Severn Trent a ‘hold’ as utility group posts better than anticipated results

29th May 2014

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Shares in Severn Trent have enjoyed a boost after the utility group reported better than expected underlying pre-tax profits for the past year.

By 2pm the shares – currently rated a ‘hold’ by analyst consensus – were up 1%, or 13p to 1,946p. Over six months, the stock is now up by 10%.

In its annual results for the 12 months ended 31 March, the FSTE 100 listed water and sewerage firm announced that its pre-tax profits were up 7% year-on-year to £269.1m.

Investors also welcomed the news of a 6% rise in the full year dividend and a further 5.6% increase forecast in the year ahead.

Severn Trent’s new chief executive Liv Garfield, says: “I have seen a great deal of teamwork, enthusiasm and commitment to serving our customers and to continually improving our performance. We know there is much more we need to do to improve our processes, speed up decision making and raise our standards.”

Graham Spooner, investment research analyst at The Share Centre, who inline with the market rates the stock a ‘hold’ says: “With the trend over recent months of investors moving away from growth stocks, high yielding utilities have attracted income seekers.

“The sector has been boosted this year on the back of bid rumours and the political pressures easing. However, as levels of uncertainty remain, especially around license proposals, and with the share price at current levels we continue to recommend investors ‘hold’. For investors looking for exposure to the sector we prefer United Utilities and recommend drip feeding into the stock.”

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