United Utilities Group Plc (UU) is a holding company primarily engaged in the provision of wastewater and water services through its subsidiaries. The company collects water from boreholes, streams, reservoirs and lakes; and gathers, deposits to treat wastewater and then channelizes it into seas and rivers.
United Utilities generates renewable energy from the water collected from houses. The collected water is transported for the removal of sewage sludge and then further treatment work is done. The company also provide services related to infrastructure management. United Utilities owns authorizations for providing services related to wastewater and water to individuals and businesses across the North West of England. The company’s head office is in Warrington, the United Kingdom.
It serves households and business customers of about 3 million and 200,000 respectively. The company's operations are differentiated in three core operating segments: Wholesale water charges, Wholesale wastewater charges and the Residential retail charges.
On 14th June 2019, United Utilities Group PLC announced that its Chief Operating Officer Steve Fraser had opted for the separation from the company. Mr Fraser had given over 14 years to United Utilities and will be joining the Cadent Gas Limited as a Chief Executive. The COO will leave the company later this year once the date will be confirmed by the management.
Financial Highlights – Financial Year 2019 (£, million)
(Source: Annual Report, Company Website)
In the Financial Year ending 31st March 2019, the company’s reported revenue stood at £1,818.5 million against £1,735.8 million in FY2018. There was an increase of 4.76 per cent due to an increase in the Wholesale water charges and Wholesale wastewater charges in the current financial year.
The underlying operating profit for FY2019 was up by around £40 million to £684.8 million from £645.1 million in the Financial Year 2018. The increased revenue was offset by the increase in the IRE (Investment Related Expenses) and depreciation in the current financial year. The reported profit from operations decreased by 0.23 per cent from £636.4 million in FY2018 to £634.9 million in FY2019, representing an increase in the operating expense for the current financial year. The company’s costs also surged by £36 million due to dry weather in 2018 and a cost of £7 million to equalise the benefits for males and females under Guaranteed Minimum Pension (GMP) benefits.
The adjusted PBT (profit before tax) increased by £90 million to £460 million in the financial year 2019. The increase was driven by increased underlying operating profit and decrease in the net financial expenses for the period. The reported PBT (profit before tax) for FY2019 stood at £436.2 million against £432.1 million in FY2018.
The underlying after-tax profit was up by £73.8 million from £304.9 million to £378.7 million in FY2019. The reported PAT (Profit after tax) was £363.4 million for the period against £354.6 million for the financial year 2018. The underlying earnings per share stood at 55.5 pence in FY2019 versus 44.7 pence in FY2018. The reported earnings per share stood at 53.3 pence in FY2019 versus 52 pence in FY2018.
The Total dividend per share for FY2019 was 41.28 pence against 39.73 pence in FY2018. The proposed final dividend for the financial year 2019 stood at 27.52 pence.
The company’s operating activities generated net cash of £832.3 million in FY2019 against £815.6 million in FY2018. The net debt for the period stood at £7,067.3 million versus £6,867.8 million in FY2018.
The company’s regulatory capital expenditure (net) stood at £821 million in Financial year ending 31st March 2019 versus £816.1 million in FY2018. RCV (Regulatory capital value) gearing remained flat at 61 per cent for FY2019.
United Utilities Group PLC Share Price Performance
Daily Chart as at June-14-19, before the market closed (Source: Thomson Reuters)
At the time of writing (as on June 14, 2019, at 3:33 PM GMT), shares of United Utilities Group Plc were quoting at GBX 827.00/share and was up by 0.39 per cent against the yesterday's closing price level. The outstanding market capitalisation of the company stood at around £5.62 billion with a dividend yield of 5.01 per cent.
In the last 52-wks, shares of United Utilities Group Plc have registered a high of GBX 879.60 (as on Mar 19, 2019) and a low of GBX 674.30 (as on Oct 15, 2018). At the current trading level, as quoted in the price chart, its shares were trading 5.98 per cent below the 52wk high price level and 22.65 per cent above the 52wk low price level.
Today's volume in the stock (before the market close, at the time of writing) stood at 726,063. However, the 5-day average daily volume traded in the stock was at 2,095,668.80, which was 11.69 per cent below the 30-day average daily volume of 2,373,198.90 traded on the London Stock Exchange.
From the SMA standpoint, at the time of writing, its shares were trading marginally above the 30-days, 60-days SMA and 200-days SMA, which indicates a positive trend in the stock price and carrying the potential to move up from the current trading levels.
In the past 1 year, shares of the United Utilities Group Plc have delivered a positive price return of 5.35 per cent. However, on a year-to-date basis, the stock was up by approximately 11.90 per cent and declined by 2.85 per cent in the past three months.
Share's RSI for the 30-days, 14-days and 9-days were hovering at a normal range and stood at 53.04, 57.59 and 60.91 respectively. However, 3-days RSI of the stock stood at 65.34.
The company is using advanced technology from across the world and from other sectors to enhance the application of System thinking, and they have developed a full plan for the evolution of their key capabilities to deliver over the next five-year period.
Also, the company has made a significant capital expenditure in FY19 that will drive revenue growth in the coming years. Its key risks are interest rate change, currency exchange rate risks and other macro environment risks.
The company is vastly diversified, both in terms of geography and product line. This helps the company to cushion the blow of any downturn in an area or product. Geopolitical events, like Brexit, could give rise to both a supply and cost issue. Being a geographically diversified company, the company is exposed to the economic instability that may reduce consumer demand for products or impact the profitability of its operations.
The company achieved a good balance of price and volume growth, and the overall shape and quality of the performance were encouraging. However, expectations regarding challenging trading conditions in the short-term, coupled with the risk and headwinds will be faced by the company. The company had raised new finance to cover the projected need in the 2020s.
United Utilities Plc’s had shown decent top-line and bottom-line performance in the current financial year. The company will need to constantly adapt to and plan for climate change in order to maintain a constant and sustainable flow of fresh water. Also, the company has made a significant capital expenditure in the financial year 2019, which will drive revenue growth in the coming years.
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