Severn Trent taps shareholders to fund post-Covid spending spree

Severn Trent is hoping it can bounce back from a bruising pandemic with a major spending spree in the next few years, tapping investors for cash to help it fly off the starting blocks.

The business said that a dip in water consumption among its customers in the year to March 31 caused a 1% drop in revenue to £1.8 billion.

It trickled down to create a pre-tax profit of £471 million, down 17% on the same period a year earlier.

But Severn Trent still managed to wrap up record Outcome Delivery Incentives (ODIs) – a way of measuring water companies’ performances among their customers.

“The last year has thrown up multiple challenges for us, but it’s clear everyone at Severn Trent has responded superbly to the new normal we find ourselves in,” said chief executive Liv Garfield.

“Our industry-leading customer ODI performance shows just how much we’ve been able to improve our services, often while working in very difficult circumstances.”

Severn Trent now plans to raise £250 million from investors in a bid to help it accelerate out of the crisis.

Earlier this week, regulator Ofwat said it had approved £2.8 billion worth of projects that would create thousands of jobs in the water sector to fuel a green recovery from Covid-19.

Severn Trent will invest £624 million as part of that programme, it said.

Hargreaves Lansdown analyst William Ryder said: “Severn Trent is raising new capital to meet the new investment opportunities, including a retail offer so that smaller investors can participate – which we strongly approve of.

“While the new shares will dilute existing shareholders a little, the overall effect should be positive if the new investments are successful.

“The regulator allows utilities to earn a reasonable return on the capital they’ve invested, so new projects open scope for higher returns in the future.”