Severn Trent's profits up

Nov 24 2009 by Jon Griffin, Birmingham Mail

PROFITS at water giant Severn Trent beat forecasts following a range of cost savings across the business and a tight rein on bad debts.

The Midland utility group posted underlying pre-tax profits of £188 million for the six months to September 30, 22 per cent ahead of last year and beating City hopes of £180 million.

Severn Trent said it had “worked hard” to hold bad debt levels at 2.3 per cent of turnover and said it was on track to deliver an extra £5 million of cost savings for the year. Households and businesses are being hit by the recession, which is impacting water usage.

Severn Trent saw an £8.8 million fall in revenues from its metered customers on a year earlier. The group has also improved its debt collection performance amid rising numbers of struggling customers, which is helping offset the fall in water usage.

Turnover from the water business overall was up 4 per cent at £695.3 million due to price increases from last April.

Profits were also helped by lower financing costs on debt linked to Retail Price Index inflation, which has been negative for most of the year, although energy costs rose by £2.1 million.

Chairman Sir John Egan said the group had “remained focused on delivering further improvements in efficiency, processes and standards, as well as successfully managing impacts from the economic environment, such as bad debts and consumption level.”

The biggest challenge ahead for the firm is the final decision on prices for the 2010-15 period due from water regulator Ofwat on Thursday.