Shares of UK-based Severn Trent (GB:SVT) soared over 3% as of writing after the company reported solid growth in its first-half profits for FY24/25. The company’s profit after tax for the six months ending September 30 nearly tripled, reaching £141.4 million, compared to £51.6 million in the same period last year. The company’s performance was mainly driven by higher tariffs, with lower energy and infrastructure renewal costs, partially offsetting higher operating costs.
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Severn Trent is a water supply company, serving 4.6 million households and businesses across the Midlands and Wales.
Severn Trent Unveils Record Investment
In the first half, the company’s capital investment grew by 40% to £665.9 million from £476.9 million a year ago. Meanwhile, the company’s turnover reached £1.22 billion, reflecting a year-over-year increase of 4.5%.
Moving ahead, the company expects that its capital spending for the year will reach the upper limit of its forecasted range of £1.3 billion and £1.5 billion. The company further stated that, following a record year of capital investment, it can cut sewage leakages by 15% over the next five years.
Additionally, Severn Trent raised its interim dividend by 4.2%, bringing it to 48.68p per share.
Severn Trent Falls Short on CRI Target
On the flip side, the company expects a penalty for missing its CRI (compliance risk index) target, despite its strong performance in most water ODIs (outcome delivery incentives). The CRI is an important metric in the water industry that measures the risk of not meeting drinking water standards.
The penalty is primarily due to issues at its Strensham site. However, it expects that the launch of its largest ultraviolet disinfection system will lead to substantial improvements.
This marks the second consecutive year the company has missed its CRI target.
Is Severn Trent a Good Share to Buy?
According to TipRanks, SVT stock has a Moderate consensus rating based on two Buys and four Holds assigned in the last three months. The average Severn Trent share price target of 2,757.0p implies a downside of 0.86%.
