Severn Trent lifts guidance for its business services unit

Courtney Goldsmith
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Water Price Set To Rise
Water utility Severn Trent upped guidance for its business services arm (Source: Getty)

Shares in Severn Trent edged up this morning after the water utility upgraded guidance on its business services unit.

The company expects like-for-like growth in both revenue and profit before interest and tax, it said in a trading update for the period to 19 July.

Shares in the FTSE 100 firm were up 0.4 per cent to 2,241p.

Severn Trent announced it would sell its North American business for £48m earlier this month to focus on its core UK market.

"As a result of the reclassification of our North American business to discontinued operations, the guidance for the remainder of our business services segment has been upgraded," the company said.

The board continues to expect the company to deliver full-year trading performance in line with expectations.

Ofwat published a draft methodology consultation for the next industry price review (PR19) earlier this month.

New regulations from Ofwat look to be tougher than before, but also offer the prospect of more lucrative returns for companies capable of clearing the higher bar. This adds a dash of excitement to the sector, but in reality, water utilities remain pretty low risk income plays," said George Salmon, equity analyst at Hargreaves Lansdown.

"Barring a major operational slip up, sentiment around the sector is likely to be dominated by macroeconomic conditions."

Severn Trent said: "As expected, PR19 looks set to be a challenging review. However, we are encouraged by the opportunities of higher financial returns for ambitious and innovative companies."

Read more: Severn Trent boss Olivia Garfield soaks up £2.45m pay package

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