viewUnited Utilities Group PLC

United Utilities up as earnings rise on regulatory outperformance

United said it outperformed on its outcome incentives set by Ofwat in the six months to the end of September, which meant it raked in an extra £21mln

United Utilities Group PLC
Water regulator Ofwat is encouraging water companies to improve debt repayment and efficiency, and treat customers better

United Utilities PLC (LON:UU.) shares picked up after the water company posted rising profits on the back of higher regulatory incentives in the first half of the year.

The UK’s largest listed water company, which controls water and wastewater in the north-west of England, reported underlying operating profits up 6.5% to £392mln in the six months to the end of September.

READ: London-listed water firms could be at risk of losing their dividend perk

The company said in an update on Wednesday that this was driven partly by its outperformance on its outcome delivery incentives (ODIs) set by regulator Ofwat, which meant it has so far raked in an extra £21mln for the 2015-2020 period, with hopes to take this to £50mln next year.

Ofwat set out new demands and incentives in July for water companies to pay their debts faster, become more efficient and treat customers better.

United's profits were also helped by 2% higher revenues of £936mln, but the coming year's taps have been tightened Ofwat has required United to reduce its revenues by £14mln in 2019/20, reflecting cheaper bills for customers.

Nevertheless, statutory pre-tax profits slumped 25% to £195mln, which it said was down to a fair value loss on its derivatives and debt, which were hit by a decrease in market interest rates.

Utilities stocks tend to be investor favourites because of their high dividends, and United lived up to expectations by announcing a half-year dividend of 14.2p per ordinary share, an increase of 3.2%.

There’s a busy month ahead for utilities, with Ofwat’s final price determination due on 16 December, following a fraught general election four days earlier, which sees opposition party Labour campaigning to renationalise water.

Ofwat could announce further “financial resilience” demands on water firms, which have already seen companies barred from making dividend payments unless they can maintain an investment grade credit rating.

United’s shares traded 1% higher at 886.8p on Wednesday morning.

Quick facts: United Utilities Group PLC

Price: 870.4 GBX

Market: LSE
Market Cap: £5.94 billion

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events


The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...


Bango reports record revenue growth in the first half of 2020

Bango PLC's (LON:BGO) Paul Larbey talks to Proactive's Katie Pilbeam `about their latest record revenue growth in the first half of this year. Larbey is confident Bango is positioned to continue delivering growth after reporting revenues of £4.77mln, up 50% year-on-year. He goes on to...

2 days, 2 hours ago

2 min read