Severn Trent Regulatory News (SVT)

31 March 2020

Severn Trent Plc Trading Update

Severn Trent Plc, a leading water and wastewater company in the UK, today announces the following update for the period to 31 March 2020.

Key highlights

· No material change to current year business performance since the 28 January 2020 trading update.

· The health, safety and well-being of our people and the millions of customers we serve throughout the Covid-19 outbreak is absolutely our first priority. Our frontline teams continue to keep essential services flowing across our region, while adhering to strict hygiene and social-distancing protocols.

· We have a robust financial liquidity position extending out to early 2022 to manage through the current uncertainty, recently supplemented by £200 million of US Private Placement receipts in the week commencing 23 March 2020.

· We remain on track to deliver at least £25 million of net customer ODI outperformance payments for 2019/20, as previously guided.

Covid-19

Our people have shown amazing commitment and dedication to ensure our customers have continued access to one of life's essentials, including those who need it most, in hospitals, care homes and schools. We are doing all that we can to protect them as they do so, with strict hygiene and social-distancing protocols in place for all our field teams and production sites, and only essential customer visits taking place. All of our people who can work from home have the necessary equipment to do so.

In response to the outbreak, we have enacted robust incident management and business continuity plans throughout our business, we are working closely with our local resilience forums and collaborating with others in the water sector.

We have increased communications to our customers, highlighting the ways that we can support them through our priority services register. We also recognise this will be a difficult time financially for some of our household customers; we are here to help and are actively promoting our range of existing social tariff and vulnerable customer schemes to help them with their bills.

But we think we need to do even more to support our communities in these unprecedented times. So today we are committing £1 million to support groups and charities helping those impacted the most in our region1. Our aim is to make this available as quickly as possible, so that we can start to make a difference straightaway.

Financial and operational performance

There has been no material change to current year business performance since the trading update announced on 28 January 2020, and we continue to expect the Group will deliver full-year trading performance in-line with previous guidance.

We remain on track to deliver at least £25 million of net customer ODI outperformance payments for 2019/20, as previously guided. As a result, across AMP6 we will have earned at least £163 million (pre-tax, 2012/13 prices) in net customer ODI outperformance payments, enabling us to defer £177 million (pre-tax, nominal prices) into revenue in AMP7.

As a result of increased levels of capitalised interest and lower RPI, we now expect net financing costs to be broadly flat in comparison to last year, despite the increase in overall net debt (previous guidance: higher year-on-year).

The restrictions implemented by the Government to limit the spread of Covid-19 are likely to have a material impact on many of the business customers of our joint venture company, WaterPlus. The company has been making good progress on improving its underlying operating performance, however this new challenge will significantly impact the pace and certainty of its recovery plan.

At the start of this month, Severn Trent Plc successfully raised £200 million in the US Private Placement market, with an average tenor of around 18 years - the first debt issue under our Sustainable Finance Framework and the first debt raising for the Holding Company since 2012. We received the funds in the week commencing 23 March 2020.

Overall, we have a robust financial position which, supplemented by the USPP cash, extends our liquidity out to early 2022. With less than 2.5% of our debt requiring re-financing in 2020, and cash and committed facilities of over £1.1 billion, we have good financial resilience with which to manage the impact of the outbreak. Given the uncertainty of how the situation will develop, we will continue to closely monitor our cash flows and update our contingency planning accordingly.

1 Comprising £500,000 re-directed from our newly established Community Fund and £500,000 of historic share forfeiture proceeds.

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', '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).