Severn Trent reports strong H1 results as Liv Garfield announces exit

(by Verity Mitchell)

Severn Trent has announced half-year results and that chief executive Liv Garfield will step down at the end of December. After 11 years at the helm, she will be succeeded by James Jesic, currently capital and commercial services director at Severn Trent and managing director of Hafren Dyfrdwy. Jesic is a chartered engineer, with a PhD in chemical engineering and has spent his career working in many parts of the organisation.

Revenues increased by 18% to £1,437m, reflecting the new price control allowances and indexation. Profit before interest and tax increased by 56.5%, driven by cost efficiencies and infrastructure renewals expenditure. 

Severn Trent reported a 74% increase in earnings per share (EPS), despite higher finance costs, and reiterated its guidance of doubling EPS by 2028 from 112p in 2025. It declared an interim dividend which increased by 3.5% to 50.4p in line with group policy, with firm guidance for a full-year dividend of 126.02p.

Management announced an upgrade to its Outcome Delivery Incentive (ODI) target for the current year to £40m from £25m previously – given its fast start on achieving key targets in leakage, reducing storm overflows and cutting pollution incidents. It has already achieved 90% of its annual ODI targets and 100% of its Price Control Deliverables. Severn Trent expects to halve storm overflow spills to around 13 in 2025. It has intervened around 2,700 times across its 2,500 storm overflows, and is on track to beat its 2030 target by the financial year end. It is forecasting a return on regulatory equity of around 13% for the current financial year, compared to 11.9% in 2025.

These achievements reflect the £500m of transition investment completed in the last two years of AMP7. This will allow Severn Trent to complete 80% of its enhancement schemes by March 2027, underpinning further regulatory rewards. It invested £769m during the half year, up 15.5% on the prior period. This delivered a 13% increase in its Regulatory Capital Value (RCV) which management said will reach £15.4bn by the financial year end.

Despite the significant investment programme, the regulated utility is hoping to end AMP8 with a broadly stable debt/RCV ratio of 60-65% (regulatory gearing was 61.5% on 30 September). This is dependent on inflation and how the transitional investment will be funded by customer bills, and is based on the company’s assumption of a £21.9bn closing RCV at March 2030.

The group’s non-regulated services business is expected to deliver £100m of EBITDA by 2030, up from £47.5m in 2025. Accelerated property sales and tuck-in acquisitions will supplement growth in green power and operating services. 

Management was proud of the four-star Environmental Performance Assessment score Severn Trent has achieved for the sixth consecutive year, making it by far the top performer in the sector on this metric.