Severn Trent (SVT) - Full year results

[Itsallaguess]

Surprised to see these haven't been mentioned yet, after releasing full-year results this morning -

Severn Trent (SVT) -

· Strong group financial results :

− Group turnover of £1,694 million, an increase of £56 million (3.4%)

− Group underlying PBIT6 of £541 million, up £21 million (4.0%)

− Group reported PBIT of £528 million, down £8 million (1.5%)

− 2017/18 Return on Regulatory Equity (RoRE) of 11.5%7

− Underlying basic EPS8 of 121.0 pence (up 4.6%), reported basic EPS from continuing operations 102.2 pence (down 25.3%)

− Proposed final dividend of 51.92 pence, taking the 2017/18 dividend to 86.55 pence


Dividends -

In line with our policy for the remainder of AMP6 announced last year to increase the dividend by at least RPI+4% each year, the Board has proposed a final ordinary dividend of 51.92 pence per share for 2017/18 (2016/17: 48.90 pence per share).

This gives a total ordinary dividend for the year of 86.55 pence (2016/17: 81.50 pence). The final ordinary dividend is payable on 20 July 2018 to shareholders on the register at 15 June 2018.


https://www.investegate.co.uk/severn-tr ... 00079476O/

Cheers,

Itsallaguess

[IanTHughes]

Surprised to see these haven't been mentioned yet, after releasing full-year results this morning

I was just about to

In line with our policy for the remainder of AMP6 announced last year to increase the dividend by at least RPI+4% each year

Surely HYP manna from heaven


Ian

[OLTB]

In line with our policy for the remainder of AMP6 announced last year to increase the dividend by at least RPI+4% each year,

That's a stunning dividend policy! My 'Water' HYP choice of United Utilities has a policy of dividend increases in line with at least RPI to 2020 (I was tempted to write the word 'only' at the end, but then thought that dividend increases in line with RPI is pretty much bang on in terms of what a HYP is designed to do anyway!).

I have read on the BBC website that the environment agency has raised issues with water leakage / wastage that needs addressing by the water companies (3 billion litres leaked per day!). I am guessing that this issue will always be urgent as water infrastructure ages and it may be the same problem as painting the Forth Bridge. Will this curb future dividend increases - possibly and there are many other factors that could as well. In the meantime, I shall leave well alone and see what happens.

Cheers, OLTB.

[Julian]

...

In line with our policy for the remainder of AMP6 announced last year to increase the dividend by at least RPI+4% each year

Surely HYP manna from heaven
...

Only if sustainable over the medium to long term which for me means at least the next 5 years and ideally 10 - 20 years. I have no idea whether this is sustainable in even the medium term (5-ish years). What are the thoughts of those that delve more deeply into the accounts?

- Julian

[Bouleversee]

When I switched on my radio early this morning, someone (may have been Gove) was going on about water leakage and expected water shortage. I think he was even talking about rationing water, though I have no idea how this could be implemented. Pressure is being put on the water companies to spend money on curing these leaks and if there is a danger of the taps running dry, I can't see dividends of inflation plus 4% being allowed to continue or being sustainable as expenditure is increased. Enjoy it while it lasts!

OT but thrown in for a bit of light relief, I've just received the latest report from Dairy Crest, which includes the following dividend announcement (compare and contrast!):

The proposed final dividend of 16.3 pence per share is in line with the previous year. Together with the interim dividend of 6.3 pence per share (2017: 6.2 pence per share) the total dividend for the year is 22.6 pence per share (2017: 22.5 pence per share). This represents a 0.4% increase in line with our progressive dividend policy. The final dividend will be paid on 10 August 2018 to shareholders on the register on 6 July 2018.
Dividend cover of 1.6 times is within the Board's target range of 1.5 to 2.5 times (2017: 1.6 times).

The perception of a progressive dividend policy appears to vary from company to company. I wonder how much the management's earnings went up. I haven't had time to dig that out.

[CryptoPlankton]

On mains leakage:

The water companies have been under pressure to reduce leakage ever since privatisation and despite massive investment to tackle it they have consistently been able to throw out decent dividends. I believe they have slackened off their efforts somewhat over the past few years and so they are being given a reminder of their duties. To put it in perspective: leakage is down a third since the mid-nineties and rose a little over 1% overall last year. OFWAT have proposed a target of >15% reduction by 2025, which should refocus the companies' minds on the issue - but I really don't think HYPers should be losing any sleep over it.

Just my partially informed (from water industry experience) humble opinion...

[Bouleversee]

Jolly good, CP. Relieved to know it's just me being negative again. I shall look forward to receiving and spending many more enhanced dividends and a continued recovery of the s.p.

[idpickering]

Surprised to see these haven't been mentioned yet, after releasing full-year results this morning -

Itsallaguess

Yeah, my bad Itsallaguess. I missed that one. Sorry gang, only human and all that....

Ian.

[Itsallaguess]

I missed that one.

It wasn't a criticism of you at all Ian, but rather just a surprise that such a good jump in a reported full-year dividend (6% plus...) went un-reported on this board, especially given that it seems to be held by lots of people in their HYP's.

Cheers,

Itsallaguess (holds SVT...)

[idpickering]

I missed that one.

It wasn't a criticism of you at all Ian, but rather just a surprise that such a good jump in a reported full-year dividend (6% plus...) went un-reported on this board, especially given that it seems to be held by lots of people in their HYP's.

Cheers,

Itsallaguess (holds SVT...)

No stress Itsallaguess. I never took it in that vein at all.

Ian.

[Dod101]

On mains leakage:

The water companies have been under pressure...........

Just like the water they deliver

Dod

[CryptoPlankton]

Jolly good, CP. Relieved to know it's just me being negative again. I shall look forward to receiving and spending many more enhanced dividends and a continued recovery of the s.p.

Don't worry, Bouleversee, I was only talking about the leakage issue, there is still plenty for the committed pessimist to get their teeth into - like next year's price review and the prospects if we get a Labour government...

[pyad]

Only if sustainable over the medium to long term which for me means at least the next 5 years and ideally 10 - 20 years. I have no idea whether this is sustainable in even the medium term (5-ish years). What are the thoughts of those that delve more deeply into the accounts?

- Julian

What people here are missing regarding water ute dividends is that although they offer the attractive idea of planned rises linked to RPI during each five year AMP term(asset management plan), there is a potential for cuts between each term. SVT did just this at the last review and cut the payout by 5% between 31/03/15 and 31/03/16. UU. made no such cut this time.

So SVT's ostensibly generous RPI+4% annual increase plan for the current five years to 31/03/20 is based on only 95% of the 2015 payout. The figures are for 2015, the last year of AMP5, they paid 84.90p. But for 2016, the first year of AMP6, this was reduced by 5% to 80.66p and it's on the latter figure that the RPI+4% policy is applied.

UU.'s ostensibly stingier RPI increase plan for the current AMP6 was based on no cut in 2016 and in fact it actually increased the payout between 15 and 16 from 37.70p to 38.45p.

So comparisons on purely current period increases can be misleading.

As for longer term dividend sustainability, you are asking far too much to anticipate "ideally 10-20 years", even "at least the next five years" for any company. For water utes specifically all you really can count on is the current AMP6 dividend plan and even that, like all dividends, can never be guaranteed.

HYPs rely on the generality that companies will continue to deliver long term rising dividends in the future, as in the past. But that's not the same as making long term predictions for specific companies or industries which in my view are worse than worthless if permitted to influence portfolio design. Not that it stops people from coming out with such inane predictions.

[OhNoNotimAgain]

Don't confuse reliability with growth.

Utilities account for less than 0.5% of the >£ 1 billion of dividends now paid out by UK companies.

Mining companies make up over 6% but their history of distribution has been volatile.

Slow and steady is not always better than big but lumpy.

[Itsallaguess]

HYPs rely on the generality that companies will continue to deliver long term rising dividends in the future, as in the past.

But that's not the same as making long term predictions for specific companies or industries which in my view are worse than worthless if permitted to influence portfolio design.

Isn't it a little more nuanced than that?

Isn't one of the reasons that we diversify by sector because we know that across a number of market-cycles, not every sector will always be firing on all cylinders, and that as one sector might take a bit of a dip, another sector might take up some of that slack in terms of continuing to deliver overall, a good and generally-rising dividend-income at a portfolio level?

I'm quite content that some of my holdings might take the odd breather, so long as my overall portfolio-income delivers to my expectations.

I think we might be asking a bit too much if we expect anything different, to be honest....

Cheers,

Itsallaguess