A worry surrounding water companies is a likely rise in their bad debts. Happily for Severn Trent, in the first three months the 2010-11 financial year the utility has contained the level at 2.5 per cent of turnover, while consumption has remained "relatively stable".
IC TIP:
Buy
at
1284p
On the downside, the group says that operating costs are expected to rise due to the impact of higher inflation and power costs, but these will be partially offset by efficiency savings. Higher average debt levels, coupled with inflation on indexed-linked debt, are likely to lead to a £15m increase in the group's interest charge.
What we said: Buy
When 4/09/09
Price: 962p
Performance to date: +33%
