United Utilities Group PLC

Good morning all, and I'm sure you all know, but I'm Chris Labett, Head of Investor Relations here at United Utilities. I'd like to welcome you to our fiscal 24 result presentation. No change to the format today. A few words from our Chair, David Higgins, then it will be to Lou and Phil for a brief presentation. and then we'll open up Q&A. For Q&A, please raise your hand like normal. Make sure you've got your name in the box so that we can see who you are. That'd be terrific. Okay, I think we're ready to go. David, over to you.

So thanks, Chris, and welcome, everyone, and thank you for joining us today. While our industry continues to be subject to media scrutiny, here at Unite Utilities, we remain very committed, delivering now and in the long term for our customers. The team under Lou have had another strong year, and as Lou and Phil will take you through this morning, we continue to perform well against our regular commitments, against the backdrop of what's been a very volatile year weather-wise, and that's a fantastic result for the entire organisation. While the next 12 months will be very busy with the general election looming here and the finalisation of course of our regulatory determination, the Board's looking forward to stepping into what will be a transformative period for our business. We recognise the importance of dividend payments as a key element of shareholder returns, and the Board has proposed a final dividend of 33.19 pence per share, and that takes our total dividend for the year to just shy of 50 pence. This is in line with our policy to grow the dividend at CPIH of inflation. And now I'm pleased to hand over to you, Lou.

Great. Thank you, David. And good morning, everyone. It's great to have you all with us this morning. And as always, I'm going to be joined today by our CFO, Phil Aspin. We're going to start with a quick update on price review before moving on to our operational and financial performance for the year. And obviously, we have got some time available for questions, which Phil and I will be more than happy to take. Before we get into the detail today, I wanted to give you a brief overview of where we are. We continue to perform well both operationally and financially with a strong set of results that we're announcing today. We're building our capabilities to deliver future growth and have already delivered improvements to priority areas through accelerated investment. We've got financial strength and flexibility with low levels of gearing. Most importantly, we've got a strong track record which means we're really well positioned and positioned to deliver further improvements for customers and strong returns as we transition into AMP8. Just as a reminder, here's the AMP8 timeline and I know just like us that you're all looking at the 12th of June date when Ofwat will be publishing their draft determination. At this point we'll have greater clarity on costs, scope and their approach to the adaptive plan that we've put forward. In August we're then going to submit and publish our response back to that draft determination. But dialogue and discussion will then continue through the autumn and into December when we receive our final determination. Following receipt of the FD We expect at that point to be able to announce our updated financial framework, including our dividend policy, in early 2025. I am really excited and proud of the plan, and I'm sure you remember it's a significant plan. A plan featuring a seven-fold increase in environmental investment. And we're really well prepared. It's a financeable plan and a strong financial position today that supports our ability to fund the growth. It's an affordable plan with one of the lowest bill increases in the sector, supported by our proposals to help more than one in six customers through a £525 million worth of affordability support. And thirdly, and most importantly, it's a deliverable plan. And a plan that sees us drive the change in the things that matter most for our customers and the environment. Improving water quality and sufficiency, reducing storm overflow spills and reducing pollution and sewer flooding. What's really exciting as we sit here today is that we're already getting to work across our five great counties, mobilising our supply chain, building that internal capability and implementing accelerated solutions to tackle spills. And as you would expect, we're engaged in extremely constructive and open dialogue with our regulators and government about the way that we tackle these challenges. There isn't much debate about our statutory obligations, but there's a lot of great and constructive discussion that relates to phasing and optimum points for delivery, as well as the types of engineering solutions that we're proposing are deployed. We've had some really positive conversations on the adaptive planning scenarios that we submitted in the plan because we believe that that represents the best value for customers. And no doubt you'll have a lot of questions on this. Both Phil and I will be happy to pick that up when we get to Q&A. But this isn't just about AMP8. There are a number of long-term investment drivers. And those drivers can broadly be grouped into, I suppose, three main buckets. So first, evolving expectations around environmental performance. And rightly so. The second, asset replacement and resource adequacy. It's all about building long-term resilience in our network. And thirdly, we feel and experience the impacts of climate change every day. and therefore we've got to develop the right infrastructure to respond. This is going to be achieved not just in one AMP. We're looking at a multi-AMP programme of investment as we move forward. We're really pleased to be on track with our AMP 7 capital delivery and having delivered 100% of our capital programme commitments. This delivery is really important because it's about building confidence with stakeholders in our ability to deliver projects and programmes on time. And we're mobilising at pace for AMP8. We're engaging with our supply chain partners and we've already awarded a number of contracts. And we already have our AMP8 programmes underway, having accelerated around £400 million worth of investment into this AMP, helping us to accelerate CSA improvements so we've got going straight away. The accelerated infrastructure programme has allowed us to start that really important work early. We're proposing to address 420 CSOs in our plan. We've got agreement in April of last year through the accelerated funding to start work on 150 projects in AMP7. What's more, we're making really strong progress. This includes fast-tracking solutions at Windermere, with all schemes entering construction this calendar year. And in addition, we're looking continuously at how we can innovate to enable improved delivery, and we're already progressing with projects at a number of our high-spilling overflows. And today, I want to take an opportunity to just share a brief case study with you. Our highest-spilling overflow for 2022 was at Cargo, a wastewater treatment works just outside of Carlisle. We're not wanting to wait and leveraging the new 500 strong team we have in place both internally and across our supply chain. We've been able to take action to deliver a modular solution straight away and that's provided increased storage and treatment. Developing the solution at Cargo has reduced spills by 90% and it provides a prototype that we're now using across this region in our smaller, more rural CSOs, with a number of key sites under construction for delivery by September of this year. Our experience with the accelerated CSO investment so far has shown us that there isn't one size that fits all when it comes to the solutions that we need. Some of our much larger projects will see vast new underground storage tanks built and then changes to treatment works. But for others, such as cargo, delivering an accelerated solution in the optimal way can make a really big impact and more importantly, do so quickly. One of our strategic priorities is to enable a step change and improve the health of our rivers. If we use the EA's published data at the start of the AMP, we were responsible for around 18% of the attributable reasons for rivers not achieving good ecological status here in the North West. We have got a plan in place to significantly reduce our footprint. And by the end of AMP8, we're aiming to get this number down to less than 5% against that current baseline. And at the same time, we're working with local government and our partners in agriculture and rural land management to further improve the health of our waterways, demonstrated through partnership working as part of the Cumbia River Restoration Programme, which recently won a European River Prize and has now been shortlisted for a global award. We're hoping that by taking the lead that will either voluntarily or through legislation start to make the significant step change in practices that others need to as well. This is going to be essential that we come together and work together to drive the improvements needed at a societal level to improve river health. So let's now turn to our operational performance. It's been a strong year for performance delivered by all my colleagues here at United Utilities, achieving approximately 80% of our performance commitments. And whilst there are still areas for improvement, this reflects really strong performance against the key areas that our customers care most about. And what's more, that improvement is against an even tighter set of targets. And this has resulted in our highest ever customer ODI reward this year of 34 million. Whilst this is our best ever reward, the weather has taken its toll and as we came into the winter period we were forecasting a higher ODI reward for this year. As you noted in our trading update in February, rainfall has been exceptionally high in the North West with the wettest year in 69 years with 14 named storms all hitting our region. You'll have seen this not only impacting us as water companies, but also agriculture, construction and the implementation of new power infrastructure. Like these other industries, the impact for us has been significant and colleagues have dealt heroically with significant levels of impacts that have been generated by storm activity, flooding, power interruptions, all factors that have impacted us here in the North West. This has impacted our ODI position and where we've seen around a £30 million reduction in reward versus what we were forecasting to achieve going into the winter months, reducing the post-tax reward to £34 million. Yet despite these challenges, we've still managed to deliver strong overall performance. We won't know for sure until July our final EPA rating and I never want to second guess or presume, but we've been a solid three or four star for the last 12 years and believe we're on track to be four star this year. There are lots of measures that make up the EPA and I'm pleased to say that despite the weather, we've been green on the EA's assessment of serious pollutions for 12 years, the only company to achieve that. And despite the progress we're making with accelerated solutions, if we look at storm overflows, we did see an increase of 40% in their activation due to weather and as a result of more monitors being in the ground, with 100% of our CSOs now being monitored. And at the beginning of May, we've launched our real-time map, enabling anyone to see what's happening at overflow locations and the ability for customers to make informed decisions based on live and accurate data. While the accelerated infrastructure delivery project has allowed us to get to work sooner and we are already starting to see the benefits of the new team and the solutions that we're starting to deploy, the implementation and construction that we need to put in the ground is going to take time. And that will take time to show in the benefits in our numbers. On water, we've met our leakage target for the 18th year, delivering over a 7% reduction in leakage in AMP7. And our Water Quality First programme has been hugely impactful. And as a result, and supported a 27% reduction in drinking water complaints so far this AMP. We've also been improving our assets by cleaning over 15,000 kilometres of water mains as we continue to focus on delivering high quality water to our customers every day. And for the second time, I'm really pleased to say that we've been named as the number one water and sewerage company in the Institute for Customer Services UK CSI index. And we've maintained our position within the top five for the entire utility industry out of 36. An excellent result, especially as this metric is seen as a good industry cross-comparison of service. Service is and always will be important, but in the next AMP there is an increase in the number of customer service measures. We feel very well placed to maximise on those opportunities, being rewarded on all MEX measures in every year of AMP 7 so far. Those benefiting from our comprehensive set of affordability support has once again grown. We're now supporting more than 375,000 customers this AMP through our schemes, hugely important to customers in the current economic climate. And as a result of the enhanced support and the investment that we made in both technology processes and colleague capability, our cash performance continues to perform very well. And our bad debt charge has reduced to 1.6% this year. I'm really excited about the opportunities for the future and it's our people and our talent that are going to help us achieve our future goals. It's been brilliant to see such strong engagement from our colleagues this year with engagement levels of 81% achieving UK high performance benchmarks. We are really pleased to be named the Water Industry Skills Employee of the Year for 2023 and that is so important for our future success that we have the right talent and capability to deliver. And this award is in recognition of our ability to both attract, develop and promote great people. And in addition, we continue to build and develop tomorrow's young talent too. You may remember last year when we were all together face to face, I invited our full year results, Sam, who'd been awarded the UK apprentice of the year. And I'm really proud to share that you've yet another award winner. Yesterday, Amelia Swain received a young engineer award for outstanding achievement. Great result for her and for our team of apprentices who are seeing so many great role models. But real testimony to the quality of colleagues we have here at UU and our ability to attack and develop great people. And finally, on our ESG performance, we continue to progress well against our six carbon pledges and have already exceeded our 2030 target for improving peatland. Not only does this provide benefits from a carbon perspective, but it also helps to reduce our flood risk, improve water quality and increase biodiversity. In terms of delivery of our environmental programme, we've achieved 100% of our winner outputs on time for AMP7. As I've said, really critical, not just in terms of delivering outcomes for the environment, but also demonstrating our ability to deliver for customers, communities, and for regulators. And we're leading the sector on vulnerability assistance with now over 400,000 customers on our priority services register. We've again performed strongly in the share action workforce disclosure with our score of 89% exceeding the UK average by 18% and the utilities average by 31%. And finally, alongside all of this, we rank highly in a range of ESG indices, having maintained our CDP climate disclosure score at 8-, being rated world-class in the Dow Jones Sustainability Index and having our fair tax mark accredited for the fifth year running. I'll now hand you over to Phil to take you through some of the financials.