United Utilities’ full-year underlying revenue rose 20.1% to £2.6bn, reflecting a step up in allowed revenues in the first year of the new five-year regulatory cycle.
Underlying operating profit jumped 34.8% higher to £1.1bn, driven by revenue growth which more than offset increased operating costs.
Free cash outflows were broadly flat at £0.1bn, as a step-up in infrastructure investment offset the improved profitability. Net debt rose by £0.6bn to £9.9bn.
For the year ahead, underlying revenue is expected to rise to between £2.7-2.8bn.
A final dividend of 35.78p per share was announced, taking the full-year total to 53.66p, up 3.5%.
The group has raised its five-year infrastructure investment plans by £2.5bn to around £11.5bn and has announced a new £0.8bn equity raise to help fund it.
The shares rose 11.8% in early trading.
Our view
United Utilities' full-year results landed ahead of market expectations. A step up in its investment plans has also improved the outlook for future revenue growth, and markets reacted very positively on the day.
In return for providing a reliable and affordable water supply to Northwest England, the regulator (Ofwat) allows United Utilities to earn an acceptable financial return.
The first year of the current five-year regulatory cycle (2025-2030) has brought a sharp step up in allowed revenues from the regulator. Alongside tight cost controls, that helped underlying operating profits jump 35% higher in 2025. That’s kind of growth’s not the new norm though. Having been rebased, markets are now expecting revenues and profits to grow at mid-single-digit rates over the rest of the cycle.
The higher allowed revenue comes with some strings attached. It’s there to help United Utilities fund major upgrades to its water infrastructure, thereby improving its capacity and service to customers, as well as reducing leaks and overflows into the county’s waterways.
United Utilities is heavily incentivised to carry out these upgrades, as its future revenue is directly tied to the value of its infrastructure. As a result of this, and increased demand from new homes and data centres, the group has raised its infrastructure spending goals by 16% to £11.5bn out to 2030.
On top of this, the group's allowed to increase prices alongside inflation, providing a natural hedge to rising costs. The caveat here is that the funds are only received two years later, which can put a strain on cash flows in the meantime.
To help fund all of this investment, United Utilities is raising another £0.8bn from equity investors by issuing new shares. This should help keep debt levels within its target range through the cycle, while still providing cover to grow dividends in line with inflation. Currently, there’s a 3.8% forward dividend yield on offer, but as always, no dividends are guaranteed.
United Utilities isn’t without troubles though. Frequent sewage spills in recent years have brought intense public and political scrutiny, denting sentiment toward the whole sector. The new regulatory period brings a much stricter view on wastewater and protecting the environment, and if the group doesn’t clean up its act quickly, it could face financial penalties.
United Utilities’ step-up in investment and inflation-linked revenues should support top-line growth in the coming years. The valuation’s risen over the past year to reflect these strengths, but with a long runway of growth ahead, we see room for more upside. However, mammoth investment plans, adverse weather and sewage leaks could present challenges along the way.
Environmental, social and governance (ESG) risk
The utilities industry is high-risk in terms of ESG. Management of these risks tends to be strong, with European firms outperforming their overseas counterparts. Environmental risks like carbon emissions, resource use and non-carbon emissions and spills tend to be the most significant risks for this industry. Employee health and safety and community relations are also key risks to monitor.
According to Sustainalytics, United Utilities’ management of ESG risk is strong.
In 2023, it was a lead performer in preventing pollution incidents, with the lowest number of incidents relative to peers per 10,000km of sewers. However, United Utilities’ ageing infrastructure means it’s exposed to climate impacts such as heavy rainfall and flooding. It has also been implicated in occasional drinking water contamination issues and some releases of untreated sewage, resulting in an ongoing investigation by regulators.
United Utilities key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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