Waste boosts Severn Trent

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A STRONG performance from Severn Trent's waste management arm helped lift annual profits at the water company by 4.2 per cent to pounds 281.4m, the top end of market forecasts, writes Russell Hotten.

The results were accompanied by confident predictions, and Severn's shares rose as analysts raised profit forecasts for the current year by about pounds 5m to pounds 306m.

Operating profits at the waste business, Biffa, rose 18.3 per cent to pounds 14.2m, because of a jump in rubbish collection and landfill business. Biffa was bought for pounds 212m in 1991 and marked the start of Severn's ambitious diversification drive.

Roderick Paul, chief executive, could not say when Biffa would start covering its finance costs but said: 'We are very pleased with the performance of Biffa, where volumes rose by 16 per cent.'

Severn aims to make 15 per cent of post-tax earnings from outside the water business. Waste services in Belgium saw turnover increase 11.5 per cent to pounds 19.4m, although profits fell 2.9 per cent to pounds 3.4m.

Profits at Severn's technology business doubled, but the international water services business suffered a pounds 4.7m loss because of delays on two big contracts and market development costs. International water services is making an operating profit.

Severn continues to cut costs at its water operation, where profits rose by pounds 31.6m to pounds 325m. The division shed 439 jobs last year and redundancy costs were pounds 4m. The company's capital spending programme has peaked, with expenditure down 24 per cent and expected to continue to fall.

A final dividend of 15.20p makes 22.75p for the year, up 7.8 per cent. Shares rose 11p to 537p.