Q&A: Tim Weller, United Utilities FD on his interim results

What are the key numbers in these interim results?

It’s a strong set of numbers underpinned by robust performance in our regulated
businesses in UU North West. Profit before tax on an underlying basis is up 14%
to £282m.

In UU North West, underlying operating result is up 9% to £380m despite the
impact of increased infrastructure renewal spend which more than doubled in the
period to £44m.

In Contract Solutions we’ve seen strong revenue growth but only a modest
improvement in operating result, reflecting the fact that the Contract Solutions
business is in the early stages of a number of major contracts. And we’ve also
increased our dividend by 2.4% in line with inflation.

What are you doing to mitigate the impact of rising energy costs?

Energy costs for us have increased by about 30%, year-on-year. I have to say
that for us, gravity is on our side. Our major bulk of water transfers, water
treatment works, and waste water treatment works, take advantage of the natural
geography in our operational area.

And so for us, energy costs as a total proportion of the overall operating
costs base of the business is a much smaller proportion than for the rest of the
UK water sector. It’s around 6% of total costs for UU Water.

And given that, the increase in energy costs had less of an impact on us than
has been the case for a number of other players in the sector. Looking forward,

we’re seeking opportunities to ensure the business is as energy efficient as
For example, at Davyhulme, our largest wastewater treatment works, we’ve
invested in a new co-generation plant, and would expect Davyhulme to be largely
energy self-sufficient during the course of the next financial year.

You’ve been singled out by the regulator for being slow off the mark
in your Capex programme. How do you respond to that?

UU, as with the rest of the water sector, has been slower than either we or the
regulator would have liked in getting the capital expenditure programme

However, the programme is now pretty much in full swing. In the first six
months of this year, capital spend, including infrastructure renewals, is up by
over 40% on last year’s number.

You joined United Utilities from Thames in the summer. What do you
make of UU?

There are a couple of major positives I’ve found since I’ve arrived at UU. In
the regulated businesses, we’re definitely beginning to see the green shoots of
recovery in terms of operating performance.

Looking at the Contract Solutions business, I’ve been struck by the
commerciality and professionalism in that business, and have to say, before I
joined UU I was somewhat jealous of the success that UU’s had in its Contract
Solutions business, and now I’m inside the tent, I can clearly see what’s driven
that success.

So what are your priorities from now on?

I’d be looking to get UU’s finance function to play its part in helping UU
become a high performance company. For example, I’d be looking to ensure that
the business continues to be financed in a cost effective and efficient manner.

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