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Severn Trent expecting up to £85 million negative impact to 2020/21 revenue

Severn Trent Plc (LON:SVT) has announced the following update for the period to 15 July 2020.

We have remained focused on taking care of one of life’s essentials through the unprecedented COVID-19 pandemic. Our front-line key worker teams have kept customers’ taps flowing as we have continued to support our local communities. Overall, the first quarter of the financial year has been in line with our expectations, and the Board continues to expect that the Group will deliver full-year trading performance consistent with prior guidance. Our AMP7 plans remain unchanged as we benefit from the clarity a finalised regulatory settlement brings.

We have not yet seen evidence that would change our initial estimates for the impact of COVID-19. We continue to guide a £50 – £85 million negative impact to 2020/21 revenue, and the Ofwat regulatory model allows this to be recovered in 2022/23. We have been encouraged by cash collections broadly in line with the same period a year ago, but continue to anticipate COVID-19 bad debt increases in line with guidance previously given as government support schemes come to an end. We will update the market at the interim results on 26 November 2020 as we see more data on the impact of COVID-19 on households and businesses.

AMP7 on track; good underlying performance

–     Operational performance – We made a strong start to the year, and remain confident of a net positive outcome on Customer ODIs.

–     Capital schemes – We entered AMP7 in a strong position with 80% of our year one capital programme contracted, and we have made a fast start on delivering this, with minimal impact from COVID-19. We are on track to invest £430 – £510 million this year in infrastructure.

–     Energy generation – Our Solar and Bioresource assets both helped to increase renewable energy generation by 4% versus a year ago to 127Gwh for the quarter.

–     Financing – On 2 June 2020, we issued our inaugural Sustainable Bond in Severn Trent Water, raising £300 million at a fixed rate of 2% over 20 years. Our balance sheet remains strong with committed facilities of £1.1 billion, all of which are undrawn.

Supporting our communities

We remain committed to supporting our communities as they recover from the impact of COVID-19, with essential funding, practical support, job security and creation, and continued infrastructure investment through local companies. To date:

–     We have distributed £500k of our £1 million COVID-19 emergency fund to around 200 organisations.

–     We have awarded nearly £700k from our new community fund to 39 projects across our patch, ranging from an eco-friendly community space in Shropshire, to community health and wellbeing projects.

–     We have paid over £80 million to our small and medium suppliers on zero payment terms.

–     In addition to upholding our pledge to not make anyone redundant or furlough any of our staff as a result of COVID-19, we re-emphasised our commitment to helping young adults leaving education at this time, with 44 apprentices and 15 graduates starting in September.

Severn Trent have made significant strides in becoming a more sustainable company in the past five years. As we continue on our sustainability journey, we are incredibly proud to have been recognised as one of the leading FTSE100 companies for our commitment to sustainable business for the long term, recently ranking second in the Responsibility100 Index1.

On 10 June 2020, alongside our Annual Report and Accounts, we published our first ever stand-alone Sustainability Report, setting out our sustainability strategies and ambitions and showcasing who we are and what we stand for as a business.

The Responsibility100 Index is a ranking of the FTSE100 companies’ social and environmental leadership, inspired by the UN Sustainable Development Goals.

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