Business Overview
Severn Trent Plc (LON: SVT) is amongst the 10 largest water and sewerage regulated companies in England and Wales. The company is focused to provide high-quality services to both households and business customers.

Recent News
On 2^nd January 2020, Severn Trent announced that it had awarded options to the eligible employees under the company’s Sharesave Scheme.



Financial Highlights – H1 Financial Year 2020 (30th September 2019, GBP, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2020, the group’s turnover increased by 3.2 per cent to £910 million against £881.5 million recorded in the first half of FY2019, on account of tariff increase in Regulated Water and Wastewater revenue and growth in business service’s external turnover. Profit before interest and tax declined from £299.1 million in H1 FY2019 to £285.3 million in H1 FY2020. The Profit before taxation was £180.7 million for H1 FY2020 against £203.6 million for H1 FY2019. The profit for the period stood at £146.7 million in the first half of the financial year 2020 as compared to £165.1 million in H1 FY2019. The company’s Basic Earnings per share were 61.7 pence in the first half of the financial year 2020 against 69.8 pence in H1 FY2019. The company’s Diluted Earnings per share were 61.5 pence for H1 FY2020 against 69.7 pence in H1 FY2019.

Share Price Performance

Daily Chart as of  January 14^th, 2020, before the market close (Source: Thomson Reuters)

Severn Trent Plc shares were trading at GBX 2,524.00 at the time of writing before the market close (at 10:19 AM GMT) on 14^th January 2020 and were up by 0.24% versus the previous day closing price. Stock's 52 weeks High is GBX 2,552.00 and Low is GBX 1,827.50.The shares of the company have delivered a positive return of 12.07 per cent in the last quarter. The company’s stock has given investors 4.34 per cent of a positive return in the last month.

Valuation Methodology

*Peers: Telecom Plus Plc, United Utilities Group Plc, Pennon Group Plc, SSE Plc and Drax Group Plc.

Conclusion
In the first half of the financial year 2020, the company had shown a decline in the financial performance. Although the revenue has increased for the period, while the profitability has declined by the period. The company needs to manage its operating costs more efficiently.

The company operates in a complex regulatory environment and has tendered its future plans to OFWAT (Water Services Regulation Authority ) for 2020 to 2025, but there is no clarity on the outlook till Dec-19. The company’s operations are impacted due to uncertainty created by ongoing Brexit, as it impacts the company’s supply chain. The fluctuations in the interest rate and exchange rate also impact negatively on the financial performance of the company.
Therefore, after considering the recent performance of the company, we have given a “Watch” recommendation at the current price of GBX 2,529 (as on 14^th January 2020, before the market close at 8:20 AM GMT), while we look for any upcoming catalysts in the near term.
 
 
*All forecasted figures and peer information have been taken from Thomson Reuters.

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