United Utilities ups dividend as cash flow benefits from accounting rejig

North West water company United Utilities upped its dividend 1.1% after a year where revenue and profit both leaked modestly lower but it remained confident of meeting its long-term targets.

Revenue for the year to 31 March slipped to £1.70bn from £1.73bn due to slight accounting changes from a joint venture, while underlying profit before tax of £389m was up £19m on the previous year due to increased financing costs from higher inflation on index-linked debt.

Underlying operating profits were up 3% to £622.9m, however, thanks to allowed regulatory revenue changes, a reduction in infrastructure renewals expenditure and lower costs offset slightly by the accounting impact of the WaterPlus JV.

Net cash generated from continuing operating activities rose almost 20% to £821m, mainly thanks to a switch between cash generated from operating activities and cash used in investing activities largely due to the accounting treatment WaterPlus.

The proposal of a final dividend of 25.92p took the total dividend for the year to 38.87p, an annual increase of 1.1%.

Net debt including derivatives at year-end had risen to £6.58bn from £6.26bn over the year, with regulatory capital value gearing remaining at 61%.

Chief executive Steve Mogford hailed a "strong performance for customers, shareholders and the environment" in what is the second year of the five-year regulatory period up to 2020.

"This performance combined with our confidence in delivering a net outperformance over the regulatory period has enabled us to commit to a further £100m of additional investment in the region. This will support our resilience projects bringing additional customer benefits over the next three years."

He also highlighted UU's best ever customer satisfaction scores and said acceleration of the ongoing investment programme delivered operational efficiencies and means a number of regulatory 'outcome delivery incentive' measures have been de-risked, which contributed to a net ODI reward of £6.7m and improves the likely cumulative outcome over the five-year period.

"Our performance in the early part of this regulatory period puts us in an industry leading position and demonstrates that we are well placed to deliver further value for customers, shareholders and the environment. This is supported by a robust capital structure and good credit ratings."