Utilities giant shareholders in line for £1.5bn payout

Nov 30 2007 by Alistair Houghton, Liverpool Daily Post

United Utilities logo (200)

WARRINGTON-BASED United Utilities plans to return £1.5bn to its shareholders after the sale of its former Norweb electricity distribution business.

United’s pre-tax profit for the six months to September 30 rose just 1% to £252m, though underlying profits were up 10% at £243m thanks to water price increases and efficiency improvements.

The company last week agreed to sell its North West electricity distribution business to a consortium led by JP Morgan and the Commonwealth Bank of Australia in a £1.8bn deal. The group now plans to focus on its water businesses, which it says have much more potential for growth.

The group had already confirmed it would return £1bn to shareholders but has now upped that figure after a review of its operations.

That review means its 2007/8 dividend to shareholders will be cut by 30%, though analysts say the total capital return should offset that cut.

Chief executive Philip Green said: “The group has delivered both a good set of financial results and further operational performance improvements, supported by our strategy to focus on core skills.”

Revenues from United Utilities’ water business rose 7% to £713m thanks to price increases of 8.3%.

The company’s investment in its water business over the period was £363m, up 49%, as the business spent heavily cutting leakage, tackling pollution and reducing the risk of sewers flooding.

It said it was on track to meet its leakage targets for 2007/08.

Mr Green said: “Our water business has now entered the peak phase of its 2005-10 capital expenditure programme and we remain confident of meeting our regulatory outputs.

“This major investment in essential infrastructure continues to deliver customer and environmental benefits.”

Operating profits at the company’s soon-to-be-sold North West energy division stood at £99m, up from £78m in the same period in 2006.

United has a £1.5bn contract to continue managing the network until 2015, with the potential for an extension on the deal until 2020.

Mr Green said: “The successful sale of our electricity distribution assets for a substantial premium to the regulatory asset value enables the group to focus on the much larger, higher-growth water asset base and meets our target of agreeing the sale by the end of this calendar year.”

alistairhoughton@dailypost.co.uk