REG - Severn Trent PLC - ST Plc Trading Update and Final Determination

Severn TrentAnnouncement

24/01/2025 07:00

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RNS Number : 5303U  Severn Trent PLC  24 January 2025

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

Severn Trent Plc Trading Update and Final Determination

 

Severn Trent Plc today announces the following trading update for the period
to 23 January 2025, together with its acceptance of Severn Trent Water's PR24
Final Determination and AMP8(1) Dividend Policy.

 

On track to deliver a strong AMP7

 

Financial performance for the year remains on track and we expect to perform
in line with guidance, which includes delivering a net ODI(2) reward in year
of over £100 million pre-customer-sharing in FY17/18 prices. This would bring
our total net ODI reward in AMP7 to around £420 million in nominal prices
(post-customer sharing), reflecting consistent sector-leading performance.

 

PR24 Final Determination

 

Following a detailed review and consideration of a broad range of
stakeholders, including customers, colleagues and investors, the Board of
Severn Trent Water Limited is pleased to accept the Final Determination for
the period 2025-2030, as published on 19 December 2024.

 

Our totex allowance of £14.9 billion will generate real RCV growth(3) of 45%
and allow us to deliver significant progress on the environment and customer
service, including:

·    Delivering the industry's fastest and most ambitious spills reduction
programme, as we aim to halve spills by 2030 and strive towards global best
practice;

·    Reducing pollutions by a further 30%;

·    Delivering a further 16% reduction in leakage and replacing around
1,400km of water mains;

·    Supporting growth in the region through investment in 70 waste
treatment works; and

·    Achieving operational Net Zero by 2030.

We will deliver this step change in investment while maintaining the second
lowest bill in England and supporting around 1 in 6 customers with their bills
through a £575 million affordability package. We will be able to make this
investment with extensive regulatory mechanisms in place which offer
protection to both customers and investors.

 

 

AMP8 Dividend Policy

 

The Severn Trent Plc Board has reviewed the Final Determination alongside
current performance. Having considered the impacts on all stakeholders,
including the many retail shareholders who rely on dividend income in return
for their investment, the Board is pleased to announce that the Dividend
Policy for AMP8 will be annual growth of CPIH. Based on the FY24/25 dividend
of 121.71p, as guided, the dividend for FY25/26 is therefore anticipated to be
126.02p, using November 2024 CPIH.

 

 

Further Information

 

A recording of our Final Determination presentation and Q&A is available
on our website (www.severntrent.com (http://www.severntrent.com) ), and we
look forward to sharing more detail on our future plans at our Capital Markets
Day in Coventry on 5 March 2025.

 

 

 

Footnotes

 

1.     Asset Management Plan ('AMP')

The regulatory cycle is broken up into five-year periods known as AMP (Asset
Management Plan) periods. The current period is known as AMP7 (2020-2025), and
AMP8 refers to the next period of 1 April 2025 to 31 March 2030.

 

2.     Outcome Delivery Incentives ('ODIs')

A framework made up of outcomes, measures, targets and incentives which
provides companies with rewards for achieving stretching performance targets
and compensates customers if performance is below performance targets. ODIs
are quoted pre-tax and post customer sharing. We assume a 25% rate of
corporation tax to be in place when ODIs are taken into revenue. A net reward
of £100 million (pre-sharing) would deliver a net reward of £60 million +/-
10% (post-sharing), dependent on the mix of ODI net rewards earned.

 

3.     RCV: Regulatory Capital Value ('RCV')

RCV is used to measure the capital base of a company when setting price
limits. The RCV increases each year by a proportion of totex that is set at
each price review and by an adjustment for inflation. The RCV is reduced each
year through the run-off mechanism (which is similar to depreciation of fixed
assets). The run-off amount is recovered through revenue in the year. RCV
Growth figures are stated inclusive of AMP8 transition spend, which has been
accelerated into AMP7 and will be included in the AMP7 closing RCV. Excluding
transition spend, real RCV growth is 40% in AMP8.

 

 

Enquiries

 Investors & Analysts
 Rachel Martin               Severn Trent Plc  +44 (0) 782 462 4011
 Head of Investor Relations

 Andy Farrell                Severn Trent Plc  +44 (0) 798 939 0825
 Investor Relations Manager

 Media
 Jonathan Sibun              Teneo             +44 (0) 207 353 4200
 Press Office                Severn Trent Plc  +44 (0) 247 771 5640

 

Cautionary statement regarding forward-looking statements

This document contains statements that are, or may be deemed to be,
'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', 'would', 'should', 'expects', 'believes', 'intends',
'plans', 'projects', 'potential', 'reasonably possible', 'targets', 'goal',
'estimates' or words with a similar meaning, and, in each case, their negative
or other variations or comparable terminology. Any forward-looking statements
in this document are based on Severn Trent's current expectations and, 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 may or may not occur in the future.

Forward-looking statements are not guarantees of future performance and no
assurances can be given that the forward-looking statements in this document
will be realised. There are a number of factors, many of which are beyond
Severn Trent's control that could cause actual results, performance and
developments to differ materially from those expressed or implied by these
forward-looking statements. These factors include but are not limited to: the
Principal Risks disclosed in our latest Annual Report and Accounts (which have
not been updated since the date of its publication); changes in the economies
and markets in which the group operates; changes in the regulatory and
competition frameworks in which the group operates; the impact of legal or
other proceedings against or which affect the group; and changes in interest
and exchange rates.

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. The final PR24 Business Plan
determination may be subject to further clarification or verification by
Severn Trent or Ofwat. This document speaks as at the date of publication.
Save as required by applicable laws and regulations, Severn Trent does not
intend to update any forward-looking statements and does not undertake any
obligation to do so. Past performance of securities of Severn Trent Plc cannot
be relied upon as a guide to the future performance of securities of Severn
Trent Plc.

Nothing in this document should be regarded as a profit forecast.

Certain information contained herein is based on management estimates,
interpretation and Severn Trent's own internal research. Management estimates
have been made in good faith and represent the current beliefs of applicable
members of Severn Trent's management. While those management members believe
that such estimates, interpretation and research are reasonable and reliable,
they, and their underlying methodology and assumptions, have not been verified
by any independent source for accuracy or completeness and are subject to
change without notice, and, by their nature, estimates may not be correct or
complete. Accordingly, no representation or warranty (express or implied) is
given to any recipient of this document that such estimates are correct or
complete.

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).

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