United Utilities Group reports 18.3% Net Income decline in 2018 while 1.4 pp EBITDA Margin growth from 56.9% to 58.4%
24 May 2018 • About United Utilities Group (
$UU.) • By InTwits
United Utilities Group reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- United Utilities Group has high CAPEX intensity: 5 year average CAPEX/Revenue was 38.8%. At the same time it's a lot of higher than industry average of 20.9%.
- CAPEX is quite volatile: ₹29m in FY2018, ₹60m in FY2017, ₹30m in FY2016, ₹63m in FY2015, ₹37m in FY2014
- The company has potentially unprofitable business model: ROIC is 5.5%
- It operates with high leverage: Net Debt/EBITDA is 7.3x while industry average is 3.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased slightly on 1.9%. During the last 5 years Revenue growth bottomed in FY2017 at -1.5%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.4 pp from 24.6% to 26.0% in 2018.
Net Income margin decreased on 5.0 pp from 25.5% to 20.4% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 40.2% in FY2018. The company's CAPEX/Revenue increased slightly on 1.5 pp from 38.7% in FY2015 to 40.2% in FY2018. For the last three years the average CAPEX/Revenue was 38.8%. The company maintained rich investment policy and has spent a big chunk of EBITDA (68.9%) to CAPEX. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2016 at 36.7% and was growing since that time.
Return on investment
The company operates at good ROE (12.3%) while ROIC is low (5.5%). ROIC showed almost no change in FY2018. ROE decreased on 3.4 pp from 15.7% to 12.3% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 7.3x and Debt / EBITDA is 7.8x. Net Debt / EBITDA decreased on 0.049x from 7.4x to 7.3x in FY2018. Debt increased on 7.1% while cash jumped on 106%. Net Debt/EBITDA followed a growing trend at 0.3x per annum in the last 5 years.
United Utilities Group has short term refinancing risk: cash is only 60.8% of short term debt.
Financial and operational results
FY ended 31 Mar 2018
United Utilities Group ($UU.) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,689 | 1,720 | 1,730 | 1,704 | 1,736 | 1.9% |
| EBITDA | 967 | 1,006 | 932 | 970 | 1,013 | 4.4% |
| Net Income | 739 | 271 | 398 | 434 | 355 | -18.3% |
Balance Sheet
|
|---|
| Cash | 116 | 244 | 214 | 248 | 510 | 105.8% |
| Short Term Debt | 112 | 578 | 469 | 326 | 840 | 157.4% |
| Long Term Debt | 5,929 | 6,067 | 6,509 | 7,058 | 7,073 | 0.2% |
Cash flow
|
|---|
| Capex | 662 | 666 | 634 | 672 | 699 | 3.9% |
Ratios
|
|---|
| Revenue growth | 3.2% | 1.9% | 0.6% | -1.5% | 1.9% | |
| EBITDA growth | 3.9% | 4.0% | -7.4% | 4.2% | 4.4% | |
|
|---|
| EBITDA Margin | 57.3% | 58.5% | 53.8% | 56.9% | 58.4% | 1.4% |
| Net Income Margin | 43.8% | 15.8% | 23.0% | 25.5% | 20.4% | -5.0% |
| CAPEX, % of revenue | 39.2% | 38.7% | 36.7% | 39.5% | 40.2% | 0.8% |
|
|---|
| ROIC | 6.8% | 6.7% | 5.4% | 5.5% | 5.5% | -0.0% |
| ROE | 36.2% | 11.7% | 15.5% | 15.7% | 12.3% | -3.4% |
| Net Debt/EBITDA | 6.1x | 6.4x | 7.3x | 7.4x | 7.3x | -0.0x |
Peers in Gas, Water & Multiutilities
Below we provide United Utilities Group benchmarking against other companies in Gas, Water & Multiutilities industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Dee Valley Group ($DVW) | 4.3% | 3.4% | -5.9% | 16.2% | |
| National Grid ($NG.) | | 2.6% | -13.1% | 13.8% | 1.4% |
| Inter RAO JSC ($IRAO) | 11.9% | 12.3% | 4.4% | 5.6% | |
| Centrica ($CNA) | 10.7% | -4.9% | -3.1% | 3.4% | |
| |
|---|
| Median (4 companies) | 10.7% | 3.0% | -4.5% | 9.7% | 1.4% |
|---|
| United Utilities Group ($UU.) | | 1.9% | 0.6% | -1.5% | 1.9% |
Top companies by Gross margin, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Centrica ($CNA) | 11.0% | 15.6% | 20.1% | 14.9% | |
| |
|---|
| Median (1 company) | 54.0% | 56.2% | 58.3% | 14.9% | |
|---|
Top companies by EBITDA margin, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Dee Valley Group ($DVW) | 50.5% | 49.2% | 49.1% | 31.8% | |
| National Grid ($NG.) | 34.8% | 34.7% | 34.3% | 31.2% | 32.9% |
| Inter RAO JSC ($IRAO) | 5.6% | 5.9% | 11.5% | 8.4% | |
| Centrica ($CNA) | 6.1% | 1.9% | 13.3% | 8.0% | |
| |
|---|
| Median (4 companies) | 20.5% | 20.3% | 23.8% | 19.8% | 32.9% |
|---|
| United Utilities Group ($UU.) | 57.3% | 58.5% | 53.8% | 56.9% | 58.4% |
Top companies by CAPEX/Revenue, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Dee Valley Group ($DVW) | 28.1% | 27.3% | 24.3% | 33.3% | |
| National Grid ($NG.) | 19.9% | 20.2% | 21.6% | 21.9% | 24.5% |
| Inter RAO JSC ($IRAO) | 4.9% | 3.5% | 4.0% | 3.4% | |
| Centrica ($CNA) | 5.0% | 3.5% | 3.1% | 3.1% | |
| |
|---|
| Median (4 companies) | 12.4% | 11.9% | 12.8% | 12.7% | 24.5% |
|---|
| United Utilities Group ($UU.) | 39.2% | 38.7% | 36.7% | 39.5% | 40.2% |
Top companies by ROIC, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Inter RAO JSC ($IRAO) | 4.4% | 5.5% | 17.3% | 11.8% | |
| National Grid ($NG.) | 8.9% | 9.0% | 7.3% | 6.4% | 6.8% |
| Centrica ($CNA) | -11.1% | -11.7% | 28.5% | 4.9% | |
| Dee Valley Group ($DVW) | 7.5% | 7.4% | 6.4% | 3.4% | |
| |
|---|
| Median (4 companies) | 5.9% | 6.4% | 12.3% | 5.7% | 6.8% |
|---|
| United Utilities Group ($UU.) | 6.8% | 6.7% | 5.4% | 5.5% | 5.5% |
Top companies by Net Debt / EBITDA
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Dee Valley Group ($DVW) | 4.2x | 4.2x | 4.4x | 6.5x | |
| National Grid ($NG.) | 5.0x | 4.9x | 6.2x | 5.9x | 5.2x |
| Centrica ($CNA) | 3.5x | 10.1x | 1.2x | 1.5x | |
| Inter RAO JSC ($IRAO) | 0.7x | 0.2x | -0.8x | -1.6x | |
| |
|---|
| Median (4 companies) | 3.8x | 4.5x | 2.8x | 3.7x | 5.2x |
|---|
| United Utilities Group ($UU.) | 6.1x | 6.4x | 7.3x | 7.4x | 7.3x |
