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Severn Trent, the FTSE 100 water provider, aims to generate £100m of extra profits over the next decade by selling unused land to build homes in the UK.
Alongside half-year results, Severn Trent said land sales would result in extra profits before interest and tax of £5m to £15m per year, which would be partially shared with customers by helping to keep bills lower.
“These plans will benefit our communities, help to address the housing shortage and create new jobs,” the group added.
Severn Trent has about 3,000 acres of spare land, mostly in the UK midlands, chief executive Liv Garfield told analysts on a conference call.
The water group estimates it can sell enough land to create 1,000 new homes by 2020, a person with knowledge of the plans said. The person added that discussions with housebuilders have already begun. Shares were up slightly in Thursday trading.
As a government-regulated utility that needs to maintain positive relations with policymakers, Severn Trent’s land sale pledge “looks good”, RBC analyst Maurice Choy said. “Anything companies in this sector can do to lift trust and legitimacy will be welcomed,” he added.
Prime Minister Theresa May has said Britain’s housing market is “broken” and declared she was making it “my mission” to fix the problem.
In Wednesday’s Budget, chancellor Philip Hammond also announced an “urgent review” into whether housebuilders were sitting on too much land, with targets to build 300,000 homes every year.
The water sector has been under political and public scrutiny about quality and service issues. Fellow utility Thames Water was fined a record £20.3m in March after it admitted to dumping 1.4bn litres of raw sewage into the Thames.
Following complaints by residents of a small Derbyshire village, who claimed to have suffered sewer flooding incidents at the hands of Severn Trent from 2000 to 2012, Ofwat last year accused the company of delivering “very poor customer service”.
The water provider has since overhauled its complaints policy, and on Thursday it said it had reduced total sewer floodings by 48 per cent in the first half of its financial year, compared with the same period in 2016.
In the six months to September, Severn Trent’s turnover rose almost 4 per cent to £850m, boosted by higher prices, lower costs and the acquisition of rival Dee Valley Water. Pre-tax profits were flat on the same period last year at £182m. The group will pay an interim dividend of 34.6p per share.
Severn Trent said it now expected to earn at least £50m in outcome delivery incentives in the full year ending March 2018 — in effect, the financial rewards for meeting or exceeding targets set by the regulator — which is just over the £48m last year.