United Utilities has published its final results for the year ended 31st March 2010. The company said it had delivered sound results in a challenging economic environment with an underlying operating profit of £756 million – an increase of 3% over last year.

Commenting on the results, Philip Green, Chief Executive, said:

“We are well positioned for the 2010-15 regulatory period. With the detailed efficiency plans we are implementing and the low cost of the group’s debt portfolio, we believe we can deliver outperformance over the five years.

“This is a sound set of results in a tough economic climate, reflecting our strong focus on cost management and efficiency improvement. In line with our policy the board has proposed a final dividend for 2009/10 of 23.13 pence per share, an increase of five per cent.

“Improving operational performance is an important part of our strategy and we are pleased to have met our regulatory leakage target for the fourth consecutive year, despite the exceptional winter weather conditions. Customer satisfaction has continued to increase and is now at its highest recorded levels.

“In light of the recent water price review, we have had to balance the need to retain a robust and sustainable financial profile for the group with the importance of income to our shareholders. As outlined in January, the board intends to pay a dividend of 30 pence per share for the 2010/11 financial year and thereafter continue with our policy of targeting real dividend growth of 2% per annum through to 2015.

“We recently agreed the sale of our Australian business, increasing the total value from non-regulated disposals from £132 million to approximately £267 million. We will continue to review the expressions of interest we have received for our remaining non-regulated businesses.”

The company said that the water and wastewater regulated business had delivered a modest increase in underlying operating profit (up 3% at £701 million), attributing this primarily to the price increase allowed by Ofwat coupled with tight cost control, offset by reduced water demand and ongoing cost pressures in areas such as power and bad debts.

United Utilities entered into forward contracts for the majority of its power requirements for 2009/10. As a result, unit power costs in 2009/10 were approximately 10% higher than in 2008/09 and the power expense has increased by around £6 million. The business has also entered into forward contracts for the majority of its power requirements for 2010/11 and 2011/12 and unit power costs are expected to be in the order of 20% lower than in 2009/10. Bad debt expense is broadly in line with the prior year at approximately 3.5% of regulated revenue.

Capital expenditure in the regulated water and wastewater business amounted to £620 million during the year, including infrastructure renewals expenditure.

United Utilities said it had undertaken a comprehensive review of the business over the last year and was as a result implementing detailed plans to improve performance and reduce the cost base. The company is streamlining its processes as it aims to become a leaner, more efficient company.  The new supplier contracts for the 2010-15 period would deliver significant savings and help improve operational and capital efficiency.

During 2009/10, United Utilities reduced the number of people working in the group by the equivalent of around 500 full time employees (includes United Utilities staff and agency staff). Approximately 350 of the 500 worked in or supported the regulated business, equivalent to around 7% of that workforce. Earlier in the year, credit rating agency Moody’s re-affirmed United Utilities’ A3 credit rating for UUW.