Severn Trent Reports Drop in Full-Year Profit

on May 30, 2013

The UK’s second-largest publicly traded water company Severn Trent Plc (LON:SVT) released its full-year results on Thursday, May 30. With the utility’s profit falling short of analyst expectations, Severn Trent’s share price declined in morning trading in London.

**Severn Trent’s Profit Falls**
In a company statement, the Coventry-based Severn Trent said that excluding losses on financial instruments its pre-tax profit dropped 3.3 percent to £266.3 million in the 12 months through March 2013 from £275.3 million a year earlier. Severn Trent’s results came below expectations, with the Sunday Times reporting on May 26 that analysts anticipated £271million in pre-tax profits.

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Severn Trent noted that its revenues had been negatively impacted by lower consumption, with bad weather during the first half of the year driving higher operational activities and costs.
Adjusted basic earnings per share were 98.9 pence in the reported period, 11.2 percent up on last year’s 88.9 pence per share. Basic earnings per share rose 32 percent to 95.7 pence, as compared with 72.5 pence a year ago. Severn Trent will pay a dividend of 75.85 pence per share for the past year, an 8.2 percent increase.

The company said that it had invested £555 million during the year and expected to spend £620 million in the current period.
**Takeover Bid Not Mentioned**
The results statement however did not mention the potential takeover approach by a consortium of British and international funds, led by Canadian infrastructure investor Borealis Infrastructure and also including the Kuwait Investment Office and Britain’s Universities Superannuation Scheme.

Earlier in May, Severn Trent received a bid, which pushed its share price to an all-time high of 2,170p. The utility however rejected the offer, noting that the proposal failed “to recognise the existing and potential value of Severn Trent”.
!m[Severn Trent’s Share Price Declines in Early Tradingas Results Fall Short of Expectations](/uploads/story/2612/thumbs/pic1_inline.png)

On May 26, The Sunday Times quoted one top 20 investor in the water utility as saying that there was “very strong expectation there will be a higher offer, and I think there’s also an expectation the company will fall”. The Telegraph quoted unnamed sources close to the consortium as confirming that a second bid for Severn Trent was highly likely.
As Bloomberg noted on Thursday, Severn Trent’s chief executive officerTony Wray declined to comment on takeover talks on a conference call. The Telegraph had previously noted that the consortium was likely to wait until after Severn Trent released its full-year results.
**Severn Trent’s share price was 0.15 percent down at 2,032.00p in London as of 10:11 BST on 30 May 2013.**


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