3rd Oct 2006 07:00
SEVERN TRENT PLCPRE-CLOSE PERIOD TRADING STATEMENT3 October 2006Severn Trent is issuing the following trading update ahead of the close periodprior to the announcement of results on 7 December 2006 for the six monthsended 30 September 2006.The Board considers that overall the Group has delivered first half-yearperformance that is broadly consistent with its expectations for the full year.Water and SewerageSales prices have increased by 6.58% (including inflation) from 1 April 2006,being the 7.23% increase allowed by Ofwat less the 0.65% voluntary abatement ofK, as previously announced. In addition, the cost of completing the agreementmade with Ofwat arising from their report dated 7 March 2006 will reduce firsthalf turnover and PBIT by around ‚£3.2m (full year around ‚£6.3m). This amountwill be credited to customer accounts during 2006/07 and represents the fullcost of the ‚£1m per annum difference (plus inflation) between the voluntaryabatement of K and Ofwat's position over the remainder of AMP4.Severn Trent Water continues to focus on the operating cost challenge of theAMP4 contract. As previously announced, rising energy prices, net of efficiencysavings, will have a significant impact on 2006/07 operating costs, with fullyear costs expected to be around ‚£15m to ‚£20m higher than last year.Investment in leakage management to address the conditions towards the end of2005/06 and the continued drive to improve customer service levels will furtherimpact on the level of operating costs in 2006/07. As a result, we expecthigher operating costs in the first half of around ‚£4m, with the full yearimpact anticipated to be around ‚£6m.Severn Trent Water's infrastructure maintenance programme and rate ofexpenditure are progressively increasing through the year. As a result thefirst half expenditure for 2006/07 of around ‚£40m to ‚£42m for such maintenanceis expected to represent around 40% of the total expenditure for the year.Gross capital expenditures under UK GAAP, (including infrastructure maintenanceexpenditure) are expected to be around ‚£500m for the full year 2006/07, withexpenditures in the first half of around ‚£195m.Waste ManagementOn 13 September, Severn Trent announced the terms of the Biffa demerger,together with details of a special dividend and share consolidation of SevernTrent Ordinary Shares. Subject to, among other things, a resolution to approvethe Demerger being passed at an extraordinary general meeting on Friday 6October, dealings in Biffa shares are expected to commence on Monday 9 October.As the demerger of Biffa is therefore expected to occur during the second half,Biffa will be included in the results of the Group's continuing operations forthe first half year.Biffa's prospectus contains a statement that based on Biffa's financialperformance since 1 April 2006, Biffa continues to trade in line with Biffa'sDirectors' expectations and that the directors of Biffa have confidence inBiffa's prospects for the current financial year.UK LaboratoriesUK Laboratories' PBIT for the first half of 2006/07 is expected to be aroundthe result achieved for the second half of 2005/06 (‚£2.6m).Water Purification and Operating ServicesWater Purification and Operating Services continue to make good progress. TotalServices' PBIT for the first half of 2006/07 is expected to be around theresult achieved for the second half 2005/06 (‚£6.5m).Other BusinessesOther Businesses, which include Property and Insurance, are expected to recorda PBIT loss of approximately ‚£1m to ‚£1.5m in the first half of 2006/07,compared to a full year loss in 2005/06 of ‚£3.5m.CorporateCorporate overheads in the first half are expected to be around the same levelas that incurred in the second half of 2005/06, before taking into account some‚£9m to ‚£11m (second half 2005/06 ‚£7.8m) of additional costs relating to thedemerger of Biffa.The disposals of Biffa Belgium and Aquafin have been completed in the firsthalf year, with exceptional profits on disposal of around ‚£25m expected to berecorded in the first half of 2006/07. In addition, the sale of US Laboratorieswas announced on 25 September, with this transaction expected to complete bythe end of December 2006. It is anticipated that US Laboratories will thereforebe treated as a discontinued business in the first half year. The anticipatedbook loss on disposal of this business is expected to be around ‚£31m.The sale process for the Property business is continuing.Net debt at the half year (excluding IAS 39 fair value adjustments) is expectedto be around ‚£3.0 billion.ENQUIRIES TUESDAY 3 OCTOBER 2006:Mike McKeon Severn Trent 0207 353 4200 Group Finance Director Jonathan Davies Severn Trent 0207 353 4200 Head of Investor Relations Peter Gavan Severn Trent 07901 517 447 Director of Corporate Affairs David Trenchard Tulchan 0207 353 4200 Peter Hewer AFTER 3 OCTOBER 2006:Mike McKeon Severn Trent 024 7665 6169 Group Finance Director Jonathan Davies Severn Trent 0121 722 4295 Head of Investor Relations Peter Gavan Severn Trent 024 7665 6114 Director of Corporate Affairs David Trenchard Tulchan 0207 353 4200 Peter Hewer Footnotes:1 The financial statements presented have been prepared in accordance with IFRS, as endorsed by the EU, and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or its predecessor body. The group's IFRS accounting policies are set out on pages 57 to 63 of its 2006 Annual Report. 2 PBIT is profit before interest and tax and excluding exceptional items. 3 This document contains certain "forward-looking statements" with respect to Severn Trent's financial condition, results of operations and business and certain of Severn Trent's plans and objectives with respect to these items. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "anticipates", "aims", "due", "could", "may", "should", "expects", "believes", "intends", "plans", "targets", "goal" or "estimates". By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies and markets in which the Group operates; changes in the regulatory and competition frameworks in which the Group operates; the impact of legal or other proceedings against or which affect the Group; and changes in interest and exchange rates. All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Severn Trent or any other member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Severn Trent does not intend to update these forward-looking statements. ENDSEVERN TRENT PLCRelated Shares:
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