Water giant Severn Trent reveals drought impact

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Tap drippingWater giant Severn Trent will provide further insight into the impact of the recent drought when it presents annual results on Wednesday.

The group, which serves more than a million customers across the heart of the UK, stretching from the Bristol Channel to the Humber, and from mid Wales to the East Midlands, was hit by a hosepipe ban earlier this year.

While the drought status was recently lifted by the Environment Agency (EA), the group is likely to have taken a hit on consumption since April, which represents the start of its new financial year.

The company is expected to report a 7% decline in underlying pre-tax profits to £269 million as customers used less water last summer and spending on infrastructure increased, offsetting the 4.7% rise in prices.

James Brand, research analyst at Deutsche Bank, said Severn Trent could be the "most exposed" of the water companies to drought impact as the EA classifies it as "high risk in the case of a dry spring and summer"

Meanwhile, Thomas Cook faces a make or break meeting with shareholders next week as it seeks approval for two disposals, without which the firm has warned it could collapse.

The tour operator, which appointed a new chief executive on Thursday, posted documents to investors to explain the financial importance of the planned sale and leaseback of part of its aircraft fleet and the disposal of five Spanish hotels.

Thomas Cook said in the circular that its directors were confident that shareholders will deliver the required majority when they vote on the disposals on Tuesday. But failure to support the fundraising move would jeopardise the company's recent £1.4 billion deal with lenders, including Royal Bank of Scotland and Barclays, to extend the maturity of its bank loans to 2015.

Later in the week, the group will publish its interim results but has already revealed losses of £262.7 million for the winter period after a particularly poor performance in North America and France.

The group unveiled Harriet Green, who is currently the boss of Leeds-based electrocomponents distributor Premier Farnell, as the person to lead its turnaround strategy from July 30. The company was plunged into crisis in November after it went back to its lenders to ask for an additional £100 million lifeline, sparking fears of a collapse, but it is now hopeful that it has a platform for recovery.

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