRS 16 'Leases'
The group adopted IFRS 16 on 1 April 2019, applying the modified
retrospective transitional approach permitted by the standard in
which both the right-of-use assets and lease liabilities brought
onto the balance sheet were based on the present value of future
lease payments at the adoption date calculated using the
appropriate discount rate at 1 April 2019. Prior year comparatives
have not been restated. The group has utilised the practical
expedient permitted by the standard whereby a single discount rate
has been applied to portfolios of leases with reasonably similar
characteristics. Following initial adoption of the standard, lease
liabilities and right-of-use assets for new leases are based on the
appropriate discount rate at the date the new contract is entered
into.
The value of right-of-use assets and lease liabilities brought
onto the balance sheet on 1 April was GBP54.4 million; there was no
effect on retained earnings at the adoption date. The income
statement charge during the period to 30 September 2019 has been
GBP1.8 million, split between GBP1.0 million of depreciation of the
right-of-use assets and GBP0.8 million in relation to the finance
charge recognised on the lease liabilities. This compares with
GBP1.6 million of operating lease expenses that would have been
recognised under IAS 17. Although the adoption of IFRS 16 has
directly impacted the profit for the group during the period, the
modest GBP0.2m impact means that the earnings per share and diluted
earnings per share of the group would have been unchanged had IFRS
16 not been adopted. There has been no net cash flow impact arising
from the application of the new standard.
At 30 September 2019 the value of right-of-use assets included
within property, plant and equipment was GBP54.4 million and the
value of lease liabilities included within borrowings was GBP54.5
million, of which GBP51.4 million was classified as non-current and
GBP3.1 million was classified as current.
As part of the group's transition to IFRS 16 an exercise was
carried out to assess whether contracts it has entered into are, or
contain, leases as defined by the new standard. This has resulted
in some differences between the population of contracts identified
as containing leases under previous accounting standards, and for
which operating lease commitments were disclosed at 31 March 2019,
and the population of contracts deemed to contain leases under IFRS
16. Had all operating lease commitments disclosed under previous
accounting standards at 31 March 2019 been recognised as leases
under IFRS 16, by discounting future lease payments using the
group's weighted average incremental borrowing rate applied to
lease liabilities of 3.09 per cent, the right-of-use assets and
lease liabilities brought onto the balance sheet would have been
GBP18.0 million higher. Expenses relating to those contracts that
do not contain leases within the scope of IFRS 16 continue to be
recognised as operating expenses in the income statement over the
terms of the agreements.
The typical items that the group leases include land, buildings,
and vehicles. The value of both right-of-use assets and lease
liabilities is based on the present value of lease payments due
over the term of the lease, with the asset being depreciated in
accordance with IAS 16 'Property, Plant and Equipment' and the
liability increased for the accretion of interest (being the
unwinding of the discounting applied to the future lease payments)
and reduced by lease payments. The group does not act as a
lessor.
The key judgements associated with applying this standard relate
to the identification and classification of contracts containing a
lease within the scope of IFRS 16, and the discount rate to use in
calculating the present value of future lease payments on which the
reported lease liability and right-of-use asset is based when it is
not implicit in the lease contract.
Due to the nature of the group's operations, many of the current
leases have long remaining terms, which causes the discount rate to
be a key factor in determining the value of the lease liability.
When the interest rate is not implicit in the lease, which is the
case for materially all of the group's leases recognised under IFRS
16, the discount rate used is based on the relevant group company's
nominal incremental borrowing rate adjusted for the payment profile
and term of each lease.
The group has applied recognition exemptions permitted by the
standard in relation to short-term leases and leases of low-value
items.
The adoption of IFRS 16 has not impacted the group's ability to
comply with any banking or financing covenants.
New and revised standards not yet effective
Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and
IFRS 7
In September 2019 the IASB published amendments to IFRS 9
'Financial Instruments', IAS 39 'Financial Instruments: Recognition
and Measurement' and IFRS 7 'Financial Instruments: Disclosures' in
respect of interest rate benchmark reform, which are effective for
annual periods beginning on or after 1 January 2020. These
amendments provide temporary exceptions from applying specific
hedge accounting requirements where a hedging relationship is
directly affected by interest rate benchmark reform, being the
market-wide reform of an interest rate benchmark, including the
replacement of an interest rate benchmark with an alternative
benchmark rate.
As the group has a significant proportion of debt and derivative
financial instruments designated in fair value hedge relationships
that are linked to LIBOR, which is expected to be replaced by an
alternative interest rate benchmark after 2021, these amendments
will be applicable to the group's hedge accounting. The temporary
exceptions provided for in the amendments mean that no changes to
the group's hedge accounting are expected to the extent that they
are impacted by interest rate benchmark reform.
The group's treasury function is actively considering and
preparing for the potential implications of interest rate benchmark
reform in anticipation of any changes.
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. In assessing
the appropriateness of the going concern basis of accounting, the
directors have reviewed the resources available to the group,
taking account of the group's financial projections together with
its liquidity position with regards to available cash and undrawn
committed borrowing facilities, as well as consideration of the
group's capital adequacy. The board has also 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, none of which have
changed significantly from the position as at 31 March 2019.
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
group's performance is measured against financial and operational
key performance indicators, 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. Revenue
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Wholesale water charges 398.4 383.4 767.4
Wholesale wastewater charges 465.4 460.7 905.8
Residential retail charges 44.7 45.9 86.7
Other 27.0 26.4 58.6
--------------- ---------------
935.5 916.4 1,818.5
--------------- --------------- -----------
4. Employee benefits expense
Included within employee benefits expense were GBP8.7 million
(30 September 2018: GBP3.7 million, 31 March 2019: GBP7.2 million)
of restructuring costs.
Included within employee costs for the year ended 31 March 2019
were GBP1.4 million of costs incurred in relation to the group's
response to a severe dry weather event experienced in that year. Of
these, GBP0.9 million was incurred in the six months ended 30
September 2018. In addition, GBP6.6 million of costs associated
with the equalisation of Guaranteed Minimum Pension (GMP) benefits
were recognised in the second half of the year ended 31 March
2019.
5. Other operating costs
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Hired and contracted services 47.2 57.2 112.2
Property rates 39.3 45.6 94.7
Materials 36.9 41.2 77.8
Power 36.6 34.1 72.8
Regulatory fees 14.1 17.3 32.5
Charge for bad and doubtful receivables 11.8 13.2 26.5
Loss on disposal of property,
plant and equipment 2.1 0.4 3.9
Cost of properties disposed - 2.9 4.7
Settlement of commercial claims - (9.9) (9.9)
Other expenses 17.2 18.7 34.1
--------------- --------------- -------------
205.2 220.7 449.3
--------------- --------------- -------------
Property rates expenses in the six months ended 30 September
2019 include the impact of a GBP9.2 million reduction agreed with
HMRC resulting from a revision to the rateable values of certain
properties. This reduction ensures that the cumulative property
rates paid by the group are appropriately recorded. Of this, GBP8.1
million was received as a refund in the current year for rates paid
in previous years, and GBP1.1 million was recognised as a reduction
of current year property rates.
During the year ended 31 March 2019, as a result of the group's
response to a severe dry weather event, there were GBP36.1 million
of expenses incurred, comprising GBP24.2 million of other operating
costs, GBP10.5 million of infrastructure renewals expenditure, and
GBP1.4 million of employee costs (see note 4). Of these, other
operating costs of GBP17.3 million, infrastructure renewals
expenditure of GBP6.8 million, and employee costs of GBP0.9 million
were incurred during the six months to 30 September 2018.
Total other operating costs are stated net of GBPnil (30
September 2018 and 31 March 2018: GBP0.2 million) costs recharged
to Water Plus at nil margin under transitional service
agreements.
6. Investment income
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2019
2019 2018 GBPm
GBPm GBPm
Interest receivable 4.9 3.3 7.6
Net pension interest income (note
13) 6.8 4.5 9.5
--------------- ---------------
11.7 7.8 17.1
--------------- --------------- -------------
7. Finance expense
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Interest payable 131.3 134.4 232.0
Net fair value (losses)/gains
on debt and derivative instruments 62.6 (43.7) (9.5)
--------------- --------------- -------------
193.9 90.7 222.5
--------------- --------------- -------------
Interest payable is stated net of GBP25.7 million (30 September
2018: GBP18.5 million, 31 March 2019: GBP37.4 million) borrowing
costs capitalised in the cost of qualifying assets within property,
plant and equipment and intangible assets during the period.
Interest payable includes a GBP70.9 million (30 September 2018:
GBP67.1 million, 31 March 2019: GBP98.3 million) non-cash,
inflation uplift charge in relation to the group's index-linked
debt.
Net fair value (losses)/gains on debt and derivative instruments
includes GBP10.1 million income (30 September 2018: GBP18.7
million, 31 March 2019: GBP30.6 million) due to net interest on
derivatives and debt designated at fair value.
8. Tax
The total effective tax rate for the current and prior period
was in line with the headline rate of 19 per cent. 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 arising from a change in the rate at which the deferred tax
liabilities are measured, from 17 per cent to 35 per cent. This
change in rate reflects a revised judgement as to the most likely
method by which the defined benefit pension surplus would be
realised. Whereas previously it was assumed that the surplus could
be realised through a reduction in future contributions, management
now consider that the most likely method of realisation would be
through a refund, which would be taxed at the rate applicable to
refunds from a trust (currently 35 per cent).
9. 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 2019 for the purpose of the basic earnings per
share was 681.9 million (30 September 2018 and 31 March 2019: 681.9
million) and for the diluted earnings per share was 683.2 million
(30 September 2018: 683.0 million, 31 March 2019: 683.4
million).
10. Dividends
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Dividends relating to the period
comprise:
Interim dividend 96.8 93.8 93.8
Final dividend - - 187.7
-------------- -------------- -------------
96.8 93.8 281.5
-------------- -------------- -------------
Dividends deducted from shareholders'
equity comprise:
Interim dividend - - 93.8
Final dividend 187.7 180.6 180.6
-------------- -------------- -------------
187.7 180.6 274.4
-------------- -------------- -------------
The interim dividends for the six months ended 30 September 2019
and 30 September 2018, and the final dividend for the year ended 31
March 2019, have not been included as liabilities in the respective
condensed consolidated financial statements at 30 September 2019
and 30 September 2018, and the consolidated financial statements at
31 March 2019, because they were approved after the reporting
date.
The interim dividend of 14.20 pence per ordinary share (2018:
interim dividend of 13.76 pence per ordinary share, final dividend
of 27.52 pence per ordinary share) is expected to be paid on 1
February 2020 to shareholders on the register at the close of
business on 20 December 2019. The ex-dividend date for the interim
dividend is 19 December 2019.
11. Joint ventures
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
At the start of the period 79.0 75.2 75.2
Share of (losses)/profits of joint
ventures (5.7) 3.4 6.7
Dividends received from joint
ventures (4.7) (2.3) (2.2)
Currency translation differences 1.2 0.7 (0.7)
-------------- -------------- -------------
At the end of the period 69.8 77.0 79.0
-------------- -------------- -------------
The group's interests in joint ventures mainly comprise its
interests in Water Plus Group Limited (Water Plus) and AS Tallinna
Vesi (Tallinn Water). Water Plus is jointly owned and controlled by
the group and Severn Trent PLC under a joint venture agreement.
Joint management of Tallinn Water is based on a shareholders'
agreement.
As reported in the group's latest annual report, Water Plus has
suffered a deterioration in its working capital position due to
billing data issues stemming from the opening of the non-household
retail market in April 2017. These issues have continued to result
in a challenging operating environment for Water Plus, resulting in
a GBP9.3 million share of loss in the six months to 30 September
2019. Given the challenging operating environment, the group has
reviewed its impairment assessment of Water Plus and concluded that
its recoverable amount at 30 September 2019 remains in excess of
its carrying value, although with reduced headroom.
Tallinn Water has disclosed in its latest financial statements
that there could be possible third party claims of up to EUR 28.6
million (31 March 2019: EUR 28.6 million) over and above those for
which a provision has been recognised in its financial statements.
If these additional claims were to materialise in the future this
would impact the group's share of profits of the joint venture and
therefore the joint venture's carrying value under the equity
method of accounting.
Details of transactions between the group and its joint ventures
are disclosed in note 20.
12. Non-current assets held for sale
During the period ended 30 September 2019 the group's overseas
investment in the Muharraq sewerage treatment plant (STP) was
reclassified from investments to non-current assets held for sale
on reaching an agreement to sell the asset. Consideration for the
disposal is expected to be equal to the fair value at which the
asset is carried. As the investment had previously been classified
as a financial asset measured at fair value through profit or loss,
no adjustment to its carrying amount was required on its transfer
to non-current assets held for sale.
Movements on the Muharraq STP asset in the current and prior
periods, when it was recognised within investments, were as
follows:
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
At the start of the period 11.4 7.0 7.0
Change in fair value 0.2 4.1 4.4
Reduction in investment stake (0.5) (0.6) (1.0)
Currency translation differences 0.6 0.9 1.0
-------------- -------------- -------------
At the end of the period 11.7 11.4 11.4
-------------- -------------- -------------
13. 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
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
% p.a. % p.a. % p.a.
Discount rate 1.80 2.90 2.40
Pensionable salary growth and pension
increases 3.25 3.45 3.45
Price inflation - RPI 3.25 3.45 3.45
Price inflation - CPI 1.95 2.05 2.05
The discount rate is consistent with a high quality corporate
bond rate with 1.80 per cent being equivalent to gilts + 90 basis
points (31 March 2019: 2.40 per cent being equivalent to gilts + 90
basis points, September 2018: 2.90 per cent being equivalent to
gilts + 105 basis points).
At both 30 September 2019 and 31 March 2019, mortality in
retirement is assumed to be in line with the Continuous Mortality
Investigation's (CMI) S2PA year of birth tables, with scaling
factor of 106 per cent and 109 per cent for male pensioners and
non-pensioners respectively, and 104 per cent and 105 per cent for
female pensioners and non-pensioners respectively (September 2018:
108 per cent for males and 102 per cent for females), reflecting
actual mortality experience. At both 30 September 2019 and 31 March
2019, mortality in retirement is based on CMI 2018 (30 September
2018: CMI 2017) long-term improvement factors, with a long-term
annual rate of improvement of 1.50 per cent (30 September 2018:
1.75 per cent).
The net pension expense before tax charged to the income
statement in respect of the defined benefit schemes is summarised
as follows:
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Current service cost 3.1 2.8 6.2
Curtailments/settlements 3.3 1.4 9.0
Administrative expenses 0.7 1.2 2.8
Pension expense charged to operating
profit 7.1 5.4 18.0
Net pension interest income credited
to investment income (note 6) (6.8) (4.5) (9.5)
-------------- -------------- -------------
Net pension expense charged before
tax 0.3 0.9 8.5
-------------- -------------- -------------
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 2019
2019 2018 GBPm
GBPm GBPm
At the start of the period 483.9 344.2 344.2
Expense recognised in the income
statement (0.3) (0.9) (8.5)
Contributions less unregistered
pension promise payments 109.2 26.3 75.2
Remeasurement gains/(losses) gross
of tax 105.9 (43.3) 73.0
-------------- -------------- -----------
At the end of the period 698.7 326.3 483.9
-------------- -------------- -----------
The closing surplus at each reporting date is analysed as
follows:
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Present value of defined benefit
obligations (3,671.4) (3,340.9) (3,425.2)
Fair value of schemes' assets 4,370.1 3,667.2 3,909.1
------------- ------------- ----------
Net retirement benefit surplus 698.7 326.3 483.9
------------- ------------- ----------
The GBP105.9 million remeasurement gain is mainly due to a
significant reduction in the discount rate resulting primarily from
a fall in gilt yields. This results in an increase in the defined
benefit surplus on an IAS 19 accounting basis due to the technical
scheme liabilities, which are subject to hedging under the
Asset-Liability matching strategy, being higher than the IAS 19
liabilities.
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 2019.
In April 2019 accelerated deficit repair contributions of
GBP97.6 million and GBP5.4 million were made to the UUPS and ESPS
respectively. These payments represent the final acceleration of
deficit repair contributions set out in the schedules of
contributions agreed with the schemes' trustees as part of the 31
March 2018 valuation process, and reduce the pension scheme deficit
contributions due from the company down to GBPnil.
As the 2018 valuation basis was consistent with a long-term
target for self-sufficiency, the expectation is that there should
be minimal ongoing reliance on the company by the pension
schemes.
During the prior period, the majority of active members in the
defined benefit sections of the UUPS transitioned to a hybrid
section comprising a capped defined benefit element and a top up
defined contribution component. Pension benefits under the defined
benefit element of the new UUPS hybrid section that became
effective for pensionable service from 1 April 2018 are linked to
CPI rather than RPI.
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 2018 for both the group's ESPS
and UUPS schemes.
On 26 October 2018 the High Court issued its ruling in a
landmark case involving Lloyds Banking Group on GMP. The
implication of the ruling is that GMP will be equalised for males
and females. The impact of GMP equalisation in the prior year under
the chosen C2 method of calculation was GBP5.5 million (0.2% of
liability) for the UUPS and GBP1.1 million (0.3% of liability) for
the ESPS, resulting in an overall increase in the pension liability
at 31 March 2019 of GBP6.6 million as a result of additional
benefits being recognised, with a corresponding amount recorded in
past service costs in the income statement. Any future true up
costs will be accounted for in OCI as a change in management
estimate.
Defined contribution schemes
During the period, the group made GBP10.9 million (30 September
2018: GBP12.4 million, 31 March 2019: GBP23.0 million) of
contributions to defined contribution schemes which are included in
employee benefits expense.
14. Borrowings
New borrowings raised during the six month period ended 30
September 2019, all of which relate to notes issued through private
placement under the Euro medium-term note programme, were as
follows:
-- On 17 April 2019, the group borrowed GBP100 million, CPI-linked, due April 2029.
-- On 3 July 2019 the group issued GBP250 million fixed rate notes due July 2033.
-- On 17 July 2019 the group issued GBP100 million fixed rates
notes in addition to the GBP250 million fixed rates notes issued in
February 2019. These notes are due February 2031 with a coupon rate
of 2.625%.
Borrowings at 30 September 2019 include GBP54.5 million in
relation to lease liabilities recognised for the first time as a
result of the adoption of IFRS 16 'Leases' during the period, of
which GBP51.4 million was classified as non-current and GBP3.1
million were classified as current.
15. Fair values of financial instruments
The fair values of financial instruments are shown in the table
below.
30 September 30 September 31 March
2019 2018 2019
Fair Carrying Fair Carrying Fair Carrying
value value value value value value
GBPm GBPm GBPm GBPm GBPm GBPm
Financial assets at fair value
through profit or loss
Derivative financial assets
- fair value hedge 491.6 491.6 419.5 419.5 329.4 329.4
Derivative financial assets
- held for trading 202.2 202.2 187.8 187.8 158.5 158.5
Derivative financial assets
- cash flow hedge 2.0 2.0 - - 1.2 1.2
Investments(1) 0.1 0.1 11.5 11.5 11.5 11.5
Non-current assets held for
sale(1) 11.7 11.7 - - - -
Financial liabilities at fair
value through profit or loss
Derivative financial liabilities
- fair value hedge - - (11.6) (11.6) (2.3) (2.3)
Derivative financial liabilities
- held for trading (150.3) (150.3) (62.6) (62.6) (75.9) (75.9)
Derivative financial liabilities
- cash flow hedge (0.9) (0.9) - - (1.7) (1.7)
Financial liabilities designated
at fair value through profit
or loss (409.6) (409.6) (360.1) (360.1) (373.9) (373.9)
Financial instruments for which
fair value does not approximate
carrying value
Financial liabilities in fair
value hedge relationships (3,025.3) (2,983.8) (2,651.6) (2,618.7) (2,749.3) (2,765.8)
Other financial liabilities
at amortised cost (6,498.2) (5,064.6) (5,667.8) (4,728.0) (5,781.9) (4,676.1)
---------- ---------- ---------- ---------- ---------- ----------
(9,376.7) (7,901.6) (8,134.9) (7,162.2) (8,484.4) (7,395.1)
---------- ---------- ---------- ---------- ---------- ----------
(1) Prior to the adoption of IFRS 9 'Financial Instruments' on 1
April 2018, investments were classified as available for sale
financial assets in accordance with IAS 39 'Financial Instruments:
Recognition and Measurement'. In the current year, investments
relating to Muharraq STP have been reclassified as non-current
assets held for sale (see note 12).
A decrease in underlying interest rates on index-linked debt
during the period is the principal reason for the increase in the
difference between the fair value and carrying value of the group's
borrowings compared with the position at 31 March 2019.
The group has calculated fair values using quoted prices where
an active market exists, which has resulted in 'level 1' fair value
liability measurement under the IFRS 13 'Fair Value Measurement'
hierarchy of GBP2,627.6 million (30 September 2018: GBP2,338.5
million, 31 March 2019: GBP2,316.9 million) for financial
liabilities in fair value hedge relationships and GBP540.0 million
(30 September 2018: GBP1,801.8 million, 31 March 2019: GBP680.9
million) for other financial liabilities at amortised cost.
The GBP169.8 million increase (30 September 2018: GBP477.7
million decrease, 31 March 2019: GBP1,620.2 million decrease) in
'level 1' fair value liability measurements is largely due to an
increase in the observable quoted bond prices in active markets at
30 September 2019. 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 2019.
16. Cash generated from operations
Six months Year ended
Six months ended ended 31 March
30 September 30 September 2019
2019 2018 GBPm
GBPm GBPm
Operating profit 383.0 339.1 634.9
Adjustments for:
Depreciation of property, plant
and equipment 179.4 174.0 357.3
Amortisation of intangible assets 19.9 17.0 35.9
Loss on disposal of property, plant
and equipment 2.1 0.4 3.9
Amortisation of deferred grants
and contributions (6.6) (3.0) (12.9)
Equity-settled share-based payments
charge 0.2 1.6 4.0
Other non-cash movements - (3.5) -
Changes in working capital:
(Increase)/Decrease in inventories (1.3) 2.5 1.9
(Increase)/Decrease in trade and
other receivables (16.0) (20.6) 11.7
Increase/(Decrease) in trade and
other payables 3.9 23.1 21.3
Increase/(Decrease) in provisions 2.6 (2.6) (5.3)
Pension contributions paid less
pension expense charged to operating
profit (102.0) (20.9) (57.2)
---------------- ------------- ----------
Cash generated from operations 465.2 507.1 995.5
---------------- ------------- ----------
17. Net debt
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
At the start of the period 7,067.3 6,867.8 6,867.8
Net capital expenditure 321.3 297.5 624.9
Dividends (note 10) 187.7 180.6 274.4
Inflation uplift on index-linked
debt (note 7) 70.9 67.1 98.3
Interest 67.9 62.9 135.7
Non-cash movements in lease liabilities* 54.5 - -
Tax 33.2 6.0 27.5
Fair value movements 21.4 (69.2) 27.3
Loans to joint ventures (9.9) 6.0 6.0
Other (2.8) 2.5 0.9
Cash generated from operations
(note 16) (465.2) (507.1) (995.5)
--------------- --------------- -------------
At the end of the period 7,346.3 6,914.1 7,067.3
--------------- --------------- -------------
*As a result of the adoption of IFRS 16 'Leases', the group
recognised lease liabilities on the balance sheet for the first
time during the period ending 30 September 2019.
Net debt comprises borrowings, net of cash and short-term
deposits and derivatives. As such, movements in net debt during the
period reflected in the above reconciliation are impacted by net
cash generated from financing activities as disclosed in the
consolidated statement of cash flows.
Fair value movements includes net fair value losses on debt and
derivative instruments of GBP62.6 million (30 September 2018:
GBP43.7 million gain, 31 March 2019: GBP9.5 million gain)
recognised in the income statement, and GBP8.8 of million gains (30
September 2018: GBP16.0 million, 31 March 2019: GBP4.8 million)
recognised through 'other comprehensive income'. This is offset by
net receipts on swaps and debt designated at fair value of GBP33.1
million (30 September 2018: GBP12.2 million net payment, 31 March
2019: GBP40.6 million net receipt) and foreign exchange gains on
investments measured at fair value through profit or loss of GBP0.6
million (31 March 2019: GBP1.0 million).
In the prior period the group received GBP31.7 million in
settlement of certain cross-currency interest rate swap liabilities
as part of an exercise to manage the mandatory breaks included
within the swap contracts. The receipt is included within 'Proceeds
from borrowings' in the statement of cash flows.
Notional net debt totals GBP7,206.3 million as at 30 September
2019 (30 September 2018: GBP6,935.2 million, 31 March 2019:
GBP6,995.9 million). Notional net debt is calculated as the
principal amount of debt to be repaid, net of cash and short-term
deposits, taking: the face value issued of any nominal sterling
debt; the inflation accreted principal of the group's index-linked
debt; and the sterling principal amount of the cross-currency swaps
relating to the group's foreign currency debt.
18. Other reserves
Six months ended 30 September 2019
Cumulative Cost Cash flow
exchange Merger of hedging hedge
reserve reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm
At 1 April 2019 (3.7) 329.7 12.0 0.3 338.3
Changes in fair value recognised
in other comprehensive income - - 1.5 (0.4) 1.1
Amounts reclassified from other
comprehensive income to profit
or loss - - - 1.9 1.9
Tax on items taken directly to
equity (note 8) - - (0.3) (0.3) (0.6)
Foreign exchange adjustments 1.7 - - - 1.7
At 30 September 2019 (2.1) 329.7 13.2 1.5 342.4
---------------------------------- ----------- --------- ------------- ---------- ------
Six months ended 30 September 2018
Cumulative Cost Cash flow
exchange Merger of hedging hedge
reserve reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm
At 31 March 2018 (1.8) 329.7 - - 329.7
Adjustment on initial application
of IFRS 9 (1.1) - 13.8 - 12.7
At 1 April 2018 (2.9) 329.7 13.8 - 340.6
Changes in fair value recognised
in other comprehensive income - - 0.1 13.9 14.0
Amounts reclassified from other
comprehensive income to profit
or loss - - - (0.6) (0.6)
Tax on items taken directly to
equity (note 8) - - - (2.3) (2.3)
Foreign exchange adjustments 0.7 - - - 0.7
At 30 September 2018 (2.2) 329.7 13.9 11.0 352.4
----------------------------------- ----------- --------- ------------- ---------- ------
Year ended 30 March 2019
Cumulative Cost Cash flow
exchange Merger of hedging hedge
reserve reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm
At 31 March 2018 (1.8) 329.7 - - 329.7
Adjustment on initial application
of IFRS 9 (1.1) - 13.8 - 12.7
At 1 April 2018 (2.9) 329.7 13.8 - 340.6
Changes in fair value recognised
in other comprehensive income - - (2.2) 3.5 1.3
Amounts reclassified from other
comprehensive income to profit
or loss - - - (3.1) (3.1)
Tax on items taken directly to
equity (note 8) - - 0.4 (0.1) 0.3
Foreign exchange adjustments (0.8) - - - (0.8)
At 31 March 2019 (3.7) 329.7 12.0 0.3 338.3
----------------------------------- ----------- --------- ------------- ---------- ------
The merger reserve arose in the year ended 31 March 2009 on
consolidation and represents the capital adjustment to reserves
required to effect the reverse acquisition of United Utilities PLC
by United Utilities Group PLC.
On adoption of IFRS 9 on 1 April 2018, the group recognised the
cost of hedging reserve as a new component of equity. This reserve
reflects accumulated fair value movements on cross-currency swaps
resulting from changes in the foreign currency basis spread, which
represents a liquidity charge inherent in foreign exchange
contracts for exchanging currencies and is excluded from the
designation of cross-currency swaps as hedging instruments.
On adoption of IFRS 9, the group designated a number of swaps
hedging non-financial risks in cash flow hedge relationships in
order to give a more representative view of operating costs. Fair
value movements relating to the effective part of these swaps are
recognised in other comprehensive income and accumulated in the
cash flow hedging reserve.
19. Commitments and contingent liabilities
At 30 September 2019 there were commitments for future capital
expenditure contracted but not provided for of GBP249.8 million (30
September 2018: GBP372.5 million, 31 March 2019: GBP302.2
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 2019. There have been no significant
developments relating to contingent liabilities in the year.
The group has determined that the possibility of any outflow in
respect of performance guarantees issued is remote and, as such, no
contingent liabilities in respect of these are disclosed (30
September 2018 and 31 March 2019: none).
Tallinn Water, one of the group's joint ventures (see note 11),
has disclosed that there could be possible third party claims of up
to EUR 28.6 million (31 March 2019: EUR 28.6 million) over and
above those for which a provision has been recognised in its
financial statements. While this is not a contingent liability of
the group due to the way in which joint ventures are accounted for
under the equity method of accounting, if these additional claims
were to materialise in the future this would impact the group's
share of profits of the joint venture and therefore the joint
venture's carrying value in the period in which this occurs.
20. Related party transactions
The related party trading transactions with the group's joint
ventures and other interests during the period and amounts
outstanding at the period end date were as follows:
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
Sales of services 221.8 234.6 455.8
Charitable contributions advanced
to related parties 0.3 0.2 0.5
Purchases of goods and services - 0.2 0.1
Costs recharged at nil margin under
transitional service agreements - 0.2 0.2
Interest income and fees recognised
on loans to related parties 1.7 1.9 4.3
Amounts owed by related parties 172.6 183.0 182.9
Amounts owed to related parties - - 0.6
Sales of services to related parties during the period mainly
represent non-household wholesale charges to Water Plus Group
Limited (Water Plus), a joint venture in which the group holds a 50
per cent stake alongside Severn Trent PLC, 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.
Charitable contributions advanced to related parties during the
year relate to amounts paid to Rivington Heritage Trust, a
charitable company limited by guarantee for which United Utilities
Water Limited is one of three guarantors.
At 30 September 2019 amounts owed by joint ventures, as recorded
within trade and other receivables in the statement of financial
position, were GBP172.6 million (30 September 2018: GBP183.0
million, 31 March 2019: GBP182.9 million), comprising GBP38.9
million (30 September 2018: GBP39.6 million, 31 March 2019: GBP39.4
million) of trade balances, which are unsecured and will be settled
in accordance with normal credit terms, and GBP133.7 million (30
September 2018: GBP143.4 million, 31 March 2019: GBP143.5 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 2020, bearing a floating interest rate of LIBOR plus a
credit margin;
-- GBP9.8 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 30 September 2019 of GBP12.5 million, comprising the
GBP9.8 million receivable held at fair value, and GBP2.7 million
recorded as an equity contribution to Water Plus recognised within
interests in joint ventures; and
-- GBP22.5 million outstanding on a GBP32.5 million revolving
credit facility provided by United Utilities PLC, with a maturity
date of 30 September 2020, bearing a floating interest rate of
LIBOR plus a credit margin.
A further GBP1.4 million (30 September 2018: GBP1.4 million, 31
March 2019: GBP1.4 million) of non-current receivables was owed by
other related parties at 30 September 2019.
No expense or allowance has been recognised for bad and doubtful
receivables in respect of the amounts owed by related parties (30
September 2018 and 31 March 2019: 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 GBP58.1
million, of which GBP35.1 million related to guarantees to United
Utilities Water Limited.
At 30 September 2019, amounts owed to joint ventures were GBPnil
(30 September 2018: GBPnil, 31 March 2019: GBP0.6 million). Amounts
outstanding are unsecured and settle in accordance with normal
credit terms.
21. Events after the reporting period
There were no material events after the reporting date that
required recognition or disclosure in the condensed financial
statements for the period ended 30 September 2019.
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:
o 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
o 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
Alison Goligher
Sir David Higgins
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
19 November 2019 19 November 2019
Chief Executive Officer Chief Financial Officer
INDEPENT 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 2019 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 2019 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
1 St Peter's Square
Manchester
M2 3AE
19 November 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BRBDBGUBBGCC
(END) Dow Jones Newswires
November 20, 2019 02:00 ET (07:00 GMT)
United Utilities (LSE:UU.)
Historical Stock Chart
From Jun 2024 to Jul 2024
United Utilities (LSE:UU.)
Historical Stock Chart
From Jul 2023 to Jul 2024