Severn Trent net capex to rise this year

27th May 2011 08:02

Water company Severn Trent said the new regulatory period has started well for the group with planned operational expenditure for the year below the level allowed for in the Final Determination issued by the industry's watchdog, Ofwat.Group turnover edged up 0.4% to £1.71bn in the year to 31 March from £1.70bn the year before, while underlying profit before tax subsided to £288.6m from £338.4m the year before, a fall of 14.7%. The market had been expecting a profit of around £276.7m. Reported profit before tax was down 24.3% to £253.0m from £334.4m the year before. Adjusted basis earnings per share fell 14.0% to 105.6p from 122.8p the previous year. The full-year dividend has been chopped by 10% to 65.09p from 72.32p, as flagged in January 2010, but the current year dividend is set to grow by 7.7% to 70.10p, the company said."We have delivered on planned outputs and are realising the benefits of efficiency programmes such as the move of 1,300 people into our new operations centre in Coventry," said chief executive Tony Wray.Around 22% of Severn Trent Water's energy requirements are now produced from renewable sources, "cementing our lead in the production of renewable electricity from sewage", the company said. Water consumption was higher in the first six months of the year, due to increases in household demand as a result of weather conditions, and robust commercial consumption, which was partly due to re-stocking. The second half of the year showed a more normal period-on-period trend. Severn Trent Water's prices were reduced by an average of 0.7% over the year. "Given the impact on the capital programme in 2010/11 from the weather, our net capital expenditure ... for 2011/12 is expected to be higher year on year, in the range of £450m to £470m," the company said. "Within that range, net infrastructure renewals expenditure will be in the region of £120m to £130m, reflecting our programme of leakage reduction and improvement to security of supply," it added.Assuming no significant deterioration in the economy, especially in relation to unemployment levels, bad debt is expected to be around 2.2% of turnover in 2011/12. --jh