Severn Trent plc Interim Results 2021

Half Yearly Financial Report

23 November 2021

Interim results for the six months to 30 September 2021

Operational performance ahead of plan, increase in Customer ODI guidance to at least £75 million¹ for the full year:

• We continue to deliver strong operational performance, with over 90% of Severn Trent Water's Customer ODIs on track across Water, Waste, Customer, and the Environment
• Continued positive momentum in Water, including another successful period on water quality complaints (improving by 9%) and speed of response (improving by 11%)
• Sector-leading performance in Waste, resulting in less disruption for customers as flooding and blockages falling by over 30% since the start of the AMP

Leading the sector with our environmental ambitions

• Leading environmental performance, 4* EPA status confirmed by the Environment Agency in July this year
• Significant investment in river quality through our WINEP scheme, with over £500 million being invested this AMP
• Biodiversity commitments continue at pace with over 2,900 hectares of our 2027 target of 5,000 hectares delivered to date, with plans to restore an additional 2,000 acres of peatland in England and Wales by 2025
• Green Recovery progressing well with all projects mobilised: projects will help create c.2,500 jobs and include bathing quality rivers, new net zero water resources, and nature-based flood solutions

Strong financial performance supporting large-scale investment programme

• Group turnover of £958 million² in line with expectations, up £71 million (8.0%), as a result of a strong recovery in non-household consumption following the lifting of lockdown restrictions
• Group PBIT of £256 million, up £31 million (13.8%)
• Effective interest cost³ of 4.2% (2020/21: 3.3%) reflecting higher inflation, effective cash cost of interest unchanged at 3.1%, with two thirds of debt fixed at low-cost rates
• Strong balance sheet, including reduction in pension deficit to £292 million, supporting over 10% RCV growth for AMP7
• Adjusted basic EPS⁴ of 54.4 pence, up 6% (basic loss per share of 73.0 pence, reflecting an exceptional deferred tax charge from the change in corporation tax rate)
• Interim dividend of 40.86 pence, in line with policy confirmed in May 2021

Supporting our communities, colleagues and customers

• Investing in the development of young people through our graduate and apprentice programmes and 500 placements offered under the Kickstarter initiative
• Recognised as a leading socially responsible business: first place on the Tortoise Responsibility100 Index and supporting diversity with the #10000BlackInterns initiative
• Supporting more customers than ever, with over 160,000 people receiving financial assistance
• Over £8 million awarded since the start of the AMP through schemes including the Severn Trent Community Fund, supporting those most in need within our region

Footnotes: see definitions at the end of this RNS

Liv Garfield, Chief Executive Severn Trent Plc, said:

“We've made another strong start to the year as we focus on delivering for stakeholders across our region and delivering for customers in the areas that matter most to them, all while driving the financial performance of our business.

We've continued to invest significantly in our network, in our people and to support our strong commitment to the environment. Our environmental ambitions remain at the heart of our company, whether planting over a million trees, reducing our carbon emissions, or producing an extra 95 million litres of water to tackle the threat of water scarcity.

Severn Trent should be a force for good in our region and I'm delighted our Green Recovery programme is creating valuable jobs, helping support the Government's levelling up agenda and the broader economic recovery.”

Group results

Footnotes to pages 1 & 2 of this RNS

1.  Customer Outcome Delivery Incentives (ODIs) quoted in 2017/18 prices and pre-tax (applying corporation tax at 25%, the rate expected to be applicable when the ODIs are taken to revenue) unless otherwise stated

2.  Includes £12.9 million revenue previously credited against operating costs – see note 1

3.  Effective interest cost – see note 18 to the financial statements

4.  Adjusted basic earnings per share (EPS) – see note 8 to the financial statements