Severn Trent warns nationalisation ‘remains a possibility’

Severn Trent has warned about the impact of nationalisation, as it posts its latest set of financial figures.

The water services company has today (21 May) announced its preliminary results for the year ending 31 March, which show a 6.8 per cent rise in pre-tax profits, which are up by £36 million to a total of £563 million in 2018/19.

The results also reveal group turnover has risen by 4.2 per cent, up £71 million to £1.767 billion.

It also boasts there has been “excellent progress” with its capital programme with £769 million spent last year.

The figures also show that Severn Trent, one of three companies that had their business plans fast-tracked by Ofwat, has “confidence” in 2019/2020 following a “strong second half of operational improvements” during the last financial year.

But the results also note that the current regulatory landscape is “complex and subject to on-going change” and warns of the impact that long-held plans by the Labour Party to nationalise the water sector could have on the industry.

Earlier this month, it emerged that Labour planned to take public ownership of water companies for less than half the market value, prompting concerns from within the sector.

“The renationalisation of the water industry remains a possibility in the event of a change of government, and any associated changes in government policy may fundamentally impact our ability to deliver the group’s strategic objectives, impacting shareholder value,” the Severn Trent results document states.

“Our aim is to ensure the water sector in England and Wales continues to deliver a world class service for customers, is able to invest for the future and maximises the benefits to wider society and all stakeholders through the social and environmental benefits the current model allows us to deliver.”

Severn Trent’s chief executive Liv Garfield said the results demonstrate “that we can deliver for our investors” and that the utility company is putting itself “at the heart of the communities in which we live and work by building a lasting legacy for future generations”.

“This has been a year where our teams have really stepped up, whether in response to customer needs in the face of one of the hottest and driest summers we’ve seen or by being named by Ofwat as one of the top companies in the sector when we received fast-track status for our future plans,” added Garfield.

James Smith, a fund manager at Premier Global Infrastructure Trust, commented: “Severn Trent’s results show how the UK water industry continues to have a high level of spending, with the company investing £1,300 for every household served over the current five-year regulatory period to 2020.

“Ofwat’s results-based incentive programme is having a notable effect on spurring efficiency in the industry, with Severn Trent expecting to earn a performance incentive of £25 million in the current financial year. Although this benefits shareholders over the short to medium term, in the longer-term customers benefit as these efficiencies are passed into the tariffs.”