Equities Update: Severn Trent, Wood Group…

Severn Trent reports strong start to year but public pressure mounting

Mark Crouch, analyst at investment platform eToro, says: “Severn Trent has reported another strong start to the year and remains on track to meet guidance forecasts. However, there are some potential problems for the company bubbling beneath the surface.

“A distinct lack of investment in the country’s water infrastructure has almost become a throwaway line in recent years, with water companies accused of prioritising profits over safety and quality while running something of a monopoly, given the lack of competition.

“Severn Trent was responsible for thousands of sewage spills in 2023, with spills increasing more than 30%. To the company’s credit, they have invested significantly into improving their network, however their target of halving spills by 2030 looks at this stage ambitious at best.

“Severn Trent had proposed a 50% rise in bills over the next five years, however the UK’s water regulator Ofwat has restricted that number to 21%. Calls for the new Labour government to nationalise the water companies are getting louder. And while that prospect seems unlikely, it will hopefully act as a potent incentive for firms to clean up their act.”

Wood group posts steady update, reaffirms outlook

Adam Vettese, analyst at investment platform eToro, says: “Wood Group is working smart in the sense that there’s less revenue but they’re doing more with it, with margins being a metric they can boast some progress on.

“In the midst of a tough market, Wood’s six-year contract win with Shell should be considered a highlight. Investors will be happy to see some progress in the price this year but there’s a fair way to go to reach some of those post-pandemic bright spots, let alone what came before.

“Sustainability seems to be the name of the game for Wood. With many new projects being in the renewable or clean energy sector, investors will be asking whether this pipeline is enough to drive the price back up to the significantly higher levels they saw in the not-too-distant past.”