21st May 2015 11:20
LONDON (Alliance News) - United Utilities Group PLC Thursday reported annual results that beat analyst expectations and its dividend was increased as expected, but pretax profit after exceptional items experienced a substantial fall.
The FTSE 100-listed water company reported a fall in pretax profit for the year ended March 31 to GBP341.6 million from GBP543.3 million a year earlier, while before exceptional items, pretax profit came in at GBP447.0 million, up from GBP388.0 million, as revenue rose to to GBP1.72 billion from GBP1.68 billion.
Operating profit increased to GBP653.3 million from GBP630.2 million, and before exceptional items United Utilities said operating profit came in at GBP664.3 million, up from GBP634.6 million. United Utilities said the rise was a result of its focus on its cost base despite the expected increase in depreciation and other cost pressures including bad debt.
Both pretax profit and operating profit before exceptional items beat analyst expectations of GBP436.0 million and GBP660.0 million, respectively.
United Utilities lifted its final dividend to 25.14 pence, resulting in a total dividend for the financial year rising to 37.70 pence from 36.04 pence, and it reiterated its commitment to grow the dividend in line with inflation over the next five years.
"We expected our 2015-20 price determination to be tough and it was. However, our operational improvements and preparation provide us with a good platform to deliver further value in the forthcoming regulatory period," it said in a statement.
The company's underlying net finance expense, which analysts said could have been the area to generate most surprise, totalled GBP222.0 million, which was down from GBP251.0 million, primarily reflecting the impact of lower retail price inflation on the group's index-linked debt.
Gearing remains within the company's range of 55% to 65%, currently standing at 59% at the end of March, representing a 1% increase from last year. Net debt rose as expected to GBP5.92 billion including derivatives, which reflects increased regulatory expenditure, dividends, interest, tax and fair value losses on debt, United Utilities said.
The net debt position is higher than some analysts expectations, which had forecast net debt would be around GBP5.85 billion.
United Utilities said that in the last regulatory period between 2010-2015, it moved up in Ofwat's customer service measure from last to ninth out of the 19 water companies which was recognised when it avoided an GBP80 million fine it potentially faced for poor performance.
Between 2010 and 2015, the company spent GBP3.8 billion in regulatory capital expenditure. In the next period to end in 2020, this is set to total around GBP3.5 billion. The company is also expecting to deliver savings of over GBP100 million, it said.
Regulatory expenditure in the year ended March 31 totalled GBP869 million, which included a GBP148 million investment in renewing infrastructure. The overall expenditure is up GBP33 million from the last financial year.
"We are encouraged by our operational and customer service performance improvements and believe we can improve further, a key focus for the next five years," United Utilities said.
"Substantial investment in our assets will continue, and we are confident of delivering further benefits for our customers and the environment. For shareholders, we are targeting a dividend growth rate of at least RPI inflation each year through to 2020, all underpinned by a robust capital structure," it added.
United Utilities shares were down 0.7% to 1,001.78 pence per share on Thursday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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