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Profit Up At Severn Trent Plc

Severn Trent (LSE: SVT) released its preliminary annual results for the year to 31 March 2014 this morning, but the market seems unimpressed and its share price remains pretty much unchanged in trading so far.

Underlying group pre-tax profit is up 7.1%, at £269m, with underlying group profit before interest and taxes (PBIT) increasing by 4.3%, to £517m, on group turnover that rose 1.4% to £1,857m.

svtLooking closer, underlying PBIT in the group’s regulated business was up 4%, on turnover that rose 2.2%, but Severn Trent reported “mixed performance” in its non-regulated business. There was growth in ‘operating services’ , but a “disappointing performance” in its ‘products’ operation, which filed a loss.

The company said that this was the fourth year of in-line or below-inflation bill increases for customers, whilst also reporting that capital investment in its water business up 8% year-on-year, with £602m being spent on delivering operational improvements, such as cleansing sewers and more leakage reduction.

Adjusted basic earnings per share fell 4.5%, down to 88.4p, but the board is recommending a final dividend of 48.24p per share, which will bring the overall payout for the year to 80.4p per share, up 6% on last year, giving a current yield of just over 4%.

Commenting on the results, new Chief Executive Liv Garfield, said:

I am pleased to report that the business has delivered another year of good financial performance in 2013/14. … We know there is much more we need to do to improve our processes, speed up decision making and raise our standards.

“I look forward to continuing our discussions with Ofwat in the next few weeks and submitting a revised plan for 2015-2020 on 27 June. …  I am really looking forward to working with the great people in Severn Trent, as we continue to deliver for our customers and communities, shareholders, and the environment.

At 1,938p Severn Trent’s share price is down 4.8% on this time last year, versus a 3.7% rise in the FTSE 100. But over five years Severn Trent is outperforming the index, with a 73% gain, compared to the FTSE 100’s 56% increase over the same period.

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Jon doesn't own shares in Severn Trent.