Low consumption hits Severn profits

Severn Trent says rising bad debts has dented its annual profits

Utility firm Severn Trent said rising bad debts and lower water usage among cash-conscious customers had dented annual profits.

Severn said growing insolvencies meant it had upped bad debt charges by £6.6 million in the year to March 31, to £34 million or 2.3% of its turnover.

Lower commercial consumption also cost Severn £20.8 million in lost income, the company said.

This left underlying pre-tax profits for the period 6% down at £273.5 million, in line with City expectations.

Severn serves a population of more than eight million people from the Bristol Channel to the Humber, and from mid-Wales to the East Midlands.

Severn said its overall debt collection performance had improved, but the firm is finding it harder to collect debts more than one year old.

The group has accelerated cost-saving plans for the current financial year to deliver an extra £5 million in savings.

The firm added that it had outperformed leakage targets set by regulator Ofwat for the second year in a row despite the coldest winter for 13 years.

The utility spent £635.3 million on assets and maintaining and improving its infrastructure network over the year - leaving it on track to spend £2.6 billion in the present five-year regulatory review period.

In April, Severn submitted its final plans to Ofwat for the next five-year period, running from next year to 2015.