The 28 per cent rise in United Utilities (UU.) stock since the start of the year tells you all you need to know about the current regulatory review: Ofwat's teeth aren't as sharp as once feared. The signs are that the watchdog will still allow water companies to make acceptable returns in the 2015-2020 period. United Utilities, which should receive its draft determination from Ofwat in August, certainly seems comfortable with the review process. Management tell us they are working closely with the regulator, which is being "really helpful".
The regulated returns of UK water companies have long been a target for private-equity bidders. With the end of the review now in sight, bid chatter is returning. Management refused to comment on speculation that the LongRiver consortium, who bid unsuccessfully for Severn Trent (SVT) last year, was set to enter the fray again.
Management was instead keen to talk about how outperformance of regulatory targets in the current period has allowed it to help hard-up customers in the North West. Another priority is rewarding shareholders with dividend increases 2 percentage point ahead of inflation. The City expects another 5 per cent increase in the dividend this year to 37.75p, and earnings per share of 44.8p (2013/14: 44.7p).
| UNITED UTILITIES (UU.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 857p | MARKET VALUE: | £5.8bn | |
| TOUCH: | 856-857p | 12-MONTH HIGH: | 862p | LOW: 641p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 325p | NET DEBT: | 250% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 1.6 | 409 | 59 | 34.3 |
| 2011 | 1.5 | 327 | 67 | 30 |
| 2012 | 1.6 | 280 | 46 | 32 |
| 2013 | 1.6 | 312 | 42 | 34.32 |
| 2014 | 1.7 | 545 | 108 | 36.04 |
| % change | +4 | +75 | +157 | +5 |
Ex-div: 18 Jun Payment: 1 Aug | ||||
