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Severn Trent unveils £100mln investment drive as full-year profits climb 4%

The FTSE 100 group will spend £100mln on improving its offering and infrastructure after reporting a rise in revenue and profit

water reservoir
Severn Trent supplies water across the Midlands

British utility group Severn Trent PLC (LON:SVT) has posted a 4% rise in full-year profits, as higher revenues and a strong performance in its new Dee Valley Water business offset higher costs and business rates.

The FTSE 100 group, which supplies water to homes and businesses across the midlands, reported an underlying pre-tax profit of £541mln (2017: £520mln).

READ: UK water stocks Severn Trent and Pennon upgraded by JP Morgan

That was on revenue of £1.69bn (2017: £1.64bn), with the top-line getting a boost from £80mln worth of customer outcome delivery incentives (ODI), up from £47.6mln a year earlier.

Those incentives are paid to the waters by regulator Ofwat for hitting or exceeding targets, such as project completions and customer service.

Severn Trent heaped praise on Dee Valley, which it bought last February, saying the new addition enjoyed a “very strong year”.

On the back of the rise in revenue and profit, the Coventry-based company unveiled a £100mln investment drive to improve its offering and infrastructure.

“We've had another very strong year on customer ODIs, which we know are the metrics our customers care about most,” said chief executive Liv Garfield.

“This, allied with a strong set of financial results, and a backdrop of the lowest average combined bill in the land demonstrates our ability to deliver for our stakeholders in a balanced and sustainable way.”

Severn shares edged 0.4% higher in early deals to £20.69.

Quick facts: Severn Trent

Price: 2293 GBX

LSE:SVT
Market: LSE
Market Cap: £54.56 m
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