HY23/24: bills follow in the path of inflation

United Utilities met consensus expectations with positive results for the H1 23/24. The rise in revenue and underlying EBIT was primarily driven by an uptick in regulatory revenue linked to inflation. Nevertheless, rising costs due to inflation put pressure on the margin, causing a year-on-year decline of 50 basis points. Moving ahead, the company reaffirmed its guidance and unveiled an ambitious new business plan spanning from 2025 to 2030.

Cloudy wastewater

Thames Water, the largest water company in the UK, is facing serious financial issues. It requires a capital injection to alleviate its substantial £14bn debt. The UK government is considering nationalising the company in the event of failure. This situation triggers an alarm for this highly-leveraged sector.

Hardman & Co Insight: UK Water – Making Waves

Over the past year, UK utility share prices have been volatile, especially within the electricity sub-sector. The combination of the war in Ukraine and the associated impact of fluctuating gas prices, along with sharply higher inflation and the consequential rise in interest rates, have destabilised much of the sector. Indeed, most sector constituents have seen their share pieces fall (although not seriously), while Centrica, the UK’s leading gas company, has bucked the trend, with a near 50% ri

The Hardman & Co Monthly: June 2023

Feature article: UK Water – making waves Over the past year, UK utility share prices have been volatile, especially within the electricity sub-sector. The combination of the war in Ukraine and the associated impact of fluctuating gas prices, along with sharply higher inflation and the consequential rise in interest rates, have destabilised much of the sector. Indeed, most sector constituents have seen their share pieces fall (although not seriously), while Centrica, the UK’s leading gas company

FY22/23: cost inflation weighs on the margin

United Utilities reported weak results for FY22/23, which were in line with the consensus expectations. The decline in revenue and EBIT was a result of lower-than-expected consumption and increased inflationary pressure on core costs. Looking ahead to FY23/24, the company anticipates an increase in regulatory revenue due to the inflation linkage. Additionally, United Utilities has announced a capex range of £720m to £800m to address additional investments.

HY22/23: Rising costs from inflationary environment

United Utilities reported lower HY22/23 results yoy with EPS above the previous level. To contend with the inflationary environment, UU relies on regulatory mechanisms, effective cost management and hedging strategies to the mitigate rising costs. The short-term outlook seems to be negative but investment to support the environmental targets will enable the company to achieve stronger RAB growth in AMP8.

FY21/22: headwind from cost pressure next year

United Utilities reported FY21/22 results with EPS above consensus and a £50m increment in the ODI guidance but has warned the market that, in FY22/23, it will see significant headwinds from cost pressures and higher financial costs. In addition, the company has announced a further £400m totex overrun in AMP7, which will be partly funded by equity, leading to EPS dilution.

H1 20/21: reported profit up yoy due to non-operational reasons

United Utilities posted its H1 20/21 (closing in March) result with revenues down by 4.3% due to the new pricing regime and the pandemic, with an underlying operating profit decline (-18%). Net profit, however, was supported by lower net financial expenses and the underlying movement in the share of joint-ventures. For FY 20/21, the company expects revenue to be £1.75-1.8bn vs £1.86bn recorded last year. Additionally, it expects an ODI reward of around £10m.

FY19/20: impacted by one-offs; future dividends under review

United Utilities reported FY19/20 results with underlying figures in line with our assumptions but the reported figures much lower due to one-offs. It exited the 2015-20 regulated period with totex outperformance of £100m and ODI outperformance of £44m. The company will pay its FY19/20 dividends but is reviewing the dividend payment for AMP7. We will be adjusting our model to account for AMP7.

H1 19/20: continued operational strength

United Utilities posted a satisfactory H1 19/20 (closing in March), with solid underlying operating profit growth (+6.5%). The company has been continuously improving operationally, earning top marks from the regulator and making it eligible to receive regulatory incentives, which UU estimates will reach £50m over the 2015-20 period.

FY18/19: a positive year in preparation for AMP7

United Utilities posted a positive set of results for its FY18/19 closing in March. UU delivered in revenues and underlying EBIT and surprised on underlying net profit, which came in 6% above consensus estimates, and reported net profit +6% above our own estimates. After achieving ‘fast-track’ status from the regulator for its 2020-25 business plan, UU is now ready to ramp up investments in preparation for AMP7, the next regulatory period.

Rather solid H1 18/19 results

United Utilities released its H1 18/19 results for the fiscal year ending next March. Revenues reached £916.4m (+4.6%), reported operating profit £339.1m (-0.8%), underlying operating profit £367.8m (+6.9%), underlying net profit £196.9m (+22.9%) and net reported £212.5m (+7.6%). At 30 September 2018, RCV gearing stood at 60%, in line with last year’s (61%) and within the guided 55-65% range, and the RCV stood at £11.5bn (£11.2bn last year). Net debt (including derivatives) stood at £6,914m, (v

PR19 business plan's first presentation

UU released and briefly commented yesterday on its PR19 business plan covering the 2020-25 period, which will be further detailed on 27 September at an analysts meeting/conference.

FY17/18: in line, nothing exciting though

United Utilities have released their FY17/18 results (closing March). Revenues reached £1,735.8m (+1.9%), reported operating profit £636.4m (+5.1%), underlying operating profit £645.1m (+3.6%), underlying net profit £304.9m (-2.7%) and net reported £354.6m (-18.2%). The dividend proposed for FY17/18 will be 39.73p (+2.2%). At 31 March 2017, RCV gearing stood at 61% in line with last year and within the guided 55%-65% range, and the RCV stood at £11,2bn (£10.7bn last year). Net debt (including d

Solid H1 17/18 results ahead of 2020-25 price review

United Utilities reported a solid set of first half results. Key highlights Revenue up 2.7%, at £876m Underlying operating profit up 10%, at £344m Underlying net profit up 5.7% at £160.1m RCV gearing in line at 61% Interim dividend up 2.2%, at 13.24p Management confirmed the ODI’s outcome guidance for the current regulatory period of between a £30m reward and a £50m penalty.

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Q1 Operating Results

Another Good Year of Diversified Growth with More to Come in 2024 CCapital have released their Q1 operating results. Overall, revenue has come in slightly lower than expected at $80.2m vs TamE of $85.9m but is largely tracking in line with our FY24 annual estimate and we note the company has maintained guidance. Drilling revenue for this quarter was impacted by a fall in utilisaztion rates as well as general remobilisation geographically but we expect a strong recovery throughout the year as k

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Morning Note – 16 April 2024

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

discoverIE - Back to organic growth

discoverIE’s March year-end update confirms a strong operational performance in challenging markets. Following two years when sales increased by +48%, FY 2024 Group sales were +1% ahead of 2023 at CER (reported -3%) driven by a +2% contribution from acquisitions and organic -1%. As expected, organic growth returned in the later part of the year (Q4 +2%, +11% sequentially) and the order book has reverted to normalised levels of c.4.5 months’ sales, which – combined with a continuing strong pipeli

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

Clean and competitive fertiliser