Severn Trent PLC

Business and Financial Review • Feb 15, 2013

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RNS Number : 9406X

Severn Trent PLC

15 February 2013

15 February 2013

Severn Trent Plc Interim Management Statement

for the period 1 October 2012 to 14 February 2013

Regulated business

Performance in our regulated business for the period since November 2012 has been largely as expected and outlook for the full year remains as previously indicated.

Total revenue for the full year should be in line with current market expectations although consumption across our measured income base has continued to decline period on period, driven by lower commercial consumption.

Operating expenditure continues to be in line with management's expectations for the year and on a like for like basis in line with the level of the Final Determination. Operating costs are expected to rise year on year, due to the impact of inflation, a full year of operating private drains and sewer assets, and increases in quasi taxes, offset by efficiency improvements.

We continue to forecast a bad debt level around 2.2% of turnover for the full year, although we continue to monitor future developments closely, especially unemployment levels and changes to the UK benefits system

Expectations for net capital expenditure (UK GAAP after deducting grants and contributions) will be towards the low end of the £555 million to £565 million range previously guided, including an estimated £10m related to private drains and sewers. The level of net infrastructure renewals expenditure included in this range is anticipated to be £140 million to £150 million.

On 18 January 2013 Severn Trent Water announced it had accepted the Section 13 Notice issued by Ofwat on 21 December 2012, setting out proposed changes to its licence.

Non-regulated business

As previously guided, on a like for like basis Severn Trent Services ongoing business (Water Purification and Operating Services) is expected to deliver mid single digit revenue growth for the full year, with PBIT impacted by investment in Operating Services andBALPURE®, which will offset the underlying growth in the business.

Group

The group interest charge is now expected to be broadly flat year on year (vs. previous guidance of slightly lower), before adjustments related to pension accounting. The non-cash interest charge will be higher than previously forecast as RPI outturned higher than expected in December 2012, but remains lower year on year. This reduction in the non-cash charge will now be fully offset by a higher cash interest cost due to a higher level of net debt over the year and the cost of carry from the recent successful bond issue. In January the group raised £500m from a 13 year bond issue, at a coupon of 3.625%, which was five and a half times subscribed and is the largest sterling bond that Severn Trent has issued.

The expected effective current tax rate for the group for 2012/13 remains at 24% to 26%.

On 17 January 2013 Ofwat announced it had accepted binding commitments from Severn Trent Plc, offered to address concerns raised by Ofwat following a complaint under the Competition Act. As a result, the investigation has been closed without any findings being established in respect of the allegations made in the complaint.

On 8 February Severn Trent Plc announced the sale of Severn Trent Analytical Services (also known as Severn Trent Laboratories) to ALS Limited. 

Severn Trent Plc will announce its Preliminary results for the period ending 31 March 2013 on 30 May 2013.

Enquiries:

Tony Wray	Severn Trent Plc	0207 353 4200 (on the day)
Chief Executive		02477 715000
Mike McKeon	Severn Trent Plc	0207 353 4200 (on the day)
Finance Director		02477 715000
Rob Salmon	Severn Trent Plc	0207 353 4200 (on the day)
Head of Communications		02477 715000
John Crosse	Severn Trent Plc	0207 353 4200 (on the day)
Head of Investor Relations		02477 715000
Anastasia Shiach / Martha Kelly	Tulchan Communications	0207 353 4200

Forward-Looking Statements:

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', 'will', 'should', 'expects', 'believes', 'intends', 'plans', 'potential', 'reasonably possible', '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 regime within which the group operates (including increased competition); developments in the capital markets from which the group raises finance;  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. No assurances can be given that the forward looking statements in this document will be realised.  Subject to compliance with applicable law and regulations, Severn Trent does not intend to update these forward looking statements and does not undertake any obligation to do so.

Nothing in this document should be regarded as a profits forecast.

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).

This information is provided by RNS

The company news service from the London Stock Exchange

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