Severn Trent PLC

Quarterly Report • Sep 8, 2016

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RNS Number : 2829J

Severn Trent PLC

08 September 2016

Restatement of prior-year results following the reclassification of the non-household retail activities as discontinued operations

Severn Trent Plc announces the restatement of prior-year results as a consequence of the reclassification of the non-household retail activities as discontinued operations. These activities are restated following the formation of the Water Plus joint venture (JV) with United Utilities, which completed on 1 June 2016 following Competition and Markets Authority approval on 3 May 2016. For the full financial year to 31 March 2017, the results for the Group will therefore include two months of discontinued operations for non-household retail operations, and ten months of the Group's 50% share of the JV.

The following restatement of 2015/16 half-year and full-year data at this time is to assist investors and analysts in their financial modelling of the Group, in advance of the half-year 2016/17 results, which will be announced on 24 November 2016.

As a result of this announcement there is no material change to current year business performance or outlook since the full-year 2015/16 results on 24 May 2016.

Summary restatement

Prior year ended 31 March 2016:

	Regulated Water and Waste Water	Business Services	Corporate and Other	Consol adjs	Group
	£m	£m	£m	£m	£m
Turnover:
From continuing operations
As previously reported	1,506.1	674.6	3.2	(397.0)	1,786.9
Non-household retail	-	(397.9)	-	364.7	(33.2)
Restated	1,506.1	276.7	3.2	(32.3)	1,753.7
From discontinued operations(1)
As previously reported	-	29.7	-	-	29.7
Non-household retail	-	397.9	-	-	397.9
Restated	-	427.6	-	-	427.6
Profit before interest, tax and exceptional items (PBITE)(2):
From continuing operations
As previously reported	492.1	38.2	(7.9)	0.4	522.8
Non-household retail	(9.6)	(9.8)	-	-	(19.4)
Restated	482.5	28.4	(7.9)	0.4	503.4
From discontinued operations
As previously reported	-	2.1	-	-	2.1
Non-household retail	-	19.4	-	-	19.4
Restated	-	21.5	-	-	21.5

·    Group turnover from continuing operations reduced by £33.2 million. This represents the sales of the Severn Trent Water non-household retail business and of our out of area retail business mainly in Scotland (£397.9m), less the sales from our wholesale business to our non-household retail business (£364.7m). Group PBITE from continuing operations is restated by £19.4 million.

·    Business Services turnover from continuing operations reduced by £397.9 million and PBITE from continuing operations is restated by £9.8 million.

·    Regulated Water and Waste Water turnover is unaffected, but PBITE reduced by £9.6 million to reflect the share of costs incurred in Regulated Water and Waste Water that were previously reallocated to non-household retail operations. As these activities are not transferring to the JV they are deemed to remain with Regulated Water and Waste Water for the purpose of this restatement.

·    Discontinued operations turnover increased by £397.9 million and PBITE increased by £19.4 million.

Summary restatement

Prior six months ended 30 September 2015:

	Regulated Water and Waste Water	Business Services	Corporate and Other	Consol adjs	Group
	£m	£m	£m	£m	£m
Turnover:
From continuing operations
As previously reported	754.4	337.3	3.0	(198.6)	896.1
Non-household retail	-	(203.2)	-	185.7	(17.5)
Restated	754.4	134.1	3.0	(12.9)	878.6
From discontinued operations(1)
As previously reported	-	29.7	-	-	29.7
Non-household retail	-	203.2	-	-	203.2
Restated	-	232.9	-	-	232.9
Profit before interest tax and exceptional items (PBITE):
From continuing operations
As previously reported	270.2	17.3	(5.8)	(0.7)	281.0
Non-household retail	(4.8)	(6.1)	-	-	(10.9)
Restated	265.4	11.2	(5.8)	(0.7)	270.1
From discontinued operations(1)
As previously reported	-	2.1	-	-	2.1
Non-household retail	-	10.9	-	-	10.9
Restated	-	13.0	-	-	13.0

·    Group turnover from continuing operations reduced by £17.5 million This represents the sales of the Severn Trent Water non-household retail business and of our out of area retail business mainly in Scotland (£203.2m), less the sales from our wholesale business to our non-household retail business(£185.7m). Group PBITE from continuing operations is restated by £10.9 million.

·    Business Services turnover from continuing operations reduced by £203.2 million and PBITE from continuing operations is restated by £6.1 million.

·    Regulated Water and Waste Water turnover is unaffected but PBITE reduced by £4.8 million to reflect the share of costs incurred in Regulated Water and Waste Water that were previously reallocated to non-household retail operations. As these activities are not transferring to the JV they are deemed to remain with Regulated Water and Waste Water for the purpose of this restatement.

·    Discontinued operations turnover increased by £203.2 million and PBITE increased by £10.9 million.

Notes:

1 Discontinued operations previously reported comprise the Water Purification business that was sold in July 2015.

2 PBITE = Profit before interest, tax and exceptional items.

Enquiries

Ruban Chandran	Severn Trent Plc	07957 166615
Head of Investor Relations
Richard Tunnicliffe	Severn Trent Plc	07834 419722
Investor Relations Manager

Appendix

Restatement of P&L for the prior year ended 31 March 2016:

The following P&L summaries are provided to assist the reader in comparing continued and discontinued operations side by side.

Ø Group

	Continuing			Discontinued				Total
	Previously reported	Non household retail	Restated	Previously reported	Non household retail	Restated	Consol adjs
	£m	£m	£m	£m	£m	£m	£m	£m
Turnover	1,786.9	(33.2)	1,753.7	29.7	397.9	427.6	(364.7)	1,816.6
Profit before interest tax and exceptional items (PBITE)	522.8	(19.4)	503.4	2.1	19.4	21.5	-	524.9
Exceptional items	1.0	-	1.0	(2.7)	-	(2.7)	-	(1.7)
Profit before interest and tax	523.8	(19.4)	504.4	(0.6)	19.4	18.8	-	523.2
Net finance costs	(209.3)	-	(209.3)	-	-	-	-	(209.3)
Gains/(losses) on financial instruments	7.7	-	7.7	-	-	-	-	7.7
Share of results of associates and joint ventures	0.1	-	0.1	-	-	-	-	0.1
Profit before tax	322.3	(19.4)	302.9	(0.6)	19.4	18.8	-	321.7
Taxation	9.7	3.9	13.6	(0.1)	(3.9)	(4.0)	-	9.6
Profit after tax	332.0	(15.5)	316.5	(0.7)	15.5	14.8	-	331.3

Turnover from continuing operations is reduced by £33.2m representing the sales of the Severn Trent Water non-household retail business and of our out of area retail business mainly in Scotland (£397.9m), less the sales from our wholesale business to our non-household retail business (£364.7m).

Turnover from discontinued operations is increased by the sales from the Severn Trent Water non-household retail operations and the sales from the out of area retail business.

The sales from the wholesale business to the Severn Trent Water non-household retail business are included in continuing operations but eliminated from the total group sales as a consolidation adjustment.

PBITE from continuing operations is reduced by the PBITE from both non-household retail businesses. In addition shared retail and central overhead costs incurred in Regulated Water and Waste Water that were previously allocated to non-household retail activities, but which will not be transferred into the joint venture, have been retained in continuing activities. Further detail is provided in the segmental analysis below.

Segmental results

Ø Business Services

	Continuing			Discontinued			Total
	Previously reported	Non household retail	Restated	Previously reported	Non household retail	Restated	Total
	£m	£m	£m	£m	£m	£m	£m
Turnover	674.6	(397.9)	276.7	29.7	397.9	427.6	704.3
Profit before interest tax and exceptional items (PBITE)	38.2	(9.8)	28.4	2.1	19.4	21.5	49.9
Exceptional items	-	-	-	(2.7)	-	(2.7)	(2.7)
Profit before interest and tax	38.2	(9.8)	28.4	(0.6)	19.4	18.8	47.2

The reduction in continuing turnover represents the sales from the Severn Trent Water non-household retail operations and the sales from the out of area retail business. This is reflected as increased turnover from discontinued operations.

PBITE from continuing operations is reduced by the PBITE from both non-household retail businesses.

PBITE from discontinued operations is increased by the amount previously reported within continuing operations plus £9.6 million from shared costs for activities not transferred to the discontinued operation and are now reported in Regulated Water and Waste Water.

Ø Regulated Water and Waste Water

	Continuing			Discontinued			Total
	Previously reported	Non household retail	Restated	Previously reported	Non household retail	Restated
	£m	£m	£m	£m	£m	£m	£m
Turnover	1,506.1	-	1,506.1	-	-	-	1,506.1
Profit before interest tax and exceptional items (PBITE)	492.1	(9.6)	482.5	-	-	-	482.5
Exceptional items	1.0	-	1.0	-	-	-	1.0
Profit before interest and tax	493.1	(9.6)	483.5	-	-	-	483.5

The reduction in PBITE represents shared costs, previously allocated to non-household retail, for activities not transferred to the discontinued operations. These costs include shared retail activities such as billing and cash collection and an element of shared central overheads that remain with the continuing business.

Restatement of P&L for the six months ended 30 September 2015:

The following P&L summaries are provided to assist the reader in comparing continued and discontinued operations side by side.

Ø Group

	Continuing			Discontinued				Total
	Previously reported	Non household retail	Restated	Previously reported	Non household retail	Restated	Consol adjs
	£m	£m	£m	£m	£m	£m	£m	£m
Turnover	896.1	(17.5)	878.6	29.7	203.2	232.9	(185.7)	925.8
Profit before interest tax and exceptional items (PBITE)	281.0	(10.9)	270.1	2.1	10.9	13.0	-	283.1
Exceptional items	-	-	-	(2.7)	-	(2.7)	-	(2.7)
Profit before interest and tax	281.0	(10.9)	270.1	(0.6)	10.9	10.3	-	280.4
Net finance costs	(106.3)	-	(106.3)	-	-	-	-	(106.3)
Gains/(losses) on financial instruments	11.5	-	11.5	-	-	-	-	11.5
Share of results of associates and joint ventures	-	-	-	-	-	-	-	-
Profit before tax	186.2	(10.9)	175.3	(0.6)	10.9	10.3	-	185.6
Taxation	(39.3)	2.2	(37.1)	(0.1)	(2.2)	(2.3)	-	(39.4)
Profit after tax	146.9	(8.7)	138.2	(0.7)	8.7	8.0	-	146.2

Turnover from continuing operations is reduced by £17.5m representing the sales of the Severn Trent Water non-household retail business and of our out of area retail business mainly in Scotland (£203.2m), less the sales from our wholesale business to our non-household retail business (£185.7m).

Turnover from discontinued operations is increased by the sales from the Severn Trent Water non-household retail operations and the sales from the out of area retail business.

The sales from the wholesale business to the Severn Trent Water non-household retail business are included in continuing operations but eliminated from the total group sales as a consolidation adjustment.

PBITE from continuing operations is reduced by the PBITE from both non-household retail businesses. In addition shared retail and central overhead costs incurred in Regulated Water and Waste Water that were previously allocated to non-household retail activities, but which will not be transferred into the joint venture, have been retained in continuing activities. Further detail is provided in the segmental analysis below.

Segmental results

Ø Business Services

	Continuing			Discontinued			Total
	Previously reported	Non household retail	Restated	Previously reported	Non household retail	Restated	Total
	£m	£m	£m	£m	£m	£m	£m
Turnover	337.3	(203.2)	134.1	29.7	203.2	232.9	367.0
Profit before interest tax and exceptional items (PBITE)	17.3	(6.1)	11.2	2.1	10.9	13.0	24.2
Exceptional items	-	-	-	(2.7)	-	(2.7)	(2.7)
Profit before interest and tax	17.3	(6.1)	11.2	(0.6)	10.9	10.3	21.5

The reduction in continuing turnover represents the sales from the Severn Trent Water non-household retail operations and the sales from the out of area retail business. This is reflected as increased turnover from discontinued operations.

PBITE from continuing operations is reduced by the PBITE from both non-household retail businesses.

PBITE from discontinued operations is increased by the amount previously reported within continuing operations plus £4.8 million from shared costs for activities not transferred to the discontinued operation and are now reported in Regulated Water and Waste Water.

Ø Regulated Water and Waste Water

	Continuing			Discontinued			Total
	Previously reported	Non household retail	Restated	Previously reported	Non household retail	Restated
	£m	£m	£m	£m	£m	£m	£m
Turnover	754.4	-	754.4	-	-	-	754.4
Profit before interest tax and exceptional items (PBITE)	270.2	(4.8)	265.4	-	-	-	265.4
Exceptional items	-	-	-	-	-	-	-
Profit before interest and tax	270.2	(4.8)	265.4	-	-	-	265.4

The reduction in PBITE represents shared costs, previously allocated to non-household retail, for activities not transferred to the discontinued operations. These costs include shared retail activities such as billing and cash collection and an element of shared central overheads that remain with the continuing business.

This information is provided by RNS

The company news service from the London Stock Exchange

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