As expected, tighter regulatory price controls and increased asset depreciation dampened half-year operating profit at water group United Utilities (UU). However, revenue benefited from the absence of customer discounts applied to bills last year. While last year the group achieved a first quartile operating performance according to Ofwat's key performance indicators, the AMP6 regulatory period has got off to a less impressive start. Following a water quality incident in Lancashire this summer, which affected around 10 per cent of its customer base, the group paid £25m in compensation to customers.
The group began its £3.5bn investment programme for AMP6, spending £358m of an annual £800m on improving operations. This included building a pipeline through Cumbria, including pumping stations and underground service reservoirs, to reduce reliance on Ennerdale Water for the region's water supply. The group also plans to invest £100m in its non-regulated assets, primarily solar generation, between 2015 and 2020. Management plans to supplement the energy it already produces via electricity generated from sludge, as part of plans to double its energy self-generation to 35 per cent by 2020.
Prior to these results JPMorgan Cazenove predicted adjusted EPS of 47.08p for the March 2016 year-end, down from 51.93p in 2015.
UNITED UTILITIES (UU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 953p | MARKET VALUE: | £6.5bn | |
| TOUCH: | 953-953.5p | 12-MONTH HIGH: | 1,045p | LOW: 817p |
| DIVIDEND YIELD: | 4% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 360p | NET DEBT: | £6.01bn | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 859 | 205 | 23.9 | 12.56 |
| 2015 | 857 | 216 | 25.2 | 12.81 |
| % change | -0.2 | +5 | +5 | +2 |
Ex-div: 17 Dec Payment: 1 Feb | ||||
