Severn Trent posts promising start to AMP6

Water utility Severn Trent issued what it described as promising annual results on Tuesday, with group turnover down 0.8% year-on-year to £1.79bn as a result of a regulated price decrease.

The FTSE 100 firm’s group underlying profit before interest and tax was down 3.2% in the 12 months to 31 March, to £523m, with group reported PBIT up 0.4% to £524m.

Its board reported a return on regulatory equity of 8.4%, and underlying basic earnings per share of 108.7p.

Severn Trent’s board declared a final dividend of 48.4p, in line with its dividend policy, taking the full-year dividend to 80.66p.

The year also marked the start of Asset Management Programme 6 (AMP6), in which Severn Trent said it was now forecasting £670m of totex efficiencies, equating to a £260m outperformance in the five years to 2020.

“Putting our customers at the heart of our business has led to a promising start to the current regulatory period,” said chief executive Liv Garfield.

“We continue to drive down costs and have the lowest combined bills in Britain, with our customers paying on average less than a pound a day for their water and wastewater services.

“Further efficiencies are also allowing us to invest even more for the long-term benefit of our customers and shareholders,” Garfield explained.

During the year, Severn Trent said it doubled the number of vulnerable customers supported with complaints down 28%, while it promised to maintain the lowest combined average bills in Britain at £329 in the current year.

It received a net reward of £23.2m from its Outcome Delivery Incentives, and had wholesale totex of £1.02bn during the 2015-2016 year, £38m lower than its final determination.

The company claimed it was now generating the equivalent of 33% of its energy needs through its renewables programme, and is on track for 50% by 2020.

Severn Trent’s effective interest rate was reduced by 90 basis points to 4.5% over the 12 months.

“Our performance continues to improve with customer complaints down 28% year-on-year,” Garfield said.

We still lead the sector on wastewater and have made strong progress in areas such as internal sewer flooding that is down 31%.

Garfield said these achievements were a credit to her colleagues, who have embraced the board’s customer-focused culture.

“There remains more to do to ensure that we are consistently achieving a great customer service every day, and I am confident that we have the momentum and plans in place to achieve this.”