Wednesday, United Utilities Group (UU.L,UUGRY.PK) reported a 21% rise in pre-tax profit for the first half of fiscal 209, driven by strong regulated revenues on price increases. However, profit after tax plunged from the previous year, hurt by a significant deferred tax charge.
Further, the UK-based multi-utility service provider said its Board slashed interim dividend by 30%, and that it expects to continue to deliver a good underlying financial performance over the remainder of fiscal 2009.
Profit before taxation for the six months ended September 30 increased to 305.9 million pounds from 252.4 million pounds in the year-ago period.
The first-half 2009 results included fair value gains on debt and derivative instruments of 30.8 million pounds, interest on swaps and debt under fair value option of 8.3 million pounds, and interest associated with cash proceeds from United Utilities Electricity sale of 20.6 million pounds. Meanwhile, prior-year results included fair value losses on debt and derivative instruments of 18.5 million pounds, and interest on swaps and debt under fair value option of 27.6 million pounds.
Excluding items, underlying profit before tax amounted to 252.7 million pounds, 4% higher than 243.3 million pounds last year.
However, profit, on an after tax basis, plunged to 4.5 million pounds or 0.7 pence per share from 337.5 million pounds or 49.6 pence per share a year ago. Excluding prior year's discontinued operations, earnings per share from continuing operations fell 98% to 0.7 pence from 38.5 pence last year.
The latest first-half results included a one-off deferred tax charge of 213.6 million pounds or 31.3 pence per share, relating to the abolition of industrial buildings allowances, while last year results were benefited by a deferred tax credit of 81.9 million pounds or 12.0 pence per share.
Half-year revenue rose 5% to 1.208 billion pounds from 1.153 billion pounds in 2007. Operating profit increased 4% to 362.1 million pounds from 347.8 million pounds last year, underlying operating profit rose 6% to 368.6 million pounds from 347.8 million pounds a year earlier.
On a segmental basis, regulated revenue increased 6% year-over-year to 756.9 million pounds, mainly on allowed price increase of 7.8%, including inflation, partially offset by lower water demand. Regulated operating profit also rose 7% to 347 million pounds.
Non-regulated revenue slightly declined to 447.3 million pounds from 454.3 million pounds in the previous year, while operating profit climbed 21% from last year to 26 million pounds, mainly reflecting the planned increase in activity on the Scottish Water contract and an increase in contribution from the company's international operations.
Further, United Utilities said its Board has declared an interim dividend of 10.64 pence, a reduction of 30% from prior year's 15.20, in light of the revised composition of the group following the sale of United Utilities Electricity and the 1.5 billion pounds return to shareholders. The dividend will be paid on February 4, 2009 to shareholders of record on December 19, 2008.
Looking ahead, United Utilities expects to continue to deliver a good underlying financial performance over the rest of fiscal 2009. The company added that it continues to benefit from a robust financing position and has headroom to cover its projected financing needs into 2010, following the return of 1.5 billion pounds to shareholders in August.
"We also remain on track to meet or outperform our medium term target of a 50% reduction in the number of serious pollution incidents for the third consecutive year," the company said.
The company also said it would submit final business plan to Ofwat in April 2009. United Utilities Water submitted its draft business plan to Ofwat in August 2008, which covers the 2010-15 period and forms part of the 2009 water price review process. According to the company, the proposed 4 billion pounds capital investment program aims to safeguard standards of service, and make provision for the challenge of climate change. The company also said it expects significant levels of capital investment to continue beyond 2010.
United Utilities proposes an average annual real price increase of 2.7% across the 2010-15 period to deliver the plan, however, average household bills are expected to increase by just over 2% in real terms on average each year.
UU.L is currently 619.50 pence, down 24.50 pence or 3.80%, on a volume of 1 million shares.
UUGRY.PK closed its trading on Tuesday at $19.46.
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