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Severn Trent expects to recover lost revenue within two years as interim profits drop

The coronavirus pandemic is dragging down non-household water consumption, which is partly offset by increased household usage

Severn Trent - Severn Trent to recover lost revenue in two years

Severn Trent PLC (LON:SVT) has said it expects to recover lost revenue due to the coronavirus (COVID-19) pandemic within two years, thanks to Ofwat's regulatory model, as it ppsted a fall in first-half profits and revenue.

The FTSE 100 utility said it expects turnover for the year to March 2021 to come in at £1.63bn-£1.67bn, down from £1.84bn last year, as the pandemic is still dragging down non-household water consumption, which is partly offset by increased household usage.

READ: Severn Trent says no effects seen yet from coronavirus on bill collections

Operating costs are expected to be higher due to increasing chemical usage to meet tighter sewage rules and expected COVID-19 related increases in household bad debt, it added.

Underlying profit before interest and tax excluding property will be lower year-on-year, Severn Trent said, due to impact of lower energy prices on renewable energy revenue and COVID-19, while property profits will be between £2mln-£5.0mln, though the company expects to deliver £100mln profit before interest and tax by 2027.

The firrn said it has accelerated capital investment plans for the new five-year regulatory period for the water industry ending in 2025, the AMP7, but expenditure will be lower than last year following completion of significant AMP6 programmes.

The group's final dividend is estimated to be 101.58p per share, up from last year’s 100.08p, as the interim payout was raised by 1.5% to 40.63p.

For the six months to September 30, 2020, Severn Trent's turnover dipped by 2% to £887mln, due to a COVID-19 related decrease in metered revenue, while underlying group profit before interest and tax dropped 21% to £225mln because of reduced revenue, increased bad debt provisioning for COVID-19, higher depreciation and timing of property profits.

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