Severn Trent LON: SVT reported what management described as a strong year of financial and operational performance, as the U.K. water utility said it accelerated investment, expanded its regulatory asset base and upgraded its 2028 earnings outlook.
James Jesic, Severn Trent’s chief executive, said in his first annual results presentation as CEO that the company is entering “a period of sustained long-term growth” driven by climate change, population growth and tighter environmental standards. He said the company’s performance and execution of its investment plan were delivering for customers, shareholders and the environment.
The company said it met or beat around 80% of its customer performance incentives, earning GBP 73 million of rewards. Jesic said Severn Trent remains on track to achieve EPA 4-star status for a seventh consecutive year, citing reductions in spills and pollutions.
Profit and earnings rise sharply
Helen, who presented the financial results during the call, said revenue growth was driven mainly by Severn Trent’s regulated water and wastewater business, as well as a higher contribution from infrastructure services following acquisitions and growth in operating services.
Profit before interest and tax rose 46% to GBP 861 million, while adjusted earnings per share increased 64.5%. The company delivered a regulatory return of 17.2%, which Helen said reflected operational and financing outperformance. Regulated gearing was maintained at 63.6%.
Core revenue increased by GBP 378 million, helped by expected real bill increases, higher consumption during drought conditions and inflation. Severn Trent also billed GBP 54 million for previously earned performance incentives. Helen said the company delivered GBP 36 million of efficiencies, mainly through process improvements, productivity, no-dig repairs on the water network and improvements in waste operations.
Energy costs fell by GBP 18 million year over year due to hedging. However, the company also recorded GBP 100 million of operating cost investment, including license fees for a new billing system, insourcing activity on mains renewal and a GBP 38 million increase in depreciation tied to the capital program. Drought conditions added GBP 21 million of costs, mainly from higher energy consumption and chemicals needed to meet water demand.
Bad debt increased but remained in line with historic averages at 2.1% of household revenue, Helen said.
Guidance upgraded as investment base grows
Severn Trent upgraded its 2028 earnings guidance to at least GBP 2.50 per share from GBP 2.24. Jesic said the upgrade reflected “strong performance and confidence in the outlook.”
The company’s regulatory asset base grew 13% to GBP 15.4 billion during the year. Helen said Severn Trent expects to invest between GBP 2.2 billion and GBP 2.5 billion of capital in the coming year, growing the regulatory asset base by a further 13% to GBP 17.4 billion before any impact from reopener investments.
Management said it expects regulatory asset base growth at a 10% compound annual growth rate through 2030, excluding growth from future funding submissions. Severn Trent also guided to at least GBP 50 million of performance incentive rewards in nominal prices for fiscal 2027.
Balance sheet, energy hedging and efficiency in focus
Helen said Severn Trent has liquidity out to at least August 2027 and raised GBP 1.8 billion during the year to fund its investment program. The debt was issued at 66 basis points below the allowed cost and included two Eurobonds, one of which she said was the longest-dated Eurobond issued by a U.K. utility.
The company said it has hedged around 90% of its energy needs for the next three years and is fully hedged for fiscal 2027. Helen said those hedges were secured before the recent Iran conflict at prices around 12% lower than fiscal 2026 exit prices.
Severn Trent is also expanding its own energy generation. The company self-generated 61% of group energy consumption this year through bioresources and green power. Planned investments in four new solar farms and rooftop solar across its estate are expected to increase generation by more than 200 GWh and lift self-generation to around 75% of current energy needs by 2030.
Helen said Severn Trent is targeting around GBP 150 million of total operating cost efficiencies across the regulatory period, helped by vertical integration, insourcing and process improvements. The company is also progressing toward a GBP 500 million capital efficiency target, with around 40% already locked in.
Operational performance and environmental metrics improve
Jesic said the company managed periods of intense rainfall and months of drought without imposing usage restrictions. Leakage reached an all-time low, beating the regulatory target for an eighth consecutive year, supported by smart metering, artificial intelligence, satellite technology and no-dig repairs.
Severn Trent said 98% of customers now have a second source of supply. A new U.K. water treatment works is expected to come online this summer following a GBP 170 million investment program.
In wastewater, Jesic said Severn Trent invested around GBP 1 billion in assets during the year. The company reported a 21% reduction in customer complaints, continued improvements in internal and external flooding, a 35% reduction in pollutions and 41% fewer average spills for calendar 2025.
Management also highlighted local investments in Birmingham, including GBP 160 million at Minworth Sewage Treatment Works, GBP 23 million to renew almost 84 kilometers of water mains by 2030 and 180,000 smart meters installed in the city. The company said it helped 330,000 customers with bills across its region during the year, including 66,000 in Birmingham.
Reopener submissions seek further growth
Jesic said Severn Trent submitted its first tranche of reopener business cases on May 1, representing close to GBP 600 million of incremental investment beyond the GBP 15 billion secured in the final determination. He said this was the first of three reopener opportunities over the next several years.
The proposed water investments include rebuilding and refurbishing water storage tanks, pipework and telemetry, as well as upgrading boreholes to improve resilient water supplies. Waste investments would increase sewer relining activity by 59%, expand sewage treatment capacity and survey 900 kilometers of the waste network to support future asset health investment cases.
Jesic said Severn Trent had been “deliberately focused” in its first reopener approach, targeting cases tied to asset renewal and growth while considering bill impact, funding returns and future regulatory requirements. He added that Ofwat has ruled out in-period funding for 2026 growth, with clarity expected by Aug. 15 on decisions including in-period revenue, regulatory capital value adjustments and returns for asset health-driven investment.
Management said artificial intelligence is being used across capital delivery, operations, customer service and weather-risk forecasting. Jesic cited AI-enabled design tools, real-time asset monitoring and the Kraken billing system as examples of technology intended to improve efficiency and reduce risk.
About Severn Trent LON: SVT
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.
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