Severn Trent see strong current earnings as FY profits fall

UK water supplier Severn Trent guided for strong current year earnings, as it posted a fall in annual profits due to higher energy costs

The group on Wednesday reported a 38.7% fall in pre-tax profit to £168m for the year to March 31. Water companies have come under fire over their dumping of raw sewage in Britain’s seas and rivers while paying massive dividends to shareholders.

An investigation by the Guardian newspaper found that firms owned by private equity concerns had been borrowing to pay dividends rather than invest in infrastructure and passing on costs of investment to customers.

Severn Trent said it was set for capital investment of £850m – 1bn for the current year.

"We are expecting the biggest investment period the sector has ever seen, with a focus on water resources, improving environmental standards and on Net Zero," said chief executive Liv Garfield.

"We anticipate strong earnings per share growth in 2023/24 as a result of a 15-20% reduction in interest charge. We expect a further step up in 2024/25 as lower energy costs and inflation-linked tariff increases flow through to operational earnings."

Reporting by Frank Prenesti for Sharecast.com