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Positive Points: Accompanying management outlook comments highlighted trading which was in line with current full year expectations. Severn Trent is subject to occasional takeover speculation. The group's defensive nature provides investor attraction when set against an uncertain economic backdrop. In the present low interest rate environment, a progressive dividend policy currently yielding over 4% remains attractive.
Negative Points: Profitability from Severn Trent's core water business is dependent on the group's ability to meet tough regulatory efficiency targets. Group net debt as of 30 September 2012 was reported at £4.05 billion, up from £3.96 billion as of 31 March 2012. Customer bad debts are expected to be around 2.2% of group turnover for the full year
Financial Highlights: In line with previous guidance, group expectations for net capital expenditure (after deducting grants and contributions) will be towards the low end of the £555 million to £565 million range, including an estimated £10 million related to private drains and sewers. The level of net infrastructure renewals expenditure included in this range is anticipated to be £140 million to £150 million.
Interim statement: Severn Trent said performance in its regulated business for the period since November 2012 has been largely as expected and outlook for the full year remains as previously indicated. Within its regulated business, total revenue for the full year and operating expenditure continues to be in line with management's expectations. Operating costs are expected to rise year on year, due to the impact of inflation, a full year of operating private drains and sewer assets, and increases in quasi taxes, offset by efficiency improvements. The group has forecast a bad debt level around 2.2% of turnover for the full year. Within Services, (non-regulated operations) water purification and operating services is expected to deliver mid-single digit revenue growth for the full year, with profits impacted by investment in Operating Services and Balpure (ballast water treatment), which will offset the underlying growth in the business. On 8 February the company announced the sale of Severn Trent Analytical Services (also known as Severn Trent Laboratories) to ALS Limited. Severn Trent Plc will publish full year results on 30 May 2013
Severn Trent: JP Morgan cuts target price from 1610p to 1520p, while reiterating a neutral rating.
No financial information regarding the sale was given
Water provider Severn Trent has sold its Analytical Services division to Australian testing inspection and certification (TIC) group ALS Limited for an undisclosed sum. The unit, also known as Severn Trent Laboratories, provides portable, wastewater and contaminated land testing services to UK commercial and utility customers. The company announced its intention to dispose of the arm back in August 2012, saying at the time that it had become a smaller business that was predominantly commercial-customer focused. Meanwhile, the sale addressed a number of commitments it had made to Ofwat in relation to the pricing of certain contracts at Severn Trent Analytical Services. It accounts for around 1.5% of Severn Trent's total revenue. ALS is listed on the Australian Securities Exchange and is one of the largest TIC companies in the world.
Severn Trent: Bank of America revises target price from 1540p to 1680p and upgrades from underperform to neutral.
Servern Trent: Barclays reduces target price from 1695p to 1640p, equal weight rating remains unchanged.
Positive Points: Accompanying management outlook comments highlighted trading which was in line with current full year expectations. Consumption across its measured income base is anticipated to return to normal seasonal levels in the second half. The board highlighted that an additional £150 million investment programme was already delivering operational improvements to the benefit of customers. Leakage, pollution incidents and service incentive mechanism scoring had improved. The group's net finance costs were £109.8 million, compared to £119.4 million in the prior period. Lower inflation had led to lower finance costs on index linked debt which had offset an increase due to higher borrowings and a higher net pension finance cost. The group's dividend yield (currently over 4%: 27November12) remains attractive in a low interest rate environment. A progressive policy continues to be pursued. Severn Trent is subject to occasional takeover speculation
Negative Points: Wet weather over the summer impacted the group's revenues. Customer measured consumption was lower by 2.8% in the period compared to the same period last year. Commercial consumption, in particular agricultural, was lower than expected, and household measured consumption was weaker than anticipated. The group remains in negotiations with the water industry regulator. Profitability from Severn Trent's core water business is dependent on the group’s ability to meet tough regulatory efficiency targets. During the period, there were a number of changes made to its Services business. The sale of the metering business was completed, and the planned sale of the Analytical Services business was announced and is progressing. Group net debt as of 30 September 2012 was £4.05 billion, up from £3.96 billion as of 31 March 2012. Balance sheet gearing (net debt/net debt plus equity) at the half year was 82.6% (31 March 2012 80.2%). Net debt, expressed as a percentage of estimated Regulatory Capital Value at 30 September 2012 was 56.4% (56.0%). Customer bad debts rose by 1.3% to £15.7 million during the period, although remained stable when expressed as a percentage of group turnover - 2.2%, unchanged from the previous year.
Financial Highlights: Group revenue rose by 3.6% to £917.7 million. Underlying or adjusted profit before tax increased by 1.6% to £157.5 million. Half year dividend increased by 8.2% to 30.34 pence per share.
Half year results: Severn Trent remains on track. The update provided few if any surprises, with the share price falling marginally (-0.5%) in early trading. The board noted that "the group is on track to deliver its expectations for the full year." Wet weather over the summer impacted, with customer measured consumption down by 2.8% in the first half, although this was compensated for by the allowed price increase of 5.2%, leaving group turnover up by 3.5%. For the group's Services business, reported underlying profit before interest and tax declined by 36.9% to £4.1 million. This was mainly due to the loss of earnings from its now sold metering business and lower earnings from a radically restructured Analytical Services business. After adjusting for the impact of exchange rate fluctuations and structural changes, profits on an underlying basis rose by 1.9%. On the dividend front, a policy of the Retail Price Index +3% growth per annum continues to be pursued for the current regulatory period, with the half year dividend receiving an 8.2% increase compared to last year. On balance, given concerns for the regulatory outlook and lower profits from its Services business
Company overview Severn Trent provides water and waste water services in the UK, and internationally, through our two divisions 1) Severn Trent Water is one of the largest of the 10 regulated water and sewerage companies in England and Wales. It provides services to more than 4.2 million households and businesses in the Midlands and mid-Wales 2) Severn Trent Services is a commercial supplier of water and waste water treatment services and products, with customers in the US, Europe, Middle East and Asia.
As the rain deluges the country Severn Trent Water updates the market on its interim results. Analyst Tina Cook at Charles Stanley is forecasting a 4% increase in revenues to £920m, driven by the regulated water business. Challenging market conditions at SVT Services (with risk of further deterioration) and higher costs at SVT Water are expected to result in pre-tax profit coming in broadly flat at £157m. Cook sees dividend per share rising 8% to 30.3p, which looks impressive but is in line with the current policy of 3% real growth per annum to 2015.
Utilities giant Severn Trent has voiced concerns with Ofwat's proposed water price controls in response to a statement by the regulator this week which welcomed 'constructive' criticism. Industry regulator Ofwat released a statement on Tuesday evening that sought to clarify some licence modification proposals following requests for more information from shareholders. The regulator began by saying: "The challenges facing the sectors means there is a need for new, innovative ways to deliver sustainable water. Flexibility is needed in the licence since it is one of the key tools of regulation so that we, as regulator, can adapt to changing circumstances." Ofwat said that this flexibility would allow it to set segmental price controls and targeted incentives. However, the regulator did welcome "constructive" responses if they have concerns with the proposals. If some companies don't accept the proposals, then the matter will be referred to the Competition Commission (CC). Severn Trent said on Friday morning: "Whilst Severn Trent Water is minded to accept Ofwat's proposed change to its licence, the company believes it would be better if the current proposals were modified," the company said. The company said it had made "constructive suggestions to overcome concerns" about the prospect of losing 40% of revenue from wholesale price controls and the lack of clarity about how future prices would be controlled. "The company believes that these suggested changes would still give Ofwat the flexibility required to drive the significant reform of the industry which Severn Trent continues to be supportive of."
Severn Trent: Nomura cuts target from 1,645p to 1,550p, neutral rating kept.
Severn Trent: Citigroup downgrades to neutral, target cut from 1,685p to 1,520p.
I am thinking if this SP drops any further of average down? A safe stock with a great dividend.
JP Morgan Cazenove upgrades Severn Trent from underweight to neutral, target price raised from 625p to 705p.
Positive Points: On 28 June Severn Trent announced that it and Costain Group PLC had entered into a new Joint Venture to provide complete business water and wastewater management services to high volume commercial and industrial water users in the UK. Operating costs are expected to rise year on year, due to the impact of inflation, a full year of operating private drains and sewer assets, and increases in quasi taxes. The utility said these would be offset by efficiency improvements. Severn Trent is subject to occasional takeover speculation. The group's defensive nature provides investor attraction when set against an uncertain economic backdrop. In the present low interest rate environment, a progressive dividend policy currently yielding over 4% remains attractive.
Negative Points: Profitability from Severn Trent's core water business is dependent on the group's ability to meet tough regulatory efficiency targets. Bad debt as a consequence of the economic downturn is being closely monitored by the group. Exceptional charges of £50.9 million were reported within the group’s full year results on 30 May 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.
Financial Highlights: The group stated that no new material trading events or transactions had occurred during the reporting period 1 April to 17 July 2012.
Interim statement: The Board of Severn Trent Plc confirmed that trading across the group had been in line with its expectations and prior guidance. The water utility said customer prices in Severn Trent Water increased by 5.2%, including inflation, from 1 April. Consumption across its measured income base had declined year on year in the period, also in line with expectations. The group advised that it will continue to forecast a bad debt level around 2.2% of turnover for the full year, adding that the matter is being closely monitored, especially unemployment levels. Based on current RPI expectations, the group's interest charge is expected to be slightly lower year on year. For the full year, Severn Trent Services said it expected to deliver low single digit revenue growth