Are Utilities Worth a Second Look?

Utilities have produced a zero return over the past five years, but Premier Asset Management investment manager James Smith says the worst may be over for the sector

Premier Asset Management 22 July, 2019 | 10:20AM

Electricity grid

News flow on utilities has been almost unremittingly bad in recent years. The sector has been hit by a multitude of problems including tougher regulation of regulated networks, increased competition and lower margins in retail supply, the collapse of profits in thermal generation, and to top it all, the threat of nationalisation. Many investors have folded, and who can blame them? 

So it should come as no surprise to learn that the UK utilities sector has lagged wider markets. In fact, over the five years to the end of June 2019, the FTSE All-Share Utilities Index has produced a total return of about zero, with any dividends paid being offset by falling share prices. Over the same period the FTSE All-Share Index has returned 36%, and the FTSE All-World Index has produced 87% (although the latter has had the benefit of a fall in sterling). 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Bluefield Solar Income Fund137.00 GBX1.48
Centrica PLC72.12 GBX-5.73
Ceres Power Holdings PLC387.00 GBX-5.15
Gore Street Energy Storage Fund Ord96.25 GBX0.26
Gresham House PLC582.50 GBX-3.72
ITM Power PLC99.60 GBX-2.35
JLEN Environmental Assets Group Ord115.00 GBX-0.86
National Grid PLC982.80 GBX-5.48
Severn Trent PLC2,465.00 GBX-3.75
SIMEC Atlantis Energy Ltd10.50 GBX-6.67
SSE PLC1,529.00 GBX-2.64
United Utilities Group PLC944.20 GBX-3.30

About Author

Premier Asset Management  is a private investment management company

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