Severn Trent sees water consumption tumble by 3 per cent

Water firm Severn Trent said trading is on target for the year although businesses are using less water.

Severn, which serves eight million customers from the Bristol Channel to the Humber, reported a three per cent fall in water consumption in the six months to September 30.

The group said total revenue and operating expenditure for the full year should be in line with current market expectations.

However, operating costs are expected to rise year on year as a result of the impact of inflation, a full year of operating private drains and sewer assets, and increases in quasi taxes, which have been offset by efficiency improvements.

Severn is forecasting a bad debt level of around 2.2 per cent of turnover for the full year.

It said it is monitoring future developments closely, especially unemployment levels and changes to the UK benefits system

Expectations for net capital expenditure will be towards the low end of the £555m to £565m range that was previously given.

This includes an estimated £10m related to private drains and sewers.

Spending on infrastructure is expected to cost between £140m and £150m.

Last month it said it had accepted the Section 13 Notice issued by Ofwat in December, setting out proposed changes to its licence.

Severn Trent Services’ Water Purification and Operating Services business is expected to deliver mid-single digit revenue growth for the full year.

Profits will take a hit from investment in Operating Services, which will offset the underlying growth in the business. In January, the group raised £500m from a 13-year bond issue, which was five and a half times subscribed and is the largest sterling bond that Severn Trent has issued.

The company will announce its preliminary results for the year to March 31 on May 30.

Last week, the group said it had sold its laboratories business in a deal triggered by competition concerns over the water company’s ownership.

The business, which provides analysis and sampling services to the water, construction and waste industries, has been bought by Australia’s ALS.

Severn Trent Analytical Services, which has offices in Wakefield, Coventry and Runcorn, is one of three divisions within Severn Trent’s non-regulated services arm.

Last summer, the company offered to sell the laboratories division in response to a complaint to water regulator Ofwat about the structural links between the water business and Severn Trent Analytical Services.