United Utilities on track as bid talk continues

WASTE and water group United Utilities said in a trading update today that it enjoyed a solid start to 2012 and is on course to deliver a good financial performance for the year.

The firm, which is currently the target of takeover bid speculation, said current trading is in line with group expectations in a trading statement for the first half until 30 September.

Revenue in the year to the end of March 2013 is expected to be higher than last year, largely due to the regulated price increases with industry watchdog Ofwat. United Utilities added that price increases are slightly below the price rise set out by the regulator, due to customers switching to water meters.

The group added that borrowings for the half year will be moderately higher compared to March 2012, mainly due to increased capex, final dividend and pension payments.

The trading statement follows news last month that several buyers could be circling around the UK water company as a possible break-up target, including an international infrastructure consortium of the Ontario Teachers pension fund, Qatari and Abu Dhabi funds, who are thought to be considering a possible £6.1bn offer. Analysts at UBS said yesterday that United Utilities was an ideal target for a pension or sovereign wealth fund, and a consortium between the speculated parties “should have the firepower to make such a bid”.

Elsewhere, analysts at JP Morgan Cazenove disagreed, saying yesterday that the utility firm is unlikely to see a bid emerging in the next six months.

Its shares closed 0.41 per cent higher at 730p.