Utility Week

Utility Week 28th November 2014

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UTILITY WEEK | 28Th NovEmbEr - 4Th DEcEmbEr 2014 | 19 Finance & Investment This week Severn Trent to axe 500 jobs despite gains mostly mid-management positions will be cut to meet efficiency targets needed to keep bills down Severn Trent has confirmed its plans to cut around 500 jobs, despite increasing its share- holder dividend payments. The company's half-year results (H1), until 30 September 2014, stated that around one in ten roles, mostly in middle man- agement positions, would be cut to hit efficiency targets needed to keep customer bills down. The H1 results also revealed that dividend payments to shareholders increased by 5.6 per cent, from 32.16 pence per share (p/s) in H1 2013 to 33.96p/s in H1 this year. Underlying profit before tax and interest for the Severn Trent group also increased, from £141.3 million to £155.8 million (10.3 per cent). The group's overall H1 profit is £108.3 million, down from £344.8 million in the same period last year. Severn Trent stated the dramatic fall was due to an "exceptional credit" rebate the company received last year, of £153.6 million, whereas this year it paid £29.9 million in tax. The group is trading in line with its expectations for the year. Chief executive Liv Garfield said job losses were "essential" to ensure that Severn Trent Water could con- tinue to offer the lowest combined water bills in the UK. She said: "We have taken the call that we will look to restructure by reducing middle management levels across the business and it is a difficult decision to down- size the organisation by 500 roles." The firm added it would create up to 100 extra front- line roles and is working with trade unions to minimise the need for compulsory redundancies. MB ENErgY Centrica earnings revised lower Centrica reported weaker than expected financial results last week, becoming the third of the big six energy suppliers to warn of lower profits as a result of the UK's low temperature-led demand this year. The British Gas parent com- pany said it has revised its 2014 earnings 10 per cent lower to 19-20 pence per share, while its residential profit margins are set to be a "lower than expected" 4 per cent. "The group has faced a number of challenges in the year to date, in particular mild weather in the UK and the Polar Vortex in North America, trading conditions for British Gas Ser- vices, and the impact of boiler inspections at the Heysham 1 and Hartlepool nuclear power stations," the company said. The expects average residen- tial dual fuel bills to fall £100 year on year. Analysis, p20 WaTEr Dee Valley profit hit by tax changes The Dee Valley Group, the parent company of Dee Valley Water, saw its half-year profit fall because of changes in corpora- tion tax rates. The company's post-tax profit fell by £1.5 million to £1.8 mil- lion, having paid £638,000 in tax for the six months until 30 September 2014. This is down from £3.3 million post-tax profit in the same period in 2013, when the group received a £1.2 million tax rebate. This change comes as a result of changes to corporation tax, which was reduced from 23 per cent to 21 per cent in the March 2013 Budget and came into effect on 2 July 2013. However, the group posted a profit before tax of £2.4 million for the six months to 30 September 2014. This is up from £2 million in the same period in 2013. WaTEr Thames unveils sewer relief plans Thames Water has unveiled plans for a £280 million sewer flood relief scheme in the Lon- don Borough of Hammersmith and Fulham and the Royal Bor- ough of Kensington and Chelsea. The water company plans to create a 5km storm relief sewer in the Counters Creek area, which will help protect 1,700 homes from sewer flooding. The scheme includes innova- tive trials of sustainable drainage systems (Suds) and measures to protect individual properties, which has helped to "substan- tially reduce" the overall cost of the project and limit the length of the new storm relief sewer. Garfield: took 'difficult decision to downsize' Stock watch 2,070 2,060 2,050 2,040 2,030 2,020 Severn TrenT Share price, 25 november 10.00am 12.30pm 2.30pm 4.00pm 2,100 2,080 2,060 2,040 2,020 Severn TrenT Share price, 20 - 25 november 20 Nov 21 Nov 24 Nov 25 Nov Severn Trent's shares fell steeply from 2,066p to 2,028p on the morning its results were published (25 November). The results showed a year-on- year fall in six-month profits from £344.8 million for 2013 to £108.3 million for 2014. This was mostly attributable to a £153.6 million "exceptional" payment from the Treasury in 2013, compared with a £29.9 million tax bill in 2014. The price later rebounded to around 2,050p.

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