Severn Trent Plc (SVT.L) reported Tuesday that its pre-tax profit increased 51% from last year, reflecting higher turnover as well as gains on financial instruments. On an after-tax basis, the company turned to a profit from last year's loss, absent prior year's exceptional tax charge. Further, the UK-based supplier of water and waste water treatment solutions announced higher interim dividend, and added that it remains on track to deliver additional cost savings planned for the full year.
Pre-tax profit for the six months to September 30, 2009 grew to GBP 208.2 million from last year's GBP 137.9 million.
The latest first-half results included a net exceptional operating charge of GBP 11.5 million, mainly related to restructuring and realigning businesses, while prior year's exceptional charges were GBP 4.4 million. The first-half results also included gains on financial instruments of GBP 31.7 million, compared to losses of GBP 12.2 million a year ago.
On an underlying basis, before exceptional items and gains on financial instruments, profit before tax rose 21.7% to GBP 188 million from GBP 154.5 million a year ago.
The company recorded total tax charge of GBP 58.2 million for the period, while prior year's tax charge was GBP 221.1 million that included an exceptional charge of GBP 185.6 million in relation to the phased withdrawal of Industrial Buildings Allowances.
On an after-tax basis, profit for the period attributable to equity holders of the company was GBP 149.7 million or 63.4 pence per share, compared to prior year's loss of GBP 83.8 million or 35.8 pence per share.
First-half adjusted earnings grew to GBP 143.4 million or 60.7 pence per share from GBP 117.2 million or 49.8 pence per share in the previous year.
Severn Trent's total turnover for the period increased 4.6% to GBP 852.1 million from GBP 814.3 million a year ago, mainly due to the price increases in Severn Trent Water.
Severn Trent Water, which provides water and waste water services to domestic and commercial customers in England and Wales, recorded turnover of GBP 695.3 million, up 4% from last year's GBP 668.4 million. Sales prices increased 5.3% from April 1, 2009, including inflation. The company noted that the decline in consumption across its measured income base that has continued at similar levels to last year has reduced the first-half turnover. The trend has now stabilized, although the company continues to monitor developments.
Severn Trent Services, which provides services and products associated with water, waste water and contaminated land principally in the US, UK and Europe, generated revenues of GBP 165.5 million, 5.3% higher than last year's GBP 157.1 million. After adjusting for the impact of exchange rate fluctuations and the effects of small acquisitions and disposals, Severn Trent Services' turnover, on a like for like constant currency basis, was down 5.8%.
The company's total profit before interest and tax, or PBIT, increased 7.2% to GBP 275.6 million from prior year's GBP 257.1 million, and underlying PBIT rose 9.8% to GBP 287.1 million from GBP 261.5 million a year earlier. Severn Trent Water's underlying PBIT was up 9.4% from last year to GBP 279.3 million, while Severn Trent Services' underlying PBIT decreased 8.3% to GBP 12.2 million.
Commenting on the results, Sir John Egan, Chairman Severn Trent, said, "Severn Trent continues to build on the progress we have made to date and has remained focused on delivering further improvements in efficiency, processes and standards, as well as successfully managing impacts from the economic environment such as bad debts and consumption levels, all of which is reflected in the 9.8% year on year increase in underlying PBIT for the first half."
Further, Severn Trent's Board declared an interim ordinary dividend of 26.71 pence, up 1.6% from last year's 26.29 pence, payable on January 15, 2010 to shareholders on the register at December 4, 2009.
Looking ahead, Tony Wray, Chief Executive Severn Trent, said, "We remain on track to deliver our investment programme for the final year of AMP4, as well as the additional cost savings announced in May. We remain committed to raising standards, driving operational efficiency and investing in areas of the business where customers see real benefit, to deliver the lowest possible bills along with appropriate returns to our shareholders."
Severn Trent noted that Water Purification in its Severn Trent Services segment has a strong order book, and that it expects an improved performance in the second half of the year. The company also said that operating services will continue to focus on cost control and delivery, while the environment for Analytical Services remains challenging.
Regarding its Ofwat Draft Determination, the company noted that it awaits publication of the Final Determination on November 26. Severn Trent said it has fully engaged with Ofwat in responding to the draft determination and have now completed formal representations. The document will contain new price limits for the 2010 to 2015 period, which take effect in April 2010. The company added that it will take the time necessary to analyse it in full, as the document will be detailed and complex, before making its own conclusions and responding to stakeholders.
On the London Stock Exchange, SVT.L is currently trading at 999.50 pence, up 2.50 pence or 0.25%, on a volume of 64 thousand shares.
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