It can be a little jarring to see a water utility company talking about creating an “awesome” place to work as a strategic priority in its financial results. However, as the end of the current regulatory period draws near, Severn Trent (SVT) and its peers are working hard to push the stakeholder angle, to counter the narrative of unbridled profit-seeking advanced by the Labour Party.
Odd as it may seem, these non-financial actions may prove ultimately more material than per share earnings figures – up 16.3 per cent to 76.2p on an adjusted basis – as water regulator Ofwat goes through its assessments of the group’s business plan. The regulator publishes its first determinations in January and, if approved, Seven Trent’s ambitious plan should work for both customers and shareholders, with a proposed base regulatory dividend of 5 per cent per year between 2020 and 2025, before including any rewards for outperformance or penalties.
In the meantime, the group appears to be satisfying its statutory responsibilities. Regulatory outperformance payments are expected to be £150m, in line with forecasts and the largest in the sector. Efficiency improvements are on track, too, with 95 per cent of the group’s £870m target locked in.
Analysts at RBC Capital Markets are forecasting adjusted pre-tax profit of £579m for March 2019, giving EPS of 140p (from £541m and 121p in FY2018).
| SEVERN TRENT (SVT) | ||||
| ORD PRICE: | 1,897p | MARKET VALUE: | £4.5bn | |
| TOUCH: | 1,897-1,899p | 12-MONTH HIGH: | 2,219p | LOW: 1,664p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 471p | NET DEBT: | £5.42bn | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 851 | 295 | 62.2 | 34.63 |
| 2018 | 882 | 299 | 69.8 | 37.35 |
| % change | +4 | +1 | +12 | +8 |
| Ex-div: | 29 Nov | |||
| Payment: | 4 Jan | |||
