Severn Trent earnings in line as pricing plan deadline looms

29th May 2014 07:07

- EPS down but in line at 88.4p- Turnover up 1.4% to £1.86bn- PBIT up 4.3% to £516.8mUK water company Severn Trent reported earnings in line with consensus, although revenues were slightly short of expectations.With new Chief Executive Liv Garfield only having had her feet under the desk for just eight weeks, and with shares almost a fifth lower than the £22 offered in a takeover bid a year ago, the FTSE 100 company faces a crucial month ahead as it faces tough new regulation from Ofwat. Garfield is due to submit Severn Trent's new pricing plan for the next five years in late June, with the regulator having instructed that any price rises will be limited.For the past 12 months to March, group turnover rose 1.4% to £1.86bn and profits before interest and tax (PBIT) rose 4.3% to £516.8m.Earnings slipped 4.5% to 88.4p per share due to the comparative period benefiting from a large tax credit. The divided was up 6.0% to 80.4p as expected. Turnover in Severn Trent Water, the regulated business, increased by 2.2% as prices were increased by 1% less than November 2012 inflation of 3.0% and the 2013 dry summer led to higher consumption from metered customers. Underlying profit before interest and tax (PBIT) increased by 4.0% to £518.6m as operating costs increased by 3.1% in line with expectations. Total capital expenditure was up 8% to £602m, although though infrastructure maintenance expenditure included in this figure and expensed under IFRS accounting rules was down £7.4m driven by shorter-term operational requirements.The smaller unregulated Services business, there was 1.3% like for like growth in sales but underlying PBIT, measured on the same basis, was 48.6% lower.Performance was mixed, the company admitted, with Operating Services performing well but Water Purification shipments below expectations due to continuing customer project and delivery delays leading to lower turnover.The group's tax position benefited from an outline agreement reached with HMRC on its long-standing discussions regarding previous overpayments of tax, meaning prior period comparative figures have been restated.The impact is to decrease profit previously reported by £11.5m, with an equal and opposite movement in reserves.CJ