Just a year into the AMP6 regulatory period and Severn Trent (SVT) is progressing well towards its target to deliver total efficiencies of £670m by the end of 2020. At the end of March, the group had already secured £490m in efficiencies. During the six months to the end of September, the water utility locked in a further £50m, much of which was as a result of working with its supply chain, including standardising products and consolidating suppliers.
Operational improvements also included reducing external sewer flooding by 9 per cent and continuing work on the Birmingham Resilience programme - its largest ever capital project - providing better maintenance access to the city's waterways. Bad debts and net labour costs also came down. Higher regulatory tariffs allowed the core regulated water and waste water business to increase revenue slightly to £765m. Renewable power generation was also up to 35 per cent of the group's total needs, from 32 per cent the same time last year.
Management took advantage of low interest rates by switching some of its fixed rate debt to floating rate, reducing the group's effective interest rate by 40 basis points to 4.2 per cent and its finance costs. Carrying out a pension increase exchange exercise with its defined benefit pension scheme also resulted in a net exceptional gain of £21m.
Analysts at house broker Deutsche Bank expect adjusted pre-tax profit of £304m and EPS of 102.4p for the 12 months to March 2017, down from £322m and 107.4p the previous year.
SEVERN TRENT (SVT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,209p | MARKET VALUE: | £5.21bn | |
| TOUCH: | 2,206-2,209p | 12-MONTH HIGH: | 2,526p | LOW: 2,024p |
| DIVIDEND YIELD: | 3.7% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 323p | NET DEBT: | £4.7bn | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 879 | 175 | 56.9 | 32.26 |
| 2016 | 906 | 185 | 79.5 | 32.6 |
| % change | +3 | +6 | +40 | +1 |
Ex-div: 1 Dec Payment: 6 Jan | ||||
