PracticeConsultingNewswatch – Water utility loses its sparkle.

Newswatch - Water utility loses its sparkle.

Severn Trent Water’s chequered history since privatisation is expected to remove the gloss from the utility company’s full-year results next Tuesday.

An apparent nervousness about growing revenues by expanding into overseas markets, considered a wise move by rivals including Thames Water, is likely to contribute to tepid profits of £357.6m, dipping to £354.3m over the current year.

This is against a background of general uncertainty in the water sector as government watchdog Ofwat leads a pricing strategy review, whose results will not be known until the end of the year.

One insider said: ‘Water companies with international business ought to offer a lot more value for analysts once the prices are set, but companies like Severn Trent have not gone down that route.’

On a more positive note, although analysts are not expecting profits growth, major investment banks are predicting that Severn Trent will out-perform its current ratings given its high levels of efficiency.

This has been compounded by the company’s offer of a one-off price cut to Ofwat, and moves to reduce bills which will put it ahead of all of its competitors by 2005 in terms of customer charges.

‘The financials are unexciting but the status is very positive, implying better performance once the sector recovers,’ said a source.

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