A forecast dividend yield of 4.6 per cent guaranteed to rise at 2 per cent above inflation is not to be sniffed in a low interest rate environment, and water utility United Utilities (UU.) proved how it can pay such generous income for at least the next two years by delivering another solid set of results. Underlying pre-tax profit increased by £27.3m to £354m, as revenue increased in line with regulatory allowances and the cost of debt continued to fall.
Water regulator Ofwat allowed price increases of 5.8 per cent during the period and that helped offset a reduction in volumes due to the economic downturn and homes switching to metered services. The underlying net finance charge was £14m lower at £253m as the average underlying interest rate fell from 5.5 to 4.9 per cent on net debt of £5.45bn. Around a half of debt is index-linked and carries an average real interest rate of 1.7 per cent.
Capital investment increased by 16 per cent to £787m, ahead of the £750m target, and is set to rise to £800m in the current financial year. Spending on private sewers following the transfer to United Utilities 18 months ago continues to be below initial estimates.
Deutsche Bank analysts expect current year adjusted pre-tax profits to rise 2.5 per cent to £363m, giving EPS of 42p (from 39.1p in 2013).
UNITED UTILITIES (UU.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 791p | MARKET VALUE: | £5.39bn | |
| TOUCH: | 790-791p | 12-MONTH HIGH: | 816p | LOW: 618p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 275p | NET DEBT: | 291% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 2.43 | 530 | 26.5 | 32.7 |
| 2010 | 1.57 | 409 | 59.2 | 34.3 |
| 2011 | 1.51 | 327 | 67.2 | 30.0 |
| 2012 | 1.56 | 280 | 46.4 | 32.0 |
| 2013 | 1.64 | 305 | 43.5 | 34.3 |
| % change | +5 | +9 | -6 | +7 |
Ex-div: 19 Jun Payment: 2 Aug | ||||
