Hi, good morning everybody, and welcome to our full-year results presentation. I'm Louise Beardmore, Chief Executive of United Utilities, and this morning I'm joined by our CFO, Phil Aspin. I'm going to start by taking you through the highlights of our financial year ending 2025 and wrapping up a summary on AMP7. Before then, handing over to Phil, who will pick up on our financial performance for the year. We're really looking forward to answering any questions that you might have during a Live Q&A session that we'll be holding at 10:30 A.M. this morning. Before we get into the detail, I wanted to take a step back and spend a couple of minutes just talking about the bigger picture. In particular, I want to touch on what I see are our three key messages. Firstly, we're really proud of our top quartile performance.
In AMP7, we met or exceeded around 80% of our performance commitments and made terrific progress in some of the areas that really matter, such as great quality service and reducing storm overflows. Our track record of improvement leaves us in great space to deliver in the future, recognizing that there's always more to do. Secondly, our AMP8 journey has already begun. I've built a really strong executive team with some new and refreshed capabilities, with a track record of delivering significant infrastructure growth at speed. We've onboarded over 120 suppliers who are already active and working here in the North West. Our delivery strategy is all about doing things simpler, doing them smarter, and doing things better. We're already accelerating towards our 7% asset-based growth rate for the AMP.
Lastly, I'm very pleased to announce today our returns guidance, which is to deliver at least 100 basis points of outperformance in AMP8. The main driver of outperformance will be from financing driven by our track record and strong balance sheet. In addition, we expect to see contributions from ODIs, PCDs, or price control deliverables, as they're known, and ToTEX. Our RORe guidance completes our financial framework, which we think paints a compelling picture of the investment case as we enter into AMP8. As a management team, we're really looking forward to getting on with it and delivering on our ambitious plans now that we have the price review out of the way.
I'll touch more at the end of the presentation about how you can find out more about our Capital Markets Day that we're going to be holding in June, and the further details we'll be providing about our delivery plans for AMP8. For now, I'd like to take you through the headlines for our FY25 results. We've delivered another good set of results, and I'm incredibly proud of the work that's been put in by the team. We've delivered solid financial results with EPS growth of almost 50% compared to last year. Our balance sheet is in great shape, with gearing at 60%, and we're fully equity- funded for AMP8. We've reaffirmed our dividend policy, meaning our dividend will have grown with inflation for 20 years at the end of this AMP.
We continue to operate in the top quartile of the sector, having met around 80% of our performance commitments again this financial year. In FY2025, we have achieved a GBP 24 million ODI reward on a real post-tax basis. This is slightly below our guidance due to some significant storms at the back end of the year. Encouragingly, we are green on the EA's environmental performance assessment for serious pollution, making that 13 consecutive years, and we are making great progress reducing spills from storm overflows. With employee engagement at 87% this year, that is 7% higher than the U.K. high- performance norm benchmark, we have highly engaged colleagues ready to deliver our ambitious plans for the next five years and beyond. Now turning to our financial performance. On an underlying basis, earnings per share increased 49% to 49.6 pence.
Across AMP7, we've delivered an average real return of 6.7% on a comparative basis, or 6.1% under Ofwat's revised methodology. Our CapEx for the year came in at the top end of our guidance range, and the dividend is in line with our policy. Now turning to some highlights of our AMP7 performance and some of the big successes we've had over the period, and why that makes us well placed to maximize on the opportunities for AMP8. We've embedded a high- performance culture and outstanding levels of engagement, and I'm very proud of the improvements, our top- quartile performance we've achieved as a team, and I'd like to thank everybody for their hard work across the AMP. Firstly, looking at our wastewater performance, without a doubt, reducing overflow spills remains a top priority.
In AMP7, we've managed to reduce the use of overflows by 39%, including a sector-leading 24% reduction in the final year of the AMP. I would add that our performance to date is made even more impressive when taking into account the operating environment last year, with significantly higher than average rainfall and a record number of named storms. Taking this all into consideration, we're well placed and on the way to achieving our target, which, as you know, is to reduce spills by over 60% by 2030. It's great to see the benefits of our accelerated program, and these early successes provide us with confidence that we're going to be able to deliver on what is the most ambitious performance commitment in the sector by a considerable margin. Another significant area of focus in wastewater is in minimizing pollution. On serious pollutions, we have consistently outperformed the sector.
We've been green on the EA's assessment for 13 consecutive years, the only company to achieve this. Despite the heavy rainfall in 2024, we expect to achieve this again. To further improve our performance, we're investing in new technology such as our UU Drone Squad, which is now mobilized and being used to detect and investigate pollutions across bigger expanses and hard-to-reach areas, allowing us to respond quickly and effectively to drive down the total number of pollutions. Our investment is about prevention. With our analysis showing that around a third of our pollution incidents, which are caused by power- supply interruptions here in the North West, particularly in more rural parts of our catchment such as Cumbria, we are investing in power- resilience so that we can continue operations during outages and, more importantly, drive down the number of pollutions that are happening during those storms.
Now focusing on our network. In 2021, we announced plans to transform the way we monitored our wastewater network, improving sewer- sensor capability and using AI and machine learning to proactively manage and maintain our pipes. Known internally as Dynamic Network Management, or DNM, this system has allowed us to predict and prevent problems in our network before they occur, delivering tangible operational benefits. To show how this technology is already bearing fruit, we managed to deliver a 36% reduction in sewer collapses across AMP7, hitting our target for a fifth consecutive year this year. The focus has improved performance on tackling blockages, has helped us reduce internal- sewer flooding by approximately a fifth. There is more to do, and this is a key area of focus for us as we enter AMP8.
Looking now to our water performance, we continue to deliver improvements in water quality with a 29% reduction over AMP7, getting us to our lowest ever level. In the last month, we reached the momentous halfway point of our eight-year project to upgrade the Vyrnwy Aqueduct. On time and within budget, a huge step forward on improving water quality for a million customers in that pipe that takes water from Wales up into Merseyside and into Cheshire. We also have a number of key strategic projects in AMP8 that will help us deliver further improvements to water quality. Leakage is at its lowest ever level here in the North West, and we've increased our find-and-fix rates by 70% this year, finding and tracing more leaks than ever before. We are making use of a number of innovations, including satellite imagery, artificial intelligence, and a new no-dig repair capability.
This has been shown to be extremely successful, with strong results in trials over the last six months, with a 92% success rate, helping us to reduce both the time taken to fix leaks and the operational costs of repair by around half. We have also been working with customers to better understand their usage, helping them to lower their consumption and ultimately their bills. This includes targeted communications to high water users and water efficiency home audits. This work has helped us to identify areas of high usage and internal leaks. Once fixed, these have helped drive reductions in per capita consumption, where we are an upper- quartile performer. I'm incredibly pleased with our customer service performance, both in year and across the AMP.
have further consolidated our position as the leading listed company for service, resulting in the third highest reward on CMEX out of 17 companies. We have also been driving hard to improve services for developers and business customers too. As we close out the AMP, we are one of only three companies to have achieved a reward in both CMEX and DMEX in every year of AMP7 . There is a greater emphasis on customer service measures in AMP8 , and our strong track record on all of those measures of experience puts us in a great position. Underpinning our performance, we have been awarded again the Service Mark with Distinction by the Institute of Customer Service, one of only five utility companies across the entire U.K. to do so, which is testimony to the team's hard work and commitment to provide great customer service every day.
As well as great service, another thing we're really passionate about is around providing support with affordability to families who need it. Those benefiting from our affordability schemes have once again grown. We've supported 414,000 customers through our affordability package in AMP7, and we're now stepping into AMP8. We're able to draw on our industry-leading affordability package worth GBP 525 million, having added a further 180,000 customers in April alone to our support schemes. That now sees us helping one in six customers across the North West. At the same time, the number of customers registered for priority services has also grown up to around 540,000 households across the region. As a result of this enhanced support, combined with the effective credit collection and use of technology, our bad debt position has remained stable at 1.5% despite the increase in customer bills.
This puts us in a really strong position as we step into AMP8 and gives us confidence that despite the increase in bills, our cash performance will remain strong into the future. So far, I've spoken about how we're delivering for the environment and for customers, and I know delivering top- quartile performance as we go forward is going to take great people. As we step into a period of truly transformational change, I'm really proud to be leading a team that is also highly engaged. We have an engagement score of 87% this year, that's 7% above U.K. high-performing norm benchmarks, and I know my team are committed and excited about the opportunities we have to improve things for customers, the environment, and the communities that we serve across the North West.
I'm honoured that 91% of our colleagues told us that they were proud to be part of this organization, and our Glassdoor rating of 4.4% is really testimony to that. As well as ensuring our existing colleagues think United Utilities is a great place to work, we're also committed to attracting and developing great talent too. The plan we're delivering in AMP8 will support 30,000 jobs, 7,000 of which are new, and will make a real difference to the North West regional economy. We have a role to play investing in our local community and supporting economic growth right across our region. Not only does our business plan support 30,000 jobs, but it also brings investment in skills and opportunities here to the North West. Our plan will contribute GBP 35 billion worth of economic value and support economic growth right across the North West region.
Finally, looking at our ESG performance, we've delivered a 39% reduction in spills since 2020. We're green on the EA's environmental performance assessment for serious pollutions. From a nature perspective, we've made great progress, having already surpassed our 2030 Peatland restoration target. We continue to foster an inclusive culture. We've been recognized externally for our success, ranking fourth in the U.K. of all companies for the Inclusive Employers List for 2024. We rank highly in a range of ESG indices. We're proud to be a component of the iconic Dow Jones Best- in- Class World Index, one of only four companies in the multi-utilities and water sector to make the list. Only last week, we received recognition from S&P for 25 years of sustainability reporting. With that, I'll hand over to Phil to take you through the financials.
Thank you, Lou, and good morning.
Firstly, here are financial highlights. Revenue increased by around 10% in line with our guidance, largely as a result of regulatory adjustments, including the inflation-linked increase allowed as part of our revenue cap, as well as the under-recovery relating to prior years. Underlying operating profit increased to GBP 634 million, primarily reflecting higher revenue, with underlying EPS of 49.6 pence, almost a 50% increase on the prior year, as the regulatory revenue increases, which flag the impact of cost inflation, take effect. The dividend per share has increased in line with our policy to GBP 51.85. Finally, our balance sheet remains robust, with gearing at 60%. Focusing first on underlying operating profit. Underlying operating profit of GBP 634 million is up GBP 116 million on the prior year, in line with our expectations. Revenue increased by GBP 196 million, or around 10%, mainly driven by regulatory adjustments.
Operating costs have increased by GBP 80 million, or around 6% compared to the prior year, reflecting increases in costs associated with growth in the underlying asset base, inflationary increases, as well as investment in performance ahead of AMP8. All of this results in an underlying operating profit of GBP 634 million, a 22% increase on the prior year. Underlying net finance expense for the year was GBP 284 million, GBP 9 million lower than the prior year, reflecting lower inflation applied to our index-linked debt, offset by an increase in cash interest and the reduction in the capitalized interest and pension interest income. Cash interest has increased by GBP 46 million, primarily reflecting the increase in debt, largely due to the accelerated funding ahead of AMP8.
On underlying tax, we recognise no current tax charges as we benefit from full expensing, and we expect this to continue into the future, resulting in no current tax charge for FY2026. This results in underlying profit after tax of GBP 339 million and an EPS of GBP 49.6. Our balance sheet continues to demonstrate our financial strength, with gearing at 60%. RCV has grown to GBP 15.4 billion, up from GBP 14.7 billion at the end of March 2024, and net debt is GBP 9.3 billion. We maintain a track record of responsible financing policies, and we benefit from a fully funded pension scheme, so we're not subject to unfunded costs in the future. Having fully- funded AMP7 through FY 2025, we've been funding our AMP8 programme and have raised GBP 1.8 billion this financial year, providing GBP 2.8 billion of liquidity, which extends out into 2027.
Now turning to RORe, I thought it would be useful to now unpack the position for AMP7. We earned financing outperformance over the AMP of 2.8%, reflecting efficient debt issuances across the period that compare favorably with the industry. As expected, tax outperformance largely reflects the impact of full expensing introduced by HMRC in 2023. ODI outperformance of 0.5% reflects a net reward for each year of AMP7, which saw us meet around 80% of our performance commitments across the five years. Looking at the ToTEX impact in a little more detail, just over half of the 2.2% relates to previously announced additional investments, including DNM and Better Rivers. The remainder can be attributed to two other buckets. Firstly, we have been impacted by some cost drivers that have outstripped inflation, most notably power and chemicals.
Secondly, the impact of isolated events across AMP7, such as the freeze-thaw event in FY 2023 and the fractured pipe outlet in Fleetwood last year. Finally, as you'll be aware, our retail cost base is set in nominal terms, resulting in a 0.4% reduction. Our AMP7 RORe performance came in, as expected, at around the midpoint of our 6-8% range, but after adjusting for a sector-wide change in methodology, the headline figure is lower at 6.1%. The adjustment, published by Ofwat on the 31st of March 2025, reflects a retrospective change to how RORe is calculated for both FY 2025 and cumulatively for AMP7, but does not change the level of outperformance in the regulatory adjustments carried forward into AMP8. After factoring in the impact of inflation, we've seen returns across the five-year period at a level of 11.5% on a nominal basis.
Now for an update on our financial framework. On returns, I'm pleased to announce our guidance for AMP8, where we expect to outperform the regulatory contract by over 100 basis points on a notional company basis. This means when combined with our base return of 5.15%, our guidance points to an improvement AMP- on- AMP in real terms. As with AMP7, I would expect the largest contribution to come from financing outperformance alongside ToTEX and incentives. Capital investment is forecast to be approximately GBP 9 billion across the five years to March 2030, representing an uplift of around GBP 5 billion from AMP7. As a result, the nominal growth in our asset base will increase from the AMP7 run rate of 5.2% per annum to around 7%. Our progressive inflation-linked dividend policy remains in place for the fourth regulatory period running.
Finally, we continue to benefit from our strong balance sheet. The PR24 AMP8 program is fully equity funded, and we continue to target gearing in the range of 55-65%, resulting in target credit ratings of BAA1 and BB+. Before I sum up, here is our technical guidance for FY26. Revenue is expected to increase to between GBP 2.5 billion and GBP 2.6 billion, in line with the final determination after adjusting for inflation. Underlying operating costs are expected to decrease, with higher costs associated with inflation and growth in asset base more than offset by lower IRE due to a more granular asset recognition, resulting in a greater component of network expenditure being capitalized. Depreciation is expected to increase by around GBP 50 million, reflecting growth in our asset base and the impact of a more granular asset recognition.
Underlying finance expense is expected to increase by around GBP 50 million due to increased debt requirements to fund the step-up in investment in AMP8. We expect full expensing to continue, resulting in no current tax charge as we enter AMP8. Capital investment is expected to ramp up. In FY26, we expect to incur a net ODI penalty, reflecting the introduction of new performance commitments, and consistent with historical performance, we expect to see this position progressively improving over the AMP, resulting in a net reward cumulatively. Finally, our progressive dividend continues to grow in line with inflation, and our policy implies an FY26 dividend per share of GBP 53.66.
Finally, to summarize, we continue to perform well financially, with underlying operating profit up 22% and underlying EPS up almost 50% on the prior year, as the regulatory revenue increases, which flag the impact of cost inflation, take effect. Our balance sheet remains one of the strongest in the sector, with RCV gearing at 60% and a fully- funded pension scheme. Together with liquidity of GBP 2.8 billion, we have a robust financial position, which underpins the growth investment we're going to see over the next five-year period. Our progressive dividend continues to grow in line with inflation, with our total dividend landing at GBP 51.85 per share, in line with policy. Thank you, and I'll now hand back to Lou.
That's great. Thanks, Phil.
Look, to summarize some of the key points that we've talked about this morning, we're performing well, both operationally and financially, with consistent upper- quartile performance and a strong track record. Financially, we're well positioned with gearing at 60%, and we are fully equity- funded for AMP8. Lastly, I'd like to thank the team here at UU. We've got some amazing, engaged, and talented colleagues who, like me, are determined to drive the step- change that everybody wants to see and sees all the opportunities that AMP8 presents. Before I finish, I'd like to remind you of our Capital Markets Day that's taking place on the 19th of June. It will be great to see as many of you there as possible, and it's going to be held in central London.
It's going to be a fantastic opportunity to hear about the significant growth in investment and the economic value that I've touched on today, and a great opportunity to meet some of the new team and their exciting plans to ensure that we deliver that growth. Thank you for your time today. I'm sure you're bound to have some questions, and we'll be happy to take those during the Q&A session later this morning at 10:30. Look forward to seeing you later on. Thank you.