United Utilities (UU) told investors today that it was trading in line with expectations and proposed an increase in its final dividend of nearly 4 per cent.

The water company, which holds its annual meeting today, said it was on track to deliver good profit growth, after an allowed 7.8 per cent increase in water bills, and would return £1.5 billion to shareholders, on top of the dividend, following the sale of its electricity network business.

UU managed to beat the full onset of the credit crunch to sell United Utilities Electricity in December 2007 for £1.7 billion to a consortium set up by the Colonial First State Global Asset Management and JPMorgan's infrastructure investments fund .

“The group has had a successful year. We have delivered good profit growth and further operational improvements,” Sir Richard Evans, the chairman, said.

Dr John McAdam, currently chairman of Rentokil Initial, will take over from Sir Richard as chairman of UU today. Sir Richard is stepping down after 10 years as chairman of the North West water company, during which it has expanded from its core businesses of water and electricity distribution.

Ventures into telecoms and support services have now concluded but the company still manages water, waste water, electricity and gas networks for other owners, through its outsourced services arm.

The water company said that it was confident that it would meet its regulatory targets for the current period. It has to cut leaks by 465 megalitres per day, a tougher target than the previous year.

The group is pre-funded for its capital investment programme until 2010 and has recently received a new £400 million facility from the European Investment Bank, one of its long-standing lenders.

After the return of capital to shareholders, which will take place by a scheme of arrangement, gearing is expected to be at the top end of Ofwat's preferred range of between 55 and 65 per cent, the company said.

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