Severn Trent PLC SVT Half Yearly Report

  Severn Trent PLC (SVT) - Half Yearly Report

RNS Number : 0506S
Severn Trent PLC
27 November 2012




Half Yearly Financial Report

27 November 2012

Interim Results for the six months to 30 September 2012





Highlights



● Financial results in line to deliver full year expectations
● Additional £150 million investment programme already delivering operational
  improvements to the benefit of customers
● Leakage, pollution incidents and SIM score all improving*
● On track to deliver improved serviceability for water distribution network
  and improvement in Ofwat KPI performance for this year
● Non-regulated part of the group showing a positive trend
● Responded to Ofwat proposed licence modifications with constructive
  suggestions to reduce uncertainty



* September 2012 vs. March 2012



Group results



^                                                  Increase/
Six months ended 30 September ^         2012   2011 (Decrease)
^                                       £m     £m          %
Group turnover                        917.7 886.0       3.6%
Underlying group PBIT^1              267.2 274.3     (2.6%)
Underlying group profit before tax^2 157.5 155.0       1.6%
Group profit before tax               120.9  65.3      85.1%
^
^                                   pence/ pence/
^                                    share  share
Adjusted basic EPS^3                  47.4  46.4       2.2%
Basic earnings per share               51.6  30.5      69.2%
^
Interim dividend declared             30.34 28.04       8.2%



^1 before exceptional items (see note 3)

^2 before exceptional items and net loss on financial instruments

^3 before exceptional items, net loss on financial instruments, current tax
on exceptional items and on financial instruments and deferred tax (see note
7)





Tony Wray, Chief Executive Severn Trent Plc, said:

"We have delivered again on our commitments to our stakeholders, we are on
track with our £150 million additional investment programme announced in May,
delivering operational improvements in the areas we targeted for this year,
improving our service to customers and producing sustainable, progressive
returns for shareholders.



Group revenue was up 3.6% period on period, although underlying group PBIT was
down, reflecting planned increased investment in our networks and customer
service in Severn Trent Water.



In the first half Severn Trent Water invested £239 million and the benefits of
this investment are evident in our operational improvements, with leakage and
pollution incidents decreasing while customer satisfaction, as measured by the
SIM (Service Incentive Mechanism), is improving.



In our non-regulated business we are encouraged by the initial performance of
our new business Severn Trent Costain, as well as the improvement in our
existing Products business.



On the regulatory front, we remain in favour of the broader reform programme
for the water industry, and have made some constructive suggestions to
overcome concerns regarding Ofwat's proposed changes to licences, in order
reduce uncertainty for the benefit of all stakeholders. We will continue to
promote constructive debate on what the future regulatory framework should
look like."



Enquiries:

                                                     0207 353 4200 (on the
Tony Wray                     Severn Trent Plc       day)
Chief Executive                                      02477 715000
                                                     0207 353 4200 (on the
Mike McKeon                   Severn Trent Plc       day)
Finance Director                                     02477 715000
                                                     0207 353 4200 (on the
John Crosse                   Severn Trent Plc       day)
Head of Investor Relations                           02477 715000
                                                     0207 353 4200 (on the
Rob Salmon                    Severn Trent Plc       day)
Media Relations                                      02477 715000
Anastasia Shiach/Martha Kelly Tulchan Communications 0207 353 4200



Interim Results Presentation and Webcast

There will be a presentation of these results at 9:30am on Tuesday 27 November
2012 at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED. This
presentation will be available as a simultaneous webcast on the Severn Trent
website (www.severntrent.com) and will remain on the website for subsequent
viewing.





Interim Management Report



Operating Review



Regulated - Severn Trent Water

Following the announcement in May of an additional £150 million of capital
investment over the next 3 years, in the first six months of this year we have
invested £22 million, increasing activity on our trunk mains and sewers,
investing more in leakage reduction and making improvements at water treatment
works. This underpins our plans to improve network serviceability, and we have
already seen a positive impact on operational performance. Our capital
programme grew by 28% period on period to £239.2 million (UK GAAP, net of
grants and contributions), of which £4 million related to private drains and
sewers which we adopted in October 2011.



Wet weather over the summer has impacted our income. Customer measured
consumption was lower by 2.8% in the first six months compared to the same
period last year. Commercial consumption, in particular agricultural, was
lower than expected, and household measured consumption was weaker than
anticipated. This downside was compensated by the allowed price increase of
5.2%, leaving turnover up by 3.5%. Due to our previously announced increased
investment and maintenance programmes and service delivery improvements,
underlying PBIT was lower by just over 1% on higher levels of planned
infrastructure renewals, the current year being the peak for the AMP, and
increases in non-controllable costs.



In order to give a consistent view of operating costs period on period we have
split out the impact of private drains and sewers in the following analysis
and in the financial review on page 5. Excluding £5.3 million of costs in the
period relating to private drains and sewers, which we adopted in October 2011
(£2.1 million incurred in prior period as we prepared for adoption), operating
expenditure was up 2.1%, in line with expectations, and the level allowed in
the Final Determination. Direct employee costs increased due to the delivery
of service improvements and increased capital programme, which was also
reflected in labour costs capitalised increasing. Hired and contracted costs
were 4.6% lower period on period. Overall net labour costs, including hired
and contracted, were 0.6% lower period on period. Bad debt was stable at 2.2%
of turnover. We were pleased with our cost management, as controllable costs
(direct employee costs and hired and contracted net of own work capitalised,
plus materials and other costs) fell by 0.8% period on period (including costs
related to private drains and sewers controllable costs rose 1.0%).
Non-controllable costs (quasi taxes, bad debts, power) increased by 7.9% vs.
the same period last year.



Depreciation was £9.4 million higher period on period due to the impact of
capital expenditure increasing the size of the asset base.



We generated slightly less renewable power in the first six months, which
accounted for 23.8% of our gross consumption compared to 24.0% in the prior
period. This was primarily due to lower levels of sludge, the raw material for
our power generation process, but by year end we expect increases in our
renewables generation year on year.



Ofwat's new KPI performance report for 2011-12 confirmed a number of areas for
improvement that we had previously highlighted in our full year results in
May. Since the end of March 2012 we have made good progress in a number of
these areas including security of supply and pollution incidents. Leakage
reduction is on target year to date, and prior to the important winter period,
in September leakage was around 4% lower than in March.



Given Ofwat's adoption of a KPI based performance assessment for all companies
in the sector, a move we wholeheartedly support, we have therefore evolved our
own suite of KPIs to align with Ofwat's, and in the future we will be
reporting and benchmarking our operational performance using these. Based on
data for 2011-12, benchmarking reveals 4 KPIs where our performance was upper
quartile, 8 where our performance was median and 3 where our performance put
us in the lower quartile.



Non-regulated

In Operating Services, excluding structural changes (see below), underlying
PBIT was broadly flat, although revenues were down period on period due to
reductions in work volumes in Italy, with the US business seeing an improved
performance in the Texas Gulf region, and a good performance in the UK from
the Ministry of Defence contract.



A new company, Severn Trent Costain, was formed with Costain Group Plc to
provide water and waste water management services to high volume commercial
and industrial users, and it has already won its first customer in the new
competitive market. This is the first national customer to switch supplier in
the UK.



In Water Purification (Products), revenue and PBIT were both up period on
period, led by a significant growth in disinfection products, particularly gas
feed and electro chlorination, as well as the launch of BALPURE®. In the
period BALPURE® contributed £2.5 million of sales, with orders totaling a
further £3 million.



In total the Products order book remained healthy, with £50 million ($83
million) at the end of September, and at present 80% is expected to ship this
financial year.



During the first six months of the year there were a number of changes to the
non-regulated operations, to make it more focused for the future. The sale of
the metering business was completed, and the planned sale of the Analytical
Services business was announced and is progressing.



Excluding the impact of structural changes (i.e. businesses sold or held for
sale, and acquisitions) and exchange movements, revenue and underlying PBIT
both grew by 9.5% and 1.9% respectively period on period, after additional
investment in business development activities, which increased by £1 million
to £1.8 million. Reported revenue (including the impact of structural changes)
grew by 1.3% and reported underlying PBIT fell by a third, mainly due to the
loss of earnings from the metering business and lower earnings from a
radically restructured Analytical Services.







Group Financial Performance

In this Interim Results Announcement PBIT is profit before interest and tax;
underlying PBIT is PBIT excluding exceptional items as set out in note3.



Group turnover was £917.7 million (£886.0 million), an increase of 3.6% over
the same period last year. Underlying group PBIT was 2.6% lower than last
year. The primary factors affecting turnover and underlying PBIT are
described in the commentary below.



There was a net exceptional credit of £1.1 million (charge of £19.5million).
Group PBIT increased 5.3% to £268.3 million (£254.8 million).



Severn Trent Water

Turnover in Severn Trent Water increased by 3.5% to £761.0 million. Sales
prices increased by 5.2% (in line with inflation) from 1 April 2012 which was
offset by lower consumption during the wet summer period.



Underlying PBIT was down by 1.4% on the same period last year, to £269.1
million. Direct operating costs increased by £9.1 million (see below), there
was an increase in infrastructure renewals expenditure of £11.3 million and
depreciation increased by £9.4 million.



Employee costs increased by £9.2 million to £106.6 million. The increased
employee costs were partly due to delivery of service improvements and the
growth in our capital programme which led to labour and related overheads
capitalised £6.7 million higher than in the first half of 2011/12 at £38.9
million. Hired and contracted costs decreased by £3.4 million to £71.1
million. Overall net labour costs, including hired and contracted, were 0.6%
lower period on period. Raw materials and consumables at £22.5 million were
4.3% lower than the same period in the prior year. Other operating costs
increased by £0.5 million to £20.3 million. In total, controllable costs were
up £1.8 million, or 1.0%, including an increase of £3.2 million relating to
private drains and sewers, which we adopted in October 2011.



Bad debts were 1.3% higher at £15.7 million, representing 2.2% of turnover
(2.2%). An increase of £3.7 million in power costs to £27.6 million arose due
to increased consumption as a result of the wet weather and higher strike
prices on our energy swaps. Quasi taxes, which comprise rates, service charges
and the CRC, increased by £3.4 million to £56.4 million, mainly due to an
increase in rates. In total, non-controllable costs were up £7.3 million or
7.9%.



During the period, Severn Trent Water invested £239.2 million (£187.0 million)
(UK GAAP, net of grants and contributions) in fixed assets and maintaining and
improving its infrastructure network. Included in this total was net
infrastructure maintenance expenditure of £63.4 million (£52.1 million),
charged to the income statement under IFRS.





Severn Trent Services



Six months ended 30 September          2012   2011 Increase/ (decrease)
                                         £m     £m                    %
Turnover
Services as reported                 162.1 160.0                 1.3%
Structural changes                   (14.4) (19.4)
Impact of exchange rate fluctuations     -  (5.7)
Like for like                        147.7 134.9                 9.5%
Underlying PBIT
Services as reported                   4.1   6.5              (36.9%)
Structural changes                     1.2  (1.3)
Impact of exchange rate fluctuations     -     -
Like for like                          5.3   5.2                 1.9%



Reported turnover in Severn Trent Services at £162.1 million in the period was
up 1.3% on the same period last year and reported underlying PBIT decreased by
36.9% to £4.1 million.



After adjusting for the impact of exchange rate fluctuations and structural
changes, turnover on a constant currency basis was up 9.5% and underlying PBIT
measured on the same basis was up 1.9%.



Corporate and Other

Corporate and Other incurred a net charge before interest, tax and exceptional
items of £7.2 million (£6.3 million). This segment includes the activities of
the group's captive insurance company which insures Severn Trent group risks
only and does not write any external business.



Exceptional items

There was an exceptional credit in the six months to 30 September 2012 of £1.1
million (charge of £19.5 million).



The exceptional credit resulted from the profit on disposal of the group's
meter installation, repair and replacement business.



Net finance costs

The group's net finance costs were £109.8 million, compared to £119.4 million
in the prior period. Lower inflation has led to lower finance costs on index
linked debt which has offset an increase due to higher borrowings and a higher
net pension finance cost.



The effective interest rate, including index linked debt, for the period to
September 2012 was 5.6% (6.3%). The effective cash cost of interest excluding
the RPI uplift on index linked debt was 4.9% (5.0%).



Net loss on financial instruments

The group uses financial derivatives solely to hedge risks associated with its
normal business activities including:

● Exchange rate exposure on borrowings denominated in foreign currencies;
● Interest rate exposures on floating rate borrowings; and
● Exposures to increases in electricity prices.



Accounting rules require that these derivatives are revalued at each balance
sheet date and, unless the strict criteria for cash flow hedge accounting are
met, the changes in value are taken to the income statement. If the risk that
is being hedged does not impact the income statement in the same period as the
change in value of the derivative then an accounting mismatch arises and there
is a net charge or credit to the income statement.



Where the derivatives are held for their full term, these mismatches are
expected to net out. Furthermore, the changes in value that are recorded
during the lives of the derivatives, unless crystalised, do not represent cash
flows.



An analysis of the amounts charged to the income statement in the period is
presented in note 4 to the financial statements.



Profit before tax

Underlying group profit before tax increased by 1.6% to £157.5million
(£155.0million). Group profit before tax was £120.9 million (£65.3million).



Taxation

The total tax credit for the period was £2.9 million (credit of £7.0 million),
of which current tax represented a charge of £40.3 million (£43.9 million) and
deferred tax was a credit of £9.0 million (credit of £16.4 million) excluding
an exceptional credit of £34.2 million arising from the reduction in
corporation tax rate from 24% to 23% with effect from 1 April 2013.



The effective rate of current tax, excluding prior year charges and current
tax on exceptional items and on financial instruments, calculated on profit
before tax, exceptional items and net loss on financial instruments was 27.7%
(29.1%).



Profit for the period and earnings per share

Profit for the period was £123.8 million (£72.3 million).



Basic earnings per share were 51.6 pence (30.5 pence). Adjusted basic
earnings per share (before exceptional items, net loss on financial
instruments, current tax on exceptional items and on financial instruments and
deferred tax) were 47.4 pence (46.4 pence), see note 7.





Cash flow



Six months ended 30 September                        2012         2011
                                                       £m           £m
Cash generated from operations                     451.3       475.6
Net capital expenditure                           (184.4)      (150.1)
Net interest paid                                  (73.2)       (83.2)
Closed out swap                                    (13.0)           -
Tax paid                                           (18.5)       (35.5)
Other cash flows                                     1.5        (0.3)
Free cash flow                                     163.7       206.5
Dividends                                         (249.9)       (92.5)
Issue of shares                                      6.3         3.9
Purchase of own shares                              (1.4)        (1.8)
Change in net debt from cash flows                 (81.3)       116.1
Non-cash movements                                  (5.6)        (6.1)
Change in net debt                                 (86.9)       110.0
Net debt as at 1 April                          (3,967.8)    (3,868.8)
Net debt as at 30 September                     (4,054.7)    (3,758.8)
Net debt comprises:
                                   30 September  31 March 30 September
                                           2012      2012         2011
                                             £m        £m           £m
Cash and cash equivalents                246.6    295.1       412.6
Bank overdrafts                           (0.9)     (0.4)           -
Bank loans                              (860.0)   (852.5)      (850.5)
Other loans                           (3,330.7) (3,326.9)    (3,254.1)
Finance leases                          (218.9)   (219.0)      (252.5)
Cross currency swaps hedging debt        109.2    135.9       185.7
Net debt                              (4,054.7) (3,967.8)    (3,758.8)





Cash generated from operations was £451.3million (£475.6 million). Capital
expenditure net of grants and proceeds of sales of fixed assets was £184.4
million (£150.1 million). Net interest paid decreased to £73.2 million
(£83.2million). Cashflows in the period included the £149.9 million special
dividend paid to shareholders in July 2012.



Net debt at 30 September 2012 was £4,054.7 million (31 March 2012
£3,967.8million). Balance sheet gearing (net debt/net debt plus equity) at
the half year was 82.6% (31 March 2012 80.2%). Net debt, expressed as a
percentage of estimated Regulatory Capital Value at 30 September 2012 was
56.4% (56.0%).



The group's net interest charge, excluding net loss on financial instruments
and net finance costs from pensions, was covered 3.7 times (3.5 times) by
profit before interest, tax, depreciation and exceptional items, and 2.4 times
(2.3 times) by underlying PBIT.



Pensions

The group operates two defined benefit pension schemes, of which the Severn
Trent Pension Scheme (STPS) is by far the largest. Formal triennial actuarial
valuations and funding agreements were last undertaken for the STPS as at 31
March 2010.



On an IAS 19 basis, the estimated net position (before deferred tax) of all of
the group's defined benefit pension schemes was a deficit of £320.5 million as
at 30 September 2012. This compares to a deficit of £345.8 million as at 31
March 2012. The movements in the net deficit were:



                                Defined benefit Fair value of plan
                                    obligations             assets Net deficit
                                             £m                 £m          £m
At 1 April 2012                       (1,903.0)           1,557.2     (345.8)
Employer contributions                       -              13.5       13.5
Employee contributions                    (2.7)               2.7          -
Benefits paid                             35.7             (35.7)          -
Current service cost                     (11.5)                 -      (11.5)
Past service cost                         (0.3)                 -       (0.3)
Net finance cost                         (45.8)              43.5       (2.3)
Actuarial gains and                       29.1              (3.2)       25.9
losses
At 30 September 2012                  (1,898.5)           1,578.0     (320.5)





On an IAS 19 basis, the funding level has increased to 83% (82%).



Treasury management

At 30 September 2012 the group had £246.6 million in cash and cash
equivalents. Average debt maturity is around 16 years.



In July 2012 the group issued a £75 million sterling denominated RPI linked
bond in the retail bond market. A coupon of 1.3% is payable on the notes
which are due to mature in July 2022. A 10 year bilateral bank facility of
£100 million was also drawn in the period.



Cash is invested in deposits with highly rated banks and liquidity funds and
the list of counterparties is regularly reviewed and reported to the Board.



The group's policy for the management of interest rate risk requires that not
less than 45% of the group's borrowings should be at fixed interest rates, or
hedged through the use of interest rate swaps or forward rate agreements. At
30 September 2012, interest rates for some 69% of the group's net debt of
£4,054.7 million were so fixed.



The group has interest rate swaps in place to manage the interest rate risk
arising from its anticipated borrowing requirements for the remainder of AMP5.
The net liability arising from these at 30 September 2012, measured at fair
value, was £311.7 million. Some of these swaps, which were entered into in
2000 - 2005, include options for the counterparty to terminate the contracts
at specified points in their lives. During the period the group terminated one
of these contracts at a cash outlay of £13.0 million. This swap had a notional
principal amount of £30 million. As a result of the termination the
corresponding amount of our net debt will now be subject to current market
interest rates, which are presently lower than the amounts payable under the
swap.



The fair value at 30 September 2012 of remaining swaps with termination
options was a liability of £144.7 million and their aggregate notional
principal amount was £345 million. The next termination options for the
remaining swaps occur between November 2012 and May 2016 and the group will
actively manage its exposure to these contracts over that period.



The group manages its electricity costs through a combination of forward price
contracts and financial derivatives. All of our power requirements for the
first four years of AMP5 and some of the remaining year have been hedged in
this way, at prices below those allowed in the Final Determination.



The group continues to target a strong, flexible and sustainable balance sheet
structure, which is reviewed on a regular basis, and believes that the planned
investment programme and current dividend policy for AMP5 are commensurate
with an investment grade credit rating.



Exchange rates

The trading results of overseas subsidiaries are translated to sterling at the
average rate of exchange ruling during the period and their net assets are
translated at the closing rate on the balance sheet date. The impact of
changing exchange rates on the subsidiaries trading results was immaterial.



Dividends

We remain committed to our dividend policy of RPI +3% growth per annum for the
remainder of AMP5. Therefore the board has declared an interim ordinary
dividend of 30.34p per share (28.04p per share, +8.2%), which will be paid on
11^th January 2013 to shareholders on the register at 7^th December 2012.



Regulatory Update

Over the past 2 years Severn Trent has led the debate on creating a
sustainable water industry in England and Wales with the "Changing Course"
series of publications. In these reports we have suggested and supported
reforms of the water industry to make it more sustainable, drive innovation
and efficiency and provide customers with even better value for money.



We welcome the publication of the Government's Draft Water Bill and were
pleased to give evidence to the EFRA (Environment, Food and Rural Affairs)
select committee in October. We are supportive of the measures to enable
business customers in England and Wales to switch water and sewerage
suppliers, and we have joined with Costain to address this market opportunity.
We have been advocating for some time the promotion of water trading between
water companies and we are also supportive of the introduction of effective
upstream competition, as this will promote more efficient use of water.



We would encourage further consideration of incumbent suppliers being able to
separate voluntarily their operating licence into retail and wholesale
functions and balancing the proposed extension of Ofwat's enforcement powers
with an efficient appeals mechanism.



Regarding the proposed modifications to licences, whilst Severn Trent Water is
minded to accept Ofwat's proposed change to its licence, the company believes
it would be better if the current proposals were modified. We would have
preferred Ofwat to have less flexibility on future price controls, which would
reduce uncertainty for stakeholders, including bondholders, shareholders and
customers. This could be achieved, whilst maintaining the integrity of the
reforms being sought, if new licences allowed only for the removal of 20 per
cent of revenues from the wholesale control, as opposed to the 40 per cent
currently proposed. To provide more clarity, the new licence could contain a
formula controlling future annual price increases each year - for example,
through a weighted average approach.



We were encouraged by the regulator's commitment to linking future price
controls to RPI, protection of the RCV as at 31 March 2015, and the allocation
of the RCV to the wholesale function. The maintenance of the mechanism to
appeal the outcome of a price review to the Competition Commission was also
welcome, as was protection for those companies which are not referred to the
Competition Commission over these changes.



We now await Ofwat's reply to our own and other companies' responses to the
consultation.



We continue to be supportive of the principles of reform of the water industry
and will continue to contribute constructively to help shape the future
regulatory framework.



Principal Risks and Uncertainties

The board considers the principal risks and uncertainties affecting the
business activities of the group for the remaining six months of the year to
be those detailed below:



Risks arising from our business model:

● Effectively improving our performance in relation to customer service in
  order to deliver what our customers tell us they want.
● Operational failure in our Waste Water operations which results in damage to
  the local environment.
● Failure of our assets or processes, resulting in injury to an employee,
  contractor, customer or member of the public.
● Inability to provide a continuous supply of quality water to large
  populations within our area, or asset failure resulting in damage to third
  party property.
● Having effective business continuity plans, including in relation to
  information technology systems, to support the on going operations of the
  businesses.



Legal and regulatory risks:

● Achieving all our regulatory targets agreed with Ofwat and other regulators
  in relation to ongoing operational performance of our assets for the period,
  failure of which may result in regulatory penalties and consequential
  changes in future funding requirements.
● Effectively anticipating and/or influencing future developments in the UK
  water industry in order for our business plans to remain sustainable.
● The regulatory landscape is complex and subject to ongoing change. There is
  a risk that processes may fail or that our processes may not effectively
  keep pace with changes in legislation leading to the risk of non-compliance.
● The ability of the group's businesses to comply with all laws and
  regulations, including those relating to the rules of competition, in all
  the jurisdictions in which the group's businesses operate around the world.



Financial risks:

● The current crisis in the eurozone may have a number of impacts on our
  business, for example, increasing the difficulties associated with obtaining
  funding for the group at similar rates to those assumed in our business
  plans.
● Changing demographics and fluctuations in the investment market may affect
  our ability to fund pensions promises sustainably.
● Counterparties with whom we have invested money may fail putting our
  investment at risk.





Outlook



The group is on track to deliver its expectations for the full year.



Consumption across our measured income base is anticipated to return to normal
seasonal levels in the second half.



We maintain our forecast for a bad debt level around 2.2% of turnover for the
full year, although we continue to monitor developments closely, especially
unemployment levels and the future changes to the UK benefits system.



We expect operating expenditure to rise year on year but in line, with the
level of the Final Determination excluding costs relating to private drains
and sewers adopted in October 2011.



Expectations for net capital expenditure (UK GAAP, net of grants and
contributions) are now for operational reasons in the range £555 million to
£565 million from £570 million to £590 million, including an estimated £10
million related to private drains and sewers which we adopted in October 2011.
The level of net infrastructure renewals expenditure included in this range
remains £140 million to £150 million.



For our non-regulated business, we now give guidance for the ongoing business
operations. For the full year these businesses are expected deliver mid single
digit revenue growth and underlying PBIT growth, which will be more than
offset by continued investment in business development in operating services
in North America and the UK, and the continued market development of
BALPURE®.



The group interest charge is expected to be slightly lower year on year,
before adjustments related to pension accounting, with a reduction in the
non-cash interest charge, due to lower RPI, partially offset by higher cash
interest cost, due to higher net debt.



The expected effective current tax rate for the group for 2012/13 remains at
24% to 26%.



Severn Trent Plc will announce its Preliminary results for the financial year
ending 31 March 2013 on 30 May 2013.



Further information

For further information, including the group's interim results presentation,
see the Severn Trent website (www.severntrent.com).





Condensed consolidated income statement

Six months ended 30 September 2012



                                                                2012    2011
                                                        Notes      £m      £m
  Turnover                                                2    917.7  886.0
  Operating costs before exceptional items                    (650.5) (611.7)
  Exceptional operating costs                             3        -  (19.5)
  Total operating costs                                       (650.5) (631.2)
  Exceptional profit on disposal of business            3, 12    1.1      -
  Profit before interest, tax and exceptional items       2    267.2  274.3
  Exceptional items                                       3      1.1  (19.5)
  Profit before interest and tax                               268.3  254.8
  Finance income                                                45.1   52.6
  Finance costs                                               (154.9) (172.0)
  Net finance costs                                           (109.8) (119.4)
  Net loss on financial instruments                       4    (37.7)  (70.2)
  Share of results of associates and joint ventures              0.1    0.1
  Profit before tax, net loss on financial instruments
  and exceptional items                                        157.5  155.0
  Exceptional Items                                              1.1  (19.5)
  Net loss on financial instruments                       4    (37.7)  (70.2)
  Profit on ordinary activities before taxation                120.9   65.3
  Current tax                                             5    (40.3)  (43.9)
  Deferred tax                                            5      9.0   16.4
  Exceptional deferred tax                                5     34.2   34.5
  Taxation on profit on ordinary activities                      2.9    7.0
  Profit for the period                                        123.8   72.3
  Attributable to:
  Equity holders of the company                                122.6   72.3
  Equity non-controlling interests                               1.2      -
                                                               123.8   72.3
  Earnings per share (pence)
  Basic                                                   7     51.6   30.5
  Diluted                                                 7     51.3   30.4







Condensed consolidated statement of comprehensive income

Six months ended 30 September 2012



                                                                 2012    2011
                                                                    £m      £m
Profit for the period                                           123.8   72.3
Loss on cash flow hedges                                        (38.3)  (66.5)
Deferred tax on loss on cash flow hedges                          8.8   16.6
Amounts on cash flow hedges transferred to the income statement   1.9    1.9
in the period
Deferred tax on transfers to income statement                    (0.4)   (0.5)
Exchange movement on translation of overseas results and net     (2.0)    1.7
assets
Net actuarial gain/(loss) on defined benefit pension schemes     25.9 (104.2)
Tax on net actuarial gain/loss                                   (6.0)   26.1
Deferred tax arising on change of rate                           (0.8)    0.8
Other comprehensive loss for the period                         (10.9) (124.1)
Total comprehensive income/(loss) for the period                112.9  (51.8)
Attributable to:
Owners of the company                                           111.8  (51.9)
Non-controlling interests                                         1.1    0.1
                                                                112.9  (51.8)







Condensed consolidated statement of changes in equity

Six months ended 30 September 2012



                  Equity attributable to owners of the
                               company
                                                                 Non-

                 Share   Share    Other Retained          controlling    Total

               capital premium reserves earnings    Total   interests   equity
                    £m      £m       £m       £m       £m          £m       £m
At 1 April      232.2   80.0   464.5   323.1 1,099.8        6.3 1,106.1
2011
Profit for the
period              -      -       -    72.3    72.3          -    72.3
Loss on
cashflow
hedges              -      -   (66.5)       -   (66.5)          -   (66.5)
Deferred tax
on loss on
cashflow
hedges              -      -    16.6       -    16.6          -    16.6
Amounts on
cash flow
hedges
transferred to
the income
statement           -      -     1.9       -     1.9          -     1.9
Deferred tax
on transfers
to the income
statement           -      -    (0.5)       -    (0.5)          -    (0.5)
Exchange
movement on
translation of
overseas
results and
net assets          -      -     1.6       -     1.6        0.1     1.7
Net actuarial
loss                -      -       -  (104.2)  (104.2)          -  (104.2)
Tax on net
actuarial loss      -      -       -    26.1    26.1          -    26.1
Deferred tax
arising from        -      -       -     0.8     0.8          -     0.8
rate change
Total
comprehensive
loss for the
period              -      -   (46.9)    (5.0)   (51.9)        0.1   (51.8)
Share options
and LTIPs
- proceeds
from shares
issued            0.4    3.5       -       -     3.9          -     3.9
- value of
employees'
services            -      -       -     2.7     2.7          -     2.7
- free shares
issued              -      -       -    (1.8)    (1.8)          -    (1.8)
Current tax on
share based
payments            -      -       -     0.3     0.3          -     0.3
Dividends paid      -      -       -   (92.5)   (92.5)       (0.3)   (92.8)
At 30           232.6   83.5   417.6   226.8   960.5        6.1   966.6
September 2011
At 1 April
2012            232.6   83.8   400.2   256.9   973.5        7.9   981.4
Profit for the
period              -      -       -   122.6   122.6        1.2   123.8
Loss on
cashflow
hedges              -      -   (38.3)       -   (38.3)          -   (38.3)
Deferred tax
on loss on
cashflow
hedges              -      -     8.8       -     8.8          -     8.8
Amounts on
cash flow
hedges
transferred to
the income
statement           -      -     1.9       -     1.9          -     1.9
Deferred tax
on transfers
to the income
statement           -      -    (0.4)       -    (0.4)          -    (0.4)
Exchange
movement on
translation of
overseas
results and
net assets          -      -    (1.9)       -    (1.9)       (0.1)    (2.0)
Net actuarial
gain                -      -       -    25.9    25.9          -    25.9
Tax on net
actuarial gain      -      -       -    (6.0)    (6.0)          -    (6.0)
Deferred tax
arising from        -      -       -    (0.8)    (0.8)          -    (0.8)
rate change
Total
comprehensive
income for the
period              -      -   (29.9)   141.7   111.8        1.1   112.9
Share options
and LTIPs
- proceeds
from shares
issued            0.7    5.6       -       -     6.3          -     6.3
- value of
employees'
services            -      -       -     2.9     2.9          -     2.9
- free shares
issued              -      -       -    (1.4)    (1.4)          -    (1.4)
Current tax on
share based
payments            -      -       -     0.8     0.8          -     0.8
Deferred tax
on share based
payments            -      -       -     0.1     0.1          -     0.1
Dividends paid      -      -       -  (249.9)  (249.9)       (0.5)  (250.4)
At 30           233.3   89.4   370.3   151.1   844.1        8.5   852.6
September 2012







Condensed consolidated balance sheet

At 30 September 2012



                                                       30 September  31 March
                                                  Notes         2012      2012
                                                                  £m        £m
Non-current assets
Goodwill                                                       44.2     44.9
Other intangible assets                                       110.0    116.0
Property, plant and equipment                               6,630.7  6,577.8
Interests in joint ventures                                     0.2      0.2
Interests in associates                                         4.4      4.6
Derivative financial instruments                              126.5    132.6
Available for sale financial assets                             0.1      0.1
                                                            6,916.1  6,876.2
Current assets
Inventory                                                      31.4     34.4
Trade and other receivables                                   513.0    479.4
Derivative financial instruments                                7.1     30.0
Cash and cash equivalents                                     246.6    295.1
                                                              798.1    838.9
Assets held for sale                                8          15.4        -
Total assets                                                7,729.6  7,715.1
Current liabilities
Borrowings                                          9        (307.9)    (89.3)
Derivative financial instruments                              (34.1)     (0.5)
Trade and other payables                                     (509.4)   (397.6)
Current income tax liabilities                                (67.5)    (46.5)
Provisions for liabilities and charges                        (11.4)    (17.0)
Liabilities associated with assets held for sale    8          (5.1)        -
                                                             (935.4)   (550.9)
Non-current liabilities
Borrowings                                          9      (4,102.6) (4,309.5)
Derivative financial instruments                             (306.7)   (288.0)
Trade and other payables                                     (430.1)   (411.0)
Deferred tax                                                 (756.8)   (801.5)
Retirement benefit obligations                     10        (320.5)   (345.8)
Provisions for liabilities and charges                        (24.9)    (27.0)
                                                           (5,941.6) (6,182.8)
Total liabilities                                          (6,877.0) (6,733.7)
Net assets                                                    852.6    981.4
Capital and reserves attributable to the
company's equity shareholders
Called up share capital                            11         233.3    232.6
Share premium account                                          89.4     83.8
Other reserves                                                370.3    400.2
Retained earnings                                             151.1    256.9
Equity attributable to the company's equity
shareholders                                                  844.1    973.5
Non-controlling interests                                       8.5      7.9
Total equity                                                  852.6    981.4





Condensed consolidated cash flow statement

Six months ended 30 September 2012

                                                             2012    2011
                                                      Note      £m      £m
Cash generated from operations                         13   451.3  475.6
Tax paid                                                    (18.5)  (35.5)
Net cash generated from operating activities                432.8  440.1
Investing activities
Interest received                                             3.2    1.9
Net cash inflow from sale of business                         2.0      -
Proceeds on disposal of property, plant and equipment         1.3      -
Purchases of intangible assets                              (10.4)   (3.1)
Purchases of property, plant and equipment                 (187.4) (156.5)
Contributions and grants received                            12.1    9.5
Net cash used in investing activities                      (179.2) (148.2)
Financing activities
Interest paid                                               (76.4)  (80.0)
Closed out swap                                             (13.0)      -
Interest element of finance lease payments                      -   (5.1)
Dividends paid to shareholders of the parent               (249.9)  (92.5)
Dividends paid to non-controlling interests                  (0.5)   (0.3)
Repayments of borrowings                                   (141.0)   (4.9)
Repayments of obligations under finance leases                  -  (13.8)
New loans raised                                            174.0      -
Issues of shares                                              6.3    3.9
Purchase of own shares                                       (1.4)   (1.8)
Net cash used in financing activities                      (301.9) (194.5)
(Decrease)/increase in cash and cash equivalents            (48.3)   97.4
Net cash and cash equivalents at beginning of period        294.7  315.2
Effect of foreign exchange rates                             (0.7)      -
Net cash and cash equivalents at end of period              245.7  412.6
Net cash and cash equivalents
Cash and cash equivalents                                   246.6  412.6
Bank overdrafts                                              (0.9)      -
                                                            245.7  412.6









Notes to the condensed interim financial information





1 General information



The interim report has been prepared in accordance with the recognition and
measurement criteria of IFRS and the disclosure requirements of the Listing
Rules.



The information for the year ended 31 March 2012 does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006. A copy
of the statutory accounts for that year prepared under IFRS has been delivered
to the Registrar of Companies. The auditor's report on those accounts was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statements under section 498 (2) or (3) of the Companies Act
2006.



Accounting policies

The interim financial information has been prepared on the going concern basis
using accounting policies consistent with International Financial Reporting
Standards and in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union. The same accounting policies, presentation and
methods of computation are followed in the interim financial information as
applied in the group's annual financial statements for the year ended 31 March
2012.



Going concern

The group is funded for its investment and cash flow needs for the next two
years. After making enquiries the directors have a reasonable expectation
that the group has adequate resources to continue in operational existence for
the foreseeable future and hence the interim financial information has been
prepared on a going concern basis.



Seasonality

The group's businesses are not seasonal in nature.



2 Segmental analysis



The group is organised into two main business segments:



Severn Trent Water: Provides water and waste water services to domestic and
commercial customers in England and Wales.



Severn Trent Services: Provides services and products associated with water,
waste water and contaminated land principally in the US, UK and Europe. 



Six months ended 30
September                                       2012                      2011
                           Severn Trent Severn Trent       Severn Severn Trent
                                 Water     Services  Trent Water     Services
                                    £m           £m           £m           £m
External sales                   760.6       156.4       734.3       151.0
Inter-segment sales                0.4         5.7         0.7         9.0
Total sales                      761.0       162.1       735.0       160.0
Profit before interest,
tax and exceptional items        269.1         4.1       272.9         6.5
Exceptional items (note 3)           -         1.1        (3.6)       (21.9)
Profit before interest and       269.1         5.2       269.3       (15.4)
tax







The reportable segments' external turnover is reconciled to group turnover as
follows:



Six months ended 30 September   2012   2011
                                  £m     £m
Severn Trent Water            760.6 734.3
Severn Trent Services         156.4 151.0
Corporate and other             0.7   0.7
                              917.7 886.0











Segmental underlying PBIT is reconciled to  the group's profit before tax  and 
discontinued operations as follows:



Six months ended 30 September                        2012    2011
                                                       £m      £m
Underlying PBIT:
Severn Trent Water                                 269.1  272.9
Severn Trent Services                                4.1    6.5
Corporate and other costs                           (7.2)   (6.3)
Consolidation adjustments                            1.2    1.2
Group underlying PBIT                              267.2  274.3
Exceptional items:
             Severn Trent Water                        -   (3.6)
             Severn Trent Services                   1.1  (21.9)
             Corporate and other costs                 -    6.0
Share of results of associates and joint ventures    0.1    0.1
Net finance costs                                 (109.8) (119.4)
Net loss on financial instruments                  (37.7)  (70.2)
Profit before tax and discontinued operations      120.9   65.3







The segmental analysis of capital employed was as follows:



                                  30 September 2012              31 March 2012
                          Severn Trent Severn Trent  Severn Trent Severn Trent
                                 Water     Services         Water     Services
                                    £m           £m            £m           £m
Operating assets              7,115.0       184.2      7,022.9       185.5
Goodwill                            -        44.2            -        44.9
Interests in joint                0.1         4.5          0.1         4.6
ventures and associates
Segment assets                7,115.1       232.9      7,023.0       235.0
Segment operating            (1,169.6)       (88.0)     (1,064.3)       (95.3)
liabilities
Capital employed              5,945.5       144.9      5,958.7       139.7





Operating assets comprise other intangible assets, property, plant and
equipment, inventory, trade and other receivables and assets held for sale.



Operating liabilities comprise trade and other payables, retirement benefit
obligations, provisions and liabilities associated with assets held for sale.



3 Exceptional items



The group classifies items of income or expenditure as exceptional if
individually or, if of a similar type, in aggregate they should, in the
opinion of the directors, be disclosed by virtue of their size or nature if
the financial statements are to give a true and fair view. In this context
materiality is assessed at the segment level.



Six months ended 30 September                                      2012 2011
                                                                      £m    £m
Severn Trent Water - restructuring costs                             -   3.6
Severn Trent Services - provisions for commercial disputes and bad
debts                                                                -  21.9
Corporate and Other - provision for terminated operations            -  (6.0)
Total exceptional operating costs                                    -  19.5
Severn Trent Services - exceptional profit on disposal of business (1.1)   - 
Exceptional items before tax                                       (1.1) 19.5





4 Net loss on financial instruments



Six months ended 30 September                                      2012   2011
                                                                     £m     £m
Gain on cross currency swaps used as hedging instruments in fair
value hedges                                                       4.2  11.9
Loss arising on adjustment for foreign currency debt in fair      (6.1) (16.1)
value hedges
Exchange gain on other loans                                      21.9  16.3
Loss on cash flow hedges transferred from equity                  (1.9)  (1.9)
Loss arising on swaps where hedge accounting is not applied      (55.8) (80.4)
                                                                 (37.7) (70.2)







5 Tax



Before the exceptional tax credit, income tax for the period is charged in the
income statement at 26.0% (six months ended 30 September 2011: charged at
42.1%), representing the best estimate of the average annual effective income
tax rate expected for the full year applied to the pre tax income of the six
month period.

The effective rate of current tax, excluding prior year charges and current
tax on exceptional items and on financial instruments, calculated on profit
before tax, exceptional items and net loss on financial instruments was 27.7%
(2011: 29.1%).

Current tax credits of £0.8 million and deferred tax credits of £1.7 million
have been taken to reserves in the period.

The Finance Act 2012 was enacted in the period and implemented a reduction in
the corporation tax rate from 24% to 23% with effect from 1 April 2013. The
impact of this rate reduction on the deferred tax provision has been reflected
in these financial statements and has resulted in a deferred tax credit of
£34.2 million in the income statement and a deferred tax charge of £0.8
million in reserves.

Future changes reducing the corporation tax rate by 1% per annum to 22% by 1
April 2014 have been announced but not substantively enacted at the balance
sheet date and have therefore not been taken into account.



6 Dividends



Amounts recognised as distributions to equity holders in the period:



Six months ended 30 September                      2012                   2011
                                 Pence per share     £m  Pence per share    £m
Final dividend for the year               42.06 100.0           39.05 92.5
ended 31 March
Special dividend                          63.00 149.9              -   -
                                         105.06 249.9           39.05 92.5



The proposed interim dividend of 30.34p per share (2011: 28.04p per share) was
approved by the board on 26 November 2012 and has not been included as a
liability as at 30 September 2012.



7 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 period, 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 potentially 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
period and LTIP awards to the extent that the vesting conditions have been
satisfied at the balance sheet date. Potential ordinary shares which would
reduce a loss per share are not considered to be dilutive and hence in these
circumstances diluted loss per share is equal to basic loss per share.



The calculation of basic and diluted earnings per share is based on the
following data:



Earnings



Six months ended 30 September                                       2012  2011
                                                                      £m    £m
Earnings for the purpose of basic and diluted earnings per share
being:
Profit for the period attributable to the equity holders of the   122.6 72.3
company



Number of shares



Six months ended 30 September                                      2012   2011
                                                                      m      m
Weighted average number of ordinary shares for the purpose of    237.7 237.0
basic earnings per share
Effect of dilutive potential ordinary shares:
                    Share options and LTIPs                        1.1   1.0
Weighted average number of ordinary shares for the purpose of    238.8 238.0
diluted earnings per share







Adjusted earnings per share





Six months ended 30 September        2012  2011
                                    Pence Pence
Adjusted basic earnings per share   47.4 46.4
Adjusted diluted earnings per share 47.2 46.2



Adjusted earnings per share figures exclude the effects of exceptional items,
net loss on financial instruments, current tax on exceptional items and on
financial instruments and deferred tax in both 2012 and 2011. The directors
consider that the adjusted figures provide a useful additional indicator of
performance. The denominators used in the calculations of adjusted basic and
diluted earnings per share are the same as those used in the unadjusted
figures set out above.



The adjustments to earnings are as follows:



Adjustments to earnings



Six months ended 30 September                                      2012   2011
                                                                     £m     £m
Earnings for the purpose of basic and diluted earnings per share 122.6  72.3
Adjustments for:
Exceptional items                                                 (1.1)  19.5
Current tax on exceptional items                                   0.3  (1.1)
Net loss on financial instruments                                 37.7  70.2
Current tax on financial instruments                              (3.6)     -
Deferred tax                                                     (43.2) (50.9)
Earnings for the purpose of adjusted basic and diluted earnings  112.7 110.0
per share





8 Non-current assets held for sale



On 8 August 2012 the group announced its intention to sell Severn Trent
Services' Analytical Services business. As a result, the assets and
liabilities associated with this business that will be sold have been
reclassified in the consolidated balance sheet as assets held for sale and
liabilities associated with assets held for sale.



9 Borrowings



                                 30 September 31 March
                                         2012     2012
                                           £m       £m
Bank overdrafts                          0.9     0.4
Bank loans                             860.0   852.5
Other loans                          3,330.7 3,326.9
Obligations under finance leases       218.9   219.0
Borrowings                           4,410.5 4,398.8









                                                        30 September 31 March
                                                                 2012     2012
                                                                   £m       £m
The borrowings are repayable as follows:
On demand or within one year - included in current             307.9    89.3
liabilities
In the second year                                              46.5   379.2
In the third to fifth years                                  1,173.9 1,039.5
After five years                                             2,882.2 2,890.8
Included in non-current liabilities                          4,102.6 4,309.5
                                                             4,410.5 4,398.8





10 Retirement benefit schemes



The group operates two defined benefit schemes being the Severn Trent Pension
Scheme and the Severn Trent Mirror Image Scheme. The group also has an
unfunded obligation to provide benefits to certain former employees whose
earnings were in excess of the pensions cap that operated when the benefits
were accrued.



The retirement benefit obligation as at 30 September 2012 has been calculated
on a year to date basis, using the actuarial valuation update as at 31 March
2012. There have not been any significant fluctuations or one time events
since that date that would require adjustment to the actuarial assumptions
made at 31 March 2012. However, the market based assumptions have been
updated for conditions prevailing at the balance sheet date as follows:



               30 September 31 March
                       2012     2012
Discount rate          4.4%     4.9%
Inflation rate         2.6%     3.1%



The defined benefit assets have been updated to reflect their market value as
at 30 September 2012. Differences between the expected return on assets and
the actual return on assets have been recognised as an actuarial loss in the
statement of comprehensive income in accordance with the group's accounting
policy. Actuarial gains and losses on the defined benefit obligations have
also been reported in the statement of comprehensive income.



Service cost is recognised in operating  costs and interest cost and  expected 
return on assets is recognised in net finance costs. Amounts recognised in the
income statement in respect of these defined benefit schemes are as follows:



Six months ended 30 September                  2012   2011
                                                 £m     £m
Current service cost                         (11.5) (12.1)
Past service cost                             (0.3)     -
Interest cost                                (45.8) (48.4)
Expected return on scheme assets              43.5  50.3
Total amount charged to the income statement (14.1) (10.2)



The amount included in the balance sheet arising from the group's  obligations 
under defined benefit schemes were as follows:



                                                        30 September  31 March
                                                                2012      2012
                                                                  £m        £m
Total fair value of assets                                  1,577.8  1,557.2
Present value of the defined benefit obligations -         (1,889.8) (1,894.4)
funded schemes
Present value of the defined benefit obligations -             (8.5)     (8.6)
unfunded schemes
Liability recognised in the balance sheet                    (320.5)   (345.8)







Movements in the liability recognised in the balance sheet were as follows:



                                                                  2012    2011
                                                                    £m      £m
At 1 April                                                     (345.8) (292.1)
Current service cost                                            (11.5)  (12.1)
Past service cost                                                (0.3)      -
Interest cost                                                   (45.8)  (48.4)
Expected return on scheme assets                                 43.5   50.3
Contributions from the sponsoring companies                      13.5   18.4
Net actuarial gain/(loss) recognised in the statement of         25.9 (104.2)
comprehensive income
At 30 September                                                (320.5) (388.1)



11 Share capital





At 30 September 2012 the issued and fully paid share capital was 238.3 million
shares of 97^17/[19]p amounting to

£233.3 million (31 March 2012: 237.6 million shares of 97^17/[19]p amounting
to £232.6 million).



During the period the company issued 717,207 shares (2011: 428,992 shares) as
a result of the exercise of employee share options.



12 Disposal of business



On 22 June 2012 the group completed the sale of its meter installation, repair
and replacement business to Enterprise Plc.



The net assets at the date of sale were:



                                         £m
Property plant and equipment          0.2 
Inventory                             0.3 
Trade and other payables              (0.1)
Net assets sold                       0.4 
Provisions arising on disposal        0.5 
                                      0.9 
Profit on disposal                    1.1 
Total consideration                   2.0 
Net cash inflow arising on disposal
Cash consideration                    2.0 
Cash and cash equivalents disposed of    -
                                      2.0 





13 Cash flow



a) Reconciliation of operating profit to operating cash flows



Six months ended 30 September                            2012   2011
                                                           £m     £m
Profit before interest and tax                         268.3 254.8
Depreciation of property, plant and equipment          133.9 125.5
Amortisation of intangible assets                       15.4  13.9
Pension service cost                                    11.8  12.1
Pension contributions                                  (13.5) (18.5)
Share based payments charge                              2.9   2.1
(Profit)/loss on sale of property, plant and equipment  (0.3)   0.3
Profit on sale of business                              (1.1)     -
Deferred income movement                                (4.8)  (4.5)
Provisions for liabilities and charges                   2.6   3.2
Utilisation of provisions for liabilities and charges   (8.4)  (6.4)
Decrease in working capital                             44.5  93.1
Cash generated from operations                         451.3 475.6
Tax paid                                               (18.5) (35.5)
Net cash generated from operating activities           432.8 440.1



b) Non-cash transactions

No additions to property, plant and equipment during the six months to
September 2012 were financed by new finance leases (2011: nil).



c) Exceptional cash flows

The following cash flows arose from items classified as exceptional in the
income statement:



Six months ended 30 September  2012   2011
                                 £m     £m
Restructuring costs           (4.0)  (7.1)
Third party legal costs          -  (3.3)
Proceeds on sale of business   2.0     -
                              (2.0) (10.4)





d) Reconciliation of movements in net debt



                                              RPI
                  As at                    uplift              Other  As at 30
                                               on
                1 April   Cash  Fair value  index  Foreign  non-cash September
                                           linked
                   2012   flow adjustments   debt exchange movements      2012
                     £m     £m          £m     £m       £m        £m        £m
Cash and cash
equivalents      295.1 (47.8)          -     -    (0.7)        -    246.6
Bank              (0.4)  (0.5)          -     -       -        -     (0.9)
overdrafts
Net cash and
cash
equivalents      294.7 (48.3)          -     -    (0.7)        -    245.7
Bank loans      (852.5)  (4.4)          -  (3.1)       -        -   (860.0)
Other loans   (3,326.9) (28.6)       (6.1) (10.7)    21.9     19.7 (3,330.7)
Finance         (219.0)     -          -     -       -      0.1   (218.9)
leases
Cross            135.9     -      (21.2)     -       -     (5.5)    109.2
currency
swaps hedging
debt
Net debt      (3,967.8) (81.3)      (27.3) (13.8)    21.2     14.3 (4,054.7)





14 Post balance sheet events



There were no significant post balance sheet events.



15 Contingent liabilities



Details of the group's contingent liabilities were disclosed in the financial
statements for the year ended 31 March 2012 which were approved on 29 May
2012. Except as noted below, there have been no significant developments
relating to the contingent liabilities disclosed in those financial
statements.



On 8 August 2012 Ofwat announced that it had opened a consultation on
proposals to accept a binding commitment from Severn Trent Plc to divest
Severn Trent Laboratories Limited.



The consultation, which ran for four weeks from 8 August 2012, sought views
from interested parties on the appropriateness of Ofwat accepting the
commitments offered by Severn Trent Plc.



We expect Ofwat to publish its conclusions on its investigation under the
Competition Act by the end of the financial year.



16 Related party transactions



There have been no related party transactions that materially affected the
financial position of performance of the group during the period.



Responsibility statement



We confirm to the best of our knowledge:



(a) the condensed set of financial statements has been prepared in
accordance with IAS 34 "Interim Financial Reporting"; and



(b) the interim management report includes a fair review of the information
required by Disclosure and Transparency Rules 4.2.7R and 4.2.8R of the United
Kingdom Financial Services Authority.



Signed on behalf of the Board who approved the half yearly financial report on
26 November 2012.





Andrew Duff Michael McKeon
Chairman    Finance Director





Further copies of this half yearly financial report may be obtained from the
Company Secretary, Severn Trent Plc, Severn Trent Centre, PO BOX 5309,
Coventry, CV3 9FH or by emailing severntrent@equiniti.com.





INDEPENDENT REVIEW REPORT TO SEVERN TRENT PLC





We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2012 which comprises the condensed consolidated income statement,
the condensed consolidated statement of comprehensive income, the condensed
consolidated statement of changes in equity, the condensed consolidated
balance sheet, the condensed consolidated cash flow statement and related
notes 1 to 16. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.



This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the company those matters we are required to state to them
in an independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our review work, for this report, or for the
conclusions we have formed.



Directors' responsibilities



The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Services Authority.



As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.



Our responsibility



Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.



Scope of Review



We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.



Conclusion



Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2012 is not prepared,
in all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union and the Disclosure and Transparency Rules
of the United Kingdom's Financial Services Authority.







Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

26 November 2012





Forward-looking statements





This document contains certain "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", "should", "expects", "believes", "intends", "plans",
"potential", "reasonably possible", "targets", "goal" or "estimates". 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 will occur in the future.



There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, changes in the
economies and markets in which the group operates; changes in the regulatory
regime within which the group operates (including increased competition);
developments in the capital markets from which the group raises finance; the
impact of legal or other proceedings against or which affect the group; and
changes in interest and exchange rates.



Details of the principal risks and uncertainties facing the group were set out
in the risk management section on pages 37 to 40 of Severn Trent's Annual
Report and Accounts 2012.



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. No assurances can be given
that the forward-looking statements in this document will be realised.
Subject to compliance with applicable law 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.





Cautionary statement



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

END


IR LLFSTLLLRFIF -0- Nov/27/2012 07:00 GMT