Severn Trent's profits saved by cold weather

As utility group Severn Trent reports its full year results, Graham Spooner, investment adviser at The Share Centre, explains what they mean for investors.

"This morning Severn Trent issued full year results that didn't dramatically differ from analyst expectations. Revenue edged to £1.7bn and although price cuts meant annual profit the drop was smaller than expected. 

"The colder weather conditions saw an increase in household demand and restocking led to robust commercial consumption. This rise offset the effect of the lower prices and brought turnover to a similar level as last year. 

"Despite a 10% fall in the full year dividend income seekers will be pleased to hear the current year dividend is expected to grow to 70.1p, increasing by 7.7%. This exceeds the company's stated dividend policy of a 3% increase each year for the next four years.

"Severn Trent plans for sustainable growth by increasing capital expenditure year on year and looks to improve the infrastructure of its networks. The company invested £405.3m fixing and maintaining assets however the cold weather across the UK led to higher than expected leakages. 

"In these uncertain times defensive shares are seen to be attractive to income seeking investors and have been performing quite well. We expect this to continue going forward and with vague rumours of takeover bids emerging in the sector, there may be interesting times ahead. We continue to recommend investors looking to reap the benefits from a safer haven to ‘hold' for now.

For more information, visit share.co.uk.