4th Apr 2006 07:00
SEVERN TRENTPRE-CLOSE PERIOD TRADING UPDATE4 April 2006Severn Trent Plc is issuing the following trading update prior to announcingits full year results on 6 June 2006.The Board considers that the Group has delivered an overall encouragingoperating performance in the year, consistent with its expectations and priorguidance.Profit Before Interest and Tax (PBIT) for Severn Trent Water for the year isexpected to be some 30% - 35% higher than the prior year. This is principallydue to a 15.2% increase in prices, including inflation, applied from 1 April2005. Severn Trent Water's cost reduction plans have been progressing well, inline with management's expectations.The anticipated Severn Trent Water PBIT for 2005/06 is stated after taking aprovision for ‚£10.6m relating to the expected cost of the agreement made withOfwat arising from the regulator's interim report dated 7 March 2006 to crediteach customer account during 2006/07. See also Severn Trent Plc's announcementdated 7 March 2006, available at www.severntrent.com.Infrastructure renewals expenditure at Severn Trent Water is expected to be inthe region of ‚£80m - ‚£85m for the year. Net capital expenditure, excludingspending on infrastructure maintenance, is expected to be around ‚£315m for theyear.In recognition of the fact that Severn Trent Water turnover increased ahead offorecast, the company has held the future price increases in 2006/07 customerbills to some 0.65% below the around 7.2% increase, including inflation,allowed by Ofwat. This is expected to reduce Severn Trent Water turnover andoperating profit, by around ‚£7m in 2006/07 (and in each subsequent year of theAMP 4 period), compared to the full allowed price increases.Biffa UK has achieved a good performance in the year in a flat market. Thefirst half 2005/06 PBIT improvement of 8% is expected to progress further withfull year PBIT for Biffa UK growing over the prior year by some 10% to 15%.This year Biffa UK has benefited from a 53 week trading year, favourablyimpacting full year PBIT growth by around 2%. The collection division, thelandfill division and the special waste division are all expected to contributeto the improved profitability year on year. Biffa Belgium is expected to recorda small operating loss in the second half. This second half performance,together with a full year operating provision for environmental taxes of ‚£4.5m(H1 ‚£3.1m), is expected to lead to a full year PBIT loss for Biffa Belgium ofaround ‚£4m to ‚£5m. Biffa's overall PBIT for the year is as a result expected tobe some 2% to 5% ahead of last year, ‚£82.2m.Laboratories' are still experiencing difficult conditions in the United States,where poor underlying US market demand and price erosion have been the majorchallenges. Management has continued to concentrate in the US business on costreduction and operational improvement, including the implementation of the newLaboratories Information Management System. The UK business has continued toperform satisfactorily. Laboratories' total PBIT for the year is expected to besome 25% - 30% lower than last year within which the UK Laboratories' PBIT isexpected to be stable year on year.Water Purification and Operating Services' total PBIT for the second half ofthe year, which under IFRS excludes the contribution from its Belgian associateAquafin, is expected to be consistent with the ‚£5.5m achieved in the first halfof the year. For the full year, Water Purification and Operating Services' PBITis expected to grow over 20%.The PBIT loss for the full year for Other businesses, which include Systems,Property, Engineering consultancy and Insurance, is expected to be ‚£9m to ‚£10m.The loss includes the net cost of actions undertaken to rationalise and/ordispose of the Systems and Engineering consultancy businesses.Corporate overheads in the second half are expected to include some ‚£8m ofadditional costs, principally relating to the Group's review of its businesses,which is the subject of a separate announcement issued today.Net debt at the year end (excluding approximately ‚£125m of IAS39 fair valueadjustments) is expected to be around ‚£3.0 billion. This increase, incomparison to 31 March 2005, principally reflects the accelerated payment ofGroup dividends during the year of ‚£66m, resulting in three dividend paymentsfalling in 2005/06 and also the rising level of capital expenditure in SevernTrent Water following the start of the AMP 4 period.The full-year results will be prepared under IFRS. Severn Trent Plc'sannouncement on 19 September 2005 outlined the impact of IFRS on Severn TrentPlc's full year profit and loss account and balance sheet and providedimportant context and information relevant to this trading statement.ENQUIRIES TUESDAY 4 APRIL 2006:Mike McKeon Severn Trent 0207 233 3914 Group Finance Director Julian Wais Severn Trent 0207 233 3914 Head of Investor Relations Peter Gavan Severn Trent 07901 517 447 Director of Corporate Affairs Andrew Grant Tulchan Group 0207 353 4200 AFTER 4 APRIL 2006:Mike McKeon 0121 722 4267 Julian Wais 07899 066 242 Peter Gavan 0121 722 4310 Tulchan 020 7353 4200 Footnotes:1 The full year results will be prepared under IFRS. Severn Trent's announcement on 19 September 2005 outlined the impact of IFRS on Severn Trent's full year profit and loss account and balance sheet and provided important context and information relevant to the trading statement. The financial statements presented have been prepared in accordance with IFRS, as endorsed by the EU or where there is a reasonable expectation of endorsement by the EU before the group prepares its first annual accounts in accordance with IFRS for the year ending 31 March 2006, 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 12 to 22 of its statement of 19 September 2005. 2 PBIT is profit before interest and tax and excluding exceptional items. In this context exceptional items means material restructuring, termination and disposal 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. This document is not an offer to sell, exchange or transfer any securities of Severn Trent Plc or any of its subsidiaries and is not soliciting an offer to purchase, exchange or transfer such securities in any jurisdiction. Securities may not be offered, sold or transferred in the United States absent registration or an applicable exemption from the registration requirements of the US Securities Act of 1933 (as amended) (the `Securities Act'). The Board of Severn Trent has announced separately today that it intends to demerge its UK waste business, Biffa UK. The decision to demerge Biffa UK remains subject to shareholder and certain other approvals and to further detailed due diligence. The Board expects the demerger to be completed by the end of the year. The Board is currently considering a number of strategic options in relation to the group's Belgian waste business. The Biffa UK shares to be distributed in connection with the demerger have not been and will not be registered under the Securities Act. The Biffa shares have not been approved or disapproved by the US Securities and Exchange Commission (the "SEC") or any US state securities commission, nor has the SEC or any US state securities commission passed upon the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the US. ENDSEVERN TRENT PLCRelated Shares:
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