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Severn Trent profits beat forecasts
UTILITY giant Severn Trent today posted forecast-beating first half profits as it kept a tight rein on bad debts and made cost savings across the business.
The firm posted underlying pre-tax profits of 188m for the six months to September 30, 22 per cent ahead of last year and beating City hopes of 180m.
Severn said it had "worked hard" to hold bad debt levels at 2.3 per cent of turnover and said it was on track to deliver an extra 5m of cost savings for this year announced in May.
The company serves a population of more than eight million people from the Bristol Channel to the Humber and from mid-Wales to the East Midlands.
Households and businesses are being hit by the recession, which is impacting water usage.
Severn saw an 8.8m fall in revenues from its metered customers on a year earlier, but the group added this trend was beginning to stabilise.
The group has also improved its debt collection performance amid rising numbers of struggling customers, which is helping offset the fall in water usage.
Turnover from the water business overall was up 4 per cent at 695.3m due to price increases from last April.
Profits were also helped by lower financing costs on debt linked to Retail Price Index inflation, which has been negative for most of the year, although energy costs rose by 2.1m.
Chairman Sir John Egan said the group had "remained focused on delivering further improvements in efficiency, processes and standards, as well as successfully managing impacts from the economic environment, such as bad debts and consumption level".
The biggest challenge ahead for the firm - and the entire water industry - is the final decision on prices for the 2010-15 period due from water regulator Ofwat on Thursday.
Severn put in for price increases but has been asked by the regulator to cut household bills by 8% in real terms over the five-year period.
The group said it had "fully engaged" with Ofwat over the price review, although full-year results would depend on getting an "acceptable" settlement.
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Saturday 11 February 2012
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