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Severn TrentAnnouncement

06/09/2014 16:39

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RNS Number : 4163M
Severn Trent PLC
16 July 2014 
 
16 July 2014 
 
Severn Trent Plc Interim Management Statement 
 
for the period 1 April to 15 July 2014 
 
The Board of Severn Trent Plc confirms that trading across the group has been
in line with its expectations and prior guidance. 
 
Regulated business 
 
Customer bills increased by less than inflation, with prices at Severn Trent
Water increasing by 1.5% from 1 April 2014, reflecting November RPI of 2.6%
and a k-factor of minus 1.1%. For the full year we still expect consumption
across our measured income base to be lower year on year. 
 
We have continued to manage our bad debt effectively, with our forecasted bad
debt level maintained at around 2.2% of turnover for the full year, and we
continue to monitor developments such as unemployment levels and changes to
the UK benefits system closely. 
 
Operating expenditure continues to be in line with the Board'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 and increases in quasi taxes and power costs,
partially offset by efficiency improvements. 
 
We have made good progress in delivering our capital investment programme.
Expectations for net capital expenditure (UK GAAP after deducting grants and
contributions) remain in the range £510 million to £530 million, including an
estimated £15 million related to private drains and sewers. The level of net
infrastructure renewals expenditure included in this range is anticipated to
be £125 million to £135 million. 
 
Following our best ever environmental performance last year, Severn Trent
Water has now been ranked as the industry leading company in 2013 by the
Environment Agency's National Environmental Performance Assessment Process,
and is the only company to achieve their highest four star rating. 
 
PR14 
 
During the period Severn Trent Water submitted its revised business plan for
2015-2020 to Ofwat. The revised plan reflects guidance given by Ofwat in
January 2014 on risk and reward, and the constructive dialogue Severn Trent
Water has had with Ofwat to address evidence requests highlighted in the risk
based review published in April 2014. As announced on June 27, elements of the
plan that change since first submission in December 2013 are: 
 
·    Adoption of Ofwat's risk and reward guidance (overall weighted average
cost of capital for the appointed business of 3.85%, real); 
 
·    PAYG (pay as you go) rate for the wholesale business of c.57% (from c.55%
in the December plan); 
 
·    Outcome delivery incentives (ODIs) range in line with Ofwat's guidance; 
 
·    Total expenditure (totex) of £6.2 billion (vs. £6.1 billion in December
plan)1; 
 
·    Legacy adjustments - the revised plan includes an additional £10 million
shortfall to RCV to reflect serviceability performance that fell short of our
targets; 
 
·    Customer bills will decrease in real terms by an average equivalent of
1.5% over the five year period (1.2% real decrease in December plan); average
household bills remain frozen in year one. 
 
1.     2012/13 prices 
 
Severn Trent Water will continue to have the lowest combined average bill in
England and Wales for the 2015-2020 period. Severn Trent Water believes the
revised Plan is fair, financeable, and balances the interests of all
stakeholders between value for money, delivering better outcomes and returns
for investors. Ofwat will now carefully review and assess the plan and a draft
determination is expected on 29 August. 
 
Non-regulated business 
 
In Severn Trent Services we expect to see further growth in Operating
Services. In Products we expect to see the benefits of the restructuring
programme, which is currently being implemented and on track to deliver the
benefits as expected. 
 
Group 
 
The group interest charge is expected to be higher year on year due to higher
net debt. 
 
The effective current tax rate for the group for 2014/15 is expected to be
between 20% and 22%. 
 
Under our dividend policy of RPI+3% growth the dividend for 2014/15 is set to
be 84.90 pence, representing growth of 5.6% year on year. 
 
Severn Trent Plc will announce its interim results for the period ending 30
September 2014 on 25 November 2014. 
 
Enquiries: 
 
 Liv Garfield                  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                
 David Shriver / Martha Walsh  Tulchan Communications  0207 353 4200               
 
 
Cautionary statement regarding Forward Looking Statements 
 
This document contains statements that are, or may be deemed to be,
'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', 'would', 'should', 'expects', 'believes', 'intends',
'plans', 'projects', 'potential', 'reasonably possible', 'targets', 'goal' or
'estimates' and, in each case, their negative or other variations or
comparable terminology. Any forward-looking statements in this document are
based on Severn Trent's current expectations and, 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 may or may not occur in the future. 
 
Forward-looking statements are not guarantees of future performance and no
assurances can be given that the forward-looking statements in this document
will be realised. There are a number of factors, many of which are beyond
Severn Trent's control, that could cause actual results, performance and
developments to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to: the
Principal Risks disclosed in our Annual Report as at May 2013 (which have not
been updated since); 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. Subject to compliance with
applicable laws 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