Severn Trent H2 2026 Earnings Report

Severn Trent EPS Results

• Actual EPS: GBX 179.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Severn Trent Revenue Results

• Actual Revenue: $2.83 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Severn Trent Announcement Details

• Quarter: H2 2026
• Date: 5/20/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 20, 2026
• Conference Call Time: 2:00AM ET

As one of Britain’s largest water companies, we supply fresh, clean drinking water to over nine million people across our region - around two billion litres every day. Once used, we collect, clean, and treat the water before safely returning it to the environment. We are one of only three listed water stocks in the UK, offering a valuable combination of reliable earnings, long-term asset growth, and inflation-linked dividends. The UK’s regulatory model provides a high degree of certainty over five-year periods. Within this framework, we lead the sector in Returns on Regulated Equity (RoRE), earning Outcome Delivery Incentives (ODIs) far in excess of any other company in the sector and with a cost of debt among the lowest in the industry. Our environmental performance has earned the highest possible 4* EPA rating from the Environment Agency every year since 2019, the only company to have achieved this. In March 2022, we launched five Get River Positive pledges to improve river water quality. We are now responsible for just 10.8% of RNAGS (reasons for rivers not achieving good ecological status) in our region, with a goal to reduce this to around 2% by 2030. As part of this commitment, we’re investing £1.1bn across our next regulatory period to halve our number of storm overflow spills by 2030. More broadly, we’ve made a triple pledge to achieve net zero operational carbon emissions by 2030, source 100% of our energy from renewables, and transition to 100% electric vehicles - subject to the availability of specialist vehicles. We’re well on track with each of these pledges: in 2020, we announced that we were 100% renewable on electricity; in 2023, we became the first UK water company to report EU Taxonomy alignment; and in 2024, we launched the world’s first carbon-neutral wastewater treatment works at our site in Staffordshire. We are entering our largest ever growth period of growth, with around 60% regulatory asset base growth in the five years to 2030. Most of this investment is driven by statutory targets addressing climate change, population growth, and rising environmental standards. We are uniquely positioned to deliver this thanks to our high level of insourcing, giving us greater control over performance, and our sector-leading Green Recovery programme and transitional expenditure, which has scaled-up our capital programme in line with our new requirements. We are committed to delivering all of this while continuing to offer one of the lowest average combined bills in the country, and for those who are unable to afford even this bill, we have a comprehensive £575m affordability package for the next five years, allowing us to support around one in six customers with their bills. On top of that, our Societal Strategy aims to improve the life chances of 100,000 people at risk of water poverty by 2033 through access to high-quality employment-related training and career opportunities. In addition to our core regulated business, we also have a large non-regulated business. Severn Trent (LON:SVT) Green Power is the UK’s largest producer of renewable energy from food waste, and together with our regulated Bioresources division, it helps Severn Trent to generate more than 60% of the energy we consume. Severn Trent Services offers a range of services that complement our regulated business, including a long-term contract supplying Ministry of Defence sites. Our Property Development business creates value by developing redundant land for sale, which we expect to generate PBIT of £150m between 2017 and 2032. But the most important part of Severn Trent is the culture we have built. In our annual independent employee engagement survey, we have consistently ranked within the top 5% of utilities globally since it was launched in 2019. And our dedicated training academy continues to foster a pipeline of talent, and the next generation of water industry leaders.

Severn Trent H2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Severn Trent reported a strong year of operating and financial performance, with PBIT up 46% to GBP 861 million and adjusted EPS up 64.5%, driven by regulated revenue growth, acquisitions, and efficiencies.
• Positive Sentiment: The company upgraded its 2028 earnings guidance to at least GBP 2.50 from GBP 2.24, reflecting confidence in its outlook and continued execution against its investment plan.
• Positive Sentiment: Management highlighted record investment and asset growth, with the regulatory asset base rising 13% to GBP 15.4 billion and a plan to grow it further to GBP 17.4 billion next year before reopeners.
• Neutral Sentiment: The company emphasized its environmental and operational outperformance, including lower spills and pollution, all-time low leakage, and a seventh straight year on track for EPA 4-star status.
• Positive Sentiment: Severn Trent said it has a strong balance sheet and financing position, including liquidity through at least August 2027, regulated gearing at 63.6%, and 90% hedged energy needs for the next three years.

Presentation

[James Jesic, CEO at Severn Trent]

Hello, everyone. I'm James Jesic, Chief Executive of Severn Trent, and I'm delighted to be presenting my first set of annual results here from Edgbaston in the West Midlands, a few miles from where I grew up, and right next to Birmingham City Center. Now, we're entering a period of sustained long-term growth across the sector, driven by structural trends. These include climate change, population growth, and ever-tightening environmental standards. I'm gonna be bringing some of that to life about some of the work we've been doing here in Birmingham, the U.K.'s second-largest city, and home to 1.2 million people, shortly. Before I do that, I'm gonna head inside and take you through the highlights of what has been a really strong year for Severn Trent. Our strong performance and execution of our record investment plan is delivering for all stakeholders.

[James Jesic, CEO at Severn Trent]

We have met or beaten around 80% of our customer performance incentives, delivering GBP 73 million of reward whilst making tangible environmental improvements, including reductions in spills and pollutions, ensuring we remain on track to deliver EPA 4-star for a 7th consecutive year. Accelerating our investment plans means we are in a great position and have real momentum, growing our regulatory asset base by 13% to GBP 15.4 billion this year. Whilst our bills remain amongst the lowest in the sector, we recognize that increases can put pressure on some households. We remain dedicated to supporting customers who need it most, helping 330,000 with their bills. Reflecting our strong performance and confidence in the outlook, we're upgrading our 2028 earnings guidance to at least GBP 2.50 from GBP 2.24.

[James Jesic, CEO at Severn Trent]

Whilst we've already secured an ambitious plan for a five-year period to 2030, building on this further, we have submitted our first tranche of reopener business cases for around GBP 600 million. A bit more on this later. This year's strong performance is delivering on our investment case and is linked to five key value drivers. Record levels of long-term investment are required to address climate change, population growth, and asset resilience, supporting sustained increases in our asset base over the coming decades. We operate within a robust inflation-linked regulatory framework with highly visible and predictable revenues. Our performance-led culture enables us to deliver ahead of regulatory expectations across operational measures, capital execution, and environmental outcomes. Our resilience balance sheet and prudent financing strategy underpin a strong track record of delivering double-digit returns.

[James Jesic, CEO at Severn Trent]

With visibility over a pipeline of investment and revenue growth, we have confidence over our long-term earnings and maintain inflation-linked dividend policy. More from me shortly, but with that, I will now hand over to Helen.

[Helen Miles, CFO at Severn Trent]

Thank you, James, and hello, everyone. We have made a flying start to this regulatory period, and I'm pleased to share another set of strong financial results. Revenue growth this year was driven mainly by our regulated water and wastewater business, alongside increased contribution from infrastructure services following acquisitions and growth in operating services. This translated into strong profit delivery, with PBIT up 46% to GBP 861 million and adjusted earnings per share increasing by 64.5%. We delivered a regulatory return of 17.2%, reflecting continued operational and financing outperformance. Regulated gearing was maintained at 63.6% through disciplined financing and continued cost control. Regulated PBIT has increased by 45% year-on-year. Core revenue increased by GBP 378 million, reflecting expected real bill increases, higher consumption during the drought, and of course, inflation. We also billed GBP 54 million for previously earned performance incentives.

[Helen Miles, CFO at Severn Trent]

We continue to drive efficiencies, delivering GBP 36 million, mainly through process improvements, productivity, no-dig repairs on the water network, and improvements in waste operations, partly as a result of our investment in insourcing. Through hedging, we were able to reduce our energy costs by GBP 18 million year on year. We invested GBP 100 million of operating costs, including license fees for our new billing system as we fully migrated customers through the year, insourcing activity on mains renewal, and GBP 38 million increase in depreciation as a result of the capital program. Other pricing effects includes inflationary increases in employment costs and another year of above-inflation increases in regulatory fees and business rates. The long drought in the spring and summer last year drove additional costs of GBP 21 million, mainly for increased energy consumption and chemicals to meet water demand.

[Helen Miles, CFO at Severn Trent]

Finally, bad debt has increased, but remains in line with historic averages at 2.1% of household revenue. The regulatory model provides important protection from energy price increases as the cost allowance in the final determination is adjusted for an energy index. This adjustment is made at the end of the five-year regulatory period, and so to manage the in-year cash and profit impact, we have a five-year rolling hedging strategy. We have already hedged around 90% of our energy needs for the next three years and are fully hedged for FY 2027. Importantly, all of this was secured before the recent Iran conflict at prices around 12% lower than FY 2026 exit prices. We are also reducing our reliance on the external energy market.

[Helen Miles, CFO at Severn Trent]

This year, we self-generated 61% of the group's energy consumption through bioresources and green power, and we are expanding our solar generation through the planned investment of four new solar farms. We are also introducing rooftop solar across our estate. In total, these programs will increase our energy generation by over 200 GWh. This expansion means we will self-generate around 75% of our current energy needs by 2030. Our balance sheet is strong, with liquidity out to at least August 2027 and regulated gearing at 63.6%, supporting sustained investment and returns. To fund our investment program, we raised GBP 1.8 billion this year, issued at 66 basis points below the allowed cost. This includes two Eurobonds, one of which was the longest dated Eurobond issued by a U.K. utility, highlighting our strong access to global debt markets.

[Helen Miles, CFO at Severn Trent]

Our finance costs are partially protected through a cost of debt allowance, which broadly moves in line with gilt yields. This is more important than ever in a time of macroeconomic uncertainty. With almost two-thirds of our debt fixed, we have limited exposure to rising interest rates, and with only 22% of index-linked debt, we have a greater benefit from higher inflation versus the regulatory allowance. This year, around 60% of our cash flow has been invested in our assets and funding growth. Delivering our growth outlook requires disciplined execution and a relentless focus on efficiency. This efficiency gives us options to reinvest in future growth and manage the impact on customer bills and our balance sheet. Removing cost of failure improves productivity, taking out repeats and rework, enabling more proactive rather than more expensive reactive responses, and at the same time, we can deliver better service for customers.

[Helen Miles, CFO at Severn Trent]

We are using AI in every part of the business to enhance our operations, which James will share in more detail later on. By vertically integrating elements of our supply chain as well as our insource capability, we are confident we can deliver around GBP 150 million of total operating cost efficiencies across the regulatory period. On capital efficiency, we are progressing well against our GBP 500 million target with around 40% already locked in, and we are seeing tangible results.

[Helen Miles, CFO at Severn Trent]

A great example is our plug and play modular tank solution, which can be used in both water and waste, and at around 40% lighter, it uses significantly less concrete and defined refinements halve installation time, so not only delivering speed and efficiency, but also reducing carbon, which contributes to our bespoke capital carbon ODI. This year, we have delivered a 17.2% regulatory return driven by both outperformance and inflation.

[Helen Miles, CFO at Severn Trent]

Our outstanding reward and ability to execute on performance incentives, manage our retail costs, and financing strategy has delivered 6.3% on top of the base return, taking our notional return on regulated equity to 11.6%. Operating above Ofwat's notional 55% gearing also adds a further 2.1%. The inflation uplift on our RCV, which James talked about earlier, adds 3.5%, giving a regulatory return of 17.2%. We have a strong track record of delivering against our commitments. Over the past five years, we have scaled up and consistently grown our capital investment, enabling a fast start to this regulatory period. We continue to build on this momentum with a further step up in FY 2027. We'll deliver 10% CAGR in our regulatory asset base to 2030.

[Helen Miles, CFO at Severn Trent]

This excludes growth from future funding submissions, including our first reopener application, which James will share more detail on later. Alongside this, we have consistently led the sector in operational outperformance, delivering outcomes that matter most to our customers. We have started the AMP strongly and guide to another year of reward in FY 2027. Our earnings have progressively grown and due to greater certainty over future revenues and costs alongside operational efficiencies, today I'm pleased to upgrade our 2028 earnings outlook to at least GBP 250 from GBP 224. This performance underpins a consistent track record of strong double-digit returns. Sustaining this over many years reflects our embedded performance-led culture, continued investment in our asset base, and the strength of our in-house capabilities. You can see here our technical guidance for the financial year ahead and a summary of the longer-term outlook.

[Helen Miles, CFO at Severn Trent]

For FY 2027, we're guiding to a performance incentive reward of at least GBP 50 million in nominal prices. We expect to invest between GBP 2.2 billion and GBP 2.5 billion of capital in the coming year. This will grow our regulatory asset base by 13% to GBP 17.4 billion before the impact of any reopeners. Other than our 2028 EPS upgrade, the remainder of our longer-term outlook is unchanged. With that, I'll now hand back to James.

[James Jesic, CEO at Severn Trent]

Thank you, Helen. Let me walk you through another year of strong operational performance for Severn Trent. I've had the privilege of playing a part in our performance-led culture over the past 23 years, and our priorities to drive the business forward are clear. We are building on strong momentum, a consistent track record of delivering for both customers and the environment. We're responding to structural changes including population growth, climate change, and increasing environmental standards. We see these as attractive long-term growth opportunities and are making disciplined strategic choices to position the business accordingly. To ensure efficient growth, we see a significant opportunity to transform our processes and have embedded AI along with process and technical innovations across the organization.

[James Jesic, CEO at Severn Trent]

Delivering for our customers remains fundamental, and it's important we have a connection to our local communities, ensuring we support the needs of those areas. Let me bring that to life with an example of what we're doing here in Birmingham.

[Video Narrator]

At Severn Trent, we serve around 10 million people every day, and our work is making a real long-term difference in our region. Let's see what we've been up to in Birmingham, the U.K.'s second-largest city, home to over 1 million people and vital public services such as the Queen Elizabeth Hospital and the University of Birmingham. Birmingham's motto is forward, always moving, progressing, innovating. Like Birmingham, we're not standing still. The city's population is expected to grow by almost 8% in the 20 years to 2038. Together with the impact of climate change, that means higher demand.

[Video Narrator]

Investing GBP 160 million at Minworth Sewage Treatment Works will ensure it is fit for decades to come. This includes almost GBP 18 million to increase storm tank capacity by around 25%, reducing the impact on the environment. We're spending GBP 23 million on renewing almost 84 km of Birmingham's water mains by 2030 to keep our top-quality water flowing for our customers. Almost a fifth of our storm overflows are located in the city, our improvements meant 26% of them didn't spill at all in 2025. With more miles of canals than Venice, we're working with the Canal & River Trust to unlock biodiversity across Birmingham's famous network, protecting at-risk species and growing more native plants. This year, we helped 66,000 Birmingham customers with paying their bill. We shared water efficiency tips during 99 school visits for almost 18,000 people.

[Video Narrator]

Installing 180,000 smart meters has helped customers manage their water consumption, as well as cutting leakage in Birmingham by 12%. As well as investing in infrastructure, we're investing in our local people, too, and this year, we helped more than 600 people in Birmingham improve their employability skills. We created over 90 new jobs at our Edgbaston customer service center and made a difference for almost 20,000 people with community fund grants of GBP 188,000 to Birmingham organizations. These are just some of the ways we're positively impacting people and places in Birmingham. We're doing lots more across our whole region, and we look forward to welcoming you to one of our other counties soon.

[James Jesic, CEO at Severn Trent]

We treat and supply water to over 9 million people across our region, and this year, we experienced periods of intense rainfall and months of drought, which we managed without the need to impose usage restrictions. That reflects both the strength of our operational management and sustained investment in our assets over many years. Leakage is now at an all-time low, beating our regulatory target for the eighth consecutive year, and we've performed well on the regulatory incentive measure.

[James Jesic, CEO at Severn Trent]

This is being driven by smart metering, AI and satellite technology enabling faster detection, with no-dig solutions reducing repair times from days to around 30 minutes. We are performing ahead of our regulatory target on water quality complaints and also investing to strengthen resilience. 98% of our customers now have a second source of supply, and this summer, one of the U.K.'s newest water treatment works, which uses innovative treatment technology, will be coming online following our GBP 170 million investment program, providing even more resilience and an example of how we are stepping up to meet the challenges of climate change and population growth.

[James Jesic, CEO at Severn Trent]

We operate one of the largest portfolios of waste treatment works in the sector, where we safely treat wastewater to meet stringent environmental standards before returning it to rivers and water courses. This year alone, we have invested around GBP 1 billion in our wastewater assets. Alongside this, we are deploying advanced technologies to improve visibility across our network, enabling more targeted investment and faster response times. We insourced our waste networks teams in 2023, strengthening our in-house capabilities. This is delivering clear benefits, including a 21% reduction in customer complaints this year, alongside continued improvements in both internal and external flooding. Our investment in sewage pumping stations has contributed to a 35% reduction in pollutions and ongoing interventions in storm overflows, resulting in 41% fewer average spills for calendar year 2025.

[James Jesic, CEO at Severn Trent]

We are also highly confident of achieving EPA 4-star status for the seventh year in a row, more than any other company, and reflective of the environmental improvements we are making. We've made a strong start to the regulatory period. Our investment is aligned with long-term growth I covered earlier. The population in our region is expected to grow by around 12% by 2050, and we're expanding waste treatment capacity, developing additional water resources, and progressing growth and resilience-related schemes to meet the additional demand and environmental standards. We are confident in our ability to deliver not only from our track record but also because we have invested in over 2,000 projects this year, mostly small, low-risk, and repeatable. A large number of smaller projects means we are able to scale delivery with standardized solutions developed through our plug-and-play program touched on by Helen earlier.

[James Jesic, CEO at Severn Trent]

Our strong relationships with the supply chain, including tier 2 and 3 partners, give us quality efficiencies and resilience, helping us actively manage program risk and drive delivery. AI and innovation are enabling improved programming and smarter solutions. For example, by using natural coagulants, we are reducing scope and cutting chemical use and lowering carbon. Finally, our insourcing strategy and acquisitions completed this year give us flexibility and control over our expertise to deliver our program. We have achieved the maximum price control deliverable reward this year for mains renewal, a significant proportion of which was delivered by our in-house team, and we have also accelerated the year two PCD targets for storm overflows and other environmental schemes. Being on track with our program is an important prerequisite for Ofwat's reopening process.

[James Jesic, CEO at Severn Trent]

As mentioned, we are using artificial intelligence to drive efficiency across the business, and here are some exciting examples to bring this to life. In capital delivery, by modeling different scenarios, we're making smarter investment decisions, helping us identify the lowest cost, highest performing solutions. AI generative tools are also speeding up design, such as finding optimal pipe routes for our larger pipeline schemes. A more predictive data-led approach is benefiting our water and waste operations.

[James Jesic, CEO at Severn Trent]

AI is supporting monitoring of assets in real time, reducing outages, as well as finding the location of issues, enabling us to be more proactive. Through our investment in our AI-enabled billing system, Kraken, we're bringing the customer status history and billing information all into a single view so our customer service agents can resolve queries much faster and more consistently. Through various tools, we can predict the impact of extreme weather and highlight risks to our network and power supplies.

[James Jesic, CEO at Severn Trent]

This enables us to be proactively intervene and prevent instances of environmental harm or risk to customer service. We see AI as a critical enabler to drive efficiency, reduce risk, and unlock long-term value. It is embedded across the business, we see further opportunities ahead. We've made a strong start to the regulatory period, delivering for our customers, shareholders, and the environment. Let me turn to the growth outlook. On the 1st of May, we submitted the first tranche of our reopener business cases, representing close to GBP 600 million of incremental investment beyond the GBP 15 billion we secured in the final determination. This is the first of three reopener opportunities available over the next few years. Our enhancement for water will maintain and improve critical assets through the rebuilding and refurbishment of water storage tanks, pipework, and telemetry.

[James Jesic, CEO at Severn Trent]

Alongside this, we will upgrade boreholes to secure long-term, high-quality, resilient water supplies. The investment in waste will enable us to increase our sewer relining activity by 59% and enhance sewage treatment capacity to support a growing population. We'll also be surveying 900 km of our waste network to support the case for future investments in asset health. For the first round of reopeners, we have been deliberately focused in our approach. We are targeting cases that offer future asset renewal and growth while carefully considering bill impact, funding returns, and the timing of potential future regulatory requirements. There are further opportunities to access investment through two more rounds of reopeners, transition spend and, of course, AMP9. As you can see, we have a large and diverse asset base, and our first reopener submission only covers a small percentage of these respective asset classes.

[James Jesic, CEO at Severn Trent]

Now, whilst Ofwat have ruled out in-period funding for 2026 growth, we expect clarity by the 15th of August on key decisions, including in-period revenue, RCV adjustments, and returns for asset health-driven investment. As Helen mentioned earlier, we have created funding capacity through efficiencies, and our current program is on track, giving us confidence in securing the growth. Let me close by summarizing how we are delivering against our investment case. We have a sustained investment program delivering at least 60% asset-based growth to 2030. That growth is underpinned by an inflation-linked model, providing highly visible and predictable revenues. Our performance-led culture drives operational excellence with GBP 73 million of performance incentives earned this year, and we remain on track for at least GBP 300 million by 2030. We have a strong track record of delivering enhanced returns, including another year of double-digit performance of over 17%.

[James Jesic, CEO at Severn Trent]

This all supports attractive earnings growth, which has allowed us to upgrade our earning guidance today. Thank you so much for listening. I look forward to seeing you all at our Q&A with myself, Helen, and the rest of the Severn Trent executive team.

Participants

Executives

• Helen Miles, CFO
• James Jesic, CEO

Analysts

• Video Narrator