Severn Trent's year off to steady start

20th Jul 2011 07:18

Not much has changed at water company Severn Trent since the beginning of April with the company continuing to trade in line with expectations.Customer prices in Severn Trent Water increased by 4.7% (including inflation) from 1 April 2011. Consumption across the group's measured income base declined year-on-year in the second quarter, albeit at a lower rate than expected."We continue to target a bad debt level of 2.2% of turnover for the full year, although we continue to monitor future developments closely, especially unemployment levels," the company said.Operating expenditure continues to be in line with the board's expectations for the year. Operating costs are expected to rise year-on-year, due to the impact of inflation, rising input costs and quasi taxes, offset by efficiency savings. Expectations for net capital expenditure, using UK generally accepted accounting principles, remain in the £450m to £470m range after deducting grants and contributions. The level of net infrastructure renewals expenditure included in this figure is anticipated to be £120m to £130m.The group expects to deliver increased revenue growth over the whole fiscal year, though the first half of the year will probably see a year-on-year decline. Due to planned investment in growth opportunities in Operating Services and new water purification products (BalPure and MicroDynamics) which will offset growth in the underlying business, profit before interest and tax is still expected to be lower than last year.Based on current inflation expectations, group interest charge is expected to be broadly flat year on year, before adjustments related to pension accounting.The expected effective current tax rate for the group for 2011/12 remains at 26% to 27%. --jh