Final Results

United Utilities Group PLC

21 May 2010

                Final results for the year ended 31 March 2010                 

£m                                               Year ended                 
                                                                            
(continuing operations)             31 March 2010          31 March 2009    
                                                            (restated)*     
                                                                            
Operating profit                        817.9                  729.5        
                                                                            
Underlying operating profit**           756.3                  736.1        
                                                                            
Profit before tax                       474.2                  529.3        
                                                                            
Underlying profit before tax**          500.4                  531.3        

Basic earnings per share***              59.2                  26.5         
(pence)                                                                     
                                                                            
Total dividends per ordinary            34.30                  32.67        
share (pence)                                                               

* In accordance with International Financial Reporting Standards, IFRIC 12
`Service Concession Arrangements' is applied retrospectively hence the prior
year has been restated

**Underlying operating profit and underlying profit before tax are defined in
the underlying profit measure tables

***One-off factors affecting earnings per share are explained in the earnings
per share section

  * Sound results in a challenging economic environment: underlying operating
    profit of £756 million
   
  * Final dividend increased by 5.0% to 23.13 pence per share, in line with
    policy
   
  * Customer satisfaction at highest recorded levels; leakage target met
    despite extreme winter weather
   
  * Programme of actions to deliver outperformance over 2010-15 period
   
  * Significant reduction in pensions deficit since Sept 2009: more sustainable
    and lower risk approach
   
  * As outlined previously 2010/11 dividend of 30 pence per share and 2% p.a.
    real growth target to 2015
   
  * Total value of agreed non-regulated disposals approximately £267 million
   
  * Continuing to assess expressions of interest for remaining non-regulated
    businesses
   
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."

For further information on the day, please contact:

Gaynor Kenyon - Communications Director                [phone]     
                                                                               
Darren Jameson - Head of Investor Relations            [phone]     
                                                                               
James Bradley / Tom Murray - Tulchan Communications    [phone]    

A presentation to investors and analysts starts at 9.00 am on Friday 21 May
2010, at the Auditorium, Deutsche Bank, Winchester House, 1 Great Winchester
Street, London, EC2N 2DB. The presentation can be accessed via a live listen in
conference call facility by dialling: [phone]. A recording of the
call will be available for seven days following 21 May 2010 on [phone]
4064, access code 864850.

This final results announcement and the associated presentation will be
available on the day at: http://www.unitedutilities.com

CHIEF EXECUTIVE'S REVIEW

Financial performance

United Utilities has delivered a sound set of financial results for the year
ended 31 March 2010. Revenue from continuing operations rose by £12 million to
£2,439 million. Underlying operating profit increased by 3% to £756 million.
Underlying profit before tax decreased by 6% to £500 million, principally due
to an increase in the underlying cost of net borrowings.

The regulated business has delivered a modest increase in underlying operating
profit, which is up 3% at £701 million. This result primarily reflects the
price increase allowed by our regulator coupled with tight cost control, offset
as expected by reduced water demand and ongoing cost pressures in areas such as
power and bad debts, alongside an expected increase in depreciation. The price
increase supports the high levels of essential investment in our assets, which
helps the business meet strict environmental standards and deliver an improved
service for our customers.

Capital expenditure in our regulated water and wastewater business amounted to
£620 million during the year, including infrastructure renewals expenditure.
This level of spend is consistent with our planned investment profile for the
final year of the 2005-10 capital expenditure programme.

Our non-regulated activities delivered an underlying operating profit of £59
million, compared with £62 million in the prior year. In the second half of the
year, we completed the disposals of our holdings in Northern Gas Networks and
Manila Water Company for a combined price of £132 million. The dividends from
these investments amounted to £2 million in 2009/10 and £12 million in 2008/09.
Adjusting for these dividends would show a year on year increase in underlying
non-regulated operating profit of £7 million. Earlier this month, the group
also agreed to sell its Australian business for a total of approximately £135
million. We intend to retain the proceeds from these disposals within the
group. The group is continuing to evaluate the expressions of interest it has
received for its remaining non-regulated businesses.

The group has sought to adopt a more sustainable approach to the delivery of
pension provision and has amended the terms of its defined benefit pension
schemes. This reduces future funding and deficit risk as well as future service
cost, thereby enabling the company to retain defined benefit pension schemes
for existing members. Following consultation, the changes to the rules of the
pension scheme were supported by the company's trade unions. The reduction in
service cost for 2010/11 is expected to be approximately £7 million, although
the lower risk investment strategy is likely to reduce investment income and
result in a lower net benefit at the profit before tax level. The amendments
have also resulted in a reduction of £92 million to the group's pension
deficit, which is required to be accounted for as a credit to operating profit
in the group's income statement. Overall, the group's net pension deficit at
the year end has decreased by £87 million, compared with the position at 30
September 2009, reflecting the aforementioned changes to the pension schemes
and the routine actuarial assessment of movements in assets and liabilities.

The group benefits from headroom to cover its projected financing needs through
to the spring of 2012. During the year we enhanced our liquidity through the
issuance of £220 million of new bonds and £150 million of term extensions to
existing committed bank facilities. This provides us with good flexibility in
terms of when and how we raise further debt finance.

Operational performance

Improving operational performance is a key area of focus for the group and we
are pleased to report further progress. The business met its regulatory leakage
target for the fourth consecutive year, despite extreme winter weather
conditions. Customer satisfaction continues to increase and is now at its
highest recorded levels. We have also halved the number of serious pollution
incidents over the last few years.

Since 2005, we have narrowed the operational efficiency gaps to the most
efficient water and wastewater companies and sustained these improvements. We
have continued to remove properties from our sewer flooding register and have
plans in place to offer mitigation measures for all properties on the register.

Although we are encouraged by the tangible progress we have made, we do
recognise that there is more to do and the business is continuing to take steps
to improve overall service performance. We expect improvement in our overall
performance assessment (OPA) score for 2009/10 and the management actions we
are taking will have a positive impact on our performance as measured by
Ofwat's new service incentive mechanism, which is scheduled to be introduced in
2010/11.

Price review, capital structure and dividend policy

In November 2009 Ofwat published its final determination of price limits for
the 2010-15 period, which sees customers benefit from lower prices and higher
levels of capital investment. After careful consideration, United Utilities
Water PLC (UUW) accepted these proposals and the new price limits took effect
from 1 April 2010.

Over the last year, we have undertaken a comprehensive review of the business,
challenging working practices across the group. As a result, we are
implementing detailed plans to improve performance and reduce our cost base. We
are streamlining our processes as we aim to become a leaner, more efficient
company and have signed new supplier contracts for the 2010-15 period, which
will deliver significant savings and help improve operational and capital
efficiency. We have substantially reduced our workforce and have placed our
pension provision on a much more sustainable footing.

Earlier in the year, Moody's re-affirmed its A3 credit rating for UUW and we
intend to continue to target this credit rating, which we believe best mirrors
the regulatory assumptions underpinning the final determination and remains
appropriate to maintain efficient access to debt capital markets.

We are well prepared for the 2010-15 price review period, with a robust and
sustainable capital structure in place. United Utilities has approximately £2
billion of index-linked debt at an average cost of 1.8% real, compared with
Ofwat's cost of debt assumption of 3.6% real. The group has also fixed the cost
of the majority of its remaining debt at an average nominal rate in the range
5.0% to 5.5%. Together with the group's index-linked debt, this equates to
approximately £300 million of financing outperformance over the 2010-15 period,
based on an RPI inflation rate of 2.5% per annum.

In line with the group's policy, we are proposing to increase the final
dividend for 2009/10 by 5% to 23.13 pence per share. This takes the total
dividend per share for the year to 34.30 pence. In order to meet the
requirements of the 2009 water price review, we need to balance the retention
of a sound financial profile with the importance of income to our investors. In
view of this, 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
dividend growth of RPI+2% per annum through to 2015.

Board change

On behalf of the board, I would like to thank our Chief Financial Officer, Tim
Weller, for the significant contribution he has made to United Utilities over
the past four years and wish him well in his new role at Cable&Wireless
Worldwide. We would also like to welcome Russ Houlden, who will join the group
as Chief Financial Officer from Telecom New Zealand later in the year.

Outlook

Based on Ofwat's final determination, prices to UUW's customers across the
2010-15 regulatory period will decrease in real terms by an annual average of
0.4%, with a 4.3% real decrease in 2010/11. We are implementing a range of
detailed efficiency and performance improvement initiatives and believe we can
deliver outperformance in respect of the new regulatory contract. Our early
capital investment planning should facilitate a smooth transition into the
2010-15 period and we expect capital expenditure to continue at high levels in
2010/11. Overall, we are well positioned for the next five years.

SEGMENTAL PERFORMANCE

REGULATED ACTIVITIES

Financial highlights

  * Regulated revenue increased by 3% to £1,541 million
   
  * Regulated underlying operating profit increased by 3% to £701 million
   
Revenue from regulated activities increased by 3% to £1,541 million,
principally as a result of an allowed price increase of 6.0% (including
inflation of 3.0%), partially offset, as expected and indicated previously, by
reduced water demand reflecting the challenging economic climate. The regulated
price increase supports significant investment in UUW's infrastructure which
provides vital water and wastewater services to customers.

Underlying operating profit for the year increased by 3%, primarily reflecting
the revenue increase coupled with the impact of tight cost control measures,
offset by higher depreciation, bad debts and power costs. The increase in
depreciation reflects the recent high levels of capital spend, in line with the
planned profile of the investment programme. Reported operating profit was
significantly higher than the prior year, reflecting a one-off credit of £77
million in respect of the group's revised pension provision and partly offset
by restructuring costs of approximately £16 million.

As outlined previously, the business had 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. This reflects the impact of the continuing tough
economic environment on cash collection rates.

Capital investment in the year, including £114 million of infrastructure
renewals expenditure, was £620 million. This level of spend was in line with
the planned capital investment profile for the final year of UUW's 2005-10
regulatory programme.

Operational performance

Operational performance is a key area of focus and UUW is targeting an upper
quartile position among UK water companies on key operational measures in the
medium-term. The regulated business continues to upgrade its infrastructure,
replacing 134 kilometres of water mains during the year. UUW continues to
supply high quality drinking water with a mean zonal compliance water quality
performance for the year of 99.94%, which compares with 99.92% for the previous
year. UUW is making good progress against its key performance indicators:

  * Relative efficiency - UUW has narrowed the operational efficiency gaps to
    the most efficient water and wastewater companies since 2005. This is
    reflected in Ofwat's most recent (2008/09) assessment of United Utilities
    as band B for the water service and band C for the wastewater service and
    represents a one band improvement for both services over this period. UUW
    expects at least to sustain these bandings in Ofwat's 2009/10 assessment.
   
  * Security of water supply - UUW met its economic level of leakage rolling
    target for the fourth consecutive year in 2009/10, despite extreme winter
    weather conditions, reflecting strong management focus and the commitment
    of the workforce.
   
  * Pollution - The business has now met or outperformed its medium-term target
    of a 50% reduction in major pollution incidents in each of the last four
    years. One water and seven wastewater Category 1&2 incidents were recorded
    in 2009, compared with the base position of two water and 21 wastewater
    incidents in 2005.
   
  * Sewer flooding - UUW continues to remove properties from the sewer flooding
    register. In 2009, an independent review of UUW's sewer flooding recording
    and reporting process was undertaken, which was submitted to Ofwat for
    consideration. The independent reviewer concluded that the processes are
    generally fit for purpose with some scope for streamlining and further
    improvement.  UUW agreed to implement changes required by Ofwat as a result
    of this review and has reassessed its sewer flooding registers. The number
    of properties on the register in 2009/10 is expected to be 1,028 (for
    properties at risk of experiencing at least one sewer flooding incident in
    ten years), which compares with a reassessed number for 2005/06 of 1,091
    properties, a net reduction of 63 properties over the four year period. The
    company has plans in place to reduce the number of incidents due to sewer
    flooding (other causes) and to offer mitigation measures for all properties
    on the register.
   
  * Overall customer satisfaction - Significant progress has been achieved and
    overall customer satisfaction in response to enquiries is now at its
    highest recorded levels, with a satisfaction rating of 82% for the 12
    months to 31 March 2010. UUW achieved its target of 85% for March 2010, the
    highest score attained for an individual month. These satisfaction levels
    are based on a comprehensive independent survey conducted on behalf of UUW
    each month. Customer satisfaction has improved from less than 50% in 2005
    to consistently over 80% during the second half of 2009/10. The business
    remains focused on achieving further improvements.
   
Although UUW has delivered real progress, the business recognises that there is
more to do. As indicated previously, sewer flooding incidents, together with
environmental underperformance at Fleetwood wastewater treatment works,
negatively impacted the 2008/09 OPA score.

UUW has a capital investment programme designed to improve performance at
Fleetwood works, which is scheduled to be completed later this year on time and
on budget. The business has introduced an enhanced monitoring system across the
company's wastewater treatment works to help improve performance in respect of
meeting consent standards at its works. With regard to sewer flooding, the
business has identified those areas of its sewer network which are high risk
with the potential to have a major flooding impact and has commenced a
programme of work to help mitigate these risks.

Improving the company's response to customer contacts is another key area of
focus, in particular billing enquiries. The business has introduced new working
practices to help improve performance and early progress is encouraging. The
process of monitoring performance against regulatory targets has been enhanced
and managers now have better information and the flexibility to reallocate
resources to help meet these targets. The more technical work has also been
brought back in-house, giving the business greater control to resolve issues
and help meet its targets.

The business expects an improved OPA score for 2009/10, with an increase in
points in the areas of wastewater treatment works compliance, company contact
score and unplanned interruptions. The actions being taken will have a positive
impact on UUW's performance as measured by Ofwat's new service incentive
mechanism, which is replacing OPA and is due to be introduced in 2010/11.

2009 water price review

On 26 November 2009, Ofwat published its final determination of price limits
for the 2010-15 period. After careful consideration, UUW accepted these
proposals and the new price limits took effect from 1 April 2010. Ofwat's final
determination of price limits for UUW was based on:

  * a £3.6 billion capital investment programme (2007/08 prices);
   
  * real growth of 12%, or approximately £900 million, in the regulatory
    capital value over the five year period;
   
  * an average annual underlying operating efficiency of 1.2% for the water
    service and 2.4% for the wastewater service;
   
  * a return on capital of 4.5% (post-tax, real); and
   
  * an average annual real price decrease of 0.4% across the five-year period,
    with a real price decrease of 4.3% in the first year.
   
United Utilities had indicated previously that there was potential for
additional investment in respect of the North East Irish Sea, which was
dependent on a European court case decision involving the UK government. A
ruling by the European Court of Justice on 10 December 2009 concluded that
United Utilities will not be required to undertake this additional investment.

Efficiency initiatives

UUW is well prepared for the 2010-15 price review period. Over the last year,
United Utilities has undertaken a comprehensive review of the business,
challenging working practices across the group, and is implementing detailed
plans to improve performance and reduce its cost base.

Operating 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.
This provides an immediate contribution to the achievement of efficiency
targets set by Ofwat.

Customer service is a key area of focus, as this forms part of Ofwat's relative
efficiency analysis and will also contribute to the regulator's new service
incentive mechanism assessment. UUW aims to reduce its cost to serve
significantly, whilst continuing to improve the customer experience. The
business has reduced its annual cost to serve from £23 per customer to £19 per
customer over the last two years and is implementing plans to deliver further
reductions, all while customer satisfaction has improved markedly. The company
has amended staff incentive mechanisms to help get things right first time,
with the aim of reducing unnecessary customer calls. Performance measurement is
now based on first time resolution, rather than average call handling time.
United Utilities' customer online self-serve system is being enhanced to make
it more comprehensive and user friendly, with the aim of reducing by a third
the need for customers to contact the company's call centre. UUW is focused on
improving its debt collection rates and is planning to utilise more local
authority collection agreements. The company is also enhancing systems to
improve its customer segmentation analysis and to obtain better data on
customers who have moved address, coupled with a more proactive debt follow up
strategy.

United Utilities is reviewing and streamlining its processes as it aims to
become a leaner, more efficient company. The group is focused on operating with
fewer, simpler and more consistent processes. For example, UUW is halving the
number of steps from metering to cash collection. The group is rationalising
its IT infrastructure, providing greater automation and visibility of workflow.
Managers now have ownership of all steps in a process to help enhance
performance. Individuals also have greater visibility and understanding of how
their performance influences the efficiency of the entire process.

The group will continue to focus on delivering benefits from its existing
efficiency initiatives, such as its workforce management system which is a key
element in improving the efficiency of frontline staff, utilising remote
operational site management and optimisation of chemical and power usage,
improving efficiency of operational pumps, developing combined heat and power
assets, which recycle energy generated from wastewater treatment processes, and
improving supply chain management to deliver further procurement economies. A
number of these schemes are also key elements of United Utilities' plan to
mitigate its carbon emissions. In 2009, UUW was awarded funding from Defra to
convert biogas, a by-product of the sludge treatment process, into bio-methane
for vehicle fuel. There is potential in the future to export biogas into the
national gas distribution network.

Capital delivery

United Utilities has a robust commercial capital delivery framework in place
for the 2010-15 period. Contractor partners have been appointed and the company
has signed new supplier contracts, which will deliver significant savings and
help improve efficiency. Incentive mechanisms are closely linked to the UUW
business plan and pain/gain incentives are assessed on a project basis, rather
than a cumulative basis, providing more clarity on performance. A partial fee
retention mechanism is also in place to help drive on-time project delivery. In
addition, UUW has flexibility in respect of the level of competitive tendering
it may use in the award of future work during the five year regulatory period.

United Utilities undertook detailed advanced planning which ensured smooth
transition into the 2010-15 period and leveraged recent economic conditions to
deliver procurement efficiency benefits. UUW expects capital investment,
including infrastructure renewals expenditure, in 2010/11 to be substantial as
the company aims for a smoother capital delivery profile across the five year
period compared with 2005-10. UUW has a strong focus on asset serviceability
and also expects to bring forward the delivery of certain outputs.

Financial

United Utilities has approximately £2 billion of long dated, index-linked debt
at an average cost of 1.8% real. This compares with Ofwat's cost of debt
assumption of 3.6% real and secures financing outperformance for the next five
years. In line with its policy, the group has also fixed the interest rates on
a significant proportion of the remainder of its existing debt portfolio, for
the 2010-15 regulatory period, at an average nominal rate in the range 5.0% to
5.5% (inclusive of credit spread). This provides more clarity on UUW's ability
to outperform the final determination. Taken together with the group's
index-linked debt, this equates to approximately £300 million of financing
outperformance over the five years, based on an RPI inflation rate of 2.5% per
annum. In addition, the group requires little re-financing during the 2010-15
period.

The changes to the defined benefit pension schemes have significantly reduced
the company's pension deficit, reduced the future service cost and reduced
future funding and deficit risk, thereby placing the company's pension
provision on a much more sustainable footing.

NON-REGULATEDACTIVITIES

Financial highlights

  * Non-regulated revenue marginally down at £890 million
   
  * Non-regulated underlying operating profit marginally lower at £59 million
   
Non-regulated revenue was marginally lower at £890 million, reflecting the
impact of difficult conditions in the UK property market on the group's utility
connections business and, as expected, a reduction in contribution from the
group's UK outsourcing contracts in the final year of the 2005-10 regulatory
period. Reported operating profit was £63 million, in line with the prior year.
This reflects a one-off credit of £9 million in relation to the group's revised
pension provision, partly offset by restructuring costs of approximately £5
million. The prior year profit numbers have been restated in accordance with
IFRIC 12, as explained in note 1 of the financial statements.

During the second half of the year, United Utilities disposed of its investment
in Northern Gas Networks Holdings Limited (NGN) for approximately £86 million
and sold its economic interest in Manila Water Company (MWC) for approximately
£46 million. The intention is to retain these proceeds within the group. As a
result of the disposals, dividends from these investments, which are included
in operating profit, were materially lower in 2009/10, at £2 million, compared
with £12 million received in 2008/09. Adjusting for the impact of these
disposals and the aforementioned one-off items would show an increase in
non-regulated underlying operating profit growth of £7 million, for the year
ended 31 March 2010, reflecting tight cost control in the business.

Business update

United Utilities applies its utility skills from its regulated activities
through outsourced utility contracts and investments. In June 2009, United
Utilities, via the 4D consortium, won a new capital delivery contract with
Southern Water to manage the design and build of a new wastewater treatment
works in the Brighton and Hove area. The contract is underway and construction
is expected to take approximately three years, followed by the potential for a
two-year contract to operate and maintain the new plant. In addition, the 4D
consortium has responsibility for managing part of Southern Water's regulatory
capital investment programme through to 2015.

The contract with Scottish Water, via Scottish Water Solutions Limited in which
United Utilities is a major partner, came to a natural end in March 2010.
Following the outcome of the recent water price review, Welsh Water announced
in February 2010 that it intended to take operations and maintenance services
in-house and therefore the contract with United Utilities has not been renewed
for the 2010-15 regulatory period.

Following the sales of its holdings in NGN and MWC, United Utilities received
several expressions of interest for its non-regulated activities. In May 2010,
the group agreed the disposal of its Australian business for approximately £135
million, comprising £106 million in cash and £29 million in net debt assumed by
the purchaser. The transaction is subject to a number of consents and
regulatory approvals and financial close is expected in the second half of
2010. The group is continuing to evaluate the expressions of interest it has
received for its remaining non-regulated businesses.

ALL OTHER SEGMENTS

As expected, the group's other activities, which include central costs,
delivered an underlying operating loss during the year of £4 million, compared
with an underlying operating loss of £6 million in 2008/09. As indicated
previously, the difficult conditions in the UK property market have affected
the performance of United Utilities Property Services, the group's property
sales and management business. The reported operating loss for other activities
was £7 million. This reflects restructuring costs of approximately £10 million,
partly offset by a one-off credit of £7 million in respect of the group's
revised pension provision.

FINANCIAL PERFORMANCE

Investment income and finance expense

Finance expense of £384 million was £113 million higher than the prior year.
This expense included £136 million of net fair value losses on debt and
derivative instruments, compared with £24 million of net fair value losses in
2008/09. The impact of changes in credit spreads on debt accounted for at fair
value through profit or loss can result in significant volatility and this is
the principal reason for the large net fair value movement in the year. In
addition, the volatility in financing expense reflects the fact that, in order
to provide a hedge of the interest cost implicit in the regulatory period, the
group fixes interest rates for the duration of each five-year review period for
a substantial proportion of its debt using interest rate swaps. IAS 39 limits
the use of hedge accounting for these commercial hedges, thereby increasing the
potential volatility of the income statement. However, this volatility in fair
values has no cashflow impact. A reduction in returns on the group's pension
schemes' assets in 2009/10, compared with the prior year, has also contributed
to the increase in finance expense in the year.

Investment income was £14 million, compared with £71 million in the prior year,
principally reflecting a reduction in cash, following the return of
approximately £1.5 billion to shareholders in the previous financial year, and
lower returns on cash deposits.

The underlying cost of net borrowings for continuing operations of £236 million
was £39 million higher than in 2008/09. This reflects higher average net debt
in 2009/10 and an increase in the group's average net borrowing rate from
around 4.7% to 4.9%. Average net debt was lower in 2008/09, primarily due to
the group holding approximately £1.1 billion of cash proceeds from the sale of
United Utilities Electricity (UUE) prior to the return of approximately £1.5
billion to shareholders in August 2008.

Profit before taxation

Underlying profit before taxation was £500 million, 6% lower than 2008/09,
principally reflecting an increase in interest expense as a result of higher
average net debt, following the return of £1.5 billion to shareholders in
August 2008, an increase in the underlying cost of net borrowings, a reduction
in investment income and lower expected returns on pension assets. This
underlying measure adjusts for the impact of one-off items, fair value
movements in respect of debt and derivative instruments and the short-term
interest benefit in the previous year associated with the cash proceeds from
the sale of UUE, prior to the £1.5 billion return to shareholders. Reported
profit before taxation decreased by 10% to £474 million principally as a result
of an increase in finance expense and lower investment income, partly offset by
the £92 million one-off credit associated with the changes to the group's
pension schemes and a £37 million profit on disposal of investments.

Taxation

During the year the group received a cash tax inflow for the year of £51
million, following agreement with UK tax authorities of prior years' tax
returns. After taking account of this repayment, the net position for 2009/10
was a small cash outflow of £1 million.

The current tax charge was £22 million and the current tax effective rate was
5%, compared with 26% in the prior year. The current tax charge included a £48
million credit in relation to the agreement with the tax authorities of prior
years' tax returns.

In the prior year, the group recognised a one-off deferred tax charge of £206
million relating to the abolition of industrial buildings allowances with a
cash impact expected to be spread over a period of approximately 20 years. This
one-off item resulted in a significant increase in the effective tax rate for
the prior year.

The group has recognised a net deferred tax charge of £49 million compared with
a deferred tax charge in the prior year of £210 million. This included a £7
million credit in relation to the agreement with the tax authorities of prior
years' tax returns.

An overall tax charge of £71 million has been recognised for the year ended 31
March 2010. Excluding the impact of prior years' adjustments and the abolition
of industrial buildings allowances, the total tax charge relating to continuing
operations would be £125 million or 26% compared with a £148 million charge or
28% in the prior year.  

Earnings per share
Basic earnings per share relating to continuing operations increased from 26.5
pence to 59.2 pence. In 2008/09, there was a one-off deferred tax charge of £
206 million relating to the abolition of industrial buildings allowances
(equivalent to 30.3 pence per share). In 2009/10, there was a one-off credit of
£55 million relating to the agreement of prior years' tax returns (equivalent
to 8.0 pence per share).

Dividend per share

The board has proposed a final dividend of 23.13 pence per ordinary share in
respect of the year ended 31 March 2010. This is an increase of 5.0%, in line
with the group's dividend policy of targeting a real growth rate of RPI+2.0%.
The inflationary increase of 3.0% is based on the RPI element included within
the allowed regulated price increase for UUW for the 2009/10 financial year
(i.e. the movement in RPI between November 2007 and November 2008).

The final dividend is expected to be paid on 2 August 2010 to shareholders on
the register at the close of business on 18 June 2010. The ex-dividend date is
16 June 2010.

As outlined on 21 January 2010, following detailed analysis and assessment of
the final determination, the board intends to pay a dividend per share of 30.0
pence for the 2010/11 financial year. Thereafter, the intention is to continue
to target a dividend per share growth rate of RPI+2% per annum through to 2015.

Cashflow

Cash generated for the year ended 31 March 2010 was £1,016 million, compared
with £911 million in the prior year. The group's net capital expenditure was £
573 million (including the purchase of intangible assets and proceeds from
sales of property, plant and equipment), principally in the regulated water and
wastewater investment programmes. This excludes infrastructure renewals
expenditure which is treated as an operating cost under International Financial
Reporting Standards.

Net debt including derivatives at 31 March 2010 was £4,906 million, compared
with £4,895 million at 31 March 2009. Expenditure on the regulatory capital
investment programmes and payments of dividends and interest, were broadly
offset by the proceeds from the disposals of the group's holdings in Northern
Gas Networks and Manila Water Company, operational cash flows and the
aforementioned cash tax receipt.

Debt financing and interest rate management

Gearing (measured as group net debt divided by UUW's regulatory capital value)
decreased to 64% at 31 March 2010, compared with 66% at 31 March 2009.
Adjusting for the group's non-recourse joint venture debt of £234 million,
gearing was 61%.

At the year end, United Utilities Water PLC had long-term credit ratings of A3/
BBB+ and United Utilities PLC had long-term credit ratings of Baa1/BBB- from
Moody's Investors Services and Standard & Poor's Ratings Services respectively.
Shortly after UUW accepted Ofwat's final determination on 21 January 2010,
Moody's re-affirmed its credit ratings of A3 for United Utilities Water PLC and
Baa1 for United Utilities PLC, both with stable outlook. However, as expected,
Standard & Poor's downgraded United Utilities Water PLC to BBB+ from A- and
United Utilities PLC to BBB- from BBB+, both with stable outlook, reflecting
differing methodologies particularly with regard to the treatment of
infrastructure renewals expenditure.

Cash and short-term deposits at 31 March 2010 amounted to £302 million. During
the year, the group's financing headroom position was enhanced through the
issuance of an additional £100 million, 5.75% bond maturing in March 2022; an
additional £50 million, 6.125% bond maturing in December 2015; and a new £70
million, 2.40%+RPI index-linked bond maturing in July 2039. United Utilities
has headroom to cover its projected financing needs through to the spring of
2012.

The group has access to the international debt capital markets through its €7
billion medium-term note programme which provides for the periodic issuance by
United Utilities PLC and United Utilities Water PLC of debt instruments on
terms and conditions determined at the time the instruments are issued. The
programme does not represent a funding commitment, with funding dependent on
the successful issue of the debt securities.

Long-term borrowings are structured or hedged to match assets and earnings,
which are largely in sterling, indexed to UK retail price inflation and subject
to regulatory price reviews every five years.

Very long-term sterling inflation index-linked debt is the group's preferred
form of funding as this provides a natural hedge to assets and earnings. At 31
March 2010, approximately 42% of the group's net debt was in index-linked form,
representing around 27% of UUW's regulatory capital value, with an average real
interest rate of 1.8%. The long-term nature of this funding also provides a
good match to the group's long-life infrastructure assets and is a key
contributor to the group's average term debt maturity profile which is in
excess of 25 years.

Where nominal debt is raised in a currency other than sterling and/or with a
fixed interest rate, to manage exposure to long-term interest rates, the debt
is generally swapped to create a floating rate sterling liability for the term
of the liability. To manage exposure to medium-term interest rates, the group
fixes interest costs for a substantial proportion of the group's debt for the
duration of each price control period at around the time of that price control
determination. The group does not undertake any speculative trading activity.

The group enters into joint ventures with consortium partners. The financial
and legal structure of joint ventures is designed to limit the group's exposure
to the extent of the equity investment and loans provided by the group, with no
further recourse should the joint venture default. All joint venture
arrangements have been incorporated into the group's results on a proportionate
consolidation basis.

Liquidity

Short-term liquidity requirements are met from the group's normal operating
cashflow and its short-term bank deposits. Further liquidity is provided by
committed but undrawn credit facilities. This liquidity supports the group's €2
billion euro-commercial paper programme.

In line with the board's treasury policy, United Utilities aims to maintain a
healthy headroom position. Available headroom at 31 March 2010 was £1,100
million based on cash, short-term deposits and medium-term committed bank
facilities, net of short-term debt. This headroom is sufficient to cover the
group's projected financing needs through to the spring of 2012.

United Utilities believes that it operates a prudent approach to managing
banking counterparty risk. Counterparty risk, in relation to both cash deposits
and derivatives, is controlled through the use of counterparty credit limits.
United Utilities' cash is held in the form of short-term (generally no longer
than three months) money market deposits with either prime commercial banks or
with triple A rated money market funds. As at 31 March 2010, no cash deposits
were held in money market funds.

United Utilities operates a bilateral, rather than a syndicated, approach to
its core relationship banking facilities. This approach spreads maturities more
evenly over a longer time period, thereby reducing refinancing risk and
providing the benefit of several renewal points rather than a large single
refinancing requirement.

Pensions

The group has sought to adopt a more sustainable approach to the delivery of
pension provision and has amended the terms of its defined benefit pension
schemes. The measures taken include a cap on the increase in pensionable
earnings, an increase in the normal retirement age, an increase in employee
contribution rates, an adjustment to the accrual rates and a re-balancing of
the pensions investment strategy. This reduces both the future service cost and
the future funding risk to the company, thereby enabling the company to retain
defined benefit pension schemes for existing members. The changes to the scheme
rules were supported by the company's trade unions. The reduction in service
cost for 2010/11 is expected to be approximately £7 million, although the lower
risk investment strategy is likely to reduce investment income and result in a
lower net benefit at the profit before tax level. These amendments have also
resulted in a reduction of £92 million to the group's pension deficit, which is
required to be accounted for as a credit to operating profit in the group's
income statement.

Overall, the group's net pension deficit at the year end has decreased by £87
million, compared with the position at 30 September 2009, reflecting the
aforementioned changes to the pension schemes and the routine actuarial
assessment of movements in assets and liabilities. As a result of changes in
market conditions over the 12 months, the group's net pension obligations
increased during the year from £213 million at 31 March 2009 to £271 million at
31 March 2010. Further detail is provided in note 8 ("Retirement benefit
obligations") of these condensed consolidated financial statements. The group
will continue to evaluate its pensions investment strategy to de-risk further
its pension provision.

Going concern

The directors have reviewed the financial resources available to the group and
have concluded that the group is a going concern. This conclusion is based
upon, amongst other matters, a review of the group's financial projections
together with a review of the cash and committed borrowing facilities available
to the group.

Underlying profit

In considering the underlying results for the year, the directors have excluded
fair value movements on debt and derivative instruments and those significant
items identified as non-recurring. Statutory operating profit and profit before
taxation from continuing operations are reconciled to underlying operating
profit from continuing operations and underlying profit before taxation from
continuing operations as follows:

Continuing operations                    Regulated       Non-       All    Group
                                         activities regulated     other         
Operating profit/(loss) for the year                activities segments         
ended                                        £m             £m       £m       £m
                                                                              
31 March 2010                                                                   
                                                                                
Operating profit/(loss) per published         761.7       63.1    (6.9)    817.9
results                                                                         
                                                                                
Impact of changes to pension schemes         (76.7)      (8.9)    (6.7)   (92.3)
                                                                                
Restructuring costs                            15.8        4.9     10.0     30.7
                                                                                
                                             ------     ------   ------   ------
                                                                                
Underlying operating profit/(loss)            700.8       59.1    (3.6)    756.3
                                                                                
                                             ------     ------   ------   ------
                                                                                
Continuing operations                     Regulated       Non-      All    Group
                                         activities  regulated    other         
Operating profit/(loss) for the year                activities segments         
ended                                            £m         £m       £m       £m
                                                                              
31 March 2009 (restated)                                                        
                                                                                
Operating profit/(loss) per published         678.4       63.4   (12.3)    729.5
results                                                                         
                                                                                
Restructuring costs                             1.0      (1.0)      1.2      1.2
                                                                                
Other reorganisation costs****                    -          -      5.4      5.4
                                                                                
                                             ------     ------   ------   ------
                                                                                
Underlying operating profit/(loss)            679.4       62.4    (5.7)    736.1
                                                                                
                                             ------     ------   ------   ------
                                                                                
Continuing operations                                                   Restated
                                                                   Year     Year
Profit before taxation                                            ended    ended
                                                               31 March 31 March
                                                                   2010     2009
                                                                     £m       £m
                                                                                
Profit before taxation per published                              474.2    529.3
results                                                                         
                                                                                
Impact of changes to pension schemes                             (92.3)        -
                                                                                
Restructuring costs                                                30.7      1.2
                                                                                
Other reorganisation costs****                                        -      5.4
                                                                                
Profit on disposal of investments                                (36.6)        -
                                                                                
Evaluation and disposal costs relating                             10.8        -
to non-regulated businesses                                                     
                                                                                
Net fair value losses on debt and                                 135.8     24.3
derivative instruments                                                          
                                                                                
Interest on swaps and debt under fair                            (22.2)    (8.3)
value option                                                                    
                                                                                
Interest associated with cash proceeds                                -   (20.6)
from UUE sale*****                                                              
                                                                                
                                                                 ------   ------
                                                                                
Underlying profit before taxation                                 500.4    531.3
                                                                                
                                                                 ------   ------
                                                                                
Continuing operations                                                   Restated
                                                                   Year     Year
Underlying cost of net borrowings                                 ended    ended
                                                               31 March 31 March
                                                                   2010     2009
                                                                     £m       £m
                                                                                
Finance expense                                                 (383.6)  (270.9)
                                                                                
Net fair value losses on debt and                                 135.8     24.3
derivative instruments                                                          
                                                                                
Interest on swaps and debt under fair                            (22.2)    (8.3)
value option                                                                    
                                                                                
Investment income                                                  14.1     70.7
                                                                                
Adjustment for net pension interest                                23.2    (6.8)
expense/(income)                                                                
                                                                                
Adjustment for IFRIC 12 financing income                          (2.9)    (5.2)
                                                                                
                                                                 ------   ------
                                                                                
Underlying cost of net borrowings                               (235.6)  (196.2)
                                                                                
                                                                 ------   ------
                                                                                
Add back adjustment for net pension                              (23.2)      6.8
interest (expense)/income                                                       
                                                                                
Add back adjustment for IFRIC 12                                    2.9      5.2
financing income                                                                
                                                                                
Interest associated with cash proceeds                                -   (20.6)
from UUE sale*****                                                              
                                                                                
                                                                 ------   ------
                                                                                
Underlying net interest payable                                 (255.9)  (204.8)
                                                                                
                                                                 ------   ------

****Relates to the capital restructuring associated with the £1.5 billion
return to shareholders.

*****The interest associated with the cash proceeds from the sale of UUE has
been deducted to provide a more representative view of underlying performance.
As the cash proceeds from the sale of UUE were held by the group until the £1.5
billion return to shareholders in August 2008, this resulted in a short-term
net debt and interest reduction.

PRINCIPAL RISKS AND UNCERTAINTIES

The group faces a variety of risks and uncertainties, both foreseeable and
unforeseeable, which if they materialise, could adversely affect its
reputation, profitability or financial position, its share price or the pricing
and liquidity of its debt securities. The principal ones are summarised below.

The group maintains an internal control framework that assesses, throughout the
year, the nature and magnitude of internal and external risks to the
achievement of business goals. The board assesses the group's appetite and
tolerance to risk and clear risk tolerance boundaries are set. Managers are
required to employ both proactive and reactive mitigation measures in a
prioritised manner to reduce exposures and ensure ongoing resilience should a
risk materialise. The executive management team regularly reviews significant
risks. The audit committee regularly reviews the framework's effectiveness and
the group's compliance with it.

Capital investment programmes

The regulated business requires significant capital expenditure, particularly
in relation to new and replacement plant and equipment for water and wastewater
networks and treatment facilities. Historically, the group has financed this
capital expenditure from operating cashflow and from external debt and equity
financing. There can be no assurance that operating cashflows will not decline
or that external debt financing and other sources of capital will be available,
at similar cost to that assumed by Ofwat, in order to meet these capital
expenditure requirements. Delivery of capital investment programmes could also
be affected by a number of factors including adverse legacy effects of earlier
capital investments (such as increased maintenance or enhancement costs) or
amounts funded in regulatory capital investment programmes proving insufficient
to meet the actual amount required. This may affect the group's ability to meet
regulatory and other environmental performance standards, which may result in
fines imposed by UUW's regulators of an amount of up to 10 per cent of
regulated business turnover or other sanctions.

In order to minimise the likelihood of funding shortfalls, capital investment
programmes are regularly monitored to identify the risk of time, cost and
quality variances from plans and budgets and to identify, where possible, any
appropriate opportunities for outperformance.

Service incentive mechanism and serviceability assessment

For the 2010-15 period, Ofwat has introduced a new comparative incentive
mechanism to reward or penalise water companies' service performance, replacing
the overall performance assessment (OPA). The service incentive mechanism (SIM)
compares companies' performance in terms of the number of `unwanted' contacts
received from customers and how well they deal with those contacts. Depending
on UUW's relative performance under the SIM it could receive a revenue penalty
or reward when price limits are next reset in 2014.

In preparation for the change, systems and processes are being developed and
enhanced, where necessary, to allow the company to report accurately on the
volume of `unwanted' contacts it receives. The company's focus is on ensuring
right first time service delivery to its customers, thus avoiding the need for
`unwanted' contacts. Where `unwanted' contacts do arise, there is a clear focus
on identifying the root causes. These actions are intended to ensure that the
company's performance under the SIM is optimised and thereby mitigating the
risk of a penalty at the next price setting.

The group is required to maintain the serviceability of its water and
wastewater assets, ensuring they continue to deliver a level of service and
performance at least as good as in the past. Where serviceability falls below
required reference levels of performance Ofwat may impose a penalty in revenue
at the next price-setting. Or, if performance were to decline, the group may
incur additional operating or capital expenditure to restore performance.

The various indicators of performance are closely and routinely monitored by
management. The company's capital investment programme is targeted to seek to
maintain stable serviceability of the company's water and wastewater assets.
Similarly, operational practice is intended to ensure stable serviceability.
Where adverse trends develop and there is a risk of serviceability deviating
from stable, then corrective action can be taken.

The adoption of private sewers

In 2008, the government announced its intention to transfer sewers and pumping
stations currently owned by private individuals and businesses to sewerage
undertakers. The precise date and nature of the transfer is yet to be
determined but could occur as soon as 2011. No allowance has been made in price
limits for the costs associated with the transfer. Therefore, any costs
incurred will represent an unbudgeted increase in operating and capital
expenditure.

Although there are costs associated with the transfer, as long as they are
incurred efficiently they are expected to be largely recoverable when price
limits are next reset, either at an interim determination or the next periodic
review, but there can be no guarantee of full cost recovery at this stage.

Economic environment, inflation and capital market conditions

In recent years, the global banking crisis and economic downturn have impacted
the bank lending environment, as well as the debt and equity capital markets.
This has resulted in the cost of capital increasing and has made the arranging
of finance and issuance of new equity and debt capital more expensive and
difficult to secure.

A compounding challenge arises from the relationship between the regulatory
capital value (RCV) of the regulated business and the Retail Prices Index
(RPI). The RCV is adjusted annually for inflation so, if RPI decreases, the RCV
would be adjusted downward to reflect this. This may lead to pressure on
gearing (and other key financial ratios), credit ratings of the regulated
business (and the group as a whole), and increase the cost or limit the
availability of credit. In the extreme, the group may be required to increase
its equity base by either reducing its dividend payments or raising new equity
capital. The global economic downturn continues to present difficult trading
and financing conditions for customers, contractors and suppliers of materials
and/or services to the group.

The group monitors closely its liquidity headroom within the parameters
approved by the board, the impact of trends in inflation or deflation on its
capital position as well as the potential impact of wider changes in the credit
markets. Where possible, the group has sought to issue debt linked to RPI to
minimise the extent of its exposure to deflationary (or low inflationary)
conditions. The group also monitors the financial position of its key
contractors and suppliers and seeks to use its procurement processes to ensure
that alternative suppliers can be sourced quickly and, where possible, on
similar terms.

Pension scheme obligations

The group participates in a number of pension arrangements, predominantly in
the UK. The principal schemes are defined benefit schemes, although these have
been closed to new employees since October 2006. The assets of these schemes
are held in trust funds independent of group finances, with the funds being
well diversified and professionally managed. The group's current schemes had a
combined IAS 19 deficit of £271 million as at 31 March 2010, compared with a
deficit of £213 million as at 31 March 2009 and a deficit of £359 million as at
30 September 2009.

Increases to pension fund deficits may result in an increased liability for the
group, the size of the liability depending upon the extent to which additional
deficits are recoverable through the regulatory price determination process. In
its final determination for the 2009 water price review, Ofwat took account of
broadly 50 per cent of the pension deficit shown in UUW's final business plan
for the regulated business when setting its overall price controls. In response
to the size of its ongoing pension risks and pension costs the group has
recently been consulting on a series of changes for employees in its defined
benefit schemes. These changes, which came into force on 31 March 2010, will
result in reduced costs and risks, including deficit, associated with defined
benefit liabilities in future. In conjunction with the trustees, the group
continues to monitor the investment strategy for the pension schemes, including
the group's exposure to investment risks.

Failure to comply with applicable law or regulations

The group is subject to various laws and regulations in the UK and
internationally. Regulatory authorities may, from time to time, make enquiries
of companies within their jurisdiction regarding compliance with regulations
governing their operations. In addition to regulatory compliance proceedings,
the group could become involved in a range of third party proceedings relating
to, for example: land use, environmental protection and water quality. Amongst
others, these may include civil actions by third parties for infringement of
rights or nuisance claims relating to odour or other matters. Furthermore, the
impact of future changes in laws or regulations or the introduction of new laws
or regulations that affect the business cannot always be predicted and, from
time to time, interpretation of existing laws or regulations may also change or
the approach to their enforcement may become more rigorous. If the group fails
to comply with applicable law or regulations, in particular in relation to its
water and wastewater licences, or has not successfully undertaken corrective
action, regulatory action could be taken that could include the imposition of a
financial penalty (of up to 10 per cent of relevant regulated turnover) or the
imposition of an enforcement order requiring the group to incur additional
capital or operating expenditure to remedy its non-compliance. In the most
extreme cases, non-compliance may lead to revocation of a licence or the
appointment of a special administrator.

The group endeavours to comply with all legal requirements in accordance with
its business principles and robust processes are in place to seek to mitigate
against non-compliance. The group continually monitors legislative and
regulatory developments and, where appropriate, participates in consultations
to seek to influence their outcome, either directly or through industry trade
associations for wider issues. The group seeks appropriate funding for any
additional compliance costs in the regulated business as part of the price
determination process.

Increased competition in the water and wastewater industry

The Cave review of competition and innovation in water markets was published in
April 2009 and in September 2009 the government consulted on legislation to
implement a number of the review's proposals. If its recommendations are
implemented, this could eventually expand the competitive market allowing
retail competition to all non-household customers. Ofwat and the Environment
Agency are considering the introduction of reforms to the regulation of water
abstraction licences that would allow trading of licences. Ofwat is also
examining the scope for `upstream' competition in treated water supply.

Ofwat has taken steps to introduce competition into the water supply market
through inset appointments and the water licensing supply regime. Prior to 2007
(with one exception), inset appointees had all been granted to existing
regulated companies. Since 2007, Ofwat has granted more inset appointments, one
of which is within UUW's region. Further inset appointments may be made in the
future, resulting in increased competition.

The group has been fully engaged in the government and Ofwat consultations on
the Cave review and other aspects of competition. A relatively small proportion
of the group's profits derive from the retailing of water and wastewater
services to non-household customers. However, United Utilities recognises that
reforms to the pricing rules that govern access to the group's water network
and greater upstream competition could put at risk a greater proportion of the
group's profits. If competition is expanded, there would also be opportunities
for the group to participate in a wider market in England and Wales.

Events, service interruptions, systems failures, water shortages or
contamination of water supplies

The group controls and operates utility networks and maintains the associated
assets with the objective of providing a continuous service. In exceptional
circumstances, a significant interruption of service provision or catastrophic
damage could occur resulting in: significant loss of life; and/or environmental
damage; and/or economic and social disruption. Such circumstances might arise,
for example, from electricity, gas or water shortages; the failure of an asset
or an element of a network or supporting plant and equipment; human error; an
individual's malicious intervention; or unavoidable resource shortfalls. The
group could be fined for breaches of statutory obligations or held liable to
third parties, or be required to provide an alternative water supply of
equivalent quality, which could increase costs. The group is also dependent
upon the ability to access, utilise and communicate remotely via electronic
software applications mounted upon corporate information technology hardware
and communicating through internal and external networks. The ownership,
maintenance and recovery of such applications, hardware and networks are not
wholly under the group's control.

The group operates long-standing, well tested and appropriately resourced
incident response and escalation procedures. The processes continue to be
refined, alongside related risk management and business continuity procedures.
These recognise that possible events can have varying causes, impacts and
likelihoods. While the group seeks to ensure that it has appropriate processes
in place, there can be no certainty that such measures will be effective in
preventing or, when necessary, managing large-scale incidents to the
satisfaction of customers, regulators, government and the wider stakeholder
community. The group also maintains insurance cover in relation to losses and
liabilities likely to be associated with such significant risks, although
potential liabilities arising from a catastrophic event could exceed the
maximum level of insurance cover that can be obtained cost-effectively. The
regulated business's licence also contains a `shipwreck' clause that, if
applicable, may offer a degree of recourse to Ofwat in the event of a
catastrophic incident.

Risks in the group's non-regulated business

Outside the regulated business, the group provides services relating to the
operation and management of assets for other utility clients in the UK and
overseas. These services include the maintenance and operation of utility
networks, the design and construction of new assets, the design and
construction of new connections to the relevant network and the provision of
ancillary services. The delivery of contracts, both existing and future, will
be achieved by exploiting the group's core infrastructure management skills and
may also require capital expenditure. The overstretching of such skills could
lead to a loss of customers or the inability to meet contractual commitments,
or to the incurrence of penalties.

The costs and risks associated with these new projects are subject to internal
reviews before approval is given to commit to them. The group aims to comply
with its contractual commitments or operating performance targets and any
requirements to maintain service continuity or achieve specified operating
efficiencies in relation to those clients. Within the non-regulated business,
the focus is on deploying the group's core skills on an asset-light basis,
whilst continually monitoring contract performance, together with programme and
project management.

Material litigation

NOSS Consortium (NOSS) (of which North West Water International Limited, a
wholly owned subsidiary of United Utilities Group PLC, is a member and the sole
remaining active participant) is party to arbitration proceedings in Thailand
in relation to a design and construction contract dated 1 November 1993 between
NOSS and the Bangkok Metropolitan Administration (BMA) to build a wastewater
treatment plant and network in central Bangkok. Following disagreements with
the engineer (Dorsch Consult) and disputes with the BMA, NOSS terminated the
contract with the BMA and served a notice of arbitration. NOSS has total claims
against the BMA of approximately six billion baht. The BMA has counterclaimed
for approximately three billion baht; however, based upon the facts and matters
currently known, the counterclaim appears to lack substance. Although there
have been some delays in the arbitral process, the arbitration now appears set
to proceed.

In February 2009, the group was served with notice of a multiparty `class
action' in Argentina into which United Utilities International Limited (UUIL)
was enjoined in 2007. The class action is related to the issuance and payment
default of a US$230 million bond by Inversora Eléctrica de Buenos Aires S.A.
(IEBA), an Argentine project company set up to purchase one of the Argentine
electricity distribution networks, which was privatised in 1997. UUIL had a 45
per cent shareholding in IEBA which it sold in 2005. The class action is being
pursued against various parties, including the original direct and indirect
shareholders of IEBA, the banks which advised IEBA and the rating agencies of
the bonds. The bonds, which were issued in 1997, were defaulted in March 2002
and IEBA entered an insolvency process in 2003. The claim is for a
non-quantified amount of unspecified damages, and purports to be pursued on
behalf of unidentified consumer bondholders in IEBA. UUIL has filed a defence
to the action and will vigorously resist the proceedings, given the robust
defences that UUIL has been advised that it has on procedural and substantive
grounds.

In March 2010, Manchester Ship Canal Company (MSCC), owners of the Manchester
Ship Canal (the "canal"), issued proceedings, seeking, amongst other relief,
damages alleging trespass against UUW in respect of UUW's discharges of water
and treated effluent into the canal. The respective legal rights of MSCC and
UUW relating to the discharges are unclear. Accordingly, the relevant legal
principles need to be tested through court process. UUW will be filing a
defence and counterclaim in support of its believed entitlement to make
discharges into the canal without charge and MSCC's claim will be vigorously
defended thereafter.

The group faces the general risk of litigation in connection with its
businesses. In most cases, liability for litigation is difficult to assess or
quantify; recovery may be sought for very large and/or indeterminate amounts
and the existence and magnitude of liability may remain unknown for substantial
periods of time. The group robustly defends litigation where appropriate and
seeks to minimise its exposure to such claims by early identification of risks
and compliance with its legal and other obligations. Based upon the facts and
matters currently known and the provisions carried in the group's consolidated
statement of financial position, the directors are of the opinion that the
possibility of the disputes referred to in this risk section having a material
adverse effect on the group's financial position is remote.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This final results announcement contains certain forward-looking statements
with respect to the operations, performance and financial condition of the
group. By their nature, these statements involve uncertainty since future
events and circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements reflect
knowledge and information available at the date of preparation of this final
results announcement and the company undertakes no obligation to update these
forward-looking statements. Nothing in this final results announcement should
be construed as a profit forecast.

Certain regulatory performance data contained in this final results
announcement is subject to regulatory audit.

Consolidated income statement                                                  
                                                                               
                                                                     Restated* 
                                                       Year ended   Year ended 
                                                         31 March     31 March 
                                                             2010         2009 
                                                                               
                                                               £m           £m 
                                                                               
Continuing operations                                                          
                                                                               
Revenue                                                   2,439.1      2,427.2 
                                                                               
                                                           ------       ------ 
                                                                               
Employee benefits expense                                                      
                                                                               
- excluding pension schemes curtailment gains             (362.4)      (347.2) 
arising on amendment of pension obligations and                                
restructuring costs                                                            
                                                                               
- pension schemes curtailment gains arising on               92.3            - 
amendment of pension obligations (note 8)                                      
                                                                               
- restructuring costs                                      (30.7)        (1.2) 
                                                                               
                                                           ------       ------ 
                                                                               
Total employee benefits expense                           (300.8)      (348.4) 
                                                                               
Depreciation and amortisation expense                     (304.7)      (261.9) 
                                                                               
Infrastructure renewals expenditure                       (113.7)      (117.8) 
                                                                               
Other operating costs                                     (905.1)      (982.7) 
                                                                               
Other reorganisation costs                                      -        (5.4) 
                                                                               
Other income                                                  3.1         18.5 
                                                                               
                                                           ------       ------ 
                                                                               
Total operating expenses                                (1,621.2)    (1,697.7) 
                                                                               
                                                           ------       ------ 
                                                                               
Operating profit                                            817.9        729.5 
                                                                               
Investment income (note 2)                                   14.1         70.7 
                                                                               
Finance expense (note 3)                                  (383.6)      (270.9) 
                                                                               
                                                           ------       ------ 
                                                                               
Investment income and finance expense                     (369.5)      (200.2) 
                                                                               
Profit on disposal of investments (note 5)                   36.6            - 
                                                                               
Evaluation and disposal costs relating to                  (10.8)            - 
non-regulated businesses                                                       
                                                                               
                                                           ------       ------ 
                                                                               
Profit before taxation                                      474.2        529.3 
                                                                               
Current taxation charge                                    (22.0)      (139.1) 
                                                                               
Deferred taxation charge                                   (48.7)        (3.5) 
                                                                               
Deferred taxation charge - abolition of industrial              -      (206.4) 
buildings allowances                                                           
                                                                               
                                                           ------       ------ 
                                                                               
Taxation (note 4)                                          (70.7)      (349.0) 
                                                                               
                                                           ------       ------ 
                                                                               
Profit for the year from continuing operations              403.5        180.3 
                                                                               
Discontinued operations                                                        
                                                                               
Loss for the year from discontinued operations                  -        (1.2) 
(note 5)                                                                       
                                                                               
                                                           ------       ------ 
                                                                               
Profit for the year                                         403.5        179.1 
                                                                               
                                                           ------       ------ 
                                                                               
Earnings per share                                                             
                                                                               
from continuing and discontinued operations (note 6)**                                                                           
                                                                               
Basic                                                       59.2p        26.3p 
                                                                               
Diluted                                                     59.2p        26.2p 
                                                                               
Earnings per share                                                             
                                                                               
from continuing operations (note 6)**                                          
                                                                               
Basic                                                       59.2p        26.5p 
                                                                               
Diluted                                                     59.2p        26.4p 
                                                                               
Dividend per ordinary share (note 7)                       34.30p       32.67p 
                                                                               
* See note 1                                                                   
                                                                               
** The weighted average number of shares for the prior year has been based on  
the 681,381,233 new ordinary shares in United Utilities Group PLC issued on 28 
July 2008 (note 6).                                                            

Consolidated statement of comprehensive income

                                                                       Restated
                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                               
                                                                £m           £m
                                                                               
Profit for the year                                          403.5        179.1
                                                                               
Other comprehensive income                                                     
                                                                               
Actuarial losses on defined benefit pension                (125.4)      (124.3)
schemes (note 8)                                                               
                                                                               
Tax on actuarial losses on defined benefit pension            35.1         34.8
schemes                                                                        
                                                                               
Revaluation of investments                                     3.4       (20.3)
                                                                               
Reclassification from other reserves arising on             (36.6)            -
sale of financial asset investment                                             
                                                                               
Net fair value gains/(losses) on cashflow hedges               0.9        (1.6)
                                                                               
Tax on net fair value (gains)/losses on cashflow             (0.5)          0.4
hedges                                                                         
                                                                               
Foreign exchange adjustments                                   6.4          8.3
                                                                               
                                                            ------       ------
                                                                               
Total comprehensive income for the year                      286.8         76.4
                                                                               
                                                            ------       ------

There is no tax impact on the items of other comprehensive income except where
stated in the table above.

Consolidated statement of financial                                            
position                                                  Restated*   Restated*
                                             31 March      31 March    31 March
                                                 2010          2009        2008
                                                   £m            £m          £m
                                                                               
ASSETS                                                                         
                                                                               
Non-current assets                                                             
                                                                               
Property, plant and equipment                 8,122.8       7,866.8     7,481.8
                                                                               
Goodwill                                          2.5           2.6         2.3
                                                                               
Other intangible assets                         208.6         198.9       176.2
                                                                               
Investments                                       7.7         136.8       155.5
                                                                               
Trade and other receivables                      56.5          44.2        53.1
                                                                               
Derivative financial instruments                378.5         445.7        70.0
                                                                               
                                               ------        ------      ------
                                                                               
                                              8,776.6       8,695.0     7,938.9
                                                                               
                                               ------        ------      ------
                                                                               
Current assets                                                                 
                                                                               
Inventories                                      74.8          73.0        63.3
                                                                               
Trade and other receivables                     451.0         491.6       456.2
                                                                               
Cash and short-term deposits                    301.5         298.6     1,810.5
                                                                               
Derivative financial instruments                 18.3         193.3        73.3
                                                                               
                                               ------        ------      ------
                                                                               
                                                845.6       1,056.5     2,403.3
                                                                               
                                               ------        ------      ------
                                                                               
Total assets                                  9,622.2       9,751.5    10,342.2
                                                                               
                                               ------        ------      ------
                                                                               
LIABILITIES                                                                    
                                                                               
Non-current liabilities                                                        
                                                                               
Trade and other payables                      (146.5)       (139.8)     (125.5)
                                                                               
Borrowings                                  (5,307.9)     (5,200.1)   (3,788.9)
                                                                               
Retirement benefit obligations (note 8)       (271.3)       (213.1)     (101.2)
                                                                               
Deferred tax liabilities                    (1,355.4)     (1,341.3)   (1,166.6)
                                                                               
Provisions                                      (8.3)        (17.2)      (18.7)
                                                                               
Derivative financial instruments              (102.3)        (90.8)      (42.3)
                                                                               
                                               ------        ------      ------
                                                                               
                                            (7,191.7)     (7,002.3)   (5,243.2)
                                                                               
                                               ------        ------      ------
                                                                               
Current liabilities                                                            
                                                                               
Trade and other payables                      (594.0)       (672.4)     (771.9)
                                                                               
Borrowings                                    (168.3)       (479.6)     (878.4)
                                                                               
Current income tax liabilities                 (89.0)        (67.6)      (66.9)
                                                                               
Provisions                                     (45.5)        (22.6)      (21.0)
                                                                               
Derivative financial instruments               (25.8)        (62.3)     (147.6)
                                                                               
                                               ------        ------      ------
                                                                               
                                              (922.6)     (1,304.5)   (1,885.8)
                                                                               
                                               ------        ------      ------
                                                                               
Total liabilities                           (8,114.3)     (8,306.8)   (7,129.0)
                                                                               
                                               ------        ------      ------
                                                                               
Total net assets                              1,507.9       1,444.7     3,213.2
                                                                               
                                               ------        ------      ------
                                                                               
EQUITY                                                                         
                                                                               
Capital and reserves attributable to equity holders                            
of the company                                                                 
                                                                               
Share capital                                   499.8         499.8       881.6
                                                                               
Share premium account                             0.9           0.7     1,429.3
                                                                               
Revaluation reserve                             158.8         158.8       158.8
                                                                               
Treasury shares                                 (0.1)         (0.3)       (0.3)
                                                                               
Cumulative exchange reserve                      22.3          15.9         7.6
                                                                               
Merger reserve                                  329.7         313.0           -
                                                                               
Other reserves                                    3.8          36.6        58.1
                                                                               
Retained earnings                               492.7         420.2       678.1
                                                                               
                                               ------        ------      ------
                                                                               
Shareholders' equity (note 10)                1,507.9       1,444.7     3,213.2
                                                                               
* See note 1                                   ------        ------      ------
                                                                               

Consolidated statement of changes in equity                                                           

Year ended 31 March 2010                                                                              
                                                                                                      
                   Share     Share Revaluation Treasury Cumulative  Merger    Other Retained     Total
                 capital   premium     reserve   shares   exchange reserve reserves earnings          
                           account                         reserve                                    
                                                                                                      
                      £m        £m          £m       £m         £m      £m       £m       £m        £m
                                                                                                      
At 1 April 2009    499.8       0.7       158.8    (0.3)       15.9   313.0     36.6    420.2   1,444.7
(restated)                                                                                            
                                                                                                      
Profit for the         -         -           -        -          -       -        -    403.5     403.5
year                                                                                                  
                                                                                                      
Other                                                                                                 
comprehensive                                                                                         
income                                                                                                
                                                                                                      
Actuarial losses       -         -           -        -          -       -        -  (125.4)   (125.4)
on defined                                                                                            
benefit pension                                                                                       
schemes (note 8)                                                                                      
                                                                                                      
Tax on actuarial       -         -           -        -          -       -        -     35.1      35.1
losses on                                                                                             
defined benefit                                                                                       
pension schemes                                                                                       
                                                                                                      
Revaluation of         -         -           -        -          -       -      3.4        -       3.4
investments                                                                                           
                                                                                                      
Reclassification       -         -           -        -          -       -   (36.6)        -    (36.6)
from other                                                                                            
reserves arising                                                                                      
on sale of                                                                                            
financial asset                                                                                       
investment                                                                                            
                                                                                                      
Net fair value         -         -           -        -          -       -      0.9        -       0.9
gains on                                                                                              
cashflow hedges                                                                                       
                                                                                                      
Tax on net fair        -         -           -        -          -       -    (0.5)        -     (0.5)
value gains on                                                                                        
cashflow hedges                                                                                       
                                                                                                      
Foreign exchange       -         -           -        -        6.4       -        -        -       6.4
adjustments                                                                                           
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------
                                                                                                      
Total                  -         -           -        -        6.4       -   (32.8)    313.2     286.8
comprehensive                                                                                         
income/(expense)                                                                                      
for the year                                                                                          
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------
                                                                                                      
Transactions                                                                                          
with owners                                                                                           
                                                                                                      
Dividends (note        -         -           -        -          -       -        -  (226.2)   (226.2)
7)                                                                                                    
                                                                                                      
New share              -       0.2           -        -          -       -        -        -       0.2
capital issued                                                                                        
                                                                                                      
Shares disposed        -         -           -      0.2          -       -        -    (0.2)         -
of from employee                                                                                      
share trust                                                                                           
                                                                                                      
Capital                -         -           -        -          -    16.7        -   (16.7)         -
reorganisation                                                                                        
(note 10)                                                                                             
                                                                                                      
Equity-settled         -         -           -        -          -       -        -      2.4       2.4
share-based                                                                                           
payments                                                                                              
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------
                                                                                                      
At 31 March 2010   499.8       0.9       158.8    (0.1)       22.3   329.7      3.8    492.7   1,507.9
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------
                                                                                                      
Year ended 31                                                                                         
March 2009                                                                                            
                                                                                                      
                   Share     Share Revaluation Treasury Cumulative  Merger    Other Retained     Total
                 capital   premium     reserve   shares   exchange reserve reserves earnings          
                           account                         reserve                                    
                                                                                                      
Restated              £m        £m          £m       £m         £m      £m       £m       £m        £m
                                                                                                      
At 1 April 2008    881.6   1,429.3       158.8    (0.3)        7.6       -     58.1    678.1   3,213.2
                                                                                                      
Profit for the         -         -           -        -          -       -        -    179.1     179.1
year                                                                                                  
                                                                                                      
Other                                                                                                 
comprehensive                                                                                         
income                                                                                                
                                                                                                      
Actuarial losses       -         -           -        -          -       -        -  (124.3)   (124.3)
on defined                                                                                            
benefit pension                                                                                       
schemes (note 8)                                                                                      
                                                                                                      
Tax on actuarial       -         -           -        -          -       -        -     34.8      34.8
losses on                                                                                             
defined benefit                                                                                       
pension schemes                                                                                       
                                                                                                      
Revaluation of         -         -           -        -          -       -   (20.3)        -    (20.3)
investments                                                                                           
                                                                                                      
Net fair value         -         -           -        -          -       -    (1.6)        -     (1.6)
losses on                                                                                             
cashflow hedges                                                                                       
                                                                                                      
Tax on net fair        -         -           -        -          -       -      0.4        -       0.4
value losses on                                                                                       
cashflow hedges                                                                                       
                                                                                                      
Foreign exchange       -         -           -        -        8.3       -        -        -       8.3
adjustments                                                                                           
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------
                                                                                                      
Total                  -         -           -        -        8.3       -   (21.5)     89.6      76.4
comprehensive                                                                                         
income/(expense)                                                                                      
for the year                                                                                          
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------
                                                                                                      
Transactions                                                                                          
with owners                                                                                           
                                                                                                      
Dividends (note        -         -           -        -          -       -        -  (349.9)   (349.9)
7)                                                                                                    
                                                                                                      
New share          499.8       0.7           -        -          -       -        -        -     500.5
capital issued                                                                                        
                                                                                                      
Capital          (881.6) (1,429.3)           -        -          -   313.0        -        - (1,997.9)
reorganisation                                                                                        
(note 10)                                                                                             
                                                                                                      
Equity-settled         -         -           -        -          -       -        -      2.4       2.4
share-based                                                                                           
payments                                                                                              
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------
                                                                                                      
At 31 March 2009   499.8       0.7       158.8    (0.3)       15.9   313.0     36.6    420.2   1,444.7
                                                                                                      
                  ------    ------      ------   ------     ------  ------   ------   ------    ------


Consolidated statement of cashflows                                           
                                                                      Restated
                                                       Year ended   Year ended
                                                         31 March     31 March
                                                             2010         2009
                                                                              
                                                               £m           £m
                                                                              
Continuing operations                                                         
                                                                              
Operating activities                                                          
                                                                              
Cash generated from operations                            1,015.7        911.4
                                                                              
Interest paid                                             (225.5)      (232.3)
                                                                              
Interest received and similar income                         12.4         90.4
                                                                              
Tax paid                                                   (51.2)       (32.8)
                                                                              
Tax received                                                 50.6            -
                                                                              
                                                           ------       ------
                                                                              
Net cash generated from operating activities                802.0        736.7
                                                                              
                                                           ------       ------
                                                                              
Investing activities                                                          
                                                                              
Purchase of property, plant and equipment                 (543.2)      (668.2)
                                                                              
Purchase of other intangible assets                        (34.4)       (45.9)
                                                                              
Proceeds from sale of property, plant and                     4.4          3.8
equipment                                                                     
                                                                              
Purchase of investments                                     (0.8)            -
                                                                              
Proceeds from disposal of investments                       132.1            -
                                                                              
Evaluation and disposal costs relating to                  (10.8)            -
non-regulated businesses                                                      
                                                                              
                                                           ------       ------
                                                                              
Net cash used in investing activities                     (452.7)      (710.3)
                                                                              
                                                           ------       ------
                                                                              
Financing activities                                                          
                                                                              
Proceeds from issue of ordinary shares                        0.2          1.6
                                                                              
Cash used in structured financing                               -      (163.9)
                                                                              
Proceeds from borrowings                                    272.9      3,784.7
                                                                              
Repayment of borrowings                                   (348.4)    (3,310.9)
                                                                              
Dividends paid to equity holders of the company           (226.2)      (349.9)
                                                                              
Return to shareholders on capital                          (16.7)    (1,482.3)
reorganisation                                                                
                                                                              
                                                           ------       ------
                                                                              
Net cash used in financing activities                     (318.2)    (1,520.7)
                                                                              
                                                           ------       ------
                                                                              
Effects of exchange rate changes                             13.5        (1.8)
                                                                              
                                                           ------       ------
                                                                              
Net increase/(decrease) in cash and cash                     44.6    (1,496.1)
equivalents                                                                   
                                                                              
                                                           ------       ------
                                                                              
Cash and cash equivalents at beginning of the               209.1      1,705.2
year                                                                          
                                                                              
                                                           ------       ------
                                                                              
Cash and cash equivalents at end of the year                253.7        209.1
                                                                              
                                                           ------       ------

Cash generated from operations                                                 
                                                                               
                                                                       Restated
                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                               
                                                                £m           £m
                                                                               
Continuing operations                                                          
                                                                               
Profit before taxation                                       474.2        529.3
                                                                               
Adjustment for investment income and finance                 369.5        200.2
expense                                                                        
                                                                               
Adjustment for profit on disposal of investments            (36.6)            -
                                                                               
Adjustment for evaluation and disposal costs                  10.8            -
relating to non-regulated businesses                                           
                                                                               
                                                            ------       ------
                                                                               
Operating profit                                             817.9        729.5
                                                                               
Adjustments for:                                                               
                                                                               
Depreciation of property, plant and equipment                275.2        238.0
                                                                               
Amortisation of other intangible assets                       29.5         23.9
                                                                               
Loss on disposal of property, plant and equipment              7.3          0.8
                                                                               
Equity-settled share-based payments charge                     2.4          1.9
                                                                               
Other non-cash movements - pension schemes                  (92.3)            -
curtailment gains arising on amendment of pension                              
obligations                                                                    
                                                                               
Changes in working capital:                                                    
                                                                               
Increase in inventories                                      (1.8)        (9.7)
                                                                               
Decrease/(increase) in trade and other receivables            27.1       (22.9)
                                                                               
Decrease in provisions and payables                         (49.6)       (50.1)
                                                                               
                                                            ------       ------
                                                                               
Cash generated from continuing operations                  1,015.7        911.4
                                                                               
                                                            ------       ------

Segment reporting

The group is organised into two principal operating divisions for management
purposes, being regulated and non-regulated activities. These divisions form
the basis on which the operating segment information, presented in accordance
with IFRS 8 `Operating Segments' (see note 1), is reported. The comparative
figures for the year ended 31 March 2009 have been restated in accordance with
IFRS 8.

The regulated activities segment is as previously reported and includes the
regulated results of United Utilities Water PLC.

The non-regulated activities segment is as previously reported and includes the
group's utility outsourcing contracts in the United Kingdom and overseas.

The `all other segments' category was previously reported as the group's other
activities segment. This category includes the results of United Utilities
Property Services Limited (formerly United Utilities Property Solutions
Limited), United Utilities Group PLC and other group holding companies.

The disclosure correlates with the information provided to the United Utilities
Group PLC board of directors (the `board') for the purposes of assessing
performance and allocating resources. The board reviews revenue, underlying
operating profit and operating profit by segment, but assets and liabilities
are reviewed at a consolidated level. Investment income and finance expense,
and taxation are managed on a group basis and are not allocated to operating
segments.

                                 Regulated Non-regulated   All other            
                                activities    activities    segments       Group
                                                                                
                                        £m            £m          £m          £m
                                                                                
Year ended 31 March 2010                                                        
                                                                                
Continuing operations                                                           
                                                                                
Total revenue                      1,540.7         890.2        14.1     2,445.0
                                                                                
Inter-segment revenue                (0.8)             -       (5.1)       (5.9)
                                                                                
                                    ------        ------      ------      ------
                                                                                
External revenue                   1,539.9         890.2         9.0     2,439.1
                                                                                
                                    ------        ------      ------      ------
                                                                                
Underlying segmental                 700.8          59.1       (3.6)       756.3
operating profit/(loss)                                                         
                                                                                
Restructuring costs                 (15.8)         (4.9)      (10.0)      (30.7)
                                                                                
Pension schemes curtailment           76.7           8.9         6.7        92.3
gains arising on amendment of                                                   
pension obligations                                                             
                                                                                
                                    ------        ------      ------      ------
                                                                                
Segmental operating profit/          761.7          63.1       (6.9)       817.9
(loss)                                                                          
                                                                                
                                    ------        ------      ------            
                                                                                
Investment income                                                           14.1
                                                                                
Finance expense                                                          (383.6)
                                                                                
Profit on disposal of                                                       36.6
investments                                                                     
                                                                                
Evaluation and disposal costs                                             (10.8)
relating to non-regulated                                                       
businesses                                                                      
                                                                                
                                                                          ------
                                                                                
Profit before taxation                                                     474.2
                                                                                
                                                                          ------
                                                                                
                                 Regulated Non-regulated   All other       Group
                                activities    activities    segments            
                                                                                
Restated                                £m            £m          £m          £m
                                                                                
Year ended 31 March 2009                                                        
                                                                                
Continuing operations                                                           
                                                                                
Total revenue                      1,499.5         911.8        22.4     2,433.7
                                                                                
Inter-segment revenue                (0.9)         (0.1)       (5.5)       (6.5)
                                                                                
                                    ------        ------      ------      ------
                                                                                
External revenue                   1,498.6         911.7        16.9     2,427.2
                                                                                
                                    ------        ------      ------      ------
                                                                                
Underlying segmental                 679.4          62.4       (5.7)       736.1
operating profit/(loss)                                                         
                                                                                
Restructuring costs                  (1.0)           1.0       (1.2)       (1.2)
                                                                                
Other reorganisation costs               -             -       (5.4)       (5.4)
                                                                                
                                    ------        ------      ------      ------
                                                                                
Segmental operating profit/          678.4          63.4      (12.3)       729.5
(loss)                                                                          
                                                                                
                                    ------        ------      ------            
                                                                                
Investment income                                                           70.7
                                                                                
Finance expense                                                          (270.9)
                                                                                
                                                                          ------
                                                                                
Profit before taxation                                                     529.3
                                                                                
                                                                          ------

NOTES

1. Basis of preparation and accounting policies

The condensed consolidated financial statements for the year ended 31 March
2010 have been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Services Authority.

The accounting policies, presentation and methods of computation have been
prepared on a basis consistent with the United Utilities Group PLC full
financial statements which are prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union (EU)
that are effective for the year ended 31 March 2010.

The adoption of the following standards and interpretations, at 1 April 2009,
has had no material impact on the group's financial statements:

IFRIC 12 `Service Concession Arrangements'

The interpretation addresses accounting by private sector operators involved in
the provision of public sector infrastructure assets and services. Relevant
assets within its scope have been reclassified from property, plant and
equipment to financial assets (where the operator has an unconditional right to
receive a specified amount of cash or other financial asset over the life of
the arrangement); or intangible assets (where the operator's future cashflows
are not specified); or a combination of both (where the operator's return is
provided partially by a financial asset and partially by an intangible asset).
Its application is retrospective and hence requires the restatement of the
information presented for the years ended 31 March 2009 and 31 March 2008.
Operating profit for the year ended 31 March 2009 has been reduced by £5.7
million, broadly offset by a corresponding increase in investment income of £
5.2 million.

IAS 23 `Borrowing Costs (March 2007)'

Borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset have been capitalised as part of the cost of
that asset. Qualifying assets include property, plant and equipment,
inventories and intangible assets developed in projects that take a significant
period of time to complete.  The standard has been adopted as a prospective
change and borrowing costs have been capitalised on projects commencing from 1
April 2009. No changes have been made for borrowing costs incurred prior to
this date that have been expensed. During the year ended 31 March 2010,
borrowing costs of £0.5 million have been capitalised.

IAS 1 `Presentation of Financial Statements (September 2007)'

The application of this standard has resulted in the consolidated balance sheet
and consolidated cashflow statement being renamed the `consolidated statement
of financial position' and the `consolidated statement of cashflows'
respectively. The shareholders' equity note is presented as a primary statement
and is renamed the `consolidated statement of changes in equity'. The
consolidated statement of recognised income and expense is also presented as a
primary statement and is renamed the `consolidated statement of comprehensive
income'. Taxation on each item within the consolidated statement of
comprehensive income is shown separately.

`Improvements to IFRS (2008)'

The amendments to IAS 1 clarify the categorisation of derivative financial
instruments as current or non-current. Previously the group has categorised as
current all derivative financial instruments classified as `held for trading'
under IAS 39 `Financial Instruments: Recognition and Measurement'. As a result
of these amendments, `held for trading' derivatives have now been categorised
between current and non-current, based upon the contractual maturity date or,
where applicable, the contractual early termination date.

IFRS 2 `Share-based Payments' (June 2009)

The amendment to IFRS 2 is effective for periods commencing on or after 1
January 2010, was endorsed by the EU on 23 March 2010, and has been early
adopted.

IFRS 8 `Operating Segments'

The application of this standard requires disclosure of information about the
group's operating segments on the same basis as that used for internal
reporting, and replaces the requirement to determine the primary (business) and
secondary (geographical) reporting segments. The group determined that its
operating segments were the same as the business segments previously identified
under IAS 14 `Segment Reporting', except that the `other activities' segment
has been renamed `all other segments'. Additional disclosures about each of
these segments are provided.

As a result of the adoption of these standards, the group has presented a
restated consolidated statement of financial position for each of the years
ended 31 March 2009 and 31 March 2008, together with notes for the relevant
restated comparatives.

The consolidated income statement for the year ended 31 March 2009 has been
re-presented to better reflect the nature of restructuring and reorganisation
costs.

At the date of authorisation of these condensed consolidated financial
statements, the following relevant standards and interpretations were in issue
but not yet effective.

IFRS 3 `Business Combinations'

This revised standard, issued in January 2008, is effective for periods
commencing on or after 1 July 2009 and was endorsed by the EU on 12 June 2009.
This will have a material impact on the group's financial statements only if it
enters into any relevant transactions in the future.

IFRIC 18 `Transfers of Assets from Customers'

This interpretation was issued in January 2009, it is effective for transfers
from customers received on or after 1 July 2009, for periods commencing on or
after 31 October 2009 and was endorsed by the EU on 27 November 2009. This
interpretation will therefore be adopted by the group in the year ending 31
March 2011. The adoption of IFRIC 18 is expected to change the group's policy
for the valuation of assets transferred from customers and may lead to an
increase in revenue, the value of assets capitalised and future depreciation
costs.

The impact of all other IFRS's and IFRIC's issued but not yet adopted is not
considered to be material to the group.

The condensed consolidated financial statements do not include all of the
information and disclosures required for full annual financial statements, do
not comprise statutory accounts within the meaning of section 435 of the
Companies Act 2006 and should be read in conjunction with the group's annual
report and financial statements for the year ended 31 March 2010.

The comparative figures for the years ended 31 March 2009 and 31 March 2008 do
not comprise the group's statutory accounts for those financial years. Those
accounts have been reported upon by the group's auditors and delivered to the
registrar of companies. The reports of the auditors were unqualified and did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report. The report for the year ended
31 March 2009 did not contain a statement under section 498(2) or (3) of the
Companies Act 2006, and the report for the year ended 31 March 2008 did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.

Going concern

The directors have reviewed the financial resources available to the group and
have concluded that the group is a going concern. This conclusion is based
upon, amongst other matters, a review of the group's financial projections
together with a review of the cash and committed borrowing facilities available
to the group.

2. Investment income

                                                                       Restated
                                                       Year ended    Year ended
                                                         31 March      31 March
                                                             2010          2009
                                                               £m            £m
                                                                               
Interest receivable                                          14.1          27.8
                                                                               
Foreign exchange gains on forward                               -          36.1
contracts                                                                      
                                                                               
                                                           ------        ------
                                                                               
                                                             14.1          63.9
                                                                               
                                                           ------        ------
                                                                               
Expected return on pension schemes'                             -         124.3
assets (note 8)                                                                
                                                                               
Interest cost on pension schemes'                               -       (117.5)
obligations (note 8)                                                           
                                                                               
                                                           ------        ------
                                                                               
Net pension interest income                                     -           6.8
                                                                               
                                                           ------        ------
                                                                               
                                                             14.1          70.7
                                                                               
                                                           ------        ------

3. Finance expense

                                                       Year ended    Year ended
                                                         31 March      31 March
                                                             2010          2009
                                                               £m            £m
                                                                               
Interest payable                                          (224.6)       (246.6)
                                                                               
Fair value losses on debt and                             (135.8)        (24.3)
derivative instruments                                                         
                                                                               
                                                           ------        ------
                                                                               
                                                          (360.4)       (270.9)
                                                                               
Expected return on pension schemes'                          94.1             -
assets (note 8)                                                                
                                                                               
Interest cost on pension schemes'                         (117.3)             -
obligations (note 8)                                                           
                                                                               
                                                           ------        ------
                                                                               
Net pension interest expense                               (23.2)             -
                                                                               
                                                           ------        ------
                                                                               
                                                          (383.6)       (270.9)
                                                                               
                                                           ------        ------

The group follows a policy of economic hedging of its interest rate and
currency exposures, with particular regard to the five-year regulatory period.
Including the interest element of swaps and interest on debt under the fair
value option within interest payable, as opposed to within the fair value
losses, adjusting for the reclassification of interest income and expenditure
associated with the group's defined benefit pension schemes and adjusting for
the reclassification of financing income relating to the group's service
concession arrangements, would give an economic underlying cost of net
borrowings of £235.6 million (2009: £196.2 million):

                                                                       Restated
                                                       Year ended    Year ended
                                                         31 March      31 March
                                                             2010          2009
                                                               £m            £m
                                                                               
Finance expense                                           (383.6)       (270.9)
                                                                               
Fair value losses on debt and                               135.8          24.3
derivative instruments                                                         
                                                                               
Add back interest on swaps and debt                        (22.2)         (8.3)
under fair value option                                                        
                                                                               
Investment income                                            14.1          70.7
                                                                               
Adjustment for net pension interest                          23.2         (6.8)
expense/(income)                                                               
                                                                               
Adjustment for service concession                           (2.9)         (5.2)
financing income (note 1)                                                      
                                                                               
                                                           ------        ------
                                                                               
Underlying cost of net borrowings                         (235.6)       (196.2)
                                                                               
                                                           ------        ------

4. Taxation

                                                                       Restated
                                                       Year ended    Year ended
                                                         31 March      31 March
                                                             2010          2009
                                                               £m            £m
                                                                               
Current taxation                                                               
                                                                               
UK corporation tax                                         (71.0)       (147.0)
                                                                               
Foreign tax                                                   1.1         (2.1)
                                                                               
Prior year adjustments                                       47.9          10.0
                                                                               
                                                           ------        ------
                                                                               
                                                           (22.0)       (139.1)
                                                                               
                                                           ------        ------
                                                                               
Deferred taxation                                                              
                                                                               
Current year                                               (55.3)           0.7
                                                                               
Prior year adjustments                                        6.6         (4.2)
                                                                               
                                                           ------        ------
                                                                               
                                                           (48.7)         (3.5)
                                                                               
Abolition of industrial buildings                               -       (206.4)
allowances                                                                     
                                                                               
                                                           ------        ------
                                                                               
                                                           (48.7)       (209.9)
                                                                               
                                                           ------        ------
                                                                               
Total tax charge for the year                              (70.7)       (349.0)
                                                                               
                                                           ------        ------

The prior year adjustments relate to agreement of prior years' UK tax returns.

Following Royal Assent of the 2008 Finance Act on 21 July 2008, the abolition
of industrial buildings allowances was formally enacted. The financial impact
as a consequence of this legislation was a one-off deferred tax charge of £
206.4 million, which was included in the deferred tax charge for the year ended
31 March 2009; however the cash impact will be spread over a period of
approximately 20 years.

5. Disposal of investmentsand discontinued operations

The group disposed of its 11.7 per cent economic interest in Manila Water
Company (MWC) to Ayala Corporation and Philwater Holdings Company Inc, both
existing shareholders of MWC, for a cash consideration of US$73 million (£46.3
million) on 12 November 2009. On completion of the transaction in March 2010,
the group has reinvested approximately US$1.2 million (£0.8 million) in new
preference shares in Philwater Holdings Company Inc.

In addition, the group disposed of its 15.0 per cent economic interest in
Northern Gas Networks Holdings Limited (NGN) to Cheung Kong Infrastructure
Holdings Limited (CKI) and SAS Trustee Corporation (managed by RREEF
Alternative Investments), both existing shareholders of NGN, for a cash
consideration of £85.8 million on 16 November 2009. These disposals, combined,
generated a profit of £36.6 million in the year ended 31 March 2010.

The contributions from the group's investments in MWC and NGN have been
included in continuing operations, within the non-regulated activities business
segment, in the group's results for the year ended 31 March 2010 (£2.4 million)
and 31 March 2009 (£12.3 million).

The group has previously reported as discontinued operations the disposal of
United Utilities Electricity (UUE), which took place on 19 December 2007. The
results of UUE, along with the profit on disposal of £493.0 million, were
disclosed as discontinued operations in the group's financial statements in the
year ended 31 March 2008. An adjustment of £1.2 million loss was recorded in
the year ended 31 March 2009.

6. Earnings per share

Basic and diluted earnings per share are calculated by dividing profit for the
year by the following weighted average number of shares in issue:

                                                            Basic       Diluted
                                                          million       million
                                                                               
Year ended 31 March 2010                                    681.5         682.0
                                                                               
Year ended 31 March 2009                                    681.4         682.3

To enable a meaningful comparison and in compliance with IAS 33 `Earnings per
Share', the weighted average number of shares for the prior year has been based
on the 681,381,233 new ordinary shares in United Utilities Group PLC issued on
28 July 2008.

The difference between the weighted average number of shares used in the basic
and diluted earnings per share calculations represents those ordinary shares
deemed to have been issued for no consideration on the conversion of all
potential dilutive ordinary shares in accordance with IAS 33 `Earnings per
Share'.

The basic and diluted earnings per share for the current and prior year are as
follows:

                                                                       Restated
                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                               
From continuing and discontinued                                               
operations                                                                     
                                                                               
Basic                                                        59.2p        26.3p
                                                                               
Diluted                                                      59.2p        26.2p
                                                                               
From continuing                                                                
operations                                                                     
                                                                               
Basic                                                        59.2p        26.5p
                                                                               
Diluted                                                      59.2p        26.4p

7. Dividends

                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                £m           £m
                                                                               
Dividends relating to the year                                                 
comprise:                                                                      
                                                                               
Interim dividend                                              76.1         72.5
                                                                               
Final dividend                                               157.6        150.1
                                                                               
                                                            ------       ------
                                                                               
                                                             233.7        222.6
                                                                               
                                                            ------       ------

                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                £m           £m
                                                                               
Dividends deducted from shareholders'                                          
equity comprise:                                                               
                                                                               
Interim dividend                                              76.1         72.5
                                                                               
Final dividend                                               150.1        277.4
                                                                               
                                                            ------       ------
                                                                               
                                                             226.2        349.9
                                                                               
                                                            ------       ------

The proposed final dividends for the years ended 31 March 2010 and 31 March
2009 were subject to approval by equity holders of United Utilities Group PLC
and hence have not been included as liabilities in the consolidated financial
statements at 31 March 2010 and 31 March 2009 respectively.

The final dividend of 23.13 pence per ordinary share (2009: final dividend of
22.03 pence per ordinary share) will be paid on 2 August 2010 to shareholders
on the register at the close of business on 18 June 2010. The ex-dividend date
for the final dividend is 16 June 2010.

The interim dividend of 11.17 pence per ordinary share (2009: interim dividend
of 10.64 pence per ordinary share)

was paid on 4 February 2010 to shareholders on the register at the close of
business on 18 December 2009.

8. Retirement benefit obligations

The main financial assumptions used by the actuary were as follows:

                                                                 Year      Year
                                                                ended     ended
                                                             31 March  31 March
                                                                 2010      2009
                                                                 % pa      % pa
                                                                               
Discount rate - United Utilities Pension Scheme (UUPS)           5.70      7.00
                                                                               
Discount rate - United Utilities Group section of the            5.70      7.00
Electricity Supply Pension Scheme (ESPS)                                       
                                                                               
Discount rate - Northern Gas Networks Pension Scheme             5.70      6.90
(NGNPS)                                                                        
                                                                               
Expected return on assets - UUPS                                 6.20      6.60
                                                                               
Expected return on assets - ESPS                                 6.30      6.20
                                                                               
Expected return on assets - NGNPS                                6.10      5.90
                                                                               
Pensionable salary growth - UUPS                                 3.30      4.15
                                                                               
Pensionable salary growth - ESPS                                 3.30      4.20
                                                                               
Pensionable salary growth - NGNPS                                4.30      4.20
                                                                               
Pension increases                                                3.30      3.20
                                                                               
Price inflation                                                  3.30      3.20

The net pension income/(expense) credited/(charged) before taxation in the
income statement in respect of the defined benefit schemes is summarised as
follows:

                                                       Year ended    Year ended
                                                         31 March      31 March
                                                             2010          2009
                                                               £m            £m
                                                                               
Current service cost                                       (26.0)        (36.7)
                                                                               
Curtailments/settlements                                                       
                                                                               
- arising on reorganisation*                               (17.2)             -
                                                                               
- arising on amendment of pension                            92.3             -
obligations                                                                    
                                                                               
Past service cost                                           (2.8)         (3.1)
                                                                               
                                                           ------        ------
                                                                               
Pension income/(expense) credited/                           46.3        (39.8)
(charged) to operating profit                                                  
                                                                               
                                                           ------        ------
                                                                               
Expected return on schemes' assets                           94.1         124.3
                                                                               
Interest on schemes' obligations                          (117.3)       (117.5)
                                                                               
                                                           ------        ------
                                                                               
Pension (expense)/income (charged)/                                            
credited to investment income and                          (23.2)           6.8
finance expense (note 3, 2)                                                    
                                                                               
                                                           ------        ------
                                                                               
Net pension income/(expense) credited/                       23.1        (33.0)
(charged) before taxation                                                      
                                                                               
                                                           ------        ------

* Curtailments arising on reorganisation of £17.2 million (2009: £nil) are
included within restructuring costs of £30.7 million (2009: £1.2 million)
within total employee benefits expense.

The reconciliation of the opening and closing statement of financial position
balances is as follows:

                                                       Year ended    Year ended
                                                         31 March      31 March
                                                             2010          2009
                                                               £m            £m
                                                                               
At the start of the year                                  (213.1)       (101.2)
                                                                               
Income/(expense) recognised in the                           23.1        (33.0)
income statement                                                               
                                                                               
Contributions paid                                           44.1          45.4
                                                                               
Actuarial losses gross of taxation                        (125.4)       (124.3)
                                                                               
                                                           ------        ------
                                                                               
At the end of the year                                    (271.3)       (213.1)
                                                                               
                                                           ------        ------

The closing obligation at each reporting date is analysed as follows:

                                                       Year ended    Year ended
                                                         31 March      31 March
                                                             2010          2009
    
                                                               £m            £m
                                                                               
Present value of defined benefit                        (2,182.2)     (1,696.9)obligations                                                                    
                                                                               
Fair value of schemes' assets                             1,910.9       1,483.8
                                                                               
                                                           ------        ------
                                                                               
Net retirement benefit obligations                        (271.3)       (213.1)
                                                                               
                                                           ------        ------

9. Additional disclosures

The following items are considered material in size or nature and are therefore
disclosed separately in accordance with IAS 1 `Presentation of Financial
Statements':

                                                                   Re-presented
                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                £m           £m
                                                                               
Operating profit items:                                                        
                                                                               
Restructuring costs                                           30.7          1.2
                                                                               
Pension schemes curtailment gains arising on                (92.3)            -
amendment of pension obligations                                               
                                                                               
Other reorganisation costs                                       -          5.4
                                                                               
Finance expense items:                                                         
                                                                               
Fair value losses on debt and derivative instruments         135.8         24.3
                                                                               
Interest on swaps and debt under fair value option            22.2        (8.3)
                                                                               
Interest associated with cash proceeds from UUE sale             -       (20.6)
                                                                               
Investing activity items:                                                      
                                                                               
Profit on disposal of investments                           (36.6)            -
                                                                               
Evaluation and disposal costs relating to                     10.8            -
non-regulated businesses                                                       

10. Shareholders' equity - capital reorganisation

The movements on the accounts within shareholders' equity of the group which
are affected by the capital reorganisation which took place during the prior
year are shown below:

                                                 Share       Merger            
                                    Share      premium      reserve       Total
                                  capital      account                         
                                                                               
                                       £m           £m           £m          £m
                                                                               
At 1 April 2008                     881.6      1,429.3            -     2,310.9
                                                                               
New share capital issued            499.8          0.7            -       500.5
                                                                               
Capital reorganisation            (881.6)    (1,429.3)        313.0   (1,997.9)
                                                                               
                                   ------       ------       ------      ------
                                                                               
At 31 March 2009                    499.8          0.7        313.0       813.5
                                                                               
New share capital issued                -          0.2            -         0.2
                                                                               
Capital reorganisation                  -            -         16.7        16.7
                                                                               
                                   ------       ------       ------      ------
                                                                               
At 31 March 2010                    499.8          0.9        329.7       830.4
                                                                               
                                   ------       ------       ------      ------

In July 2008 the High Court (the "Court") approved a scheme of arrangement (the
"Scheme") of United Utilities PLC to establish a new listed company, United
Utilities Group PLC, as the holding company of United Utilities PLC. United
Utilities PLC shareholders received 17 United Utilities Group PLC ordinary
shares for every 22 United Utilities PLC shares, together with one United
Utilities Group PLC B share of 170.0 pence for each United Utilities PLC share.

The Court then approved the reduction of the capital of United Utilities Group
PLC, whereby the nominal value of each ordinary share was reduced from 500.0
pence to five pence.

In addition, a merger reserve was created in the United Utilities Group PLC
company, which was capitalised into A shares that were cancelled as part of the
reduction of capital.

The Scheme and the subsequent reduction in capital increased the distributable
reserves of United Utilities Group PLC by £4.8 billion enabling the return of £
1,499.0 million capital and allowing future dividends.

On 14 April 2009, the remaining B shares were redeemed. This has been recorded
as an adjustment to equity and has eliminated the outstanding financial
liability. This transaction concluded the capital reorganisation.

The merger reserve, as shown above, arises on consolidation and represents the
capital adjustment required to effect the reverse acquisition, being the
difference between the existing share capital and share premium of United
Utilities PLC at the date of the reverse acquisition and the share capital of
United Utilities Group PLC following the reduction of capital of United
Utilities Group PLC.

11. Related party transactions

Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.

The following trading transactions were carried out with the group's joint
ventures:

                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                £m           £m
                                                                               
Sales of services                                             92.9        109.8
                                                                               
Purchases of goods and services                                4.8         11.4
                                                                               
                                                            ------       ------

Amounts owed by and to the group's joint ventures are as follows:

                                                        Year ended   Year ended
                                                          31 March     31 March
                                                              2010         2009
                                                                £m           £m
                                                                               
Amounts owed by related parties                               19.2         12.8
                                                                               
Amounts owed to related parties                                0.9          1.9
                                                                               
                                                            ------       ------

Sales of services to related parties were on the group's normal trading terms.

The amounts outstanding are unsecured and will be settled in accordance with
normal credit terms. The group has issued guarantees of £126.8 million (2009: £
80.7 million) to its joint ventures, which are included in the total disclosed
in note 12. A £0.4 million provision has been made for doubtful receivables in
respect of the amounts owed by related parties (2009: £0.1 million). A £0.3
million expense has been recognised for bad and doubtful receivables in respect
of the amounts owed by related parties (2009: £nil).

12. Contingent liabilities

The group has entered into performance guarantees as at 31 March 2010, where a
financial limit has been specified, of £201.2 million (2009: £119.8 million).

13. Events after the reporting period

In May 2010 the group agreed the disposal of its Australian business for
approximately £135 million comprising £106 million in cash and £29 million in
net debt assumed by the purchaser. The transaction is subject to a number of
consents and regulatory approvals and financial close is expected in the second
half of 2010. The results of the Australian business are included within
continuing operations for the year ended 31 March 2010 and are presented within
the group's non-regulated activities segment.

The group's contract with Welsh Water has not been renewed for the 2010-15
regulatory period. The contribution from this contract was immaterial to the
non-regulated activities segmental result for the year ended 31 March 2010.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The responsibility statement below has been prepared in connection with the
company's full annual report for the year ended 31 March 2010. Certain parts
thereof are not included within this announcement.

Responsibility statement

We confirm that to the best of our knowledge:

  * the financial statements, prepared in accordance with IFRSs as adopted by
    the European Union, give a true and fair view of the assets, liabilities,
    financial position and profit or loss of the company and the undertakings
    included in the consolidation taken as a whole; and
   
  * the management report, which is incorporated into the directors' report,
    includes a fair review of the development and performance of the business
    and the position of the company and the undertakings included in the
    consolidation taken as a whole, together with a description of the
    principal risks and uncertainties that they face.
   
 

This responsibility statement was approved by the board on 20 May 2010 and
signed on its behalf by:

Philip Green                                   Tim Weller

Chief executive officer                        Chief financial officer