Severn Trent Sees Pre-tax Profits Fall 50%

Severn Trent, the water and sewage service provider, has seen pre-tax profits fall 53.5% to £148.2m – from £318.9m for 2014.

In its result for the year to end of March 2015, the company saw turnover increase 2.5% and underlying profits were up 3.2% year on year to £540.3m.

Nik Stanojevic, utilities analyst at Brewin Dolphin told Sky News the pre-tax profit numbers should not set alarm bells ringing and was unlikely to be repeated: “The fall in pre-tax profits was largely due to a one-off charge for currency and interest rate swaps. I don’t think it is a material reason for investors to be overly negative on Severn Trent – the reason for the fall is not an operational thing.”

This view was certainly borne out by early trading which saw little movement in Severn Trent’s share price.

In its results the company highlighted its focus on operational improvement and pointed to improved or stable performance on 12 out of 14 Ofwat key performance indicators year on year. It also achieved its target of 10% reduction in water leakage

During the year Severn Trent re-focused on core business which saw the disposal of its Water Purification division for $81.2m.

Mr Stanojevic said that Brewin Dolphin was reviewing it long-standing negative stance on Severn Trent in light of the new management team led by chief executive Liv Garfield, formerly at the helm of BT's Openreach business.

"Severn Trent seems to be improving a great deal. We have historically been negative on the company but we recently met with the management and were impressed with their confidence with regard to hitting Ofwat targets and the commitment to a large investment programme."

He added: "The dividend has been cut this year but in the future I think we might see dividends rise as the companes benefits from its improved efficiency and targeted investment."

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