Underlying operating profit(1)

Reported operating profit

RCV gearing(2) (%)


Total dividend per ordinary share (pence)



Revenue was up £41 million, at £1,859 million, largely reflecting our allowed regulatory revenue changes.

Consistent with Ofwat's annual wholesale revenue forecasting incentive mechanism (WRFIM), we have reduced revenue by £14 million in 2019/20 (outturn prices). This consists of two components; first reflecting actual volumes being higher than our original assumptions during AMP6, and secondly reductions relating to the 2014/15 'AMP5 blind year', which is £5 million in 2019/20.

The impact of COVID-19 has resulted in reduced consumption from businesses and has therefore reduced revenue by around £5 million in 2019/20 with a more significant impact likely in 2020/21. By way of illustration, for every 1 per cent per annum reduction in non-household consumption, revenue will reduce by around £4 million. However, a significant amount of uncertainty persists and therefore, at this point, it is difficult to predict the impact for 2020/21. Furthermore, shortfalls in revenue are recovered in future years under the regulatory revenue control.

Operating profit

Underlying operating profit at £744 million was £59 million higher than last year. This reflects the £41 million increase in revenue and a £22 million decrease in IRE partly offset by a £7 million increase in underlying depreciation. The remaining cost base has decreased by £4 million as a result of a £19 million decrease in property rates largely due to an £8 million refund received and an £8 million reduction in accrued property rates relating to wastewater assets, and smaller reductions across the rest of the cost base partly offset by a £10 million credit in the prior year resulting from the settlement of a historical commercial claim and a £9 million increase in power costs largely due to electricity price increases. During the current year operating costs of £3 million and infrastructure renewal expenditure of £4 million were incurred in response to Storms Ciara and Dennis that occurred in February 2020.

Reported operating profit decreased by £5 million, to £630 million, reflecting the increase in underlying operating profit being more than offset by an increase in adjusted items. Adjusted items for 2019/20 included £83 million of accelerated depreciation of bioresources assets that have been taken out of use. A further £19 million relates to costs associated with COVID-19, principally reflecting a higher bad debt charge recognising the higher risk of future non-payment of household customer bills, and £12 million relates to restructuring costs. In the prior year, adjusted items included £36 million of costs associated with the dry weather of 2018, £7 million associated with the equalisation of pension benefits between males and females in relation to Guaranteed Minimum Pension (GMP) benefits, and £7 million of restructuring costs.

Investment income and finance expense

The underlying net finance expense of £246 million was £15 million higher than last year, mainly due to the impact of new debt and interest rate swaps traded since March 2019, and higher RPI inflation on the group's index-linked debt.

Interest of £95 million on non index-linked debt was £11 million higher than last year due to a higher level of debt following new issuances and associated interest rate swaps traded in the period. The indexation of principal on index-linked debt, including the impact of inflation swaps, amounted to a net charge in the income statement of £100 million, compared with a net charge of £98 million last year. As at 31 March 2020, the group had approximately £3.5 billion of RPI-linked debt at an average real rate of 1.4 per cent, and £0.5 billion of CPI-linked debt at an average real rate of 0.2 per cent.

The higher RPI inflation charge compared with last year contributed to the group's average underlying interest rate of 3.4 per cent being higher than the rate of 3.3 per cent for the year ended 31 March 2019. The average underlying interest rate represents the underlying net finance expense divided by average debt.

Reported net finance expense of £289 million was £84 million higher than last year, principally reflecting an increase in the fair value losses on debt and derivative instruments, from a £9 million gain in 2018/19 to a £76 million loss in 2019/20 and the £5 million expected credit losses on our loans to Water Plus.

The group fixed the interest rates on the majority of its non index-linked debt for the 2015–20 regulatory period at a net effective nominal interest rate of around 3.2 per cent (excluding the impact of cost of carry).

Profit before tax

Underlying profit before tax was £492 million, £32 million higher than last year. This reflects the £59 million increase in underlying operating profit, partly offset by the £15 million increase in underlying net finance expense and a £6 million share of underlying losses of joint ventures compared with a £7 million profit last year.

Our joint venture Water Plus has been operating in a challenging environment due to billing data issues stemming from the market opening in April 2017, and delivered a disappointing operating result for the year to March 2020. Prior to the onset of COVID-19, Water Plus had been making progress with its recovery plan but the impact COVID-19 has had on the ability of business customers to pay has resulted in a far more challenging operating environment for Water Plus. Our share of Water Plus losses for the year amounted to £51 million, of which £46 million has been recognised in the income statement, comprising our £14 million share of Water Plus underlying losses and our £32 million share of Water Plus losses arising as a result of COVID-19. As a result of the £46 million of losses recognised in the income statement, our long-term interest (comprising our equity investment in and zero coupon shareholder loans to Water Plus) has been written down to £nil. In addition we have recognised an allowance for expected credit losses of £5 million on our loans to Water Plus. Further detail is provided in note 12 (Joint Ventures) of our consolidated financial statements.

The underlying measure of profit before tax reflects the adjusted items, as outlined in the operating profit section above, the Water Plus adjustments, and other consistently applied presentational adjustments, as outlined in the underlying profit measures on Our performance in 2019/20.

Reported profit before tax decreased by £133 million to £303 million reflecting the £5 million reduction in reported operating profit, a £84 million increase in reported net finance expense including fair value movements and a £38 million share of losses of joint ventures compared with a £7 million share of profits last year.


The group continues to be fully committed to paying its fair share of tax and acting in an open and transparent manner in relation to its tax affairs and we were delighted to secure the Fair Tax Mark in July last year.

In addition to corporation tax, the group pays significant other contributions to the public finances on its own behalf as well as collecting and paying over further amounts for its 5,000 strong workforce. The total payments for 2019/20 were around £250 million and included business rates, employment taxes, environmental taxes and other regulatory service fees such as water abstraction charges as well as corporation tax.

In 2019/20, we paid corporation tax of £72 million, which represents an effective cash tax rate on underlying profits of 15 per cent, which is 4 per cent lower than the headline rate of corporation tax of 19 per cent. We paid six rather than the usual four quarterly instalment payments as we transition to the new quarterly instalment regime. After adjusting for these one off additional payments, the key reconciling items to the headline rate of corporation tax continue to be allowable tax deductions on capital investment and pension payments, these being deductions put in place by successive governments to encourage such investment and thus reflecting responsible corporate behaviour in relation to taxation.

We have expressed the effective cash tax rate in terms of underlying profits as this measure excludes fair value movements on debt and derivative instruments and thereby enables a medium-term cash tax rate forecast. We expect the average cash tax rate on underlying profits to remain below the headline rate of tax for the medium term. The key risk to sustaining this rate is any unexpected changes in tax legislation or practice and, as necessary, we would actively engage with the relevant authorities in order to manage this risk.

As well as the payments we also received a repayment of corporation tax of £16 million which relates to agreement of prior years' UK tax matters.

The current tax charge was £51 million in 2019/20, compared with £42 million in the previous year. There were current tax credits of £12 million in 2019/20 and £3 million in 2018/19, following agreement of prior years' tax matters.

Summary of net debt movement

For 2019/20, the group recognised a deferred tax charge of £158 million, compared with £34 million for 2018/19. Of the deferred tax charge for 2019/20, £136 million relates to the government's reversal of the planned reduction in the rate of corporation tax from 19 per cent to 17 per cent from 1 April 2020. Excluding the deferred tax adjustment for the change in tax rate of £136 million in the current year, the total effective tax rate was around 20 per cent for the current year and around 17 per cent for the prior year. Subject to any legislative or tax practice changes, we would expect the total effective tax rate to be in line with the headline rate of corporation tax for the medium-term. In 2019/20, there are £157 million of tax adjustments taken to equity, primarily relating to remeasurement movements on the group's defined benefit pension schemes – including the adjustment arising from a change in the rate at which the deferred tax liabilities are measured, from 17 per cent to 35 per cent, being the rate applicable to refunds from a trust.

Profit after tax

Underlying profit after tax of £430 million was £22 million higher than last year, principally reflecting the £32 million increase in underlying profit before tax.

For 2019/20 we have changed the approach we use to derive underlying profit after tax to exclude the impact of deferred tax. This approach is in line with the regulatory model whereby cash tax is recovered through revenues, with future revenues allowing for cash tax including the unwinding of any deferred tax balance as it becomes current. By making this adjustment, the group's underlying tax charge does not include tax that will be recovered through revenues in future periods, thus reducing the impact of timing differences. This approach is consistent with the approach taken by our listed peers and with what we believe to be the direction of travel of the International Accounting Standards Board's (IASB) rate-regulated activities project. Our prior year numbers have been restated for comparability.

Reported profit after tax decreased by £257 million to £107 million, principally reflecting the £133 million decrease in the reported profit before tax and a £124 million increase in the reported deferred tax charge largely resulting from the Government's reversal of the planned reduction in the rate of corporation tax from 19 per cent to 17 per cent from 1 April 2020.

Earnings per share

Underlying earnings per share increased from 59.8 pence to 63.0 pence. This underlying measure is derived from underlying profit after tax. As noted above, we have changed the approach we use to derive underlying profit after tax to exclude the impact of deferred tax, with our prior year numbers restated for comparability.

Basic earnings per share decreased from 53.3 pence to 15.7 pence for the same reasons that caused the decrease in profit after tax.

Dividend per share

Reflecting performance in the year and across AMP6 more generally, the board has proposed a final dividend of 28.40 pence per ordinary share in respect of the year ended 31 March 2020. Taken together with the interim dividend of 14.20 pence per ordinary share, paid in February, this results in a total dividend per ordinary share for 2019/20 of 42.60 pence. This is an increase of 3.2 per cent, compared with the dividend relating to last year, in line with the group's AMP6 dividend policy of targeting a growth rate of at least RPI inflation each year through to 2020. The inflationary increase of 3.2 per cent is based on the RPI element included within the allowed regulated revenue increase for the 2019/20 financial year (i.e. the movement in RPI between November 2017 and November 2018).

The final dividend is expected to be paid on 3 August 2020 to shareholders on the register at the close of business on 26 June 2020. The ex-dividend date is 25 June 2020.

The AMP7 dividend policy announced in January 2020 targets a growth rate of CPIH inflation each year through to 2025, with further details set out below. It is, however, too early to predict the full impact of COVID-19 on inflation, the economy more generally and on our business, and we will review our dividend policy for AMP7 as a clearer picture of the post COVID-19 economic environment emerges.

Policy period –the dividend policy aligns with the five-year regulatory period which runs from 1 April 2020 to 31 March 2025.

Policy approval process – the dividend policy was considered and approved by the United Utilities Group board in January 2020, as part of a comprehensive review of the 2020–25 regulatory final determination in the context of a detailed business planning process, with due regard for the group's financial metrics, credit ratings and long-term financial stability, and is reviewed at least annually.

Distributable reserves – as at 31 March 2020, the company had distributable reserves of £3,105 million. The total external dividends relating to the 2019/20 financial year amounted to £291 million. The company distributable reserves support over ten times this annual dividend.

Financing headroom – supporting the group's cash flow, we adopt a funding/liquidity headroom policy of having available resources to cover the next 15–24 months of projected cash outflows on a rolling basis.

Cash flows from subsidiaries – the basis for UUG dividend distributions in AMP7 comprises expected returns from UUW based on AMP7 performance, including the base dividend return of 4 per cent (nominal) on the equity portion of the shadow RCV, together with accumulated outperformance in prior periods that has been retained by the group after sharing with customers. The UUW board has determined that there should be no dividend payments made by UUW during the financial year 2020/21 and that any eventual dividend that may ultimately be earned relating to the 2020/21 financial year will be deferred into the future when prevailing uncertainties have been resolved and the financial position has become more clear. This does not impact the UUG board's decision in relation to the payment of dividends for 2020/21 and the UUG board will continue to monitor UUW's AMP7 performance in order to support the external payment of dividends to shareholders.

Financial stability – the water industry has invested significant capital since privatisation in 1989 to improve services for customers and provide environmental benefits, a large part of which is driven by legislation. Water companies have typically raised borrowings to help fund the capital investment programme. Part of total expenditure is additive to the regulatory capital value, or RCV, on which water companies earn a regulated level of return. RCV gearing is useful in assessing a company's financial stability in the UK water industry and is one of the key credit metrics that the credit rating agencies focus on. We have had a relatively stable RCV gearing level over the last ten years, always within our target range of 55 to 65 per cent, supporting a stable A3 credit rating for UUW with Moody's. RCV gearing at 31 March 2020 was 62 per cent and the movement in net debt is outlined in the cash flow section below. Given the level of uncertainty associated with the economic impact of COVID-19, and specifically the future outlook for inflation, it is probable that our RCV gearing will increase above its current level and we will therefore continue to monitor the position as greater clarity emerges.

Annual dividend approval process – the group places significant emphasis on strong corporate governance, and before declaring interim and proposing final dividends the UUG board undertakes a comprehensive assessment of the group's key financial metrics.

Policy sustainability – at the time of approving the policy in January 2020, the board was satisfied that on average across AMP7 as a whole the projected dividend would be covered by underlying profit after tax and that the policy would be sufficient to withstand reasonable changes in assumptions, such as inflation, opex, capex and interest rates. Extreme economic, regulatory, political or operational events, which could lead to a significant deterioration in the group's financial metrics during the policy period, may present risks to policy sustainability. In particular, the longer-term economic impacts resulting from COVID-19 could impact the group's financial metrics, and these could include sustained levels of high unemployment, corporate failures and lower inflation affecting revenues, financing costs and RCV.

Cash flow

Net cash generated from continuing operating activities for the year ended 31 March 2019 was £810 million, and therefore broadly consistent with £832 million in the previous year. The group's net capital expenditure was £645 million, principally in the regulated water and wastewater investment programmes. This excludes infrastructure renewals expenditure which is treated as an operating cost under IFRS. Cash flow capex differs from regulatory capex, since regulatory capex includes infrastructure renewals expenditure and is based on capital work done in the period, rather than actual cash spent.

Net debt including derivatives at 31 March 2020 was £7,361 million, compared with £7,067 million at 31 March 2019. This increase largely reflects regulatory capital expenditure, payments of dividends, interest and tax, the inflationary uplift on index-linked debt, fair value movements and the impact of IFRS16 resulting in a non-cash increase in lease liabilities, partly offset by operating cash flows and a repayment of loans owed from joint ventures.

Fair value of debt

The group's gross borrowings at 31 March 2020 had a carrying value of £8,363 million. The fair value of these borrowings was £8,834 million. This £471 million difference principally reflects the significant fall in real interest rates compared with the rates at the time we raised a portion of the group's index-linked debt. This difference has decreased from £1,089 million at 31 March 2019 due primarily to an increase in credit spreads.

Debt financing and interest rate management

Gearing, measured as group net debt divided by UUW's shadow (adjusted for actual spend) regulatory capital value, was 62 per cent at 31 March 2020. This is slightly higher than the 61 per cent as at 31 March 2019 and remains within our target range of 55 to 65 per cent.

UUW's senior unsecured debt obligations are rated A3 with Moody's Investors Service (Moody's), A- with Fitch Ratings (Fitch) and BBB+ with Standard & Poor's Ratings Services (S&P) and all on stable outlook. United Utilities PLC's (UU PLC) senior unsecured debt obligations are rated Baa1 with Moody's, A- with Fitch and BBB- with S&P, all on stable outlook.

The group has access to the international debt capital markets through its €7 billion euro medium-term note (EMTN) programme. The EMTN programme does not represent a funding commitment, with funding dependent on the successful issue of the notes.

Gross debt – total carrying value £8,363 million

Gross debt pie chart

Yankee bonds (USD) £397.5m

Euro bonds (EUR) £193.4m

HKD bonds (HKD) £279.8m

GBP bonds £2,339.8m

GBP RPI-linked bonds £1,988.7m

GBP CPI-linked bonds £174.0m

GBP CPI-linked loans £101.3m

GBP fixed rate and RPI-linked bonds swapped to CPI linked £275.3m

EIB and other RPI-linked bonds £1,543.0m

Other EIB loans £572.0m

Lease obligations £57.6m

Other borrowings £440.7m

Cash and short-term deposits at 31 March 2020 amounted to £528 million. Over 2015–20, we had a financing requirement totalling around £2.5 billion. This was fully funded before the end of the AMP with subsequent finance raised prefunding our AMP7 requirement. In total over 2020–25, we expect to raise around £2.1 billion to cover refinancing and incremental debt, supporting our five-year investment programme.

We remain one of the sector leaders in the issuance of CPI-linked debt having previously achieved CPI-linkage on £465 million of our debt portfolio, in response to Ofwat's decision to transition away from RPI inflation linkage. In November 2019, we increased the CPI-linkage in our debt portfolio by a further £50 million (to £515 million) by increasing the amount outstanding on UUW's financing subsidiary, United Utilities Water Finance PLC's (UUWF) £250 million public bond with a maturity date in July 2033, by an additional £50 million and simultaneously swapping to CPI.

In February 2020, UUWF raised £250 million 1.75 per cent fixed rate notes in the public bond market with an 18-year maturity.

Since September 2019, the group has extended a £50 million committed bank facility by one year out to 2024, and £100 million of facilities by one year out to 2025. In addition, since March 2020, the group has renewed £50 million of committed bank facilities for a five-year term, and extended a £100 million facility for approximately a further three years to April 2026.

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


stable credit rating with Moody's


expected financing for AMP7


available liquidity


IAS19 pension surplus

Term debt maturity per regulatory period

Long-term sterling inflation index-linked debt provides a natural hedge to assets and earnings. At 31 March 2020, approximately 48 per cent of the group's net debt was in RPI-linked form, representing around 30 per cent of UUW's regulatory capital value, with an average real interest rate of 1.4 per cent. A further 7 per cent of the group's net debt was in CPI-linked from, representing around 4 per cent of UUW's RCV, with an average real rate of 0.2 per cent. The long-term nature of this funding provides a good match to the company's long-life infrastructure assets and is a key contributor to the group's average term debt maturity profile, which is around 18 years.

Our inflation hedging policy is to target around 50 per cent of net debt to be maintained in index-linked form. This reflects a balanced assessment across a range of factors.

Where nominal debt is raised in a currency other than sterling and/or with a fixed interest rate, the debt is generally swapped to create a floating rate sterling liability for the term of the debt. To manage exposure to medium-term interest rates, the group fixes underlying interest costs on nominal debt out to ten years on a reducing balance basis.

Historically, this has been supplemented by fixing substantially all remaining floating rate exposure across a forthcoming regulatory period around the time of the price control determination. Recognising Ofwat's intention to apply debt indexation for new debt raised during the 2020–25 regulatory period, we have retained the hedge to fix underlying interest costs on nominal debt out to ten years on a reducing balance basis, but have not supplemented this with the additional 'top up' fixing at the start of the new regulatory period.


Short-term liquidity requirements are met from the group's normal operating cash flow and its short-term bank deposits and supported by committed but undrawn credit facilities. The group's €7 billion EMTN programme provides further support.

At 31 March 2020, the group had around £1.2 billion of available liquidity, comprising cash and short-term deposits (enhanced by new finance raised in the period), plus committed undrawn revolving credit facilities. Of this, £722 million covers short-term debt and debt maturities which fall due across the next 12 months. After taking this into account, the group has headroom of £436 million, providing flexibility in terms of when and how further debt finance is raised to help refinance maturing debt and support the delivery of our regulatory capital investment programme. The group plans to raise between £500 million and £800 million of term funding in 2020/21 and the group has recently re-established a Euro Commercial Paper Programme, which would facilitate access to the Bank of England's Covid Corporate Financing Facility (CCFF), should the group need to do so. The Bank of England has confirmed our eligibility to participate in the CCFF. Whilst we do not expect to use this facility, we see it as prudent contingency planning to have it available to the group.

We consider that we operate 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. Our cash is held in the form of short-term money market deposits with prime commercial banks.

We operate a bilateral rather than a syndicated approach to our 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.


As at 31 March 2020, the group had an IAS 19 net pension surplus of £754 million, compared with a net pension surplus of £484 million at 31 March 2019. This £270 million increase is as a result of the acceleration of £103 million deficit repair contributions to the group's defined benefit schemes made in April 2019, and a spike in credit spreads at 31 March 2020 due to COVID-19 that resulted in a temporary decrease in the valuation of liabilities. The scheme specific funding basis does not suffer volatility due to credit spread movements to the same extent as it uses a prudent, fixed credit spread assumption and is hedged for inflation and interest rates. Any inflation and credit spread movements are therefore not expected to have a material impact on the pension liabilities calculated on a scheme specific funding basis.

Further detail on pensions is provided in note 19 (Retirement benefit surplus) of our consolidated financial statements.

What Matters

Maintaining a secure pension position for employees

Our pension schemes have low-dependency on the company, giving significant protection to employees and shareholders.

As a responsible employer, we are committed to ensuring that the pension promises we have made are kept and that we help our employees to plan for retirement.

We have £4 billion of pension assets under management. Around 14,000 former employees and more than 99 per cent of our current employees are members of one of our two pension schemes.

Working closely with the trustees of our pension schemes we have taken a responsible approach to pension risk management for many years. This has provided us with the most robust and resilient defined benefit pension schemes in the water industry, and two of the strongest in the UK.

With our schemes invested in low risk assets, and interest rates, inflation and growth asset risk all effectively hedged, we have significantly reduced the financial volatility experienced by the pension schemes and further improved resilience for the future.

Combined with the acceleration of payment of our remaining deficit repair contributions (totalling around £126 million) in 2019, this means the pension scheme has minimal reliance on the company in order to meet all of its liabilities – in other words, we have achieved 'low dependency' in line with the recommendations of The Pensions Regulator published in March 2020. This means that customers and shareholders are protected from significant exposures to pension scheme deficits.

We provide financial awareness seminars to all of our employees in the early, mid and late stages of their careers that cover a broad range of money management topics including financial planning, managing debt and pensions.

We offer highly competitive pensions to our employees, with an employer contribution of up to 14 per cent of salary to our defined contribution arrangement. Our defined contribution arrangement has been awarded the Pensions Quality Mark plus accreditation.

Following on from the closure of our defined benefit schemes to new members over a decade ago, in 2018 we made significant amendments for existing members with the introduction of hybrid benefits.

This put the scheme on a more sustainable cost basis for the future and further reduced the risk of future scheme deficits.

Generating value for:

Guide to Alternative Performance Measures (APMs)

The underlying profit measures in the following table represent alternative performance measures (APMs) as defined by the European Securities and Markets Authority (ESMA). These measures are linked to the group's financial performance as reported under International Financial Reporting Standards (IFRSs) as adopted by the European Union in the group's consolidated income statement, which can be found in the Consolidated income statement. As such, they represent non-GAAP measures.

These APMs have been presented in order to provide a more representative view of business performance. The group determines adjusted items in the calculation of its underlying measures against a framework which considers significance by reference to profit before tax, in addition to other qualitative factors such as whether the item is deemed to be within the normal course of business, its assessed frequency of reoccurrence and its volatility which is either outside the control of management and/or not representative of current year performance.

Adjustments in arriving at underlying profit measures

Dry weather eventAn extreme period of hot and dry weather during the summer of 2018 led to significant strain being placed on our water resources and network and as a result our reservoir levels ran extremely low. Activities were carried out to safeguard supplies, generating significant costs which would not have been incurred under normal conditions. Given the infrequent nature of periods of dry weather of this severity, this event is not considered part of the normal course of business.
GMP equalisationThe group has recognised an additional past service cost in respect of its defined benefit pension schemes. This reflects a change in benefits following a legal ruling during the year relating to the equalisation of Guaranteed Minimum Pension (GMP) benefits between males and females. This one-off adjustment, which is not representative of costs incurred in the normal course of business, is a direct consequence of the ruling and is not expected to reoccur in future years.
Bioresources asset write-downFollowing a strategic review of the group's bioresources activities, the likelihood of future economic benefit being derived from certain assets is now considered remote in light of improvements in alternative lower-cost and more environmentally friendly processes. This has resulted in a material asset write-down resulting from a strategic review coming out of the PR19 process and that considers the group's zero-carbon commitments. As such, it is not considered to be part of the normal course of business, with similarly material write-downs not expected to reoccur in future years.
COVID-19The group has incurred significant costs resulting from the COVID-19 pandemic, including incremental expected credit losses on household and non-household customer receivables caused by the economic impact of business closures and expected increases in unemployment, and operating expenses relating to the response to the pandemic. The group's joint venture, Water Plus, has also been significantly impacted by the pandemic, resulting in the business recognising an impairment of certain assets and a higher allowance for expected credit losses, which feeds through to the group's share of losses from joint ventures. This has also caused the group to recognise an allowance for expected credit losses in relation to loans extended to Water Plus. Due to the unprecedented nature of the pandemic and the associated economic shock in the current year, these costs are not deemed to be representative of normal business performance when compared against prior periods.
Restructuring costsThe group has incurred restructuring costs in the past in relation to a number of discrete events which can cause volatility in the reported results. Management adjusts internally for these costs to provide an underlying view of performance which it views as being more representative of the normal course of business and more comparable period to period.
Net fair value losses/(gains) on debt and derivative instrumentsFair value movements on debt and derivatives can be both very significant and volatile from one period to the next. These movements are determined by macro economic factors which are outside the control of management and these instruments are purely held for funding and hedging purposes (not for trading purposes). Taking these factors into account, management believes it is useful to adjust for this to provide a more representative view of performance.
Interest on derivatives and debt under fair value optionNet fair value gains on debt and derivative instruments includes interest on derivatives and debt under fair value option. In adjusting for net fair value gains on debt and derivatives, it is appropriate to add back interest on derivatives and debt under fair value option to provide a view of the group's cost of debt which is better aligned to the return on capital it earns through revenue.
Net pension interest incomeThis item can be very volatile from one period to the next and it is a direct function of the extent to which the pension scheme is in an accounting deficit or surplus position. Management believes it is useful to adjust for this to provide a more representative view of performance.
Capitalised borrowing costsAccounting standards allow for the capitalisation of borrowing costs in the cost of qualifying assets. Management believes it is appropriate to adjust for these significant costs to provide a representative cost of borrowings and current year performance which is better aligned to the return on capital it earns through revenue.
Deferred tax adjustmentManagement adjusts to exclude the impact of deferred tax in order to provide a more representative view of the group's profit after tax and tax charge for the year given that the regulatory model allows for cash tax to be recovered through revenues, with future revenues allowing for cash tax including the unwinding of any deferred tax balance as it becomes current. By making this adjustment, the group's underlying tax charge does not include tax that will be recovered through revenues in future periods, thus reducing the impact of timing differences. This adjustment has been made for the first time in the current year, with prior year comparatives re-presented to take account of this adjustment.
Agreement of prior years' tax mattersThe agreement of prior years' tax matters can be significant, volatile and often related to final settlement of numerous prior year periods. Management adjusts for this to provide a more representative view of the tax charge/credit in relation to current year performance.
Tax in respect of adjustments to underlying profit before taxManagement adjusts for the tax impacts of the above adjusted items to provide a more representative view of current year performance.

Underlying profit

Operating profitYear ended
31 March 2020
Year ended
31 March 2019
Reported operating profit630.3634.9
Dry weather event36.1
GMP equalisation6.6
Bioresources asset write-down82.6
COVID-19 – expected credit loss on non-household receivables1.4
COVID-19 – expected credit loss on household receivables16.7
COVID-19 – operating expenses1.1
Restructuring costs11.87.2
Underlying operating profit743.9684.8
Net finance expense£m£m
Finance expense(313.0)(222.5)
Investment income24.017.1
Reported net finance expense(289.0)(205.4)
COVID-19 – expected credit losses on loans to JVs5.0
Net fair value losses/(gains) on debt and derivative instruments76.3(9.5)
Interest on swaps and debt under fair value option16.530.6
Net pension interest income(14.0)(9.5)
Adjustment for capitalised borrowing costs(40.6)(37.4)
Underlying net finance expense(245.8)(231.2)
Share of (losses)/profits of joint ventures(38.1)6.7
COVID-19 – Water Plus impairment losses and expected credit losses32.0
Underlying share of (losses)/profits of joint ventures(6.1)6.7
Reported profit before tax303.2436.2
Adjustments in respect of operating profit113.649.9
Adjustments in respect of net finance expense43.2(25.8)
Adjustments in respect of share of (losses)/profits of joint ventures32.0
Underlying profit before tax492.0460.3
Reported profit after tax106.8363.4
Adjustments in respect of profit before tax188.824.1
Deferred tax adjustment*157.534.0
Agreement of prior years' UK tax matters(12.2)(2.8)
Tax in respect of adjustments to underlying profit before tax(11.3)(10.8)
Underlying profit after tax*429.6407.9
Earnings per share£m£m
Reported profit after tax (a)106.8363.4
Underlying profit after tax (b)429.6407.9
Weighted average number of shares in issue, in millions (c)681.9m681.9m
Reported earnings per share, in pence (a/c)15.753.3
Underlying earnings per share, in pence (b/c)63.059.8
Dividend per share42.60p41.28p

* Approach used to derive underlying profit after tax has been changed to exclude the impact of deferred tax to better reflect the regulatory revenue allowances, with prior year numbers restated for comparability.