Shareholders will be keen to see if Severn Trent is turning on the investment taps
The business has avoided some of the worst fallout from a recent review by Ofwat, as the whole sector has come under fire for the condition of some of Britain’s rivers.
Earlier this month, Ofwat said that it would force water companies to collectively pay a net £70m to customers for failing to meet their performance targets.
However, Severn Trent was told it could charge customers more because its performance had improved.
The company’s 4.6m customers will now see their bills go up by a combined £89m as a result, Ofwat said. It made the company by far the biggest winner from the review.
Seven of its rivals were told they needed to slash bills due to failings. Thames Water will return £74m, Ofwat said.
But Russ Mould and Danni Hewson, analysts at AJ Bell, said that shareholders will have other concerns on Wednesday when the company reports its first half results.
“A bigger cloud, as far as Severn Trent’s share price is concerned, may have been interest rate increases from the Bank of England,” they said.
Shares in the water giant have fluctuated a little over recent years, but are fairly unchanged compared with a year ago and only around 4 per cent lower compared with this point in 2021.
Analysts are expecting the company’s pre-tax profit to reach £238m in the year to the end of March 2024, an increase of around 42 per cent on last year. Its pre-tax profit was £105m in the first half of the last financial year.
“A further big number to note is capital expenditure,” Mr Mould and Ms Hewson said, as the company has one eye on the new asset management plan (AMP) period, which sets what water companies can charge customers.