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[24 JUL 01] SEVERN TRENT NEWS
Severn Trent Business Prospects Look Good

Speaking at Severn Trent Plc's Annual General Meeting today, Chairman David Arculus gave an upbeat report on current trading.

"Our strategy for transforming Severn Trent into an environmental services business remains on track, with all three of our principal business units making good progress.

"Unaudited management accounts for the quarter ended 30 June 2001 show that group profit before taxation, excluding an exceptional profit arising from the sale of Stoner, was marginally ahead of our expectations.

"Severn Trent Water has continued to perform well with its programme of cost efficiencies. The 1100 headcount reduction announced in December 1999 has now been virtually implemented, several months ahead of the scheduled date.

"Biffa has made further progress with the successful integration of UK Waste. Increased profit from the UK business, which now constitutes more than 90% of Biffa's profit before interest, tax and goodwill amortisation, has offset some continuing weakness in Belgium.

"Profit before interest, tax and goodwill amortisation from our other growth business, Severn Trent Services, was significantly ahead of the corresponding period of last year. Whilst there are some signs that the issues with the US economy are having an impact upon the business, the effect to date has been modest.

"At Severn Trent Systems we have continued to experience problems in resolving issues associated with the delivery of the CIS-Open Vision system contracts in the US. All appropriate steps will be vigorously pursued to recover Severn Trent Systems' entitlements, but we now expect losses from this business to be much higher than the 5.6 million loss reported last year. The additional loss is expected to have a limited impact on the group's overall anticipated results.

"Our strategy for creating shareholder value continues to be based upon the profitable growth of our waste and services businesses and out-performance by our regulated water business against the targets built into the OFWAT price determination. We remain in a strong position to achieve these objectives."

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CWN / Business / A-ZSevern Trent / 24 Jul 01
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