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  • by Trevor Loveday

Severn Trent Group weathers inflation with pre-tax income uptick

Severn Trent Water parent, Severn Trent Group, reported a 2.6% year-on-year increase in profit before tax to £274m for the year to 31 March 2022 on turnover up 6.4% to £1,943m.

Group profit before interest and tax (PBIT) was up 7.5% to 506m. The increase was offset by a 44% surge in finance costs to £269m as inflation increase the cost of index-linked debt. A £37m gain on financial instruments for the year followed a £16m loss in the previous 12 months.

The Business Services arm reported a 49% leap in PBIT at £38.5m with £13m of that coming from property and its Green Power division more than doubling it PBIT to £5.6m

Severn Trent Water reported a 6.5% boost to turnover to £1,804m. The main changes were £62m from a post-covid jump in non-household consumption (tempered by a drop to more normal levels in households) and £26m in new revenue from diversions required by HS2. Self-generation helped boost income from the company’s Bioresources arm to £12m.

PBIT at Severn Trent Water increased on the previous year 5.4% to £478m on sales up 6.5% to £1,804.

Operating cost rises at the company included a 14% hike in power costs to £114m as wholesale energy prices rose 250% above the previous year’s. And a 6% increase in labour costs was fuelled by a 2.3% annual pay ward and an increase staff numbers due largely to a move to moving operations in house.

Other operating cost increases at the water at the sewerage company totalled £7.9m and included higher chemical and fuel costs. The company reported a £2.2m share in losses at its Water Plus joint venture with United Utilities totalling £8.9m with £4.9m of exceptional losses.

Bad debt provision was down 38.8% to £25m – some 2% of household revenue. However the company reported: “Pressure on household budgets from increasing energy bills, other cost of living inflation and higher national insurance,” had led t it to hold onto most of its £8.5m forward’s-looking provision.

The water and sewage company’s return on regulatory equity was 8.7% with outperformance coming “mainly from our customer ODIs and financing” with 88% of its measures generating rewards totalling £79m.


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