Severn Trent in line to meet FY targets as investment pays dividends

MIDLAND utility Severn Trent has said it remains on track to deliver financial results in line with full year expectations after seeing group turnover increase for the first six months of the year compared with 2011.

The company said that its optimism had been raised due to a £150m investment programme already delivering improvements to its operations. Performance has also been boosted by reduced leakage and pollution incidents.

Group turnover was £917.7m (2011: £886m), an increase of 3.6% over the same period last year.  Underlying pre-tax profit was 2.6% lower than last year at £267.2m (2011: £274.3m).  

Turnover in Severn Trent Water increased by 3.5% to £761m. Sales prices increased by 5.2% (in line with inflation) from April 1, 2012 which was offset by lower consumption during the wet summer period.

Underlying pre-tax profit was down by 1.4% on the same period last year, to £269.1m.  Direct operating costs increased by £9.1m and there was an increase in infrastructure renewals expenditure of £11.3m and depreciation increased by £9.4m.

Tony Wray, Severn Trent chief executive, said: “We have delivered again on our commitments to our stakeholders, we are on track with our £150m additional investment programme announced in May, delivering operational improvements in the areas we targeted for this year, improving our service to customers and producing sustainable, progressive returns for shareholders.”

He said while profit levels were down this was reflected by the increased levels of investment.

“In the first half Severn Trent Water invested £239m and the benefits of this investment are evident in our operational improvements, with leakage and pollution incidents decreasing while customer satisfaction, as measured by the SIM (Service Incentive Mechanism), is improving.

“In our non-regulated business we are encouraged by the initial performance of our new business Severn Trent Costain, as well as the improvement in our existing Products business,” he added.

Mr Wray said that on the regulatory front, the company remained in favour of broader reforms for the water industry and had made some constructive suggestions to overcome concerns regarding Ofwat’s proposed changes to licences. This was in order to reduce uncertainty for the benefit of all stakeholders, he added.

“We will continue to promote constructive debate on what the future regulatory framework should look like,” he said.