Economic downturn takes its toll on utility Severn Trent
As Severn Trent reports interim results at the lower end of market expectations, Graham Spooner, investment research analyst at The Share Centre, explains what these mean for investors.
"Severn Trent has reported a 2.1% increase in group turnover for the six months to 30 September, and adjusted pretax profit of £155m, which is at the bottom end of the expected £155m - £170m range. However, income seekers will be reassured by the promised inflation beating dividend increase of 7.7%.
"The defensive qualities of the sector have attracted investors in these recent volatile market conditions; however the results announced this morning show that even utilities are not immune to the downturn.
"The sector has had a good run this year and Severn Trent's share price has been relatively strong, rising significantly since September. But due to the recent weakness in the market and the reaction to the update this morning, the share price has fallen and we now believe it is at a much fairer rating. The increase in dividend may tempt income seekers, however we recommend investors to ‘hold' for now."