Severn Trent a ‘hold’ for low risk income seekers

Otmane El Rhazi from Mindful Money » Shares.

Shares in water company Severn Trent are a ‘hold’ after a ‘mixed bag’ of results.

 

The company reported a 53.5% fall in pre-tax profits to £148.2 million, from £318.9 million in 2014.

 

However, the underlying profits at the company rose 8.8% and turnover increased 2.5%. Revenue also increased 2.4% to £1.8 billion in the year to March, up from £1.76 million a year earlier.

 

The fall in pre-tax profit was blamed on investment ‘in business development in US concession’ which had ‘impacted profit year-on-year’.

 

Severn Trent chief executive Liv Garfield said the performance over the past year had ‘demonstrated where we are strong and the areas we need to focus on to drive improvement’.

 

‘We have hit our target of a 10% reduction in leakage…and improved our customer service performance. We’ve made some significant cultural and operational changes…as a result we are facing the future with confidence,’ said Garfield.

 

Graham Spooner, investment research analyst at The Share Centre, retained a ‘hold’ recommendation on the shares.

 

‘Investors do not expect much in the way of excitement from this sector and are used to such company results being in line with expectations,’ he said.

 

‘Current investors will be pleased to see that the all-important dividend has risen by 5.6% to 84.9p. However, as a result of the regulator review in December, this will fall to a forecasted 80.66p for the year ahead.’

 

Spooner added that the shares were a ‘hold’ for ‘investors seeking income and wanting to take a lower level of risk’.