Severn Trent Plc has delivered a robust financial performance in 2023-24, with group turnover rising to £2,338.2 million in 2023-24 from £2,165.1 million in 2022/23, while profit before interest and tax (PBIT) rose to £511.8 million in 2023-24 (2022/23: £508.8 million) according to its preliminary Announcement of Annual Results for the year to 31 March 2024 released today.

The 8.0% increase in turnover of £173.1 million was driven mainly by higher revenues in the group’s egulated water and wastewater business which were up by £156.6 million. Turnover for the regulated business was £2,152.0 million (2022/23: £1,995.4 million) and PBIT was £479.6 million (2022/23: £467.5 million).

Total group profit after tax for the year was £140.2 million (2022/23: £132.2 million), while basic earnings per share was 51.0 pence (2022/23: 52.7 pence) - Severn Trent said this was down due to the share issue in the year. However, adjusted basic earnings per share was 79.4 pence (2022/23: 58.2 pence) as the growth in adjusted earnings was greater than the impact of the share issue.Severn Trent Plc

The Chief Financial Officer’s review says the Group’s balance sheet remains strong. As at 31 March 2024 adjusted net debt was £7,187.9 million while its shadow regulated gearing, taking into account the Green Recovery programme, was 59.7% (2023: 59.8%) and its regulated gearing was 61.3% (2023: 60.5%). Severn Trent said this was higher due to investments in relation to Green Recovery, transitional expenditure and other items that will be reflected in the Regulatory Capital Value (RCV) as ‘midnight adjustments’ at the end of AMP7.

Operational cash flow was £760.8 million, (2022/23: £713.1 million) while cash capex was £1,146.2 million, up £459.6 million due to the increasing capital programme including transitional expenditure for AMP8.

Net labour costs of £200.9 million were 27.0% higher year-on-year. Gross employee costs increased by £80.3 million of which £25.7 million was driven by a pay increase of 7.5% and £16.7 million was due to higher national insurance and employer pension contribution costs.

A planned increase in Severn Trent’s headcount driven by the insourcing of reactive sewage services teams from Customer Solutions Plus earlier this year, and additional resource to support the delivery of its biggest ever capital programme, resulted in an increase of £27.7 million.

Net hired and contracted costs increased by £34.6 million (15.9%), £15.8 million of which is due to the planned step-up in the Green Recovery programme. The remaining increase is driven by higher spend on third party gangs to support with leakage and other operational improvement activities and increases on building maintenance contracts and third-party technology contracts.

Power costs were £78.4 million (38.3%) higher, mainly driven by the higher wholesale price of electricity on imports, hedged over the course of 2022 which was affected by the significant increase in wholesale market energy prices at that time. Power consumption on the company’s pumping stations was around £2 million higher due to the exceptionally wet weather. However, the higher power prices are partially offset by self-generation and incentive income in both the Bioresources and Green Power businesses.

Infrastructure renewals expenditure was £31.2 million lower compared to 2022/23. Severn Trent said this was driven by less reactive activity required as well as improved efficiency on mains renewals, partly offset by additional activity on comm pipe renewals. The work mix also switched towards more capital activity in the year.

Severn Trent said the proposed final dividend of 70.10 pence (2022/23: 64.09 pence), is in line with its inflation-linked dividend policy and payable on 17 July 2024.

Invested £1.2bn in FY24, - 63% increase year-on-year, bringing the total invested during AMP7 to over £3 billion

Operational and financial highlights in the report include:

• Invested £1.2bn in FY24, a 63% increase year-on-year, bringing the total invested during AMP7 to over £3 billion
• “Highly confident “ Severn Trent has achieved 4* EPA2 in 2023, an unprecedented fifth consecutive year of achieving the highest environmental rating.
• Accelerating investment in 900 storm overflows this year alone, as the utility works to reduce average spill rate to below 20 by 2025, and halve its rate by 2030.
• Net ODI4 reward of £55m this year (17/18 prices) - in total across AMP7 Severn Trent expects to earn sector-leading net ODI rewards of around £420 million in nominal prices.
• Sustained investment and continuous improvement culture driven best ever performance on supply interruptions, blockages and low pressure.
• Achieved lowest ever leakage this year, meaning Severn Trent has now reduced leakage on its network by 10.8% in AMP7, and remains on track for a 15% reduction by the end of the AMP.
• Record energy generation of 655GWh, the equivalent of 60% of energy consumption, following acquisition of Andigestion.
• Successful £1billion equity raise, enabling the accelerationof £450 million of AMP8 investment into AMP7.
• Progressed on AMP8 strategic investments, with ODI Centre of Excellence and Zero Spills Hub enabling an early start on AMP8 ODIs, ‘Plug and Play’ capabilities expanding to deliver AMP8 capital programme faster, first 20,000 customers migrated onto new customer platform, Kraken, and insourced around 400 colleagues into the customer Waste Network Team.

Liv Garfield - “We are planning record levels of investment in the coming years, while also keeping bills the second lowest in the country"

Commenting on the results, Liv Garfield, Chief Executive, Severn Trent Plc, said:

“I’m proud of the performance our brilliant teams have delivered this year, whether for our customers, the environment or the wider region. We have achieved our best ever leakage performance and we’re very confident of keeping the highest 4* status from the Environment Agency for an unprecedented fifth consecutive year. We’re also driving innovation across our sector, with new technology at our Strongford treatment works eliminating all of the site’s carbon emissions.

“The extra £1bn we raised from our investors will help us continue to transform the network, reducing spills, improving river health and providing our customers with the best and most reliable service. Following extensive work to test and trial solutions, just last week we unveiled plans to deliver storm overflow solutions across 900 locations in the Midlands this year, and a dedicated 300-strong team are now installing c. 1,000 capital schemes which, once finished, will see a reduction of 20% of spills per year.

“We are planning record levels of investment in the coming years, while also keeping bills the second lowest in the country. Our customers and the communities in which they live are at the heart of our business and we’re doing more than ever to ensure we have a positive economic, environmental and social impact across our region.”

Chief Exec's total pay package of £3.2 million, includes £584,000 bonus

Severn Trent has awarded its chief executive a total pay package of £3.2 million, including a £584,000 bonus.

Liv Garfield was awarded a total pay package of £3.2million, including a £584,000 bonus. In February this year the water company was ordered to pay a fine of £2,072,000 for allowing huge amounts of raw sewage to discharge into the River Trent from Strongford Wastewater Treatment Works (WTW) near Stoke-on-Trent, Staffordshire, between November 2019 and February 2020. About 260mn litres of this was discharged illegally and in breach of permits.

According to the report, the CEO’s annual bonus of £584,000 bonus was adjusted down by Severn Trent’s Remuneration Committee “to reflect and acknowledge this regrettable event.”

The report states:

“After significant discussion and careful consideration, the Committee has determined that it is appropriate to exercise downward discretion to the CEO’s annual bonus to reflect and acknowledge this regrettable event. Whilst the Company did not have any serious pollutions in 2023/24 and are highly confident of EPA 4* rating for an unprecedented fifth consecutive year, the Committee believes that an adjustment is appropriate to reflect the judgment made, the potential impact of this event, and the expectations of our customers and broader stakeholders.”

The report also comments on the Leigh Day Claim for £239 million (excluding interest) - a class action comprising certain consumers of STW (on an opt-out basis) who have allegedly been overcharged for sewerage services as a result of an alleged abuse of a dominant position.

Severn Trent said:

“This is an industry-wide issue and five other defendants have had similar claims made against them. The certification hearing is timetabled to take place in September 2024. We consider this claim to be speculative and we reject the alleged basis of the sums claimed. Accordingly, we shall continue to robustly defend the claim in its entirety.”