Dollar drains Severn profits

This Is Money13 April 2012

UTILITY group Severn Trent today said its core water arm had performed ahead of hopes, but said its services operation had not done as well as expected.

The group said Severn Trent Water, which serves around 8m customers between the Bristol Channel and the Humber, had outperformed its financial targets and managed its costs successfully.

It said the regulated division, which is making up to 350 staff redundant in the next two to three years, had good water resources for the time of year and was now focused on achieving further efficiencies.

However, it said pre-tax profits before interest and goodwill in its services activities, which include its laboratory, water purification and operating services, would be 10% to 12% less than last year due largely to the weakening US dollar.

It said its laboratories division had experienced challenging market conditions in the US, although water purification and operating services had continued to perform well.

Severn Trent added that it expected pre-tax profits before interest and goodwill in its commercial waste division, Biffa, to come in about 4% to 6% ahead of last year, including the benefits of a full year's contribution from the acquisition of rival Hales in June 2003.

In a statement ahead of the end of its financial year on 31 March, the group said: 'The board considers that overall, the group has delivered a satisfactory performance for the full year.'

In November, Severn blamed higher pension charges and the weak US dollar for a 6.5% fall in half-year profits to £141.3m.

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