Severn Trent water use rises but services profit set to fall

14th Feb 2014 07:00

Water company Severn Trent said customers were using more water, but warned that annual profits in its services business were likely to be lower than a year ago.Severn, which supplies 7.7m people in the Midlands and Wales, said consumption was slightly higher year-on-year, given current volumes.The group expects operating costs to rise against a year ago due to inflation and energy costs, although efficiency gains would partly make up for that.It is not expecting any material financial impact from the flooding hitting the UK, although it warned on its website on Friday that severe weather and power outages across its region were causing problems for many of its customers.Forecasted bad debts are still at about 2.2% of turnover for the full year and Severn said it continued to keep an eye on unemployment levels and changes to the UK benefit system.In its services business, operating services continues to perform well year-on-year, but in products shipments had been below expectations in the last two months due to continuing customer project and delivery delays."Therefore, for the full year, Severn Trent Services underlying pre-tax profit before interest is now expected to be lower year-on-year," it said.The company also said it expected its interest charge to be higher than last year due to higher net debt and pension costs, which it said was likely to cost £13m."Severn Trent confirms that the group's trading performance overall remains in line with its expectations and prior guidance," it added.PW