Severn Trent Regulatory News (SVT)

13 February 2015

Severn Trent Plc Trading Update

for the period 1 October 2014 to 12 February 2015

The Board of Severn Trent Plc confirms that the group is on track to deliver in line with its expectations for the full year.

Regulated business

Consumption across our measured income base is now expected to be slightly higher year on year as a result of the warmer weather.

We anticipate our bad debt level will remain unchanged at around 2.2% of turnover (UK GAAP) for the full year.

Operating expenditure continues to be in line with the Board's expectations for the year and, on a like for like basis, in line with the level of the Final Determination for AMP5. Operating costs are expected to rise year on year due to the impact of inflation and quasi taxes, partially offset by efficiency improvements.

Expectations for net capital expenditure (UK GAAP after deducting grants and contributions) remain at £530 million to £545 million. The level of expected net infrastructure renewals expenditure included in capital investment remains £130 million to £140 million.

During the period Severn Trent Water accepted the Final Determination from Ofwat for the period 2015-2020, published on 12 December 2014.

Non-regulated business

We continue to expect top line growth to moderate in the second half, although full year PBIT is still anticipated to be in line with our expectations.

Group

The group interest charge is now forecast to be lower year on year. A higher level of net debt will be more than offset by a higher level of capitalised interest, as a result of a shift in the profile of major capital schemes, and a lower non cash RPI interest charge due to falling RPI.

Expectations for the effective current tax rate for the group remain between 18% and 20%.

Under our dividend policy for AMP5 of RPI+3% growth the total dividend for 2014/15 is expected to be 84.90 pence, representing growth of 5.6% year on year.

The Group also announced its new dividend policy for the period 2015-2020. The 2015/16 dividend will be set at 80.66 pence, a reduction of 5% compared to the current year total dividend of 84.90 pence. The policy will then be to grow the dividend annually at no less than RPI until March 2020.

In November 2014 the group announced proposals to create a new organisational structure to respond to the challenges of AMP 6. This programme is now nearing completion, which will give rise to an expected exceptional charge of £25 million - £30 million in the second half of the year. The anticipated annual benefits of this reorganisation are anticipated to be circa. £20 million from FY 2015/16.

Severn Trent Plc will hold a capital markets day on 17 March to provide more detail on its business plan for the period 2015-2020. The company will announce its Preliminary Results for the financial year ending 31 March 2015 on 22 May 2015.

Enquiries:

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' or 'estimates' 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 (which have not been updated since); 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. Subject to compliance with applicable laws and regulations, Severn Trent does not intend to update these forward-looking statements and does not undertake any obligation to do so,

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).