United Utilities Regulatory News (UU.)

27 Sep 2006 07:00

UNITED UTILITIES TRADING UPDATE IntroductionUnited Utilities today issues an update on trading for the six months ending 30September 2006. The company will announce its interim results on 5 December2006.Commenting on the group's trading position, Philip Green, Chief Executive,said:"The group is on track to deliver results in line with our expectations for thesix months ending 30 September 2006."In United Utilities North West, we have sustained our recent performanceimprovement on leakage and are on course to meet the economic level of leakagerolling target for 2006/07. Water resource levels remain robust and we do notexpect to introduce any water restrictions. Progress on delivering theregulatory efficiency initiatives and capital programmes has also been good."United Utilities Contract Solutions continues to benefit from a strong orderbook and performance across the contract portfolio is in line withexpectations."Vertex has secured a number of new contracts in the first half of the year andwe see good opportunities for the business to enhance further its presence inthe public and financial services sectors."Further progress has been made in raising index-linked debt funding, which, intotal, now stands at ‚£1,225 million, representing around 16 per cent of thegroup's regulated asset value. This long-dated funding, with an averageinterest rate of around 1.8 per cent real, continues to provide additionalvalue for our shareholders."To reflect the continuing evolution of the group, for reporting purposes thebusiness segments will now be aligned to major individual business units whichmore closely reflect the internal organisational and management structure.United Utilities North West(formerly described as licensed multi-utility operations)United Utilities North West is expected to deliver strong operating profitgrowth in the first half of the year. This principally reflects the regulatoryprice increases which are supporting the substantial capital investmentprogrammes. This rise in operating profit is being achieved despiteinflationary pressures and increasing costs that are a function of the growthin the asset base.Overall, operational performance has been good and United Utilities Water hascontinued to focus on maintaining a robust supply and demand balance. Thebusiness met its year-end economic level of leakage spot target and leakagelevels are currently below the 2006/07 rolling average target of 470 megalitresper day. Water resource levels remain healthy, without any need for waterrestrictions.Capital expenditure is expected to increase this year, compared with theprevious year, reflecting the planned phasing of the investment programmes. Itis anticipated that the level of capital expenditure will peak in years threeand four of this five-year regulatory price control period.The business is making good progress in delivering its planned operating andcapital efficiency initiatives, with benefits being realised from theimplementation of a new customer billing system, process optimisation schemesand improved work planning and scheduling programmes. It is also continuing todevelop a range of key operational and service measurements to help it achievefurther performance improvements and these will be outlined at the interimresults later in the year.United Utilities Contract Solutions(formerly included within infrastructure management)Operating profit in the first half is expected to show a small increase on lastyear's underlying figure, after adjusting for ‚£6.4 million of profit ondisposals (principally proceeds from the successful Initial Public Offering ofTallinna Vesi's shares) included in the reported figure for the six monthsended 30 September 2005.The infrastructure management segment previously included the contribution fromUnited Utilities Property Solutions (UUPS), which manages and develops thegroup's property and land portfolio. UUPS' operating profit in the first halfof last year amounted to ‚£9.1 million and its full year contribution for 2005/06 was ‚£18.1 million. The performance of UUPS will now be included in the otherincome line in the income statement and its operating profit in the first halfof 2006/07 is expected to be in line with the comparative period.The table at the foot of this update shows the impact on the prior half yearand full year published segmental analysis of the reclassification of UUPS'results.Following a continued period of winning and implementing new contracts, whichsaw the order book sustained at around ‚£5 billion and resulted in a 35 per centincrease in turnover, the business is now focusing on optimising returns fromits substantial contract portfolio. It is also mobilising its contract renewalwith Scottish Water, through Scottish Water Solutions, which was securedearlier in the year.United Utilities Contract Solutions (UUCS) has a number of opportunities in thepipeline, with good prospects of securing additional contracts.Vertex(formerly described as business process outsourcing)Operating profit in the half year is expected to be in line with last year'sunderlying figure, after adjusting for pension settlement credits ofapproximately ‚£6 million included in the reported figure for the six monthsended 30 September 2005. The current half year performance reflects are-shaping of the Vertex contract portfolio and the fact that the business isin the early stages of a number of contracts, including its substantial,long-term contract with Thurrock Council.Since the start of the year, Vertex has secured contracts with a total value ofaround ‚£128 million. This includes an important contract with Living Time andAIG Life, which marks a move into the UK's retirement income market, offeringadditional opportunities for growth. Vertex will build a product administrationplatform and provide a full end-to-end administration service for its client.The public sector and the financial services sector continue to offer goodgrowth prospects.Other financialBorrowings, net of cash and short term deposits, at the half year are expectedto show an increase of approximately ‚£0.3 billion when compared with 31 March2006, excluding the impact of IAS 39. This increase principally reflectsexpenditure on the regulated businesses' water, wastewater and electricitycapital programmes and payment of the 2005/06 final dividend.The overall tax charge at the half year is expected to be close to 30 per cent.This primarily reflects the full provision for deferred tax, as required by IAS12, and the continued expected increase in current tax following the change intax treatment of capitalised revenue expenditure.United Utilities' Contacts:Philip Green, Chief Executive Officer +44 (0)1925 237000Tim Weller, Chief Financial Officer +44 (0)1925 237000Gaynor Kenyon, Communications Director +44 (0)7753 622282Darren Jameson, Investor Relations Manager +44 (0)7733 127707 Prior year reclassification Operating profit* Half-year ended 30 September Year ended 31 March 2006 2005 As reported Transfers Reclassified As reported Transfers Reclassified ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m United Utilities 325.0 325.0 652.3 652.3North West (formerly described as licensed multi-utility operations) United Utilities 41.1 (9.1) 32.0 95.5 (18.1) 77.4Contract Solutions** (formerly included within infrastructure management) Vertex*** (formerly 11.0 11.0 20.8 20.8described as business process outsourcing) Other activities 3.2 9.1 12.3 6.7 18.1 24.8 ------ ------ ------ ------ Total 380.3 380.3 775.3 775.3 ====== ====== ====== ======Notes* Operating profit from continuing operations before amortisation of certainintangible assets and restructuring costs** UUCS reported and reclassified result for the half year ended 30 September2005 included ‚£6.4m profit on disposals (‚£6.4m in full year ended 31 March2006)*** Vertex reported and reclassified result for the half year ended 30September 2005 included a credit of ‚£6.4m in respect of pension settlements (‚£10.6m in full year ended 31 March 2006)ENDUNITED UTILITIES PLC