Final Results - Year Ended 31 March 2000
Severn Trent PLC
5 June 2000
Preliminary Results for the year ended 31 March 2000
SEVERN TRENT TAKES OVER AS NATIONAL WASTE LEADER WITH UK WASTE ACQUISITION
Severn Trent Plc today announced the acquisition of UK Waste from Waste
Management Inc. for £380 million, establishing Severn Trent's waste arm Biffa,
as the clear UK waste leader. The merger of this predominantly collection and
recycling business with Biffa will create a business with a turnover of nearly
£500 million.
Severn Trent also announced that it is in negotiations with Waste Management
Inc. to acquire WM Sellbergs (Sweden); agreements have not yet been finalised,
as a number of significant issues are still to be resolved. Severn Trent will
only conclude a deal that is shareholder value enhancing.
Today's results reflect a major change in the shape of the Group with the
annual turnover rate for the non-regulated arms expected to account for over
50% of the Group total in the current year. Key acquisitions over the past
year by Severn Trent Services have already secured Severn Trent's position as
the leader in environmental testing laboratories in the US and UK, and reflect
the Group's transformation into an international environmental services
business.
Financial and operating highlights:
Group: Turnover up 14.8% to £1,566.6m (£1,364.3m)
* Profit before interest, tax and exceptional costs steady at
£459.4m (£461.7m)
* Profit before tax and exceptional costs £338.7m (£361.4m)
* Exceptional restructuring and Year 2000 costs £64.7 million
* Final dividend of 28.0p per ordinary share, bringing total for the year to
45.0p (43.0p)
* Non-regulated businesses: Turnover up 30.0% to £698.3m (98/99
£537.3m); profit before interest and tax (pre exceptionals)
£52.0m (£51.6m)
Strategic Acquisition
* Acquisition of UK Waste from Waste Management Inc. for £380
million
* Earnings enhancing in financial year 2001/02 (pre goodwill
amortisation)
* Deal defines future shape of the waste industry and creates a
platform for growth particularly for collection and recycling
Severn Trent Water: Turnover up 3.1% to £982.1m (£952.7m)
* Major restructuring programme on track to meet new regulatory
targets and deliver £60m p.a cost savings by 2005
* Ready for competition - comprehensive network access code
published
Biffa: Turnover up 17.5% to £291.1m (£247.8m)
* Excellent year for collection division - turnover up 19.1% to
£151.6m
Severn Trent Services: Rapid growth in turnover - up 63.4% to £242.8m
(£148.6m)
* Restructuring by new CEO Bill Cook to position business as
integrated solutions provider
* Market leader in environmental testing labs - UK and US
Commenting today, David Arculus, Severn Trent's Chairman, said:
'Today's announcement reflects a change in the shape of the Severn Trent Group
with our non-regulated businesses taking centre stage. Over the past decade,
we have transformed the Group from a regional water company into an
international environmental services business.
Our acquisition of UK Waste marks a highpoint in the transformation of the
Group as we take our place as the UK market leader in waste management. We
have already secured leadership positions in environmental laboratories in the
UK and the US, establishing a strong non-regulated platform for growth. The
annual run rate of turnover for our non-regulated operating arms is close to
£1 billion and is expected to account for over 50% of the Group total over the
next year.
Over the last six years, under the strong leadership of Vic Cocker, Severn
Trent has seen significant change. Vic has made a tremendous contribution to
the Group's development and has been instrumental in creating the diversified
environmental services business we see today. His successor will be our
Deputy Chief Executive, Robert Walker, whose strategic and operational skills
will be invaluable as we speed up the development of our non-regulated
activities.'
Vic Cocker, Group Chief Executive, said:
'The merger of UK Waste, which is predominantly a collection and recycling
business, with Severn Trent's waste management arm Biffa, will create a
business with a turnover of almost £500 million. The deal will redefine the
shape of the UK waste industry, and will help to progress the Government's
recently announced waste strategy.
Our excellent management team will drive further growth and profits through
our non-regulated businesses and we are very positive in our outlook for the
water business. Severn Trent Water's restructuring programme will enable us to
meet the challenging new regulatory targets and deliver £60m p.a. of cost
savings by 2005, while maintaining our excellent service and environmental
standards to deliver the highest quality for our customers.'
Enquiries:
Vic Cocker Severn Trent Plc 020 7404 5959 (on the day)
Group Chief Executive 0121 722 4000 (thereafter)
Alan Costin Severn Trent Plc as above
Group Finance Director
Samantha Cohen Severn Trent Plc 0774 700 8367
Media Relations Manager
Simon Holberton Brunswick Group 020 7404 5959
Chairman's Statement
Today's announcements reflect a significant change in the shape of the Severn
Trent Group with our non-regulated businesses taking centre stage. Over the
past decade, we have successfully transformed Severn Trent from a regional
water company into an international environmental services group. The Severn
Trent Group now comprises three main businesses - Severn Trent Water, Severn
Trent Services and Biffa, which will increasingly work together to provide
integrated environmental solutions.
We have today separately announced the conditional acquisition of UK Waste
from Waste Management Inc, which marks a highpoint in the transformation of
the Group, as Severn Trent becomes the waste leader in the UK. We are also in
negotiations with Waste Management Inc to acquire WM Sellbergs in Sweden;
agreements have not yet been finalised as a number of significant issues are
still to be resolved. We can make no further comment on the potential Swedish
transaction at this stage, but Severn Trent will only conclude a deal that
enhances value for our shareholders.
Our acquisitions over the past year have also made us the clear market leader
in environmental laboratory testing services in the US and UK. We have a new
management team in place to drive further growth and profits through our
non-regulated businesses and we are very positive in our outlook for the water
business.
I am proud to say that the Severn Trent Group is now well positioned to thrive
in a more competitive marketplace and we are looking forward to an exciting
future.
Transforming the Group
Negotiations were completed over the weekend for the acquisition of UK Waste
for £380 million, establishing Biffa as the clear UK leader in waste
management. The deal, which will be earnings enhancing in financial year
2001/02 before goodwill amortisation, redefines the shape of the UK waste
industry and helps to progress the Government's recently announced waste
strategy. UK Waste has 26 collection depots, 8 operational landfill sites and
6 paper recycling plants. The merger of this primarily waste collection and
recycling business with Biffa creates a waste business with a current turnover
of nearly £500 million (Biffa turnover 99/00 £291 million).
Acquisitions in both Biffa and Severn Trent Services, supported by the solid
financial performance of the group over the last twelve months, underline the
transformation of the Severn Trent Group. The annual rate of turnover for the
non-regulated operating arms of the Severn Trent group will be nearly £1
billion and will represent over 50% of the Group total - achieving our medium
term target for turnover.
Following this achievement, there are strong opportunities for the generation
of further growth and value, based on our attainment of leadership positions
in key markets. These include waste services (UK and Belgium), environmental
laboratories (US and UK), water and waste purification (US and Europe), and
contract operations (US and Europe). Within five years we expect around 30%
of operating profit to be derived from these activities.
Financial Review
During the year Group turnover rose 14.8% to £1,566.6m (1998/99 £1,364.3m).
Turnover from the non-regulated businesses increased by 30.0% to £698.3m
(1998/99 £537.3m) and accounted for 42% of revenues as against 36% the
previous year.
Group profit before interest and exceptional costs was £459.4m (1998/99
£461.7m). Of this, the non-regulated businesses contributed £52.0m (1998/99
£51.6m).
After exceptional costs totalling £64.7 million and interest costs of £120.7
million, profit on ordinary activities before tax was £274.0 million (1998/99
£350.4 million).
The tax charge for the year was £22.1 million (1998/99 £46.6 million), an
effective rate of 8.1% (1998/99 13.3%).
Profit after tax was £251.9 million (1998/99 £303.8 million).
Basic earnings per share before exceptional costs were 92.8p (1998/99 92.4p).
On these results the Board is recommending a final dividend of 28.0p per
ordinary share, bringing the total for the year to 45.0p (1998/99 43.0p).
Operational review
Severn Trent Water
Turnover in Severn Trent Water rose 3.1% to £982.1 million with operating
profits before exceptionals steady at £423.5 million. Water quality and
customer service levels improved again and capital investment for the year was
£556 million. This brought the total for the five year period to £2,373
million, and over the ten year period since privatisation, the company has
invested £5.0 billion in improving its infrastructure, customer service and
quality.
A major restructuring programme is in place to meet new regulatory targets and
deliver £60 million operating cost savings per annum by 2005. The cost of
this programme is expected to be £52.5 million and has been provided for as an
exceptional item in the accounts for the year ended 31 March 2000.
Severn Trent remains confident about the outlook for the water business and
believes that there are opportunities to outperform the OFWAT determination in
respect of both operating costs and capital investment costs. Our OPEX
profile for AMP3 is now determined, the first two years are fully planned, and
we aim to deliver the bulk of the savings up-front. Our CAPEX financial
profile has been finalised and virtually all outputs have been agreed with the
regulators.
Severn Trent Water is primed for opportunities presented by competition with
the publication of its Network Access Code and is in position to win more
business outside its region and offer new products and services to commercial
and industrial customers.
Biffa Waste Services
During the year Biffa Waste Services increased turnover by 17.5% to £291.1
million. Biffa's collection division had an excellent year with turnover
rising 19.1% to £151.6 million and profits increasing to £20 million. Profits
from special waste division also showed a healthy increase, but landfill
profits were down in both the UK and Belgium. UK landfill profits were
reduced by £1.8 million due to the adoption of the new FRS15 accounting
standard, and by very competitive market conditions. Consequently, profit
before interest for the Biffa group fell by 9.4% to £31 million.
Following the acquisition of UK Waste, Biffa is the clear leader in waste
management in the UK, and a strong competitor in Belgium, offering a
comprehensive range of services to industry, commerce, retail customers and
the health and public sectors. Between 1991 and 2000, Biffa almost tripled
both its revenues and profits - and until now has done so largely organically
rather than by acquisition. Biffa's expansion has been and will continue to
be fuelled by new legislation that has made companies more responsible for the
way their waste is managed, and by generating a variety of treatment solutions
for different types of waste. The collection and recycling strengths of UK
Waste, together with Biffa's strengths in this area, will give us a
pre-eminent position in fulfilling the Government's waste strategy. This
emphasises the logic of acquiring a business where the vast majority of the
value is in the collection business.
Biffa has the largest and fastest growing collection activity in the UK, and
business growth will continue to be driven by industrial and commercial
collection activities as the waste market develops to meet legislative
targets. The combined Biffa/UK Waste business gives us an even stronger
national depot and transfer station coverage and will present the opportunity
to establish the lowest collection cost structure in the industry. Moreover,
Biffa's proven and successful business model will underpin the enlarged
collection activity.
Severn Trent Services
Severn Trent Services posted strong growth with revenues rising 63.4% to
£242.8 million and profit before interest and exceptionals increasing by 42.7%
to £15.7 million.
Under its new President and CEO, Bill Cook, the business has undergone a major
reorganisation to capitalise on its critical mass, accelerate organic growth
and establish a single, powerful brand.
Laboratory Services in the USA now has a run rate of almost USD200 million -
three times the size of its nearest competitor, while the acquisition of Hyder
Laboratories has confirmed our position as the leader in the UK environmental
laboratory market.
It was also a good year for the Water Purification businesses with turnover
increasing 35.3% to £78.2m.
The Operating Services division now has over 400 contracts in 31 states within
the USA and is one of the leading providers of management services for
municipal and industrial water and waste water systems in the country. In
Europe, in addition to its investment in Aquafin, which provides sewerage
services to the Flanders region of Belgium, the business is also expanding,
with a series of acquisitions in northern Italy which take advantage of
Italy's moves towards privatisation.
Severn Trent Systems
The delivery of CIS-OV, the customer information and billing system, has
required considerable investment (all of which has been written off against
profits) and delayed some revenues, resulting in an operating loss of £2.6m
for the year.
The system is now operational in 4 leading utilities in the USA and Australia,
with 4 additional contracts for delivery in 2000, and new sales expected.
Demand for Severn Trent Systems' other highly successful software products in
work management, fieldworking, network modelling and systems integration,
remains strong. It is clear that software products require on-going
investment and a global marketing capability in order to realise their full
potential sales and profit stream. It has therefore been decided to
restructure the business, separating Severn Trent Systems from Severn Trent
Services so that a thorough review of strategic alternatives for this business
can be undertaken.
Property, Engineering Consultancy and Insurance
Our Property, Engineering Consultancy and Insurance businesses produced good
results with operating profits up 23.8% to £7.8 million.
The Board
Vic Cocker, who has been Chief Executive for the last six years, retires in
October 2000 after 26 years with Severn Trent. Vic has made a tremendous
contribution to the Group's development and has been largely instrumental in
creating the international environmental services business Severn Trent is
today. He will be greatly missed by his colleagues.
Vic's successor will be Robert Walker, Deputy Chief Executive, whose strategic
and operational skills will be invaluable as the Group accelerates the
development of its non-regulated activities.
The Future
We have an exceptionally strong portfolio of non-regulated businesses. We are
now the leader in the UK waste industry, and a strong competitor in Belgium.
In our services businesses we are now by far the leading environmental
laboratory business in the US and in the UK. We are also the leading supplier
of chlorine based disinfection equipment and services worldwide.
The future of Severn Trent lies with our management teams and our people. In
our water business we have a proven track record of beating tough regulatory
targets. Biffa has a management well capable of exploiting the synergies
which exist within the extended waste business. The Severn Trent Services
team is now focussed into two areas, the US and Europe.
Environmental leadership is Severn Trent's guiding principle. With ever
increasing attention being given to environmental issues by Government and by
customers, the Group has the opportunity to generate increasing value for
shareholders by providing integrated environmental solutions.
David Arculus
Chairman, Severn Trent Plc
Group profit and loss account
Year ended 31 March 2000
2000 1999
Notes £m £m
Turnover: group and share of joint ventures 1,580.2 1,378.6
Less: share of joint ventures' turnover (13.6) (14.3)
------- -------
Continuing operations 1,485.0 1,364.3
Acquisitions 81.6 -
------------------------------------------------------------------------------
Turnover 1,566.6 1,364.3
Operating costs before exceptional costs (1,115.8) (911.9)
Exceptional restructuring costs 1(c) (56.1) -
Exceptional Year 2000 costs 1(c) (8.6) (11.0)
------------------------------------------------------------------------------
Total operating costs (1,180.5) (922.9)
Operating profit
Continuing operations 378.6 441.4
Acquisitions 7.5 -
------- -----
386.1 441.4
Joint ventures and associates
Continuing operations 8.6 9.3
------------------------------------------------------------------------------
Profit before interest
Before exceptional costs 459.4 461.7
Total exceptional costs (above) (64.7) (11.0)
------- -----
394.7 450.7
Net interest payable (120.7) (100.3)
------------------------------------------------------------------------------
Profit on ordinary activities before taxation 274.0 350.4
Taxation on profit on ordinary activities 1(d) (22.1) (46.6)
------------------------------------------------------------------------------
Profit for the financial year 251.9 303.8
Dividends (including non-equity dividends) 1(e) (154.0) (147.0)
------------------------------------------------------------------------------
Retained profit for the financial year 97.9 156.8
------------------------------------------------------------------------------
Earnings per share (pence)
Basic 1(f) 73.8 89.2
Diluted 1(f) 73.5 88.5
Basic before Year 2000 and restructuring costs 1(f) 92.8 92.4
Diluted before Year 2000 and restructuring costs 1(f) 92.3 91.7
There is no difference between the profit on ordinary activities before
taxation and the retained profit for the financial year stated above, and
their historical cost equivalents.
Balance Sheet
At 31 March 2000
2000 1999
£m £m
Fixed assets
Intangible assets - goodwill 138.0 56.6
Tangible assets 4,630.9 4,237.9
Investments in joint ventures
Share of gross assets 7.3 5.9
Share of gross liabilities (6.9) (6.2)
Loans to joint ventures 4.5 4.7
------- -------
4.9 4.4
Investments in associates 16.3 17.2
Other investments 4.5 3.1
------- -------
Total investments 25.7 24.7
------------------------------------------------------------------------------
4,794.6 4,319.2
Current Assets
Stocks 77.3 82.2
Debtors 353.8 284.9
Short-term deposits 35.8 22.9
Cash at bank and in hand 8.4 9.3
------------------------------------------------------------------------------
475.3 399.3
Creditors: amounts falling due within one year (1,089.2) (923.4)
------------------------------------------------------------------------------
Net current liabilities (613.9) (524.1)
------------------------------------------------------------------------------
Total assets less current liabilities 4,180.7 3,795.1
Creditors: amounts falling due after more than one year (1,537.7) (1,306.2)
Provisions for liabilities and charges (96.0) (42.7)
------------------------------------------------------------------------------
Net assets 2,547.0 2,446.2
------------------------------------------------------------------------------
Capital and reserves
Called up share capital 231.7 231.1
Share premium account 12.2 5.4
Capital redemption reserve 147.0 147.0
Profit and loss account 2,155.8 2,062.4
------------------------------------------------------------------------------
Total shareholders' funds 2,546.7 2,445.9
Equity shareholders' funds 2,537.6 2,436.8
Non-equity shareholders' funds 9.1 9.1
Minority shareholders' interest (equity) 0.3 0.3
------------------------------------------------------------------------------
2,547.0 2,446.2
------------------------------------------------------------------------------
Group cash flow statement
Year ended 31 March 2000
2000 1999
Notes £m £m £m £m
Net cash inflow from operating
activities 1(g) 671.5 628.0
Dividends received from associates
and joint ventures 1.5 1.6
Returns on investments and servicing
of finance (94.5) (79.1)
Taxation (49.3) (209.6)
Capital expenditure and financial
investment (575.5) (609.7)
Acquisitions (145.1) (81.3)
Equity dividends paid (247.1) (35.7)
----- -----
Net cash outflow before use of liquid
resources and financing (438.5) (385.8)
Management of liquid resources (13.8) 10.1
Financing
Increase in debt 428.0 364.2
Issue of shares 3.6 2.9
----- -----
431.6 367.1
----- -----
Decrease in cash (20.7) (8.6)
----- -----
Reconciliation of net cash flow to movement in net debt
2000 1999
£m £m £m £m
Decrease in cash (as above) (20.7) (8.6)
Cash flow from movement in net debt
and financing (428.0) (364.2)
Cash flow from movement in liquid
resources 13.8 (10.1)
----- -----
Change in net debt resulting from
cash flows (434.9) (382.9)
Net debt assumed with acquisitions (14.9) (1.5)
Inception of finance leases (11.3) (15.5)
Rolled up interest on debt (0.2) -
Currency translation differences 0.4 3.4
----- -----
Increase in net debt (460.9) (396.5)
Opening net debt (1478.5) (1082.0)
------ ------
Closing net debt (1939.4) (1478.5)
------ ------
Statement of total recognised gains and losses
Year ended 31 March 2000
2000 1999
£m £m
Profit for the financial year - group 250.0 301.7
- joint ventures 0.8 0.6
- associates 1.1 1.5
----- -----
Total profit for the financial year 251.9 303.8
Currency translation differences (0.7) 3.9
----- -----
Total recognised gains and losses for the year 251.2 307.7
----- -----
Reconciliation of movements in shareholders' funds
2000 1999
£m £m
Profit for the financial year 251.9 303.8
Dividends (including non-equity dividends) (154.0) (147.0)
----- -----
97.9 156.8
Other recognised gains and losses relating to the year (0.7) 3.9
Shares issued 3.6 2.9
Scrip dividend - 3.4
Goodwill written off direct to reserves - (1.5)
------- -------
Net addition to shareholders' funds 100.8 165.5
Opening shareholders' funds 2,445.9 2,280.4
------- -------
Closing shareholders' funds 2,546.7 2,445.9
------- -------
Segmental analysis
Analysis of turnover and profit before interest by geographical origin and
type of business
Other-principally
United Kingdom USA and Europe Group
2000 1999 2000 1999 2000 1999
£m £m £m £m £m £m
Group turnover
Water and sewerage 982.1 952.7 - - 982.1 952.7
Waste management 248.3 203.3 42.8 44.5 291.1 247.8
Services 52.9 53.5 189.9 95.1 242.8 148.6
Systems 71.2 63.4 15.5 17.0 86.7 80.4
Property, Engineering
Consultancy and Insurance 77.1 60.0 0.6 0.5 77.7 60.5
Inter segment trading (113.5) (123.8) (0.3) (1.9) (113.8) (125.7)
------- ------- ----- ----- ------- -------
1,318.1 1,209.1 248.5 155.2 1,566.6 1,364.3
------- ------- ----- ----- ------- -------
Group profit before interest
and exceptional costs
Water and sewerage 423.5 423.9 - - 423.5 423.9
Waste management -
underlying 25.7 26.4 7.1 7.8 32.8 34.2
Depreciation adjustment
(note 1a) (1.8) - - - (1.8) -
----- ----- ----- ----- ----- -----
Waste management 23.9 26.4 7.1 7.8 31.0 34.2
Services (0.3) 1.4 16.0 9.6 15.7 11.0
Systems (2.6) (0.8) - 0.9 (2.6) 0.1
Property, Engineering
Consultancy and Insurance 7.9 6.3 - - 7.9 6.3
Unrealised profit on
inter segment trading (2.5) (3.2) - - (2.5) (3.2)
------- ------- ----- ----- ------- -------
449.9 454.0 23.1 18.3 473.0 472.3
------- ------- ----- -----
Corporate overheads (13.6) (10.6)
------- -------
459.4 461.7
------- -------
Exceptional costs
Water and sewerage
(Year 2000) (8.6) (11.8) - - (8.6) (11.8)
Water and sewerage
(Restructuring) (52.5) - - - (52.5) -
Services (Restructuring) (0.9) - (2.6) - (3.5) -
Property, Engineering
Consultancy and Insurance
(Restructuring) (0.1) - - - (0.1) -
Elimination of inter segment
profit (Year 2000) - 0.8 - - - 0.8
------- ------ ----- ----- ------- -------
(62.1) (11.0) (2.6) - (64.7) (11.0)
------- ------- ----- ----- ------- -------
Group profit before interest
Water and sewerage 362.4 412.1 - - 362.4 412.1
Waste management -
underlying 25.7 26.4 7.1 7.8 32.8 34.2
Depreciation adjustment
(note 1a) (1.8) - - - (1.8) -
----- ----- ----- ----- ----- -----
Waste management 23.9 26.4 7.1 7.8 31.0 34.2
Services (1.2) 1.4 13.4 9.6 12.2 11.0
Systems (2.6) (0.8) - 0.9 (2.6) 0.1
Property, Engineering
Consultancy and Insurance 7.8 6.3 - - 7.8 6.3
Unrealised profit on
inter segment trading (2.5) (2.4) - - (2.5) (2.4)
------- ------- ----- ----- ------- -------
387.8 443.0 20.5 18.3 408.3 461.3
------- ------- ----- -----
Corporate overheads (13.6) (10.6)
------- -------
Group profit before interest 394.7 450.7
------- -------
The segmental analysis has been amended to exclude from Services the results
of Severn Trent Systems which are now shown separately.
In addition, Services' overseas profit before interest in 2000 is shown after
deducting US corporate overheads of £1.8 million. Services' comparative
figures have been amended to reflect a charge of £0.7 million previously
reported within Corporate overheads.
The segmental analysis includes the following amounts in respect of businesses
acquired during the year:
Other-principally
United Kingdom USA and Europe Total
£m £m £m
Turnover
Waste management 19.2 - 19.2
Services - 61.7 61.7
Systems - 0.7 0.7
-------------- ---------------- -----
19.2 62.4 81.6
-------------- ---------------- -----
Other-principally
United Kingdom USA and Europe Total
£m £m £m
Operating Profit
Waste management 0.3 - 0.3
Services - 7.4 7.4
Systems - (0.2) (0.2)
-------------- ---------------- -----
0.3 7.2 7.5
-------------- ---------------- -----
Waste management operating profit in the table above is after charging £0.3
million of the £1.8 million depreciation adjustment referred to in note 1a.
Notes
1 Financial information
a Results
The results have been extracted from the audited financial statements
of the group for the year ended 31 March 2000. These audited
statements incorporate an unqualified audit report. The results do
not constitute statutory accounts within the meaning of section 240
of the Companies Act 1985. Statutory accounts for the year ended 31
March 1999, which incorporated an unqualified auditors' report, have
been filed with the Registrar of Companies.
Adoption of FRS15 'Tangible Fixed Assets' this year has necessitated
a change in the depreciation method applied by the group to its UK
landfill sites. As a result of changing methodology, an additional
£1.8 million depreciation has been expensed in the current year's
results. This book adjustment has no impact on the group's cash
flows.
b Turnover - Water and sewerage
Water and sewerage turnover is shown net of customer rebates as
follows:
2000 1999
£m £m
Gross turnover 1000.1 970.5
Customer rebate (18.0) (17.8)
------ -----
982.1 952.7
------ -----
c Exceptional Year 2000 and restructuring costs
Exceptional Year 2000 charges in the year ended 31 March 2000 of
£8.6 million (1999: £11.0 million) relate to the costs of ensuring
that all group computer and operating systems are Millennium
compliant.
Exceptional restructuring costs of £56.1 million (1999: Nil) relate
to the costs of restructuring Severn Trent Water following the AMP3
determination, and a restructuring of Severn Trent Services.
d Taxation
2000 1999
£m £m
UK corporation tax - current year at 30% (31%) 22.4 135.0
- prior year (3.3) (16.8)
Double taxation relief (0.9) (1.0)
Overseas taxation - current year 3.3 4.3
- prior year - (0.1)
Share of taxation charges - joint ventures 0.1 -
- associates 1.0 1.2
Advance corporation tax - current year - (86.3)
- prior year (0.5) 10.3
---- ----
Total taxation 22.1 46.6
---- ----
e Dividends
An interim dividend of 17.0 pence net per share was paid on 6 April
2000. The Directors recommend a final dividend of 28.0 pence net per
share, which it is intended will be paid on 2 October 2000.
The final dividend will be payable to shareholders on the register on
18 August 2000 and shares will be traded 'ex-dividend' with effect
from 14 August 2000.
The cost of the proposed equity dividends to the company's
shareholders for the year ended 31 March 2000 was £153.7 million
(1999: £146.5 million). Dividends received or receivable by the
company from its subsidiaries comprised £145.0 million from Severn
Trent Water Limited (1999: £138.0 million) plus a special dividend
of £125.0 million to effect a capital restructuring following the
AMP3 determination and £11.6 million from non regulated businesses
(1999: £5.1 million). The group also received dividends of £1.5
million from associates and joint ventures (1999: £1.6 million).
Severn Trent Water Limited's dividend policy is to declare dividends
which are consistent with its regulatory obligations and at a level
which is decided each year after consideration of a number of
factors, including regulatory uncertainty, market expectations,
actual and potential efficiencies, future cash flow requirements and
balance sheet considerations. The amount declared is expected to
vary each year as the impact of these factors changes.
f Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, excluding those
held in the Severn Trent Employee Share Ownership Trust which are
treated as cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potential dilutive ordinary shares. These represent share options
granted to employees where the exercise price is less than the
average market price of the Company's shares during the year.
Supplementary earnings per share figures are presented. These exclude
the effects of exceptional Year 2000 costs in 1999 and 2000 and
exceptional restructuring costs in 2000. The directors consider that
the supplementary figures provide a useful additional indication of
performance.
2000
Weighted Per
average share
Earnings number of amount
£m shares(m) pence
Basic earnings per share 251.5 340.8 73.8
Effect of dilutive securities
Options - 1.6 (0.3)
----- ----- ----
Diluted earnings per share 251.5 342.4 73.5
----- ----- ----
Supplementary earnings per share
Basic earnings per share 251.5 340.8 73.8
Effect of:
Exceptional Year 2000 costs 8.6 - 2.5
Exceptional restructuring costs 56.1 - 16.5
----- ----- ----
Basic earnings per share before Year
2000 and restructuring costs 316.2 340.8 92.8
----- ----- ----
Diluted earnings per share 251.5 342.4 73.5
Effect of:
Exceptional Year 2000 costs 8.6 - 2.5
Exceptional restructuring costs 56.1 - 16.3
----- ----- ----
Diluted earnings per share before
Year 2000 and restructuring costs 316.2 342.4 92.3
----- ----- ----
1999
Weighted Per
average share
Earnings number of amount
£m shares(m) pence
Basic earnings per share 303.3 340.0 89.2
Effect of dilutive securities
Options - 2.6 (0.7)
----- ----- ----
Diluted earnings per share 303.3 342.6 88.5
----- ----- ----
Supplementary earnings per share
Basic earnings per share 303.3 340.0 89.2
Effect of:
Exceptional Year 2000 costs 11.0 - 3.2
Exceptional restructuring costs - - -
----- ----- ----
Basic earnings per share before Year
2000 and restructuring costs 314.3 340.0 92.4
----- ----- ----
Diluted earnings per share 303.3 342.6 88.5
Effect of:
Exceptional Year 2000 costs 11.0 - 3.2
Exceptional restructuring costs - - -
----- ----- ----
Diluted earnings per share before
Year 2000 and restructuring costs 314.3 342.6 91.7
----- ----- ----
g Cash flow statement - reconciliation of profit before interest to
operating cash flows
2000 1999
£m £m
Profit before interest 394.7 450.7
Share of operating profit of associates and
joint ventures (8.6) (9.3)
Depreciation charge 252.1 232.1
Amortisation of goodwill 6.4 1.3
Profit on sale of tangible fixed assets (2.5) (1.0)
Profit on sale of fixed asset investments - (0.2)
Deferred income received 0.8 0.9
Deferred income written back (4.6) (2.7)
Provisions for liabilities and charges 67.8 8.4
Utilisation of provisions for liabilities and charges (26.2) (15.0)
Working capital increase (8.4) (37.2)
----- -----
Net cash inflow from operating activities 671.5 628.0
----- -----
2 Annual Report
The 2000 Annual Report will be sent to shareholders in early July. Copies
may be obtained from the Company Secretary, Severn Trent Plc, 2297
Coventry Road, Birmingham B26 3PU.
3 Annual General Meeting
The Annual General Meeting will be held at The International Convention
Centre, Birmingham, on 1 August 2000 at 2.30pm.
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