Flooding will not hit Severn Trent

Severn Trent expects no material financial impact from the current floods in the UK, it announced in an interim statement on Friday.

It also forecast trading for the last three months to be in line with expectations, but declined to give any specific numbers.

In Gloucestershire, the company is testing it flood defences around its Mythe Water Treatment Works at Tewkesbury. Floodwater from the adjacent River Severn has been rising towards the top of the wall it built around the water treatment site after it was flooded in 2007 causing the plant to shut down.

But the river level at Mythe Bridge is currently even, far off its 2007 reading.

Overall, the Coventry-based water utility is in a strong position, with consumption slightly higher than last year and, although operating costs are expected to rise owing to inflation and energy costs, it said these would be offset by unspecified "efficiency measures".

Heartened the market

The statement also heartened the market by revealing that its net capital expenditure will be toward the lower end of its £600-620 million guidance, including around £15 million related to private drains and sewers. Any weakness in the company's performance could bring out the predators. Last year the company had to fend off three takeover bids.

For the consumer, it pledged to freeze prices in 2015-16 and limit rises below inflation for the rest of the period. The company is awaiting an announcement from Ofwat, due any time from 10 March, on its 2015-20 business plans submitted last year.

In January, the regulator confirmed that the utilities' weighted average cost of capital, the benchmark on which the industry's returns are based, should be pegged at no more than 3.85%.

Severn Trent also took the opportunity to warn that it expected lower year-on-year underlying profit before interest and tax from its services segment on lower than anticipated shipments in its products business.

The water utility is scheduled to unveil its preliminary results for the full financial year on May 29. These will be delivered by new chief executive Liv Garfield who comes from BT.

Last month, Warrington-based rival United Utilities also reported recent performance in line with expectations.

Severn Trent rose marginally in mid-morning trading, up 1.3% to 1773p.