Trading Statement for the period 1 Oct to 7 Feb

Severn Trent Plc

 

Trading Update for the period 1 October 2017 to 7 February 2018

 

Severn Trent, a leading UK water and waste water company, today provides its trading update.   

 

Financial outlook: The Board continues to expect that the Group will deliver FY17/18 trading performance in line with its expectations and guidance previously disclosed at the HY17/18 results presentation on 23^rd November 2017. We also reaffirm that at least £50 million customer ODI⁽¹⁾ outperformance payments are expected to be earned this year.

 

Delivering sustainable performance for all stakeholders:

 

AMP6⁽²⁾: We are focused on providing benefits to our customers, communities, colleagues and investors, and we have generated sector-leading outperformance payments on key customer ODIs and continue to do well year-to-date.

 

We have positive momentum on Waste, particularly on internal and external sewer flooding, category 3 pollutions and serious pollution incidents. We re-confirm that we will hit the AMP6 outperformance cap⁽³⁾. On Water, we have had more supply interruptions than normal in the last quarter, but are encouraged by the reduction in water quality complaints, which were down 12% year on year. We confirm that we expect to earn at least £50 million customer ODI⁽¹⁾ outperformance payments across Waste and Water this year.

 

We continue to work hard on improving our SIM⁽⁴⁾ scores. We also note that we have one of the sector-leading scores in CCW's⁽⁵⁾ independent annual survey on what our customers think.

 

We have delivered material reductions in our cost of finance. Since our HY17/18 results announcement, a £400m fixed-rate sterling bond with a coupon of 6% matured and was refinanced in part with a £250m five-year sterling bond with a coupon of 1.625%. We continue to explore varied sources of finance to help positon us as an upper-quartile performer in AMP7. 

 

AMP7⁽²⁾: Ofwat announced its PR19⁽⁶⁾ Final Methodology in December 2017, providing welcome clarity on upcoming plans. We expected a tough review, recently restructuring our wholesale business to improve operational effectiveness and our customers' experience. We are encouraged by the enhanced incentive regime, creating strong outperformance opportunities. We are positioning ourselves for continued success in AMP7.

 

To assist AMP7 planning, we have launched our largest ever customer engagement programme, including a community panel of 10,000 customers, a review of two million customer contacts and analysis of over seven million social media conversations. This helps us understand the core service improvements and wider social and environmental initiatives our customers expect, thereby underpinning future growth in our RCV⁽⁷⁾. 

 

Corporate social responsibility: We are conscious of Severn Trent's role in society through the impact on our community, the wider environment, and the importance of workplace diversity. Our work in the community delivers benefits through our extensive customer education and employee volunteering programmes. We are keen to play our part in supporting social mobility and we have a highly-rated apprentice programme. We have reported a gender pay gap of 2.4% and, while we have even further to go, we have made strong progress in supporting workplace diversity and gender pay equality. We have a strong record of environmental performance and through our renewable energy business we are on track to generate the equivalent of 50% of our energy needs by 2020.

 

 

Footnotes                                                                      

1.     ODIs = Outcome Delivery Incentives

2.     AMP6 = regulatory period for 2015-2020. AMP7 = regulatory period for 2020-2025

3.     For AMP6, our customer ODI outperformance payments for Waste are capped at £190m (pre-tax at 2012/13 prices). To the end of 2016/17, we had earned £75m from our Waste customer ODIs, with £115m remaining

4.     SIM = Service Incentive Mechanism, Ofwat's measure of customer experience in AMP6

5.     CCW = Consumer Council for Water

6.     PR19 = Price Review for AMP7

7.     RCV = Regulatory Capital Value

 

Enquiries:
Investors & Analysts
Ruban Chandran	Severn Trent Plc	+44 (0) 7957 166615
Head of Investor Relations
Richard Tunnicliffe	Severn Trent Plc	+44 (0) 7834 419722
Investor Relations Manager
Media
Jonathan Sibun	Tulchan Communications	+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. No assurances can be given that the forward-looking statements in this document will be realised. 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 profits forecast.

 

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).