Severn Trent is reporting a rise in its profits and turnover with the publication this morning of its interim Group financial results for the six months to 30 September 2017.

Turnover for the regulated water and waste water segment was £789.9 million (2016/17: £765.2 million) and underlying PBIT was £278.3 million (2016/17: £268.9 million). Dee Valley Water contributed £12.5 million to turnover and £3.6 million to underlying PBIT in the period. T

The Group also announced a 34.63p interim dividend - a 6.2% increase on the 32.60p per share paid out in 2016/17.

On Customer Outcome Delivery Incentives (ODIs) the water company is now forecasting net outperformance payments of at least £50 million, and expect to hit the Waste cap6 for AMP6.

Severn Trent is also  forecasting £770 million AMP6 efficiencies, with a further £50 million locked in during H1 2017/18. Altogether, £660 million or 86% of total efficiencies are now locked in. To date the utility has invested £324 million in the first half of  2017/18.

Commenting on operational performance, the results show that the Birmingham Resilience scheme is progressing well – Severn Trent has finished tunnelling at two of the sites required along the Elan Valley Aqueduct and will start work on the final tunnel at Knighton next year.

The design work for the new abstraction point on the River Severn and formal consultation with  customers is complete, while the  second largest capital scheme in Newark is also progressing well, with work to renew the water mains now finished.

On track to deliver 50% of renewable energy self-generation by 2020

The utility has now spent £116 million of the £190 million planned investment in renewable energy and is generating the equivalent of 38% of its energy needs, remaining on-track to deliver 50% by 2020.

A new food waste plant at Roundhill has opened for business, and wind turbines in Derby andmhydro additions at Howden and Clywedog are now in full-time operation. 

Renewable energy turnover increased by £3.1 million and underlying PBIT increased by £1.6 million, driven by strong performance in the bioresources business. Severn Trent is also intending to embrace competition in the bioresources market with a dedicated team.

Severn Trent has separately streamlined its portfolio in its Business Services division, by selling the US Operating Services business in June, allowing it to focus on core strategic growth areas.

Ambitions to reduce leakage by 15% during AMP7

Looking ahead, the water company described  preparations for PR19 as “well progressed” saying it would stretch further on customer ODIs for example it has ambitions to reduce leakage by 15% over the course of AMP7.  

Net labour costs were £2.6 million (3.9%) higher period on period. A 2% pay award and 4% increase in headcount from insourcing was partially offset by an increase in the amount capitalised, as Severn Trent spent more of its time on the growing capital programme this year.

Net hired and contracted costs decreased by £3.7 million. Gross costs were £2.0 million lower, in part due to one-time costs related to Open Water in 2016/17 and more insourcing, and costs capitalised increased as a result of the larger capital programme.

Power costs were £4.4 million higher than the previous year. The utility has implemented a number of successful initiatives to reduce energy usage and consumption was down by 2.9 Gwh (around 1%) despite a 2% increase of water into supply.  The group manages its power costs through a combination of self-generation, forward price contracts and financial derivatives.

There were no significant property disposals in the period, however, Severn Trent said it has identified opportunities to generate profits of around £100 million over the next 10 years from the development of surplus property assets,  a proportion of which will be shared with customers through lower bills.

Severn Trent currently has the lowest average combined water and sewerage bills in Britain, at £341 per annum.

Commenting on the results, Liv Garfield, Chief Executive Severn Trent Plc, said:

“Our customer-first approach is delivering positive results. It is also clear in today’s society that businesses, including the water sector, are under increasing scrutiny and greater pressure to explain their contribution to society beyond financial profit. We need to make sure our decisions strike the right balance between all of our stakeholders and show we run our business in a sustainable and responsible way."