Water firm Severn Trent has declared an interim dividend of 28.04p, up 7.7% on last year in line with its policy of increasing payments by three percentage points above retail price inflation.
Group turnover in the six months to September 30th edged up 2.1% to £886.0m from £867.9m the year before.
Interim profit before tax tumbled 35.4% to £65.3m from £101.1m the year before, but with exceptional items and losses on financial instruments stripped out, profits were more or less flat, at £155.0m, versus £168.0m last year.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Underlying group profit before interest, tax and exceptional items fell 1.0% to £274.3m from £277.0m at the half-way stage last year, reflecting increased investment in the group's networks in Severn Trent Water.
Latest Videos FromMoneyWeek
Adjusted basic earnings per share retreated to 46.4p from 47.4p the year before. The interim divi of 28.04p is up 2p on last year's interim payment.
Net debt at the end of September stood at £3.76bn, versus net debt of £3.87bn six months earlier and debt of £3.72bn at the end of September 2010. Net interest paid increased to £83.2m from £80.7m at the interim stage last year.
Cash generated from operations was £475.6m, down from £478.2m the year before. Capital expenditure, net of grants and proceeds of sales of fixed assets, was £150.1m, down from 198.5m a year earlier.
The company took a £70.2m bath on its hedging instruments, a significant increase on the £50.7m of losses on financial instruments it took in the first half of last year.
Severn Trent Water
Customer consumption of water was broadly unchanged from the year before, which meant that the 4.7% increase in prices led to a 4.7% increase in turnover for Severn Trent Water to £735.0m.
Consumption in the second half of the year is expected to be consistent with the trend seen in the first half.
The division's profit before interest and tax (PBIT) was broadly flat (up 0.1% to £272,9m), due to a higher level of planned infrastructure renewals and contractor expenditure.
Operational expenditure for the first half was in line with expectations and below the level allowed in the regulator's Final Determination, with total employment costs marginally ahead and a reduction in bad debts.
Severn Trent Services
The first six months of the current financial year saw a continuation of the challenging economic and operating environments seen in the second half of last year, with both turnover and underlying PBIT lower period-on-period. Underlying PBIT was also dented by £0.8m of the previously announced investment expenditure in new products and longer term growth initiatives.
The company has taken a provision of £21.9m in exceptional charges relating to its Operating Services business in Italy, as there are doubts over whether the company will be able to recover its economic interest in the Servizio Idrico Integrato business, which has run into refinancing difficulties.
"In Severn Trent Services, market environments remain challenging, and we do not currently expect to see any upturn in these markets before the start of the next financial year. We expect full year performance to be second half weighted," the company said.
--
jh
