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UPDATE 2-Utd Utilities profit slips, confident as CEO exits

Published 11/24/2010, 05:30 AM
Updated 11/24/2010, 05:48 AM

* H1 underlying profits fall 24 pct to 196.2 mln sterling

* Confident of delivering on goals for 2015

* Interim dividend of 10 pence per share, in line

* Departing CEO doesn't anticipate change in strategy

* Shares edge up 0.2 percent (Adds details, share reaction, analyst comment)

By Una Galani

LONDON, NOV 24 (Reuters) - United Utilities posted a 24 percent fall in profits after regulators ordered the UK's largest listed water company to cut prices.

The group said it is confident of outperforming its goals for 2015 two days after naming a new chief executive.

Industry regulator Ofwat forced the group in April to cut prices as part of a sector review, hitting profit. United Utilities also had to absorb increased costs related to its inflation-linked bonds, the company said on Wednesday.

"I'm not against change but I am against radical change on a model that makes sense," outgoing boss Philip Green told journalists on a conference call when asked about the ongoing government review of the heavily regulated industry.

Green, who has led the group since 2006, added that he did not anticipate any significant shift in strategy under his successor, Steve Mogford, a former chief operating officer of BAE Systems who will formally take the reins in March.

Under Green, United Utilities sold most of the non-regulated assets it acquired after being privatised, leaving the business focused on its core water and wastewater activities.

It set an interim dividend of 10 pence per share despite a fall in underlying profit before tax to 196.2 million pounds ($310.3 million) from a restated 258.2 million in the year-earlier half.

This compared favourably to an estimate of 173 million pounds from Deutsche Bank.

"The result was 14 percent above my consensus. The important thing is that the financing charge of the coventional debt was lower than previously disclosed. I am raising my price target by 12 pence," Evolution Securities analyst Lakis Athanasiou said.

Following the disposals, the group looks the least expensive of the UK water stocks, trading on a 9 percent premium to its regulated asset base compared to the sector average of 12 percent, according to Deutsche Bank.

United Utilities shares edged up 0.2 percent to 618.5 pence at 1023 GMT, roughly in line with the STOXX Europe 600 Utilities Index. Prior to the results, United Utilities' shares had risen 10 percent since April.

That compares to a 17 percent rise for rival Severn Trent which on Tuesday cut its dividend as it reported a fall in first-half profits.

The utilities index has fallen 7 percent over the same period. (Reporting by Una Galani; Editing by Mark Potter and Michael Shields)

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