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Severn Trent profit falls by 51% despite increased turnover

Severn Trent’s turnover grew 1.9% but profit fell 51.4% in the 12 months to September 30, the water company announced in its interim results today.

Group turnover was £867.9M compared to £852.1M for the same period last year, while profit before tax fell from £208.2M in the previous year to £101.1M this year.

Capital spending on infrastructure and restructuring costs were to blame for the drop in profit, but Severn Trent said it was “approaching the end of a significant period of change”.

“Our expected capital programme for the AMP5 period remains at £2.2bn in current outturn prices.”

Severn Trent

It has made progress in renewables by commissioning the UK’s first commercial scale 15 GWh energy crop plant in August, within budget and almost two months ahead of programme. The £15M anaerobic digestion plant supplies the adjacent Stoke Bardolph sewage works with electricity and exports any surplus to the grid.

The company said it was in “good shape to deliver further efficiencies and meet the challenges of AMP5”. Capital expenditure will be more weighted toward the second half of the year, after spend in the first half “has proceeded more slowly than anticipated”. However, Severn Trent said its “early start” approach with contractors meant the capital programme has started well.

“For the full year we anticipate capex being in the range of £415M to £425M. We also expect to deliver on our regulatory commitments for this year. Our expected capital programme for the AMP5 period remains at £2.2bn in current outturn prices,” it said.

Efficiency savings

Severn Trent said it can deliver efficiency savings beyond what was agreed in its Ofwat final determination.

It has increased its efficiency targets to 2% on operational expenditure and 10% on capital expenditure – compared to targets of operational expenditure efficiency of 1.7%, and capital expenditure efficiency of 7% in the final determination.

Severn Trent chief executive Tony Wray said improvements have been made in sewer flooding and leakage. “We have made a good start to the AMP5 period with further progress in developing our people, delivering the highest standards and the lowest charges,” he said.

“We are also pleased to report that despite challenging markets, Severn Trent Services has returned to growth, as expected.”

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