Water giant Severn Trent’s (SVT) half-year numbers look flat on the prior period due to lower gains from a pension increase exchange exercise. This offered members of its defined benefit pension schemes a higher payment upfront in exchange for reduced future increases, reducing the liability and adding £8.3m to the income statement for the six months to September 2017, compared with £21m in the previous year. On an underlying basis, progress was more apparent, with pre-tax profit up 4.4 per cent to £288m, thanks in part to a contribution from Dee Valley, a water company bought by the group in February.
The group is looking to generate additional returns by selling off surplus land assets. Management said improvements in anaerobic digestion processes used for extracting energy from waste were reducing the need for land. Sales are expected to generate an additional £5m-£15m in profit before interest and tax each year for the next 10 years, so leading to around £100m in extra returns.
The group has been investing heavily to improve its customer outcome delivery incentives and now expects outperformance payments of at least £50m for the year to March 2018. It now boasts the lowest average bills for combined water and sewerage in Britain and reduced the number of internal and external flooding incidents by 38 per cent and 50 per cent, respectively. Analysts at RBC Capital Markets are forecasting pre-tax profit of £329m, giving EPS of 121.7p for the year to March 2018.
| SEVERN TRENT (SVT) | ||||
| ORD PRICE: | 2,125p | MARKET VALUE: | £5.02bn | |
| TOUCH: | 2,125-2,126p | 12-MONTH HIGH: | 2,575p | LOW: 2,047p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 409p | NET DEBT: | £5.09bn | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 820 | 182 | 78.4 | 32.60 |
| 2017 | 850 | 182 | 62.6 | 34.63 |
| % change | +4 | +0 | -20 | +6 |
| Ex-div: | 30 Nov | |||
| Payment: | 05 Jan | |||
