Severn Trent shares head higher as profits surge

Shares in Severn Trent gushed higher on Wednesday as the utility reported a near-trebling in pre-tax profit and told investors it had hit its targets on "leakage and blockages".

Reporting half year numbers for the six months to September 30, the company said pre-tax profit had come in at £192.3 million, up from £70.7m in the corresponding period of 2023.

Turnover stood at £1.21 billion, down from £1.65 billion a year earlier, while earnings per share (EPS) was 47.2p, up from 20.5p.

The firm said the business, which serves over 4m homes and businesses, was 'stronger than ever' in the final few months of the current regulatory framework used by Ofwat (AMP7).

"This year more than 80% of ODIs are green, and we are set to deliver our largest ever year of capital investment, giving us a smooth capital glide path into AMP8, while we have had another year of four star EPA status confirmed for 2023," it said.

But the firm said that, while its performance was "green" on the vast majority of water outcome delivery incentives (ODIs), one exception was the compliance risk indicator (CRI), which it was expecting to be "in penalty" this year. This metric shows whether water is being treated in line with regulations.

"This is mainly caused by our Strensham site, where we expect the introduction of our biggest ever ultraviolet disinfection scheme to deliver significant improvement," it said.

"The enhancement project is well underway and is forecast for delivery early in AMP8," it added.

Chief executive Liv Garfield said the company knew there was "more to do".

"The Outstanding rating we received for our plan gives us visibility and confidence to make a fast start on the biggest investment programme in our history," she said.

"We are implementing the sector's most ambitious storm overflow improvement plan at pace, while also creating 7,000 jobs across our region, including a new 440-strong team of experts dedicated to our water pipe replacement programme.

"We are going further and faster than ever before and have a great platform to deliver huge benefits for our region in the years ahead."

The company said it was in a 'resilient' financial position, with £600m of finance raised this year and 20 months of liquidity, which provides flexibility in the timing of accessing debt.

In London, shares gained around 2.8% in Wednesday's afternoon trade.