Severn Trent profits rise as prices go up

UTILITY Severn Trent saw its pre-tax profits surge yesterday, as a slump in consumption was offset by price rises.<br /><br />Profits went up by 51 per cent to &pound;208.2m in the six months to September, beating analysts&rsquo; expectations. But Severn Trent still warned that demand was falling at a similar rate to last year.<br /><br />The group, which supplies water to over 3.7m homes and companies around the UK, added it was on target to meet the &pound;5m cost savings it had promised for the year.<br /><br />As utilities struggle to fight off a fall in demand during the downturn, Severn Trent said it had &ldquo;worked hard&rdquo; to keep on top of its bad debt levels, which were staying at 2.3 per cent of the group&rsquo;s turnover.<br /><br />The company&rsquo;s report comes ahead of the industry regulator Ofwat&rsquo;s ruling on how much water companies cat put up prices for the next five years.<br /><br />Severn Trent said it would take time to analyse the report before commenting.<br /><br />In July, Ofwat suggested it is expecting Severn&rsquo;s average bill to drop by eight per cent over the course of the next five years from April 2010.<br /><br />The company&rsquo;s interim dividend is being put up by 1.6 per cent to 26.71p.<br /><br />Turnover from Severn Trent&rsquo;s regulated water arm &mdash; the main core of its business &mdash; went up by four per cent to &pound;695m.<br /><br />But turnover from metered customers, who usually run factories or business buildings rather than homes, dropped by &pound;8.8m in the half from the same time a year ago, as companies collapsed. <br /><br />FAST FACTS SEVERN TRENT<br /><br />&9679; Profits are up at the water company despite demand falling in the downturn.<br /><br />&9679; Ofwat, which regulates the industry, will this week make a ruling on how much firms like Severn Trent can charge for the next five years.