Whether the stick is a better motivator than the carrot is a matter of debate. In the case of United Utilities (UU.), the former is working well. The water company’s outcome delivery incentives (ODIs) – targets regulated companies in the sector must meet to either earn a reward or avoid facing a penalty – are "skewed to the downside", as it says. As a result, the group has been investing in improving its operational performance.
Chief executive Steve Mogford said the group was investing around £800m each year. It looks to be paying off, with complaints down 22 per cent against the same period last year. In addition, the group is now one of only two companies to achieve 'industry-leading company' status for environmental performance through the Environment Agency’s annual assessment.
On an adjusted basis, operating profit increased by £32m to £344m, narrowly beating analysts' expectations. This was thanks in part to £16m in cost reductions. The group is looking to use technology to further improve efficiency as part of an initiative intended to generate savings of £100m over the life of the group’s current business plan, running to 2020.
Analysts at RBC Capital Markets are forecasting statutory pre-tax profit of £359.4m for the full year to March 2018, giving EPS of 41.9p (from £442.4m and 63.5p in 2017).
| UNITED UTILITIES (UU.) | ||||
| ORD PRICE: | 783p | MARKET VALUE: | £5.34bn | |
| TOUCH: | 782.5-783p | 12-MONTH HIGH: | 1,078p | LOW: 765p |
| DIVIDEND YIELD: | 5% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 410p | NET DEBT: | 240% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 853 | 158 | 29.7 | 12.95 |
| 2017 | 876 | 242 | 28.9 | 13.24 |
| % change | +3 | +53 | -3 | +2 |
| Ex-div: | 21 Dec | |||
| Payment: | 1 Feb | |||
