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Distinctly unexcited, that’s how Tempus in the Times feels about Severn Trent, the water company. It announced a special dividend yesterday as its cash pile mounted. Investors will get £150m extra, while a further £150m will be spent improving customer services. Severn Trent had to take writedowns on its water services business in Italy and Spain but overall, the main business of pumping water into people’s homes is pootling along nicely; it's just short of a takeover. Tempus thinks you can get better value elsewhere in the sector.
Positive Points: Severn Trent said it had reduced leakage to a record low level and it pledged to invest an additional £150 million in its network over the next three years to enhance water security, on top of the £1.6 billion already planned. The company stated that water lost through leaks fell 7% in the year to the end of March, below the target set by its regulator. This led the group to repeat its expectation that it will not have to enforce a hosepipe ban over the current financial year. The company will return about £150 million to investors in the form of a special dividend. Severn Trent is subject to occasional takeover speculation. The group's defensive nature provides investor attraction when set against an uncertain economic backdrop.
Negative Points: Profitability from Severn Trent's core water business is dependent on the group’s ability to meet tough regulatory efficiency targets. Exceptional charges of £50.9 million were reported that included operational costs of £34.4 million. Within this figure, costs arising from Severn Trent Water's programme to restructure and realign the business resulted in an exceptional charge of £11.5 million. Within the company's services business, which provides water and waste treatment in Europe and North America, Severn Trent said market environments remain challenging. Raw materials and consumables at £46.8 million were 1.3% higher than the same period in the prior year.
Financial Highlights: Severn Trent posted a profit before tax of £156.7 million, down 38% from £253 million reported a year ago. Turnover for the group was £1.77 billion, up 3.5% from a year earlier. Exceptional charges during the year to 31 March of £50.9 million were reported (£21.4 million – 2011). The company have recommended a total dividend of 70.1p, up 7.7% from 65.09p. In addition, a special dividend of 63p has been proposed, subject to shareholder approval.
Full year results: Severn Trent's full year results exceeded market expectations which saw a rise in prices offset an increase in expenses and lower consumption from its metered users. At its water division, turnover increased by 4.9% to 1.5 billion pounds after the firm put up prices in line with inflation at the start of the year. Prices were also increased in April by 5.2%. Consumption from customers with water meters was lower, reducing turnover by some 10 million pounds, while business customers used water more efficiently. Severn Trent added that it expected measured consumption would continue to fall this year, and anticipates a decrease of about 2%, in line with a 1.6% drop last year. Profit before tax for the year fell 38% to 156.7 million pounds from 253 million pounds a year earlier, while revenues rose 3.5% to 1.77 billion pounds, in line with estimates.
Severn Trent is a group of companies employing more than 15,000 people across the UK, US and mainland Europe, with some involvement in the Middle East. It is traded on the London Stock Exchange and is a constituent of the FTSE 100 Index. Severn Trent Water provides water and sewerage services to over 3.7 million households and businesses in the Midlands and mid Wales. The group also operates a non-regulated business. Severn Trent Services is one of the world's leading suppliers of water and waste water treatment solutions. Headquartered in the US, it has a growing presence in Europe, the Middle East and Asia. The business has three main divisions: Water Purification, Operating Services and Analytical Services.
Exceptional charges in excess of 50 million pounds in the year to March led Severn Trent (SVT) to report a 38% reduction in pre-tax profits to 156.7 million pounds despite revenue climbing 3.5% to 1.77 billion pounds at the water utility company. Most notably, the firm was forced to realise a charge of 11.5 million pounds arising from its restructuring as well as 22.9 million pound impairment on goodwill. Operationally, the firm noted it had reduced leakage by 7% year on year to a record low, and below the Ofwat target. Severn Trent shares climbed 42p to 1,706p.
As part of its review of the utilities sector, Investec has downgraded its rating on water group Severn Trent from buy to hold and cut its target price from 1,718p to 1,664p. Investec says that the recent share price spike has been driven by bid speculation, something which it does not necessarily see as likely.
Severn Trent Services Severn Trent Services is expected to deliver an improved second half performance, compared to the first half, in line with prior guidance. However, markets remain challenging, with no significant upturn expected before the start of the next financial year. Group The group completed a successful £250m 30 year bond issue in January, at a coupon of 4.875%, and simultaneously a tender offer for its 2014 £200m bond, which saw an uptake of 75% or £151m. The costs of the tender offer will give rise to an exceptional finance charge of £16m for FY2011/12, representing the difference between the purchase price and the carrying value of the bond. The expected effective current tax rate for the group for FY 2011/12 remains at 26% to 27%. Severn Trent Plc will announce its preliminary results for the financial year ending 31 March 2012 on 30 May.
The Board of Severn Trent Plc confirms that trading across the group has been in line with its expectations. No new material trading events or transactions have occurred during the period 1 October 2011 to 16 February 2012. Severn Trent Water Consumption levels across our measured income base for FY 2011/12 are expected to lower year on year, in line with the trend seen in the first half. The level of bad debt for the full year is expected to remain broadly stable compared with the first six months, although we continue to monitor future developments closely, especially unemployment levels. Operating expenditure continues to be in line with the Board's expectations for the year, and below the level allowed in the Final Determination. Operating costs are expected to rise year on year, due to the impact of inflation, prudent investment in our networks, and quasi taxes (including the CRC levy), partially offset by efficiency savings. Expectations for net capital expenditure (UK GAAP after deducting grants and contributions) remain in the range £450 million to £470 million. The level of net infrastructure renewals expenditure included in this figure is anticipated to be £120 million to £130 million. Both figures exclude the costs of Private Drains and Sewers (PDaS). Severn Trent Water is not currently predicting any usage restrictions this year, despite record low rainfall over the winter period. This situation remains under constant review however and the company is taking steps to improve supply resilience this year. Severn Trent Water has maintained its focus on continuous improvement and is on course to meet its 2011/12 leakage target. Severn Trent Water is one of only 3 companies that is targeting reduced leakage year on year over the current regulatory period. Work volumes related to Private Drains and Sewers continues to be at the lower end of initial expectations. The company will provide FY 2011/12 costs, and updated capital and operational expenditure estimates for the remainder of the current regulatory period, with its Preliminary Results in May.
http://www.investegate.co.uk/Article.aspx?id=201202170700146008X
Tony Wray, Chief Executive Severn Trent Plc, said: "We have delivered a solid set of results for the half year. Group revenue was up 2% period on period with underlying group PBIT down slightly, reflecting increased investment in our networks in Severn Trent Water. We remain focused on improving the services from our networks. We have increased our network replacement activity underpinning our plans to improve network serviceability, supply availability and unplanned interruptions. We are maintaining our leakage activity levels following the severity of the last three winters. The transfer of private drains and sewers has gone smoothly and we will provide an overview of activity and expenditure levels at our year end. We remain committed to our dividend policy of RPI +3% growth per annum for the remainder of AMP5. We welcome Ofwat's latest publication for a risk based approach to regulation which aligns to the ideas we have previously published in our Changing Course document."
Interim Results for the six months to 30 September 2011 Highlights ● Severn Trent Water operating expenditure below level allowed in Ofwat's Final Determination ● Delivering capital programme and long term productivity improvements ● Interim dividend 28.04 pence per share, up 7.7% in line with dividend policy of RPI +3% ● Strong balance sheet, business fully funded for next 2 years ● Transfer of private drains and sewers (PDaS) successfully completed on 1st October ● Encouraged by direction of regulatory reform
http://www.investegate.co.uk/Article.aspx?id=201111250700317586S
Read in mail about drop being due to taking over private sewers... which they will add to bills anyway so meaningless.. drop due to ex div. Roll on Dudai 2500 buy out... :)
Lower prices and higher costs have led Severn Trent (SVT) to announce a 14.7% drop in pre-tax profit for the full-year, as the utility group failed to meet targets set by Ofwat, the industry regulator, to reduce leakages. For the 12-months ended 31st March 2011, underlying pre-tax profit fell to 288.6 million pounds as turnover remained flat at 1.7 billion pounds. Looking ahead, the group said that as a result of the weather impacts on its capital programme, it will invest more in its network this coming year. Shares in Severn gained 15p to 1,517p.
market appears to be happy with the annual results presented to the city this morning. the almost certain loss of the final salary pension may also have increased confidence. Hopefully, we have left the 1400's behind us now.
major restructuring and streamlining over recent years. will this be reflected positively at the end of next month with the yearly figures. Across the board 3% pay rise makes me optimistic that they are in a good position. Hopefully break through the 1500 and move on.
come a long way in the last 12 months ,i sold up at 12 quid
A steady rise shopuld be in order now. Bad news is long gone, and profits are up. Why is this share such a steady eddy? I have traded it so well over the last year that my average is about 8.5 even though it bottomed at 9.3 or something. If this was Lloy or Rbs I would be a millionaire, when I am still poor. Doh !!!
RNS - big profits rise: http://www.lse.co.uk/ShareNews.asp?shareprice=SVT&ArticleCode=b7xjjpryn838imn&ArticleHeadline=STOCKS_NEWS_UKSevern_Trent_up_profit_beats_view
anyone have any views on this? it's 20% up for me within six months which sounds great and then i realise how small the amount i put in was versus the money i wasted elsewhere. still not sure on the debts issue though.
Rise in price due to a report that Northumbrian Water could receive a £1.7bn takeover from a Canadian Pension fund http://news.bbc.co.uk/1/hi/business/8490794.stm
almost makes up for the stress when this was languishing below £10 last year.
I cant remember last time SVT made a start like this. If the market holds at current levels, this will test 12 soon.