United Utilities on track to hit targets as its revenues rise

Suzie Neuwirth
UNITED Utilities yesterday said that trading is in line with expectations and that it is ahead of schedule in meeting targets set by the water regulator.

The FTSE 100-listed firm said that its revenue had increased since 1 October last year and that it continues to make good progress with its investment programme, remaining on track to invest at least £800m in its asset base in 2013-14.

“As we anticipated, United Utilities’ statement suggests no major surprises in its general trading and near-term prospects,” said Angelos Anastasiou, analyst at Whitman Howard.

The regulator Ofwat sets prices for the industry every five years, with the next cycle being from 2015 to 2020. Water companies submitted their business plans for the next price review on 2 December. Ofwat will make a decision by January 2015.

Most companies have pledged not to raise customers’ bills above the rate of inflation over the next regulatory period.

On Monday, Ofwat put pressure on water companies to accept a lower rate of return on investment during the next price cycle. It suggested a 3.85 per cent weighted average cost of capital – the combined returns on debt and equity – compared to an average 4.2 per cent submitted by the companies in their business plans.

Analysts’ responses to the guidance were mixed. “We believe that the initial positive share price reaction to the Ofwat guidance from all of the companies reflected some general bid speculation in the sector,” said Anastasiou. United Utilities’ shares closed up 0.6 per cent.