United Utilities (UU) achieved its best ever score on Ofwat's service incentive mechanism - which is measured according to customer feedback - during the first half of the year. This is a very positive step because, as chief executive Steve Mogford says, "good service is a proxy for efficiency". The more efficient the water utility can become, the better chance it has of delivering against its 19 regulatory incentives and gaining outperformance rewards.
Part of the way the utility is trying to drive efficiency is through its 'systems thinking' approach, employing new technology, integrating assets and data intelligence. For example, management plans to use sensors in its network to improve meteorological analysis to protect assets, thereby addressing potential supply problems before they affect customers. The group accelerated its investment programme for the five-year regulatory period, investing £383m in its asset base and plans to spend a total of £800m during the full year. Bad debt has also reduced to 2.8 per cent of regulated revenue from 3 per cent the same time last year.
Operating profit was boosted by a reduction in asset depreciation, slightly lower infrastructure renewals expenditure and the cost base. However, an increase in RPI inflation more than doubled the group's net finance expense, pushing down reported pre-tax profit.
Analysts at house broker Deutsche Bank forecast adjusted EPS of 44p for the year ending March 2017, down from 44.7p the previous year.
UNITED UTILITIES (UU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 901p | MARKET VALUE: | £6.14bn | |
| TOUCH: | 901-901.5p | 12-MONTH HIGH: | 1,064p | LOW: 854p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 392p | NET DEBT: | £6.5bn | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 857 | 216 | 25.2 | 12.81 |
| 2016 | 853 | 158 | 29.7 | 12.95 |
| % change | - | -27 | +18 | +1 |
Ex-div: 15 Dec Payment: 1 Feb | ||||
