United Utilities’ (UU.) chief executive Steve Mogford has a simple response to the resurgent threat of nationalisation as an ongoing political debate - “It is something which you can’t do a lot about”. Instead the group is focusing on what it can control, pursuing a “responsible approach” that balances the needs of shareholders while continuing to deliver high levels of customer service.
The group expects to receive a £16m reward for achieving its best ever service incentive mechanism scores (Ofwat’s measure of customer satisfaction) in FY2019, at the end of the current regulatory period, AMP6. Outperformance against outcome delivery incentives generated an overall net reward of £19.2m for the year, with an anticipated cumulative AMP6 reward of around £30m.
Having secured fast-track status for AMP7, the group is capitalising on this forward visibility, with plans to spend an additional £100m of outperformance money (on top of the £250m already committed) to “facilitate a flying start” to the next period.
Market consensus forecasts indicate adjusted cash profits of £1.14bn and EPS of 57p in 2020, falling to £1.03bn and 45p in 2021, according to S&P Capital.
| UNITED UTILITIES (UU.) | ||||
| ORD PRICE: | 782p | MARKET VALUE: | £ 5.33bn | |
| TOUCH: | 781-782p | 12-MONTH HIGH: | 880p | LOW: 674p |
| DIVIDEND YIELD: | 5.3% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 456p* | NET DEBT: | £7.1bn | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 1.72 | 342 | 39.8 | 37.70 |
| 2016 | 1.73 | 354 | 58.3 | 38.45 |
| 2017 | 1.70 | 442 | 63.6 | 38.87 |
| 2018 | 1.74 | 432 | 52.0 | 39.73 |
| 2019 | 1.82 | 436 | 53.3 | 41.28 |
| % change | +5 | +1 | +3 | +4 |
| Ex-div: | 20 Jun | |||
| Payment: | 01 Aug | |||
| *Includes intangible assets of £203m, or 30p a share | ||||
