With the reduction in regulated prices well flagged, the decrease in Severn Trent 's (SVT) turnover last year is unsurprising. The good news for investors is the progress management has made in delivering efficiencies in line with its business plan for the current regulatory period, which runs from 2015 to 2020.
IC TIP:
Hold
at
2284p
Regulator Ofwat's outcome delivery incentives (ODI) model entices companies to outperform the allowed regulatory return via penalties and rewards. Severn Trent generated £23m in real rewards through measures including tighter cost control and reducing leakages, pollution and flooding. This is ahead of the £15m indicated in the group's February trading update.