2005 - 2006 - Pinsent Masons Water Yearbook 2012

UNITED KINGDOM PART 3 (ii): COMPANY ANALYSIS: LOCAL/REGIONAL PLAYERS
Severn Trent Plc
Severn Trent Water supplies water and sewerage services to the 8million people in the catchment
areas of the rivers Severn and Trent. This includes Birmingham, Britain’s second largest city, the
English Midlands and a part of central Wales. Severn Trent is the third largest of the UK Water Plcs
and was formed from the merger of 234 local entities in 1973. In the UK, the company sought to bid
for South West Water Plc (Pennon) after Wessex Water launched a hostile bid in 1996. This bid was
blocked by the MMC and since then, Severn Trent has concentrated on investigating potential inset
appointments and PFI contracts in the UK. The company has a good reputation for water resource
management and a pro-active approach to regulatory and environmental developments. Work on
water leakage (a decrease of 30% from 1989 to 2002) and changes in industrial usage have seen the
average annual water demand fall by 15% since 1995.
Industrial water contracts are being actively sought and Severn Trent has gained national accounts for
Northern Foods (Bowyers) and Centre Parcs, generating a total turnover of £3.5 million per annum.
Contracts gained in 2002-03, include Rank Hovis McDougalls, Dairy Crest and Northampton General
Hospital.
Severn Trent, profit and loss account
Y/E 31/03 (£ million) 2001 2002 2003 2004 2005
Severn Trent Water
Turnover 887.2 899.9 917.9 956.7 1,015.1
Group Turnover 1,681.6 1,799.1 1,852.0 2,015.1 2,081.2
Operating profit 358.8 375.3 343.8 399.2 393.7
Net interest -161.1 -159.0 -159.4 -168.0 -176.4
Pre-tax profit 206.2 216.3 184.4 254.4 217.3
Tax charge -64.8 -58.4 -84.3 69.6 77.8
Post-tax profit 141.4 157.9 100.1 184.8 139.5
Earnings per Share (p) 41.0 45.7 28.9 53.5 40.3
Dividends per share (p) 45.0 45.9 45.9 47.0 48.5
Severn Trent - Water treatment, operating and laboratory services
UK Rest of World
Y/E 31/03 (£ million) 2004 2005 2004 2005
Turnover
Laboratories 28.2 30.0 141.9 132.6
Water services 35.4 32.6 175.7 175.5
Operating profit
Laboratories 3.8 4.0 13.9 6.9
Water services 0.0 0.8 13.8 20.3
Severn Trent Services
Severn Trent Services (STS) is based in the USA. It offers laboratory analysis (Analytical Services),
water purification products (Water Purification Solutions) and operating services (North American
Operating Services), with an international arm serving customers in the same sectors in the UK and
Europe. Over the past three years, STS has acquired a series of laboratories in the USA including four
in 2000-01, where it aims to repeat the success it has achieved in the UK. In 2000, STS acquired
Hyder Laboratories Ltd., to extend its testing activities into Wales.
STS acquisitions 2000-01 2001-02 2002-03 2003-04 2004-05
Companies 8 5 3 3 0
Cost (£ million) 41 18 N/A N/A 0
Severn Trent Environmental Services (STES) and Severn Trent Operating Services (STOS), stated
policy is to avoid BOT and construction type contracts and to concentrate on asset and services
management, along with a number of investments in major projects. It is one of the lower key players
in the international market, but with a good track record and steadily improving profitability. Severn
Trent has one of the world’s largest water and wastewater consulting operations and in recent years
354 Pinsent Masons Water Yearbook 2005 – 2006