As Severn Trent updates the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

Severn Trent shares are up modestly this morning after the utility company reported full year results which were ahead of expectations. Revenues came in at £1.82bn up 3.7%, while profits before tax rose by 4.3% to £525m. These numbers have been delivered on the back of cost efficiencies and lower supply interruptions and leakages.

A key feature of these results for interested investors is the dividend which has been raised to 81.5p for the year. Moreover, management have adjusted their dividend policy going forward by growing it by RPI +4% which suggests 2017/18 will be in the region of 86.55p.

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Commenting on its full year performance, Chief Executive Liv Garfield expressed her delight of being able to deliver significant improvements during the period.  She also reassured the market that the group is continuing to improve efficiency and it has identified a further £100m totex savings this regulatory period, taking total efficiencies to £770m.

Whilst these results are encouraging and the dividend going forward will be improved, it still yields less than other listed utilities which we prefer such as National Grid and United Utilities. We therefore continue to recommend Severn Trent as a ‘hold’ for investors seeking income and willing to accept a low level of risk.

Headlines:

  • Severn Trent’s full year results ahead of expectations with revenues up 3.7% and profits up 4.3%
  • CEO noted the need to further develop customer experience and highlighted confidence in plans to deliver improvements
  • The Share Centre recommends Severn Trent as a ‘hold’ and prefers National Grid and United Utilities in the sector

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