Severn Trent on track after good first half

Severn Trent reported continued strong performance in its half-year results on Thursday, with group turnover rising 3.6% or £30.5m to £881.5m in the six months ended 30 September.

The FTSE 100 water company said its group underlying profit before interest and tax was £12.4m, or 4.3%, to £299.1m, while group reported profit before interest and tax improved 1.4% ot £4.1m to £299.1m.

It said it saw a reduction in its effective interest rate by 70 basis points, driving underlying basic earnings per share of 76.2p - an increase of 16.3%.

Basic earnings per share from continuing operations rose 12.2% to 69.8p, with the board declaring an interim dividend of 37.35p, up 7.9%.

On the operational front, Severn Trent noted it was in the upper quartile position in the UK Customer Service Index for utility companies.

It said its outcome delivery incentives (ODI) were in line with expectations, with the company maintaining a “sector leading” AMP6 ODI performance of £150m to date.

The board also said it maintained its lead in waste performance, by employing greater use of data and technology to optimise our network.

It also saw continued progress on its water performance, reporting that it was delivering on its catchment management customer ODI, and forecasting a further 6% reduction in the number of water quality complaints.

Increased water production was seen during the hot, dry summer, to meet a 22% increase in customer demand.

Looking ahead, Severn Trent said it submitted a “high quality” AMP7 business plan, which would deliver 13% total expenditure efficiency, upper quartile financing and ambitious performance targets, while maintaining the lowest bills in England and Wales for another five years.

It reported “excellent progress” on its capital programme, with capital expenditure of £340m in the first six months of the year, remaining on track for more than £650m by the end of the year.

Severn Trent had locked in around 95% of £870m total expenditure efficiencies, with a £100m reinvestment on track to set the company up for a “fast start” in AMP7.

It was also investing in renewable energy, with its acquisition of Agrivert food waste plants adding an additional 106 GWh per annum to its existing portfolio.

“Our job is to deliver for all of our stakeholders - our customers, colleagues and investors - and by that we don't just mean delivering high quality waste and water services,” said chief executive officer Liv Garfield.

“We want to make a fundamental difference in society and in the communities we serve.

“As such, we're delighted to be one of a handful of companies, and the only utility, to be acknowledged as a ‘Pathfinder Company’ by the Purposeful Company organisation and we look forward to developing our approach to this further in the future.”

Garfield said she was “pleased” to be sharing a “good set” of financial and operational results in what had been a busy first half of the year.

“The performance culture we have embedded into the organisation continues to deliver strong performance for our customers, also providing a great platform as we head into AMP7.

“As we plan and invest for the future, we are on track for our biggest year of capital spend in a decade, with more than £300m invested in the first six months to improve performance for our customers today and for generations to come.

“Building a lasting legacy is a key priority for us and we believe our PR19 plans will deliver what our customers have asked for, while maintaining the right balance of affordability and future investment.”