Preliminary Announcement of Annual Results
24 May 2023  
Results for the year to 31 March 2023  
Environmental leadership, strong performance, investing for future growth
Setting the benchmark through environmental and social leadership
| · | Highly confident in achieving 4* EPA1 status for a fourth consecutive year, performance on all six environmental metrics expected to be on or better than target |
| · | Improved our performance on river quality by a third over the last year; our share of RNAGS2 reduced from 24% to 16%; average annual storm overflow performance reduced from 25 to 18 activations, ahead of regulatory target |
| · | Work underway on the world’s first Net Zero waste water treatment hub, to be delivered in 2024, providing the blueprint for reducing process emissions; supported by Ofwat’s Innovation Fund |
| · | Financially supporting 237,000 customers in need with up to 90% off their bill, on track to help 315,000 customers by 2025 |
| · | Progressing well with our ten-year Societal Strategy to help support 100,000 people out of poverty by 2032 |
| · | Doubling our biodiversity commitment to 10,000 hectares by 2025, two years earlier than planned |
12.2% RoRE3 for FY23 driven by strong environmental, operational and financial performance
| · | Continuing to deliver strong operational and financial outperformance, despite extreme weather and tough macroeconomic conditions; cumulative AMP7 RoRE of 8.9% to date |
| · | Around 80% of ODI4 measures met or exceeded including leakage, pollutions and water quality complaints, resulting in a net reward of £53 million; over £200 million delivered AMP75 to date, already surpassing our total in AMP65 |
| · | Record energy generation of 5956 GWh, equivalent to 53% of Group consumption, with 45 GWh of additional generation expected from planned acquisition of Andigestion Ltd7 |
| · | Group PBIT8 of £509 million (2021/22: £506 million), up 1%, in line with expectations |
| · | Adjusted basic EPS9 of 58.2 pence (2021/22: 96.1 pence) reflecting the effect of inflation on index-linked debt. Basic EPS of 52.7 pence (2021/22: loss of 35.2 pence) |
| · | Proposed final dividend of 64.09 pence (2021/22: 61.28 pence), in line with our policy and payable on 14 July 2023 |
Investment on-track, well-positioned for AMP8 growth
| · | Year end RCV10 of £11.6 billion, AMP to date growth of £2.2 billion, with investment plans on track |
| · | RCV expected to be £12.8 billion by March 2025, reflecting AMP7 nominal growth of 36% |
| · | Strong balance sheet with regulatory gearing of 60.0%11, well below the sector average, providing capacity for future investment in water resources, improving environmental standards and Net Zero |
| · | Capital investment of £737 million12 with 84% of prices agreed for our core capital programme, £200 million of new annual supply chain capacity secured for future investment |
| · | Guiding to increased capital investment of between £850 million and £1 billion for 2023/24, as we ramp up delivery capability ahead of AMP8 |
Liv Garfield, Chief Executive, Severn Trent Plc, said:
“Creating job opportunities, continuing significant regional investment, and financially supporting more customers than ever before is made possible by the strong results we have delivered this year.
“At a time when unemployment rates in our region are increasing and the cost of living crisis is still front and centre of many customers’ minds, we are proud to be able to create 1,000 jobs in our region over the next couple of years and to further help up to 50,000 customers with financial support. This, coupled with our long-term programme to help people into work, go towards truly supporting the communities we serve.
“This support is being delivered whilst continuing with the multibillion-pound investment in the region to improve water and waste services, providing an exceptional service and investing in our people who go above and beyond every day to make a positive impact in our region. We are expecting the biggest investment period the sector has ever seen, with a focus on water resources, improving environmental standards and on Net Zero, and we feel more than ready for this exciting opportunity ahead of us.”
Group results
| 2023 | 2022 | Increase/ (decrease) | ||
| £m | £m | % | ||
| Group turnover | 2,165.1 | 1,943.3 | 11.4 | |
| Group PBIT | 508.8 | 506.2 | 0.5 | |
| pence/share | pence/share | |||
| Adjusted basic EPS | 58.2 | 96.1 | (39.4) | |
| Basic EPS | 52.7 | (35.2) | 249.7 | |
| Total ordinary dividends | 106.82 | 102.14 | 4.6 |
Footnotes to page 1 of this RNS
1. EPA: Environmental Performance Assessment (‘EPA’) status is expected to be confirmed by the Environment Agency (‘EA’) in July 2023
2. RNAGS: The EA’s analysis of Reasons for Not Achieving Good Status (RNAGS) records the source, activity and sector involved in causing waters to be at less than good status
3. RoRE: Return on Regulatory Equity (see glossary)
4. ODIs: Outcome Delivery Incentives, quoted pre-tax and in 2017/18 prices unless otherwise stated. FY23 ODIs include in year reward earnings of £35.5 million and £17.5 million for work and milestones already delivered in relation to end of AMP ODIs
5. AMP: Asset Management Plan (see glossary); AMP7 refers to the period 1 April 2020 to 31 March 2025, and AMP6 refers to the period 1 April 2015 to 31 March 2020
6. Includes 548 GWh from renewable sources and 47 GWh from natural gas
7. Acquisition is subject to clearance by the Competition and Markets Authority
8. PBIT: Profit before interest and tax
9. Adjusted basic earnings per share: Set out in note 9
10. RCV: Regulatory Capital Value (see glossary). RCV is measured including additions from Green Recovery and real options. Nominal RCV assumes forecast CPIH of 2.5% for 2023/24, and 1.5% for 2024/25 and forecast RPI of 4.2% for 2023/24 and 2.1% for 2024/25 as per Oxford Economics April 2023 forecast
11. Refers to shadow regulatory gearing based on shadow RCV which includes our Green Recovery programme. Regulatory gearing on our reported RCV is 60.7%
12. See alternative performance measures in note 16 for definition of capital investment