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Severn Trent profits fall ahead of expected £25mln in regulatory incentives

The FTSE 100 company said it expected to receive £25mln in incentives set by water regulator Ofwat

Severn Trent -

Severn Trent PLC’s (LON:SVT) shares fell after the water company reporting falling profits as expected regulatory incentives were delayed.

In its half year results on Thursday, the water company said profits before interest and tax decreased by 4.3% to £286.3mln in the six months to the end of September.

READ: Severn Trent flows steady in first quarter as Ofwat update eyed

The FTSE 100 company added that “strong performance, continued investment and environmental improvement” supported a full year customer outcome delivery incentives (ODI) guidance of at least £25mln in net rewards set by the regulator Ofwat.

Ofwat set out new demands and incentives in July for water companies to pay their debts faster, become more efficient and treat customers better, including provisions to reduce the dividend if the company is not financially strong enough.

The company said it was targeting £190mln in ODIs related to its waste division over four years, based on its environmental schemes set to improve 1,600km of rivers.

The utilities company, a sector traditionally favoured by investors for unusually high dividends, declared a half-year dividend of 40.03p per share, up 7% from 37.35p last year, which will be paid to registered shareholders on 3 January.

On Wednesday, sector-mate United Utilities raked in an extra £21mln for the regulatory period and hopes to take this to £50mln next year as it continued to outperform on its ODIs.

The sector as a whole continues to be overshadowed by the upcoming general election, due to opposition party Labour's plans to renationalise water.

SVT shares dropped 2.4% to 2,280p in early trading on Thursday.

Quick facts: Severn Trent

Price: 2581 GBX

Market: LSE
Market Cap: £6.14 billion

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