TIDMSVT
RNS Number : 4051N
Severn Trent PLC
20 May 2020
Preliminary Announcement of Annual Results
20 May 2020
Results for the year to 31 March 2020
Operationally and financially resilient as we begin our new
regulatory period
Responding to COVID-19 by supporting our colleagues, customers
and communities:
-- The health, safety and wellbeing of colleagues remains our
first priority with adapted ways of working, mental health support
and financial security assurances for frontline and home-working
teams.
-- Operations remain resilient, as our agile approach enables us
to continue delivering services reliably.
-- Customers supported with well-established social tariff
schemes for those struggling to pay their bills and GBP3.5 million
available through Severn Trent Trust Fund to further support those
in need.
-- COVID-19 GBP1 million emergency fund(1) established with over
GBP500k already donated to c.200 organisations.
-- Supporting SME suppliers with immediate payment and
commitments to invest, providing much needed certainty for our
supply chain.
Well placed for AMP7 (2) after strong final year of AMP6 (2)
:
-- Continued improvements in key customer measures(3) with
year-on-year reductions in leakage (4%), supply interruptions
(61%), water quality complaints (14%) and pollutions (11%).
-- Environmental performance contributing strongly to annual
customer ODI(4) outperformance of GBP36 million, taking total for
AMP6 to GBP174 million, with GBP191 million (in nominal prices)
deferred to AMP7 revenue.
-- Substantial GBP800 million capex investment in year completes
GBP3 billion AMP6 programme, delivers flagship Birmingham
Resilience Programme, improves 1,600km of river quality and
provides a fast start to AMP7.
-- Industry leading 4* EPA accreditation anticipated(5) from EA,
reflecting strong environmental performance.
-- 491GWh of renewable energy generated, equivalent to 51% of
our energy needs, with the remainder purchased from renewable
sources from 1 April 2020 - ten years ahead of our 2030 target.
-- GBP10 million Severn Trent Community Fund, made up of 1% of
Severn Trent Water AMP7 profits, launched in April with over
GBP400k already awarded in addition to amounts donated through our
emergency fund.
Financially resilient, with results in line with
expectations:
-- Group turnover of GBP1,844 million, up GBP76 million (4.3%).
-- Group underlying PBIT(6) of GBP570 million, down GBP3 million
(0.6%) following the deferral of customer ODIs to AMP7, an increase
in our bad debt provision and a significant property sale in the
prior year.
-- Group reported PBIT(7) of GBP568 million, up GBP5 million (0.9%).
-- Effective interest cost reduced by a further 20bps to 3.7%,
taking the total reduction over five years to 170bps.
-- Cumulative AMP6 RoRE(8) of 8.5%, delivered across all three levers of outperformance.
-- Underlying basic EPS(9) of 146.0 pence (up 0.1%) reflects
lower underlying PBIT offset by improved finance costs.
-- We have recorded an exceptional loss of GBP46.8 million and
provided GBP4.9 million against a loan receivable in relation to
our joint venture, Water Plus; largely driven by impact of COVID-19
on the non-household retail market.
-- Reported profit after tax of GBP159 million (down 49.6%) and
basic EPS of 66.7 pence (down 50.0%) after exceptional Water Plus
losses and exceptional deferred tax charge from the rate change(10)
of GBP91.8 million.
-- Well positioned to manage the financial impacts of COVID-19
with GBP755 million undrawn debt facilities, GBP200 million raised
on US Private Placement market and less than 2.5% of debt maturing
in FY21.
-- IAS19 pension deficit of GBP234 million - down GBP219
million, reflecting temporary spike in credit spreads at year end,
and lower long-term RPI forecast. Triennial contributions agreed in
November 2019.
-- Proposed final dividend of 60.05 pence, in line with policy.
Liv Garfield, Chief Executive, Severn Trent Plc, said:
"Operationally, this has been another year where we have
delivered for all of our stakeholders. However, the last few weeks
have been extraordinary; not only for our business, but for the
country. I want to say thank you to all of my awesome colleagues;
it has been a challenging time, and across each and every part of
the business, they have shown amazing commitment to ensuring our
customers have continued access to one of life's essentials. We
know that this is a difficult time for our customers, and I am
incredibly proud of the ways in which the business has responded.
We also understand that for many people this will be a difficult
time financially, and we have stepped up our support for those on
our Priority Services Register and customers that need extra help
with their bills.
Our business remains strong and we have made further progress
against the things that really matter to our customers with
leakage, supply interruptions and water quality complaints all
improving. We have invested GBP3 billion in our long- term future
over the past five years and are now very focused on emerging from
this crisis in the best possible shape to deliver against the
exciting plans we have set out for the next five years."
Group results
2020 2019
Increase/ (decrease)
GBPm GBPm %
Group turnover 1,843.5 1,767.4 4.3
Underlying Group PBIT(6) 570.3 573.6 (0.6)
Group PBIT 568.2 563.3 0.9
-------------------------------- -------- -------- ---------------------
pence pence Increase/
/share /share (decrease)
%
Underlying basic EPS(9) 146.0 145.8 0.1
Basic earnings per share 66.7 133.4 (50.0)
Total ordinary dividends 100.08 93.37 7.2
-------------------------------- -------- -------- ------------
Footnotes to pages 1 and 2 of this RNS
1. Comprising GBP500,000 re-directed from our newly established
Community Fund and GBP500,000 of historical share forfeiture
proceeds.
2. AMP: Asset Management Plan; AMP6: the regulatory period from
2015-2020; AMP7: the regulatory period from 2020-2025.
3. References to 2019/20 or year-on-year movement on performance
commitments relate to Severn Trent Water as it operates today,
following the realignment to the Welsh boundary. In order to allow
for a like-for-like comparison, all references to performance over
the AMP relate to Severn Trent Water as it operated prior to the
realignment.
4. ODIs = Outcome Delivery Incentives, quoted pre-tax and in
2012/13 prices unless otherwise stated.
5. Environmental Performance Assessment (EPA) status is expected
to be confirmed by the Environment Agency (EA) later this year.
6. Underlying profit before interest and tax (PBIT) excludes
exceptional operating items and amortisation of acquired intangible
assets.
7. Exceptional items before tax are set out in note 4.
8. Return on Regulated Equity quoted net, pre-tax at 2012/13
prices, using Ofwat's RoRE methodology.
9. Underlying basic earnings per share is set out in note 11.
10. In March 2020 the Government's proposal to reverse its
previous decision to reduce the corporation tax rate to 17% with
effect from 1 April 2020 was substantively enacted.
Note : FY2020/21 technical guidance is included in the Chief
Financial Officer's section of this announcement.
Enquiries
Investors & Analysts
Richard Eadie Severn Trent Plc +44 (0) 788 980 6578
Head of Investor Relations
Rachel Martin Severn Trent Plc +44 (0) 782 462 4011
Investor Relations Manager
Media
Jonathan Sibun Tulchan Communications +44 (0) 207 353 4200
Press Office Severn Trent Plc +44 (0) 247 771 5640
Preliminary Results presentation and conference call
A presentation of these results hosted by Liv Garfield, CEO, and
James Bowling, CFO, will be available on our website
(severntrent.com) from 8.30am BST today, 20 May 2020. We will be
hosting a live Q&A session with Liv, James and our wider
Executive team at 9.30am BST today via conference call.
You can access the conference call via:
UK Freefone: 0800 012 1327
International direct: +44 1296 480 180
Participant passcode: 335 619#
For a complete list of dial-in numbers available by country,
please visit:
http://www.btconferencing.com/globalaccess/?bid=54_automated
Managing the impact of COVID-19 on our business and our
stakeholders
The COVID-19 pandemic continues to have a profound impact across
the globe, our country and our region. As a provider of essential
services, we have rapidly deployed our well-practised incident
management processes to reorganise our activities and minimise
disruption to customers, while keeping our people safe and well.
Beyond the operational challenges, we have carefully considered how
we can make a positive impact for the good of all our stakeholders
and the communities we serve and live in. The sections below
outline the impact on our business, and the actions we have taken
to help our stakeholders, in more detail.
Supporting our colleagues
The health, safety and wellbeing of our people remains our first
priority. In line with this, we have:
-- Revised working practices, with virtual remote technicians
and at-home network monitoring, to ensure we keep people as safe as
possible while delivering essential services;
-- Maintained regular two-way communication and collaboration with our trade unions;
-- Committed to not make anyone redundant or furlough any employees as a result of COVID-19;
-- Maintained our all-employee bonus in recognition of our
colleagues' hard work over the last year;
-- Agreed a headline annual pay increase of 2.3% for our colleagues for the next three years;
-- Continued to provide full pay to our colleagues who are
unable to work, in line with our existing policy; and
-- Launched a 'Caring for our Colleagues' campaign, providing
mental and physical wellbeing support, and agreed individual care
plans for our colleagues living in a vulnerable situation.
Helping customers through this difficult time
Our teams are working hard to continue providing essential
services for our customers with minimal disruption, despite the new
ways of working.
We know many of our customers will be facing difficult
situations, so we are offering support through:
-- Initiatives for those struggling to pay their bills,
including the WaterSure scheme for those on low incomes and our Big
Difference Scheme, which offers bill discounts of 10%-90% for
eligible customers;
-- Making GBP3.5 million available as part of our Severn Trent
Trust Fund for those who may be unable to pay their household bills
at this time; and
-- Making sure our vulnerable customers know we are there for
them with targeted communications and support through our Priority
Services Register.
Playing our part in the communities where we live and work
We recognise that as a large, local company, we can offer
further support to our communities, through:
-- Our GBP1 million emergency fund(1) , which has already
donated over GBP500k to around 200 organisations, including
foodbanks, regional Age UK branches and charities supporting the
most vulnerable in society;
-- Working closely with organisations such as Business in the
Community and local resilience forums to ensure local communities
are receiving the support they need;
-- Helping our SME suppliers by moving to immediate processing
of payments for three months - in April we paid GBP38 million to
our smaller suppliers early;
-- Recognising the value to our suppliers of committing to
future work, we have accelerated the promotion of activity and are
progressing capital construction projects where it is safe to do
so; and
-- Our Chair, CEO, and CFO have each asked the Company to donate
25% of their salaries for three months to local charities.
(1) Comprising GBP500,000 re-directed from our newly established
Community Fund and GBP500,000 of historical share forfeiture
proceeds.
An agile approach to a challenging situation
Multi-skilled teams, agile ways of working and a 'can-do'
culture mean we can adapt quickly and flex parts of our AMP7 plan,
to compensate for disruption elsewhere. For example:
-- We have been able to adopt remote working quickly and
strengthen our IT capability to provide enhanced monitoring of our
network and some treatment sites, and improve fault
diagnostics;
-- Our operations teams have been able to complete work ahead of
schedule, reducing work in progress thanks to the significant
reduction in road traffic;
-- We have brought forward projects scheduled for later in the
year to minimise public disruption - for example, renewing parts of
our network in Derby, providing additional resilience for
customers, several months early;
-- Home-working employees have been volunteering to use their
daily exercise to take care of the network in their neighbourhood,
carrying out centrally co-ordinated checks for issues such as
leakage; and
-- Our customer education team has developed an online lesson
for children, supporting families at home while delivering key
messages on water scarcity and sewer misuse.
Maintaining financial resilience
As a responsible business, we place great emphasis on
maintaining financial resilience and are well-positioned to manage
the current situation, with a strong balance sheet, appropriate
gearing levels and healthy liquidity. This reflects:
-- GBP755 million of undrawn credit facilities, from a total
GBP1.1 billion committed facilities, as at 31 March 2020;
-- GBP200 million of funds raised on the US Private Placement market in early March 2020; and
-- Less than 2.5% of our debt maturing in the year ending 31 March 2021.
We are experiencing a financial impact from the COVID-19
pandemic in three primary areas:
Household bad debt - while our priority will be to help those
customers who struggle to pay, we do expect to see an increase in
related bad debt from higher unemployment and stressed household
finances. In the year ended 31 March 2020 we recorded a bad debt
charge of GBP42.5 million, including GBP2.2 million for direct
COVID-19 risks, and expect to see further COVID-19 related
increases to our bad debt in future periods, based on the latest
economic forecasts.
Non-household wholesale revenue - due to the nationwide
restrictions on non-essential business activity, we expect to see a
reduction in volumes billed in the year ending 31 March 2021, only
partially offset by increased household consumption. The Ofwat
regulatory model allows us to recover this revenue in two
years.
Water Plus joint venture - as a retailer in the non-household
market, Water Plus has been significantly impacted by the COVID-19
outbreak, the resulting lockdown and its effects on commercial
customers, and it expects to see lower economic activity leading to
increases in business customer failures. Taking account of an
impairment of its long-term assets, an additional bad debt charge,
and trading losses recorded before the impact of COVID-19, we have
recorded an exceptional loss of GBP46.8 million in the year ended
31 March 2020, reducing the value of our investment to nil, and
also provided GBP4.9 million against a loan receivable from Water
Plus.
On 30 April 2020, Ofwat published the outcome of its
consultation on proposals to address the liquidity and bad debt
challenges in the non-household retail market. We view these
measures to strengthen the non-household retail market positively
for both Severn Trent Water and Water Plus. Further detail can be
found here:
https://www.ofwat.gov.uk/wp-content/uploads/2020/04/Proposals-to-address-liquidity-challenges-and-increases-in-bad-debt---decision-document.pdf
Further information on the financial impact of COVID-19 can be
found in the Chief Financial Officer's review.
Chief Executive's Review
I'm immensely proud of the way the organisation has adapted to
the turbulent and unprecedented challenges we are faced with. Never
has it been more evident that our people live the values we created
together of 'having courage', 'taking pride' and most importantly
'showing care'. As an organisation it has been essential we
demonstrate those same values in the way we treat our stakeholders.
Having courage to make the right choices in the face of an
unprecedented situation, taking pride in doing the best possible
job we can for those that need our services the most and making
sure we show care for all those affected have all been top of our
agenda at the end of a very busy year.
It has been a strong final year of the AMP, most notably on the
water side of our business where our targeted investment and
catchment approach has delivered improvements across a number of
key measures. The average number of minutes our customers were off
supply reduced by over 60% year-on-year to 7 minutes and 18
seconds. We reduced leakage by 19 ML/d, hitting our target for the
eighth time in nine years, delivering an 8% reduction over the AMP,
and achieved our lowest number of water quality complaints in a
decade.
On the waste side of the business, in this final year we
completed a number of environmental programmes including those
under the Water Framework Directive, which helped deliver 1,600km
of river quality improvements. We anticipate achieving 4* EPA
status from the Environment Agency, reflecting our strong
performance across the range of measures it uses to assess the
impact we have on the environment. But we have also incurred
penalties on some of our flooding measures, as we faced
substantially more stretching targets that were agreed to lift the
waste customer ODI cap, combined with persistent wet weather over
the second half of the year.
We have delivered net customer ODI outperformance payments of
GBP36 million for the year, made possible by the lifting of the
waste customer ODI cap. This takes the total amount earned in AMP6
to GBP174 million, providing us with GBP191 million (in nominal
prices) of additional revenue in AMP7.
During the year we generated a Return on Regulated Equity of
6.7% as outperformance on customer ODIs (+1.0%) and financing
(+2.2%) was partly offset by totex (-2.0%). This totex performance
reflects our reinvestment of efficiencies from earlier in the AMP,
enhancing our resilience and supporting customer ODI performance,
as well as increased spend on maintenance schemes, and a higher bad
debt charge. Over the AMP we have generated a cumulative Return on
Regulated Equity of 8.5%.
Across AMP6 we have made a number of achievements which put us
in a strong position as we enter AMP7:
-- Our customers have benefitted from improved service
performance, with reductions in leakage (8%), external sewer
flooding (48%), water quality complaints (28%) and category 3
pollutions (21%) over the AMP.
-- We have maintained the lowest bills in England and Wales and
increased the number of customers we help with their bills to
around 70,000 a year, while donating over GBP17 million to the
Severn Trent Trust Fund.
-- We have positively improved our environment, reducing
pollutions, sewer flooding and leakage; improving river water
quality and influencing customers' and farmers' behaviour to
protect the water cycle.
-- We have increased our renewable energy production to 491GWh,
meaning we now generate the equivalent of 51% of our energy needs,
with our remaining electricity now supplied from 100% renewable
sources.
-- Our resilience has been strengthened with the completion of
the GBP300 million Birmingham Resilience Programme, taking the
total invested in our capital programme over the AMP to GBP3
billion.
-- We have delivered sustained and balanced outperformance to
the benefit of both customers and shareholders, culminating in a
Return on Regulated Equity among the best in the sector.
We are now almost two months into the new AMP and, despite the
ongoing challenges of COVID-19, we are pleased with how the
business is performing. Operationally, we remain on track to
deliver improvements across a range of measures, and expect to
outperform on customer ODIs this year. The work we have done over
AMP6 in tightening our cost base means we are confident we can
deliver improved services within our allowed AMP7 totex. Our
capital programme is on track, with 80% of year one work
contracted, while noting that capex will reduce from the end of one
AMP into the first year of the next.
The Severn Trent culture underpins our response to COVID-19 and
our continued performance. At our Capital Markets Day in March, we
showed how doing the right thing, whether for our customers,
colleagues, communities, or the environment, can deliver a
multitude of benefits and ultimately ensure the long-term success
of our business.
We look forward to delivering our sustainability ambitions,
including our Triple Carbon Pledge, the improvement of 5,000
hectares for biodiversity, and our newly launched Community Fund,
for the benefit of all stakeholders over the next five years and
beyond. We will be reporting against these commitments in our first
Sustainability Report, to be released on our website on 12
June.
2019/20 performance
Operationally, we have had a good year in water, as our
reinvestment of totex efficiencies, accelerated rollout of new
technology and targeted insourcing have driven significant
improvements across a range of measures.
-- Supply interruptions - our 'Prevent, Restore, Repair'
strategy, including the insourcing of Network Response and Trunk
Main Repair teams, and investment in new tankers and equipment, has
made a significant difference to our performance. This year our
customers were off supply for an average of 7 minutes and 18
seconds, our best ever performance, down from 20 minutes last year,
and 34 minutes the year before.
-- Leakage - last year we accelerated our AMP7 leakage plan,
rolling out new technology and new ways of working at speed. This
has helped deliver a 4% reduction year-on-year, hitting our target
for the eighth time in nine years and taking the total reduction
over the AMP to 8%.
-- Water quality complaints - after a challenging start to the
AMP we have delivered consistent improvements in this measure over
the past four years, helped by learnings from Dee Valley's
expertise. While we missed our target marginally, we have delivered
a 14% improvement year-on-year, taking our total AMP6 improvement
to 28%.
In waste, we have delivered a number of key environmental
programmes and performance commitments, but have had a challenging
year on our flooding measures.
-- Internal and external sewer flooding - our targeting of 'hot
spots' and identifying and managing root causes of sewer flooding
continues to yield results. However we saw an increase year-on-year
as the persistent wet weather we experienced in the second half led
to increased run-off from highly saturated ground into our waste
water network. Over the AMP our sewer flooding performance has
improved significantly, but due to the tougher targets agreed as
part of uncapping, we incurred a penalty of GBP19.5 million across
the two measures. In order to drive the necessary improvements for
AMP7, we are educating customers on sewer misuse, and stepping up
our training and investment in 'right first time' and repeat
flooding prevention activities.
-- Category 3 pollutions - we achieved our best category 3
pollutions performance in a decade this year, taking our AMP6
reduction to 21%. Our ambition is to reduce pollutions by 50% over
the next five years, going further than our regulatory
commitment.
-- 4* EPA status - we anticipate achieving 4* EPA status from
the Environment Agency this year, for the third time in the AMP.
This assessment covers a range of environmental measures and truly
reflects our strong track record on protecting and enhancing the
local environment we rely on.
-- Water Framework Directive - we set ourselves an ambitious
target at the beginning of the AMP to deliver meaningful
improvements in the quality of our region's rivers. Over the last
five years, this programme has also generated customer ODI
outperformance payments of GBP42.6 million. In AMP7, we have an
even more ambitious plan to improve the quality of a further
2,100km of rivers and have already started work on delivering this
programme.
We have invested GBP800 million in our capital programme this
year, taking our total capital investment over AMP6 to GBP3
billion, with an additional GBP689 million in infrastructure
renewals over five years, driving real RCV growth of around 9%. The
Birmingham Resilience Programme was a significant part of this and
we are pleased to have seen our largest ever capital scheme
completed on time, to budget and delivering more resilience than
initially planned.
This year also saw the creation of our in-house design team, who
have been designing assets for our AMP7 programme for several
months. In particular, they are exploring low carbon, low cost
solutions, such as wetlands, as alternatives to building new
assets, supporting both our totex efficiency and Triple Carbon
Pledge.
We have enhanced the digital experience we offer our customers.
We have made it easier to pay bills online, taking 850,000 payments
through self-service in the past year, and introduced a virtual
assistant that can offer a third of customers an end-to-end
service, giving our service agents more time to deal with complex
and sensitive issues. As well as improving accessibility and
enhancing the service we offer customers, this technology drives
down our cost to serve, helping keep bills low.
The new measure of customer experience, C-MeX, takes into
account customer perception, making the work we do in our local
communities even more important. Shadow reporting of C-MeX places
us ninth in the sector for the year. While this is an improvement
from our position under the previous SIM measure, we are determined
to progress further over the next five years.
In April our new Community Fund, consisting of 1% of Severn
Trent Water's profits, issued its first payments to local causes,
having already awarded over GBP400k in funding. In addition, we
have also paid over GBP500k from our GBP1 million COVID-19
emergency fund to around 200 organisations, including many
foodbanks, community groups and charities that look after the most
vulnerable in society.
It was an important year for Hafren Dyfrdwy, being its first
full year of operation under the new Welsh Licence. We recently
completed the GBP14 million Service Reservoir Programme - a
significant capital scheme for a business of this size - replacing
a number of ageing distribution service reservoirs in Wrexham and
securing water quality in the area for years to come. There is
still work to be done on some key measures, but we were pleased to
see notable year-on-year improvements in supply interruptions (down
66%) and leakage (down 13%), and continued low levels of external
sewer flooding and category 3 pollutions.
In our non-regulated business, the successful integration of
Agrivert has increased our food waste capacity, adding five
anaerobic digestion plants to our asset base. These plants
contributed to overall energy generation of 491GWh, equivalent to
51% of our energy needs. Our remaining electricity is now purchased
solely from renewable sources, achieving the first of our three
carbon pledges ten years early.
Elsewhere in the non-regulated business, we have continued to
see excellent customer service and strong margin improvement in
Operating Services, and our property development team remain on
track with our commitment to deliver GBP100 million PBIT over the
ten years to 2027.
Reflections on AMP6
Over the course of AMP6 we have worked hard to deliver for all
of our stakeholders, keeping bills low, improving service
standards, investing for the long term and generating a cumulative
RoRE of 8.5%. While we are proud of what we have achieved, we have
had to learn and adapt to tougher regulatory commitments, more
weather extremes and the evolving expectations of society. The
lessons we have learned informed our AMP7 plan and will be
essential to its execution in the next five years.
A key strength of Severn Trent is our ability to take successes
and quickly scale these up across the wider business. We have
broken down some of the silos between our water and waste
processes, taking the best from both and adapting them where
needed. This shared success is equally evident in how we have
invested over the AMP. In the earlier years of AMP6 we delivered
substantial totex and customer ODI outperformance on the waste side
of the business and reinvested some of this outperformance into
water, increasing the resilience of our network and improving
service performance in key measures.
We have brought core skills in-house and used our culture and
broader view of the network to drive performance. For example, in
2016 we took the decision to insource our mains flushing team,
directly contributing to a customer ODI benefit of around GBP5
million. As we head into AMP7, we have taken some bold decisions on
further activities to insource, with our newly established design
teams set to change the way we deliver our capital programme,
taking a much more holistic view of the impact on our business, the
environment, and local communities.
A thorough understanding of our operational end-to-end processes
and interdependencies enables us to deliver multiple benefits
through targeted interventions. Essential to this understanding is
timely, accurate data and network modelling. For example, the
installation of 40,000 acoustic and pressure loggers across our
network has played a crucial role in finding and fixing leaks much
quicker. We have designed our AMP7 customer ODIs with this insight
in mind.
The environment is an essential part of our supply chain. By
embracing a catchment approach and nature-based solutions we can
improve performance and reduce operating costs, while making a
positive impact on our local environment. This approach forms a key
part of our AMP7 strategy, with several initiatives already
underway, including the improvement of 5,000 hectares for
biodiversity, strategically planting 1.3 million trees and working
with 9,000 farmers to improve 44 catchments with innovative methods
such as phosphate socks.
We know that culture is our key strength, especially in
challenging moments. Over the AMP we have had periods of extreme
weather but we have always focused on the best interests of our
customers while delivering efficiencies and customer ODIs in line
with expectations. While smart investment is important, it is our
people who step up and deliver when we need it. This culture isn't
something that just happens and we will continue to work hard to
ensure our people can deliver their best performance every day.
Looking ahead to AMP7
The head start we gained through the 'fast tracking' of our AMP7
plan in January 2019 has helped us to deliver our commitments
despite the ongoing challenges related to COVID-19. The work we
have done in the past year means that:
-- We are already on the right run-rates to deliver our
commitments within our allowed totex, having made the necessary
savings across the business. This includes a 23% real reduction in
head office costs over the past two years through process
improvement, re-skilling colleagues, and close monitoring of
attrition levels;
-- The reinvestment made over the past year in asset health,
innovative technology and new equipment has increased the
resilience of our network and helped prepare the business for a
number of key commitments;
-- Our capital programme is on track with the certainty from
fast-track enabling us to start work with our supply chain and new
design team early; and
-- We have robust plans in place for the delivery of customer
ODIs and understand how we can best re-deploy resource. While some
customer ODIs, such as Per Capita Consumption, will be more
difficult to deliver in the current situation, we can pull forward
work on others to support a net positive outcome.
We are pleased with our start to the AMP on our key performance
commitments. Strong performance in the last year on common measures
such as leakage and category 3 pollutions put us on the right
run-rate for our year one targets. We also have a range of new
customer ODIs, such as public sewer flooding and risk of low
pressure, which we have been shadow reporting for many months, and
are pleased with our progress so far.
Despite these challenging times, we remain confident we can
deliver positive net outperformance payments this year, and across
the AMP. Due to the nature of some of our customer ODIs, including
those that require capital investment, we expect the level of
outperformance payments to grow over the AMP.
Our AMP7 capital programme remains on track with 80% of year one
spend contracted. Due to the essential nature of our work,
following the implementation of appropriate safeguards, design and
construction activity has continued apace since the outbreak of
COVID-19, with limited impact on our planned capital activity for
year one.
We expect the amount of capital expenditure in the first year of
the AMP to be the lowest of the five years, as projects to meet our
AMP7 targets are planned and designed before we take them through
to delivery. Group capital expenditure is expected to be between
GBP430 million and GBP510 million this year, across a broad range
of projects including new Thermal Hydrolysis Plants, increasing our
energy generation capabilities, and work to enhance the resilience
of our waste network in Stroud.
Innovation will play a key role in AMP7, as we find new ways of
achieving more stringent targets, more efficiently and with a
positive impact on the environment. In 2019 we established our new
Resource Recovery and Innovation Centre where we are now trialling
large scale innovative technology, supported by a range of global
research partners, including members of the World Water Innovation
Fund. The Centre is currently trialling a range of exciting new
projects, including the use of mainstream anaerobic treatment which
could substantially reduce both the cost and carbon associated with
waste water treatment.
Our people
We have one of the most engaged workforces in the sector, with
our latest engagement survey placing us in the top 5% of utilities
globally, and our colleagues are invested in the long-term future
of our organisation, with 72% participating in our Sharesave
scheme.
We strive to provide a fair, inclusive and safe place to work
for our people. In line with this priority, in the past year we
have committed to:
-- paying the real living wage to everyone who works both for
and with Severn Trent, becoming an accredited member of the Living
Wage Foundation in March 2020; and
-- adopting the recommendations of the Parker Review on ethnic
diversity of Boards, recognising the need for us to represent the
communities we serve in every way.
We have worked hard this year to embed sustainable thinking
throughout our organisation. We recently dedicated a day to our
commitments in this area for our top 300 business leaders, and we
are now holding events to ensure every one of our 6,800 colleagues
hears the same, key messages about why sustainability is important
to Severn Trent, and what they can do to support our ambitions.
This year our Board and Executive teams have continued to
evolve, demonstrating the attractiveness of Severn Trent to
external talent, and our strong internal talent pipeline. We were
pleased to welcome Christine Hodgson as our Chair, following the
retirement of Andrew Duff, after nine successful years on the
Board. Christine has had an extensive induction into the business,
spending time with many colleagues across the front-line, customer
service and support functions, and understanding what our Purpose
and Values mean to us as an organisation.
Most recently we supplemented the Board with the appointment of
Sharmila Nebhrajani as a Non-Executive Director. Shar brings a
wealth of experience from regulated sectors including medicine,
bioethics, financial services and the media that will complement
the broader skill-set of the Board and provide fresh thinking as
the Company continues to develop.
Continuing to provide a fair return to shareholders
The Board carefully considered the unprecedented circumstances
in relation to this year's dividend and took into account the
Group's prospects and financial position; stakeholder interests
including customers, shareholders, colleagues and our communities;
and the Board's decision not to use any of the Government's
business support measures.
Recognising the critical role that dividends play in providing
necessary income for pensioners and savers, and the significant
number of employee and former employee investors, the Board
determined that, based on the strong performance in 2019/20 and the
underlying financial position of the Company, it remains
appropriate to recommend to shareholders that the final dividend
for year ended 31 March 2020 of 60.05 pence be paid in line with
policy.
Chief Financial Officer's Review
These are unprecedented economic circumstances. The extent of
the impact of the COVID-19 outbreak on the UK economy is uncertain.
We are not immune to the impacts on the wider economy and we expect
to see a continued reduction in consumption from non-household
customers, an increase in bad debt costs from household customers,
even after allowing for an increase in the use of our range of
social tariffs, and a severe impact on our non-household joint
venture, Water Plus. We have reflected these on our balance sheet
at 31 March 2020, where appropriate, and further details are set
out below.
Our funding position continues to be strong and we are carefully
monitoring our liquidity and working capital . Our balance sheet at
31 March 2020 showed net cash of GBP48.6 million and we had undrawn
facilities amounting to GBP755 million. All of our projected
investment and other cash flow needs are covered by cash or
committed facilities through to January 2022. At the year end the
Group's regulatory gearing was 64.9%.
This strong financial position was a factor in our decision to
declare a final dividend of 60.05 pence in line with our AMP6
dividend policy of growth of RPI plus at least 4% per annum. Other
matters, over and above our strong financial position, that the
Board took into account in reaching this decision are noted in the
Chief Executive's review above.
At the half year we flagged the market data issues that were
impacting our non-household retail joint venture, Water Plus. In
the second half of the year we have seen some performance
improvement as the monthly losses relating to these issues have
reduced and cash collection improved. However, Water Plus expects
the economic impact of COVID-19 on non-household customers to be
severe and this has resulted in the joint venture recording losses
from the impairment of its trade debtors, goodwill and certain
intangible assets. Before taking account of these COVID-19 related
write-downs, our share of Water Plus's loss for the year was
GBP14.3 million, of which GBP9.3 million arose in the first half of
the year. We also recorded a provision of GBP4.9 million against
our loans to Water Plus.
Our total share of the Water Plus losses, GBP51.7 million, was
greater than the value of our long-term investment of GBP46.8
million and as a result we did not record GBP4.9 million of these
losses in the income statement. We have shown the amount of our
share of the losses from Water Plus recorded in the income
statement as an exceptional item.
Turning now to our core business, we have built on good
financial performance in the first half of the year to deliver
another good set of results for 2019/20. Although underlying PBIT
in our Regulated Water and Waste Water business was slightly lower
than the previous year, this was expected as we chose to defer
customer ODI rewards worth GBP78 million into AMP7, taking GBP22
million less in revenue than in the previous year, and increased
our planned IRE programme to deliver remaining AMP6 commitments,
offsetting the GBP22 million comparative benefit of hot weather
costs in the previous year. In Business Services, stronger
performance in the second half of the year in Operating Services
and Bioresources produced growth in both revenues and PBIT for the
full year. There were no individually significant land sales in
2019/20 but the GBP6.9 million earned this year means we remain on
track to deliver GBP100 million of PBIT from property sales over
the ten years to 2027.
Our underlying basic earnings per share was up 0.1% to 146.0
pence per share. Basic earnings per share were 66.7 pence.
We have delivered good performance on RoRE, which was 6.7% for
the year ended 31 March 2020. The delivery of substantial
environmental programmes meant another strong year on customer
ODIs, and we continued to outperform on financing. This was partly
offset by the impact of our reinvestment of totex efficiencies
delivered earlier in the AMP. On a cumulative basis, we
outperformed across all three levers over AMP6 and achieved a RoRE
of 8.5%, sustaining our position amongst the very best in the
sector.
We are committed to paying the right amount of tax at the right
time. We pay a range of taxes, including business rates, employers'
national insurance and environmental taxes such as the Climate
Change Levy as well as the corporation tax shown in our tax charge
in the income statement. This year we will again publish a Tax
Report that sets out details of all of the taxes we incur at
www.severntrent.com/sustainability-strategy/reports-and-publications/tax/
. Our corporation tax charge for the year, excluding the
exceptional deferred tax charge, was higher than the statutory rate
reflecting non-deductible items charged to our income statement.
Cash tax payments were reduced by the benefit of tax allowances on
our capital programme and contributions to our pension schemes,
partly offset by the timing of instalment payments to HMRC under
the current rules.
A brief overview of our financial performance for the year is as
follows:
-- Group turnover was GBP1,843.5 million (2018/19: GBP1,767.4
million), an increase of 4.3% as Regulated Water and Waste Water
revenue increased by 2.4%, mainly due to the RPI-linked tariff
increases and Business Services' turnover increased by 19.7%,
(including GBP21.8 million from a full year contribution from the
Agrivert business acquired in the previous year).
-- Underlying PBIT (see note 18) was down 0.6% to GBP570.3
million (2018/19: GBP573.6 million). Underlying PBIT in our
Regulated Water and Waste Water business was GBP15.5 million lower,
Business Services grew by GBP0.8 million and Corporate and other
results improved by GBP2.6 million.
-- We recorded no exceptional operating costs (2018/19: GBP9.6
million arising from the High Court judgment in the Lloyds Bank
case relating to Guaranteed Minimum Pension rights).
-- Reported Group PBIT was up by 0.9% to GBP568.2 million (2018/19: GBP563.3 million).
-- Net finance costs were GBP188.4 million (2018/19: GBP194.2
million). Our effective interest cost of 3.7% (see note 18) was
down from 2018/19 (3.9%) due to the continued benefit of replacing
expensive fixed rate debt with new low cost fixed rate debt, low
variable interest rates and reduced RPI inflation on our
index-linked debt.
-- Our full effective tax rate was 48.9%, including the
exceptional deferred tax charge arising from the change in
corporation tax rate for 2020/21. Our underlying effective tax rate
(see note 18) was 10.4%, down from 11.6% in 2018/19 largely due to
higher capital allowances from the larger capital programme in the
year.
-- Reported Group profit after tax was GBP158.8 million (2019: GBP315.3 million).
Regulated Water and Waste Water
Turnover for our Regulated Water and Waste Water business was
GBP1,620.7 million (2018/19: GBP1,583.1 million) and underlying
PBIT was GBP511.5 million (2018/19: GBP527.0 million).
2020 2019 Increase/(decrease)
GBPm GBPm GBPm %
Turnover 1,620.7 1,583.1 37.6 2.4
------------------------------------- -------- -------- ---------- ----------
Net labour costs (135.8) (124.0) (11.8) (9.5)
Net hired and contracted costs (155.9) (161.9) 6.0 3.7
Power (105.8) (102.1) (3.7) (3.6)
Bad debts (42.5) (25.5) (17.0) (66.7)
Other costs (192.6) (186.2) (6.4) (3.4)
(632.6) (599.7) (32.9) (5.5)
------------------------------------- -------- -------- ---------- ----------
Infrastructure renewals expenditure (149.6) (141.4) (8.2) (5.8)
Depreciation (327.0) (315.0) (12.0) (3.8)
------------------------------------- -------- -------- ---------- ----------
Underlying PBIT 511.5 527.0 (15.5) (2.9)
------------------------------------- -------- -------- ---------- ----------
Turnover increased by GBP37.6 million. The components of this
were:
-- Higher tariffs, including the impact of the annual RPI
increase on prices, which increased revenue by GBP48.2 million
;
-- A net increase of GBP8.1 million to revenue as a result of a
lower year-on-year adjustment for wholesale revenue in prior
periods billed in excess of the wholesale revenue allowance ;
offset by
-- A reduction year-on-year of GBP21.7 million on the
outperformance payments earned from customer ODIs taken into
revenue this year ;
-- A number of other smaller variances resulted in an additional net increase of GBP3.0 million .
Net labour costs were GBP11.8 million (9.5%) higher. Gross
employee costs increased by 10.8% due to the annual pay award and
the continuation of our strategy to bring more work in-house. The
significant step up in activity on capital projects this year
increased the level of own labour capitalised, up GBP16.7 million
on the previous year.
Net hired and contracted costs were down GBP6.0 million (3.7%).
Increases in job volumes and some outsourced debt collection
activity offset the benefit from the in-sourced capital design team
and the costs incurred in the hot, dry summer in the previous
year.
Power costs were up GBP3.7 million driven by the anticipated
rise in pass-through costs. Energy consumption was flat
year-on-year as increased efficiency across the business offset the
impact of new capital schemes and increased pumping required in the
wetter winter. The Group manages its power costs through a
combination of demand management, self-generation and forward price
contracts.
Our bad debt charge increased by GBP17.0 million this year and
represented 3.2% of household revenue (2018/19: 2.0%). We continued
to perform well in collecting recent debt and our new targeted
approach to older debt is showing some promising results, although
the uncollected balance falling into older age categories this year
increased the provision. The impact of COVID-19 has directly led to
GBP2.2 million of the increase in the provision to take account of
the expected impact of the forecast economic downturn next year on
collection of our year end receivables.
Other costs rose by GBP6.4 million. The increase was
predominantly driven by higher chemical prices and usage due to the
completion of new capital schemes.
Infrastructure renewals expenditure was GBP 8.2 million higher
in the year reflecting the completion of AMP6 projects, including
our Trunk Mains Renewal Programme, enhancing the resilience of our
network as we enter AMP7.
Depreciation of GBP327.0 million was GBP12.0 million higher than
the prior year, following the capitalisation of new assets and
increased investment in data technology assets with shorter lives
creating operational efficiencies in our network.
Return on Regulated Equity (RoRE)
RoRE is a key performance indicator for the regulated business
and reflects our combined performance on totex, customer ODIs and
financing against the base return allowed in the Final
Determination.
Severn Trent Water's RoRE for the year ended 31 March 2020 and
for the five year period ended on that date is set out in the
following table:
2019/20 AMP6
% %
----------------------------------- ---- -------- --- -----
Base return 5.5 5.6
Totex performance (2.0) 0.5
ODI performance(1) 1.0 0.9
Financing performance 2.2 1.5
Regulatory return for the year(2) 6.7 8.5
----------------------------------------- -------- --- -----
1 For years 2015/16 to 2018/19, customer ODI performance has
been restated by 0.1% p.a. to recognise the impact of the PR14 SIM
penalty over the years when the penalty was earned.
2 Calculated in accordance with Ofwat guidance set out in RAG 4.07.
We have delivered RoRE of 6.7% in the year, outperforming the
base return by 1.2% as a result of:
-- Continued outperformance on financing, reflecting our effective interest cost of 3.7%;
-- Customer ODI performance of 1.0%, primarily following
successful delivery of our Water Framework Directive and
Sustainable Sewage Treatment programmes, both the culmination of
five years of investment; and
-- Our totex position of negative 2.0%, reflecting our
reinvestment of efficiencies from earlier in the AMP, enhancing our
resilience and supporting customer ODI performance, as well as
increased spend on maintenance schemes, and a higher bad debt
charge.
Our cumulative AMP6 RoRE of 8.5% highlights a strong AMP
performance where we have outperformed the final determination on
all components of RoRE. Over the five year period we have delivered
a sector-leading customer ODI performance, overall net totex
efficiencies, and strong upper quartile performance on
financing.
Business Services
2020 2019 Increase/(decrease)
GBPm GBPm GBPm %
---------------------- ------ ------ ---------- ----------
Turnover
Operating Services 70.7 60.2 10.5 17.4
Green Power 53.5 29.7 23.8 80.1
Bioresources 102.4 97.5 4.9 5.0
Other 13.8 13.5 0.3 2.2
240.4 200.9 39.5 19.7
---------------------- ------ ------ ---------- ----------
Underlying PBIT
Operating Services 14.8 7.0 7.8 111.4
Green Power 6.6 0.6 6.0 1,000.0
Bioresources 29.3 29.5 (0.2) (0.7)
Property Development 7.7 19.9 (12.2) (61.3)
Other 6.5 7.1 (0.6) (8.5)
64.9 64.1 0.8 1.2
---------------------- ------ ------ ---------- ----------
Business Services turnover was GBP240.4 million (up 19.7%) and
underlying PBIT was GBP64.9 million (up 1.2%).
In our Operating Services business, turnover and underlying PBIT
increased by GBP10.5 million and GBP7.8 million respectively.
Improved performance across all areas within the business, as well
as an increase in the expected whole life revenues and profits on
the contract with the Ministry Of Defence, have driven the
increase.
In Green Power, turnover increased by GBP23.8 million and
underlying PBIT increased by GBP6.0 million. Strong energy
generation complemented by the first full year of Agrivert, the
food waste company acquired in November 2018, (increasing turnover
by GBP21.8 million and underlying PBIT by GBP7.2 million in the
current year) have generated the increase.
Turnover from Bioresources increased by GBP4.9 million, but
underlying PBIT decreased by GBP0.2 million due to lower wholesale
energy prices.
Turnover and underlying PBIT in our other businesses
(principally Affinity Products and Developer Services) was broadly
flat year-on-year. Profits from Property Development were GBP12.2
million lower as there were no individually significant disposals
in the current year. We remain on track to deliver GBP100 million
of PBIT from property sales by 2027 although we expect market
conditions to be less favourable in the next year following the
COVID-19 pandemic, resulting in a rephasing of our planned
disposals.
Corporate and other
Corporate overheads were GBP8.6 million (2018/19: GBP8.6
million) and our other businesses generated PBIT of GBP3.0 million
(2018/19: GBP0.4 million).
Exceptional items before tax
We recorded no exceptional operating costs (2018/19: GBP9.6
million from a High Court judgment in the Lloyds Bank case in
relation to gender equality in Guaranteed Minimum Pension rights
).
In 2019/20 we recorded exceptional losses before tax of GBP51.7
million arising from the impact of COVID-19 on our joint venture
Water Plus, including GBP46.8 million from our share of its losses
and an exceptional impairment charge of GBP4.9 million in relation
to our loans receivable from Water Plus (see below). In view of the
materiality of these impacts and the unprecedented nature of the
impact of COVID-19 on Water Plus, we consider these items to be
exceptional.
Net finance costs
Despite higher net debt, our net finance costs for the year were
GBP188.4 million, GBP5.8 million lower than the prior year due to a
combination of lower interest rates, and effective management of
our debt portfolio. Capitalised interest of GBP44.2 million
increased by GBP11.0 million year-on-year due to the higher level
of capital activity in the year.
Our effective interest cost was 3.7% (2018/19: 3.9%) and our
effective cash cost of interest (excluding the RPI uplift on
index-linked debt and pensions-related charges) was 3.1% (2018/19:
3.1%). Net pension finance costs were broadly in line with the
previous year.
Our earnings before interest, tax, depreciation and amortisation
(EBITDA) interest cover was 5.3 times (2018/19: 5.1 times) and
underlying PBIT interest cover was 3.2 times (2018/19: 3.2 times).
See note 18 for further details.
Gains/losses on financial instruments
We use financial derivatives solely to hedge risks associated
with our normal business activities including:
-- Exchange rate exposure on foreign currency borrowings;
-- Interest rate exposures on floating rate borrowings;
-- Exposures to increases in electricity prices; and
-- Forthcoming changes in the regulatory model from RPI to CPIH.
We hold interest rate swaps with a net notional principal of
GBP50 million, fixed to floating, GBP423 million floating to fixed,
GBP250 million of forward starting interest rate swaps, floating to
fixed, and cross currency swaps with a sterling principal of GBP141
million, which economically act to hedge exchange rate risk on
certain foreign currency borrowings.
We revalue the derivatives at each balance sheet date and take
the changes in value to the income statement, unless the derivative
is part of a cash flow hedge.
Where hedge accounting is not applied, if the risk that is being
hedged does not impact the income statement in the same period as
the change in value of the derivative, then an accounting mismatch
arises and there is a net charge or credit to the income statement.
During the year there was a loss of GBP9.8 million (2018/19: gain
of GBP28.5 million) in relation to these instruments.
Note 7 to the financial statements gives an analysis of the
amounts charged to the income statement in relation to financial
instruments.
As part of our power cost management strategy, we have fixed
62.4% of our estimated wholesale energy usage for 2020/21.
Share of loss of joint venture
Our joint venture, Water Plus, had a difficult year. Billing and
revenue assurance issues identified early in the year impacted
trading results in the first half and the recovery that was
starting to bear fruit in the second half was stopped in its tracks
by the COVID-19 outbreak.
In common with other participants in the non-household retail
market, Water Plus has been significantly impacted by the COVID-19
outbreak, the resulting lockdown and its effects on commercial
customers, and expects to see lower economic activity leading to
increases in business customer failures. Water Plus reworked its
business plan to take account of the expected impacts of the
COVID-19 outbreak on its customer base and recorded impairments of
its goodwill, intangible assets and trade receivables as a
result.
Water Plus has updated its impairment assessment for its
long-term assets, in particular goodwill and customer relationships
recognised under the acquisition accounting rules of IFRS 3. The
updated impairment tests identified an impairment of GBP51.1
million against these assets. In addition, Water Plus has already
seen a significant reduction in cash collected from its
non-household customers and, using prospective economic data to
estimate the likely impact of future economic circumstances on its
debt book at 31 March 2020, has recognised an additional GBP29.3
million bad debt provision.
Before taking account of these COVID-19 related write-downs, our
share of Water Plus's loss for the year was GBP14.3 million, of
which GBP9.3 million arose in the first half of the year.
We have recognised GBP46.8 million, our share of these losses
capped at the level of our long-term investment, as an exceptional
loss from our joint venture. We have not recognised GBP4.9 million
of losses in excess of our investment.
We have also recorded an exceptional impairment of GBP4.9
million in our loans receivable from Water Plus (see above).
Taxation
We are committed to paying the right amount of tax at the right
time. We pay a range of taxes, including business rates, employers'
national insurance and environmental taxes such as the Climate
Change Levy as well as the corporation tax shown in our tax charge
in the income statement. Our corporation tax charge for the year,
excluding the exceptional deferred tax charge, was higher than the
statutory rate reflecting non-deductible items charged to our
income statement, such as losses from the joint venture which are
reported after tax, partially offset against tax credits arising
from overpayments in the previous year. Cash tax payments were
reduced by the benefit of tax allowances on our capital programme,
contributions to our pension schemes partly offset by the timing of
instalment payments to HMRC under the current rules.
2020 2019
GBPm GBPm
----------------------------------- ------ ------
Tax incurred:
Corporation tax 26.7 31.5
Business rates and property taxes 81.6 80.7
Employer's National Insurance 28.9 25.5
Environmental taxes 6.6 9.6
Other taxes 4.9 3.5
------------------------------------ ------ ------
148.7 150.8
----------------------------------- ------ ------
Further details on the taxes and levies that we pay can be found
in our report, "Explaining our Tax Contribution 2019/20", which
will be made available at
www.severntrent.com/sustainability-strategy/reports-and-publications/tax/
when our Annual Report and Accounts is published in June.
The corporation tax charge for the year recorded in the income
statement, before exceptional taxes, was GBP59.2 million (2018/19:
GBP67.6 million) and we made net corporation tax payments of
GBP33.9 million in the year (2018/19: GBP21.3 million). The
difference between the tax charged and the tax paid is summarised
below:
2020 2019
GBPm GBPm
---------------------------------------------------------------------- -------- -------
Tax on profit on ordinary activities 59.2 69.4
Tax on exceptional items 0.9 -
Exceptional deferred tax charge arising from rate change 91.8 -
Tax effect of timing differences (120.9) (37.6)
Current tax credits recorded in Other Comprehensive Income or equity (9.5) (9.7)
Overprovisions in previous years 5.2 9.4
Corporation tax payable for the year 26.7 31.5
Payable by instalments next year - (15.9)
----------------------------------------------------------------------- -------- -------
Instalments due in the year 26.7 15.6
Repayments received (0.4) -
Payments relating to prior years 4.5 5.7
Overpayments 3.1 -
---------------------------------------------------------------------- -------- -------
Net tax paid in the year 33.9 21.3
----------------------------------------------------------------------- -------- -------
The overpayments arose from prudent estimates of the tax charge
for the year when calculating quarterly instalment payments.
Note 8 in the financial statements sets out the tax charges and
credits in the year, which are described below.
The current tax charge for the year was GBP31.0 million
(2018/19: GBP31.8 million) and the deferred tax charge, before the
exceptional deferred tax charge arising from the change of rate,
was GBP29.1 million ( 20 18/19: GBP37.6 million).
In March 2020 the UK Government announced that it would reverse
the previously planned reduction in the corporation tax rate that
was due to take effect from 1 April 2020. This change was
substantively enacted in March 2020 and we have therefore
remeasured our deferred tax assets and liabilities at 31 March 2020
at the new rate of 19%. This resulted in an exceptional deferred
tax charge in the income statement of GBP91.8 million and a credit
to reserves amounting to GBP2.7 million.
Our full effective tax rate this year was 48.9% (2018/19:
18.0%), which is higher than the UK rate of corporation tax (19%),
due to the exceptional deferred tax charge.
UK tax rules specify the rate of tax relief available on capital
expenditure. Typically this is greater in the early years than the
rate of depreciation used to write off the expenditure in our
accounts. The impact of this timing difference applied across our
significant and recurring capital programme tends to reduce our
underlying effective current tax rate and corporation tax payments
in the year. By the same token we make a provision for the tax that
we will pay in future periods when the tax relief on the capital
expenditure has been received and we receive no allowance for the
depreciation charge arising on that expenditure. This is the most
significant component of our deferred tax position.
Our underlying effective current tax rate was 10.4% (2018/19:
11.6%) (see note 18).
The exceptional losses recorded in relation to our joint
venture, Water Plus, are recorded after tax and therefore there is
no impact on our tax charge from these losses.
Profit for the year and earnings per share
Total profit for the year was GBP 158.8 million (2018/19: GBP
315.3 million).
Basic earnings per share decreased by 50.0% to 66.7 pence
(2018/19: 133.4 pence). Underlying basic earnings per share was
146.0 pence (2018/19: 145.8 pence). For further details see note
11.
Cash flow
2020 2019
GBPm GBPm
Operational cash flow 888.5 826.3
Cash capex (799.5) (769.3)
Net interest paid (184.2) (161.6)
Purchase of subsidiaries net of cash acquired -- (50.9)
Payments for swap terminations (16.8) --
Proceeds from swap terminations 16.5 --
Net tax paid (33.9) (21.3)
Free cash flow (129.4) (176.8)
Dividends (228.4) (211.9)
Issue of shares 9.6 11.1
Purchase of own shares -- (1.1)
Change in net debt from cash flows (348.2) (378.7)
Debt acquired in subsidiaries -- (63.0)
Non-cash movements (49.2) (35.8)
------------------------------------------------
Change in net debt (397.4) (477.5)
Opening net debt (5,834.1) (5,356.6)
Closing net debt (6,231.5) (5,834.1)
------------------------------------------------ ---------- ----------
2020 2019
GBPm GBPm
------------------------------- ---------- ----------
Bank loans (1,251.9) (1,120.1)
Other loans (5,058.5) (4,820.5)
Lease liabilities (122.7) (112.2)
Net cash and cash equivalents 48.6 39.6
Cross currency swaps 60.4 37.1
Loans due from joint ventures 92.6 142.0
Net debt (6,231.5) (5,834.1)
-------------------------------- ---------- ----------
Operational cashflow (see note 18) was GBP888.5 million
(2018/19: GBP826.3 million) mainly due to higher PBIT, depreciation
and amortisation and our increase in working capital was lower than
the previous year.
Our biggest year of capital investment in more than a decade led
to cash capex (see note 18) of GBP799.5 million (2018/19: GBP769.3
million). In 2018/19 the acquisition of Agrivert resulted in a net
cash outflow of GBP50.9 million and we also repaid GBP63.0 million
of debt that was acquired with the business.
Our net interest payments were higher at GBP184.2 million
(2018/19: GBP161.6 million). Our net tax payments were GBP33.9
million, an increase of GBP12.6 million, largely due to the
acceleration of quarterly instalment payments introduced by the
government this year.
We received GBP9.6 million (2018/19: GBP11.1 million) from the
exercise of options under the employee Save As You Earn share
scheme and our dividends paid increased in line with our
policy.
These cash flows, together with accounting adjustments to the
carrying value of debt, resulted in an increase of GBP397.4 million
in net debt (2018/19: GBP477.5 million).
At 31 March 2020 we held GBP48.6 million (2019: GBP39.6 million)
in net cash and cash equivalents. Average debt maturity was around
13 years (2019: 14 years). Including committed facilities, our cash
flow requirements are funded until January 2022.
Net debt at 31 March 2020 was GBP6,231.5 million (2019:
GBP5,834.1 million) and balance sheet gearing (net debt/net debt
plus equity) was 83.4% (2019: 83.3%). Group net debt, expressed as
a percentage of estimated Regulatory Capital Value at 31 March 2020
was 64.9% (2019: 63.0%) and Severn Trent Water Group RCV gearing
was 64.4% (2019: 62.3%).
The estimated fair value of debt at 31 March 2020 was GBP951.8
million higher than book value (2019: GBP1,219.6 million higher).
The decrease in the difference to book value is largely due to
higher credit spreads at the balance sheet date.
Our policy for the management of interest rates is that at least
40% of our borrowings in AMP6 should be at fixed interest rates, or
hedged through the use of interest rate swaps or forward rate
agreements. We continue to carefully monitor market conditions and
our interest rate exposure. Given the flatness of the yield curve
we believe it is appropriate to reduce our exposure to floating
rates of interest. At 31 March 2020, 64% of our gross debt of
GBP6,433.1 million was at fixed rate, 12% was in floating and 24%
was index-linked. In March 2020 we raised GBP200 million at fixed
rates of interest through a US Private Placement.
Our long-term credit ratings are:
Long-term ratings Severn Trent Plc Seven Trent Water Outlook
-------------------- ----------------- ------------------ --------
Moody's Baa2 Baa1 Stable
Standard and Poor's BBB BBB+ Stable
-------------------- ----------------- ------------------ --------
We invest cash in deposits with highly rated banks and liquidity
funds. We regularly review the list of counterparties and report to
the Treasury Committee.
Pensions
We have three defined benefit pensions arrangements, two from
Severn Trent and one from Dee Valley Water. The Severn Trent
schemes are closed to future accrual.
The most recent formal actuarial valuations for the Severn Trent
schemes ('the Schemes') were completed as at 31 March 2019. The
agreement reached with the Trustee for the STPS, which is by far
the largest of the schemes, included:
-- Inflation-linked payments of GBP15.0 million per annum
through an asset-backed funding arrangement, potentially continuing
to 31 March 2031, although these contributions will cease earlier
should a subsequent valuation of the STPS show that these
contributions are no longer needed;
-- Payments under another asset-backed funding arrangement of
GBP8.2 million per annum to 31 March 2032; and
-- Deficit reduction payments totalling GBP32.4 million
increasing in line with inflation through to 31 March 2027.
In addition to these payments, the Company will directly pay the
annual PPF levy incurred by the STPS (GBP1.4 million in
2019/20).
The Schemes have entered into additional hedging arrangements to
reduce the impact of fluctuations in interest rates and inflation
on the Schemes' liabilities without adversely impacting the
expected return from the Schemes' assets.
Hafren Dyfrdwy participates in the Dee Valley Water Limited
Section of the Water Companies Pension Scheme ("the Section"). The
Section funds are administered by trustees and are held separately
from the assets of the Group. The Section is closed to new
entrants. The most recent formal actuarial valuation of the Section
was completed as at 31 March 2017 and as a result deficit reduction
contributions to the Section ceased.
On an IAS 19 basis, the net position (before deferred tax) of
all of the Group's defined benefit pension schemes was a deficit of
GBP234.0 million (2019: GBP452.9 million). To calculate the pension
deficit for accounting purposes, we are required to use corporate
bond yields as the basis for the discount rate of our long-term
liabilities, irrespective of the nature of the scheme's assets or
their expected returns.
On an IAS 19 basis, the funding level has improved to 91% (31
March 2019: 84%).
The movements in the net deficit during the year were:
Fair value of scheme assets Defined benefit obligations Net deficit
GBPm GBPm GBPm
-------------------------------------------- ---------------------------- ---------------------------- ------------
At start of the year 2,418.9 (2,871.8) (452.9)
Amounts credited/(charged) to income
statement 54.8 (69.5) (14.7)
Actuarial (losses)/gains taken to reserves (0.4) 187.8 187.4
Net contributions received and benefits
paid (59.2) 105.4 46.2
At end of the year 2,414.1 (2,648.1) (234.0)
-------------------------------------------- ---------------------------- ---------------------------- ------------
During the year lower inflation expectations had been largely
offset by lower discount rates. However, at the year end we saw an
increase in corporate bond yields resulting in a higher discount
rate than would have applied earlier in the year, which in turn led
to a reduction in the net deficit.
Dividends
In line with our AMP6 policy to increase the dividend by at
least RPI+4% each year, t he Board has proposed a final ordinary
dividend of 60.05 pence per share for 2019/20 (2018/19: 56.02 pence
per share). This gives a total ordinary dividend for the year of
100.08 pence (2018/19: 93.37 pence). In January we announced that
our dividend policy for AMP7 will be growth of at least CPIH.
The final ordinary dividend is payable on 17 July 2020 to
shareholders on the register at 12 June 2020.
Principal risks and uncertainties
The Board considers the principal risks and uncertainties
affecting the Group's business activities to be those detailed
below:
Customer Perception:
-- We may be unable to improve and maintain our levels of
customer service sufficiently to deliver what our customers tell us
they want.
Legal, Political and Regulatory Environment:
-- We may be unable to effectively anticipate and/or influence
future developments in the UK water industry resulting in our
business plans becoming unsustainable.
-- The regulatory landscape is complex and subject to ongoing
change. There is a risk that processes may fail or that our
processes may not effectively keep pace with changes in
legislation, leading to the risk of non-compliance. We specifically
continue to engage with the Government, MPs, the Welsh Government,
regulators and other stakeholders about the future shape and
direction of the water sector.
Operations, assets and people:
-- We may experience loss of data or interruptions to our key
business systems as a result of cyber threats.
-- We may fail to meet our regulatory targets including targets
from Ofwat in relation to operational performance of our assets
resulting in regulatory penalties.
-- Failure of certain key assets or processes may result in
inability to provide a continuous supply of clean water and safely
take waste-water away within our area.
-- Due to the nature of our operations, we could endanger the
health and safety of our people, contractors and members of the
public as well as negatively impact our local and wider
environment.
-- We may be unable to deal with the impact of extreme and
unpredictable weather events on our assets and infrastructure
and/or be unable to successfully plan for future water resource
supply and demand due to climate change.
Financial risks:
-- Lower interest rates, higher inflation or underperforming
equity markets may require us to provide more funding for our
pension schemes.
-- We may be unable to fund the business sufficiently in order
to meet our liabilities as they fall due.
COVID-19:
-- At the time of writing, the COVID-19 global pandemic
continues to dominate the focus of the world. Whilst global
pandemics have not previously been noted as a principal risk, they
do feature on our horizon scanning and many of the associated risks
are captured within our ERM framework.
-- Management continues to assess the impact of COVID-19 on the
Company's operations and finances. Internal Strategic and Tactical
Incident Teams were established, comprising Executive Committee
members, to lead the swift implementation of contingency plans and
continuously monitor plans in response to the rapidly changing
situation.
-- We have modelled plausible and extreme scenarios to determine
expected impacts and test our financial resilience. The modelled
outcomes are based on regularly updated assumptions, including:
- The longevity of the incident (initial lockdown and recovery)
- using latest Government advice;
- The expected macroeconomic impacts of the incident (GDP,
inflation and unemployment rates) using independent economic
forecasts;
- The impact on household bad debt rates, using our experience during previous recessions;
- An estimate of incremental operating costs both during the
incident and in the recovery phase, required to ensure service
levels are maintained, using our experience of previous incidents;
and
- The impact on our revenues in 2020/21 and subsequent years,
based on the expected revenue true-up mechanisms in the regulatory
model.
-- All modelled scenarios generate outcomes consistent with, and
within the parameters used to support our Viability Statement, to
be published with our Annual Report and Accounts in June 2020.
-- Our modelling to date shows that, while there will be a
financial impact, neither the plausible or extreme scenarios we
have modelled would result in an impact to the Group's expected
liquidity, solvency or debt covenants that could not be addressed
by mitigating actions, and are therefore not considered threats to
the Group's financial resilience. However, there remains a risk
that the impact of COVID-19 is greater than that modelled by the
Group.
-- Our priority remains the health and safety of our people and
customers, and we are taking all possible actions to support them
whilst continuing to deliver our essential services.
-- The Board continues to receive weekly updates on the Group's
COVID-19 response in order to assess, monitor and promptly respond
to the evolving impact of COVID-19 on our operations and business,
including impacts for all our stakeholders.
The UK's decision to leave the European Union (EU):
-- We continue to monitor and prepare for various scenarios
relating to the customs exit of the UK Brexit plan. Despite
uncertainty on timescales and details of agreements we remain
confident that Brexit does not give rise to new principal risk for
the Group and the risk has materially reduced since the terms of
Brexit were resolved and the UK formally left the EU on 31 January
2020.
-- Preparations are well advanced at a company and industry
level but it has been agreed to pause industry plans through the
Water UK co-ordinated group called the Operations Strategy Group,
this will reconvene subject to Government timelines but it is not
envisaged that there are likely to be any significant risks not
previously considered as part of the 'No Deal' preparations.
-- Progress during the Brexit transition phase and trade
negotiations will continue to be monitored and the risks and
uncertainties will be managed through our existing ERM process.
Technical Guidance 2020/21
Year-end guidance 2019/20 Year-on-
Year
Regulated Water and Waste Water
Turnover GBP1.51 billion to GBP1.55 billion. Lower year-on-year GBP1.62bn
as a result of:
* GBP50 million to GBP85 million from the expected
impact of COVID-19 (non-household consumption down,
partly offset by increased household usage).
Assumes government's published path out of lockdown,
with a gradual recovery in economic activity
over the year. We will provide an update on
expected outturn at our quarterly trading update
in July. The Ofwat regulatory model allows us
to recover this revenue in two years.
* GBP24 million of regulated revenue now allocated to
Bioresources (reported in the Business Services
segment) in line with the FD.
Operating Higher year-on-year due to increasing chemical GBP782m
costs (incl. usage to meet tighter effluent consents and
IRE) expected COVID-19 related increases in household
bad debt, partially offset by our insourcing
strategy and a reduction in our IRE programme
following completion of AMP6 programmes.
Customer We expect to be in positive territory and earn GBP36m
ODIs a net reward across Water and Waste measures.
--------------- ----------------------------------------------------------------------- ---------- ---------
Business Services
Underlying Higher year-on-year. Corresponding GBP24 million GBP57m
PBIT (excl. increase in Bioresources revenue allocated from
Property) Regulated Water and Waste Water, partially offset
by the impact of lower energy prices on renewable
energy revenue and COVID-19.
Underlying Between GBP1 million and GBP5 million, based GBP8m
Property on an expected pause in property market activity.
PBIT We remain on track with commitment to deliver
GBP100 million PBIT over ten years to 2027.
--------------- ----------------------------------------------------------------------- ---------- ---------
Group
Interest Higher year-on-year due to increased total debt GBP188m
charge and lower capitalised borrowing costs.
Total tax rate of c.19% and underlying effective
Tax rate current tax rate between 9% and 11%. 10.4%
Group capex GBP430 million to GBP510 million. Lower capital GBP800m
expenditure year-on-year following completion
of significant AMP6 programmes.
Dividend Annual dividend growth of CPIH. 2020/21 dividend
(1) 101.58p. 100.08p
--------------- ----------------------------------------------------------------------- ---------- ---------
Footnotes to Technical Guidance
1. 2020/21 dividend growth is based on November 2019 CPIH of 1.50%.
Further Information
For further information, including the Group's full-year results
presentation, see the Severn Trent website ( www.severntrent.com
).
Investor Timetable
Ex-dividend date (Final) 11 June 2020
Dividend record date (Final) 12 June 2020
-----------------
DRIP election date (Final) 26 June 2020
-----------------
AGM 15 July 2020
Q1 Trading Update
-----------------
Final dividend payment date 17 July 2020
-----------------
Half year results announcement 2020/21 26 November 2020
-----------------
Ex-dividend date (Interim) 3 December 2020
-----------------
Dividend record date (Interim) 4 December 2020
-----------------
DRIP election date (Interim) 11 December 2020
-----------------
Interim dividend payment date 6 January 2021
-----------------
For more information please visit:
https://www.severntrent.com/investors/financial-calendar-and-regulatory-news/
Consolidated income statement
For the year ended 31 March 2020
2020 2019
----------- ------------------- ---------- ----------- ------------------- ----------
Non-underlying Non-underlying
Underlying items(1) Total Underlying items(1) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
Turnover 2,3 1,843.5 -- 1,843.5 1,767.4 -- 1,767.4
Other income 6.9 -- 6.9 19.9 -- 19.9
Operating costs
before charge for
bad and doubtful
debts (1,237.2) (2.1) (1,239.3) (1,188.1) (10.3) (1,198.4)
Charge for bad and
doubtful debts (42.9) -- (42.9) (25.6) -- (25.6)
------------------- ----- ----------- ------------------- ---------- ----------- ------------------- ----------
Total operating
costs (1,280.1) (2.1) (1,282.2) (1,213.7) (10.3) (1,224.0)
------------------- ----- ----------- ------------------- ---------- ----------- ------------------- ----------
Profit before
interest and tax 570.3 (2.1) 568.2 573.6 (10.3) 563.3
------------------- ----- ----------- ------------------- ---------- ----------- ------------------- ----------
Finance income 5 59.9 -- 59.9 68.9 -- 68.9
Finance costs 6 (248.3) -- (248.3) (263.1) -- (263.1)
------------------- ----- ----------- ------------------- ---------- ----------- ------------------- ----------
Net finance costs (188.4) -- (188.4) (194.2) -- (194.2)
Impairment of
loans receivable 4 -- (4.9) (4.9) -- -- --
Net (losses)/gains
on financial
instruments 7 (17.4) -- (17.4) 16.0 -- 16.0
Share of net loss
of joint ventures
accounted for
using the equity
method -- (46.8) (46.8) (0.4) -- (0.4)
Profit on ordinary
activities before
taxation 364.5 (53.8) 310.7 395.0 (10.3) 384.7
Current tax 8 (30.1) (0.9) (31.0) (31.8) -- (31.8)
Deferred tax 8 (29.1) (91.8) (120.9) (39.4) 1.8 (37.6)
Taxation on profit
on ordinary
activities 8 (59.2) (92.7) (151.9) (71.2) 1.8 (69.4)
----- ----------- ------------------- ---------- ----------- ------------------- ----------
Profit for the
year 305.3 (146.5) 158.8 323.8 (8.5) 315.3
------------------- ----- ----------- ------------------- ---------- ----------- ------------------- ----------
Earnings per share (pence)
2020 2019
--------- ----- ------
Basic 66.7 133.4
Diluted 66.3 133.2
---------- ----- ------
1 For definition of non-underlying items see note 18.
Consolidated statement of comprehensive income
For the year ended 31 March 2020
2020 2019
Note GBPm GBPm
Profit for the year 158.8 315.3
------------------------------------------------------------------- ----- ------- -------
Other comprehensive income/(loss)
Items that will not be reclassified to the income statement:
Net actuarial gains 13 187.4 57.9
Current tax on pension contributions in prior periods 9.5 9.5
Deferred tax on pension contributions in prior periods (9.5) (9.5)
Deferred tax on net actuarial gains (32.9) (12.2)
Deferred tax arising on rate change 2.7 --
157.2 45.7
------------------------------------------------------------------- ----- ------- -------
Items that may be reclassified to the income statement:
Losses on cash flow hedges (38.9) (8.6)
Deferred tax on losses on cash flow hedges 7.4 1.5
Amounts on cash flow hedges transferred to the income statement 7 8.2 8.2
Deferred tax on transfer to the income statement (1.6) (1.3)
(24.9) (0.2)
------------------------------------------------------------------- ----- ------- -------
Other comprehensive income for the year 132.3 45.5
------------------------------------------------------------------- ----- ------- -------
Total comprehensive income for the year 291.1 360.8
------------------------------------------------------------------- ----- ------- -------
Consolidated statement of changes in equity
For the year ended 31 March 2020
Equity attributable to owners of the Company
-----------------------------------------------------------------------------
Share capital Share premium Other reserves Retained earnings Total
Note GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----- -------------- -------------- --------------- ------------------ --------
As at 1 April 2018 235.1 117.7 93.0 551.1 996.9
-------------------------------- ----- -------------- -------------- --------------- ------------------ --------
Profit for the year -- -- -- 315.3 315.3
Losses on cash flow hedges -- -- (8.6) -- (8.6)
Deferred tax on losses on cash
flow hedges -- -- 1.5 -- 1.5
Amounts on cash flow hedges
transferred to the income
statement 7 -- -- 8.2 -- 8.2
Deferred tax on transfer to the
income statement -- -- (1.3) -- (1.3)
Net actuarial gains 13 -- -- -- 57.9 57.9
Current tax on pension
contributions in prior periods -- -- -- 9.5 9.5
Deferred tax on pension
contributions in prior periods -- -- -- (9.5) (9.5)
Deferred tax on net actuarial
gains -- -- -- (12.2) (12.2)
Total comprehensive income for
the year -- -- (0.2) 361.0 360.8
-------------------------------- ----- -------------- -------------- --------------- ------------------ --------
Share options and LTIPs
- proceeds from shares issued 0.8 10.3 -- -- 11.1
- value of employees' services -- -- -- 8.1 8.1
- own shares purchased -- -- -- (1.1) (1.1)
Current tax on share based
payments -- -- -- 0.2 0.2
Dividends paid 10 -- -- -- (211.9) (211.9)
As at 31 March 2019 235.9 128.0 92.8 707.4 1,164.1
-------------------------------- ----- -------------- -------------- --------------- ------------------ --------
Adjustment on adoption of IFRS
16 1 -- -- -- (1.6) (1.6)
As at 1 April 2019 235.9 128.0 92.8 705.8 1,162.5
-------------------------------- ----- -------------- -------------- --------------- ------------------ --------
Profit for the year -- -- -- 158.8 158.8
Losses on cash flow hedges -- -- (38.9) -- (38.9)
Deferred tax on losses on cash
flow hedges -- -- 7.4 -- 7.4
Amounts on cash flow hedges
transferred to the income
statement 7 -- -- 8.2 -- 8.2
Deferred tax on transfer to the
income statement -- -- (1.6) -- (1.6)
Net actuarial gains 13 -- -- -- 187.4 187.4
Current tax on pension
contributions in prior periods -- -- -- 9.5 9.5
Deferred tax on pension
contributions in prior periods -- -- -- (9.5) (9.5)
Deferred tax on net actuarial
gains -- -- -- (32.9) (32.9)
Deferred tax arising from rate
change -- -- -- 2.7 2.7
Total comprehensive income for
the year -- -- (24.9) 316.0 291.1
-------------------------------- ----- -------------- -------------- --------------- ------------------ --------
Share options and LTIPs
- proceeds from shares issued 0.6 9.0 -- -- 9.6
- value of employees' services -- -- -- 8.1 8.1
Deferred tax on share based
payments -- -- -- 0.8 0.8
Dividends paid 10 -- -- -- (228.4) (228.4)
As at 31 March 2020 236.5 137.0 67.9 802.3 1,243.7
-------------------------------- ----- -------------- -------------- --------------- ------------------ --------
Consolidated balance sheet
At 31 March 2020
31 March 31 March
2020 2019
Note GBPm GBPm
Non-current assets
Goodwill 91.4 90.9
Other intangible assets 153.8 124.2
Property, plant and equipment 9,580.8 9,085.6
Right-of-use assets 128.8 --
Investments in joint ventures 12 -- 37.0
Derivative financial instruments 65.5 68.4
Trade and other receivables 153.7 204.0
Retirement benefit surplus 13 21.3 18.6
-----
10,195.3 9,628.7
---------------------------------- ----- ---------- ----------
Current assets
Inventory 29.2 20.8
Trade and other receivables 525.5 513.5
Current tax receivable 3.1 --
Derivative financial instruments -- 0.1
Cash and cash equivalents 48.6 41.0
606.4 575.4
---------------------------------- ----- ---------- ----------
Current liabilities
Borrowings (475.4) (197.0)
Derivative financial instruments (4.4) --
Trade and other payables (573.6) (496.7)
Current tax payable -- (9.3)
Provisions for liabilities (18.9) (32.2)
(1,072.3) (735.2)
---------------------------------- ----- ---------- ----------
Net current liabilities (465.9) (159.8)
Non-current liabilities
Borrowings (5,957.7) (5,857.2)
Derivative financial instruments (159.2) (126.5)
Trade and other payables (1,187.3) (1,082.9)
Deferred tax (901.1) (747.5)
Retirement benefit obligations 13 (255.3) (471.5)
Provisions for liabilities (25.1) (19.2)
(8,485.7) (8,304.8)
---------------------------------- ----- ---------- ----------
Net assets 1,243.7 1,164.1
---------------------------------- ----- ---------- ----------
Equity
Called up share capital 236.5 235.9
Share premium account 137.0 128.0
Other reserves 67.9 92.8
Retained earnings 802.3 707.4
Total equity 1,243.7 1,164.1
---------------------------------- ----- ---------- ----------
Consolidated cash flow statement
For the year ended 31 March 2020
2020 2019
Note GBPm GBPm
-------------------------------------------------------------- ----- -------- --------
Cash generated from operations(1) 14 928.1 872.8
Tax received 14 0.4 --
Tax paid 14 (34.3) (21.3)
Net cash generated from operating activities 894.2 851.5
-------------------------------------------------------------- ----- -------- --------
Cash flows from investing activities
Purchase of subsidiaries net of cash acquired -- (50.9)
Investments in associates and joint ventures -- (6.2)
Purchases of property, plant and equipment (777.2) (782.1)
Purchases of intangible assets and goodwill (74.8) (35.1)
Proceeds on disposal of property, plant and equipment 12.9 1.4
Net loans repaid by joint ventures 35.6 --
Interest received 2.0 0.8
Net cash outflow from investing activities (801.5) (872.1)
-------------------------------------------------------------- ----- -------- --------
Cash flow from financing activities
Interest paid (181.9) (158.0)
Interest element of lease payments (4.3) (4.4)
Dividends paid to shareholders of the parent (228.4) (211.9)
Repayments of borrowings (3.0) (166.5)
Principal elements of lease payments (5.5) (1.7)
New loans raised 330.1 554.2
Issues of shares 9.6 11.1
Payments for swap terminations (16.8) --
Proceeds from swap terminations 16.5 --
Purchase of own shares -- (1.1)
Net cash (outflow)/inflow from financing activities (83.7) 21.7
-------------------------------------------------------------- ----- -------- --------
Net movement in cash and cash equivalents 9.0 1.1
Net cash and cash equivalents at the beginning of the period 39.6 38.5
Net cash and cash equivalents at end of period 48.6 39.6
-------------------------------------------------------------- ----- -------- --------
Cash at bank and in hand 37.3 41.0
Bank overdrafts -- (1.4)
Short term deposits 11.3 --
48.6 39.6
-------------------------------------------------------------- ----- -------- --------
1 Contributions and grants received have been presented as
operating cash flows in 2019/20 as these credits are released to
operating costs over the useful economic life of the non-current
asset to which they relate. These were presented as investment cash
flows in prior periods. Comparatives have been restated increasing
operating cash inflows by GBP46.5 million and increasing investing
cash outflows by the same amount.
Notes to the financial statements
1. General information
a) Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS) and IFRIC interpretations issued and
effective and ratified by the European Union as at 31 March 2020
and those parts of the Companies Act 2006 applicable to companies
reporting under IFRS as adopted by the European Union. The
preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amount of revenues and
expenses for the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results may ultimately differ from those
estimates.
Including undrawn committed credit facilities, the Group is
fully funded for its investment and cash flow needs until January
2022. After making enquiries, including considering the potential
impacts of COVID-19 as described in this RNS, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future and
hence the financial statements have been prepared on the going
concern basis.
The financial statements have been prepared under the historical
cost convention as modified by the revaluation of certain financial
assets and liabilities (including derivative instruments) at fair
value.
The financial information set out in this announcement does not
constitute the Company's statutory accounts, within the meaning of
section 430 of the Companies Act 2006, for the years ended 31 March
2020 or 2019, but is derived from those accounts. While the
financial information included within this announcement has been
prepared in accordance with the recognition and measurement
criteria of IFRS, it does not comply with the disclosure
requirements of IFRS. Statutory accounts for 2019 have been
delivered to the Registrar of Companies and those for 2020 will be
delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 498(2) or
(3) of the Companies Act 2006.
The auditors have consented to the publication of the
Preliminary Announcement as required by Listing Rule 9.7a having
completed their procedures under APB bulletin 2008/2.
i) Changes in accounting policies - IFRS 16 'Leases'
The Group has adopted IFRS 16 Leases retrospectively from 1
April 2019, but has not restated comparatives for prior reporting
periods, as permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening
balance sheet on 1 April 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the Group's incremental borrowing
rate as at 1 April 2019. The Group's weighted average incremental
borrowing rate applied to the lease liabilities on 1 April 2019 was
3.14%.
For leases previously classified as finance leases the Group
recognised the carrying amount of the right-of-use asset and lease
liability immediately before transition as the carrying amount of
the right-of-use asset and the lease liability at the date of
initial application. There have been no remeasurement amounts of
leases previously classified as finance leases under IFRS 16
principles.
GBPm
--------------------------------------------------------------------------------------------- -------
Operating lease commitments disclosed as at 31 March 2019 17.5
Add: adjustments as a result of a different treatment of extension and termination options 10.6
Add: finance lease liabilities recognised as at 31 March 2019 112.2
Less: short-term leases recognised on a straight-line basis as an expense (1.0)
Less: low-value leases recognised on a straight-line basis as an expense (0.1)
Discounted using the lessee's incremental borrowing rate at the date of initial application (11.1)
--------------------------------------------------------------------------------------------- -------
Lease liability recognised as at 1 April 2019 128.1
--------------------------------------------------------------------------------------------- -------
Recognised at 31 March 2020 as:
Current lease liabilities 5.8
Non-current lease liabilities 116.9
--------------------------------------------------------------------------------------------- -------
122.7
--------------------------------------------------------------------------------------------- -------
The associated right-of-use assets for property leases were
measured on a retrospective basis as if the new rules had always
been applied. Other right-of-use assets were measured at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the
balance sheet as at 31 March 2019. There were no onerous lease
contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to the following types
of assets:
31 March 1 April
2020 2019
GBPm GBPm
--------------------------- --------- --------
Land and buildings 10.4 11.7
Infrastructure assets 113.8 114.8
Fixed plant and equipment 4.2 7.8
Moveable plant 0.4 0.8
--------------------------- --------- --------
Total right-of-use assets 128.8 135.1
--------------------------- --------- --------
The change in accounting policy affected the following items in
the balance sheet on 1 April 2019:
GBPm
------------------------------- --------
Property, plant and equipment (118.8)
Right-of-use assets 135.1
Deferred tax 0.4
Provisions (2.4)
Borrowings (15.9)
Retained earnings 1.6
------------------------------- --------
Impact on segment disclosure and earnings per share
Year ended 31 March 2020
Regulated Water Business
and Waste Water Services Corporate and other
GBPm GBPm GBPm
--------------------- ----------------- ---------- ----------------------
Segment assets 7.1 6.4 1.0
Segment liabilities -- (2.4) --
7.1 4.0 1.0
--------------------- ----------------- ---------- ----------------------
Basic and diluted earnings per share decreased by 0.3 pence per
share for the year ended 31 March 2020 as a result of the adoption
of IFRS 16. Underlying basic and diluted earnings per share also
decreased by 0.3 pence per share.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
-- reliance on previous assessments on whether leases are onerous;
-- accounting for operating leases with a remaining lease term
of less than 12 months at 1 April 2019 as short-term leases per
asset class;
-- accounting for operating leases of low value assets as at 1
April 2019 on an individual basis;
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application; and
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
Leasing activities
The Group leases various land and buildings, plant and equipment
and vehicles. Rental agreements are typically made for fixed
periods of 1 to 999 years but may have extension options as
described below. Lease terms are negotiated on an individual basis
and contain a wide range of different terms and conditions. The
lease agreements do not impose any covenants, but leased assets may
not be used as security for borrowing purposes.
Until the current financial year, leases of property, plant and
equipment were classified as either finance or operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease.
From 1 April 2019, leases are recognised as right-of-use assets
with a corresponding liability at the date at which the leased
assets are available for use by the Group. Each lease payment is
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
Group's incremental borrowing rate is used, being the rate that the
Group would have to pay to borrow the funds necessary to obtain an
asset of similar value in a similar economic environment with
similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following; the amount of the initial measurement of lease
liability; any lease payments made at or before the commencement
date less any lease incentives received; any initial direct costs,
and restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of less than 12 months.
Extension and termination options
Extension and termination options are included in a number of
property and equipment leases across the Group. These terms are
used to maximise operational flexibility in managing contracts. The
majority of extension and termination options held are exercisable
only by the Group and not by the respective lessor.
In determining the lease term, the Group considers all facts and
circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended
(or not terminated). The assessment is reviewed if a significant
event or a significant change in circumstances occurs which affects
this assessment and that is within the control of the Group. During
the current financial year, there has been no financial effect of
revising lease terms to reflect the effect of exercising extension
or termination options.
2. Segmental analysis
The Group is organised into two main business segments:
Regulated Water and Waste Water includes the wholesale water and
waste water activities of Severn Trent Water Limited (excluding
Bioresources and Developer Services), its retail services to
domestic customers, and Hafren Dyfrdwy Cyfyngedig.
Business Services includes the Group's Operating Services
businesses in the UK & Ireland, the Green Power business, the
Bioresources business, the Property Development business and our
other businesses including Developer Services, affinity products
and searches.
The Severn Trent Executive Committee ('STEC') is considered to
be the Group's chief operating decision maker. The reports provided
to STEC include segmental information prepared on the basis
described above.
Results from interests in joint ventures are not included in the
segmental reports reviewed by STEC.
The measure of profit or loss that is reported to STEC for the
segments is underlying PBIT. A segmental analysis of turnover and
underlying PBIT is presented below.
Goodwill is allocated and monitored at the segment level.
Transactions between reportable segments are included within
segmental results, assets and liabilities in accordance with Group
accounting policies. These are eliminated on consolidation.
a) Segmental results
The following table shows the segmental turnover and PBIT:
2020 2019
-------------------------------------------- --------------------------------------------
Regulated Water and Regulated Water and
Waste Water Business Services Waste Water Business Services
GBPm GBPm GBPm GBPm
------------------------ ------------------------ ------------------ ------------------------ ------------------
External turnover 1,620.7 222.8 1,583.1 183.4
Inter-segment turnover -- 17.6 -- 17.5
Total turnover 1,620.7 240.4 1,583.1 200.9
------------------------ ------------------------ ------------------ ------------------------ ------------------
Underlying PBIT 511.5 64.9 527.0 64.1
Exceptional operating
items and amortisation
of acquired intangible
assets -- (2.1) (8.9) (1.0)
Profit before interest
and tax 511.5 62.8 518.1 63.1
------------------------ ------------------------ ------------------ ------------------------ ------------------
The reportable segments' turnover is reconciled to Group
turnover as follows:
2020 2019
GBPm GBPm
--------------------------------- -------- --------
Regulated Water and Waste Water 1,620.7 1,583.1
Business Services 240.4 200.9
Corporate and other 0.7 0.4
Consolidation adjustments (18.3) (17.0)
1,843.5 1,767.4
--------------------------------- -------- --------
Segmental underlying PBIT is reconciled to the Group's profit
before tax as follows:
2020 2019
GBPm GBPm
----------------------------------------------------------------------------- -------- --------
Regulated Water and Waste Water 511.5 527.0
Business Services 64.9 64.1
Corporate and other (5.6) (8.2)
Consolidation adjustments (0.5) (9.3)
Underlying PBIT 570.3 573.6
Exceptional operating items and amortisation of acquired intangible assets:
Regulated Water and Waste Water -- (8.9)
Business Services (2.1) (1.0)
Corporate and other -- (0.4)
Net finance costs (188.4) (194.2)
Impairment of loans receivable (4.9) --
Net (losses)/gains on financial instruments (17.4) 16.0
Share of net loss of joint ventures accounted for using the equity method (46.8) (0.4)
Profit on ordinary activities before taxation 310.7 384.7
----------------------------------------------------------------------------- -------- --------
The Group's treasury and tax affairs are managed centrally by
the Group Treasury and Tax departments. Finance costs are managed
on a Group basis and hence interest income and costs are not
reported at the segmental level. Tax is not reported to STEC on a
segmental basis.
The following table shows the segmental capital employed:
2020 2019
------------------------------------------- --------------------------------------------
Regulated Water and Regulated Water and
Waste Water Business Services Waste Water Business Services
GBPm GBPm GBPm GBPm
------------------------- ----------------------- ------------------ ------------------------ ------------------
Operating assets 9,883.0 626.3 9,214.4 622.3
Goodwill 63.5 29.2 63.5 28.7
Investments in joint
ventures -- -- -- 37.0
Segment assets 9,946.5 655.5 9,277.9 688.0
Segment operating
liabilities (1,991.8) (42.4) (1,986.3) (68.7)
Capital employed 7,954.7 613.1 7,291.6 619.3
------------------------- ----------------------- ------------------ ------------------------ ------------------
Operating assets comprise other intangible assets, property,
plant and equipment, right-of-use assets, retirement benefit
surpluses, inventory and trade and other receivables.
Operating liabilities comprise trade and other payables,
retirement benefit obligations and provisions.
3. Revenue from contracts with customers
Revenue recognised from contracts with customers is analysed by
business segment below:
Year ended 31 March 2020
Regulated Water and Corporate Consolidation
Waste Water Business Services and other adjustments Group
GBPm GBPm GBPm GBPm GBPm
------------------------ ----------------------- ------------------ ----------- ------------------------ --------
Water and waste water
services 1,616.4 57.1 -- -- 1,673.5
Operating services -- 70.7 -- -- 70.7
Renewable energy -- 81.2 -- -- 81.2
Other sales 4.3 13.8 -- -- 18.1
Intra-group sales -- 17.6 0.7 (18.3) --
1,620.7 240.4 0.7 (18.3) 1,843.5
------------------------ ----------------------- ------------------ ----------- ------------------------ --------
Year ended 31 March 2019
Regulated Water and Corporate Consolidation
Waste Water Business Services and other adjustments Group
GBPm GBPm GBPm GBPm GBPm
------------------------ ----------------------- ------------------ ----------- ------------------------ --------
Water and waste water
services 1,581.7 54.5 -- -- 1,636.2
Operating services -- 57.1 -- -- 57.1
Renewable energy -- 46.2 -- -- 46.2
Other sales 1.4 25.7 -- 0.8 27.9
Intra-group sales -- 17.4 0.4 (17.8) --
1,583.1 200.9 0.4 (17.0) 1,767.4
------------------------ ----------------------- ------------------ ----------- ------------------------ --------
Revenue from water and waste water services provided to
customers with meters is recognised when the service is provided
and is measured based on actual meter readings and estimated
consumption for the period between the last meter reading and the
year end. For customers who are not metered, the performance
obligation is to stand ready to provide water and waste water
services throughout the period. Such customers are charged on an
annual basis, coterminous with the financial year and revenue is
recognised on a straight line basis over the financial year.
Income from diversions of GBP6.8 million (2018/19: GBP8.4
million), which is reimbursement of costs for diversions, is
included within infrastructure maintenance expenditure within
operating costs.
The Operating Services business includes a material 25-year
contract with multiple performance obligations. Under this contract
the Group bills the customer based on an inflation-linked
volumetric tariff and invoices are payable on normal commercial
terms. The performance obligations, which are satisfied as the
services are performed, are: operating and maintaining the
customer's infrastructure assets; u pgrading the customer's
infrastructure assets; administrating the services received from
statutory water and sewerage undertakers; administrating billing
services of the customer's commercial and Non Base Dependent
customers. Revenue is allocated to each performance obligation
based on the stand-alone selling price of each performance
obligation, which is based on the forecast costs incurred and
expected margin for each obligation. Changes to projected margins
are adjusted on a cumulative basis in the period that they are
identified.
Other than the provision of water and waste water services,
there is no direct correlation between the satisfaction of the
performance obligations and the timing of billing and customer
payments. The estimated transaction price for the contract is
derived from estimates of the customer's consumption at the
contract tariff rate, adjusted for inflation. This estimate is
updated on an annual basis. At 31 March 2020 the aggregate amount
of the estimated transaction price allocated to performance
obligations that were not satisfied was GBP459.3 million (2019:
GBP509.6 million). This amount is expected to be recognised as
revenue as follows:
2020 2019
GBPm GBPm
---------------------------- ------ ------
In the next year 43.6 43.5
Between one and five years 177.6 178.1
After more than five years 238.1 288.0
---------------------------- ------ ------
459.3 509.6
---------------------------- ------ ------
The assumptions and other sources of estimation uncertainty in
relation to this contract do not present a significant risk of a
material adjustment to the carrying amounts of assets and
liabilities in the next financial year and therefore are not
included as a source of estimation uncertainty.
Revenue recognised in excess of amounts billed is recorded as a
contract asset and amounts billed in excess of revenue recognised
is recorded as a contract liability. Changes in contract assets in
the year were as follows:
2020 2019
GBPm GBPm
---------------------------- ------- -------
Contract asset at 1 April 35.1 39.1
Amounts billed (47.6) (46.1)
Revenue recognised 49.1 42.1
---------------------------- ------- -------
Contract asset at 31 March 36.6 35.1
---------------------------- ------- -------
No revenue recognised in the year was included as a contract
liability at the beginning of the year (2019: nil). No revenue
recognised in the year is from performance obligations satisfied in
previous periods (2019: nil).
4. Exceptional items before tax
The Group classifies items of income or expenditure as
exceptional if, individually or in aggregate if of a similar type,
they should, in the opinion of the Directors be disclosed by virtue
of their size or nature if the financial statements are to give a
true and fair view. In this context, materiality is assessed at the
segment level.
2020 2019
GBPm GBPm
---------------------------------------------------------------- ------- ------
Regulated Water and Waste Water
GMP equalisation costs -- (8.9)
-- (8.9)
---------------------------------------------------------------- ------- ------
Business Services
GMP equalisation costs -- (0.3)
-- (0.3)
---------------------------------------------------------------- ------- ------
Corporate and other
GMP equalisation costs -- (0.4)
-- (0.4)
---------------------------------------------------------------- ------- ------
Exceptional operating costs -- (9.6)
----------------------------------------------------------------- ------- ------
Other exceptional items
Exceptional impairment of loans receivable from joint venture (4.9) --
Exceptional share of net losses of joint venture (see note 12) (46.8) --
(51.7) (9.6)
---------------------------------------------------------------- ------- ------
5. Finance income
2020 2019
GBPm GBPm
Interest income earned on bank deposits 0.4 0.2
Other financial income 1.3 7.7
--------------------------------------------------- ----- -----
Total interest receivable 1.7 7.9
Interest income on defined benefit scheme assets 58.2 61.0
59.9 68.9
-------------------------------------------------- ----- -----
6. Finance costs
2020 2019
GBPm GBPm
Interest expense charged on:
Bank loans and overdrafts 21.6 21.3
Other loans 150.5 153.0
Lease liabilities 4.3 4.4
Total borrowing costs 176.4 178.7
Other financial expenses 2.6 9.6
Interest cost on defined benefit scheme liabilities 69.3 74.8
248.3 263.1
----------------------------------------------------- ------ ------
7. Net (losses)/gains on financial instruments
2020 2019
GBPm GBPm
------- ------
Gain on swaps used as hedging instruments in fair value hedges 5.1 0.3
(Loss)/gain arising on debt in fair value hedges (1.6) 0.5
Exchange loss on other loans (6.7) (8.1)
Loss on cash flow hedges transferred from equity (8.2) (8.2)
Hedge ineffectiveness on cash flow hedges 2.7 1.9
(Loss)/gain arising on swaps where hedge accounting is not applied (9.8) 28.5
Amortisation of fair value adjustment on debt 1.1 1.1
(17.4) 16.0
-------------------------------------------------------------------- ------- ------
8. Tax
2020 2019
GBPm GBPm
------ ------
Current tax
Current year at 19% (2019: 19%) 36.2 41.2
Prior years (5.2) (9.4)
Total current tax 31.0 31.8
---------------------------------------------------- ------ ------
Deferred tax
Origination and reversal of temporary differences:
Current year 29.8 30.1
Prior years (0.7) 7.5
Exceptional charge on rate change 91.8 --
Total deferred tax 120.9 37.6
---------------------------------------------------- ------ ------
151.9 69.4
---------------------------------------------------- ------ ------
9. Acquisitions
On 30 November 2018, Severn Trent Green Power Limited acquired
100% of the issued share capital of Agrivert Holdings Limited. For
a total consideration of GBP61.3 million and the assumption of
GBP59.7 million of existing debt.
The acquisition was accounted for using the acquisition method.
Goodwill of GBP28.7 million was capitalised, attributable to the
anticipated future opportunities and outperformance arising as a
result of the acquisition. The goodwill valuation was based on
management's best estimates of the fair values of the assets and
liabilities acquired.
As outlined by IFRS 3, management has until the earliest of the
date at which all information required is received or one year from
the acquisition date in order to satisfy the measurement period
criteria. The adjustments to fair values recognised at 31 March
2020 are set out below:
GBPm
Goodwill recognised at 1 April based on provisional fair values 28.7
Adjustment to estimated fair value of trade and other receivables 0.5
Goodwill recognised at 31 March 2020 based on final fair values 29.2
-------------------------------------------------------------------- -----
During the 12 month period post-acquisition, new information was
obtained regarding accrued income held within the entities
acquired. This new information related to disputed amounts and
amounts related to debtors that had gone into administration. The
provision for the doubtful collection of accrued income as at the
acquisition date has therefore been adjusted in the fair values of
trade and other receivables on acquisition.
10. Dividends
Amounts recognised as distributions to owners of the Company in
the year:
2020 2019
---------- ------ ---------------- ------
Pence per
share GBPm Pence per share GBPm
---------------------------------------------------------- ---------- ------ ---------------- ------
Final dividend for the year ended 31 March 2019 (2018) 56.02 133.1 51.92 122.9
Interim dividend for the year ended 31 March 2020 (2019) 40.03 95.3 37.35 89.0
---------------------------------------------------------- ---------- ------ ---------------- ------
Total dividends paid 96.05 228.4 89.27 211.9
---------------------------------------------------------- ---------- ------ ---------------- ------
Proposed final dividend for the year ended 31 March 2020 60.05 145.0
---------------------------------------------------------- ---------- ------ ---------------- ------
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
11. Earnings per share
a) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, excluding
treasury shares and those held in the Severn Trent Employee Share
Ownership Trust which are treated as cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. These represent share options
granted to employees where the exercise price is less than the
average market price of the Company's shares during the period.
Basic and diluted earnings per share is calculated on the basis
of profit attributable to the owners of the Company.
The calculation of basic and diluted earnings per share is based
on the following:
i) Earnings for the purpose of basic and diluted earnings per share
2020 2019
GBPm GBPm
Profit for the year 158.8 315.3
---------------------- ------ ------
ii) Number of shares
2020 2019
m m
------------------------------------------------------------------------------------------ ------ ------
Weighted average number of ordinary shares for the purpose of basic earnings per share 238.0 236.3
Effect of dilutive potential ordinary shares:
- share options and LTIPs 1.4 0.4
Weighted average number of ordinary shares for the purpose of diluted earnings per share 239.4 236.7
------------------------------------------------------------------------------------------ ------ ------
b) Underlying earnings per share
2020 2019
pence pence
Underlying basic earnings per share 146.0 145.8
Underlying diluted earnings per share 145.1 145.6
---------------------------------------- ------ ------
Underlying earnings per share figures exclude the effects of
deferred tax, exceptional tax, losses/gains on financial
instruments, current tax related to losses/gains on financial
instruments, amortisation of acquired intangible assets,
exceptional items and current tax related to exceptional items. The
Directors consider that the underlying figures provide a useful
additional indicator of performance. The denominators used in the
calculations of underlying basic and diluted earnings per share are
the same as those used in the unadjusted figures set out above.
The adjustments to earnings are as follows:
2020 2019
GBPm GBPm
Earnings for the purpose of basic and diluted earnings per share 158.8 315.3
Adjustments for:
- exceptional items before tax 51.7 9.6
- current tax on exceptional items (0.9) --
- amortisation of acquired intangible assets 2.1 0.7
- net losses/(gains) on financial instruments 17.4 (16.0)
- current tax on net losses/gains on financial instruments (2.6) (2.6)
- deferred tax 120.9 37.6
------------------------------------------------------------------------------
Earnings for the purpose of underlying basic and diluted earnings per share 347.4 344.6
------------------------------------------------------------------------------ ------ -------
12. Interests in joint ventures
Our principal joint venture undertaking as at 31 March 2020, is
Water Plus Limited, which is the largest business retailer in the
non-household retail water market in England.
Movements in our investment were as follows:
2020 2019
GBPm GBPm
------------------------------------------------------------ ------- ------
Carrying value of joint venture investment at 1 April 37.0 37.6
Amortisation of discount on zero coupon loan note - (0.2)
Zero coupon loan note classified as part of net investment 9.8 -
Group's share of loss after tax and comprehensive loss (46.8) (0.4)
------------------------------------------------------------ ------- ------
As at 31 March - 37.0
------------------------------------------------------------ ------- ------
In common with other participants in the non-household retail
market, Water Plus has been significantly impacted by the COVID-19
outbreak; the resulting lockdown; and its effects on commercial
customers and expects to see lower economic activity leading to
increases in business customer failures.
Water Plus has updated its business plan to take account of the
expected impacts of the COVID-19 outbreak, and the impairment
assessment for its long-term assets, in particular goodwill and
customer relationships recognised under the acquisition accounting
rules of IFRS 3. The updated impairment tests identified an
impairment of GBP51.1 million against these assets. In addition,
Water Plus has already seen a significant reduction in cash
collected from its non-household customers and, using economic
forecasts to estimate the likely impact of future economic
circumstances on their debt book at 31 March, has recognised an
additional GBP29.3 million bad debt provision.
Before taking account of our share of these COVID-19 related
write-downs, our share of Water Plus's loss for the year was
GBP14.3 million, of which GBP9.3 million arose in the first half of
the year.
We have recognised GBP46.8 million, our share of these losses
capped at the level of our long-term investment, as an exceptional
loss from our joint venture. As we have no obligation to make
further contributions to Water Plus we have not recognised GBP4.9
million of losses in excess of our investment.
We have also recorded an exceptional impairment of GBP4.9
million in our loans receivable from Water Plus.
13. Retirement benefit schemes
The Group operates three defined benefit schemes in the UK, two
from Severn Trent and one from Dee Valley Water. The Severn Trent
schemes are closed to future accrual. The Group also has an
unfunded obligation to provide benefits to certain former employees
whose earnings were in excess of the pensions cap that operated
when the benefits were accrued. The most recent actuarial
valuations of the Severn Trent schemes were at 31 March 2019. The
Group participates in the Dee Valley Water plc Section of the Water
Companies Pension Scheme, which is a defined benefit sectionalised
scheme. The most recent actuarial valuation of this scheme was at
31 March 2017.
The assumptions used in calculating the defined benefit
obligations as at 31 March 2020 have been updated to reflect market
conditions prevailing at the balance sheet date as follows.
2020 2019
% %
--------------------------------------------------------------------------------------- ----- -----
Price inflation - RPI 2.5 3.2
Price inflation - CPI 1.7 2.2
Discount rate 2.4 2.5
Pension increases in payment 2.5 3.2
Pension increases in deferment 2.5 3.2
---------------------------------------------------------------------------------------- ----- -----
2020 2019
---------------------------------------------------------------------------------------- ----- -----
Remaining life expectancy for members currently aged 65 (years)
- men 22.2 21.9
- women 23.9 23.6
Remaining life expectancy for members currently aged 45 upon retirement at 65 (years)
- men 23.1 22.9
- women 25.1 24.8
---------------------------------------------------------------------------------------- ----- -----
The calculation of the scheme obligations is sensitive to the
actuarial assumptions and in particular to the assumptions relating
to discount rate, price inflation (capped, where relevant) and
mortality. The following table summarises the estimated impact on
the group's obligations from changes to key actuarial assumptions
whilst holding all other assumptions constant.
Assumption Change in assumption Impact on scheme liabilities
Discount rate Increase/decrease by 0.1% pa Decrease/increase by GBP41/GBP42 million
Price inflation Increase/decrease by 0.1% pa Increase/decrease by GBP36/GBP35 million
Mortality Increase in life expectancy by 1 year Increase by GBP97 million
---------------- -------------------------------------- -----------------------------------------
The defined benefit assets have been updated to reflect their
market value as at 31 March 2020. Due to the unprecedented market
situation related to COVID-19, valuation of the asset categories
requiring judgment (in particular, property included at GBP261.9
million) is subject to significant uncertainty at the balance sheet
date. Consequently, a higher degree of caution should be attached
to the valuation of those assets than would normally be the case.
Actuarial gains and losses on the scheme assets and defined benefit
obligations have been reported in the statement of comprehensive
income. Service cost, and the cost of administrating the scheme,
are recognised in operating costs and interest cost is recognised
in net finance costs.
Movements in the net deficit recognised in the balance sheet
were as follows:
Defined
Fair value benefit
of plan assets obligations Net deficit
GBPm GBPm GBPm
--------------------------------------------------------------------- ---------------- ------------- ------------
At 31 March 2019 2,418.9 (2,871.8) (452.9)
Current service cost - (0.2) (0.2)
Scheme administration costs (3.4) - (3.4)
Interest income/(cost) 58.2 (69.3) (11.1)
Return on plan assets (0.4) - (0.4)
Actuarial gains recognised in the statement of comprehensive income - 187.8 187.8
Contributions from the sponsoring companies 46.2 - 46.2
Employees' contributions and benefits paid (105.4) 105.4 -
--------------------------------------------------------------------- ---------------- ------------- ------------
At 31 March 2020 2,414.1 (2,648.1) (234.0)
--------------------------------------------------------------------- ---------------- ------------- ------------
The net deficit is presented on the balance sheet as
follows:
2020 2019
GBPm GBPm
------------------------------- -------- --------
Retirement benefit surplus 21.3 18.6
Retirement benefit obligation (255.3) (471.5)
------------------------------- -------- --------
(234.0) (452.9)
------------------------------- -------- --------
14. Cash flow
a) Reconciliation of operating profit to operating cash
flows
2020 2019
GBPm GBPm
Profit before interest and tax 568.2 563.3
Depreciation of property, plant and equipment 327.4 315.4
Depreciation of right-of-use assets 6.6 --
Amortisation of intangible assets 30.8 29.8
Amortisation of acquired intangible assets 2.1 0.7
Impairment of property, plant and equipment 0.5 --
Pension service cost 0.2 9.8
Defined benefit pension scheme administration costs 3.4 2.3
Defined benefit pension scheme contributions (46.2) (34.9)
Share based payment charge 8.1 8.1
Loss on sale of property, plant and equipment and intangible assets 1.2 0.6
Release from deferred credits (15.4) (14.7)
Contributions and grants received(1) 39.6 46.5
Provisions charged to the income statement 3.3 12.2
Utilisation of provisions for liabilities (13.1) (12.8)
Operating cash flows before movements in working capital 916.7 926.3
Increase in inventory (8.4) (1.7)
Increase in amounts receivable (12.8) (60.0)
Increase in amounts payable 32.6 8.2
Cash generated from operations 928.1 872.8
Tax received 0.4 --
Tax paid (34.3) (21.3)
Net cash generated from operating activities 894.2 851.5
---------------------------------------------------------------------- ------- -------
1 Contributions and grants received have been presented as
operating cash flows in 2019/20 as these credits are released to
operating costs over the useful economic life of the non-current
asset to which they relate. These were presented as investment cash
flows in prior periods. Comparatives have been restated increasing
operating cash inflows by GBP46.5 million and increasing investing
cash outflows by the same amount.
b) Non-cash transactions
No additions to property, plant and equipment during the year
were financed by new leases (2019: nil). Assets transferred from
developers and under Private Drains and Sewers legislation at no
cost were recognised at their fair value of GBP71.0 million (2019:
GBP42.1 million).
c) Reconciliation of movements in net debt
Net cash and Cross Loans due
cash Lease currency from joint
equivalents Bank loans Other loans liabilities swaps ventures Net debt
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
As at 31 March
2019 39.6 (1,120.1) (4,820.5) (112.2) 37.1 142.0 (5,834.1)
Recognised on
adoption of
IFRS 16 (see
note 1) -- -- -- (15.9) -- -- (15.9)
--------------- -------------- ----------- ------------ -------------- -------------- -------------- ----------
As at 1 April
2019 39.6 (1,120.1) (4,820.5) (128.1) 37.1 142.0 (5,850.0)
Cash flow 9.0 (128.1) (199.0) 5.5 -- (35.6) (348.2)
Fair value
adjustments -- -- (0.5) -- 23.3 -- 22.8
Inflation
uplift on
index-linked
debt -- (2.2) (31.8) -- -- -- (34.0)
Foreign
exchange -- -- (6.7) -- -- -- (6.7)
Other non-cash
movements -- (1.5) -- (0.1) -- (13.8) (15.4)
As at 31 March
2020 48.6 (1,251.9) (5,058.5) (122.7) 60.4 92.6 (6,231.5)
--------------- -------------- ----------- ------------ -------------- -------------- -------------- ----------
15. Post balance sheet events
Dividends
Following the year end the Board of Directors have approved a
final dividend of 60.05 pence per share. Further details of this
are shown in note 10.
16. Contingent liabilities
Bonds and guarantees
Group undertakings have entered into bonds and guarantees in the
normal course of business. No liability (2019: nil) is expected to
arise in respect of either bonds or guarantees.
17. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
included in this note. Trading transactions between the Group and
its joint venture, Water Plus, are disclosed below.
2020 2019
GBPm GBPm
--------------------- ------ ------
Sale of services 306.6 335.0
Net interest income 3.2 3.8
---------------------- ------ ------
309.8 338.8
--------------------- ------ ------
Outstanding balances between the Group and the joint venture as
at 31 March were as follows:
2020 2019
GBPm GBPm
------------------------------------------------------ ------ ------
Trade and other receivables due from related parties 12.1 2.3
Loans receivable from joint ventures 92.6 142.0
------------------------------------------------------- ------ ------
104.7 144.3
------------------------------------------------------ ------ ------
The retirement benefit schemes operated by the Group are
considered to be related parties. Details of transactions and
balances with the retirement benefit schemes are disclosed in note
13.
18. Alternative performance measures (APMs)
Financial measures or metrics used in this report that are not
defined by IFRS are alternative performance measures. The Group
uses such measures for performance analysis because they provide
additional useful information on the performance and position of
the Group. Since the Group defines its own alternative performance
measures, these might not be directly comparable with other
companies' alternative performance measures. These measures are not
intended to be a substitute for, or superior to, IFRS
measurements.
a) Exceptional items
Exceptional items are income or expenditure which individually
or, in aggregate if of a similar type, should, in the opinion of
the Directors, be disclosed by virtue of their size or nature if
the financial statements are to give a true and fair view. In this
context, materiality is assessed at the segment level.
b) Underlying PBIT
Underlying profit before interest and tax is profit before
interest and tax excluding exceptional items as recorded in the
income statement and amortisation of intangible assets recognised
on acquisition of subsidiaries. This provides a consistent measure
of operating performance excluding distortions caused by these
items and reflecting the operational performance of the acquired
subsidiaries. Following the acquisition of Agrivert, this APM was
updated to include adjustment of amortisation on acquired
intangible assets. The calculation of this APM is shown on the face
of the income statement and in note 2 for reportable segments.
c) Underlying earnings per share
Underlying earnings per share figures exclude the effects of
exceptional items, amortisation of intangible assets recognised on
acquisition of subsidiaries, net (losses)/gains on financial
instruments, current tax on exceptional items and on net
(losses)/gains on financial instruments, exceptional current tax
and deferred tax. The Directors consider that the underlying
figures provide a useful additional indicator of performance and
remove non-performance related distortions. See note 11.
d) Net debt
Net debt comprises borrowings including remeasurements for
changes in fair value of amounts in fair value hedging
relationships, cross currency swaps that are used to fix the
sterling liability of foreign currency borrowings (whether hedge
accounted or not), net cash and cash equivalents, and loans to
joint ventures. See note 14.
e) Effective interest cost
The effective interest cost is calculated as net finance costs,
excluding net finance costs from pensions, plus capitalised finance
costs divided by the monthly average net debt during the year.
(net finance costs - net finance costs from pensions +
capitalised finance costs)
(monthly average net debt)
2020 2019
GBPm GBPm
-------- --------
Net finance costs 188.4 194.2
Net finance costs from pensions (11.1) (13.8)
Capitalised finance costs 44.2 33.2
221.5 213.6
--------------------------------- -------- --------
Average net debt 5,972.2 5,547.7
Effective interest cost 3.7% 3.9%
--------------------------------- -------- --------
This APM is used as it shows the average finance cost for the
net debt of the business.
f) Effective cash cost of interest
The effective cash cost of interest is calculated on the same
basis as the effective interest cost except that it excludes
finance costs that are not paid in cash but are accreted to the
carrying value of the debt (principally RPI adjustments on
index-linked debt).
(net finance costs - net finance costs from pensions - RPI
interest + capitalised finance costs)
(monthly average net debt)
2020 2019
GBPm GBPm
--------------------------------- -------- --------
Net finance costs 188.4 194.2
Net finance costs from pensions (11.1) (13.8)
Inflation adjustments (34.0) (39.7)
Capitalised finance costs 44.2 33.2
---------------------------------
187.5 173.9
--------------------------------- -------- --------
Average net debt 5,972.2 5,547.7
--------------------------------- -------- --------
Effective cash cost of interest 3.1% 3.1%
--------------------------------- -------- --------
This is used as it shows the average finance cost that is paid
in cash.
g) Underlying PBIT interest cover
The ratio of underlying PBIT (see (b) above) to net finance
costs excluding net finance costs from pensions.
Underlying PBIT
(net finance costs - net finance costs from pensions)
2020 2019
GBPm GBPm
------- -------
Underlying PBIT 570.3 573.6
------------------------------------------------------------- ------- -------
Net finance costs 188.4 194.2
Net finance costs from pensions (11.1) (13.8)
Net finance costs excluding net finance costs from pensions 177.3 180.4
------------------------------------------------------------- ------- -------
ratio ratio
------------------------------------------------------------- ------- -------
Underlying PBIT interest cover 3.2 3.2
------------------------------------------------------------- ------- -------
This is used to show how the underlying PBIT of the business
covers the financing costs associated only with net debt on a
consistent basis.
h) EBITDA and EBITDA interest cover
The ratio of profit before interest, tax, exceptional items,
depreciation and amortisation to net finance costs excluding net
finance costs from pensions.
(underlying PBIT + depreciation + amortisation)
(net finance costs - net finance costs from pensions)
2020 2019
GBPm GBPm
---------------------------------------------------------------------------------------------------- ------- -------
Underlying PBIT 570.3 573.6
Depreciation (including right-of-use assets) 334.0 315.4
Amortisation (excluding amortisation of intangible assets recognised on acquisition of
subsidiaries) 30.8 29.8
EBITDA 935.1 918.8
---------------------------------------------------------------------------------------------------- ------- -------
Net finance costs 188.4 194.2
Net finance costs from pensions (11.1) (13.8)
Net finance costs excluding finance costs from pensions 177.3 180.4
---------------------------------------------------------------------------------------------------- ------- -------
ratio ratio
---------------------------------------------------------------------------------------------------- ------- -------
EBITDA interest cover 5.3 5.1
---------------------------------------------------------------------------------------------------- ------- -------
This is used to show how the EBITDA of the business covers the
financing costs associated only with net debt on a consistent
basis.
i) Underlying effective current tax rate
The current tax charge for the year, excluding prior year
charges, exceptional current tax, and current tax on exceptional
items and on financial instruments, divided by profit before tax,
net losses/gains on financial instruments, exceptional items,
amortisation of intangible assets recognised on acquisition of
subsidiaries and share of net loss of joint ventures accounted for
using the equity method.
(Current year current tax charge in the income statement -
current tax on exceptional items - current tax on financial
instruments - current tax on amortisation of acquired intangible
assets)
(PBT - share of net loss of JVs - exceptional items - net
losses/gains on financial instruments - amortisation of
acquired intangible assets)
2020 2019
Current tax thereon Current tax thereon
GBPm GBPm GBPm GBPm
--------------------------------------------- ------ -------------------- ------- --------------------
Profit before tax 310.7 (36.2) 384.7 (41.2)
--------------------------------------------- ------ -------------------- ------- --------------------
Adjustments
Share of net loss of joint ventures 46.8 -- 0.4 --
Amortisation of acquired intangible assets 2.1 -- 0.7 --
Exceptional items 4.9 (0.9) 9.6 --
Net (losses)/gains on financial instruments 17.4 (2.6) (16.0) (2.6)
381.9 (39.7) 379.4 (43.8)
--------------------------------------------- ------ -------------------- ------- --------------------
Underlying effective current tax rate 10.4% 11.6%
--------------------------------------------- ------ -------------------- ------- --------------------
This APM is used to be remove distortions in the tax charge and
create a metric consistent with the calculation of underlying
earnings per share in note 11. Share of net loss of joint ventures
is excluded from the calculation because the loss is included after
tax and so the tax on joint venture profits is not included in the
current tax charge.
j) Operational cashflow
Cash generated from operations less contributions and grants
received.
2020 2019
GBPm GBPm
----------------------------------- ------- -------
Cash generated from operations 928.1 872.8
Contributions and grants received (39.6) (46.5)
Operational cashflow 888.5 826.3
----------------------------------- ------- -------
This APM is used to show operational cash excluding the effect
of contributions and grants received as part of capital
programmes.
k) Cash capex
Cash paid to acquire property, plant and equipment and
intangible fixed assets less contributions and grants received and
proceeds on disposal of property, plant and equipment and
intangible fixed assets.
2020 2019
GBPm GBPm
------------------------------------------------------- ------- -------
Purchase of property, plant and equipment 777.2 782.1
Purchase of intangible assets 74.8 35.1
Contributions and grants received (39.6) (46.5)
Proceeds on disposal of property, plant and equipment (12.9) (1.4)
Cash capex 799.5 769.3
------------------------------------------------------- ------- -------
This APM is used to show the cash impact of the Group's capital
programmes.
Glossary
Asset Management Plan (AMP)
Price limit periods are sometimes known as AMP (Asset Management
Plan) periods. The period from 1 April 2015 to 31 March 2020 is
known as AMP6 because it is the sixth cycle since the water
industry was privatised in 1989.
C-MeX (Customer Measure of Experience)
The proposed Customer Measure of Experience (C-MeX) will replace
the SIM as the incentive for companies to improve the experience of
residential customers from 1 April 2020 onwards.
Customer ODI (Outcome Delivery Incentive)
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. This was first introduced
at the 2014 price review (PR14) by the regulator, Ofwat.
Final Determination (FD)
The outcome of the price review process that sets price,
investment and services packages that customers receive.
Ofwat
The water industry's economic regulator in England &
Wales.
PR14 / PR19
The price review (PR) is a financial review process led by Ofwat
where wholesale price controls for water and sewage companies are
set every five years. PR19 (Price Review 2019) set wholesale price
controls for water and sewerage companies for 2020 to 2025.
Price limits
The price limits are set to enable water companies to deliver
the services required of them over the AMP period. These include
allowing for capital maintenance of assets, ensuring security of
supply and meeting drinking water and environmental quality
requirements.
Regulatory Capital Value (RCV)
The regulatory capital value is used to measure the capital base
of a company when setting price limits. The regulatory capital
value represents the initial market value of a company, including
debt, plus new capital expenditure.
RoRE
Return on Regulated Equity (RoRE) measures the returns (after
tax and interest) that companies have earned by reference to the
notional regulated equity, where regulated equity is calculated
from the RCV and notional net debt.
Service Incentive Mechanism (SIM)
The SIM allows comparison of companies' customer service
performance. It measures the following aspects of service
delivery:
i) Where customers have made contact regarding a service issue,
for example, phoning about a billing error or writing to complain
about a water supply problem.
ii) A customer survey measuring how well companies have handled
all types of customer contacts, not just when things have gone
wrong.
Companies receive rewards or penalties in the Price Review
depending on their SIM performance.
Totex
Totex (shortened form of total expenditure) includes operating
expenditure (opex), infrastructure renewals expenditure (IRE) and
capital expenditure (capex).
Waste cap
The limit on the amount of outperformance payments for waste
water related customer ODIs. For Severn Trent in AMP6 this was
GBP190 million.
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).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFUFAUESSELI
(END) Dow Jones Newswires
May 20, 2020 02:00 ET (06:00 GMT)
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