Severn Trent reported a 10 per cent increase in interim underlying profit before tax as the FTSE 100 utility committed itself to remaining the cheapest water and sewerage services supplier in England and Wales during the next five years.
Group turnover at the Coventry-based company rose by 2.7 per cent to £947.6m in the six months to September compared with the same time last year, as higher consumption of metered water helped nudge up revenue beyond a 1.5 per cent rise in tariffs in April agreed with industry regulator Ofwat.
Interim pre-tax profit before exceptional items rose 10.3 per cent to £155.8m. However, net profit fell by 68.6 per cent to £108m, partly because of the absence of a large gain made last year when water companies benefited from a settlement with HM Revenue & Customs over the treatment of industrial buildings. Severn Trent also reverted to paying £30m in tax during the interim period compared with receiving credits of £154m in the same period last year.
Shares in Severn Trent fell by 1.4 per cent to £20.34, leaving them up 12 per cent on the year and valuing the company's equity at almost £5bn.
Liv Garfield, chief executive who took over from predecessor Tony Wray in April, said she believed the company had submitted all the evidence required to win support from Ofwat for its spending and pricing plants in the next regulatory period running to 2020.
“Our average combined bill is the lowest in the land and we are confident of maintaining the lowest bills for the next five years . . . we have delivered further reductions in leakage and sewer flooding,” she said.
Interim net finance costs were £119m, compared with £126m one year ago. Net debt stood at £4.5bn at September 30, compared with £4.3bn one year ago.
Interim net profit was also hit by a £24m loss on financial instruments, used to insulate the company against shifts in floating interest charges, compared with a gain of £61m one year ago.
The company said it would increase its interim dividend by 5.6 per cent to 33.96p, leaving it on track to deliver a full-year payout of 84.9p.
Severn Trent, which last year spurned a £5.3bn bid by a consortium involving pension funds, said in August it was close to resolving queries over a total spending plan of £560m under a five-year investment settlement scheduled for approval by Ofwat in December.
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