By Philip Waller
LONDON (Reuters) - Water group Severn Trent
Lower consumption by the likes of premium car maker Jaguar Land Rover meant annual revenue would drop by between 20 million pounds and 25 million, compared with a fall of 12 to 15 million it previously forecast, Severn Trent said on Tuesday.
Its shares were down 4.8 percent at 1,130 pence by 1033 GMT, having fallen as low as 1,120p, helping drag down peers United Utilities
Credit Suisse noted Severn Trent's comments had implications for utilities generally. "Overall we think the news is negative, not just for Severn Trent but for sector sentiment," the broker said in a note to clients.
Severn Trent, which provides water and sewerage services to more than 3.7 million households and companies in central England and mid-Wales, said it expected a continuing decline in consumption, mainly due to non-household customers using less.
Finance director Mike McKeon said on a conference call the company was seeing an impact from the collapse of retailers such as Woolworths and MFI as well as the downturn at manufacturers such as Jaguar Land Rover, whose several plants in its region have been hit by a drop in car demand.
NOT POSITIVE
Commercial customers account for about 20 percent of the company's revenue, he said.
"There's a combined (impact from) companies going out of business or not performing at the level they normally would," McKeon said.
McKeon noted analysts were expecting Severn Trent to report full-year pretax profit before interest and exceptional items of between 465 million pounds and 480 million, against 469.5 million last time, but declined to say what the company's own expectations were.
Analyst Angelos Anastasiou at Pali International said the broker had reduced its 2008/9 pretax profit forecast by 11 million pounds to 270.4 million.
"While this is not positive, everything else seems to be on track," Anastasiou said, adding that Pali was keeping its "buy" recommendation on the stock.
Severn Trent said operating and capital expenditure during the current regulatory period remained in line with the company's expectations, although it was expecting its gross capital spending for 2008/9 to fall to between 650 million pounds and 670 million, from 670 million to 690 million.
The group said it was on track to meet its operating and capital spending targets in monetary terms, although falling inflation was likely to cause the target set by the regulator to be lower than expected going into the final year of its current regulatory period.
McKeon said Severn Trent was taking the reduction into account in its financial planning. "We are working hard to see where we can take advantage of lower inflation," McKeon said.
(Editing by Mike Nesbit and David Holmes)
($1=.7176 pounds)
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Last updated: 27 January 2009, 11:11
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