Seven Trent on target for full year but commercial consumption dips
MIDLANDS utility Severn Trent has said it has performed to expectations and its outlook for the full year remains unchanged despite a slowdown in commercial consumption.
The Coventry-based group said in an update covering the period from November last year that total revenue for the full year should be in line with current market forecasts, as should operating expenditure.
However, it has warned that that operating costs are expected to rise year on year, due to the impact of inflation, a full year of operating private drains and sewer assets, and increases in quasi taxes, offset by efficiency improvements.
“We continue to forecast a bad debt level around 2.2% of turnover for the full year, although we continue to monitor future developments closely, especially unemployment levels and changes to the UK benefits system,” it said.
Net capital expenditure is predicted to be at the low end of the £555m to £565m range. The figure includes an estimated £10m related to private drains and sewers. The level of net infrastructure renewals expenditure included in this range is anticipated to be between £140m and £150m.
It said as previously guided, on a like for like basis, Severn Trent Services’ ongoing business (Water Purification and Operating Services) is expected to deliver mid single digit revenue growth for the full year.
The group’s interest charge is now expected to be broadly flat year on year, before adjustments related to pension accounting. The non-cash interest charge will be higher than previously forecast as RPI out-turned higher than expected in December but remains lower year on year.
This reduction in the non-cash charge will now be fully offset by a higher cash interest cost due to a higher level of net debt over the year and the cost of carrying over the recent successful bond issue.
In January the group raised £500m from a 13-year bond issue, at a coupon of 3.625%, which was five and a half times subscribed and is the largest sterling bond that Severn Trent has issued.
The expected effective current tax rate for the group for 2012/13 remains at 24% to 26%.
Earlier this month the group announced the sale of its Severn Trent Analytical Services (also known as Severn Trent Laboratories) to ALS Ltd in an undisclosed deal.
Severn Trent will announce its preliminary full-year results on May 30.
