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"value": "NOTES TO THE GROUP FINANCIAL STATEMENTS
1 General information
The Severn Trent Group\u2019s operations are described in the segmental
analysis in note 5.
Severn Trent Plc is a company incorporated and domiciled in the United
Kingdom. The address of its registered office is shown on the back of
the cover of the Annual Report and Accounts.
Severn Trent Plc is listed on the London Stock Exchange.
2 Accounting policies
a) Basis of preparation
The financial statements for the Group and the parent company have
been prepared on the going concern basis (see strategic report on
page 83 which sets out the Group\u2019s considerations relating to viability
and going concern) under the historical cost convention, except for the
revaluation of financial instruments including derivatives (refer to
accounting policy notes t and u), and accounting for the transfer of
assets from customers (refer to accounting policy note i).
(i) Consolidated financial statements
The consolidated financial statements have been prepared in
accordance with International Accounting Standards in conformity with
the requirements of the Companies Act 2006 and United Kingdom
adopted International Financial Reporting Standards.
(ii) Parent company financial statements
The parent company financial statements have been prepared in
accordance with United Kingdom Accounting Standards and comply
with the Companies Act 2006. The Company meets the definition of
a qualifying entity as defined in FRS 100 \u2018Application of Financial
Reporting Requirements\u2019, accordingly the Company has elected to
apply FRS 101 \u2018Reduced Disclosure Framework\u2019.
Therefore the recognition and measurement requirements of United
Kingdom adopted International Financial Reporting Standards have
been applied, with amendments where necessary in order to comply
with Companies Act 2006 and The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410)
as the parent company financial statements are Companies Act 2006
accounts.
As permitted by FRS 101, the parent company has taken advantage of
the disclosure exemptions available under that standard in relation to
statement of cash flows, share based payment, financial instruments,
capital management, presentation of comparative information in
respect of certain assets, standards not yet effective and related party
transactions. Where required, equivalent disclosures are given in the
consolidated financial statements.
As permitted by Section 408 of the Companies Act 2006, no profit or
loss account is presented for the parent company. The profit for the
year is disclosed in the Company statement of comprehensive income,
the Company statement of changes in equity and the Company balance
sheet.
Severn Trent Plc is a partner in Severn Trent Limited Partnership
and Severn Trent 2017 Limited Partnership (\u2018the partnerships\u2019), which
are registered in Scotland. As the partnerships are included in the
consolidated accounts, the parent company has taken advantage of the
exemption conferred by Regulation 7 of The Partnership (Accounts)
Regulations 2008 from the requirements of Regulations 4 to 6.
The key accounting policies for the Group and the parent company
are set out below and have been applied consistently except where
indicated. Where policies are specific to the Group or to the Company
this is set out in the relevant policy.
b) Basis of consolidation
The consolidated financial statements include the results of Severn
Trent Plc and its subsidiaries and joint ventures. Results are included
from the date of acquisition or incorporation and excluded from the date
of disposal.
Subsidiaries are consolidated where the Group has the power to control
a subsidiary.
Joint venture undertakings are accounted for on an equity basis where
the Group exercised joint control under a contractual arrangement.
Non-controlling interests in the net assets of subsidiaries are identified
separately from the Group\u2019s equity. Non-controlling interests consist
of the amount of those interests at the date of the original business
combination and the non-controlling interests\u2019 share of changes in
equity since that date.
Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not included within the Group
financial statements.
Foreign currency denominated assets and liabilities of the Company
and its subsidiary undertakings are translated into the relevant
functional currency at the rates of exchange ruling at the year end.
Any exchange differences so arising are dealt with through the
income statement.
Foreign currency transactions arising during the year are translated
into sterling at the rate of exchange ruling on the date of the
transaction. All gains and losses on exchange arising during the
year are dealt with through the income statement.
c) Revenue recognition
Revenue includes turnover and interest income.
Turnover represents the fair value of consideration receivable,
excluding value added tax, trade discounts and intercompany sales,
in the ordinary course of business for goods and services provided.
Turnover is not recognised until the service has been provided to the
customer.
Water and waste water revenue is recognised when the service is
provided and includes an estimate of the amount of water and waste
water charges unbilled at the year end. The accrual is estimated using
a defined methodology based upon a measure of unbilled water
consumed by tariff, which is calculated from historical billing
information.
Amounts received from developers for diversions activity is recognised
as turnover when the service to divert the infrastructure has been
completed.
Operating services revenue is recognised in line with the delivery of
each performance obligation. Further details of the performance
obligations are detailed in note 6. The expected turnover over the life
of a contract is allocated to each performance obligation based on the
stand-alone selling price of each performance obligation, which is
based on the forecast costs incurred and expected margin for each
obligation. Any changes to the revenue relating to performance
obligations already delivered are recognised in the period in which
they are identified. Differences between amounts recognised as
revenue and amounts billed are recognised as contract assets
or liabilities.
Renewable energy revenue includes sales of electricity and gas and
the related green energy incentives. Revenue from energy sales is
recognised when the electricity or gas is delivered to the national grid.
Green energy incentives are recognised when the Group becomes
entitled to them.
Interest income is accrued on a time basis by reference to the principal
outstanding and at the effective interest rate applicable.
2 Accounting policies (continued) d) Exceptional items Exceptional items are income or expenditure, which individually or in aggregate, if of a similar type, should, in the opinion of the directors, be disclosed by virtue of their size or nature if the financial statements are to give a true and fair view. In this context, materiality is assessed at the segment level. e) Taxation Current tax payable is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxation is provided in full on taxable temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred taxation is measured on a non-discounted basis using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Where there is a change in the tax rate enacted or substantively enacted, deferred tax assets and liabilities in the opening balance sheet are remeasured at the new rate. The resulting charge/credit to income statement and reserves is recognised in the year that the rate change occurs. Current and deferred tax are recognised in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. A deferred tax asset is only recognised to the extent it is probable that sufficient taxable profits will be available in the future to utilise it. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities. f) Goodwill Goodwill represents the excess of the fair value of purchase consideration over the fair value of the net assets acquired. Goodwill arising on acquisition of subsidiaries is included in intangible assets, whilst goodwill arising on acquisition of associates or joint ventures is included in interests in associates or joint ventures respectively. If an acquisition gives rise to negative goodwill this is credited directly to the income statement. Fair value adjustments based on provisional estimates are amended within one year of the acquisition, if required, with a corresponding adjustment to goodwill. Goodwill and indefinite life intangibles are tested for impairment in accordance with the policy set out in note 2 l) below and carried at cost less accumulated impairment losses. Goodwill is allocated to the cash-generating unit that derives benefit from the goodwill for impairment testing purposes. Where goodwill forms part of a cash-generating unit and all or part of that unit is disposed of, the associated goodwill is included in the carrying amount of that operation when determining the gain or loss on disposal of the operation. g) Other intangible non-current assets Intangible assets acquired separately, or internally generated where a separate resource that is controlled by the Group is created, are capitalised at cost. Following initial recognition, finite life intangible assets are amortised on a straight-line basis over their estimated useful economic lives as follows: Years Software 3-10 Other intangible assets 15-25 Amortisation charged on intangible assets is taken to the income statement through operating costs. Finite life intangible assets are reviewed for impairment where indicators of impairment exist (see 2 l). Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses. Such assets are reviewed for impairment at least annually and where indications of impairment exist. Development expenditure is capitalised as an intangible asset and written off over its expected useful economic life where the following criteria are met: \u2013 it is technically feasible to create and make the asset available for use or sale; \u2013 there are adequate resources available to complete the development and to use or sell the asset; \u2013 there is the intention and ability to use or sell the asset; \u2013 it is probable that the asset created will generate future economic benefits; and \u2013 the development costs can be measured reliably. Research expenditure is expensed when it is incurred. h) Pre-contract costs Incremental costs incurred in obtaining contracts with customers are recognised as a prepayment and written off to the income statement over the life of the contract where it is expected that the costs will be recovered. All other costs of obtaining contracts are written off to the income statement as incurred. i) Property, plant and equipment Property, plant and equipment is held at cost (or at deemed cost for infrastructure assets on transition to IFRS) less accumulated depreciation and impairment. Expenditure on development projects is capitalised and depreciated over the expected useful life of those assets. The costs of like-for-like replacement of infrastructure components are recognised in the income statement as they arise. Expenditure which results in enhancements to the operating capability of the infrastructure networks is capitalised. Where items of property, plant and equipment are transferred to the Group from customers or developers, the fair value of the asset transferred is recognised in the balance sheet. Fair value is determined based on estimated depreciated replacement cost. The transfer is considered to be linked to the provision of ongoing services therefore the corresponding credit is recorded in deferred income and released to turnover over the expected useful lives of the related assets. Further details regarding the judgment applied is detailed in note 4. Where assets take a substantial period to get ready for their intended use, the borrowing costs directly attributable to the acquisition, construction or production of these assets are added to their cost. 2 Accounting policies (continued)
i) Property, plant and equipment (continued)
Property, plant and equipment is depreciated, using the straight-line
method, to its estimated residual value over its estimated useful life,
with the exception of freehold land, which is not depreciated. Assets in
the course of construction are not depreciated until commissioned.
The estimated useful lives are:
Years
Infrastructure assets
Impounding reservoirs 250
Raw water aqueducts 250
Mains 80-150
Sewers 150-200
Other assets
Buildings 30-80
Fixed plant and equipment 20-40
Vehicles and mobile plant 2-15
j) Leased assets
Where the Group enters a contract that contains a lease, it recognises
a right-of-use asset and a lease liability. The right-of-use asset is
measured at cost, which includes: the amount of the initial
measurement of the lease liability (see below); any lease payments
made at or before the commencement date less any lease incentives
received; any initial direct costs incurred by the Group; and an estimate
of any remediation or similar costs required by the lease contract.
At the commencement date, the lease liability is measured at the
present value of the future lease payments discounted using the
interest rate implicit in the lease or, if that cannot be readily
determined, the Group\u2019s incremental borrowing rate. Lease liabilities
are included in borrowings.
Lease payments are treated as consisting of a capital element and a
finance charge; the capital element reduces the lease liability and the
finance charge is written off to the income statement at a constant
rate over the period of the lease in proportion to the capital amount
outstanding. Depreciation of the right-of-use asset is charged over
the shorter of the estimated useful life and the lease period unless
ownership is expected to transfer to the Group at the end of the lease,
in which case the right-of-use asset is depreciated to the end of the
useful life of the underlying asset.
Extension and termination options are included in a number of property
and equipment leases across the Group. These terms are used to
maximise operational flexibility in managing contracts.
Most extension and termination options held are exercisable only by
the Group and not by the respective lessor. In determining the lease
term, the Group considers all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise
a termination option. Extension options (or periods after termination
options) are only included in the lease term if the lease is reasonably
certain to be extended (or not terminated). The assessment is reviewed
if a significant event or a significant change in circumstances occurs
which affects this assessment and is within the control of the Group.
Where the lease term is less than one year or the underlying asset is
low value, the Group does not recognise a right-of-use asset or lease
liability. Payments under such leases are charged to operating costs.
k) Grants and contributions
Grants and contributions received in respect of non-current assets,
including certain charges made for new connections to the water and
sewerage networks, are treated as deferred income and released to
turnover over the useful economic life of those non-current assets.
Grants and contributions which are given in compensation for expenses
incurred with no future related costs are recognised in turnover in the
period that they become receivable.
l) Impairment of non-current assets
If the recoverable amount of goodwill, an item of property, plant and
equipment, or any other non-current asset is estimated to be less than
its carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset
belongs. Recoverable amount is the higher of fair value less costs to
sell or estimated value in use at the date the impairment review is
undertaken. Fair value less costs to sell represents the amount
obtainable from the sale of the asset in an arm\u2019s length transaction
between knowledgeable and willing third parties, less costs of disposal.
Value in use represents the present value of future cash flows expected
to be derived from a cash-generating unit, discounted using a pre-tax
discount rate that reflects current market assessments of the cost of
capital of the cash-generating unit or asset.
The discount rate used is based on the Group\u2019s cost of capital adjusted
for the risk profiles of individual businesses. For regulated businesses
we use the WACC from Ofwat\u2019s latest price review adjusted for market
changes since this date where appropriate.
Goodwill is tested for impairment annually. Impairment reviews are
also carried out if there is an indication that an impairment may have
occurred, or, where otherwise required, to ensure that non-current
assets are not carried above their estimated recoverable amounts.
Impairment losses are recognised in the income statement.
m) Parent company investments
The parent company recognises investments in subsidiary undertakings
at historical cost. Impairment losses are recognised in line with the
policy set out in l) above.
n) Inventory
Inventories are stated at the lower of cost and net realisable value.
For properties held for resale, the cost includes the cost of acquiring
and developing the sites.
Net realisable value is the estimated selling price less all estimated
costs of completion and costs to be incurred in selling and distribution.
o) Loans receivable
Loans receivable are measured at fair value on initial recognition, less
issue fee income received where the fee is integral to the yield on the
loan. All loan receivables are held for collection of contractual cash
flows, which represent solely payments of principal and interest. After
initial recognition, loans receivable are subsequently measured at
amortised cost using the effective interest rate method whereby
interest and issue fee income are credited to the income statement
and added to the carrying value of loans receivable at a constant rate
in proportion to the loan amount outstanding.
The Group recognises a loss allowance for expected credit losses (ECL)
on its loans receivable from joint ventures. The amount of expected
credit losses is updated at each reporting date to reflect changes in
credit risk since initial recognition.
The Group recognises lifetime ECL when there has been a significant
increase in credit risk since initial recognition. If the credit risk has
not increased significantly since initial recognition, the Group measures
the loss allowance at an amount equal to the 12 month ECL.
2 Accounting policies (continued) o) Loans receivable (continued) Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of the loans. In contrast, 12 month ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of default over the remaining life of the asset at the reporting date with the risk of default for the same period at initial recognition. In making this assessment, the Group considers both quantitative and qualitative information about the risk of default that is reasonable and supportable, including forward-looking information that is available. This includes assessment of a deterioration in: actual or expected business; financial or economic conditions of the borrower; actual or expected operating results, cash flows and financial position of the borrower; and the regulatory, economic, or technological environment faced by the borrower. Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. Definition of default The Group considers that a default has taken place where information developed internally indicates that the borrower is unlikely to pay its creditors, including the Group, in full. Irrespective of the above analysis, the Group considers that default has occurred when a loan receivable is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. p) Trade receivables and accrued income Trade receivables and accrued income are measured at fair value on initial recognition, and subsequently measured at amortised cost using the effective interest rate method, less loss allowance. If there is objective evidence that the asset is impaired, it is written down to its recoverable amount and the irrecoverable amount is recognised as an expense in operating costs. The Group applies the simplified approach permitted by IFRS 9 for estimating expected credit losses on trade and other receivables. For trade receivables that are assessed not to be impaired individually, expected credit losses are estimated based on the Group\u2019s historical experience of trade receivable write-offs and reasonable, supportable forward-looking information which is available without undue cost or effort. q) Retirement benefits (i) Defined benefit schemes The difference between the value of defined benefit pension scheme assets and defined benefit pension scheme liabilities is recorded on the balance sheet as a retirement benefit asset or obligation. Defined benefit pension scheme assets are measured at fair value using bid price for assets with quoted prices. For scheme assets with no quoted price, the fair value is derived by using quotations from independent third parties or by using applicable valuation techniques at the end of each reporting period. Defined benefit pension scheme liabilities are measured at the balance sheet date by an independent actuary using the projected unit method and discounted at the current rate of return on high-quality corporate bonds of equivalent term and currency to the liability. Service cost, representing the cost of employee service in the year, is included in operating costs. Net finance cost is calculated by applying the discount rate used for the scheme liabilities to the net obligation. Changes in the retirement benefit obligation that arise from: \u2013 differences between the return on scheme assets and interest income included in the income statement; \u2013 actuarial gains and losses from experience adjustments; and \u2013 changes in demographic or financial assumptions, are classified as remeasurements, charged or credited to other comprehensive income and recorded in the statement of comprehensive income in the period in which they arise. There is no contractual agreement, or stated policy, for charging the net defined benefit cost to participating Group companies. Therefore, the parent recognises a charge in the income statement which is equal to the contributions payable in the year. The net defined benefit cost for these schemes is recognised by the sponsoring employers, Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig. (ii) Defined contribution schemes Contributions to defined contribution pension schemes are charged to the income statement in the period in which they fall due. r) Provisions Provisions are recognised where: \u2013 there is a present obligation as a result of a past event; \u2013 it is probable that there will be an outflow of economic benefits to settle this obligation; and \u2013 a reliable estimate of this amount can be made. Insurance provisions are recognised for claims notified and for claims incurred but which have not yet been notified, based on advice from the Group\u2019s independent insurance advisers. Provisions are discounted to present value using a pre-tax discount rate that reflects the risks specific to the liability where the effect is material. s) Purchase of own shares Where market purchases of Severn Trent ordinary shares are made through an obligating contract, a liability for the present value of the redemption amount is recognised and charged to retained earnings. Payments for the purchase of shares are charged to the liability when made. Shares held by the Severn Trent Employee Share Ownership Trust that have not vested unconditionally by the balance sheet date are deducted from shareholders\u2019 funds until such time as they vest. t) Borrowings The accounting policy for borrowings that are the hedged item in a fair value hedge is set out in note 2 u) and the accounting policy for lease liabilities is set out in note 2 j). All other borrowings are initially recognised at fair value less issue costs. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method whereby interest and issue costs are charged to the income statement and added to the carrying value of borrowings at a constant rate in proportion to the capital amount outstanding. Index-linked debt is adjusted for changes in the relevant inflation index and changes in value are charged to finance costs in the income statement. Borrowings denominated in foreign currency are translated to sterling at the spot rate on the balance sheet date. Exchange gains or losses resulting from this are credited or charged to gains/losses on financial instruments in the income statement. 2 Accounting policies (continued) u) Derivative financial instruments Derivative financial instruments are stated at fair value, including accrued interest. Fair value is determined using the methodology described in note 34 a). The accounting policy for changes in fair value depends on whether the derivative is designated as a hedging instrument. The various accounting policies are described below. Interest receivable or payable in respect of derivative financial instruments is included in finance income or costs in the income statement. Derivatives not designated as hedging instruments Gains or losses arising on remeasurement of derivative financial instruments that are not designated as hedging instruments are recognised in gains/losses on financial instruments in the income statement. Derivatives designated as hedging instruments The Group uses derivative financial instruments such as cross currency swaps, forward currency contracts, energy swaps and interest rate swaps to hedge its risks associated with foreign currency, interest rate and energy price fluctuations. At the inception of each hedge relationship, the Group documents: \u2013 the economic relationship between the hedging instrument and the hedged item; \u2013 its risk management objectives and strategy for undertaking the hedge transaction; and \u2013 whether changes in fair value or the cash flows of the hedging instrument are expected to offset changes in fair values or cash flows (as appropriate) of the hedged item. Hedge accounting is discontinued when the hedging instrument expires, is sold, terminated or exercised, or no longer qualifies for hedge accounting. Fair value hedges Where a loan or borrowing is in a fair value hedging relationship it is remeasured for changes in fair value of the hedged risk at the balance sheet date, with gains or losses being recognised in gains/losses on financial instruments in the income statement. The gain or loss on the corresponding hedging instrument is also taken to gains/losses on financial instruments in the income statement so that the effective portion of the hedge will offset the gain or loss on the hedged item. If hedge accounting is discontinued, the fair value adjustment arising from the hedged risk on the hedged item is amortised to the income statement over the anticipated remaining life of the hedged item. Cash flow hedges The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity and the ineffective portion is charged to gains/losses on financial instruments in the income statement. When the gain or loss from the hedged underlying transaction is recognised in the income statement, the gains or losses on the hedging instrument that have previously been recognised in equity are recycled through gains/losses on financial instruments in the income statement. If hedge accounting is discontinued, any cumulative gain or loss on the hedging instrument previously recognised in equity is held in equity until the forecast transaction occurs, or transferred to gains/losses on financial instruments in the income statement if the forecast transaction is no longer expected to occur. From this point the derivative is accounted for in the same way as derivatives not designated as hedging instruments. If the hedging instrument is terminated, the gains and losses previously recognised in equity are held in equity until either the forecast transaction occurs or the forecast transaction is no longer expected to occur. Embedded derivatives Where a contract includes terms that cause some of its cash flows to vary in a similar way to a derivative financial instrument, that part of the contract is considered to be an embedded derivative. Embedded derivatives are separated from the contract and measured at fair value with gains and losses taken to the income statement if the host contract is not an asset within the scope of IFRS 9 and: \u2013 the risks and characteristics of the embedded derivative are not closely related to those of the contract; \u2013 a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and \u2013 the contract is not carried at fair value with gains and losses reported in the income statement. In all other cases embedded derivatives are accounted for in line with the accounting policy for the contract as a whole. v) Share based payment The Group operates a number of equity settled share based compensation plans for employees. The fair value of the employee services received in exchange for the grant is recognised as an expense over the vesting period of the grant. The fair value of employee services is determined by reference to the fair value of the awards granted, calculated using an appropriate pricing model, excluding the impact of any non-market vesting conditions. The number of awards that are expected to vest takes into account non-market vesting conditions including, where appropriate, continuing employment by the Group. The charge is adjusted to reflect shares that do not vest as a result of failing to meet a non-market condition. Share based compensation plans are satisfied in shares of the parent company. Where the fair value of the awards is not recharged to participating Group companies, the parent company records the fair value of the awards as an increase in its investment in the subsidiary. The investment is adjusted to reflect shares that do not vest as a result of failing to meet a non-market based condition. w) Cash flow statement For the cash flow statement, cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Such investments are normally those with less than three months maturity from the date of acquisition and include cash and bank balances and investments in liquid funds. Net cash and cash equivalents include overdrafts repayable on demand and amounts drawn under the Group\u2019s revolving credit facility. Interest paid in the cash flow statement includes amounts charged to the income statement and amounts included in the cost of property, plant and equipment. 2 Accounting policies (continued) x) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value. The identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date except that: \u2013 deferred tax assets or liabilities and retirement benefit assets or obligations are recognised and measured in accordance with the policies set out under notes 2 e) and 2 q) above; and \u2013 assets or disposal groups that are classified as held for sale are measured in accordance with the policy set out below. Where an asset or group of assets (a disposal group) is available for immediate sale and the sale is highly probable and expected to occur within one year, then the disposal group is classified as held for sale. The disposal group is measured at the lower of the carrying amount and the fair value less costs to sell. Depreciation is not charged on such assets. Where the initial accounting for a business combination is incomplete at the end of the reporting period, the Group reports provisional amounts and finalises these within one year of the acquisition date (the \u2018measurement period\u2019). Contingent consideration is measured at fair value at the acquisition date. During the measurement period, changes in provisional fair values of assets and liabilities acquired, or of contingent consideration, are recognised as adjustments to goodwill or bargain purchase gain. Outside the measurement period, changes in fair value of contingent consideration that is not classified as equity are recognised in profit or loss.3 New accounting policies and future requirements At the balance sheet date, no Standards or Interpretations were in issue but not yet effective that are expected to have a material impact on the Group\u2019s financial position. 4 Critical accounting judgments and key sources of estimation uncertainty In the process of applying the Group\u2019s accounting policies, the Group is required to make certain judgments, estimates and assumptions that it believes are reasonable based on the information available. Although these estimates are based on management\u2019s best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. a) Critical accounting judgments (i) Classification of costs between operating expenditure and capital expenditure Severn Trent Water\u2019s business involves significant construction and engineering projects. Assessing the classification of costs incurred on such projects between capital expenditure and operating expenditure requires judgments to be made. The judgments are made based on objective criteria that the Group has developed to facilitate the consistent application of its accounting policies. The costs of like-for- like replacement of infrastructure components are recognised in the income statement as they arise. Total infrastructure renewal expenditure during the year was \u00a3238.4 million (2022: \u00a3198.2 million). Expenditure which results in quality or capacity enhancements to the operating capability of the infrastructure networks is capitalised and amounted to \u00a3898.9 million (2022: \u00a3714.3 million). (ii) Income from connections to the water and waste water networks The Group receives income from developers and domestic customers for new connections to the water and waste water networks either in the form of infrastructure assets or cash. The more significant examples of these transactions are: \u2013 Developers transfer to the Group infrastructure assets that they have installed in a new development. Usually there is no monetary consideration exchanged when the Group adopts assets in this manner. \u2013 When new properties are connected to the network, the Group is permitted, under the Water Industry Act, to obtain a contribution from the developer towards the cost of reinforcing its network to meet the additional demands arising from the new connections. These are referred to as Infrastructure charges. The charges are a standard amount per property and are not linked to specific reinforcement expenditure. \u2013 When developers require properties to be connected to the Group\u2019s network, the Group installs a meter and connection to each property but retains ownership of the assets and responsibility for their maintenance. Assessing whether this income is received in relation to the provision of the connection to the Group\u2019s infrastructure networks or is to facilitate the ongoing provision of water and waste water services to the properties in question requires judgment about the nature of the ongoing relationship between the Group and the customer. During the period the Group received infrastructure assets with a fair value of \u00a3105.0 million (2022: \u00a369.0 million), infrastructure charges amounting to \u00a321.8 million (2022: \u00a325.0 million) and other charges relating to the provision of infrastructure amounting to \u00a320.2 million (2022: \u00a317.0 million). The Group considers that the purpose of these transactions is to facilitate the ongoing provision of water and waste water services to the properties in question and they are inextricably linked to that ongoing service. There is a transferable right to receive an ongoing water and waste water service that passes from customer to customer when the property is bought and sold during the life of the property and, without the ongoing water and waste water service, the transactions have no value. Therefore, in line with our accounting policies the amounts received are held on the balance sheet and released to turnover in the income statement over the life of the related assets. 4 Critical accounting judgments and key sources of
estimation uncertainty (continued)
a) Critical accounting judgments (continued)
(iii) Climate change
The Group continues to develop its assessment of the impact that
climate change may have on the amounts recognised in the financial
statements. The natural environment in which the Group operates is
continually changing, and the expected impact on the Group from
climate change is set out within the \u2018Our approach to climate change\u2019
section of the Strategic Report on page 39.
We have considered the impact of the climate change related risks
to which the Group is exposed in the preparation of these financial
statements. The risks are long term in nature, and whilst they will
provide a need for investment in the future, we conclude that there
is no material impact on the carrying amount of assets or liabilities
recognised in the financial statements, nor do they lead to any
additional key sources of estimation or judgment.
b) Sources of estimation uncertainty
(i) Depreciation and carrying amounts of property, plant
and equipment
Calculating the depreciation charge and hence the carrying value for
property, plant and equipment requires estimates to be made of the
useful lives of the assets. The estimates are based on engineering data
and the Group\u2019s experience of similar assets. Details are set out in note
2 i). The average useful life of property, plant and equipment by asset
category is detailed as follows:
Average
useful
economic life
(years)
Land and buildings 42.1
Infrastructure assets 135.2
Fixed plant and equipment 24.3
Moveable plant 11.4
The impact on the annual depreciation expense of a 10 per cent increase
and decrease in useful economic life (\u2018UEL\u2019) of property, plant and
equipment by asset category is detailed as follows:
Impact on annual depreciation (\u00a3m)
10 per cent
increase in
UEL
\u00a3m
10 per cent
decrease in
UEL
\u00a3m
Land and buildings (9.3) 11.3
Infrastructure assets (9.1) 5.1
Fixed plant and equipment (20.5) 25.0
Moveable plant (0.6) 0.8
(ii) Retirement benefit obligations
Determining the amount of the Group\u2019s retirement benefit obligations
and the net costs of providing such benefits requires assumptions to be
made concerning long-term interest rates, inflation and longevity of
current and future pensioners. Changes in these assumptions could
significantly impact the amount of the obligations or the cost of
providing such benefits. The Group makes assumptions concerning
these matters with the assistance of advice from independent qualified
actuaries. Details of the assumptions made and associated sensitivities
are set out in note 28 to the financial statements.
(iii) Expected credit losses on trade receivables
Expected credit losses for trade receivables are based on the historical
credit losses experienced over the last nine years and reasonable
forecasts of the future impact of external economic factors on the
Group\u2019s collection of trade receivables. A number of economic factors
such as high inflation, rising interest rates and reduction of Government
support for domestic energy bills might impact household disposable
income and therefore the expected credit losses on trade receivables.
The gross carrying amounts and expected credit loss allowances for
trade receivables and accrued income were as follows:
2023
\u00a3m
2022
\u00a3m
Gross carrying amount 746.7 630.9
Provision for bad and doubtful debts (135.1) (135.0)
Net carrying amount 611.6 495.9
Movements in the expected credit loss allowance are as follows:
2023
\u00a3m
2022
\u00a3m
At 1 April 135.0 137.1
Charge for bad and doubtful debts 24.5 24.6
Amounts written off during the period (24.4) (26.7)
At 31 March 135.1 135.0
The average expected credit loss for the outstanding trade receivables
and accrued income was 2.25% at 31 March 2023. A change of 10bps in
the expected credit loss would increase the charge and provision for
bad and doubtful debts by \u00a310.3 million.
5 Segmental analysis
a) Background
The Group is organised into two main business segments:
Regulated Water and Waste Water includes the activities of Severn
Trent Water Limited, except hydro-electric generation and property
sales, and Hafren Dyfrdwy Cyfyngedig.
Business Services includes the Group\u2019s Operating Services businesses,
the Green Power business including Severn Trent Water\u2019s hydro-
electric generation, the Property Development business and our other
non-regulated businesses including affinity products and searches.
The Severn Trent Executive Committee (\u2018STEC\u2019) is the Group\u2019s chief
operating decision maker. The reports provided to STEC include
segmental information prepared on the basis described above.
Results from interests in our joint venture are not included in the
segmental reports reviewed by STEC.
Goodwill is allocated and monitored at the segment level.
Transactions between reportable segments are included within
segmental results, assets and liabilities in accordance with Group
accounting policies. These are eliminated on consolidation.
The measure of profit or loss that is reported to STEC for the segments
is PBIT. A segmental analysis of turnover and PBIT is presented below.
5 Segmental analysis (continued)
b) Segmental results
The following table shows the segmental turnover and PBIT:
2023 2022
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
External turnover 1,995.0 170.1 1,803.9 139.4
Inter-segment turnover 0.4 7.0 0.5 4.2
Total turnover 1,995.4 177.1 1,804.4 143.6
Profit before interest and tax 467.5 49.2 476.3 36.4
Profit before interest and tax is stated after:
2023 2022
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Depreciation of property, plant and equipment 367.6 12.1 350.6 11.1
Depreciation of right-of-use assets 2.2 1.7 1.0 2.8
Amortisation of intangible assets 30.8 2.8 33.4 2.9
(Profit)/Loss on disposal of fixed assets (0.2) (2.0) 2.5 (7.9)
The reportable segments\u2019 turnover is reconciled to Group turnover as follows:
2023
\u00a3m
2022
\u00a3m
Regulated Water and Waste Water 1,995.4 1,804.4
Business Services 177.1 143.6
Corporate and other 1.1 1.1
Consolidation adjustments (8.5) (5.8)
2,165.1 1,943.3
Included in the revenues of Regulated Water and Waste Water of \u00a31,995.4 million (2022: \u00a31,804.4 million) is \u00a3259.5 million (2022: \u00a3259.8 million)
which arose from sales to Water Plus Group. No other single customer contributed 10% or more to the Group\u2019s revenue for either 2023 or 2022.
Segmental PBIT is reconciled to the Group\u2019s profit before tax as follows:
2023
\u00a3m
2022
\u00a3m
Regulated Water and Waste Water 467.5 476.3
Business Services 49.2 36.4
Corporate and other (8.0) (6.9)
Consolidation adjustments 0.1 0.4
PBIT 508.8 506.2
Net finance costs (362.6) (269.4)
Reduction in expected credit loss on loan receivable \u2013 0.2
Net gains on financial instruments 21.7 39.3
Share of net gain/(loss) of joint ventures accounted for using the equity method \u2013 (2.2)
Profit on ordinary activities before taxation 167.9 274.1
The Group\u2019s treasury and tax affairs are managed centrally by the Group Treasury and Tax departments. Finance costs are managed on a Group
basis and hence interest income and costs are not reported at the segmental level. Tax is not reported to STEC on a segmental basis.
5 Segmental analysis (continued)
c) Segmental capital employed
Separate segmental analyses of assets and liabilities are not reviewed by STEC. The balance sheet measure reviewed by STEC on a segmental
basis is capital employed.
2023 2022
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Operating assets 11,498.4 349.5 10,869.7 337.4
Goodwill 63.5 30.5 63.5 29.2
Segment assets 11,561.9 380.0 10,933.2 366.6
Segment operating liabilities (2,507.4) (33.3) (2,158.8) (29.6)
Capital employed 9,054.5 346.7 8,774.4 337.0
Operating assets comprise other intangible assets, property, plant and equipment, right-of-use assets, retirement benefit surpluses, inventory
and trade and other receivables.
Operating liabilities comprise trade and other payables, retirement benefit obligations and provisions.
The reportable segments\u2019 assets are reconciled to the Group\u2019s total assets as follows:
2023
\u00a3m
2022
\u00a3m
Segment assets
Regulated Water and Waste Water 11,561.9 10,933.2
Business Services 380.0 366.6
Corporate and other 5.3 4.5
Other financial assets 117.0 174.2
Investment in joint venture 16.5 16.5
Loan receivable from joint venture 75.3 79.6
Current tax receivable 9.9 6.2
Consolidation adjustments (17.3) (26.6)
Total assets 12,148.6 11,554.2
The consolidation adjustments comprise elimination of intra-group debtors and unrealised profits on fixed assets.
The reportable segments\u2019 liabilities are reconciled to the Group\u2019s total liabilities as follows:
2023
\u00a3m
2022
\u00a3m
Segment liabilities
Regulated Water and Waste Water (2,507.4) (2,158.8)
Business Services (33.3) (29.6)
Corporate and other (47.4) (38.2)
Other financial liabilities (7,314.9) (6,774.2)
Deferred tax (1,293.5) (1,320.6)
Consolidation adjustments 18.5 31.1
Total liabilities (11,178.0) (10,290.3)
The consolidation adjustments comprise elimination of intra-group creditors.
5 Segmental analysis (continued)
c) Segmental capital employed (continued)
The following table shows the additions to other intangible assets, property, plant and equipment and right-of-use assets:
2023 2022
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Other intangible assets 39.5 0.5 35.9 0.4
Property, plant and equipment 885.5 14.3 694.3 20.0
Right-of-use assets 3.0 \u2013 2.7 1.5
d) Geographical areas
All of the Group\u2019s sales were derived from the UK in 2023 and 2022.
6 Revenue from contracts with customers
Revenue recognised from contracts with customers is analysed by type of revenue and by business segment below:
Year ended 31 March 2023
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Corporate
and other
\u00a3m
Consolidation
adjustments
\u00a3m
Group
\u00a3m
Water and waste water services 1,932.9 \u2013 \u2013 (0.4) 1,932.5
Operating services \u2013 84.7 \u2013 \u2013 84.7
Renewable energy 57.2 78.6 \u2013 (7.0) 128.8
Other sales 5.3 13.8 1.1 (1.1) 19.1
1,995.4 177.1 1.1 (8.5) 2,165.1
Year ended 31 March 2022
Regulated
Water and
Waste Water
\u00a3m
Business
Services
\u00a3m
Corporate
and other
\u00a3m
Consolidation
adjustments
\u00a3m
Group
\u00a3m
Water and waste water services 1,767.5 \u2013 \u2013 (0.5) 1,767.0
Operating services \u2013 74.4 \u2013 \u2013 74.4
Renewable energy 32.8 55.5 \u2013 (4.2) 84.1
Other sales 4.1 13.7 1.1 (1.1) 17.8
1,804.4 143.6 1.1 (5.8) 1,943.3
Revenue from water and waste water services provided to customers with meters is recognised when the service is provided and is measured
based on actual meter readings and estimated consumption for the period between the last meter reading and the year end. For customers who
are not metered, the performance obligation is to stand ready to provide water and waste water services throughout the period. Such customers
are charged on an annual basis, coterminous with the financial year and revenue is recognised on a straight-line basis over the financial year.
Deferred income arising from connections to the Group\u2019s water and waste water networks represents a contract liability and is recognised in line
with the Group\u2019s accounting policy set out in note 2 and the judgment described in note 4. Changes in the Group\u2019s contract liabilities from deferred
income in relation to connections were as follows:
2023
\u00a3m
2022
\u00a3m
At 1 April 1,353.4 1,259.1
Contributions and grants received 40.2 42.8
Assets transferred at no cost 105.0 69.0
Amounts released to income statement (16.4) (17.5)
At 31 March 1,482.2 1,353.4
Revenue amounting to \u00a316.4 million (2022: \u00a317.5 million) that was included in the opening balance of the contract liability was recognised in the
income statement during the year. No revenue was recognised in the year from performance obligations relating to connections to the Group\u2019s
water and waste water networks that were satisfied or partially satisfied in previous years (2022: nil).
Payments for infrastructure charges and other charges relating to connection to the networks occur when the connections are made. The
performance obligations, including provision of an ongoing water and waste water service, are provided over the life of the relevant property.
6 Revenue from contracts with customers (continued) Revenue from the remaining performance obligations is expected to be recognised as follows: 2023 \u00a3m 2022 \u00a3m In the next year 16.2 29.5 Between one and five years 64.8 118.0 After more than five years 1,401.2 1,205.9 1,482.2 1,353.4 Payments received from customers in advance of the service period represents a contract liability. Changes in the Group\u2019s contract liabilities from payments received in advance were as follows: 2023 \u00a3m 2022 \u00a3m Contract liability at 1 April 144.8 132.5 Revenue recognised (1,394.9) (1,291.1) Cash received 1,396.6 1,303.4 Contract liability at 31 March 146.5 144.8 The Operating Services business includes a material 25-year contract with multiple performance obligations. Under this contract with the Ministry of Defence (\u2018MoD\u2019), the Group bills the customer based on an inflation-linked volumetric tariff and invoices are payable on normal commercial terms. The performance obligations, which are satisfied as the services are performed, are: \u2013 operating and maintaining the customer\u2019s infrastructure assets; \u2013 upgrading the customer\u2019s infrastructure assets; \u2013 administrating the services received from statutory water and sewerage undertakers; and \u2013 administrating billing services of the customer\u2019s commercial and Non Base Dependent customers. Revenue has been allocated to each performance obligation based on the stand-alone selling price of each performance obligation, which is based on the forecast costs incurred and expected margin for each obligation. Changes to projected margins are adjusted on a cumulative basis in the period that they are identified. Other than the provision of water and waste water services, there is no direct correlation between the satisfaction of the performance obligations and the timing of billing and customer payments. The estimated transaction price for the contract is derived from estimates of the customer\u2019s consumption at the contract tariff rate, adjusted for inflation. This estimate is updated on an annual basis. The estimated transaction price has increased from 31 March 2022 as a result of increased inflation and consumption. At 31 March 2023 the aggregate amount of the estimated transaction price allocated to performance obligations that were not satisfied was \u00a3372.5 million (2022: \u00a3396.3 million). This amount is expected to be recognised as revenue as follows: 2023 \u00a3m 2022 \u00a3m In the next year 52.1 49.0 Between one and five years 212.3 197.4 After more than five years 108.1 149.9 372.5 396.3 The assumptions and other sources of estimation uncertainty in relation to this contract do not present a significant risk of a material adjustment to the carrying amounts of assets and liabilities in the next financial year and therefore are not included as a source of estimation uncertainty in note 4 b). Revenue recognised in excess of amounts billed is recorded as a contract asset and amounts billed in excess of revenue recognised are recorded as contract liabilities. Changes in contract assets in the year were as follows: 2023 \u00a3m 2022 \u00a3m Contract asset at 1 April 39.9 38.2 Amounts billed (52.6) (49.9) Revenue recognised 57.0 51.6 Contract asset at 31 March 44.3 39.9 No contract liabilities arose from the Group\u2019s Operating Services contract with the MoD. 7 Net operating costs 2023 \u00a3m 2022 \u00a3m Wages and salaries 315.1 299.1 Social security costs 35.3 30.9 Pension costs 22.4 28.2 Share based payments 9.5 8.3 Total employee costs 382.3 366.5 Power 198.3 110.9 Raw materials and consumables 115.2 81.3 Rates 84.4 84.3 Charge for bad and doubtful debts 24.5 24.6 Services charges 41.6 36.5 Depreciation of tangible fixed assets 379.7 361.5 Depreciation of right-of-use assets 3.9 3.8 Amortisation of intangible fixed assets 33.7 36.3 Hired and contracted services 291.6 256.9 Rental charges \u2013 land and buildings 0.3 0.1 \u2013 other \u2013 0.5 Hire of plant and machinery 9.1 9.3 Profit on disposal of tangible fixed assets (2.2) (5.4) Exchange (gains)/losses (0.8) 0.5 Infrastructure maintenance expenditure 238.4 198.2 Ofwat licence fees 5.5 4.9 Other operating costs 71.3 63.3 Other operating income (3.1) (3.3) 1,873.7 1,630.7 Own work capitalised (217.4) (188.3) 1,656.3 1,442.4 During the year the following fees were charged by the auditor: 2023 \u00a3m 2022 \u00a3m Fees payable to the Company\u2019s auditor for: \u2013 the audit of the Company\u2019s annual accounts 0.3 0.3 \u2013 the audit of the Company\u2019s subsidiary accounts 0.7 0.6 Total audit fees 1.0 0.9 Fees payable to the Company\u2019s auditor and its associates for other services to the Group: \u2013 audit related assurance services 0.2 0.2 \u2013 other assurance services 0.1 0.1 Total non-audit fees 0.3 0.3 Other assurance services include certain agreed upon procedures performed by Deloitte in connection with financing documents. Details of the Group policy on the use of the auditor for non-audit services and how auditor independence and objectivity are safeguarded are set out in the Audit and Risk Committee report on pages 127 and 134. No services were provided pursuant to contingent fee arrangements. Details of directors\u2019 remuneration are set out in the Directors\u2019 Remuneration Report on pages 141 to 144. 8 Employee numbers
Average number of employees (including Executive Directors) during the year:
2023 2022
By business segment
Regulated Water and Waste Water 7,176 6,612
Business Services 461 492
Corporate and other 14 14
7,651 7,118
9 Finance income
2023
\u00a3m
2022
\u00a3m
Interest income earned on bank deposits 3.3 0.1
Other financial income 2.2 1.8
Total interest receivable 5.5 1.9
Interest income on defined benefit scheme assets 78.6 52.8
84.1 54.7
10 Finance costs
2023
\u00a3m
2022
\u00a3m
Interest expense charged on:
Bank loans and overdrafts 30.9 14.7
Other loans 328.6 243.5
Lease liabilities 3.7 4.0
Total borrowing costs 363.2 262.2
Other financial expenses 1.3 2.4
Interest cost on defined benefit scheme liabilities 82.2 59.5
446.7 324.1
Borrowing costs of \u00a356.6 million (2022: \u00a334.5 million) incurred on funding eligible capital projects have been capitalised at an interest rate of 5.4%
(2022: 4.11%). Tax relief of \u00a310.7 million (2022: \u00a36.5 million) was claimed on these costs which has created tax losses carried forward, offset by a
related deferred tax asset of \u00a314.1 million (2022: \u00a38.6 million).
11 Net gains/(losses) on financial instruments
2023
\u00a3m
2022
\u00a3m
Loss on swaps used as hedging instruments in fair value hedges (1.3) (1.0)
(Loss)/gain arising on debt in fair value hedges (0.3) 1.6
Exchange loss on other loans (7.4) (6.6)
Net loss on cash flow hedges transferred from equity (4.9) (6.8)
Hedge ineffectiveness on cash flow hedges (1.3) (0.6)
Gain arising on swaps where hedge accounting is not applied 35.7 51.5
Amortisation of fair value adjustment on debt 1.2 1.2
21.7 39.3
The gains from financial assets and liabilities mandatorily measured at fair value through profit or loss was \u00a334.4 million (2022: \u00a350.5 million).
There were no financial assets or liabilities designated as at fair value through the profit or loss (2022: nil).
The Group\u2019s hedge accounting arrangements are described in note 35.
12 Taxation
a) Analysis of tax charge in the year
2023
\u00a3m
2022
\u00a3m
Current tax
Current year at 19% (2022: 19%) \u2013 \u2013
Prior years 0.2 (4.8)
Total current tax charge/(credit) 0.2 (4.8)
Deferred tax
Origination and reversal of temporary differences:
Current year 36.0 66.7
Prior years (0.5) 5.0
Exceptional charge on rate change \u2013 294.4
Total deferred tax charge 35.5 366.1
35.7 361.3
An exceptional deferred tax charge of \u00a3294.4 million arose from recalculating opening deferred tax liabilities at 25% in 2022 (see note 26).
b) Factors affecting the tax charge in the year
The tax expense for the year is higher (2022: higher) than the standard rate of corporation tax in the UK of 19% (2022: 19%). The differences are
explained below:
Total tax
2023
\u00a3m
2022
\u00a3m
Profit before taxation 167.9 274.1
Tax at standard rate of corporation tax in the UK 19% (2022: 19%) 31.9 52.1
Tax effect of depreciation on non-qualifying assets 2.2 1.9
Permanent difference from super deductions (4.6) (5.3)
Other permanent differences (2.0) 2.1
Current year impact of rate change 8.5 15.9
Adjustments in respect of prior years (0.3) 0.2
Exceptional deferred tax arising from rate change \u2013 294.4
Total tax charge 35.7 361.3
Current tax
2023
\u00a3m
2022
\u00a3m
Profit before taxation 167.9 274.1
Tax at standard rate of corporation tax in the UK 19% (2022: 19%) 31.9 52.1
Tax effect of depreciation on non-qualifying assets 2.2 1.9
Permanent difference from super deductions (4.6) (5.3)
Other permanent differences (2.0) 2.1
Tax effect of accelerated capital allowances (33.1) (40.8)
Other temporary differences 5.6 (10.0)
Adjustments in respect of prior years 0.2 (4.8)
Total current tax charge/(credit) 0.2 (4.8)
The most significant factor impacting the Group\u2019s current tax charge is the difference between the depreciation charged on property, plant and
equipment in the financial statements and the amount deductible from taxable profits in the form of capital allowances. Where the assets qualify
for capital allowances this creates a temporary difference and deferred tax is recognised on the difference between the carrying amount of the
asset and the amount that will be deductible for tax purposes in future years. Changes in the amount of deferred tax recognised on these assets
are charged or credited to deferred tax in the income statement. Where the amount of the capital allowances received is greater than the
depreciation charged this is referred to as accelerated capital allowances.
12 Taxation (continued) b) Factors affecting the tax charge in the year (continued) On 3 March 2021, the UK Government announced the introduction of a capital allowance \u2018super deduction\u2019 which gave an in-year capital allowance of 130% on the cost of plant and machinery qualifying for the relief between 1 April 2021 and 31 March 2023 and an acceleration of capital allowances on the cost of assets qualifying for special rate allowances. The introduction of these changes meant the Group was eligible to claim more capital allowances in the last two years to the extent that the Group was not liable to pay corporation tax for those years. Certain of the Group\u2019s property, plant and equipment assets are not eligible for capital allowances under current legislation. Therefore there is no tax deduction that corresponds to the depreciation charged on these assets and deferred tax is not recognised in respect of this permanent difference. The 30% allowance in excess of the cost of assets qualifying for the super deduction will never be charged as depreciation in the financial statements and therefore this represents a permanent difference between profits recognised in the income statement and taxable profits. Other permanent differences comprise expenditure that is not deductible for tax purposes or income that is not taxable. Other temporary differences comprise items other than depreciation of property, plant and equipment where the amount is included in the tax computation in a different period from when it is recognised in the income statement. Deferred tax is provided on these items. The amounts included for tax assets in the financial statements include estimates and judgments relating to uncertain tax positions. If the computations subsequently submitted to HMRC include different amounts then these differences are reflected as an adjustment in respect of prior years in the subsequent financial statements. Deferred tax is provided at 25%, the rate that is expected to apply when the asset or liability is expected to be settled. Further details are provided in note 26. c) Tax (credited)/charged directly to other comprehensive income or equity No current tax has been charged or credited to other comprehensive income or equity. The following amounts of deferred tax have been (credited)/ charged to other comprehensive income or equity: 2023 \u00a3m 2022 \u00a3m Deferred tax on: Actuarial losses/gains (63.0) 47.1 Cash flow hedges (0.6) 13.0 Share based payments (0.1) (4.9) Transfers to the income statement 0.1 1.7 Effect of change in tax rate \u2013 (8.4) Total deferred tax (credited)/charged to other comprehensive income or equity (62.6) 48.5 13 Dividends Amounts recognised as distributions to owners of the Company in the year: 2023 2022 Pence per share \u00a3m Pence per share \u00a3m Final dividend for the year ended 31 March 2022 (2021) 61.28 153.9 60.95 152.2 Interim dividend for the year ended 31 March 2023 (2022) 42.73 107.4 40.86 102.3 Total dividends paid 104.01 261.3 101.81 254.5 Proposed final dividend for the year ended 31 March 2023 64.09 163.1 The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 14 Earnings/(loss) per share a) Basic and diluted earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding treasury shares and those held in the Severn Trent Employee Share Ownership Trust, which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company\u2019s shares during the period. Potential ordinary shares are not treated as dilutive if their conversion does not decrease earnings per share or increase loss per share. Basic and diluted earnings per share are calculated on the basis of profit attributable to the owners of the Company. The calculation of basic and diluted earnings per share is based on the following: i) Earnings for the purpose of basic and diluted earnings per share 2023 \u00a3m 2022 \u00a3m Profit/(loss) for the period 132.2 (87.2) ii) Number of shares 2023 \u00a3m 2022 \u00a3m Weighted average number of ordinary shares for the purpose of basic earnings per share 250.8 247.9 Effect of dilutive potential ordinary shares: \u2013 share options and LTIPs 1.1 \u2013 Weighted average number of ordinary shares for the purpose of diluted earnings per share 251.9 247.9 Unvested share options and LTIPs have not been treated as dilutive potential ordinary shares in 2022 because their conversion would decrease the loss per share. b) Adjusted earnings per share 2023 pence 2022 pence Adjusted basic earnings per share 58.2 96.1 Adjusted diluted earnings per share 58.0 95.6 Adjusted earnings per share figures are presented for continuing operations. These exclude the effects of net gains/losses on financial instruments, current tax on net gains/losses on financial instruments, and deferred tax in both 2023 and 2022. The Directors consider that the adjusted figures provide a useful additional indicator of performance. The denominators used in the calculations of adjusted basic and diluted earnings per share are the same as those used in the unadjusted figures set out above except that the number of ordinary shares for the purpose of the adjusted diluted earnings per share for the year ended 31 March 2022 is 249.3 million as this includes 1.4 million dilutive potential ordinary shares from share options and LTIPs. The adjustments to earnings that are made in calculating adjusted earnings per share are as follows: 2023 \u00a3m 2022 \u00a3m Earnings for the purpose of basic and diluted earnings per share 132.2 (87.2) Adjustments for: \u2013 net gains on financial instruments (21.7) (39.3) \u2013 current tax on net gains on financial instruments \u2013 (1.4) \u2013 deferred tax 35.5 366.1 Earnings for the purpose of adjusted basic and diluted earnings per share 146.0 238.2 The comparative earnings for the purpose of adjusted basic and diluted earnings per share excluded an amount relating to amortisation of acquired intangibles. We have restated this comparative measure to include the effect of amortisation of acquired intangibles so that it is calculated on a consistent basis with the current year. 15 Goodwill
2023
\u00a3m
2022
\u00a3m
Cost
At 1 April 91.4 91.4
Acquisition of subsidiary 1.3 \u2013
At 31 March 92.7 91.4
On 8 February 2023, Severn Trent Services Operations UK Limited acquired 100% of the issued share capital of M A solutions (Lindum) Ltd for a
total consideration of \u00a31.6 million, of which \u00a30.8 million is cash consideration and the remainder deferred consideration.
The acquisition has been accounted for using the acquisition method. Goodwill of \u00a31.3 million was recognised, attributable to the anticipated future
opportunities and outperformance arising as a result of the acquisition. The goodwill valuation was based on management\u2019s best estimates of the
fair values of the assets and liabilities acquired, which was estimated at \u00a30.3m.
Goodwill relates to specific cash-generating units (CGUs) hence no allocation of goodwill is required. A summary of the carrying amount of
goodwill by CGU is presented below.
2023
\u00a3m
2022
\u00a3m
Regulated Water and Waste Water 62.2 62.2
Green Power 29.2 29.2
Operating Services 1.3 \u2013
92.7 91.4
Regulated Water and Waste Water also has an intangible asset with indefinite useful life amounting to \u00a34.3 million (2022: \u00a34.3 million). This is
reviewed for impairment as part of the Regulated Water and Waste Water impairment review, set out in note 15 a) below.
a) Regulated Water and Waste Water
On 1 July 2018 Instruments of appointments of Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig (formerly Dee Valley Water Limited)
were amended to align the areas for which the appointments were made with the national border of England and Wales. As a result, the business
that the goodwill relates to is now partly in Severn Trent Water and partly Hafren Dyfrdwy consequently this goodwill is allocated to the Regulated
Water and Waste Water cash-generating unit.
The Group has reviewed the carrying value of goodwill for impairment in accordance with the policy stated in note 2. The carrying value of the
Regulated Water and Waste Water CGU was determined on the basis of fair value, through a level 3 valuation, less costs to sell.
The fair value, determined using a discounted cash flow calculation for the Regulated Water and Waste Water segment is based on the most recent
financial projections available for the business, which cover the five-year period to 31 March 2028.
The key assumptions underlying these projections are the cash flows in the projections and the following:
%
Discount rate 6.5
RPI long-term inflation 3.0
CPI long-term inflation 2.0
Growth rate in the period beyond the detailed projections 1.5
The discount rate is an estimate for the weighted average cost of capital at the year end date based on the post-tax WACC detailed in the Ofwat
PR19 final determination adjusted for market changes. The rate disclosed above is the equivalent pre-tax nominal rate.
Inflation has been included in the detailed projections at 3.0% and 2.0% for RPI and CPI respectively, based on the Bank of England\u2019s target rate
for CPI.
Cash flows beyond the end of the five-year period are extrapolated using an assumed real growth rate of 1.5% in the Group\u2019s regulatory capital
base, based on past experience and external factors likely to drive long-term growth in the regulatory capital base.
The fair value less costs to sell for the CGU exceeded its carrying value by \u00a32,534.4 million. An increase in the discount rate to 7.1% or a reduction
in the growth rate in the period beyond the detailed projections to 0.7% would reduce the recoverable amount to the carrying amount of the CGU.
15 Goodwill (continued)
b) Green Power
On 30 November 2018, the Group acquired Agrivert Holdings and its subsidiary undertakings resulting in goodwill of \u00a329.2 million. This goodwill
has been allocated to the Green Power South cash-generating unit which is determined to be the lowest level of independent cash flows relating to
the goodwill. Green Power South is included within the Green Power part of the Business Services segment.
The Group has reviewed the carrying value of goodwill for impairment in accordance with the policy stated in note 2. The carrying value of the
Green Power South CGU was determined on the basis of a value in use calculation.
The value in use determined using a discounted cash flow calculation for the Green Power South CGU is based on the most recent financial
projections available for the business to 2028.
The key assumptions underlying these projections are the cash flows in the projections and:
Key assumption %
Discount rate 7.8
Growth rate in the period beyond the detailed projections 2.0
The discount rate was based on a review of a range of external sources of information about the cost of capital for the Severn Trent energy
business. This rate was then converted to the equivalent pre-tax discount rate disclosed above.
Cash flows beyond the end of the five-year period are extrapolated using assumed growth of 2.0% in the Group\u2019s free cash flows, informed
through external market trends.
The value in use for the CGU exceeded its carrying value by \u00a319.2 million. An increase in the discount rate to 9.0% or reduction in the growth rate in
the period beyond the detailed projections to 1.2% would reduce the recoverable amount to the carrying amount of the CGU.
16 Other intangible assets
Computer software
Internally
generated
\u00a3m
Purchased
\u00a3m
Capitalised
development
costs and
patents
\u00a3m
Other
intangible
assets
\u00a3m
Total
\u00a3m
Cost
At 1 April 2021 303.9 162.5 12.8 35.8 515.0
Additions 21.8 14.5 \u2013 \u2013 36.3
Disposals \u2013 \u2013 (12.8) \u2013 (12.8)
Transfers from property, plant and equipment 11.3 3.0 1.3 \u2013 15.6
At 1 April 2022 337.0 180.0 1.3 35.8 554.1
Additions 22.1 12.2 \u2013 5.7 40.0
At 31 March 2023 359.1 192.2 1.3 41.5 594.1
Amortisation
At 1 April 2021 (216.4) (116.9) (12.8) (4.9) (351.0)
Amortisation for the year (25.5) (8.7) \u2013 (2.1) (36.3)
Disposals \u2013 \u2013 12.8 \u2013 12.8
At 1 April 2022 (241.9) (125.6) \u2013 (7.0) (374.5)
Amortisation for the year (20.6) (10.9) (0.1) (2.1) (33.7)
At 31 March 2023 (262.5) (136.5) (0.1) (9.1) (408.2)
Net book value
At 31 March 2023 96.6 55.7 1.2 32.4 185.9
At 31 March 2022 95.1 54.4 1.3 28.8 179.6
Other intangible assets include the instrument of appointment acquired with Dee Valley Water, customer contracts and energy subsidy contracts
both acquired with Agrivert and rights obtained under contracts for biological assets. The instrument of appointment has an indefinite useful life
and as such the carrying value has been included in the impairment assessment performed for the Regulated Water and Waste Water CGU
described in note 15. As at 31 March 2023 no impairment was recorded (2022: nil).
17 Property, plant and equipment
Land and
buildings
\u00a3m
Infrastructure
assets
\u00a3m
Fixed
plant and
equipment
\u00a3m
Moveable
plant
\u00a3m
Assets under
construction
\u00a3m
Total
\u00a3m
Cost
At 1 April 2021 4,015.0 5,773.2 4,792.8 72.3 1,095.3 15,748.6
Additions 59.1 136.4 132.9 0.7 385.2 714.3
Transfers on commissioning 131.5 97.0 313.3 12.3 (554.1) \u2013
Transfers to intangible assets \u2013 \u2013 \u2013 \u2013 (15.6) (15.6)
Disposals (3.9) \u2013 (8.6) (4.9) (3.0) (20.4)
At 1 April 2022 4,201.7 6,006.6 5,230.4 80.4 907.8 16,426.9
Additions 35.9 161.4 77.6 0.8 623.2 898.9
Transfers on commissioning 74.5 1.2 180.7 1.3 (257.7) \u2013
Disposals (10.8) (2.3) (30.8) (2.5) (9.3) (55.7)
At 31 March 2023 4,301.3 6,166.9 5,457.9 80.0 1,264.0 17,270.1
Depreciation
At 1 April 2021 (1,542.2) (1,434.7) (2,858.1) (38.4) \u2013 (5,873.4)
Charge for the year (100.9) (40.7) (212.7) (7.2) \u2013 (361.5)
Disposals 3.5 \u2013 8.3 4.6 \u2013 16.4
At 1 April 2022 (1,639.6) (1,475.4) (3,062.5) (41.0) \u2013 (6,218.5)
Charge for the year (102.1) (45.6) (225.0) (7.0) \u2013 (379.7)
Disposals 10.8 0.2 32.1 1.9 \u2013 45.0
At 31 March 2023 (1,730.9) (1,520.8) (3,255.4) (46.1) \u2013 (6,553.2)
Net book value
At 31 March 2023 2,570.4 4,646.1 2,202.5 33.9 1,264.0 10,716.9
At 31 March 2022 2,562.1 4,531.2 2,167.9 39.4 907.8 10,208.4
Additions include assets transferred from developers at no cost, which have been recognised at their fair value of \u00a3105.0 million
(2022: \u00a369.0 million) and provisions for works in response to legally enforceable undertakings to regulators amounting to \u00a334.2 million
(2022: \u00a315.3 million).
The net book value of land and buildings is analysed as follows:
2023
\u00a3m
2022
\u00a3m
Freehold 2,570.1 2,561.8
Short leasehold 0.3 0.3
2,570.4 2,562.1
18 Leases
a) The Group\u2019s leasing activities
The Group leases various properties, equipment and vehicles. Lease agreements are typically made for fixed periods of up to 999 years but may
have extension options as described in note 2 j).
Lease contracts are negotiated on an individual basis and include a wide range of terms and conditions. The contracts do not include covenants
other than security interests in the leased assets that are held by the lessor and leased assets may not be used as security for other borrowing.
The contracts do not impose any restrictions on dividend payment, additional debt or further leasing. There were no sale and leaseback
transactions in the period.
b) Income statement
The income statement includes the following amounts relating to leases:
2023
\u00a3m
2022
\u00a3m
Depreciation charge of right-of-use assets:
Land and buildings 0.9 1.4
Infrastructure assets 1.1 1.1
Fixed plant and equipment 0.2 0.2
Moveable plant 1.7 1.1
Total depreciation of right-of-use assets 3.9 3.8
Interest expense included in finance cost 3.7 4.0
Expense relating to short-term leases included in operating costs \u2013 0.5
Expense relating to leases of low value assets included in operating costs 0.3 0.1
c) Balance sheet
The balance sheet includes the following amounts relating to leases:
2023
\u00a3m
2022
\u00a3m
Right-of-use assets:
Land and buildings 12.5 12.3
Infrastructure assets 110.4 111.5
Fixed plant and equipment 4.1 4.1
Moveable plant 2.3 2.0
129.3 129.9
Additions to right-of-use assets were \u00a33.0 million (2022: \u00a34.2 million). Disposals were \u00a3nil (2022: \u00a30.2 million). Extension of lease terms during
the year has resulted in a reduction in dilapidation provisions included in right-of-use assets of \u00a30.8 million (2022: \u00a31.1 million).
2023
\u00a3m
2022
\u00a3m
Lease liabilities:
Current 8.3 7.1
Non-current 102.6 110.3
110.9 117.4
18 Leases (continued)
c) Balance sheet (continued)
Obligations under lease liabilities were as follows:
2023
\u00a3m
2022
\u00a3m
Within 1 year 12.3 11.0
1 \u2013 2 years 12.2 11.2
2 \u2013 5 years 39.6 35.5
After more than 5 years 80.4 95.0
Gross obligations under leases 144.5 152.7
Less future finance charges (33.6) (35.3)
Present value of lease obligations 110.9 117.4
Net obligations under leases were as follows:
2023
\u00a3m
2022
\u00a3m
Within 1 year 8.3 7.1
1 \u2013 2 years 8.4 7.4
2 \u2013 5 years 29.6 25.9
After more than 5 years 64.6 77.0
Included in non-current liabilities 102.6 110.3
110.9 117.4
d) Cash flow
The total cash outflow for leases in the year was \u00a316.8 million (2022: \u00a316.1 million) which consists of \u00a33.7 million (2022: \u00a34.0 million) payments
of interest and \u00a313.1 million (2022: \u00a312.1 million) repayment of principal elements. This is included in financing cash flows.
19 Interests in joint ventures
Particulars of the Group\u2019s principal joint venture undertaking at 31 March 2023 were:
Name Type
Country of
incorporation
Class of share
capital held
Proportion of
ownership
interest
Water Plus Group Limited Joint venture Great Britain Ordinary B 50%
Water Plus is the largest business retailer in the non-household retail water market in England and Scotland. Its principal activities are core retail
services including billing, meter reading, call centre support and water efficiency advice as well as key account management services and value
added solutions.
Water Plus competes in England and Scotland for customers ranging from small and medium-sized enterprises through to large corporate
entities in both the private and public sectors.
Movements in the investment were as follows:
2023
\u00a3m
2022
\u00a3m
Carrying value of joint venture investment at 1 April 16.5 \u2013
Reclassification on subscription for equity \u2013 18.7
Group\u2019s share of profit/(loss) after tax and comprehensive income/(loss) \u2013 (2.2)
Carrying value of joint venture investment at 31 March 16.5 16.5
On 23 April 2021, the Group extinguished the \u00a332.5 million Revolving Credit Facility (\u2018RCF\u2019) previously extended to Water Plus, and replaced this
with a subscription for \u00a332.5 million of equity shares in Water Plus Group Limited at par. The carrying value of the loan receivable was reclassified
to investment in joint venture.
During the current year, Water Plus broke even (2022: loss of \u00a34.4m).
As at 31 March 2023 and 2022 the joint venture did not have any significant contingent liabilities to which the Group was exposed and, other than
those set out below, the Group did not have any significant contingent liabilities in relation to its interests in the joint venture. The Group had no
capital commitments in relation to its interests in the joint venture at 31 March 2023 or 2022.
19 Interests in joint ventures (continued)
The Company has given guarantees in favour of Water Plus Limited in respect of the joint venture\u2019s liabilities to wholesalers in the Open Water
market. The guarantee is capped at \u00a343.5 million (2022: \u00a354.1 million).
The registered office of Water Plus Group Limited is South Court Riverside Park, Campbell Road, Stoke-On-Trent, United Kingdom, ST4 4DA.
Balance sheet and income statement extracts can be found below for Water Plus:
At 31 March
2023
\u00a3m
2022
\u00a3m
Non-current assets 40.0 41.6
Current assets
1
300.9 367.3
Current liabilities
2
(112.4) (154.5)
Non-current liabilities
3
(214.6) (241.4)
Net assets/liabilities 13.9 13.0
1 Includes cash of \u00a312.2 million (2022: \u00a324.4 million)
2 Includes current financial liabilities (excluding trade and other payables and provisions) of \u00a31.2 million (2022: \u00a30.1 million)
3 Includes non-current financial liabilities of \u00a3213.1 million (2022: \u00a3240.3 million)
For the year ended 31 March
2023
\u00a3m
2022
\u00a3m
Revenue 731.7 750.9
Depreciation and amortisation (6.2) (6.6)
Finance income 3.7 4.0
Finance costs (11.3) (7.7)
Tax credit/(charge) (1.6) 4.2
Comprehensive gain/(loss) for the year \u2013 (3.5)
The below shows a reconciliation from the net assets of Water Plus to the carrying value as above:
2023
\u00a3m
2022
\u00a3m
Net assets of Water Plus at 31 March 13.9 13.0
Severn Trent\u2019s share of net assets 7.0 6.5
Water Plus financial liabilities classified as part of net investment in joint venture 9.8 9.8
Other (0.3) 0.2
Carrying value of joint venture investment at 31 March 16.5 16.5
The net assets position of Water Plus is derived from the best information available at the time the financial statements of the Group are approved.
The impact on the Group of any subsequent changes in the net assets of Water Plus will be reflected in the financial statements prepared to
31 March 2024.
20 Categories of financial assets
Note
2023
\u00a3m
2022
\u00a3m
Fair value through profit and loss
Cross currency swaps \u2013 not hedge accounted 20.5 13.7
Interest rate swaps \u2013 not hedge accounted \u2013 2.9
Inflation swaps \u2013 not hedge accounted 7.3 \u2013
27.8 16.6
Derivatives designated as hedging instruments
Cross currency swaps \u2013 fair value hedges 14.0 14.6
Interest rate swaps \u2013 cash flow hedges 40.5 \u2013
Energy hedges \u2013 cash flow hedges 0.5 27.6
55.0 42.2
Total derivative financial assets 82.8 58.8
Financial assets at amortised cost
Trade receivables 21 294.4 217.7
Accrued income 21 317.2 278.2
Other amounts receivable 21 73.4 58.8
Loan receivable from joint venture 21 75.3 79.6
Short-term deposits 22 \u2013 75.0
Cash at bank and in hand 22 34.2 40.4
Total financial assets at amortised cost 794.5 749.7
Total financial assets 877.3 808.5
Disclosed in the balance sheet as:
Non-current assets
Derivative financial assets 82.3 31.2
Trade and other receivables 3.3 6.7
Loan receivable from joint venture 75.3 79.6
160.9 117.5
Current assets
Derivative financial assets 0.5 27.6
Trade and other receivables 681.7 548.0
Cash and cash equivalents 34.2 115.4
716.4 691.0
877.3 808.5
21 Trade and other receivables 2023 \u00a3m 2022 \u00a3m Current assets Net trade receivables 294.4 217.7 Other amounts receivable 70.1 52.1 Contract assets 44.3 39.9 Prepayments 24.9 18.5 Net accrued income 317.2 278.2 750.9 606.4 Non-current assets Other amounts receivable 3.3 6.7 Prepayments 9.8 5.8 Loan receivable from joint venture 75.3 79.6 88.4 92.1 839.3 698.5 Prepayments include unamortised success fees paid as a result of winning the MoD contract (see note 6) amounting to \u00a34.3 million (2022: \u00a34.8 million). The costs are being amortised on a straight line basis over the life of the contract. The carrying values of trade and other receivables are reasonable approximations of their fair values. a) Credit risk (i) Trade receivables and accrued income Credit control policies and procedures are determined at the individual business unit level. By far the most significant business unit of the Group is Severn Trent Water Limited, which represents 91% of Group turnover and 89% of net trade receivables. Severn Trent Water has a statutory obligation to provide water and waste water services to domestic customers within its region. Therefore there is no concentration of credit risk with respect to its trade receivables from these services and the credit quality of its customer base reflects the wealth and prosperity of all of the domestic households within its region. In the current and prior year, the Group\u2019s joint venture, Water Plus, was the largest retailer for non-domestic customers in the Severn Trent region. The trade receivables and amounts shown as loans receivable from joint ventures are disclosed within note 41, Related party transactions. Credit risk is considered separately for trade receivables due from Water Plus and is considered immaterial as amounts outstanding are paid within 30 days. The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected credit loss allowance for all trade receivables, contract assets and accrued income. A collective provision is recorded for expected credit losses against assets for which no specific provision has been made. Expected credit losses for trade receivables are based on the historical credit losses experienced over the last nine years and reasonable forecasts of the future impact of external economic factors on the Group\u2019s collection of trade receivables. Debts are written off when there is no realistic expectation of further collection and enforcement activity has ceased. There were no amounts outstanding on receivables written off and still subject to enforcement activity (2022: nil). (ii) Contract assets The contract assets represent the Group\u2019s right to receive consideration from the MoD for services provided. On that basis the Group considers that the credit risk in relation to these assets is immaterial and therefore no provision for expected credit losses has been recognised (2022: nil). (iii) Loan receivable from joint venture As well as trade receivables from Water Plus the Group has advanced loans to its joint venture. These loans are assessed for impairment under the two stage impairment model in IFRS 9. 21 Trade and other receivables (continued)
b) Expected credit loss allowance
(i) Trade receivables and accrued income
The expected credit loss at 31 March 2023 and 2022 was as set out below. The loss allowance is based on historical credit losses adjusted for
expected changes in cash collection. The loss rate disclosed is calculated by applying the loss allowance to the gross carrying amount for each
age category.
2023
Expected loss
rate
%
Gross carrying
amount
\u00a3m
Loss
allowance
\u00a3m
Net carrying
amount
\u00a3m
Not past due 3 415.3 (13.4) 401.9
Up to 1 year past due 21 109.2 (22.8) 86.4
1 \u2013 2 years past due 32 66.2 (21.4) 44.8
2 \u2013 3 years past due 38 46.6 (17.5) 29.1
3 \u2013 4 years past due 41 29.6 (12.0) 17.6
4 \u2013 5 years past due 52 26.5 (13.9) 12.6
5 \u2013 6 years past due 56 18.8 (10.5) 8.3
6 \u2013 7 years past due 55 12.8 (7.0) 5.8
7 \u2013 8 years past due 64 8.3 (5.3) 3.0
8 \u2013 9 years past due 69 5.9 (4.1) 1.8
More than 9 years past due 96 7.5 (7.2) 0.3
746.7 (135.1) 611.6
2022
Expected loss
rate
%
Gross carrying
amount
\u00a3m
Loss
allowance
\u00a3m
Net carrying
amount
\u00a3m
Not past due 4 333.1 (11.7) 321.4
Up to 1 year past due 25 93.8 (23.1) 70.7
1 \u2013 2 years past due 39 63.3 (24.6) 38.7
2 \u2013 3 years past due 43 39.0 (16.7) 22.3
3 \u2013 4 years past due 55 32.2 (17.6) 14.6
4 \u2013 5 years past due 49 26.2 (12.8) 13.4
5 \u2013 6 years past due 54 16.2 (8.7) 7.5
6 \u2013 7 years past due 63 11.2 (7.1) 4.1
7 \u2013 8 years past due 69 7.4 (5.1) 2.3
8 \u2013 9 years past due 73 3.3 (2.4) 0.9
More than 9 years past due 100 5.2 (5.2) \u2013
630.9 (135.0) 495.9
Movements on the expected credit loss allowance were as follows:
2023
\u00a3m
2022
\u00a3m
At 1 April 135.0 137.1
Charge for bad and doubtful debts 24.5 24.6
Amounts written off during the year (24.4) (26.7)
At 31 March 135.1 135.0
(ii) Loan receivable from joint venture
In previous years, the Group has determined that there has been a significant increase in the credit risk since inception relating to its loans
receivable of \u00a376.4 million (2022: \u00a380.7 million) from Water Plus, in the light of significant losses incurred by Water Plus. Following a breakeven
position from Water Plus in the current year, the Group determines that there continues to be credit risk since inception on the loan receivable
balance from Water Plus. The Group has therefore assessed the lifetime expected credit loss of its loans to Water Plus at 31 March 2023 based on
Water Plus\u2019s financial projections. The Group has maintained the expected credit loss provision at \u00a31.1 million (2022: \u00a31.1 million) resulting in a net
loan receivable of \u00a375.3 million (2022: \u00a379.6 million).
22 Cash and cash equivalents
2023
\u00a3m
2022
\u00a3m
Cash at bank and in hand 34.2 40.4
Short-term deposits \u2013 75.0
34.2 115.4
\u00a318.4 million (2022: \u00a324.6 million) of cash at bank and in hand is restricted for use on the MoD contract and \u00a30.6 million (2022: \u00a30.5 million) is held
as security for insurance obligations. Neither are available for use by the Group.
23 Borrowings
2023
\u00a3m
2022
\u00a3m
Current liabilities
Bank overdraft 5.5 7.7
Bank loans 3.6 3.7
Other loans 300.0 346.7
Lease liabilities 8.3 7.1
317.4 365.2
Non-current liabilities
Bank loans 709.4 778.8
Other loans 6,174.2 5,476.8
Lease liabilities 102.6 110.3
6,986.2 6,365.9
7,303.6 6,731.1
See note 34 for details of interest rates payable and maturity of borrowings.
24 Categories of financial liabilities
Note
2023
\u00a3m
2022
\u00a3m
Fair value through profit and loss
Interest rate swaps \u2013 not hedge accounted 10.0 37.0
Inflation swaps \u2013 not hedge accounted \u2013 3.7
10.0 40.7
Derivatives designated as hedging instruments
Cross currency swaps \u2013 fair value hedges 0.9 \u2013
Interest rate swaps \u2013 cash flow hedges 0.4 2.6
1.3 2.6
Total derivative financial liabilities 11.3 43.3
Other financial liabilities
Borrowings 23 7,303.6 6,731.1
Trade payables 25 122.7 89.1
Other payables 25 15.6 13.4
Total other financial liabilities 7,441.9 6,833.6
Total financial liabilities 7,453.2 6,876.9
Disclosed in the balance sheet as:
Non-current liabilities
Derivative financial liabilities 11.3 43.3
Borrowings 6,986.2 6,365.9
6,997.5 6,409.2
Current liabilities
Borrowings 317.4 365.2
Trade payables 122.7 89.1
Other payables 15.6 13.4
455.7 467.7
7,453.2 6,876.9
25 Trade and other payables
2023
\u00a3m
2022
\u00a3m
Current liabilities
Trade payables 122.7 89.1
Social security and other taxes 10.9 11.1
Other payables 15.6 13.4
Accruals and receipts in advance 555.0 512.4
Deferred income 16.2 29.5
720.4 655.5
Non-current liabilities
Accruals and receipts in advance 13.6 10.1
Deferred income 1,466.0 1,323.9
1,479.6 1,334.0
2,200.0 1,989.5
The accruals balance above includes \u00a3146.5m of contract liabilities (2022: \u00a3144.8m). Movements in this balance are set out in note 6 of the
financial statements.
Movements in the deferred income balance are set out in note 6 to the financial statements.
26 Deferred tax
An analysis of the movements in the major deferred tax liabilities and assets recognised by the Group is set out below:
Accelerated
tax
depreciation
\u00a3m
Retirement
benefit
obligations
\u00a3m
Fair value of
financial
instruments
\u00a3m
Other
\u00a3m
Total
\u00a3m
At 1 April 2021 972.1 (27.8) (39.0) 0.7 906.0
Charge/(credit) to income 57.8 9.0 11.5 (6.6) 71.7
Charge/(credit) to income arising from rate change 307.0 (2.6) (10.5) 0.5 294.4
Charge/(credit) to equity \u2013 47.1 14.7 (4.9) 56.9
Charge/(credit) to equity arising from rate change \u2013 (6.2) (1.8) (0.4) (8.4)
At 1 April 2022 1,336.9 19.5 (25.1) (10.7) 1,320.6
Charge/(credit) to income 49.2 15.5 14.4 (43.6) 35.5
Charge/(credit) to equity \u2013 (63.0) 0.5 (0.1) (62.6)
At 31 March 2023 1,386.1 (28.0) (10.2) (54.4) 1,293.5
Deferred tax assets and liabilities have been offset. The offset amounts, which are to be recovered/settled after more than 12 months, are
as follows:
2023
\u00a3m
2022
\u00a3m
Deferred tax asset (92.6) (35.8)
Deferred tax liability 1,386.1 1,356.4
1,293.5 1,320.6
Deferred tax is provided at the rate that is expected to apply when the asset or liability is expected to be settled. On 3 March 2021, the UK
Government announced an increase in the rate of corporation tax from 19% to 25%, effective 1 April 2023. Deferred tax assets and liabilities were
therefore remeasured at 1 April 2021 at the new rate of 25%. This resulted in an exceptional deferred tax charge in the income statement for 2022
of \u00a3294.4 million and a credit to reserves amounting to \u00a38.4 million.
27 Retirement benefit schemes
a) Defined benefit pension schemes
(i) Background
The Group operates a number of defined benefit pension schemes. The Severn Trent Pension Scheme and the Severn Trent Mirror Image Pension
Scheme closed to future accrual on 31 March 2015, while the Dee Valley Water Limited Section of the Water Companies Pension Scheme, which is
a sectionalised scheme, currently remains open to accrual.
The defined benefit pension schemes cover increases in accrued benefits arising from inflation and pension increases. Their assets are held in
separate funds administered by Trustees. The Trustees are required to act in the best interests of the schemes\u2019 beneficiaries. A formal actuarial
valuation of each scheme is carried out on behalf of the Trustees at triennial intervals by an independent professionally qualified actuary. Under
the defined benefit pension schemes, members are entitled to retirement benefits calculated by reference to their pensionable service and
pensionable salary history, with inflationary pension increases applying in line with the scheme rules. The defined benefit pension schemes and
the dates of their last completed formal actuarial valuations as at the accounting date are as follows:
Date of last formal
actuarial valuation
Severn Trent Pension Scheme (STPS)* 31 March 2022
Severn Trent Mirror Image Pension Scheme (STMIPS) 31 March 2022
Water Companies Pension Scheme \u2013 Dee Valley Water Limited Section (DVWS) 31 March 2020
* The STPS is by far the largest of the Group\u2019s UK defined benefit schemes, comprising over 90% of the Group\u2019s overall defined benefit obligations.
The defined benefit scheme assets have been updated to reflect their market value at 31 March 2023. Actuarial gains and losses on the scheme
assets and defined benefit obligations have been reported in the statement of comprehensive income. Service cost, and the costs of administrating
the scheme, are recognised in operating costs and interest cost is recognised in net finance costs.
27 Retirement benefit schemes (continued)
a) Defined benefit pension schemes (continued)
(ii) Amount included in the balance sheet arising from the Group\u2019s obligations under the defined benefit pension schemes
2023
\u00a3m
2022
\u00a3m
Fair value of assets 1,785.3 2,659.4
Present value of the defined benefit obligations (2,064.7) (2,787.4)
(279.4) (128.0)
Presented on the balance sheet as:
Retirement benefit obligation \u2013 funded schemes in surplus 5.7 17.5
Retirement benefit obligation \u2013 funded schemes in deficit (278.6) (137.6)
Retirement benefit obligation \u2013 unfunded schemes (6.5) (7.9)
Retirement benefit obligation \u2013 total (285.1) (145.5)
Net retirement benefit obligation (279.4) (128.0)
STPS, STMIPS, and DVWS
2023
\u00a3m
2022
\u00a3m
Fair value of scheme assets
Equities 188.4 478.1
Annuity policies 122.2 104.6
Corporate bonds 237.0 953.0
Liability-driven investment funds (\u2018LDIs\u2019) 259.2 642.4
Property 239.6 296.8
Buy and maintain credit \u2013 22.5
High-yield bonds \u2013 25.8
Cash 738.9 136.2
1,785.3 2,659.4
* In June 2021, the STMIPS Trustees completed the purchase of a bulk annuity contract with JUST, an insurance company, to secure the benefits of all members of the STMIPS. The Trustees
continue to pay benefits to members as before the transaction, but these cashflows are now matched exactly by income from JUST. In March 2023, the DVWS also entered into a bulk
annuity buy-in investment policy with JUST that covers the majority of the scheme obligations.
Most of the assets have quoted prices in active markets, but there are equities, annuity policies, corporate bonds and LDI investments which are
unquoted amounting to \u00a3419.0 million (2022: \u00a3496.0 million).
Movements in the fair value of the scheme assets were as follows:
2023
\u00a3m
2022
\u00a3m
Fair value at 1 April 2,659.4 2,600.4
Interest income on scheme assets 78.6 52.8
Contributions from the sponsoring companies 100.5 61.9
Return on plan assets (excluding amounts included in finance income) (922.0) 68.9
Scheme administration costs (4.3) (3.8)
Benefits paid (126.9) (120.8)
Fair value at 31 March 1,785.3 2,659.4
27 Retirement benefit schemes (continued) a) Defined benefit pension schemes (continued) (ii) Amount included in the balance sheet arising from the Group\u2019s obligations under the defined benefit pension schemes (continued) Movements in the present value of the defined benefit obligations were as follows: 2023 \u00a3m 2022 \u00a3m Present value at 1 April (2,787.4) (2,968.1) Current service cost (0.1) (0.2) Past service credit 8.3 \u2013 Interest cost (82.2) (59.5) Actuarial (losses)/gains arising from changes in demographic assumptions (16.2) 5.6 Actuarial gains arising from changes in financial assumptions 744.7 192.9 Actuarial losses arising from experience adjustments (58.7) (78.9) Benefits paid 126.9 120.8 Present value at 31 March (2,064.7) (2,787.4) The Group has an obligation to pay pensions to a number of former employees, whose benefits would otherwise have been restricted by the Finance Act 1989 earnings cap. Provision for such benefits amounting to \u00a36.5 million (2022: \u00a37.9 million) is included as an unfunded scheme within the retirement benefit obligation. The Group has assessed that it has an unconditional right to a refund of any surplus assets in each of the Schemes following settlement of all obligations to Scheme members and therefore the surplus in the DVWS has been recognised in full. (iii) Amounts recognised in the income statement in respect of these defined benefit pension schemes 2023 \u00a3m 2022 \u00a3m Amounts credited/(charged) to operating costs: Current service cost (0.1) (0.2) Past service credit 8.3 \u2013 Scheme administration costs (4.3) (3.8) 3.9 (4.0) Amounts charged to finance costs: Interest cost (82.2) (59.5) Amounts credited to finance income: Interest income on scheme assets 78.6 52.8 Total amount credited/(charged) to the income statement 0.3 (10.7) The actual return on scheme assets was a loss of \u00a3843.4 million (2022: gain of \u00a3121.7 million). Actuarial gains and losses have been reported in the statement of comprehensive income. 27 Retirement benefit schemes (continued)
a) Defined benefit pension schemes (continued)
(iv) Actuarial risk factors
The schemes typically expose the Group to actuarial risks such as investment risk, inflation risk and longevity risk for so long as the benefits are
not insured.
Investment risk
The Group\u2019s contributions to the schemes are based on actuarial calculations which make assumptions about the returns expected from the
schemes\u2019 investments. If the investments underperform these assumptions in the long term then the Group may need to make additional
contributions to the schemes in order to fund the payment of accrued benefits.
Each scheme\u2019s investment strategy seeks to balance the level of investment return sought with the aim of reducing volatility and risk. In
undertaking this approach, reference is made to both the maturity of the liabilities and the funding level of that scheme. A number of further
strategies are employed to manage underlying risks, including liability-matching asset strategies, diversification of asset portfolios and interest
rate hedging.
Currently the STPS has a balanced approach to investment in equity securities, debt instruments and real estates. Due to the long-term nature of
the scheme liabilities, the Group and the STPS Trustees consider it appropriate to invest a portion of the scheme assets in equity securities and in
real estate to leverage the return generated by the fund. The STMIPS and DVWS are now primarily invested in bulk annuity insurance contracts
with JUST, with a small residual amount of invested assets remaining.
Inflation risk
The benefits payable to members of the schemes are linked to inflation measured by the RPI or CPI, subject to caps. The Group\u2019s contributions to
the schemes are based on assumptions about the future level of inflation. If inflation is higher than the levels assumed in the actuarial calculations
then the Group may need to make additional contributions to the schemes in order to fund the payment of accrued benefits.
The schemes use LDIs within the asset portfolios to hedge against the value of liabilities changing as a result of movements in long-term interest
rate and inflation expectations. This structure allows the schemes to both hedge against these risks and retain capital investment in assets that
are expected to generate higher returns.
Longevity risk
The Group\u2019s contributions to the schemes are based on assumptions about the life expectancy of scheme members after retirement. If scheme
members live longer than assumed in the actuarial calculations then the Group may need to make additional contributions to the schemes in order
to fund the payment of accrued benefits.
(v) Actuarial assumptions
The major financial assumptions used in the accounting valuation of the obligations for the STPS which represents by far the largest defined
benefit obligation for the Group were as follows:
2023
% pa
2022
% pa
Price inflation \u2013 RPI 3.3 3.6
Price inflation \u2013 CPI Pre 2030: 2.3 2.6
Post 2030: 3.2 3.5
Discount rate 4.8 2.8
Pension increases in payment 3.3 3.6
Pension increases in deferment 3.3 3.6
The assumption for RPI inflation is derived with reference to the difference between the yields on longer-term fixed rate gilts and on index-linked
gilts. RPI is expected to be more closely aligned with CPI from 2030 onwards, which is reflected in the corresponding assumption for CPI inflation.
In setting the discount rate, we construct a yield curve. Short dated yields are taken from market rates for AA corporate bonds. Long-dated yields
for the curve are based on the average yield available on all long-dated AA corporate bonds. We project the expected cash flows of the schemes
and adopt a single equivalent cash flow weighted discount rate taking account of this constructed yield curve.
27 Retirement benefit schemes (continued)
a) Defined benefit pension schemes (continued)
(v) Actuarial assumptions (continued)
The mortality base table assumptions are based on those used in the latest triennial funding valuation of the STPS. The mortality assumptions
adopted at the year end for accounting purposes and the life expectancies at age 60 implied by the assumptions are as follows:
2023 2022
Men Women Men Women
Mortality table used S3PMA S3PFA_M S3PMA_L S3PFA_M
Mortality table compared with standard table 98% 91% 112% 95%
Mortality projections CMI 2021 CMI 2021 CMI 2021 CMI 2021
Long-term rate of future improvement per annum 1.0% 1.0% 1.0% 1.0%
Weighting factor given to data for 2021 40% 40% 20% 20%
Remaining life expectancy for members currently aged 60 (years) 25.8 28.6 26.5 28.5
Remaining life expectancy at age 60 for members currently aged 40 (years) 26.9 29.8 27.6 29.7
The calculation of the scheme obligations is sensitive to the actuarial assumptions and in particular to the assumptions relating to discount rate,
price inflation (capped, where relevant) and mortality. The following table summarises the estimated impact on the Group\u2019s obligations from
changes to key actuarial assumptions whilst holding all other assumptions constant.
Assumption Change in assumption Impact on disclosed obligations
Discount rate
1
Increase/decrease by 0.1% pa Decrease/increase by \u00a326 million
Price inflation
2
Increase/decrease by 0.1% pa Increase/decrease by \u00a321 million
Mortality
3
Increase in life expectancy by 1 year Increase by \u00a372 million
1 A change in discount rate is likely to occur as a result of changes in bond yields and as such would be expected to be offset to a significant degree by a change in the value of the bond assets
held by the schemes.
2 The projected impact resulting from a change in RPI reflects the underlying effect on pensions in payment, pensions in deferment and resultant pension increases. This would be expected
to be offset by returns on LDI assets within the asset portfolios used to hedge against the value of liabilities, as set out in the inflation risk section of note 34(d).
3 The change in this assumption reflects the risk that life expectancy rates might increase.
In reality inter-relationships exist between the assumptions, particularly between the discount rate and price inflation. The above analysis does
not take into account the effect of these inter-relationships. Also, in practice any movement in obligations arising from assumption changes are
likely to be accompanied by movements in asset values \u2013 and so the impact on the accounting deficit may be lower than the impact on the
obligations shown above.
In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit
method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the
balance sheet.
(vi) Effect on future cash flows
Contribution rates are set in consultation with the Trustees for each Scheme and each participating employer.
The average duration of the benefit obligation at the end of the year is 13 years for STPS, 10 years for STMIPS and 12 years for DVWS.
The most recently completed formal triennial actuarial valuations and funding agreements were carried out as at 31 March 2022 for the STPS and
STMIPS and 31 March 2020 for DVWS. As a result of the STPS actuarial valuation, annual deficit reduction contributions of \u00a334.2 million were
agreed, with the March 2023 payment having been increased in line with the annual increase in CPI to November 2022. Thereafter, future
contributions for the STPS will also increase in line with CPI inflation until March 2027. The first two contributions in March 2023 and March 2024
are payable directly into the STPS and it is expected that payments in future years will be payable to a limited liability partnership that the Group
and Trustee are in the process of setting up.
Payments of \u00a38.2 million per annum through an asset backed funding arrangement will also continue to 31 March 2032 for the STPS. Further
inflation linked payments of \u00a315.0 million per annum are being made through an additional asset backed funding arrangement, with payments
having started in the financial year ending 31 March 2018 and continuing to 31 March 2031. These contributions will cease earlier should a
subsequent valuation of the STPS show that they are no longer needed. There are no deficit reduction contributions payable by the Group for
STMIPS and DVWS.
b) Defined contribution pension schemes
The Group also operates the Severn Trent Group Personal Pension, a defined contribution scheme, for its UK employees.
The total cost charged to operating costs of \u00a322.4 million (2022: \u00a328.1 million) represents contributions payable to these schemes by the Group at
rates specified in the rules of the scheme. As at 31 March 2023, no contributions (2022: nil) in respect of the current reporting period were owed to
the schemes.
Hafren Dyfrdwy operates two defined contribution pension schemes, neither of which were material in either the current or prior year.
28 Provisions
Insurance
\u00a3m
Regulatory
\u00a3m
Other
\u00a3m
Total
\u00a3m
At 1 April 2022 19.8 23.1 17.4 60.3
Charged to income statement 5.3 1.1 0.7 7.1
Other net additions \u2013 34.2 \u2013 34.2
Utilisation of provision (9.9) (7.4) \u2013 (17.3)
Unwinding of discount \u2013 \u2013 0.2 0.2
At 31 March 2023 15.2 51.0 18.3 84.5
2023
\u00a3m
2022
\u00a3m
Included in:
Current liabilities 52.4 38.4
Non-current liabilities 32.1 21.9
84.5 60.3
Insurance includes provisions in respect of Lyra Insurance Guernsey Limited, a captive insurance company and a wholly owned subsidiary of the
Group, and insurance deductions in Severn Trent Water Limited. The associated outflows are estimated to arise over a period of up to five years
from the balance sheet date.
Regulatory comprises provisions for works in response to legally enforceable undertakings to regulators, some of which are capital projects. The
associated outflows are estimated to arise over a period of up to five years from the balance sheet date.
Other provisions include provisions for dilapidations, commercial disputes, either from continuing or discontinued operations, and potential
environmental claims. The associated outflows are estimated to arise over a period up to ten years from the balance sheet date.
29 Share capital
2023
Number
2022
Number
Total issued and fully paid share capital
254,425,641 ordinary shares of 97
17
/
19
p (2022: 253,410,074) 249.1 248.1
At 31 March 2023, 2,863,716 treasury shares (2022: 3,116,579) were held at a nominal value of \u00a32,803,427 (2022: \u00a33,051,131).
On 25 May 2021 the Company issued 10,420,000 ordinary shares of 97
17
/
19
p at 2,400p per share, through a placing, raising \u00a3245.3 million net of
issue costs.
Changes in share capital were as follows:
Number \u00a3m
Ordinary shares of 97
17
/
19
p
At 1 April 2021 242,259,862 237.2
Shares issued under the Employee Sharesave Scheme 730,212 0.7
Shares issued from equity placing 10,420,000 10.2
At 1 April 2022 253,410,074 248.1
Shares issued under the Employee Sharesave Scheme 1,015,567 1.0
At 31 March 2023 254,425,641 249.1
30 Share premium 2023 \u00a3m 2022 \u00a3m At 1 April 394.4 148.1 Share premium arising on issue of shares for Employee Sharesave Scheme 14.3 11.2 Share premium arising from equity placing \u2013 235.1 At 31 March 408.7 394.4 31 Other reserves Capital redemption reserve \u00a3m Hedging reserve \u00a3m Total \u00a3m At 1 April 2021 157.1 (55.4) 101.7 Total comprehensive income for the year \u2013 46.7 46.7 At 1 April 2022 157.1 (8.7) 148.4 Total comprehensive income for the year \u2013 1.9 1.9 At 31 March 2023 157.1 (6.8) 150.3 The capital redemption reserve arose on the redemption of B shares. The hedging reserve arises from gains or losses on interest rate swaps and energy swaps taken directly to equity under the hedge accounting provisions of IFRS 9. 32 Capital management The Group\u2019s principal objectives in managing capital are: \u2013 to maintain a flexible and sustainable balance sheet structure; \u2013 to maintain an investment grade credit rating; \u2013 to access a broad range of sources of finance to obtain both the quantum required and lowest cost compatible with the need for continued availability; \u2013 to manage exposure to movements in interest rates to provide an appropriate degree of certainty as to its cost of funds; \u2013 to minimise exposure to counterparty credit risk; and \u2013 to provide the Group with an appropriate degree of certainty as to its foreign exchange exposure. The Group seeks to achieve a balance of long-term funding or commitment of funds across a range of funding sources at the best possible economic cost. The Group monitors future funding requirements and credit market conditions to ensure continued availability of funds. The Group has continued to monitor market conditions and limit its exposure to floating interest rate debt, which comprises 5% (2022: 4%) of our gross debt portfolio at the balance sheet date, with a further 28% (2022: 27%) of index-linked debt and 67% (2022: 69%) of fixed rate debt. Exposure to credit risk (excluding credit risk relating to amounts receivable from contracts with customers) is set out in note 34 b). Foreign exchange risk is set out in note 34 a) (ii). The Group has the following credit ratings: Moody\u2019s Standard and Poor\u2019s Fitch Severn Trent Plc Baa2 BBB BBB Severn Trent Water Baa1 BBB+ BBB+ The ratings were stable. A key metric in measuring financial sustainability and capital efficiency for companies in the water sector is RCV gearing. This is measured as Severn Trent Water Group\u2019s net debt plus Hafren Dyfrdwy Cyfyngedig\u2019s net debt divided by their combined RCV. Amongst other considerations, the Group takes into account Ofwat assumption at the Price Review (60% for AMP 7). At 31 March 2023 the Group\u2019s RCV gearing ratio based on the RCV in the Final Determination for AMP7 (FD RCV) was 60.7% (2022: 59.5%). The FD RCV excludes expenditure that was not in the PR19 Business Plan such as our Green Recovery Programme. This expenditure will be included in the opening RCV for AMP8. Where the expenditure has been incurred but is not yet included in the RCV, there is a mismatch in the RCV gearing ratio. We therefore also monitor our shadow RCV gearing ratio which adjusts the RCV for expenditure already incurred but not yet included in the RCV. The shadow RCV gearing ratio at 31 March 2023 was 60.0% (2022: 59.2%). The Group\u2019s dividend policy is a key tool in achieving its capital management objectives. This policy is reviewed and updated in line with Severn Trent Water\u2019s five year price control cycle and takes into account, inter alia, the planned investment programme, the appropriate gearing level achieving a balance between an efficient cost of capital and retaining an investment grade credit rating and delivering an attractive and sustainable return to shareholders. The Board has decided to set the 2022/23 dividend at 106.82 pence, an increase of 4.6% compared to the total dividend for 2021/22 of 102.14 pence. Our policy is to grow the dividend annually at no less than CPIH until March 2025. 32 Capital management (continued)
The Group\u2019s capital at 31 March was:
2023
\u00a3m
2022
\u00a3m
Net cash and cash equivalents 28.7 107.7
Bank loans (713.0) (782.5)
Other loans (6,474.2) (5,823.5)
Lease liabilities (110.9) (117.4)
Cross currency swaps 33.6 28.3
Loans receivable from joint venture 75.3 79.6
Net debt (7,160.5) (6,507.8)
Equity attributable to owners of the company (970.6) (1,263.9)
Total capital (8,131.1) (7,771.7)
33 Fair values of financial instruments
a) Fair value measurements
The valuation techniques that the Group applies in determining the fair values of its financial instruments on a recurring basis are described
below. The techniques are classified under the hierarchy defined in IFRS 13 which categorises valuation techniques into Levels 1 \u2013 3 based on the
degree to which the fair value is observable. The Group\u2019s valuation techniques are Level 2 unless otherwise stated below:
2023
\u00a3m
2022
\u00a3m Valuation techniques and key inputs
Cross currency swaps Discounted cash flow
Future cash flows are estimated based on forward interest rates from
observable yield curves at the period end and contract interest rates
discounted at a rate that reflects the credit risk of counterparties. The
currency cash flows are translated at spot rate.
Assets 34.5 28.3
Liabilities (0.9) \u2013
Interest rate swaps Discounted cash flow
Future cash flows are estimated based on forward interest rates from
observable yield curves at the period end and contract interest rates
discounted at a rate that reflects the credit risk of counterparties.
Assets 40.5 2.9
Liabilities (10.4) (39.6)
Energy swaps Discounted cash flow
Future cash flows are estimated based on forward electricity prices from
observable indices at the period end and contract prices discounted at a rate
that reflects the credit risk of counterparties.
Assets 0.5 27.6
Inflation swaps Discounted cash flow
Future cash flows on the RPI leg of the instrument are estimated based on
observable forward inflation indices.
Future cash flows on the CPI leg of the instrument are estimated based on the
future expected differential between RPI and CPI (\u201cthe CPI wedge\u201d).
Both legs are discounted using observable swap rates at the period end, at a
rate that reflects the credit risk of counterparties. This is considered to be a
Level 3 valuation technique.
Assets 7.3 \u2013
Liabilities \u2013 (3.7)
Changes in the carrying values of instruments that are measured using a Level 3 technique were as follows:
Inflation swaps
\u00a3m
At 1 April 2021 (32.1)
Net gains recognised in profit or loss 28.4
At 31 March 2022 (3.7)
Net gains recognised in profit or loss 11.0
At 31 March 2023 7.3
These Level 3 instruments are valued using unobservable inputs. In valuing the inflation swaps, we have identified the unobservable input
as the CPI wedge. A change of 10bps in the CPI wedge would result in a change in the carrying value of \u00a34.5 million.
33 Fair values of financial instruments (continued) b) Comparison of fair value of financial instruments with their carrying amounts The Directors consider that the carrying amounts of all financial instruments, except those disclosed in the table below, approximate to their fair values. The carrying values and estimated fair values of other financial instruments are set out below: 2023 2022 Carrying value \u00a3m Fair value \u00a3m Carrying value \u00a3m Fair value \u00a3m Floating rate debt Bank loans 569.0 551.0 652.6 652.6 Other loans 146.8 157.9 147.8 161.4 Overdraft 5.5 5.5 7.7 7.7 721.3 714.4 808.1 821.7 Fixed rate debt Other loans 4,441.3 4,177.0 3,984.3 4,253.0 Lease liabilities 110.9 110.9 117.4 126.6 4,552.2 4,287.9 4,101.7 4,379.6 Index-linked debt Bank loans 144.0 137.1 129.9 149.5 Other loans 1,886.1 1,798.0 1,691.4 2,456.1 2,030.1 1,935.1 1,821.3 2,605.6 7,303.6 6,937.4 6,731.1 7,806.9 The above floating, fixed or index-linked classification does not take into account the impact of interest rate swaps or cross currency swaps. Fixed rate loans are valued using market prices for similar instruments, which is a Level 2 valuation technique. Index-linked loans are rarely traded and quoted prices are not considered a reliable indicator of fair value. Therefore, these loans are valued using discounted cash flow models with discount rates derived from observed market prices for a sample of bonds, which is a Level 2 valuation technique. Fair values of the other debt instruments are also calculated using discounted cash flow models with discount rates derived from observed market prices, which is a Level 2 valuation technique. 34 Risks arising from financial instruments The Group\u2019s activities expose it to a variety of financial risks: \u2013 market risk (including interest rate risk, exchange rate risk and other price risk); \u2013 credit risk; \u2013 liquidity risk; and \u2013 inflation risk. The Group\u2019s overall risk management programme addresses the unpredictability of financial markets and seeks to reduce potential adverse effects on the Group\u2019s financial performance or position. Financial risks are managed by a central treasury department (\u2018Group Treasury\u2019) under policies approved by the Board of Directors. The Board has established a Treasury Committee to monitor treasury activities and to facilitate timely responses to changes in market conditions when necessary. Group Treasury operates under the Group\u2019s Treasury Procedures Manual and Policy Statement and identifies, evaluates and hedges financial risks in close co-operation with the Group\u2019s operating units. The Board defines written principles for overall risk management, as well as written policies covering specific areas such as exchange rate risk, interest rate risk, credit risk and the use of derivative and non-derivative financial instruments. The Group\u2019s policy is that derivative financial instruments are not held for trading but may be used to mitigate the Group\u2019s exposure to financial risk. The types of derivative instruments held and the related risks are described below. Interest rate swaps are held to mitigate the Group\u2019s exposure to changes in market interest rates. Further details are set out in section a) (i) and note 35 b) (i). Cross currency swaps are held to mitigate the Group\u2019s exposure to exchange rate movements on amounts borrowed in foreign currencies. Further details are set out in section a) (ii) and note 35 a) (i). 34 Risks arising from financial instruments (continued)
Energy swaps are held to mitigate the Group\u2019s exposure to changes in wholesale energy prices. Further details are provided in note 35 b) (ii).
Severn Trent Water, the Group\u2019s most significant business unit, operates under a regulatory environment where its prices are linked to inflation
measured by CPIH. In order to mitigate the risks to cash flow and earnings arising from fluctuations in CPIH, the Group holds debt instruments
where the principal repayable and interest cost is linked to RPI/CPI/CPIH and the Group holds RPI/CPI swaps to mitigate the risk of divergence
between RPI and CPIH.
a) Market risk
The Group is exposed to fluctuations in interest rates and, to a lesser extent, exchange rates. The nature of these risks and the steps that the
Group has taken to manage them are described below.
(i) Interest rate risk
The Group\u2019s annual income and its operating cash flows are substantially independent of changes in market interest rates. The Group\u2019s interest
rate risk arises from long-term borrowings.
Borrowings issued at variable rates expose the Group to the risk of adverse cash flow impacts from increases in interest rates.
Borrowings issued at fixed rates expose the Group to the risk of interest costs above the market rate when interest rates decrease.
The Group\u2019s policy is to maintain 40% to 70% of its interest-bearing liabilities in fixed rate instruments during AMP7. In measuring this metric,
management makes adjustments to the carrying value of debt to better reflect the amount that interest is calculated on. Details of the
adjustments made are set out below:
2023
\u00a3m
2022
\u00a3m
Net debt (note 37) 7,160.5 6,507.8
Cash and cash equivalents 34.2 115.4
Loans receivable from joint venture 75.3 79.6
Cross currency swaps included in net debt at fair value 33.6 28.3
Fair value hedge accounting adjustments (20.1) (21.1)
Exchange on currency debt not hedge accounted (22.3) (14.9)
Interest bearing financial liabilities 7,261.2 6,695.1
The Group manages its cash flow interest rate risk by borrowing at fixed or index-linked rates or by using interest rate swaps. Under these swaps
the Group receives variable rate interest and pays fixed rate interest calculated by reference to the agreed notional principal amounts. In practice
the swaps are settled by transferring the net amount. These swaps have the economic effect of converting borrowings from variable rates to fixed
rates. The Group has entered into a series of these interest rate swaps to hedge future interest payments beyond 2030.
34 Risks arising from financial instruments (continued)
a) Market risk (continued)
(i) Interest rate risk (continued)
The following tables show analyses of the Group\u2019s interest bearing financial liabilities by type of interest. Debt which is hedged by interest rate
swaps or cross currency swaps is included in the category after taking account of the impact of the swap. Debt raised in foreign currencies has
been included at the notional sterling value of the payable leg of the corresponding cross currency swap since this is the amount that is exposed to
changes in interest rates.
Valuation adjustments that do not impact the amount on which interest is calculated, such as fair value hedge accounting adjustments, are
excluded from this analysis.
The net principal amount of unhedged swaps is shown as an adjustment to floating rate and fixed rate debt to demonstrate the impact of the swaps
on the amount of liabilities bearing fixed interest.
2023
Floating
rate
\u00a3m
Fixed
rate
\u00a3m
Index- linked
\u00a3m
Total
\u00a3m
Overdraft (5.5) \u2013 \u2013 (5.5)
Bank loans (543.6) (25.4) (144.0) (713.0)
Other loans (83.0) (4,462.7) (1,886.1) (6,431.8)
Lease liabilities \u2013 (110.9) \u2013 (110.9)
(632.1) (4,599.0) (2,030.1) (7,261.2)
Impact of swaps not matched against specific debt instruments 275.0 (275.0) \u2013 \u2013
Interest bearing financial liabilities (357.1) (4,874.0) (2,030.1) (7,261.2)
Proportion of interest bearing financial liabilities that are fixed 67%
Weighted average interest rate of fixed debt 4.11%
Weighted average period for which interest is fixed (years) 9.7
2022
Floating
rate
\u00a3m
Fixed
rate
\u00a3m
Index- linked
\u00a3m
Total
\u00a3m
Overdraft (7.7) \u2013 \u2013 (7.7)
Bank loans (625.4) (27.2) (129.9) (782.5)
Other loans (104.3) (3,991.8) (1,691.4) (5,787.5)
Lease liabilities \u2013 (117.4) \u2013 (117.4)
(737.4) (4,136.4) (1,821.3) (6,695.1)
Impact of swaps not matched against specific debt instruments 475.0 (475.0) \u2013 \u2013
Interest bearing financial liabilities (262.4) (4,611.4) (1,821.3) (6,695.1)
Proportion of interest bearing financial liabilities that are fixed 66%
Weighted average interest rate of fixed debt 3.84%
Weighted average period for which interest is fixed (years) 9.2
Interest rate swaps not hedge accounted
The Group has a number of interest rate swaps which are not accounted for as cash flow or fair value hedges. This has led to a credit of
\u00a325.9 million (2022: \u00a325.2 million) in the income statement.
Average contract fixed
interest rate Notional principal amount Fair value
2023
%
2022
%
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Pay fixed rate interest
1-2 years \u2013 4.98 \u2013 (50.0) \u2013 (2.2)
2-5 years \u2013 5.14 \u2013 (150.0) \u2013 (13.6)
5-10 years 5.46 5.46 (75.0) (75.0) (10.0) (21.2)
5.46 5.20 (75.0) (275.0) (10.0) (37.0)
In addition to the above the Group has cross currency swaps that also swap fixed rate interest to floating (see below).
34 Risks arising from financial instruments (continued)
a) Market risk (continued)
(i) Interest rate risk (continued)
Interest rate sensitivity analysis
The sensitivity after tax of the Group\u2019s profits, cash flow and equity, including the impact on derivative financial instruments, to changes in interest
rates at 31 March is as follows:
2023 2023
+1.0%
\u00a3m
-1.0%
\u00a3m
+1.0%
\u00a3m
+1.0%
\u00a3m
Profit or loss 2.3 (2.8) 9.7 (10.6)
Cash flow (2.8) 2.8 (1.5) 1.5
Equity 2.3 (2.8) 9.7 (10.6)
(ii) Exchange rate risk
Except for debt raised in foreign currency, which is hedged, the Group\u2019s business does not involve significant exposure to foreign exchange
transactions. Substantially all of the Group\u2019s profits and net assets arise from Severn Trent Water, which has very limited and indirect exposure to
changes in exchange rates, and therefore the sensitivity of the Group\u2019s results to changes in exchange rates is not material.
Certain of the Group\u2019s subsidiaries enter into transactions in currencies other than the functional currency of the operation. Exchange risks
relating to such operations are not material but are managed centrally by Group Treasury through forward exchange contracts to buy or sell
currency. These contracts led to nil charge (2022: nil) in the income statement.
The Group has raised debt denominated in currencies other than sterling to meet its objective of accessing a broad range of sources of finance.
The Group mitigated its exposure to exchange rate fluctuations by entering into cross currency swaps at the time that the debt was drawn down to
swap the proceeds into sterling debt bearing interest based on SONIA.
Where the terms of the receivable leg of the swap closely match the terms of the underlying debt, the swaps are expected to be effective hedges,
hence the swaps have been accounted for as fair value hedges. The notional value and fair value of these swaps is shown in note 35 a) (i).
The Group also has cross currency swaps with a sterling notional value of \u00a398.3 million (2022: \u00a398.3 million) which are not accounted for as fair
value hedges. Economically these swaps act to mitigate the exchange rate risk of debt within the Group which is denominated in foreign currency
and also swap the interest from fixed rate to floating, but they are not designated hedges under IFRS 9. This has led to income of \u00a37.1 million
(2022: charge of \u00a32.3 million) in the income statement, as well as an exchange loss of \u00a37.4 million (2022: loss of \u00a36.6 million) on the underlying
debt.
The Group\u2019s gross and net currency exposures arising from currency borrowings are summarised in the tables below. These show, in the relevant
currency, the amount borrowed and the notional principal of the related swap or forward contract. The net position shows the Group\u2019s exposure to
exchange rate risk in relation to its currency borrowings.
2023
Euro
\u20acm
US Dollar
$m
Yen
\u00a5bn
Borrowings by currency (19.9) (180.0) (10.3)
Cross currency swaps \u2013 hedge accounted 19.9 30.0 10.3
Cross currency swaps \u2013 not hedge accounted \u2013 150.0 \u2013
Net currency exposure \u2013 \u2013 \u2013
2022
Euro
\u20acm
US Dollar
$m
Yen
\u00a5bn
Borrowings by currency (19.9) (180.0) (2.0)
Cross currency swaps \u2013 hedge accounted 19.9 30.0 2.0
Cross currency swaps \u2013 not hedge accounted \u2013 150.0 \u2013
Net currency exposure \u2013 \u2013 \u2013
34 Risks arising from financial instruments (continued)
b) Credit risk
Operationally the Group has no significant concentrations of credit risk. It has policies in place to ensure that sales of products are made to
customers with an appropriate credit history, other than in Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig, whose operating licences
oblige them to supply domestic customers even in cases where bills are not paid. Amounts provided against accounts receivable and movements
on the provision during the year are disclosed in note 21.
Cash deposits and derivative contracts are only placed with high credit quality financial institutions, which have been approved by the Board.
Group Treasury monitors the credit quality of the approved financial institutions and the list of financial institutions that may be used is approved
annually by the Board. The Group has policies that limit the amount of credit exposure to any one financial institution.
Credit risk analysis
At 31 March the aggregate credit limits of authorised counterparties and the amounts held on short term deposits were as follows:
Credit limit Amount deposited
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Double A range 150.0 150.0 \u2013 \u2013
Single A range 770.5 710.5 \u2013 75.0
Triple B range \u2013 10.0 \u2013 \u2013
920.5 870.5 \u2013 75.0
The fair values of derivative assets analysed by credit ratings of counterparties were as follows:
Derivative assets
2023
\u00a3m
2022
\u00a3m
Single A range 82.8 52.6
Triple B range \u2013 6.2
82.8 58.8
c) Liquidity risk
(i) Committed facilities
Prudent liquidity management requires sufficient cash balances to be maintained; adequate committed facilities to be available; and market
position to be closed out when required. Group Treasury manages liquidity and flexibility in funding by monitoring forecast and actual cash flows
and the maturity profile of financial assets and liabilities, and by keeping committed credit lines available.
At the balance sheet date the Group had committed undrawn borrowing facilities expiring as follows:
2023
\u00a3m
2022
\u00a3m
2 \u2013 5 years 800.0 1,100.0
5 years 100.0 \u2013
900.0 1,100.0
(ii) Cash flows from non-derivative financial instruments
The following tables show the estimated cash flows that will arise from the Group\u2019s non-derivative net financial liabilities. The information
presented is based on the earliest date on which the Group can be required to pay and represents the undiscounted cash flows including principal
and interest.
34 Risks arising from financial instruments (continued)
c) Liquidity risk (continued)
Interest and inflation assumptions are based on prevailing market conditions at the year end date.
2023
Undiscounted amounts payable:
Floating
rate
\u00a3m
Fixed
rate
\u00a3m
Index-linked
\u00a3m
Trade and
other
payables
\u00a3m
Payments on
financial
liabilities
\u00a3m
Within 1 year (16.7) (473.5) (36.1) (149.2) (675.5)
1 \u2013 2 years (10.6) (153.7) (89.3) \u2013 (253.6)
2 \u2013 5 years (141.8) (906.6) (113.8) \u2013 (1,162.2)
5 \u2013 10 years (211.9) (2,002.1) (714.3) \u2013 (2,928.3)
10 \u2013 15 years \u2013 (905.4) (168.0) \u2013 (1,073.4)
15 \u2013 20 years \u2013 (1,064.8) (304.4) \u2013 (1,369.2)
20 \u2013 25 years \u2013 (152.9) (326.2) \u2013 (479.1)
25 \u2013 30 years \u2013 \u2013 (738.5) \u2013 (738.5)
30 \u2013 35 years \u2013 \u2013 (2,909.0) \u2013 (2,909.0)
35 \u2013 40 years \u2013 \u2013 (917.5) \u2013 (917.5)
40 \u2013 45 years \u2013 \u2013 (413.3) \u2013 (413.3)
Total (381.0) (5,659.0) (6,730.4) (149.2) (12,919.6)
Undiscounted amounts receivable:
Loans due
from joint
ventures
\u00a3m
Trade and
other
receivables
\u00a3m
Cash and
short-term
deposits
\u00a3m
Receipts from
financial
assets
\u00a3m
Within 1 year 2.4 681.7 34.2 718.3
1 \u2013 2 years 7.3 3.3 \u2013 10.6
2 - 5 years 87.0 \u2013 \u2013 87.0
Total 96.7 685.0 34.2 815.9
2022
Undiscounted amounts payable:
Floating
rate
\u00a3m
Fixed
rate
\u00a3m
Index-linked
\u00a3m
Trade and
other
payables
\u00a3m
Payments on
financial
liabilities
\u00a3m
Within 1 year (4.1) (404.4) (133.1) (113.5) (655.1)
1 - 2 years (317.3) (449.7) (32.7) \u2013 (799.7)
2 - 5 years (407.7) (1,175.7) (154.4) \u2013 (1,737.8)
5 - 10 years (111.4) (1,591.1) (593.1) \u2013 (2,295.6)
10 - 15 years \u2013 (731.7) (255.1) \u2013 (986.8)
15 - 20 years \u2013 (1,070.7) (280.5) \u2013 (1,351.2)
20 - 25 years \u2013 \u2013 (211.6) \u2013 (211.6)
25 - 30 years \u2013 \u2013 (727.2) \u2013 (727.2)
30 - 35 years \u2013 \u2013 (1,713.3) \u2013 (1,713.3)
35 - 40 years \u2013 \u2013 (2,082.6) \u2013 (2,082.6)
40 - 45 years \u2013 \u2013 (411.9) \u2013 (411.9)
Total (840.5) (5,423.3) (6,595.5) (113.5) (12,972.8)
Undiscounted amounts payable:
Loans due
from joint
ventures
\u00a3m
Trade and
other
receivables
\u00a3m
Cash and
short-term
deposits
\u00a3m
Receipts from
financial
assets
\u00a3m
Within 1 year 3.3 547.9 115.4 666.6
1 \u2013 2 years 102.3 6.6 \u2013 108.9
2 - 5 years 12.5 \u2013 \u2013 12.5
Total 118.1 554.5 115.4 788.0
34 Risks arising from financial instruments (continued)
c) Liquidity risk (continued)
Index-linked debt includes loans with maturities up to 50 years. The principal is revalued at fixed intervals and is linked to movements in the RPI,
CPI or CPIH. Interest payments are made biannually based on the revalued principal. The principal repayment equals the revalued amount at
maturity. The payments included in the table above are estimates based on the forward inflation rates published by the Bank of England at the
balance sheet date.
(iii) Cash flows from derivative financial instruments
The following tables show the estimated cash flows that will arise from the Group\u2019s derivative financial instruments. The tables are based on the
undiscounted net cash inflows/(outflows) on the derivative financial instruments that settle on a net basis and the undiscounted gross inflows/
(outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been
determined by reference to the projected interest and foreign currency rates derived from the forward curves existing at the balance sheet date.
Actual amounts may be significantly different from those indicated below.
Cross currency swaps
2023
Interest
rate swaps
\u00a3m
Inflation
swaps
\u00a3m
Energy
swaps
\u00a3m
Cash
receipts
\u00a3m
Cash
payments
\u00a3m
Total
\u00a3m
Within 1 year 13.9 0.5 0.5 7.4 (6.1) 16.2
1 - 2 years 9.3 0.5 \u2013 7.5 (6.0) 11.3
2 - 5 years 12.1 2.0 \u2013 157.2 (125.1) 6.2
5 - 10 years 0.4 7.2 \u2013 47.7 (45.1) 10.2
10 - 15 years \u2013 (1.9) \u2013 82.8 (59.0) 21.9
35.7 8.3 0.5 302.6 (241.3) 105.8
Cross currency swaps
2022
Interest
rate swaps
\u00a3m
Inflation
swaps
\u00a3m
Energy
swaps
\u00a3m
Cash
receipts
\u00a3m
Cash
payments
\u00a3m
Total
\u00a3m
Within 1 year (16.5) 0.2 28.0 6.2 (3.5) 14.4
1 - 2 years (16.6) 0.3 \u2013 6.2 (3.5) (13.6)
2 - 5 years (29.4) 1.3 \u2013 146.3 (120.3) (2.1)
5 - 10 years (25.0) 3.0 \u2013 39.3 (33.2) (15.9)
10 - 15 years \u2013 (5.7) \u2013 \u2013 \u2013 (5.7)
15 \u2013 20 years \u2013 (8.2) \u2013 \u2013 \u2013 (8.2)
(87.5) (9.1) 28.0 198.0 (160.5) (31.1)
d) Inflation risk
The Group\u2019s principal operating subsidiary, Severn Trent Water, operates under a regulatory environment where its prices are linked to inflation
as measured by CPIH. Its operating profits and cash flows are therefore exposed to changes in inflation. In order to mitigate and partially offset
this risk, Severn Trent Water has raised debt that pays interest at a fixed coupon based on a principal amount that is adjusted for the change in
inflation during the life of the debt instrument (\u2018index-linked debt\u2019). The amount of index-linked debt at the balance sheet date is shown in section
a) (i) Interest rate risk, and the estimated future cash flows relating to this debt are shown in section c) (ii) Cash flows from non-derivative
financial instruments.
Ofwat is moving the measure of inflation used in the economic regulatory model from RPI to CPIH over a period of time. In anticipation of this the
Group has entered into CPI/RPI swaps with a notional value of \u00a3350 million (2022: \u00a3350 million) in order to mitigate the risk of divergence between
inflation measured by CPIH and that measured by RPI.
Inflation rate sensitivity analysis
The finance cost of the Group\u2019s index-linked debt instruments varies with changes in CPI/CPIH/RPI rather than interest rates. The sensitivity at
31 March of the Group\u2019s profit and equity to changes in CPI/CPIH/RPI is set out in the following table. This analysis relates to financial instruments
only and excludes any CPI/CPIH/RPI impact on Severn Trent Water\u2019s revenues and Regulatory Capital Value, or accounting for defined benefit
pension schemes.
2023 2022
+1.0%
\u00a3m
-1.0%
\u00a3m
+1.0%
\u00a3m
-1.0%
\u00a3m
Profit or loss (16.4) 16.4 (14.8) 14.8
Equity (16.4) 16.4 (14.8) 14.8
35 Hedge accounting
The Group uses derivative financial instruments to hedge exposures to changes in exchange rates and interest rates. Hedge accounting is adopted
for such instruments where the criteria set out in IFRS 9 are met. Hedge ineffectiveness arises from credit risk, which is not hedged.
a) Fair value hedges
(i) Cross currency swaps
The Group raises debt denominated in currencies other than sterling. Cross currency swaps are entered into at the time that the debt is drawn
down to swap the proceeds into sterling debt bearing in order to mitigate the Group\u2019s exposure to exchange rate fluctuations. Where the terms of
the receivable leg of the swap closely match the terms of the underlying debt, the swaps are expected to be effective hedges.
At the year end the amounts of cross currency swaps designated as fair value hedges were as follows:
Notional principal amount Fair value
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Euro 11.4 11.4 6.4 7.4
US dollar 23.2 23.2 3.1 0.9
Yen 59.9 8.5 3.6 6.3
94.5 43.1 13.1 14.6
b) Cash flow hedges
(i) Interest rate swaps
The Group has entered into interest rate swaps under which it has agreed to exchange the difference between fixed and floating interest rate
amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on
future cash flow exposures arising from issued variable rate debt. Where the hedge is expected to be highly effective these interest rate swaps are
accounted for as cash flow hedges.
Details of interest rate swaps that have been accounted for as cash flow hedges are summarised below:
Average contract fixed
interest rate Notional principal amount Fair value
Period to maturity
2023
%
2022
%
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2-5 years 2.43 1.70 125.4 50.0 9.5 1.0
5-10 years 1.83 2.10 248.0 325.2 30.6 (0.7)
2.03 2.05 373.4 375.2 40.1 0.3
The Group recognised a loss on hedge ineffectiveness of \u00a31.3 million (2022: loss of \u00a30.6 million) in gains/losses on financial instruments in the
income statement in relation to interest rate swaps.
(ii) Energy swaps
The Group enters into a series of energy swaps under which it agrees to exchange the difference between fixed and market prices of electricity at
six-monthly intervals. No such energy swaps are currently active and the risk of changes in wholesale energy prices in the next year is managed
through physical contracts.
Details of energy swaps that have been accounted for as cash flow hedges are summarised below:
Average contract price Notional contracted amount Fair value
Period to maturity
2023
\u00a3/MWh
2022
\u00a3/MWh
2023
MWh
2022
MWh
2023
\u00a3m
2022
\u00a3m
Less than 1 year 44.7 38.5 43,680 131,520 0.5 27.6
44.7 38.5 43,680 131,520 0.5 27.6
35 Hedge accounting (continued)
c) Cumulative fair value adjustments
At the year end the cumulative fair value adjustments arising from the corresponding continuing hedge relationships were as follows:
Carrying amount
of hedged items
Cumulative amount of fair
value adjustments on the
hedged items
2023
Assets
\u00a3m
Liabilities
\u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Cross currency swaps \u2013 (109.9) \u2013 (14.0)
Interest rate swaps \u2013 (171.4) \u2013 \u2013
\u2013 (281.3) \u2013 (14.0)
Carrying amount
of hedged items
Cumulative amount of fair
value adjustments on the
hedged items
2022
Assets
\u00a3m
Liabilities
\u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Cross currency swaps \u2013 (58.2) \u2013 (13.7)
Interest rate swaps \u2013 (374.9) \u2013 \u2013
\u2013 (433.1) \u2013 (13.7)
\u00a3109.9 million (2022: \u00a358.2 million) of the carrying amount of hedged items and \u00a314.0 million (2022: \u00a313.7 million) of the cumulative amount of fair
value adjustments on the hedged items relates to fair value hedges. The remainder relates to cash flow hedges.
36 Share based payment
The Group operates a number of share based remuneration schemes for employees. During the year, the Group recognised total expenses of
\u00a39.5 million (2022: \u00a38.3 million) related to equity settled share based payment transactions.
The weighted average share price during the period was \u00a327.65 (2022: \u00a327.30).
At 31 March 2023, there were no options exercisable (2022: none) under any of the share based remuneration schemes.
a) Long Term Incentive Plan (LTIP)
Under the LTIP, conditional awards of shares may be made to executive directors and senior staff. Awards are subject to performance conditions
and continued employment throughout the vesting period.
(i) Awards made under the LTIP
The 2019, 2020, 2021 and 2022 LTIP awards are subject to Severn Trent Water\u2019s achievement of Return on Regulatory Equity in excess of the base
return included within the Final Determinations over a three year vesting period. It has been assumed that performance against the LTIP
non-market conditions will be 100% (2022: 100%).
(ii) Awards outstanding
Details of changes in the number of awards outstanding during the year are set out below:
Number of
awards
Outstanding at 1 April 2021 692,189
Granted during the year 203,756
Vested during the year (230,003)
Lapsed during the year (26,744)
Outstanding at 1 April 2022 639,198
Granted during the year 215,103
Vested during the year (226,429)
Lapsed during the year (14,713)
Outstanding at 31 March 2023 613,159
36 Share based payment (continued)
a) Long Term Incentive Plan (LTIP) (continued)
Details of LTIP awards outstanding at 31 March were as follows:
Number of awards
Date of grant
Normal Date
of Vesting 2023 2022
July 2019 2022 \u2013 231,442
July 2020 2023 202,547 205,651
July 2021 2024 196,129 202,105
July 2022 2025 214,483 \u2013
613,159 639,198
The awards outstanding at 31 March 2023 had a weighted average remaining contractual life of 1.5 years (2022: 1.1 years).
Details of the basis of the LTIP scheme are set out in the Directors\u2019 remuneration report on pages 141 to 163.
b) Employee Sharesave Scheme
Under the terms of the Sharesave Scheme, the Board may grant the right to purchase ordinary shares in the Company to those employees who
have entered into an HMRC approved Save As You Earn contract for a period of three or five years.
Options outstanding
Details of changes in the number of options outstanding during the year are set out below:
Number of
share options
Weighted
average
exercise price
Outstanding at 1 April 2021 4,102,760 1,688p
Granted during the year 884,726 2,307p
Forfeited during the year (74,463) 1,734p
Cancelled during the year (135,804) 1,811p
Exercised during the year (730,212) 1,611p
Lapsed during the year (4,608) 1,682p
Outstanding at 1 April 2022 4,042,399 1,824p
Granted during the year 1,112,373 2,183p
Forfeited during the year (72,506) 1,968p
Cancelled during the year (216,312) 2,113p
Exercised during the year (1,015,567) 1,502p
Lapsed during the year (7,749) 1,772p
Outstanding at 31 March 2023 3,842,638 1,994p
Sharesave options outstanding at 31 March were as follows:
Number of awards
Date of grant
Normal Date
of Vesting
Normal Date
of Vesting 2023 2022
January 2017 2022 1,633p \u2013 123,540
January 2018 2023 1,652p 111,115 112,993
January 2019 2022 or 2024 1,474p 216,309 1,101,868
January 2020 2023 or 2025 1,787p 829,908 885,178
January 2021 2024 or 2026 1,860p 855,384 943,311
January 2022 2025 or 2027 2,307p 732,604 875,509
January 2023 2026 or 2028 2,183p 1,097,318 \u2013
3,842,638 4,042,399
The options outstanding at 31 March 2023 had a weighted average remaining contractual life of 1.8 years (2022: 1.7 years).
36 Share based payment (continued)
c) Fair value calculations
The fair values of the share awards made and share options granted during the year were calculated using the Black Scholes method. The
principal assumptions and data are set out below:
2023 2022
LTIP SAYE LTIP SAYE
3 year
scheme
5 year
scheme
3 year
scheme
5 year
scheme
Share price at grant date (pence) 2,858 2,674 2,674 2,676 2,939 2,939
Option life (years) 3 3.3 5.3 3 3.3 5.3
Vesting period (years) 3 3 5 3 3 5
Expected volatility (%) 18.2 18.2 18.2 18.2 18.2 18.2
Expected dividend yield (%) 3.7 4.0 4.0 3.9 3.5 3.5
Risk free rate (%) n/a 3.5 3.6 n/a 0.1 0.1
Fair value per share (pence) 2,842 526 542 2,659 543 521
Expected volatility is measured over the three years prior to the date of grant of the awards or share options.
Volatility has been calculated based on historical share price movements.
The risk free rate is derived from yields at the grant date of gilts of similar duration to the awards or share options.
The dividend yield is calculated using the expected dividend for the year divided by the share price at the date of grant.
37 Cash flow statement
a) Reconciliation of operating profit to operating cash flows
2023
\u00a3m
2022
\u00a3m
Profit before interest and tax 508.8 506.2
Depreciation of property, plant and equipment 379.7 361.5
Depreciation of right-of-use assets 3.9 3.8
Amortisation of intangible assets 33.7 36.3
Pension service (credit)/cost (8.2) 0.2
Defined benefit pension scheme administration costs 4.3 3.8
Defined benefit pension scheme contributions (100.5) (61.9)
Share based payment charge 9.5 8.3
Profit on sale of property, plant and equipment and intangible assets (2.2) (5.4)
Release from deferred credits (16.4) (17.5)
Contributions and grants received 40.2 42.8
Provisions charged to the income statement 7.1 14.8
Utilisation of provisions for liabilities (17.3) (12.3)
Operating cash flows before movements in working capital 842.6 880.6
Increase in inventory (3.4) (1.2)
Increase in amounts receivable (146.2) (87.6)
Increase in amounts payable 60.3 99.9
Cash generated from operations 753.3 891.7
Tax received 6.1 \u2013
Tax paid (10.1) (1.2)
Net cash generated from operating activities 749.3 890.5
37 Cash flow statement (continued) b) Non-cash transactions Non-cash investing and financing transactions disclosed in other notes were: \u2013 Acquisition of infrastructure assets from developers at no cost and provisions in response to legally enforceable undertakings to regulators (note 17). \u2013 Acquisition of right-of-use assets (note 18). \u2013 Shares issued to employees for no cash consideration under the LTIP (note 36). c) Reconciliation of movement in cash and cash equivalents to movement in net debt Net cash and cash equivalents \u00a3m Bank loans \u00a3m Other loans \u00a3m Lease liabilities \u00a3m Cross currency swaps \u00a3m Loans due from joint venture \u00a3m Net debt \u00a3m At 1 April 2022 107.7 (782.5) (5,823.5) (117.4) 28.3 79.6 (6,507.8) Cash flow (79.0) 83.7 (452.7) 13.1 \u2013 (5.5) (440.4) Fair value adjustments \u2013 \u2013 0.9 \u2013 \u2013 \u2013 0.9 Inflation uplift on index-linked debt \u2013 (13.5) (193.9) \u2013 \u2013 \u2013 (207.4) Foreign exchange \u2013 \u2013 (7.4) \u2013 \u2013 \u2013 (7.4) Other non-cash movements \u2013 (0.7) 2.4 (6.6) 5.3 1.2 1.6 At 31 March 2023 28.7 (713.0) (6,474.2) (110.9) 33.6 75.3 (7,160.5) d) Liabilities from financing activities Bank loans \u00a3m Other loans \u00a3m Lease liabilities \u00a3m Total \u00a3m At 1 April 2021 (1,011.1) (5,471.3) (121.3) (6,603.7) Cash flow 238.5 (250.6) 12.1 \u2013 Fair value adjustments \u2013 2.9 \u2013 2.9 Inflation uplift on index-linked debt (6.9) (99.6) \u2013 (106.5) Foreign exchange \u2013 (6.6) \u2013 (6.6) Other non-cash movements (3.0) 1.7 (8.2) (9.5) At 1 April 2022 (782.5) (5,823.5) (117.4) (6,723.4) Cash flow 83.7 (452.7) 13.1 (355.9) Fair value adjustments \u2013 0.9 \u2013 0.9 Inflation uplift on index-linked debt (13.5) (193.9) \u2013 (207.4) Foreign exchange \u2013 (7.4) \u2013 (7.4) Other non-cash movements (0.7) 2.4 (6.6) (4.9) At 31 March 2023 (713.0) (6,474.2) (110.9) (7,298.1) 38 Contingent liabilities a) Bonds and guarantees Group undertakings have entered into bonds and guarantees in the normal course of business. No liability (2022: nil) is expected to arise in respect of either bonds or guarantees. b) Claims under the Environmental Information Regulations 2004 regarding property searches Since 2016, the Group has received letters of claim from a number of groups of personal search companies (PSCs) which allege that the information held by Severn Trent Water Limited (STW) used to produce the CON29DW residential and also the commercial water and drainage search reports sold by Severn Trent Property Solutions Limited (STPS), is disclosable under the Environmental Information Regulations. In April 2020, a group of over 100 PSCs commenced litigation against all water and sewerage undertakers in England and Wales, including STW and STPS. The claimants are seeking damages, on the basis that STW and STPS charged for information which should have been made available either free, or for a limited charge, under the Environmental Information Regulations. STW and STPS are defending this claim. This is an industry-wide issue and the litigation is in progress. A timetable for the claim has recently been set by the court leading up to a stage 1 trial on the EIR legal issues only (not the other issues or amount of damages) which is scheduled to be held in November 2023. c) Ongoing combined sewer overflow investigations Ofwat and the Environment Agency are each conducting their own investigations into the waste water industry, to investigate compliance with the conditions of environmental permits. Ofwat has launched specific enforcement investigations against six sewerage companies, but Severn Trent is not included in those cases. The Environment Agency\u2019s investigation of all English sewerage companies is continuing and it is not yet clear what the outcome of those investigations will be. We have responded quickly and comprehensively to all questions from the regulators and have had open conversations with them on the issues under investigation. 39 Financial and other commitments a) Investment expenditure commitments 2023 \u00a3m 2022 \u00a3m Property, plant and equipment contracted for but not provided for in the financial statements 634.9 354.7 In addition to these contractual commitments, Severn Trent Water Limited has longer term expenditure plans which include investments to achieve improvements in performance mandated by the Director General of Water Services (Ofwat) and to provide for growth in demand for water and waste water services. 40 Post balance sheet events Following the year end the Board of Directors has proposed a final dividend of 64.09 pence per share. 41 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not included in
this note. Trading transactions between the Group and its joint venture Water Plus are disclosed below.
2023
\u00a3m
2022
\u00a3m
Sale of services 259.5 259.8
Net interest income 3.9 2.5
263.4 262.3
Outstanding balances between the Group and the joint venture as at 31 March were as follows:
2023
\u00a3m
2022
\u00a3m
Amounts due to related parties \u2013 (0.2)
Trade and other receivables due from related parties 0.2 \u2013
Loans receivable from joint venture 75.3 79.6
75.5 79.4
The retirement benefit schemes operated by the Group are considered to be related parties. Details of transactions and balances with the
retirement benefit schemes are disclosed in note 27.
Remuneration of key management personnel
Key management personnel comprise the members of STEC during the year, and non-executive directors of the Company.
The remuneration of the directors is included within the amounts disclosed below. Further information about the remuneration of individual
directors is provided in the audited part of the Directors\u2019 remuneration report on pages 151 and 160 to 163.
2023
\u00a3m
2022
\u00a3m
Short term employee benefits 4.6 5.7
Service contract non-executive director benefits 0.9 0.7
Share based payments 5.4 6.6
10.9 13.0
42 Alternative performance measures (APMs)
Financial measures or metrics used in this report that are not defined by IFRS are alternative performance measures (\u2018APM\u2019s). The Group uses
such measures for performance analysis because they provide additional useful information on the performance and position of the Group. Since
the Group defines its own APMs, these might not be directly comparable with other companies\u2019 APMs. These measures are not intended to be a
substitute for, or superior to, IFRS measurements.
a) Exceptional items
Exceptional items are income or expenditure which individually or, in aggregate if of a similar type, should, in the opinion of the Directors, be
disclosed by virtue of their size or nature if the financial statements are to give a true and fair view. In this context, materiality is assessed at the
segment level. There were no exceptional items in the years ended 31 March 2023 and 2022.
b) Adjusted earnings per share
Adjusted earnings per share figures exclude the effects of net gains/losses on financial instruments, current tax on net gains/losses on financial
instruments and deferred tax. The Directors consider that the adjusted figures provide a useful additional indicator of performance and remove
non-performance related distortions. See note 14.
c) Net debt
Net debt comprises borrowings including remeasurements for changes in fair value of amounts in fair value hedging relationships, cross
currency swaps that are used to fix the sterling liability of foreign currency borrowings (whether hedge accounted or not), net cash and cash
equivalents, and loans to joint ventures. See note 37.
42 Alternative performance measures (APMs) (continued)
d) Effective interest cost
The effective interest cost is calculated as net finance costs, excluding net finance costs from pensions, plus capitalised finance costs divided by
the monthly average net debt during the year.
2023
\u00a3m
2022
\u00a3m
Net finance costs 362.6 269.4
Net finance costs from pensions (3.6) (6.7)
Capitalised finance costs 56.6 34.5
415.6 297.2
Average net debt 6,720.6 6,292.2
Effective interest cost 6.2% 4.7%
This APM is used as it shows the average finance cost for the net debt of the business.
e) Effective cash cost of interest
The effective cash cost of interest is calculated on the same basis as the effective interest cost except that it excludes finance costs that are not
paid in cash but are accreted to the carrying value of the debt (principally indexation adjustments on index-linked debt).
2023
\u00a3m
2022
\u00a3m
Net finance costs 362.6 269.4
Net finance costs from pensions (3.6) (6.7)
Indexation adjustments (215.7) (106.5)
Capitalised finance costs 56.6 34.5
199.9 190.7
Average net debt 6,720.6 6,292.2
Effective cash cost of interest 3.0% 3.0%
This is used as it shows the average finance cost that is paid in cash.
f) PBIT interest cover
The ratio of PBIT to net finance costs excluding net finance costs from pensions.
2023
\u00a3m
2022
\u00a3m
PBIT 508.8 506.2
Net finance costs 362.6 269.4
Net finance costs from pensions (3.6) (6.7)
Net finance costs excluding net finance costs from pensions 359.0 262.7
ratio ratio
PBIT interest cover ratio 1.4 1.9
This is used to show how the PBIT of the business covers the financing costs associated only with net debt on a consistent basis. In previous years
we have reported adjusted PBIT interest cover.
42 Alternative performance measures (APMs) (continued)
g) EBITDA and EBITDA interest cover
The ratio of profit before interest, tax, exceptional items, depreciation and amortisation to net finance costs excluding net finance costs from
pensions.
2023
\u00a3m
2022
\u00a3m
PBIT 508.8 506.2
Depreciation (including right-of-use assets) 383.6 365.3
Amortisation 33.7 36.3
EBITDA 926.1 907.8
Net finance costs 362.6 269.4
Net finance costs from pensions (3.6) (6.7)
Net finance costs excluding finance costs from pensions 359.0 262.7
EBITDA interest cover ratio 2.6 3.5
This is used to show how the EBITDA of the business covers the financing costs associated only with net debt on a consistent basis.
h) Adjusted effective current tax rate
The current tax charge for the year, excluding prior year charges and current tax on financial instruments, divided by profit before tax, net losses/
gains on financial instruments, exceptional items, and share of net profit/loss of joint ventures accounted for using the equity method.
\u00a3m
2023
Current tax
thereon
\u00a3m \u00a3m
2022
Current tax
thereon
\u00a3m
Profit before tax 167.9 \u2013 274.1 \u2013
Adjustments
Share of net (profit)/loss of joint venture \u2013 \u2013 2.2 \u2013
Net (gains)/losses on financial instruments (21.7) \u2013 (39.3) \u2013
146.2 \u2013 237.0 \u2013
Adjusted effective current tax rate 0.0% 0.0%
This APM is used to remove distortions in the tax charge and create a metric consistent with the calculation of adjusted earnings per share in
note 14. Share of net (profit)/loss of joint ventures is excluded from the calculation because the (profit)/loss is included after tax and so the tax on
joint venture profits is not included in the current tax charge.
i) Operational cashflow
Cash generated from operations less contributions and grants received.
2023
\u00a3m
2022
\u00a3m
Cash generated from operations 753.3 891.7
Contributions and grants received (40.2) (42.8)
Operational cashflow 713.1 848.9
This APM is used to show operational cash excluding the effect of contributions and grants received as part of capital programmes.
42 Alternative performance measures (APMs) (continued)
j) Cash capex
Cash paid to acquire property, plant and equipment and intangible fixed assets less contributions and grants received and proceeds on disposal of
property, plant and equipment and intangible fixed assets.
2023
\u00a3m
2022
\u00a3m
Purchase of property, plant and equipment 699.7 610.3
Purchase of intangible assets 40.0 36.3
Contributions and grants received (40.2) (42.8)
Proceeds on disposal of property, plant and equipment (12.9) (9.5)
Cash capex 686.6 594.3
This APM is used to show the cash impact of the Group\u2019s capital programmes.
k) Capital investment
Additions to property, plant and equipment and intangible fixed assets less contributions and grants received, assets contributed at no cost, and
capitalised finance costs.
2023
\u00a3m
2022
\u00a3m
Additions to property, plant and equipment 898.9 714.3
Additions to intangible assets 40.0 36.3
Contributions and grants received (40.2) (42.8)
Assets contributed at no cost (105.0) (69.0)
Capitalised finance costs (56.6) (34.5)
Capital investment 737.1 604.3
Includes \u00a334.2 million (2022: \u00a315.3 million) of provisions for future capital expenditure arising from regulatory obligations (See notes 17 and 28).
43 Subsidiary undertakings
Details of all subsidiary undertakings as at 31 March 2023 are given below. Details of the joint venture are set out in note 19. All subsidiary
undertakings have been included in the consolidation.
Owned directly by Severn Trent Plc
Country of operation
and incorporation
Percentage of share
capital held
Class of share
capital held
Athena Holdings Limited Hong Kong 100% Ordinary
The following subsidiary undertakings all operate and are incorporated in the United Kingdom. The percentage of share capital held is 100% and
the class of share capital held is ordinary.
All subsidiary undertakings
Aqua Deva Limited Severn Trent Green Power Group Limited
Chester Water Limited Severn Trent Green Power Holdings Limited
Debeo Debt Recovery Limited Severn Trent Green Power Limited
Dee Valley Group Limited Severn Trent Holdings Limited
Dee Valley Limited Severn Trent Investment Holdings Limited
Dee Valley Services Limited Severn Trent LCP Limited
Dee Valley Water (Holdings) Limited Severn Trent Leasing Limited
East Worcester Water Limited Severn Trent Metering Services Limited
Etwall Land Limited Severn Trent MIS Trustees Limited
Hafren Dyfrdwy Cyfyngedig Severn Trent Overseas Holdings Limited
M A Solutions (LINDUM) Ltd Severn Trent Pension Scheme Trustees Limited
Midlands Land Portfolio Limited Severn Trent PIF Trustees Limited
North Wales Gas Limited Severn Trent Property Solutions Limited
Northern Gas Supplies Limited Severn Trent Reservoirs Limited
Severn Trent (W&S) Limited Severn Trent Retail and Utility Services Limited
Severn Trent Data Portal Limited Severn Trent Services (Water and Sewerage) Limited
Severn Trent Draycote Limited Severn Trent Services Defence Holdings Limited
Severn Trent Finance Holdings Limited Severn Trent Services Defence Limited
Severn Trent Finance Limited Severn Trent Services Holdings Limited
Severn Trent General Partnership Limited Severn Trent Services International (Overseas Holdings) Limited
Severn Trent Green Power (Ardley) Limited Severn Trent Services International Limited
Severn Trent Green Power (Bridgend) Limited Severn Trent Services Operations UK Limited
Severn Trent Green Power (Cassington) Limited Severn Trent Solar Power Limited
Severn Trent Green Power (CW) Limited Severn Trent SSPS Trustees Limited
Severn Trent Green Power (Hertfordshire) Limited Severn Trent Trimpley Limited
Severn Trent Green Power (North London) Limited Severn Trent Utilities Finance Plc
Severn Trent Green Power (RBWM) Limited Severn Trent Water Limited
Severn Trent Green Power (Wallingford) Limited Severn Trent Wind Power Limited
Severn Trent Green Power (West London) Limited Severn Trent WWIF Limited
Severn Trent Green Power Biogas Limited Wrexham Water Limited
Severn Trent Green Power Composting Limited
The Group owns 100% of the share capital of the following subsidiary undertakings.
All subsidiary undertakings Country of operation and incorporation Class of share capital held
Energy Supplies UK Limited United Kingdom A and B Ordinary
Lyra Insurance Guernsey Limited Guernsey Ordinary
Severn Trent Carsington Limited United Kingdom A and B Ordinary
43 Subsidiary undertakings (continued)
Unless stated below, the registered office of the aforementioned entities is Severn Trent Centre, 2 St John\u2019s Street, Coventry, CV1 2LZ,
United Kingdom.
Company Registered office
Athena Holdings Limited One 33, Hysan Avenue, Causeway Bay, Hong Kong
Dee Valley Limited Packsaddle, Wrexham Road, Rhostyllen, Wrexham, LL14 4EH
Hafren Dyfrdwy Cyfyngedig Packsaddle, Wrexham Road, Rhostyllen, Wrexham, LL14 4EH
Lyra Insurance Guernsey Limited St Martin\u2019s House, Le Bordage, St Peter Port, GY1 4AU, Guernsey
Severn Trent General Partnership Limited 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Severn Trent Green Power (Ardley) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (Bridgend) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (Cassington) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (CW) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (Hertfordshire) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (North London) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (RBWM) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (Wallingford) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power (West London) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power Biogas Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power Composting Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power Group Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power Holdings Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
43 Subsidiary undertakings (continued)
Subsidiary audit exemptions
Severn Trent Plc has issued guarantees over the liabilities of the following companies at 31 March 2023 under section 479C of Companies Act 2006
and these entities are exempt from the requirements of the Act relating to the audit of individual accounts by virtue of section 479A of the Act.
Company Company Number
Chester Water Limited 2888872
Dee Valley Group Limited 4316684
Dee Valley Limited 2902525
Dee Valley Water (Holdings) Limited 4421854
East Worcester Water Limited 2757948
Etwall Land Limited 7559793
Severn Trent (W&S) Limited 3995023
Severn Trent Carsington Limited 7570384
Severn Trent Data Portal Limited 8181048
Severn Trent Draycote Limited 7681784
Severn Trent Finance Holdings Limited 6044159
Severn Trent Finance Limited 6294618
Severn Trent General Partnership Limited SC416614
Severn Trent Green Power (Ardley) Limited 5807721
Severn Trent Green Power (Hertfordshire) Limited 6771560
Severn Trent Green Power (North London) Limited 9689098
Severn Trent Green Power (West London) Limited 8308321
Severn Trent Green Power Composting Limited 4927756
Severn Trent Holdings Limited 5656363
Severn Trent Investment Holdings Limited 7560050
Severn Trent LCP Limited 7943556
Severn Trent Leasing Limited 6810163
Severn Trent Metering Services Limited 2569703
Severn Trent Overseas Holdings Limited 2455508
Severn Trent Reservoirs Limited 3115315
Severn Trent Services Holdings Limited 4395572
Severn Trent Services International (Overseas Holdings) Limited 3125131
Severn Trent Services International Limited 2387816
Severn Trent Retail and Utility Services Limited 2562471
Severn Trent Trimpley Limited 10690056
Severn Trent WWIF Limited 11966722
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"fact-349": {
"value": "2 Accounting policies a) Basis of preparation The financial statements for the Group and the parent company have been prepared on the going concern basis (see strategic report on page 83 which sets out the Group\u2019s considerations relating to viability and going concern) under the historical cost convention, except for the revaluation of financial instruments including derivatives (refer to accounting policy notes t and u), and accounting for the transfer of assets from customers (refer to accounting policy note i). (i) Consolidated financial statements The consolidated financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and United Kingdom adopted International Financial Reporting Standards. (ii) Parent company financial statements The parent company financial statements have been prepared in accordance with United Kingdom Accounting Standards and comply with the Companies Act 2006. The Company meets the definition of a qualifying entity as defined in FRS 100 \u2018Application of Financial Reporting Requirements\u2019, accordingly the Company has elected to apply FRS 101 \u2018Reduced Disclosure Framework\u2019. Therefore the recognition and measurement requirements of United Kingdom adopted International Financial Reporting Standards have been applied, with amendments where necessary in order to comply with Companies Act 2006 and The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) as the parent company financial statements are Companies Act 2006 accounts. As permitted by FRS 101, the parent company has taken advantage of the disclosure exemptions available under that standard in relation to statement of cash flows, share based payment, financial instruments, capital management, presentation of comparative information in respect of certain assets, standards not yet effective and related party transactions. Where required, equivalent disclosures are given in the consolidated financial statements. As permitted by Section 408 of the Companies Act 2006, no profit or loss account is presented for the parent company. The profit for the year is disclosed in the Company statement of comprehensive income, the Company statement of changes in equity and the Company balance sheet. Severn Trent Plc is a partner in Severn Trent Limited Partnership and Severn Trent 2017 Limited Partnership (\u2018the partnerships\u2019), which are registered in Scotland. As the partnerships are included in the consolidated accounts, the parent company has taken advantage of the exemption conferred by Regulation 7 of The Partnership (Accounts) Regulations 2008 from the requirements of Regulations 4 to 6. The key accounting policies for the Group and the parent company are set out below and have been applied consistently except where indicated. Where policies are specific to the Group or to the Company this is set out in the relevant policy. b) Basis of consolidation The consolidated financial statements include the results of Severn Trent Plc and its subsidiaries and joint ventures. Results are included from the date of acquisition or incorporation and excluded from the date of disposal. Subsidiaries are consolidated where the Group has the power to control a subsidiary. Joint venture undertakings are accounted for on an equity basis where the Group exercised joint control under a contractual arrangement. Non-controlling interests in the net assets of subsidiaries are identified separately from the Group\u2019s equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests\u2019 share of changes in equity since that date. Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not included within the Group financial statements. Foreign currency denominated assets and liabilities of the Company and its subsidiary undertakings are translated into the relevant functional currency at the rates of exchange ruling at the year end. Any exchange differences so arising are dealt with through the income statement. Foreign currency transactions arising during the year are translated into sterling at the rate of exchange ruling on the date of the transaction. All gains and losses on exchange arising during the year are dealt with through the income statement. c) Revenue recognition Revenue includes turnover and interest income. Turnover represents the fair value of consideration receivable, excluding value added tax, trade discounts and intercompany sales, in the ordinary course of business for goods and services provided. Turnover is not recognised until the service has been provided to the customer. Water and waste water revenue is recognised when the service is provided and includes an estimate of the amount of water and waste water charges unbilled at the year end. The accrual is estimated using a defined methodology based upon a measure of unbilled water consumed by tariff, which is calculated from historical billing information. Amounts received from developers for diversions activity is recognised as turnover when the service to divert the infrastructure has been completed. Operating services revenue is recognised in line with the delivery of each performance obligation. Further details of the performance obligations are detailed in note 6. The expected turnover over the life of a contract is allocated to each performance obligation based on the stand-alone selling price of each performance obligation, which is based on the forecast costs incurred and expected margin for each obligation. Any changes to the revenue relating to performance obligations already delivered are recognised in the period in which they are identified. Differences between amounts recognised as revenue and amounts billed are recognised as contract assets or liabilities. Renewable energy revenue includes sales of electricity and gas and the related green energy incentives. Revenue from energy sales is recognised when the electricity or gas is delivered to the national grid. Green energy incentives are recognised when the Group becomes entitled to them. Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable. d) Exceptional items Exceptional items are income or expenditure, which individually or in aggregate, if of a similar type, should, in the opinion of the directors, be disclosed by virtue of their size or nature if the financial statements are to give a true and fair view. In this context, materiality is assessed at the segment level. e) Taxation Current tax payable is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxation is provided in full on taxable temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred taxation is measured on a non-discounted basis using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Where there is a change in the tax rate enacted or substantively enacted, deferred tax assets and liabilities in the opening balance sheet are remeasured at the new rate. The resulting charge/credit to income statement and reserves is recognised in the year that the rate change occurs. Current and deferred tax are recognised in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. A deferred tax asset is only recognised to the extent it is probable that sufficient taxable profits will be available in the future to utilise it. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities. f) Goodwill Goodwill represents the excess of the fair value of purchase consideration over the fair value of the net assets acquired. Goodwill arising on acquisition of subsidiaries is included in intangible assets, whilst goodwill arising on acquisition of associates or joint ventures is included in interests in associates or joint ventures respectively. If an acquisition gives rise to negative goodwill this is credited directly to the income statement. Fair value adjustments based on provisional estimates are amended within one year of the acquisition, if required, with a corresponding adjustment to goodwill. Goodwill and indefinite life intangibles are tested for impairment in accordance with the policy set out in note 2 l) below and carried at cost less accumulated impairment losses. Goodwill is allocated to the cash-generating unit that derives benefit from the goodwill for impairment testing purposes. Where goodwill forms part of a cash-generating unit and all or part of that unit is disposed of, the associated goodwill is included in the carrying amount of that operation when determining the gain or loss on disposal of the operation. g) Other intangible non-current assets Intangible assets acquired separately, or internally generated where a separate resource that is controlled by the Group is created, are capitalised at cost. Following initial recognition, finite life intangible assets are amortised on a straight-line basis over their estimated useful economic lives as follows: Years Software 3-10 Other intangible assets 15-25 Amortisation charged on intangible assets is taken to the income statement through operating costs. Finite life intangible assets are reviewed for impairment where indicators of impairment exist (see 2 l). Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses. Such assets are reviewed for impairment at least annually and where indications of impairment exist. Development expenditure is capitalised as an intangible asset and written off over its expected useful economic life where the following criteria are met: \u2013 it is technically feasible to create and make the asset available for use or sale; \u2013 there are adequate resources available to complete the development and to use or sell the asset; \u2013 there is the intention and ability to use or sell the asset; \u2013 it is probable that the asset created will generate future economic benefits; and \u2013 the development costs can be measured reliably. Research expenditure is expensed when it is incurred. h) Pre-contract costs Incremental costs incurred in obtaining contracts with customers are recognised as a prepayment and written off to the income statement over the life of the contract where it is expected that the costs will be recovered. All other costs of obtaining contracts are written off to the income statement as incurred. i) Property, plant and equipment Property, plant and equipment is held at cost (or at deemed cost for infrastructure assets on transition to IFRS) less accumulated depreciation and impairment. Expenditure on development projects is capitalised and depreciated over the expected useful life of those assets. The costs of like-for-like replacement of infrastructure components are recognised in the income statement as they arise. Expenditure which results in enhancements to the operating capability of the infrastructure networks is capitalised. Where items of property, plant and equipment are transferred to the Group from customers or developers, the fair value of the asset transferred is recognised in the balance sheet. Fair value is determined based on estimated depreciated replacement cost. The transfer is considered to be linked to the provision of ongoing services therefore the corresponding credit is recorded in deferred income and released to turnover over the expected useful lives of the related assets. Further details regarding the judgment applied is detailed in note 4. Where assets take a substantial period to get ready for their intended use, the borrowing costs directly attributable to the acquisition, construction or production of these assets are added to their cost. i) Property, plant and equipment (continued) Property, plant and equipment is depreciated, using the straight-line method, to its estimated residual value over its estimated useful life, with the exception of freehold land, which is not depreciated. Assets in the course of construction are not depreciated until commissioned. The estimated useful lives are: Years Infrastructure assets Impounding reservoirs 250 Raw water aqueducts 250 Mains 80-150 Sewers 150-200 Other assets Buildings 30-80 Fixed plant and equipment 20-40 Vehicles and mobile plant 2-15 j) Leased assets Where the Group enters a contract that contains a lease, it recognises a right-of-use asset and a lease liability. The right-of-use asset is measured at cost, which includes: the amount of the initial measurement of the lease liability (see below); any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs incurred by the Group; and an estimate of any remediation or similar costs required by the lease contract. At the commencement date, the lease liability is measured at the present value of the future lease payments discounted using the interest rate implicit in the lease or, if that cannot be readily determined, the Group\u2019s incremental borrowing rate. Lease liabilities are included in borrowings. Lease payments are treated as consisting of a capital element and a finance charge; the capital element reduces the lease liability and the finance charge is written off to the income statement at a constant rate over the period of the lease in proportion to the capital amount outstanding. Depreciation of the right-of-use asset is charged over the shorter of the estimated useful life and the lease period unless ownership is expected to transfer to the Group at the end of the lease, in which case the right-of-use asset is depreciated to the end of the useful life of the underlying asset. Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximise operational flexibility in managing contracts. Most extension and termination options held are exercisable only by the Group and not by the respective lessor. In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and is within the control of the Group. Where the lease term is less than one year or the underlying asset is low value, the Group does not recognise a right-of-use asset or lease liability. Payments under such leases are charged to operating costs. k) Grants and contributions Grants and contributions received in respect of non-current assets, including certain charges made for new connections to the water and sewerage networks, are treated as deferred income and released to turnover over the useful economic life of those non-current assets. Grants and contributions which are given in compensation for expenses incurred with no future related costs are recognised in turnover in the period that they become receivable. l) Impairment of non-current assets If the recoverable amount of goodwill, an item of property, plant and equipment, or any other non-current asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell or estimated value in use at the date the impairment review is undertaken. Fair value less costs to sell represents the amount obtainable from the sale of the asset in an arm\u2019s length transaction between knowledgeable and willing third parties, less costs of disposal. Value in use represents the present value of future cash flows expected to be derived from a cash-generating unit, discounted using a pre-tax discount rate that reflects current market assessments of the cost of capital of the cash-generating unit or asset. The discount rate used is based on the Group\u2019s cost of capital adjusted for the risk profiles of individual businesses. For regulated businesses we use the WACC from Ofwat\u2019s latest price review adjusted for market changes since this date where appropriate. Goodwill is tested for impairment annually. Impairment reviews are also carried out if there is an indication that an impairment may have occurred, or, where otherwise required, to ensure that non-current assets are not carried above their estimated recoverable amounts. Impairment losses are recognised in the income statement. m) Parent company investments The parent company recognises investments in subsidiary undertakings at historical cost. Impairment losses are recognised in line with the policy set out in l) above. n) Inventory Inventories are stated at the lower of cost and net realisable value. For properties held for resale, the cost includes the cost of acquiring and developing the sites. Net realisable value is the estimated selling price less all estimated costs of completion and costs to be incurred in selling and distribution. o) Loans receivable Loans receivable are measured at fair value on initial recognition, less issue fee income received where the fee is integral to the yield on the loan. All loan receivables are held for collection of contractual cash flows, which represent solely payments of principal and interest. After initial recognition, loans receivable are subsequently measured at amortised cost using the effective interest rate method whereby interest and issue fee income are credited to the income statement and added to the carrying value of loans receivable at a constant rate in proportion to the loan amount outstanding. The Group recognises a loss allowance for expected credit losses (ECL) on its loans receivable from joint ventures. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition. The Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If the credit risk has not increased significantly since initial recognition, the Group measures the loss allowance at an amount equal to the 12 month ECL. o) Loans receivable (continued) Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of the loans. In contrast, 12 month ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of default over the remaining life of the asset at the reporting date with the risk of default for the same period at initial recognition. In making this assessment, the Group considers both quantitative and qualitative information about the risk of default that is reasonable and supportable, including forward-looking information that is available. This includes assessment of a deterioration in: actual or expected business; financial or economic conditions of the borrower; actual or expected operating results, cash flows and financial position of the borrower; and the regulatory, economic, or technological environment faced by the borrower. Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. Definition of default The Group considers that a default has taken place where information developed internally indicates that the borrower is unlikely to pay its creditors, including the Group, in full. Irrespective of the above analysis, the Group considers that default has occurred when a loan receivable is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. p) Trade receivables and accrued income Trade receivables and accrued income are measured at fair value on initial recognition, and subsequently measured at amortised cost using the effective interest rate method, less loss allowance. If there is objective evidence that the asset is impaired, it is written down to its recoverable amount and the irrecoverable amount is recognised as an expense in operating costs. The Group applies the simplified approach permitted by IFRS 9 for estimating expected credit losses on trade and other receivables. For trade receivables that are assessed not to be impaired individually, expected credit losses are estimated based on the Group\u2019s historical experience of trade receivable write-offs and reasonable, supportable forward-looking information which is available without undue cost or effort. q) Retirement benefits (i) Defined benefit schemes The difference between the value of defined benefit pension scheme assets and defined benefit pension scheme liabilities is recorded on the balance sheet as a retirement benefit asset or obligation. Defined benefit pension scheme assets are measured at fair value using bid price for assets with quoted prices. For scheme assets with no quoted price, the fair value is derived by using quotations from independent third parties or by using applicable valuation techniques at the end of each reporting period. Defined benefit pension scheme liabilities are measured at the balance sheet date by an independent actuary using the projected unit method and discounted at the current rate of return on high-quality corporate bonds of equivalent term and currency to the liability. Service cost, representing the cost of employee service in the year, is included in operating costs. Net finance cost is calculated by applying the discount rate used for the scheme liabilities to the net obligation. Changes in the retirement benefit obligation that arise from: \u2013 differences between the return on scheme assets and interest income included in the income statement; \u2013 actuarial gains and losses from experience adjustments; and \u2013 changes in demographic or financial assumptions, are classified as remeasurements, charged or credited to other comprehensive income and recorded in the statement of comprehensive income in the period in which they arise. There is no contractual agreement, or stated policy, for charging the net defined benefit cost to participating Group companies. Therefore, the parent recognises a charge in the income statement which is equal to the contributions payable in the year. The net defined benefit cost for these schemes is recognised by the sponsoring employers, Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig. (ii) Defined contribution schemes Contributions to defined contribution pension schemes are charged to the income statement in the period in which they fall due. r) Provisions Provisions are recognised where: \u2013 there is a present obligation as a result of a past event; \u2013 it is probable that there will be an outflow of economic benefits to settle this obligation; and \u2013 a reliable estimate of this amount can be made. Insurance provisions are recognised for claims notified and for claims incurred but which have not yet been notified, based on advice from the Group\u2019s independent insurance advisers. Provisions are discounted to present value using a pre-tax discount rate that reflects the risks specific to the liability where the effect is material. s) Purchase of own shares Where market purchases of Severn Trent ordinary shares are made through an obligating contract, a liability for the present value of the redemption amount is recognised and charged to retained earnings. Payments for the purchase of shares are charged to the liability when made. Shares held by the Severn Trent Employee Share Ownership Trust that have not vested unconditionally by the balance sheet date are deducted from shareholders\u2019 funds until such time as they vest. t) Borrowings The accounting policy for borrowings that are the hedged item in a fair value hedge is set out in note 2 u) and the accounting policy for lease liabilities is set out in note 2 j). All other borrowings are initially recognised at fair value less issue costs. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method whereby interest and issue costs are charged to the income statement and added to the carrying value of borrowings at a constant rate in proportion to the capital amount outstanding. Index-linked debt is adjusted for changes in the relevant inflation index and changes in value are charged to finance costs in the income statement. Borrowings denominated in foreign currency are translated to sterling at the spot rate on the balance sheet date. Exchange gains or losses resulting from this are credited or charged to gains/losses on financial instruments in the income statement. u) Derivative financial instruments Derivative financial instruments are stated at fair value, including accrued interest. Fair value is determined using the methodology described in note 34 a). The accounting policy for changes in fair value depends on whether the derivative is designated as a hedging instrument. The various accounting policies are described below. Interest receivable or payable in respect of derivative financial instruments is included in finance income or costs in the income statement. Derivatives not designated as hedging instruments Gains or losses arising on remeasurement of derivative financial instruments that are not designated as hedging instruments are recognised in gains/losses on financial instruments in the income statement. Derivatives designated as hedging instruments The Group uses derivative financial instruments such as cross currency swaps, forward currency contracts, energy swaps and interest rate swaps to hedge its risks associated with foreign currency, interest rate and energy price fluctuations. At the inception of each hedge relationship, the Group documents: \u2013 the economic relationship between the hedging instrument and the hedged item; \u2013 its risk management objectives and strategy for undertaking the hedge transaction; and \u2013 whether changes in fair value or the cash flows of the hedging instrument are expected to offset changes in fair values or cash flows (as appropriate) of the hedged item. Hedge accounting is discontinued when the hedging instrument expires, is sold, terminated or exercised, or no longer qualifies for hedge accounting. Fair value hedges Where a loan or borrowing is in a fair value hedging relationship it is remeasured for changes in fair value of the hedged risk at the balance sheet date, with gains or losses being recognised in gains/losses on financial instruments in the income statement. The gain or loss on the corresponding hedging instrument is also taken to gains/losses on financial instruments in the income statement so that the effective portion of the hedge will offset the gain or loss on the hedged item. If hedge accounting is discontinued, the fair value adjustment arising from the hedged risk on the hedged item is amortised to the income statement over the anticipated remaining life of the hedged item. Cash flow hedges The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity and the ineffective portion is charged to gains/losses on financial instruments in the income statement. When the gain or loss from the hedged underlying transaction is recognised in the income statement, the gains or losses on the hedging instrument that have previously been recognised in equity are recycled through gains/losses on financial instruments in the income statement. If hedge accounting is discontinued, any cumulative gain or loss on the hedging instrument previously recognised in equity is held in equity until the forecast transaction occurs, or transferred to gains/losses on financial instruments in the income statement if the forecast transaction is no longer expected to occur. From this point the derivative is accounted for in the same way as derivatives not designated as hedging instruments. If the hedging instrument is terminated, the gains and losses previously recognised in equity are held in equity until either the forecast transaction occurs or the forecast transaction is no longer expected to occur. Embedded derivatives Where a contract includes terms that cause some of its cash flows to vary in a similar way to a derivative financial instrument, that part of the contract is considered to be an embedded derivative. Embedded derivatives are separated from the contract and measured at fair value with gains and losses taken to the income statement if the host contract is not an asset within the scope of IFRS 9 and: \u2013 the risks and characteristics of the embedded derivative are not closely related to those of the contract; \u2013 a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and \u2013 the contract is not carried at fair value with gains and losses reported in the income statement. In all other cases embedded derivatives are accounted for in line with the accounting policy for the contract as a whole. v) Share based payment The Group operates a number of equity settled share based compensation plans for employees. The fair value of the employee services received in exchange for the grant is recognised as an expense over the vesting period of the grant. The fair value of employee services is determined by reference to the fair value of the awards granted, calculated using an appropriate pricing model, excluding the impact of any non-market vesting conditions. The number of awards that are expected to vest takes into account non-market vesting conditions including, where appropriate, continuing employment by the Group. The charge is adjusted to reflect shares that do not vest as a result of failing to meet a non-market condition. Share based compensation plans are satisfied in shares of the parent company. Where the fair value of the awards is not recharged to participating Group companies, the parent company records the fair value of the awards as an increase in its investment in the subsidiary. The investment is adjusted to reflect shares that do not vest as a result of failing to meet a non-market based condition. w) Cash flow statement For the cash flow statement, cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Such investments are normally those with less than three months maturity from the date of acquisition and include cash and bank balances and investments in liquid funds. Net cash and cash equivalents include overdrafts repayable on demand and amounts drawn under the Group\u2019s revolving credit facility. Interest paid in the cash flow statement includes amounts charged to the income statement and amounts included in the cost of property, plant and equipment. 2 Accounting policies (continued) x) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value. The identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date except that: \u2013 deferred tax assets or liabilities and retirement benefit assets or obligations are recognised and measured in accordance with the policies set out under notes 2 e) and 2 q) above; and \u2013 assets or disposal groups that are classified as held for sale are measured in accordance with the policy set out below. Where an asset or group of assets (a disposal group) is available for immediate sale and the sale is highly probable and expected to occur within one year, then the disposal group is classified as held for sale. The disposal group is measured at the lower of the carrying amount and the fair value less costs to sell. Depreciation is not charged on such assets. Where the initial accounting for a business combination is incomplete at the end of the reporting period, the Group reports provisional amounts and finalises these within one year of the acquisition date (the \u2018measurement period\u2019). Contingent consideration is measured at fair value at the acquisition date. During the measurement period, changes in provisional fair values of assets and liabilities acquired, or of contingent consideration, are recognised as adjustments to goodwill or bargain purchase gain. Outside the measurement period, changes in fair value of contingent consideration that is not classified as equity are recognised in profit or loss.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-351": {
"value": "a) Basis of preparation The financial statements for the Group and the parent company have been prepared on the going concern basis (see strategic report on page 83 which sets out the Group\u2019s considerations relating to viability and going concern) under the historical cost convention, except for the revaluation of financial instruments including derivatives (refer to accounting policy notes t and u), and accounting for the transfer of assets from customers (refer to accounting policy note i). (i) Consolidated financial statements The consolidated financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and United Kingdom adopted International Financial Reporting Standards. (ii) Parent company financial statements The parent company financial statements have been prepared in accordance with United Kingdom Accounting Standards and comply with the Companies Act 2006. The Company meets the definition of a qualifying entity as defined in FRS 100 \u2018Application of Financial Reporting Requirements\u2019, accordingly the Company has elected to apply FRS 101 \u2018Reduced Disclosure Framework\u2019. Therefore the recognition and measurement requirements of United Kingdom adopted International Financial Reporting Standards have been applied, with amendments where necessary in order to comply with Companies Act 2006 and The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) as the parent company financial statements are Companies Act 2006 accounts. As permitted by FRS 101, the parent company has taken advantage of the disclosure exemptions available under that standard in relation to statement of cash flows, share based payment, financial instruments, capital management, presentation of comparative information in respect of certain assets, standards not yet effective and related party transactions. Where required, equivalent disclosures are given in the consolidated financial statements. As permitted by Section 408 of the Companies Act 2006, no profit or loss account is presented for the parent company. The profit for the year is disclosed in the Company statement of comprehensive income, the Company statement of changes in equity and the Company balance sheet. Severn Trent Plc is a partner in Severn Trent Limited Partnership and Severn Trent 2017 Limited Partnership (\u2018the partnerships\u2019), which are registered in Scotland. As the partnerships are included in the consolidated accounts, the parent company has taken advantage of the exemption conferred by Regulation 7 of The Partnership (Accounts) Regulations 2008 from the requirements of Regulations 4 to 6. The key accounting policies for the Group and the parent company are set out below and have been applied consistently except where indicated. Where policies are specific to the Group or to the Company this is set out in the relevant policy. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-412": {
"value": "The consolidated financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and United Kingdom adopted International Financial Reporting Standards. ",
"dimensions": {
"concept": "ifrs-full:StatementOfIFRSCompliance",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-352": {
"value": "b) Basis of consolidation The consolidated financial statements include the results of Severn Trent Plc and its subsidiaries and joint ventures. Results are included from the date of acquisition or incorporation and excluded from the date of disposal. Subsidiaries are consolidated where the Group has the power to control a subsidiary. Joint venture undertakings are accounted for on an equity basis where the Group exercised joint control under a contractual arrangement. Non-controlling interests in the net assets of subsidiaries are identified separately from the Group\u2019s equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests\u2019 share of changes in equity since that date. Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not included within the Group financial statements. Foreign currency denominated assets and liabilities of the Company and its subsidiary undertakings are translated into the relevant functional currency at the rates of exchange ruling at the year end. Any exchange differences so arising are dealt with through the income statement. Foreign currency transactions arising during the year are translated into sterling at the rate of exchange ruling on the date of the transaction. All gains and losses on exchange arising during the year are dealt with through the income statement. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-353": {
"value": "c) Revenue recognition Revenue includes turnover and interest income. Turnover represents the fair value of consideration receivable, excluding value added tax, trade discounts and intercompany sales, in the ordinary course of business for goods and services provided. Turnover is not recognised until the service has been provided to the customer. Water and waste water revenue is recognised when the service is provided and includes an estimate of the amount of water and waste water charges unbilled at the year end. The accrual is estimated using a defined methodology based upon a measure of unbilled water consumed by tariff, which is calculated from historical billing information. Amounts received from developers for diversions activity is recognised as turnover when the service to divert the infrastructure has been completed. Operating services revenue is recognised in line with the delivery of each performance obligation. Further details of the performance obligations are detailed in note 6. The expected turnover over the life of a contract is allocated to each performance obligation based on the stand-alone selling price of each performance obligation, which is based on the forecast costs incurred and expected margin for each obligation. Any changes to the revenue relating to performance obligations already delivered are recognised in the period in which they are identified. Differences between amounts recognised as revenue and amounts billed are recognised as contract assets or liabilities. Renewable energy revenue includes sales of electricity and gas and the related green energy incentives. Revenue from energy sales is recognised when the electricity or gas is delivered to the national grid. Green energy incentives are recognised when the Group becomes entitled to them. Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-354": {
"value": "d) Exceptional items Exceptional items are income or expenditure, which individually or in aggregate, if of a similar type, should, in the opinion of the directors, be disclosed by virtue of their size or nature if the financial statements are to give a true and fair view. In this context, materiality is assessed at the segment level. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForExceptionalItemsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-355": {
"value": "e) Taxation Current tax payable is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxation is provided in full on taxable temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred taxation is measured on a non-discounted basis using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Where there is a change in the tax rate enacted or substantively enacted, deferred tax assets and liabilities in the opening balance sheet are remeasured at the new rate. The resulting charge/credit to income statement and reserves is recognised in the year that the rate change occurs. Current and deferred tax are recognised in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. A deferred tax asset is only recognised to the extent it is probable that sufficient taxable profits will be available in the future to utilise it. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-413": {
"value": "e) Taxation Current tax payable is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxation is provided in full on taxable temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred taxation is measured on a non-discounted basis using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Where there is a change in the tax rate enacted or substantively enacted, deferred tax assets and liabilities in the opening balance sheet are remeasured at the new rate. The resulting charge/credit to income statement and reserves is recognised in the year that the rate change occurs. Current and deferred tax are recognised in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. A deferred tax asset is only recognised to the extent it is probable that sufficient taxable profits will be available in the future to utilise it. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-414": {
"value": "f) Goodwill Goodwill represents the excess of the fair value of purchase consideration over the fair value of the net assets acquired. Goodwill arising on acquisition of subsidiaries is included in intangible assets, whilst goodwill arising on acquisition of associates or joint ventures is included in interests in associates or joint ventures respectively. If an acquisition gives rise to negative goodwill this is credited directly to the income statement. Fair value adjustments based on provisional estimates are amended within one year of the acquisition, if required, with a corresponding adjustment to goodwill. Goodwill and indefinite life intangibles are tested for impairment in accordance with the policy set out in note 2 l) below and carried at cost less accumulated impairment losses. Goodwill is allocated to the cash-generating unit that derives benefit from the goodwill for impairment testing purposes. Where goodwill forms part of a cash-generating unit and all or part of that unit is disposed of, the associated goodwill is included in the carrying amount of that operation when determining the gain or loss on disposal of the operation. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-356": {
"value": "f) Goodwill Goodwill represents the excess of the fair value of purchase consideration over the fair value of the net assets acquired. Goodwill arising on acquisition of subsidiaries is included in intangible assets, whilst goodwill arising on acquisition of associates or joint ventures is included in interests in associates or joint ventures respectively. If an acquisition gives rise to negative goodwill this is credited directly to the income statement. Fair value adjustments based on provisional estimates are amended within one year of the acquisition, if required, with a corresponding adjustment to goodwill. Goodwill and indefinite life intangibles are tested for impairment in accordance with the policy set out in note 2 l) below and carried at cost less accumulated impairment losses. Goodwill is allocated to the cash-generating unit that derives benefit from the goodwill for impairment testing purposes. Where goodwill forms part of a cash-generating unit and all or part of that unit is disposed of, the associated goodwill is included in the carrying amount of that operation when determining the gain or loss on disposal of the operation. g) Other intangible non-current assets Intangible assets acquired separately, or internally generated where a separate resource that is controlled by the Group is created, are capitalised at cost. Following initial recognition, finite life intangible assets are amortised on a straight-line basis over their estimated useful economic lives as follows: Years Software 3-10 Other intangible assets 15-25 Amortisation charged on intangible assets is taken to the income statement through operating costs. Finite life intangible assets are reviewed for impairment where indicators of impairment exist (see 2 l). Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses. Such assets are reviewed for impairment at least annually and where indications of impairment exist. Development expenditure is capitalised as an intangible asset and written off over its expected useful economic life where the following criteria are met: \u2013 it is technically feasible to create and make the asset available for use or sale; \u2013 there are adequate resources available to complete the development and to use or sell the asset; \u2013 there is the intention and ability to use or sell the asset; \u2013 it is probable that the asset created will generate future economic benefits; and \u2013 the development costs can be measured reliably. Research expenditure is expensed when it is incurred. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-415": {
"value": "g) Other intangible non-current assets Intangible assets acquired separately, or internally generated where a separate resource that is controlled by the Group is created, are capitalised at cost. Following initial recognition, finite life intangible assets are amortised on a straight-line basis over their estimated useful economic lives as follows: Years Software 3-10 Other intangible assets 15-25 Amortisation charged on intangible assets is taken to the income statement through operating costs. Finite life intangible assets are reviewed for impairment where indicators of impairment exist (see 2 l). Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses. Such assets are reviewed for impairment at least annually and where indications of impairment exist. Development expenditure is capitalised as an intangible asset and written off over its expected useful economic life where the following criteria are met: \u2013 it is technically feasible to create and make the asset available for use or sale; \u2013 there are adequate resources available to complete the development and to use or sell the asset; \u2013 there is the intention and ability to use or sell the asset; \u2013 it is probable that the asset created will generate future economic benefits; and \u2013 the development costs can be measured reliably. Research expenditure is expensed when it is incurred. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-357": {
"value": "h) Pre-contract costs Incremental costs incurred in obtaining contracts with customers are recognised as a prepayment and written off to the income statement over the life of the contract where it is expected that the costs will be recovered. All other costs of obtaining contracts are written off to the income statement as incurred. ",
"dimensions": {
"concept": "severntrentplc:DescriptionOfAccountingPolicyForPreContractCosts",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-358": {
"value": "i) Property, plant and equipment Property, plant and equipment is held at cost (or at deemed cost for infrastructure assets on transition to IFRS) less accumulated depreciation and impairment. Expenditure on development projects is capitalised and depreciated over the expected useful life of those assets. The costs of like-for-like replacement of infrastructure components are recognised in the income statement as they arise. Expenditure which results in enhancements to the operating capability of the infrastructure networks is capitalised. Where items of property, plant and equipment are transferred to the Group from customers or developers, the fair value of the asset transferred is recognised in the balance sheet. Fair value is determined based on estimated depreciated replacement cost. The transfer is considered to be linked to the provision of ongoing services therefore the corresponding credit is recorded in deferred income and released to turnover over the expected useful lives of the related assets. Further details regarding the judgment applied is detailed in note 4. Where assets take a substantial period to get ready for their intended use, the borrowing costs directly attributable to the acquisition, construction or production of these assets are added to their cost. Property, plant and equipment is depreciated, using the straight-line method, to its estimated residual value over its estimated useful life, with the exception of freehold land, which is not depreciated. Assets in the course of construction are not depreciated until commissioned. The estimated useful lives are: Years Infrastructure assets Impounding reservoirs 250 Raw water aqueducts 250 Mains 80-150 Sewers 150-200 Other assets Buildings 30-80 Fixed plant and equipment 20-40 Vehicles and mobile plant 2-15 ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-359": {
"value": "j) Leased assets Where the Group enters a contract that contains a lease, it recognises a right-of-use asset and a lease liability. The right-of-use asset is measured at cost, which includes: the amount of the initial measurement of the lease liability (see below); any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs incurred by the Group; and an estimate of any remediation or similar costs required by the lease contract. At the commencement date, the lease liability is measured at the present value of the future lease payments discounted using the interest rate implicit in the lease or, if that cannot be readily determined, the Group\u2019s incremental borrowing rate. Lease liabilities are included in borrowings. Lease payments are treated as consisting of a capital element and a finance charge; the capital element reduces the lease liability and the finance charge is written off to the income statement at a constant rate over the period of the lease in proportion to the capital amount outstanding. Depreciation of the right-of-use asset is charged over the shorter of the estimated useful life and the lease period unless ownership is expected to transfer to the Group at the end of the lease, in which case the right-of-use asset is depreciated to the end of the useful life of the underlying asset. Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximise operational flexibility in managing contracts. Most extension and termination options held are exercisable only by the Group and not by the respective lessor. In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and is within the control of the Group. Where the lease term is less than one year or the underlying asset is low value, the Group does not recognise a right-of-use asset or lease liability. Payments under such leases are charged to operating costs. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-360": {
"value": "k) Grants and contributions Grants and contributions received in respect of non-current assets, including certain charges made for new connections to the water and sewerage networks, are treated as deferred income and released to turnover over the useful economic life of those non-current assets. Grants and contributions which are given in compensation for expenses incurred with no future related costs are recognised in turnover in the period that they become receivable. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGovernmentGrants",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-361": {
"value": "l) Impairment of non-current assets If the recoverable amount of goodwill, an item of property, plant and equipment, or any other non-current asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell or estimated value in use at the date the impairment review is undertaken. Fair value less costs to sell represents the amount obtainable from the sale of the asset in an arm\u2019s length transaction between knowledgeable and willing third parties, less costs of disposal. Value in use represents the present value of future cash flows expected to be derived from a cash-generating unit, discounted using a pre-tax discount rate that reflects current market assessments of the cost of capital of the cash-generating unit or asset. The discount rate used is based on the Group\u2019s cost of capital adjusted for the risk profiles of individual businesses. For regulated businesses we use the WACC from Ofwat\u2019s latest price review adjusted for market changes since this date where appropriate. Goodwill is tested for impairment annually. Impairment reviews are also carried out if there is an indication that an impairment may have occurred, or, where otherwise required, to ensure that non-current assets are not carried above their estimated recoverable amounts. Impairment losses are recognised in the income statement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-364": {
"value": "m) Parent company investments The parent company recognises investments in subsidiary undertakings at historical cost. Impairment losses are recognised in line with the policy set out in l) above. ",
"dimensions": {
"concept": "severntrentplc:DescriptionOfAccountingPolicyForParentCompanyInvestments",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-362": {
"value": "n) Inventory Inventories are stated at the lower of cost and net realisable value. For properties held for resale, the cost includes the cost of acquiring and developing the sites. Net realisable value is the estimated selling price less all estimated costs of completion and costs to be incurred in selling and distribution. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-363": {
"value": "o) Loans receivable Loans receivable are measured at fair value on initial recognition, less issue fee income received where the fee is integral to the yield on the loan. All loan receivables are held for collection of contractual cash flows, which represent solely payments of principal and interest. After initial recognition, loans receivable are subsequently measured at amortised cost using the effective interest rate method whereby interest and issue fee income are credited to the income statement and added to the carrying value of loans receivable at a constant rate in proportion to the loan amount outstanding. The Group recognises a loss allowance for expected credit losses (ECL) on its loans receivable from joint ventures. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition. The Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If the credit risk has not increased significantly since initial recognition, the Group measures the loss allowance at an amount equal to the 12 month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of the loans. In contrast, 12 month ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of default over the remaining life of the asset at the reporting date with the risk of default for the same period at initial recognition. In making this assessment, the Group considers both quantitative and qualitative information about the risk of default that is reasonable and supportable, including forward-looking information that is available. This includes assessment of a deterioration in: actual or expected business; financial or economic conditions of the borrower; actual or expected operating results, cash flows and financial position of the borrower; and the regulatory, economic, or technological environment faced by the borrower. Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. Definition of default The Group considers that a default has taken place where information developed internally indicates that the borrower is unlikely to pay its creditors, including the Group, in full. Irrespective of the above analysis, the Group considers that default has occurred when a loan receivable is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-365": {
"value": "p) Trade receivables and accrued income Trade receivables and accrued income are measured at fair value on initial recognition, and subsequently measured at amortised cost using the effective interest rate method, less loss allowance. If there is objective evidence that the asset is impaired, it is written down to its recoverable amount and the irrecoverable amount is recognised as an expense in operating costs. The Group applies the simplified approach permitted by IFRS 9 for estimating expected credit losses on trade and other receivables. For trade receivables that are assessed not to be impaired individually, expected credit losses are estimated based on the Group\u2019s historical experience of trade receivable write-offs and reasonable, supportable forward-looking information which is available without undue cost or effort. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-366": {
"value": "q) Retirement benefits (i) Defined benefit schemes The difference between the value of defined benefit pension scheme assets and defined benefit pension scheme liabilities is recorded on the balance sheet as a retirement benefit asset or obligation. Defined benefit pension scheme assets are measured at fair value using bid price for assets with quoted prices. For scheme assets with no quoted price, the fair value is derived by using quotations from independent third parties or by using applicable valuation techniques at the end of each reporting period. Defined benefit pension scheme liabilities are measured at the balance sheet date by an independent actuary using the projected unit method and discounted at the current rate of return on high-quality corporate bonds of equivalent term and currency to the liability. Service cost, representing the cost of employee service in the year, is included in operating costs. Net finance cost is calculated by applying the discount rate used for the scheme liabilities to the net obligation. Changes in the retirement benefit obligation that arise from: \u2013 differences between the return on scheme assets and interest income included in the income statement; \u2013 actuarial gains and losses from experience adjustments; and \u2013 changes in demographic or financial assumptions, are classified as remeasurements, charged or credited to other comprehensive income and recorded in the statement of comprehensive income in the period in which they arise. There is no contractual agreement, or stated policy, for charging the net defined benefit cost to participating Group companies. Therefore, the parent recognises a charge in the income statement which is equal to the contributions payable in the year. The net defined benefit cost for these schemes is recognised by the sponsoring employers, Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig. (ii) Defined contribution schemes Contributions to defined contribution pension schemes are charged to the income statement in the period in which they fall due. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-367": {
"value": "r) Provisions Provisions are recognised where: \u2013 there is a present obligation as a result of a past event; \u2013 it is probable that there will be an outflow of economic benefits to settle this obligation; and \u2013 a reliable estimate of this amount can be made. Insurance provisions are recognised for claims notified and for claims incurred but which have not yet been notified, based on advice from the Group\u2019s independent insurance advisers. Provisions are discounted to present value using a pre-tax discount rate that reflects the risks specific to the liability where the effect is material. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-368": {
"value": "s) Purchase of own shares Where market purchases of Severn Trent ordinary shares are made through an obligating contract, a liability for the present value of the redemption amount is recognised and charged to retained earnings. Payments for the purchase of shares are charged to the liability when made. Shares held by the Severn Trent Employee Share Ownership Trust that have not vested unconditionally by the balance sheet date are deducted from shareholders\u2019 funds until such time as they vest. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-369": {
"value": "t) Borrowings The accounting policy for borrowings that are the hedged item in a fair value hedge is set out in note 2 u) and the accounting policy for lease liabilities is set out in note 2 j). All other borrowings are initially recognised at fair value less issue costs. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method whereby interest and issue costs are charged to the income statement and added to the carrying value of borrowings at a constant rate in proportion to the capital amount outstanding. Index-linked debt is adjusted for changes in the relevant inflation index and changes in value are charged to finance costs in the income statement. Borrowings denominated in foreign currency are translated to sterling at the spot rate on the balance sheet date. Exchange gains or losses resulting from this are credited or charged to gains/losses on financial instruments in the income statement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-370": {
"value": "u) Derivative financial instruments Derivative financial instruments are stated at fair value, including accrued interest. Fair value is determined using the methodology described in note 34 a). The accounting policy for changes in fair value depends on whether the derivative is designated as a hedging instrument. The various accounting policies are described below. Interest receivable or payable in respect of derivative financial instruments is included in finance income or costs in the income statement. Derivatives not designated as hedging instruments Gains or losses arising on remeasurement of derivative financial instruments that are not designated as hedging instruments are recognised in gains/losses on financial instruments in the income statement. Derivatives designated as hedging instruments The Group uses derivative financial instruments such as cross currency swaps, forward currency contracts, energy swaps and interest rate swaps to hedge its risks associated with foreign currency, interest rate and energy price fluctuations. At the inception of each hedge relationship, the Group documents: \u2013 the economic relationship between the hedging instrument and the hedged item; \u2013 its risk management objectives and strategy for undertaking the hedge transaction; and \u2013 whether changes in fair value or the cash flows of the hedging instrument are expected to offset changes in fair values or cash flows (as appropriate) of the hedged item. Hedge accounting is discontinued when the hedging instrument expires, is sold, terminated or exercised, or no longer qualifies for hedge accounting. Fair value hedges Where a loan or borrowing is in a fair value hedging relationship it is remeasured for changes in fair value of the hedged risk at the balance sheet date, with gains or losses being recognised in gains/losses on financial instruments in the income statement. The gain or loss on the corresponding hedging instrument is also taken to gains/losses on financial instruments in the income statement so that the effective portion of the hedge will offset the gain or loss on the hedged item. If hedge accounting is discontinued, the fair value adjustment arising from the hedged risk on the hedged item is amortised to the income statement over the anticipated remaining life of the hedged item. Cash flow hedges The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity and the ineffective portion is charged to gains/losses on financial instruments in the income statement. When the gain or loss from the hedged underlying transaction is recognised in the income statement, the gains or losses on the hedging instrument that have previously been recognised in equity are recycled through gains/losses on financial instruments in the income statement. If hedge accounting is discontinued, any cumulative gain or loss on the hedging instrument previously recognised in equity is held in equity until the forecast transaction occurs, or transferred to gains/losses on financial instruments in the income statement if the forecast transaction is no longer expected to occur. From this point the derivative is accounted for in the same way as derivatives not designated as hedging instruments. If the hedging instrument is terminated, the gains and losses previously recognised in equity are held in equity until either the forecast transaction occurs or the forecast transaction is no longer expected to occur. Embedded derivatives Where a contract includes terms that cause some of its cash flows to vary in a similar way to a derivative financial instrument, that part of the contract is considered to be an embedded derivative. Embedded derivatives are separated from the contract and measured at fair value with gains and losses taken to the income statement if the host contract is not an asset within the scope of IFRS 9 and: \u2013 the risks and characteristics of the embedded derivative are not closely related to those of the contract; \u2013 a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and \u2013 the contract is not carried at fair value with gains and losses reported in the income statement. In all other cases embedded derivatives are accounted for in line with the accounting policy for the contract as a whole. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-435": {
"value": "u) Derivative financial instruments Derivative financial instruments are stated at fair value, including accrued interest. Fair value is determined using the methodology described in note 34 a). The accounting policy for changes in fair value depends on whether the derivative is designated as a hedging instrument. The various accounting policies are described below. Interest receivable or payable in respect of derivative financial instruments is included in finance income or costs in the income statement. Derivatives not designated as hedging instruments Gains or losses arising on remeasurement of derivative financial instruments that are not designated as hedging instruments are recognised in gains/losses on financial instruments in the income statement. Derivatives designated as hedging instruments The Group uses derivative financial instruments such as cross currency swaps, forward currency contracts, energy swaps and interest rate swaps to hedge its risks associated with foreign currency, interest rate and energy price fluctuations. At the inception of each hedge relationship, the Group documents: \u2013 the economic relationship between the hedging instrument and the hedged item; \u2013 its risk management objectives and strategy for undertaking the hedge transaction; and \u2013 whether changes in fair value or the cash flows of the hedging instrument are expected to offset changes in fair values or cash flows (as appropriate) of the hedged item. Hedge accounting is discontinued when the hedging instrument expires, is sold, terminated or exercised, or no longer qualifies for hedge accounting. Fair value hedges Where a loan or borrowing is in a fair value hedging relationship it is remeasured for changes in fair value of the hedged risk at the balance sheet date, with gains or losses being recognised in gains/losses on financial instruments in the income statement. The gain or loss on the corresponding hedging instrument is also taken to gains/losses on financial instruments in the income statement so that the effective portion of the hedge will offset the gain or loss on the hedged item. If hedge accounting is discontinued, the fair value adjustment arising from the hedged risk on the hedged item is amortised to the income statement over the anticipated remaining life of the hedged item. Cash flow hedges The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity and the ineffective portion is charged to gains/losses on financial instruments in the income statement. When the gain or loss from the hedged underlying transaction is recognised in the income statement, the gains or losses on the hedging instrument that have previously been recognised in equity are recycled through gains/losses on financial instruments in the income statement. If hedge accounting is discontinued, any cumulative gain or loss on the hedging instrument previously recognised in equity is held in equity until the forecast transaction occurs, or transferred to gains/losses on financial instruments in the income statement if the forecast transaction is no longer expected to occur. From this point the derivative is accounted for in the same way as derivatives not designated as hedging instruments. If the hedging instrument is terminated, the gains and losses previously recognised in equity are held in equity until either the forecast transaction occurs or the forecast transaction is no longer expected to occur. Embedded derivatives Where a contract includes terms that cause some of its cash flows to vary in a similar way to a derivative financial instrument, that part of the contract is considered to be an embedded derivative. Embedded derivatives are separated from the contract and measured at fair value with gains and losses taken to the income statement if the host contract is not an asset within the scope of IFRS 9 and: \u2013 the risks and characteristics of the embedded derivative are not closely related to those of the contract; \u2013 a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and \u2013 the contract is not carried at fair value with gains and losses reported in the income statement. In all other cases embedded derivatives are accounted for in line with the accounting policy for the contract as a whole. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-416": {
"value": "u) Derivative financial instruments Derivative financial instruments are stated at fair value, including accrued interest. Fair value is determined using the methodology described in note 34 a). The accounting policy for changes in fair value depends on whether the derivative is designated as a hedging instrument. The various accounting policies are described below. Interest receivable or payable in respect of derivative financial instruments is included in finance income or costs in the income statement. Derivatives not designated as hedging instruments Gains or losses arising on remeasurement of derivative financial instruments that are not designated as hedging instruments are recognised in gains/losses on financial instruments in the income statement. Derivatives designated as hedging instruments The Group uses derivative financial instruments such as cross currency swaps, forward currency contracts, energy swaps and interest rate swaps to hedge its risks associated with foreign currency, interest rate and energy price fluctuations. At the inception of each hedge relationship, the Group documents: \u2013 the economic relationship between the hedging instrument and the hedged item; \u2013 its risk management objectives and strategy for undertaking the hedge transaction; and \u2013 whether changes in fair value or the cash flows of the hedging instrument are expected to offset changes in fair values or cash flows (as appropriate) of the hedged item. Hedge accounting is discontinued when the hedging instrument expires, is sold, terminated or exercised, or no longer qualifies for hedge accounting. Fair value hedges Where a loan or borrowing is in a fair value hedging relationship it is remeasured for changes in fair value of the hedged risk at the balance sheet date, with gains or losses being recognised in gains/losses on financial instruments in the income statement. The gain or loss on the corresponding hedging instrument is also taken to gains/losses on financial instruments in the income statement so that the effective portion of the hedge will offset the gain or loss on the hedged item. If hedge accounting is discontinued, the fair value adjustment arising from the hedged risk on the hedged item is amortised to the income statement over the anticipated remaining life of the hedged item. Cash flow hedges The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity and the ineffective portion is charged to gains/losses on financial instruments in the income statement. When the gain or loss from the hedged underlying transaction is recognised in the income statement, the gains or losses on the hedging instrument that have previously been recognised in equity are recycled through gains/losses on financial instruments in the income statement. If hedge accounting is discontinued, any cumulative gain or loss on the hedging instrument previously recognised in equity is held in equity until the forecast transaction occurs, or transferred to gains/losses on financial instruments in the income statement if the forecast transaction is no longer expected to occur. From this point the derivative is accounted for in the same way as derivatives not designated as hedging instruments. If the hedging instrument is terminated, the gains and losses previously recognised in equity are held in equity until either the forecast transaction occurs or the forecast transaction is no longer expected to occur. Embedded derivatives Where a contract includes terms that cause some of its cash flows to vary in a similar way to a derivative financial instrument, that part of the contract is considered to be an embedded derivative. Embedded derivatives are separated from the contract and measured at fair value with gains and losses taken to the income statement if the host contract is not an asset within the scope of IFRS 9 and: \u2013 the risks and characteristics of the embedded derivative are not closely related to those of the contract; \u2013 a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and \u2013 the contract is not carried at fair value with gains and losses reported in the income statement. In all other cases embedded derivatives are accounted for in line with the accounting policy for the contract as a whole. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-372": {
"value": "v) Share based payment The Group operates a number of equity settled share based compensation plans for employees. The fair value of the employee services received in exchange for the grant is recognised as an expense over the vesting period of the grant. The fair value of employee services is determined by reference to the fair value of the awards granted, calculated using an appropriate pricing model, excluding the impact of any non-market vesting conditions. The number of awards that are expected to vest takes into account non-market vesting conditions including, where appropriate, continuing employment by the Group. The charge is adjusted to reflect shares that do not vest as a result of failing to meet a non-market condition. Share based compensation plans are satisfied in shares of the parent company. Where the fair value of the awards is not recharged to participating Group companies, the parent company records the fair value of the awards as an increase in its investment in the subsidiary. The investment is adjusted to reflect shares that do not vest as a result of failing to meet a non-market based condition. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-371": {
"value": "w) Cash flow statement For the cash flow statement, cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Such investments are normally those with less than three months maturity from the date of acquisition and include cash and bank balances and investments in liquid funds. Net cash and cash equivalents include overdrafts repayable on demand and amounts drawn under the Group\u2019s revolving credit facility. Interest paid in the cash flow statement includes amounts charged to the income statement and amounts included in the cost of property, plant and equipment. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-373": {
"value": "x) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value. The identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date except that: \u2013 deferred tax assets or liabilities and retirement benefit assets or obligations are recognised and measured in accordance with the policies set out under notes 2 e) and 2 q) above; and \u2013 assets or disposal groups that are classified as held for sale are measured in accordance with the policy set out below. Where an asset or group of assets (a disposal group) is available for immediate sale and the sale is highly probable and expected to occur within one year, then the disposal group is classified as held for sale. The disposal group is measured at the lower of the carrying amount and the fair value less costs to sell. Depreciation is not charged on such assets. Where the initial accounting for a business combination is incomplete at the end of the reporting period, the Group reports provisional amounts and finalises these within one year of the acquisition date (the \u2018measurement period\u2019). Contingent consideration is measured at fair value at the acquisition date. During the measurement period, changes in provisional fair values of assets and liabilities acquired, or of contingent consideration, are recognised as adjustments to goodwill or bargain purchase gain. Outside the measurement period, changes in fair value of contingent consideration that is not classified as equity are recognised in profit or loss.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-374": {
"value": "3 New accounting policies and future requirements At the balance sheet date, no Standards or Interpretations were in issue but not yet effective that are expected to have a material impact on the Group\u2019s financial position. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-375": {
"value": "4 Critical accounting judgments and key sources of estimation uncertainty In the process of applying the Group\u2019s accounting policies, the Group is required to make certain judgments, estimates and assumptions that it believes are reasonable based on the information available. Although these estimates are based on management\u2019s best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. a) Critical accounting judgments (i) Classification of costs between operating expenditure and capital expenditure Severn Trent Water\u2019s business involves significant construction and engineering projects. Assessing the classification of costs incurred on such projects between capital expenditure and operating expenditure requires judgments to be made. The judgments are made based on objective criteria that the Group has developed to facilitate the consistent application of its accounting policies. The costs of like-for- like replacement of infrastructure components are recognised in the income statement as they arise. Total infrastructure renewal expenditure during the year was \u00a3238.4 million (2022: \u00a3198.2 million). Expenditure which results in quality or capacity enhancements to the operating capability of the infrastructure networks is capitalised and amounted to \u00a3898.9 million (2022: \u00a3714.3 million). (ii) Income from connections to the water and waste water networks The Group receives income from developers and domestic customers for new connections to the water and waste water networks either in the form of infrastructure assets or cash. The more significant examples of these transactions are: \u2013 Developers transfer to the Group infrastructure assets that they have installed in a new development. Usually there is no monetary consideration exchanged when the Group adopts assets in this manner. \u2013 When new properties are connected to the network, the Group is permitted, under the Water Industry Act, to obtain a contribution from the developer towards the cost of reinforcing its network to meet the additional demands arising from the new connections. These are referred to as Infrastructure charges. The charges are a standard amount per property and are not linked to specific reinforcement expenditure. \u2013 When developers require properties to be connected to the Group\u2019s network, the Group installs a meter and connection to each property but retains ownership of the assets and responsibility for their maintenance. Assessing whether this income is received in relation to the provision of the connection to the Group\u2019s infrastructure networks or is to facilitate the ongoing provision of water and waste water services to the properties in question requires judgment about the nature of the ongoing relationship between the Group and the customer. During the period the Group received infrastructure assets with a fair value of \u00a3105.0 million (2022: \u00a369.0 million), infrastructure charges amounting to \u00a321.8 million (2022: \u00a325.0 million) and other charges relating to the provision of infrastructure amounting to \u00a320.2 million (2022: \u00a317.0 million). The Group considers that the purpose of these transactions is to facilitate the ongoing provision of water and waste water services to the properties in question and they are inextricably linked to that ongoing service. There is a transferable right to receive an ongoing water and waste water service that passes from customer to customer when the property is bought and sold during the life of the property and, without the ongoing water and waste water service, the transactions have no value. Therefore, in line with our accounting policies the amounts received are held on the balance sheet and released to turnover in the income statement over the life of the related assets. (iii) Climate change The Group continues to develop its assessment of the impact that climate change may have on the amounts recognised in the financial statements. The natural environment in which the Group operates is continually changing, and the expected impact on the Group from climate change is set out within the \u2018Our approach to climate change\u2019 section of the Strategic Report on page 39. We have considered the impact of the climate change related risks to which the Group is exposed in the preparation of these financial statements. The risks are long term in nature, and whilst they will provide a need for investment in the future, we conclude that there is no material impact on the carrying amount of assets or liabilities recognised in the financial statements, nor do they lead to any additional key sources of estimation or judgment. b) Sources of estimation uncertainty (i) Depreciation and carrying amounts of property, plant and equipment Calculating the depreciation charge and hence the carrying value for property, plant and equipment requires estimates to be made of the useful lives of the assets. The estimates are based on engineering data and the Group\u2019s experience of similar assets. Details are set out in note 2 i). The average useful life of property, plant and equipment by asset category is detailed as follows: Average useful economic life (years) Land and buildings 42.1 Infrastructure assets 135.2 Fixed plant and equipment 24.3 Moveable plant 11.4 The impact on the annual depreciation expense of a 10 per cent increase and decrease in useful economic life (\u2018UEL\u2019) of property, plant and equipment by asset category is detailed as follows: Impact on annual depreciation (\u00a3m) 10 per cent increase in UEL \u00a3m 10 per cent decrease in UEL \u00a3m Land and buildings (9.3) 11.3 Infrastructure assets (9.1) 5.1 Fixed plant and equipment (20.5) 25.0 Moveable plant (0.6) 0.8 (ii) Retirement benefit obligations Determining the amount of the Group\u2019s retirement benefit obligations and the net costs of providing such benefits requires assumptions to be made concerning long-term interest rates, inflation and longevity of current and future pensioners. Changes in these assumptions could significantly impact the amount of the obligations or the cost of providing such benefits. The Group makes assumptions concerning these matters with the assistance of advice from independent qualified actuaries. Details of the assumptions made and associated sensitivities are set out in note 28 to the financial statements. (iii) Expected credit losses on trade receivables Expected credit losses for trade receivables are based on the historical credit losses experienced over the last nine years and reasonable forecasts of the future impact of external economic factors on the Group\u2019s collection of trade receivables. A number of economic factors such as high inflation, rising interest rates and reduction of Government support for domestic energy bills might impact household disposable income and therefore the expected credit losses on trade receivables. The gross carrying amounts and expected credit loss allowances for trade receivables and accrued income were as follows: 2023 \u00a3m 2022 \u00a3m Gross carrying amount 746.7 630.9 Provision for bad and doubtful debts (135.1) (135.0) Net carrying amount 611.6 495.9 Movements in the expected credit loss allowance are as follows: 2023 \u00a3m 2022 \u00a3m At 1 April 135.0 137.1 Charge for bad and doubtful debts 24.5 24.6 Amounts written off during the period (24.4) (26.7) At 31 March 135.1 135.0 The average expected credit loss for the outstanding trade receivables and accrued income was 2.25% at 31 March 2023. A change of 10bps in the expected credit loss would increase the charge and provision for bad and doubtful debts by \u00a310.3 million. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-376": {
"value": "5 Segmental analysis a) Background The Group is organised into two main business segments: Regulated Water and Waste Water includes the activities of Severn Trent Water Limited, except hydro-electric generation and property sales, and Hafren Dyfrdwy Cyfyngedig. Business Services includes the Group\u2019s Operating Services businesses, the Green Power business including Severn Trent Water\u2019s hydro- electric generation, the Property Development business and our other non-regulated businesses including affinity products and searches. The Severn Trent Executive Committee (\u2018STEC\u2019) is the Group\u2019s chief operating decision maker. The reports provided to STEC include segmental information prepared on the basis described above. Results from interests in our joint venture are not included in the segmental reports reviewed by STEC. Goodwill is allocated and monitored at the segment level. Transactions between reportable segments are included within segmental results, assets and liabilities in accordance with Group accounting policies. These are eliminated on consolidation. The measure of profit or loss that is reported to STEC for the segments is PBIT. A segmental analysis of turnover and PBIT is presented below. b) Segmental results The following table shows the segmental turnover and PBIT: 2023 2022 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Regulated Water and Waste Water \u00a3m Business Services \u00a3m External turnover 1,995.0 170.1 1,803.9 139.4 Inter-segment turnover 0.4 7.0 0.5 4.2 Total turnover 1,995.4 177.1 1,804.4 143.6 Profit before interest and tax 467.5 49.2 476.3 36.4 Profit before interest and tax is stated after: 2023 2022 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Regulated Water and Waste Water \u00a3m Business Services \u00a3m Depreciation of property, plant and equipment 367.6 12.1 350.6 11.1 Depreciation of right-of-use assets 2.2 1.7 1.0 2.8 Amortisation of intangible assets 30.8 2.8 33.4 2.9 (Profit)/Loss on disposal of fixed assets (0.2) (2.0) 2.5 (7.9) The reportable segments\u2019 turnover is reconciled to Group turnover as follows: 2023 \u00a3m 2022 \u00a3m Regulated Water and Waste Water 1,995.4 1,804.4 Business Services 177.1 143.6 Corporate and other 1.1 1.1 Consolidation adjustments (8.5) (5.8) 2,165.1 1,943.3 Included in the revenues of Regulated Water and Waste Water of \u00a31,995.4 million (2022: \u00a31,804.4 million) is \u00a3259.5 million (2022: \u00a3259.8 million) which arose from sales to Water Plus Group. No other single customer contributed 10% or more to the Group\u2019s revenue for either 2023 or 2022. Segmental PBIT is reconciled to the Group\u2019s profit before tax as follows: 2023 \u00a3m 2022 \u00a3m Regulated Water and Waste Water 467.5 476.3 Business Services 49.2 36.4 Corporate and other (8.0) (6.9) Consolidation adjustments 0.1 0.4 PBIT 508.8 506.2 Net finance costs (362.6) (269.4) Reduction in expected credit loss on loan receivable \u2013 0.2 Net gains on financial instruments 21.7 39.3 Share of net gain/(loss) of joint ventures accounted for using the equity method \u2013 (2.2) Profit on ordinary activities before taxation 167.9 274.1 The Group\u2019s treasury and tax affairs are managed centrally by the Group Treasury and Tax departments. Finance costs are managed on a Group basis and hence interest income and costs are not reported at the segmental level. Tax is not reported to STEC on a segmental basis. c) Segmental capital employed Separate segmental analyses of assets and liabilities are not reviewed by STEC. The balance sheet measure reviewed by STEC on a segmental basis is capital employed. 2023 2022 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Regulated Water and Waste Water \u00a3m Business Services \u00a3m Operating assets 11,498.4 349.5 10,869.7 337.4 Goodwill 63.5 30.5 63.5 29.2 Segment assets 11,561.9 380.0 10,933.2 366.6 Segment operating liabilities (2,507.4) (33.3) (2,158.8) (29.6) Capital employed 9,054.5 346.7 8,774.4 337.0 Operating assets comprise other intangible assets, property, plant and equipment, right-of-use assets, retirement benefit surpluses, inventory and trade and other receivables. Operating liabilities comprise trade and other payables, retirement benefit obligations and provisions. The reportable segments\u2019 assets are reconciled to the Group\u2019s total assets as follows: 2023 \u00a3m 2022 \u00a3m Segment assets Regulated Water and Waste Water 11,561.9 10,933.2 Business Services 380.0 366.6 Corporate and other 5.3 4.5 Other financial assets 117.0 174.2 Investment in joint venture 16.5 16.5 Loan receivable from joint venture 75.3 79.6 Current tax receivable 9.9 6.2 Consolidation adjustments (17.3) (26.6) Total assets 12,148.6 11,554.2 The consolidation adjustments comprise elimination of intra-group debtors and unrealised profits on fixed assets. The reportable segments\u2019 liabilities are reconciled to the Group\u2019s total liabilities as follows: 2023 \u00a3m 2022 \u00a3m Segment liabilities Regulated Water and Waste Water (2,507.4) (2,158.8) Business Services (33.3) (29.6) Corporate and other (47.4) (38.2) Other financial liabilities (7,314.9) (6,774.2) Deferred tax (1,293.5) (1,320.6) Consolidation adjustments 18.5 31.1 Total liabilities (11,178.0) (10,290.3) The consolidation adjustments comprise elimination of intra-group creditors. The following table shows the additions to other intangible assets, property, plant and equipment and right-of-use assets: 2023 2022 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Regulated Water and Waste Water \u00a3m Business Services \u00a3m Other intangible assets 39.5 0.5 35.9 0.4 Property, plant and equipment 885.5 14.3 694.3 20.0 Right-of-use assets 3.0 \u2013 2.7 1.5 d) Geographical areas All of the Group\u2019s sales were derived from the UK in 2023 and 2022. ",
"dimensions": {
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"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-417": {
"value": "d) Geographical areas All of the Group\u2019s sales were derived from the UK in 2023 and 2022. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeographicalAreasExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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},
"fact-377": {
"value": "6 Revenue from contracts with customers Revenue recognised from contracts with customers is analysed by type of revenue and by business segment below: Year ended 31 March 2023 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Corporate and other \u00a3m Consolidation adjustments \u00a3m Group \u00a3m Water and waste water services 1,932.9 \u2013 \u2013 (0.4) 1,932.5 Operating services \u2013 84.7 \u2013 \u2013 84.7 Renewable energy 57.2 78.6 \u2013 (7.0) 128.8 Other sales 5.3 13.8 1.1 (1.1) 19.1 1,995.4 177.1 1.1 (8.5) 2,165.1 Year ended 31 March 2022 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Corporate and other \u00a3m Consolidation adjustments \u00a3m Group \u00a3m Water and waste water services 1,767.5 \u2013 \u2013 (0.5) 1,767.0 Operating services \u2013 74.4 \u2013 \u2013 74.4 Renewable energy 32.8 55.5 \u2013 (4.2) 84.1 Other sales 4.1 13.7 1.1 (1.1) 17.8 1,804.4 143.6 1.1 (5.8) 1,943.3 Revenue from water and waste water services provided to customers with meters is recognised when the service is provided and is measured based on actual meter readings and estimated consumption for the period between the last meter reading and the year end. For customers who are not metered, the performance obligation is to stand ready to provide water and waste water services throughout the period. Such customers are charged on an annual basis, coterminous with the financial year and revenue is recognised on a straight-line basis over the financial year. Deferred income arising from connections to the Group\u2019s water and waste water networks represents a contract liability and is recognised in line with the Group\u2019s accounting policy set out in note 2 and the judgment described in note 4. Changes in the Group\u2019s contract liabilities from deferred income in relation to connections were as follows: 2023 \u00a3m 2022 \u00a3m At 1 April 1,353.4 1,259.1 Contributions and grants received 40.2 42.8 Assets transferred at no cost 105.0 69.0 Amounts released to income statement (16.4) (17.5) At 31 March 1,482.2 1,353.4 Revenue amounting to \u00a316.4 million (2022: \u00a317.5 million) that was included in the opening balance of the contract liability was recognised in the income statement during the year. No revenue was recognised in the year from performance obligations relating to connections to the Group\u2019s water and waste water networks that were satisfied or partially satisfied in previous years (2022: nil). Payments for infrastructure charges and other charges relating to connection to the networks occur when the connections are made. The performance obligations, including provision of an ongoing water and waste water service, are provided over the life of the relevant property. Revenue from the remaining performance obligations is expected to be recognised as follows: 2023 \u00a3m 2022 \u00a3m In the next year 16.2 29.5 Between one and five years 64.8 118.0 After more than five years 1,401.2 1,205.9 1,482.2 1,353.4 Payments received from customers in advance of the service period represents a contract liability. Changes in the Group\u2019s contract liabilities from payments received in advance were as follows: 2023 \u00a3m 2022 \u00a3m Contract liability at 1 April 144.8 132.5 Revenue recognised (1,394.9) (1,291.1) Cash received 1,396.6 1,303.4 Contract liability at 31 March 146.5 144.8 The Operating Services business includes a material 25-year contract with multiple performance obligations. Under this contract with the Ministry of Defence (\u2018MoD\u2019), the Group bills the customer based on an inflation-linked volumetric tariff and invoices are payable on normal commercial terms. The performance obligations, which are satisfied as the services are performed, are: \u2013 operating and maintaining the customer\u2019s infrastructure assets; \u2013 upgrading the customer\u2019s infrastructure assets; \u2013 administrating the services received from statutory water and sewerage undertakers; and \u2013 administrating billing services of the customer\u2019s commercial and Non Base Dependent customers. Revenue has been allocated to each performance obligation based on the stand-alone selling price of each performance obligation, which is based on the forecast costs incurred and expected margin for each obligation. Changes to projected margins are adjusted on a cumulative basis in the period that they are identified. Other than the provision of water and waste water services, there is no direct correlation between the satisfaction of the performance obligations and the timing of billing and customer payments. The estimated transaction price for the contract is derived from estimates of the customer\u2019s consumption at the contract tariff rate, adjusted for inflation. This estimate is updated on an annual basis. The estimated transaction price has increased from 31 March 2022 as a result of increased inflation and consumption. At 31 March 2023 the aggregate amount of the estimated transaction price allocated to performance obligations that were not satisfied was \u00a3372.5 million (2022: \u00a3396.3 million). This amount is expected to be recognised as revenue as follows: 2023 \u00a3m 2022 \u00a3m In the next year 52.1 49.0 Between one and five years 212.3 197.4 After more than five years 108.1 149.9 372.5 396.3 The assumptions and other sources of estimation uncertainty in relation to this contract do not present a significant risk of a material adjustment to the carrying amounts of assets and liabilities in the next financial year and therefore are not included as a source of estimation uncertainty in note 4 b). Revenue recognised in excess of amounts billed is recorded as a contract asset and amounts billed in excess of revenue recognised are recorded as contract liabilities. Changes in contract assets in the year were as follows: 2023 \u00a3m 2022 \u00a3m Contract asset at 1 April 39.9 38.2 Amounts billed (52.6) (49.9) Revenue recognised 57.0 51.6 Contract asset at 31 March 44.3 39.9 No contract liabilities arose from the Group\u2019s Operating Services contract with the MoD. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-418": {
"value": "6 Revenue from contracts with customers Revenue recognised from contracts with customers is analysed by type of revenue and by business segment below: Year ended 31 March 2023 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Corporate and other \u00a3m Consolidation adjustments \u00a3m Group \u00a3m Water and waste water services 1,932.9 \u2013 \u2013 (0.4) 1,932.5 Operating services \u2013 84.7 \u2013 \u2013 84.7 Renewable energy 57.2 78.6 \u2013 (7.0) 128.8 Other sales 5.3 13.8 1.1 (1.1) 19.1 1,995.4 177.1 1.1 (8.5) 2,165.1 Year ended 31 March 2022 Regulated Water and Waste Water \u00a3m Business Services \u00a3m Corporate and other \u00a3m Consolidation adjustments \u00a3m Group \u00a3m Water and waste water services 1,767.5 \u2013 \u2013 (0.5) 1,767.0 Operating services \u2013 74.4 \u2013 \u2013 74.4 Renewable energy 32.8 55.5 \u2013 (4.2) 84.1 Other sales 4.1 13.7 1.1 (1.1) 17.8 1,804.4 143.6 1.1 (5.8) 1,943.3 Revenue from water and waste water services provided to customers with meters is recognised when the service is provided and is measured based on actual meter readings and estimated consumption for the period between the last meter reading and the year end. For customers who are not metered, the performance obligation is to stand ready to provide water and waste water services throughout the period. Such customers are charged on an annual basis, coterminous with the financial year and revenue is recognised on a straight-line basis over the financial year. Deferred income arising from connections to the Group\u2019s water and waste water networks represents a contract liability and is recognised in line with the Group\u2019s accounting policy set out in note 2 and the judgment described in note 4. Changes in the Group\u2019s contract liabilities from deferred income in relation to connections were as follows: 2023 \u00a3m 2022 \u00a3m At 1 April 1,353.4 1,259.1 Contributions and grants received 40.2 42.8 Assets transferred at no cost 105.0 69.0 Amounts released to income statement (16.4) (17.5) At 31 March 1,482.2 1,353.4 Revenue amounting to \u00a316.4 million (2022: \u00a317.5 million) that was included in the opening balance of the contract liability was recognised in the income statement during the year. No revenue was recognised in the year from performance obligations relating to connections to the Group\u2019s water and waste water networks that were satisfied or partially satisfied in previous years (2022: nil). Payments for infrastructure charges and other charges relating to connection to the networks occur when the connections are made. The performance obligations, including provision of an ongoing water and waste water service, are provided over the life of the relevant property. Revenue from the remaining performance obligations is expected to be recognised as follows: 2023 \u00a3m 2022 \u00a3m In the next year 16.2 29.5 Between one and five years 64.8 118.0 After more than five years 1,401.2 1,205.9 1,482.2 1,353.4 Payments received from customers in advance of the service period represents a contract liability. Changes in the Group\u2019s contract liabilities from payments received in advance were as follows: 2023 \u00a3m 2022 \u00a3m Contract liability at 1 April 144.8 132.5 Revenue recognised (1,394.9) (1,291.1) Cash received 1,396.6 1,303.4 Contract liability at 31 March 146.5 144.8 The Operating Services business includes a material 25-year contract with multiple performance obligations. Under this contract with the Ministry of Defence (\u2018MoD\u2019), the Group bills the customer based on an inflation-linked volumetric tariff and invoices are payable on normal commercial terms. The performance obligations, which are satisfied as the services are performed, are: \u2013 operating and maintaining the customer\u2019s infrastructure assets; \u2013 upgrading the customer\u2019s infrastructure assets; \u2013 administrating the services received from statutory water and sewerage undertakers; and \u2013 administrating billing services of the customer\u2019s commercial and Non Base Dependent customers. Revenue has been allocated to each performance obligation based on the stand-alone selling price of each performance obligation, which is based on the forecast costs incurred and expected margin for each obligation. Changes to projected margins are adjusted on a cumulative basis in the period that they are identified. Other than the provision of water and waste water services, there is no direct correlation between the satisfaction of the performance obligations and the timing of billing and customer payments. The estimated transaction price for the contract is derived from estimates of the customer\u2019s consumption at the contract tariff rate, adjusted for inflation. This estimate is updated on an annual basis. The estimated transaction price has increased from 31 March 2022 as a result of increased inflation and consumption. At 31 March 2023 the aggregate amount of the estimated transaction price allocated to performance obligations that were not satisfied was \u00a3372.5 million (2022: \u00a3396.3 million). This amount is expected to be recognised as revenue as follows: 2023 \u00a3m 2022 \u00a3m In the next year 52.1 49.0 Between one and five years 212.3 197.4 After more than five years 108.1 149.9 372.5 396.3 The assumptions and other sources of estimation uncertainty in relation to this contract do not present a significant risk of a material adjustment to the carrying amounts of assets and liabilities in the next financial year and therefore are not included as a source of estimation uncertainty in note 4 b). Revenue recognised in excess of amounts billed is recorded as a contract asset and amounts billed in excess of revenue recognised are recorded as contract liabilities. Changes in contract assets in the year were as follows: 2023 \u00a3m 2022 \u00a3m Contract asset at 1 April 39.9 38.2 Amounts billed (52.6) (49.9) Revenue recognised 57.0 51.6 Contract asset at 31 March 44.3 39.9 No contract liabilities arose from the Group\u2019s Operating Services contract with the MoD. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRevenueExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-378": {
"value": "7 Net operating costs 2023 \u00a3m 2022 \u00a3m Wages and salaries 315.1 299.1 Social security costs 35.3 30.9 Pension costs 22.4 28.2 Share based payments 9.5 8.3 Total employee costs 382.3 366.5 Power 198.3 110.9 Raw materials and consumables 115.2 81.3 Rates 84.4 84.3 Charge for bad and doubtful debts 24.5 24.6 Services charges 41.6 36.5 Depreciation of tangible fixed assets 379.7 361.5 Depreciation of right-of-use assets 3.9 3.8 Amortisation of intangible fixed assets 33.7 36.3 Hired and contracted services 291.6 256.9 Rental charges \u2013 land and buildings 0.3 0.1 \u2013 other \u2013 0.5 Hire of plant and machinery 9.1 9.3 Profit on disposal of tangible fixed assets (2.2) (5.4) Exchange (gains)/losses (0.8) 0.5 Infrastructure maintenance expenditure 238.4 198.2 Ofwat licence fees 5.5 4.9 Other operating costs 71.3 63.3 Other operating income (3.1) (3.3) 1,873.7 1,630.7 Own work capitalised (217.4) (188.3) 1,656.3 1,442.4 During the year the following fees were charged by the auditor: 2023 \u00a3m 2022 \u00a3m Fees payable to the Company\u2019s auditor for: \u2013 the audit of the Company\u2019s annual accounts 0.3 0.3 \u2013 the audit of the Company\u2019s subsidiary accounts 0.7 0.6 Total audit fees 1.0 0.9 Fees payable to the Company\u2019s auditor and its associates for other services to the Group: \u2013 audit related assurance services 0.2 0.2 \u2013 other assurance services 0.1 0.1 Total non-audit fees 0.3 0.3 Other assurance services include certain agreed upon procedures performed by Deloitte in connection with financing documents. Details of the Group policy on the use of the auditor for non-audit services and how auditor independence and objectivity are safeguarded are set out in the Audit and Risk Committee report on pages 127 and 134. No services were provided pursuant to contingent fee arrangements. Details of directors\u2019 remuneration are set out in the Directors\u2019 Remuneration Report on pages 141 to 144. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-419": {
"value": "2023 \u00a3m 2022 \u00a3m Wages and salaries 315.1 299.1 Social security costs 35.3 30.9 Pension costs 22.4 28.2 Share based payments 9.5 8.3 Total employee costs 382.3 366.5 Power 198.3 110.9 Raw materials and consumables 115.2 81.3 Rates 84.4 84.3 Charge for bad and doubtful debts 24.5 24.6 Services charges 41.6 36.5 Depreciation of tangible fixed assets 379.7 361.5 Depreciation of right-of-use assets 3.9 3.8 Amortisation of intangible fixed assets 33.7 36.3 Hired and contracted services 291.6 256.9 Rental charges \u2013 land and buildings 0.3 0.1 \u2013 other \u2013 0.5 Hire of plant and machinery 9.1 9.3 Profit on disposal of tangible fixed assets (2.2) (5.4) Exchange (gains)/losses (0.8) 0.5 Infrastructure maintenance expenditure 238.4 198.2 Ofwat licence fees 5.5 4.9 Other operating costs 71.3 63.3 Other operating income (3.1) (3.3) 1,873.7 1,630.7 Own work capitalised (217.4) (188.3) 1,656.3 1,442.4 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-436": {
"value": "2023 \u00a3m 2022 \u00a3m Wages and salaries 315.1 299.1 Social security costs 35.3 30.9 Pension costs 22.4 28.2 Share based payments 9.5 8.3 Total employee costs 382.3 366.5 Power 198.3 110.9 Raw materials and consumables 115.2 81.3 Rates 84.4 84.3 Charge for bad and doubtful debts 24.5 24.6 Services charges 41.6 36.5 Depreciation of tangible fixed assets 379.7 361.5 Depreciation of right-of-use assets 3.9 3.8 Amortisation of intangible fixed assets 33.7 36.3 Hired and contracted services 291.6 256.9 Rental charges \u2013 land and buildings 0.3 0.1 \u2013 other \u2013 0.5 Hire of plant and machinery 9.1 9.3 Profit on disposal of tangible fixed assets (2.2) (5.4) Exchange (gains)/losses (0.8) 0.5 Infrastructure maintenance expenditure 238.4 198.2 Ofwat licence fees 5.5 4.9 Other operating costs 71.3 63.3 Other operating income (3.1) (3.3) 1,873.7 1,630.7 Own work capitalised (217.4) (188.3) 1,656.3 1,442.4 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-420": {
"value": "During the year the following fees were charged by the auditor: 2023 \u00a3m 2022 \u00a3m Fees payable to the Company\u2019s auditor for: \u2013 the audit of the Company\u2019s annual accounts 0.3 0.3 \u2013 the audit of the Company\u2019s subsidiary accounts 0.7 0.6 Total audit fees 1.0 0.9 Fees payable to the Company\u2019s auditor and its associates for other services to the Group: \u2013 audit related assurance services 0.2 0.2 \u2013 other assurance services 0.1 0.1 Total non-audit fees 0.3 0.3 Other assurance services include certain agreed upon procedures performed by Deloitte in connection with financing documents. Details of the Group policy on the use of the auditor for non-audit services and how auditor independence and objectivity are safeguarded are set out in the Audit and Risk Committee report on pages 127 and 134. No services were provided pursuant to contingent fee arrangements. Details of directors\u2019 remuneration are set out in the Directors\u2019 Remuneration Report on pages 141 to 144. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-379": {
"value": "8 Employee numbers Average number of employees (including Executive Directors) during the year: 2023 2022 By business segment Regulated Water and Waste Water 7,176 6,612 Business Services 461 492 Corporate and other 14 14 7,651 7,118 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-421": {
"value": "9 Finance income 2023 \u00a3m 2022 \u00a3m Interest income earned on bank deposits 3.3 0.1 Other financial income 2.2 1.8 Total interest receivable 5.5 1.9 Interest income on defined benefit scheme assets 78.6 52.8 84.1 54.7 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-380": {
"value": "9 Finance income 2023 \u00a3m 2022 \u00a3m Interest income earned on bank deposits 3.3 0.1 Other financial income 2.2 1.8 Total interest receivable 5.5 1.9 Interest income on defined benefit scheme assets 78.6 52.8 84.1 54.7 10 Finance costs 2023 \u00a3m 2022 \u00a3m Interest expense charged on: Bank loans and overdrafts 30.9 14.7 Other loans 328.6 243.5 Lease liabilities 3.7 4.0 Total borrowing costs 363.2 262.2 Other financial expenses 1.3 2.4 Interest cost on defined benefit scheme liabilities 82.2 59.5 446.7 324.1 Borrowing costs of \u00a356.6 million (2022: \u00a334.5 million) incurred on funding eligible capital projects have been capitalised at an interest rate of 5.4% (2022: 4.11%). Tax relief of \u00a310.7 million (2022: \u00a36.5 million) was claimed on these costs which has created tax losses carried forward, offset by a related deferred tax asset of \u00a314.1 million (2022: \u00a38.6 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-422": {
"value": "10 Finance costs 2023 \u00a3m 2022 \u00a3m Interest expense charged on: Bank loans and overdrafts 30.9 14.7 Other loans 328.6 243.5 Lease liabilities 3.7 4.0 Total borrowing costs 363.2 262.2 Other financial expenses 1.3 2.4 Interest cost on defined benefit scheme liabilities 82.2 59.5 446.7 324.1 Borrowing costs of \u00a356.6 million (2022: \u00a334.5 million) incurred on funding eligible capital projects have been capitalised at an interest rate of 5.4% (2022: 4.11%). Tax relief of \u00a310.7 million (2022: \u00a36.5 million) was claimed on these costs which has created tax losses carried forward, offset by a related deferred tax asset of \u00a314.1 million (2022: \u00a38.6 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-381": {
"value": "11 Net gains/(losses) on financial instruments 2023 \u00a3m 2022 \u00a3m Loss on swaps used as hedging instruments in fair value hedges (1.3) (1.0) (Loss)/gain arising on debt in fair value hedges (0.3) 1.6 Exchange loss on other loans (7.4) (6.6) Net loss on cash flow hedges transferred from equity (4.9) (6.8) Hedge ineffectiveness on cash flow hedges (1.3) (0.6) Gain arising on swaps where hedge accounting is not applied 35.7 51.5 Amortisation of fair value adjustment on debt 1.2 1.2 21.7 39.3 The gains from financial assets and liabilities mandatorily measured at fair value through profit or loss was \u00a334.4 million (2022: \u00a350.5 million). There were no financial assets or liabilities designated as at fair value through the profit or loss (2022: nil). The Group\u2019s hedge accounting arrangements are described in note 35. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-382": {
"value": "12 Taxation a) Analysis of tax charge in the year 2023 \u00a3m 2022 \u00a3m Current tax Current year at 19% (2022: 19%) \u2013 \u2013 Prior years 0.2 (4.8) Total current tax charge/(credit) 0.2 (4.8) Deferred tax Origination and reversal of temporary differences: Current year 36.0 66.7 Prior years (0.5) 5.0 Exceptional charge on rate change \u2013 294.4 Total deferred tax charge 35.5 366.1 35.7 361.3 An exceptional deferred tax charge of \u00a3294.4 million arose from recalculating opening deferred tax liabilities at 25% in 2022 (see note 26). b) Factors affecting the tax charge in the year The tax expense for the year is higher (2022: higher) than the standard rate of corporation tax in the UK of 19% (2022: 19%). The differences are explained below: Total tax 2023 \u00a3m 2022 \u00a3m Profit before taxation 167.9 274.1 Tax at standard rate of corporation tax in the UK 19% (2022: 19%) 31.9 52.1 Tax effect of depreciation on non-qualifying assets 2.2 1.9 Permanent difference from super deductions (4.6) (5.3) Other permanent differences (2.0) 2.1 Current year impact of rate change 8.5 15.9 Adjustments in respect of prior years (0.3) 0.2 Exceptional deferred tax arising from rate change \u2013 294.4 Total tax charge 35.7 361.3 Current tax 2023 \u00a3m 2022 \u00a3m Profit before taxation 167.9 274.1 Tax at standard rate of corporation tax in the UK 19% (2022: 19%) 31.9 52.1 Tax effect of depreciation on non-qualifying assets 2.2 1.9 Permanent difference from super deductions (4.6) (5.3) Other permanent differences (2.0) 2.1 Tax effect of accelerated capital allowances (33.1) (40.8) Other temporary differences 5.6 (10.0) Adjustments in respect of prior years 0.2 (4.8) Total current tax charge/(credit) 0.2 (4.8) The most significant factor impacting the Group\u2019s current tax charge is the difference between the depreciation charged on property, plant and equipment in the financial statements and the amount deductible from taxable profits in the form of capital allowances. Where the assets qualify for capital allowances this creates a temporary difference and deferred tax is recognised on the difference between the carrying amount of the asset and the amount that will be deductible for tax purposes in future years. Changes in the amount of deferred tax recognised on these assets are charged or credited to deferred tax in the income statement. Where the amount of the capital allowances received is greater than the depreciation charged this is referred to as accelerated capital allowances. On 3 March 2021, the UK Government announced the introduction of a capital allowance \u2018super deduction\u2019 which gave an in-year capital allowance of 130% on the cost of plant and machinery qualifying for the relief between 1 April 2021 and 31 March 2023 and an acceleration of capital allowances on the cost of assets qualifying for special rate allowances. The introduction of these changes meant the Group was eligible to claim more capital allowances in the last two years to the extent that the Group was not liable to pay corporation tax for those years. Certain of the Group\u2019s property, plant and equipment assets are not eligible for capital allowances under current legislation. Therefore there is no tax deduction that corresponds to the depreciation charged on these assets and deferred tax is not recognised in respect of this permanent difference. The 30% allowance in excess of the cost of assets qualifying for the super deduction will never be charged as depreciation in the financial statements and therefore this represents a permanent difference between profits recognised in the income statement and taxable profits. Other permanent differences comprise expenditure that is not deductible for tax purposes or income that is not taxable. Other temporary differences comprise items other than depreciation of property, plant and equipment where the amount is included in the tax computation in a different period from when it is recognised in the income statement. Deferred tax is provided on these items. The amounts included for tax assets in the financial statements include estimates and judgments relating to uncertain tax positions. If the computations subsequently submitted to HMRC include different amounts then these differences are reflected as an adjustment in respect of prior years in the subsequent financial statements. Deferred tax is provided at 25%, the rate that is expected to apply when the asset or liability is expected to be settled. Further details are provided in note 26. c) Tax (credited)/charged directly to other comprehensive income or equity No current tax has been charged or credited to other comprehensive income or equity. The following amounts of deferred tax have been (credited)/ charged to other comprehensive income or equity: 2023 \u00a3m 2022 \u00a3m Deferred tax on: Actuarial losses/gains (63.0) 47.1 Cash flow hedges (0.6) 13.0 Share based payments (0.1) (4.9) Transfers to the income statement 0.1 1.7 Effect of change in tax rate \u2013 (8.4) Total deferred tax (credited)/charged to other comprehensive income or equity (62.6) 48.5 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-383": {
"value": "13 Dividends Amounts recognised as distributions to owners of the Company in the year: 2023 2022 Pence per share \u00a3m Pence per share \u00a3m Final dividend for the year ended 31 March 2022 (2021) 61.28 153.9 60.95 152.2 Interim dividend for the year ended 31 March 2023 (2022) 42.73 107.4 40.86 102.3 Total dividends paid 104.01 261.3 101.81 254.5 Proposed final dividend for the year ended 31 March 2023 64.09 163.1 The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-384": {
"value": "14 Earnings/(loss) per share a) Basic and diluted earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding treasury shares and those held in the Severn Trent Employee Share Ownership Trust, which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company\u2019s shares during the period. Potential ordinary shares are not treated as dilutive if their conversion does not decrease earnings per share or increase loss per share. Basic and diluted earnings per share are calculated on the basis of profit attributable to the owners of the Company. The calculation of basic and diluted earnings per share is based on the following: i) Earnings for the purpose of basic and diluted earnings per share 2023 \u00a3m 2022 \u00a3m Profit/(loss) for the period 132.2 (87.2) ii) Number of shares 2023 \u00a3m 2022 \u00a3m Weighted average number of ordinary shares for the purpose of basic earnings per share 250.8 247.9 Effect of dilutive potential ordinary shares: \u2013 share options and LTIPs 1.1 \u2013 Weighted average number of ordinary shares for the purpose of diluted earnings per share 251.9 247.9 Unvested share options and LTIPs have not been treated as dilutive potential ordinary shares in 2022 because their conversion would decrease the loss per share. b) Adjusted earnings per share 2023 pence 2022 pence Adjusted basic earnings per share 58.2 96.1 Adjusted diluted earnings per share 58.0 95.6 Adjusted earnings per share figures are presented for continuing operations. These exclude the effects of net gains/losses on financial instruments, current tax on net gains/losses on financial instruments, and deferred tax in both 2023 and 2022. The Directors consider that the adjusted figures provide a useful additional indicator of performance. The denominators used in the calculations of adjusted basic and diluted earnings per share are the same as those used in the unadjusted figures set out above except that the number of ordinary shares for the purpose of the adjusted diluted earnings per share for the year ended 31 March 2022 is 249.3 million as this includes 1.4 million dilutive potential ordinary shares from share options and LTIPs. The adjustments to earnings that are made in calculating adjusted earnings per share are as follows: 2023 \u00a3m 2022 \u00a3m Earnings for the purpose of basic and diluted earnings per share 132.2 (87.2) Adjustments for: \u2013 net gains on financial instruments (21.7) (39.3) \u2013 current tax on net gains on financial instruments \u2013 (1.4) \u2013 deferred tax 35.5 366.1 Earnings for the purpose of adjusted basic and diluted earnings per share 146.0 238.2 The comparative earnings for the purpose of adjusted basic and diluted earnings per share excluded an amount relating to amortisation of acquired intangibles. We have restated this comparative measure to include the effect of amortisation of acquired intangibles so that it is calculated on a consistent basis with the current year. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-423": {
"value": "15 Goodwill 2023 \u00a3m 2022 \u00a3m Cost At 1 April 91.4 91.4 Acquisition of subsidiary 1.3 \u2013 At 31 March 92.7 91.4 On 8 February 2023, Severn Trent Services Operations UK Limited acquired 100% of the issued share capital of M A solutions (Lindum) Ltd for a total consideration of \u00a31.6 million, of which \u00a30.8 million is cash consideration and the remainder deferred consideration. The acquisition has been accounted for using the acquisition method. Goodwill of \u00a31.3 million was recognised, attributable to the anticipated future opportunities and outperformance arising as a result of the acquisition. The goodwill valuation was based on management\u2019s best estimates of the fair values of the assets and liabilities acquired, which was estimated at \u00a30.3m. Goodwill relates to specific cash-generating units (CGUs) hence no allocation of goodwill is required. A summary of the carrying amount of goodwill by CGU is presented below. 2023 \u00a3m 2022 \u00a3m Regulated Water and Waste Water 62.2 62.2 Green Power 29.2 29.2 Operating Services 1.3 \u2013 92.7 91.4 Regulated Water and Waste Water also has an intangible asset with indefinite useful life amounting to \u00a34.3 million (2022: \u00a34.3 million). This is reviewed for impairment as part of the Regulated Water and Waste Water impairment review, set out in note 15 a) below. a) Regulated Water and Waste Water On 1 July 2018 Instruments of appointments of Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig (formerly Dee Valley Water Limited) were amended to align the areas for which the appointments were made with the national border of England and Wales. As a result, the business that the goodwill relates to is now partly in Severn Trent Water and partly Hafren Dyfrdwy consequently this goodwill is allocated to the Regulated Water and Waste Water cash-generating unit. The Group has reviewed the carrying value of goodwill for impairment in accordance with the policy stated in note 2. The carrying value of the Regulated Water and Waste Water CGU was determined on the basis of fair value, through a level 3 valuation, less costs to sell. The fair value, determined using a discounted cash flow calculation for the Regulated Water and Waste Water segment is based on the most recent financial projections available for the business, which cover the five-year period to 31 March 2028. The key assumptions underlying these projections are the cash flows in the projections and the following: % Discount rate 6.5 RPI long-term inflation 3.0 CPI long-term inflation 2.0 Growth rate in the period beyond the detailed projections 1.5 The discount rate is an estimate for the weighted average cost of capital at the year end date based on the post-tax WACC detailed in the Ofwat PR19 final determination adjusted for market changes. The rate disclosed above is the equivalent pre-tax nominal rate. Inflation has been included in the detailed projections at 3.0% and 2.0% for RPI and CPI respectively, based on the Bank of England\u2019s target rate for CPI. Cash flows beyond the end of the five-year period are extrapolated using an assumed real growth rate of 1.5% in the Group\u2019s regulatory capital base, based on past experience and external factors likely to drive long-term growth in the regulatory capital base. The fair value less costs to sell for the CGU exceeded its carrying value by \u00a32,534.4 million. An increase in the discount rate to 7.1% or a reduction in the growth rate in the period beyond the detailed projections to 0.7% would reduce the recoverable amount to the carrying amount of the CGU. b) Green Power On 30 November 2018, the Group acquired Agrivert Holdings and its subsidiary undertakings resulting in goodwill of \u00a329.2 million. This goodwill has been allocated to the Green Power South cash-generating unit which is determined to be the lowest level of independent cash flows relating to the goodwill. Green Power South is included within the Green Power part of the Business Services segment. The Group has reviewed the carrying value of goodwill for impairment in accordance with the policy stated in note 2. The carrying value of the Green Power South CGU was determined on the basis of a value in use calculation. The value in use determined using a discounted cash flow calculation for the Green Power South CGU is based on the most recent financial projections available for the business to 2028. The key assumptions underlying these projections are the cash flows in the projections and: Key assumption % Discount rate 7.8 Growth rate in the period beyond the detailed projections 2.0 The discount rate was based on a review of a range of external sources of information about the cost of capital for the Severn Trent energy business. This rate was then converted to the equivalent pre-tax discount rate disclosed above. Cash flows beyond the end of the five-year period are extrapolated using assumed growth of 2.0% in the Group\u2019s free cash flows, informed through external market trends. The value in use for the CGU exceeded its carrying value by \u00a319.2 million. An increase in the discount rate to 9.0% or reduction in the growth rate in the period beyond the detailed projections to 1.2% would reduce the recoverable amount to the carrying amount of the CGU. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-385": {
"value": "15 Goodwill 2023 \u00a3m 2022 \u00a3m Cost At 1 April 91.4 91.4 Acquisition of subsidiary 1.3 \u2013 At 31 March 92.7 91.4 On 8 February 2023, Severn Trent Services Operations UK Limited acquired 100% of the issued share capital of M A solutions (Lindum) Ltd for a total consideration of \u00a31.6 million, of which \u00a30.8 million is cash consideration and the remainder deferred consideration. The acquisition has been accounted for using the acquisition method. Goodwill of \u00a31.3 million was recognised, attributable to the anticipated future opportunities and outperformance arising as a result of the acquisition. The goodwill valuation was based on management\u2019s best estimates of the fair values of the assets and liabilities acquired, which was estimated at \u00a30.3m. Goodwill relates to specific cash-generating units (CGUs) hence no allocation of goodwill is required. A summary of the carrying amount of goodwill by CGU is presented below. 2023 \u00a3m 2022 \u00a3m Regulated Water and Waste Water 62.2 62.2 Green Power 29.2 29.2 Operating Services 1.3 \u2013 92.7 91.4 Regulated Water and Waste Water also has an intangible asset with indefinite useful life amounting to \u00a34.3 million (2022: \u00a34.3 million). This is reviewed for impairment as part of the Regulated Water and Waste Water impairment review, set out in note 15 a) below. a) Regulated Water and Waste Water On 1 July 2018 Instruments of appointments of Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig (formerly Dee Valley Water Limited) were amended to align the areas for which the appointments were made with the national border of England and Wales. As a result, the business that the goodwill relates to is now partly in Severn Trent Water and partly Hafren Dyfrdwy consequently this goodwill is allocated to the Regulated Water and Waste Water cash-generating unit. The Group has reviewed the carrying value of goodwill for impairment in accordance with the policy stated in note 2. The carrying value of the Regulated Water and Waste Water CGU was determined on the basis of fair value, through a level 3 valuation, less costs to sell. The fair value, determined using a discounted cash flow calculation for the Regulated Water and Waste Water segment is based on the most recent financial projections available for the business, which cover the five-year period to 31 March 2028. The key assumptions underlying these projections are the cash flows in the projections and the following: % Discount rate 6.5 RPI long-term inflation 3.0 CPI long-term inflation 2.0 Growth rate in the period beyond the detailed projections 1.5 The discount rate is an estimate for the weighted average cost of capital at the year end date based on the post-tax WACC detailed in the Ofwat PR19 final determination adjusted for market changes. The rate disclosed above is the equivalent pre-tax nominal rate. Inflation has been included in the detailed projections at 3.0% and 2.0% for RPI and CPI respectively, based on the Bank of England\u2019s target rate for CPI. Cash flows beyond the end of the five-year period are extrapolated using an assumed real growth rate of 1.5% in the Group\u2019s regulatory capital base, based on past experience and external factors likely to drive long-term growth in the regulatory capital base. The fair value less costs to sell for the CGU exceeded its carrying value by \u00a32,534.4 million. An increase in the discount rate to 7.1% or a reduction in the growth rate in the period beyond the detailed projections to 0.7% would reduce the recoverable amount to the carrying amount of the CGU. b) Green Power On 30 November 2018, the Group acquired Agrivert Holdings and its subsidiary undertakings resulting in goodwill of \u00a329.2 million. This goodwill has been allocated to the Green Power South cash-generating unit which is determined to be the lowest level of independent cash flows relating to the goodwill. Green Power South is included within the Green Power part of the Business Services segment. The Group has reviewed the carrying value of goodwill for impairment in accordance with the policy stated in note 2. The carrying value of the Green Power South CGU was determined on the basis of a value in use calculation. The value in use determined using a discounted cash flow calculation for the Green Power South CGU is based on the most recent financial projections available for the business to 2028. The key assumptions underlying these projections are the cash flows in the projections and: Key assumption % Discount rate 7.8 Growth rate in the period beyond the detailed projections 2.0 The discount rate was based on a review of a range of external sources of information about the cost of capital for the Severn Trent energy business. This rate was then converted to the equivalent pre-tax discount rate disclosed above. Cash flows beyond the end of the five-year period are extrapolated using assumed growth of 2.0% in the Group\u2019s free cash flows, informed through external market trends. The value in use for the CGU exceeded its carrying value by \u00a319.2 million. An increase in the discount rate to 9.0% or reduction in the growth rate in the period beyond the detailed projections to 1.2% would reduce the recoverable amount to the carrying amount of the CGU. 16 Other intangible assets Computer software Internally generated \u00a3m Purchased \u00a3m Capitalised development costs and patents \u00a3m Other intangible assets \u00a3m Total \u00a3m Cost At 1 April 2021 303.9 162.5 12.8 35.8 515.0 Additions 21.8 14.5 \u2013 \u2013 36.3 Disposals \u2013 \u2013 (12.8) \u2013 (12.8) Transfers from property, plant and equipment 11.3 3.0 1.3 \u2013 15.6 At 1 April 2022 337.0 180.0 1.3 35.8 554.1 Additions 22.1 12.2 \u2013 5.7 40.0 At 31 March 2023 359.1 192.2 1.3 41.5 594.1 Amortisation At 1 April 2021 (216.4) (116.9) (12.8) (4.9) (351.0) Amortisation for the year (25.5) (8.7) \u2013 (2.1) (36.3) Disposals \u2013 \u2013 12.8 \u2013 12.8 At 1 April 2022 (241.9) (125.6) \u2013 (7.0) (374.5) Amortisation for the year (20.6) (10.9) (0.1) (2.1) (33.7) At 31 March 2023 (262.5) (136.5) (0.1) (9.1) (408.2) Net book value At 31 March 2023 96.6 55.7 1.2 32.4 185.9 At 31 March 2022 95.1 54.4 1.3 28.8 179.6 Other intangible assets include the instrument of appointment acquired with Dee Valley Water, customer contracts and energy subsidy contracts both acquired with Agrivert and rights obtained under contracts for biological assets. The instrument of appointment has an indefinite useful life and as such the carrying value has been included in the impairment assessment performed for the Regulated Water and Waste Water CGU described in note 15. As at 31 March 2023 no impairment was recorded (2022: nil). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-424": {
"value": "16 Other intangible assets Computer software Internally generated \u00a3m Purchased \u00a3m Capitalised development costs and patents \u00a3m Other intangible assets \u00a3m Total \u00a3m Cost At 1 April 2021 303.9 162.5 12.8 35.8 515.0 Additions 21.8 14.5 \u2013 \u2013 36.3 Disposals \u2013 \u2013 (12.8) \u2013 (12.8) Transfers from property, plant and equipment 11.3 3.0 1.3 \u2013 15.6 At 1 April 2022 337.0 180.0 1.3 35.8 554.1 Additions 22.1 12.2 \u2013 5.7 40.0 At 31 March 2023 359.1 192.2 1.3 41.5 594.1 Amortisation At 1 April 2021 (216.4) (116.9) (12.8) (4.9) (351.0) Amortisation for the year (25.5) (8.7) \u2013 (2.1) (36.3) Disposals \u2013 \u2013 12.8 \u2013 12.8 At 1 April 2022 (241.9) (125.6) \u2013 (7.0) (374.5) Amortisation for the year (20.6) (10.9) (0.1) (2.1) (33.7) At 31 March 2023 (262.5) (136.5) (0.1) (9.1) (408.2) Net book value At 31 March 2023 96.6 55.7 1.2 32.4 185.9 At 31 March 2022 95.1 54.4 1.3 28.8 179.6 Other intangible assets include the instrument of appointment acquired with Dee Valley Water, customer contracts and energy subsidy contracts both acquired with Agrivert and rights obtained under contracts for biological assets. The instrument of appointment has an indefinite useful life and as such the carrying value has been included in the impairment assessment performed for the Regulated Water and Waste Water CGU described in note 15. As at 31 March 2023 no impairment was recorded (2022: nil). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-386": {
"value": "17 Property, plant and equipment Land and buildings \u00a3m Infrastructure assets \u00a3m Fixed plant and equipment \u00a3m Moveable plant \u00a3m Assets under construction \u00a3m Total \u00a3m Cost At 1 April 2021 4,015.0 5,773.2 4,792.8 72.3 1,095.3 15,748.6 Additions 59.1 136.4 132.9 0.7 385.2 714.3 Transfers on commissioning 131.5 97.0 313.3 12.3 (554.1) \u2013 Transfers to intangible assets \u2013 \u2013 \u2013 \u2013 (15.6) (15.6) Disposals (3.9) \u2013 (8.6) (4.9) (3.0) (20.4) At 1 April 2022 4,201.7 6,006.6 5,230.4 80.4 907.8 16,426.9 Additions 35.9 161.4 77.6 0.8 623.2 898.9 Transfers on commissioning 74.5 1.2 180.7 1.3 (257.7) \u2013 Disposals (10.8) (2.3) (30.8) (2.5) (9.3) (55.7) At 31 March 2023 4,301.3 6,166.9 5,457.9 80.0 1,264.0 17,270.1 Depreciation At 1 April 2021 (1,542.2) (1,434.7) (2,858.1) (38.4) \u2013 (5,873.4) Charge for the year (100.9) (40.7) (212.7) (7.2) \u2013 (361.5) Disposals 3.5 \u2013 8.3 4.6 \u2013 16.4 At 1 April 2022 (1,639.6) (1,475.4) (3,062.5) (41.0) \u2013 (6,218.5) Charge for the year (102.1) (45.6) (225.0) (7.0) \u2013 (379.7) Disposals 10.8 0.2 32.1 1.9 \u2013 45.0 At 31 March 2023 (1,730.9) (1,520.8) (3,255.4) (46.1) \u2013 (6,553.2) Net book value At 31 March 2023 2,570.4 4,646.1 2,202.5 33.9 1,264.0 10,716.9 At 31 March 2022 2,562.1 4,531.2 2,167.9 39.4 907.8 10,208.4 Additions include assets transferred from developers at no cost, which have been recognised at their fair value of \u00a3105.0 million (2022: \u00a369.0 million) and provisions for works in response to legally enforceable undertakings to regulators amounting to \u00a334.2 million (2022: \u00a315.3 million). The net book value of land and buildings is analysed as follows: 2023 \u00a3m 2022 \u00a3m Freehold 2,570.1 2,561.8 Short leasehold 0.3 0.3 2,570.4 2,562.1 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-387": {
"value": "18 Leases a) The Group\u2019s leasing activities The Group leases various properties, equipment and vehicles. Lease agreements are typically made for fixed periods of up to 999 years but may have extension options as described in note 2 j). Lease contracts are negotiated on an individual basis and include a wide range of terms and conditions. The contracts do not include covenants other than security interests in the leased assets that are held by the lessor and leased assets may not be used as security for other borrowing. The contracts do not impose any restrictions on dividend payment, additional debt or further leasing. There were no sale and leaseback transactions in the period. b) Income statement The income statement includes the following amounts relating to leases: 2023 \u00a3m 2022 \u00a3m Depreciation charge of right-of-use assets: Land and buildings 0.9 1.4 Infrastructure assets 1.1 1.1 Fixed plant and equipment 0.2 0.2 Moveable plant 1.7 1.1 Total depreciation of right-of-use assets 3.9 3.8 Interest expense included in finance cost 3.7 4.0 Expense relating to short-term leases included in operating costs \u2013 0.5 Expense relating to leases of low value assets included in operating costs 0.3 0.1 c) Balance sheet The balance sheet includes the following amounts relating to leases: 2023 \u00a3m 2022 \u00a3m Right-of-use assets: Land and buildings 12.5 12.3 Infrastructure assets 110.4 111.5 Fixed plant and equipment 4.1 4.1 Moveable plant 2.3 2.0 129.3 129.9 Additions to right-of-use assets were \u00a33.0 million (2022: \u00a34.2 million). Disposals were \u00a3nil (2022: \u00a30.2 million). Extension of lease terms during the year has resulted in a reduction in dilapidation provisions included in right-of-use assets of \u00a30.8 million (2022: \u00a31.1 million). 2023 \u00a3m 2022 \u00a3m Lease liabilities: Current 8.3 7.1 Non-current 102.6 110.3 110.9 117.4 Obligations under lease liabilities were as follows: 2023 \u00a3m 2022 \u00a3m Within 1 year 12.3 11.0 1 \u2013 2 years 12.2 11.2 2 \u2013 5 years 39.6 35.5 After more than 5 years 80.4 95.0 Gross obligations under leases 144.5 152.7 Less future finance charges (33.6) (35.3) Present value of lease obligations 110.9 117.4 Net obligations under leases were as follows: 2023 \u00a3m 2022 \u00a3m Within 1 year 8.3 7.1 1 \u2013 2 years 8.4 7.4 2 \u2013 5 years 29.6 25.9 After more than 5 years 64.6 77.0 Included in non-current liabilities 102.6 110.3 110.9 117.4 d) Cash flow The total cash outflow for leases in the year was \u00a316.8 million (2022: \u00a316.1 million) which consists of \u00a33.7 million (2022: \u00a34.0 million) payments of interest and \u00a313.1 million (2022: \u00a312.1 million) repayment of principal elements. This is included in financing cash flows. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLeasesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-388": {
"value": "19 Interests in joint ventures Particulars of the Group\u2019s principal joint venture undertaking at 31 March 2023 were: Name Type Country of incorporation Class of share capital held Proportion of ownership interest Water Plus Group Limited Joint venture Great Britain Ordinary B 50% Water Plus is the largest business retailer in the non-household retail water market in England and Scotland. Its principal activities are core retail services including billing, meter reading, call centre support and water efficiency advice as well as key account management services and value added solutions. Water Plus competes in England and Scotland for customers ranging from small and medium-sized enterprises through to large corporate entities in both the private and public sectors. Movements in the investment were as follows: 2023 \u00a3m 2022 \u00a3m Carrying value of joint venture investment at 1 April 16.5 \u2013 Reclassification on subscription for equity \u2013 18.7 Group\u2019s share of profit/(loss) after tax and comprehensive income/(loss) \u2013 (2.2) Carrying value of joint venture investment at 31 March 16.5 16.5 On 23 April 2021, the Group extinguished the \u00a332.5 million Revolving Credit Facility (\u2018RCF\u2019) previously extended to Water Plus, and replaced this with a subscription for \u00a332.5 million of equity shares in Water Plus Group Limited at par. The carrying value of the loan receivable was reclassified to investment in joint venture. During the current year, Water Plus broke even (2022: loss of \u00a34.4m). As at 31 March 2023 and 2022 the joint venture did not have any significant contingent liabilities to which the Group was exposed and, other than those set out below, the Group did not have any significant contingent liabilities in relation to its interests in the joint venture. The Group had no capital commitments in relation to its interests in the joint venture at 31 March 2023 or 2022. The Company has given guarantees in favour of Water Plus Limited in respect of the joint venture\u2019s liabilities to wholesalers in the Open Water market. The guarantee is capped at \u00a343.5 million (2022: \u00a354.1 million). The registered office of Water Plus Group Limited is South Court Riverside Park, Campbell Road, Stoke-On-Trent, United Kingdom, ST4 4DA. Balance sheet and income statement extracts can be found below for Water Plus: At 31 March 2023 \u00a3m 2022 \u00a3m Non-current assets 40.0 41.6 Current assets1 300.9 367.3 Current liabilities2 (112.4) (154.5) Non-current liabilities3 (214.6) (241.4) Net assets/liabilities 13.9 13.0 1 Includes cash of \u00a312.2 million (2022: \u00a324.4 million) 2 Includes current financial liabilities (excluding trade and other payables and provisions) of \u00a31.2 million (2022: \u00a30.1 million) 3 Includes non-current financial liabilities of \u00a3213.1 million (2022: \u00a3240.3 million) For the year ended 31 March 2023 \u00a3m 2022 \u00a3m Revenue 731.7 750.9 Depreciation and amortisation (6.2) (6.6) Finance income 3.7 4.0 Finance costs (11.3) (7.7) Tax credit/(charge) (1.6) 4.2 Comprehensive gain/(loss) for the year \u2013 (3.5) The below shows a reconciliation from the net assets of Water Plus to the carrying value as above: 2023 \u00a3m 2022 \u00a3m Net assets of Water Plus at 31 March 13.9 13.0 Severn Trent\u2019s share of net assets 7.0 6.5 Water Plus financial liabilities classified as part of net investment in joint venture 9.8 9.8 Other (0.3) 0.2 Carrying value of joint venture investment at 31 March 16.5 16.5 The net assets position of Water Plus is derived from the best information available at the time the financial statements of the Group are approved. The impact on the Group of any subsequent changes in the net assets of Water Plus will be reflected in the financial statements prepared to 31 March 2024. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfJointVenturesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-437": {
"value": "20 Categories of financial assets Note 2023 \u00a3m 2022 \u00a3m Fair value through profit and loss Cross currency swaps \u2013 not hedge accounted 20.5 13.7 Interest rate swaps \u2013 not hedge accounted \u2013 2.9 Inflation swaps \u2013 not hedge accounted 7.3 \u2013 27.8 16.6 Derivatives designated as hedging instruments Cross currency swaps \u2013 fair value hedges 14.0 14.6 Interest rate swaps \u2013 cash flow hedges 40.5 \u2013 Energy hedges \u2013 cash flow hedges 0.5 27.6 55.0 42.2 Total derivative financial assets 82.8 58.8 Financial assets at amortised cost Trade receivables 21 294.4 217.7 Accrued income 21 317.2 278.2 Other amounts receivable 21 73.4 58.8 Loan receivable from joint venture 21 75.3 79.6 Short-term deposits 22 \u2013 75.0 Cash at bank and in hand 22 34.2 40.4 Total financial assets at amortised cost 794.5 749.7 Total financial assets 877.3 808.5 Disclosed in the balance sheet as: Non-current assets Derivative financial assets 82.3 31.2 Trade and other receivables 3.3 6.7 Loan receivable from joint venture 75.3 79.6 160.9 117.5 Current assets Derivative financial assets 0.5 27.6 Trade and other receivables 681.7 548.0 Cash and cash equivalents 34.2 115.4 716.4 691.0 877.3 808.5 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherNoncurrentAssetsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-425": {
"value": "20 Categories of financial assets Note 2023 \u00a3m 2022 \u00a3m Fair value through profit and loss Cross currency swaps \u2013 not hedge accounted 20.5 13.7 Interest rate swaps \u2013 not hedge accounted \u2013 2.9 Inflation swaps \u2013 not hedge accounted 7.3 \u2013 27.8 16.6 Derivatives designated as hedging instruments Cross currency swaps \u2013 fair value hedges 14.0 14.6 Interest rate swaps \u2013 cash flow hedges 40.5 \u2013 Energy hedges \u2013 cash flow hedges 0.5 27.6 55.0 42.2 Total derivative financial assets 82.8 58.8 Financial assets at amortised cost Trade receivables 21 294.4 217.7 Accrued income 21 317.2 278.2 Other amounts receivable 21 73.4 58.8 Loan receivable from joint venture 21 75.3 79.6 Short-term deposits 22 \u2013 75.0 Cash at bank and in hand 22 34.2 40.4 Total financial assets at amortised cost 794.5 749.7 Total financial assets 877.3 808.5 Disclosed in the balance sheet as: Non-current assets Derivative financial assets 82.3 31.2 Trade and other receivables 3.3 6.7 Loan receivable from joint venture 75.3 79.6 160.9 117.5 Current assets Derivative financial assets 0.5 27.6 Trade and other receivables 681.7 548.0 Cash and cash equivalents 34.2 115.4 716.4 691.0 877.3 808.5 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherCurrentAssetsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-389": {
"value": "20 Categories of financial assets Note 2023 \u00a3m 2022 \u00a3m Fair value through profit and loss Cross currency swaps \u2013 not hedge accounted 20.5 13.7 Interest rate swaps \u2013 not hedge accounted \u2013 2.9 Inflation swaps \u2013 not hedge accounted 7.3 \u2013 27.8 16.6 Derivatives designated as hedging instruments Cross currency swaps \u2013 fair value hedges 14.0 14.6 Interest rate swaps \u2013 cash flow hedges 40.5 \u2013 Energy hedges \u2013 cash flow hedges 0.5 27.6 55.0 42.2 Total derivative financial assets 82.8 58.8 Financial assets at amortised cost Trade receivables 21 294.4 217.7 Accrued income 21 317.2 278.2 Other amounts receivable 21 73.4 58.8 Loan receivable from joint venture 21 75.3 79.6 Short-term deposits 22 \u2013 75.0 Cash at bank and in hand 22 34.2 40.4 Total financial assets at amortised cost 794.5 749.7 Total financial assets 877.3 808.5 Disclosed in the balance sheet as: Non-current assets Derivative financial assets 82.3 31.2 Trade and other receivables 3.3 6.7 Loan receivable from joint venture 75.3 79.6 160.9 117.5 Current assets Derivative financial assets 0.5 27.6 Trade and other receivables 681.7 548.0 Cash and cash equivalents 34.2 115.4 716.4 691.0 877.3 808.5 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-390": {
"value": "21 Trade and other receivables 2023 \u00a3m 2022 \u00a3m Current assets Net trade receivables 294.4 217.7 Other amounts receivable 70.1 52.1 Contract assets 44.3 39.9 Prepayments 24.9 18.5 Net accrued income 317.2 278.2 750.9 606.4 Non-current assets Other amounts receivable 3.3 6.7 Prepayments 9.8 5.8 Loan receivable from joint venture 75.3 79.6 88.4 92.1 839.3 698.5 Prepayments include unamortised success fees paid as a result of winning the MoD contract (see note 6) amounting to \u00a34.3 million (2022: \u00a34.8 million). The costs are being amortised on a straight line basis over the life of the contract. The carrying values of trade and other receivables are reasonable approximations of their fair values. a) Credit risk (i) Trade receivables and accrued income Credit control policies and procedures are determined at the individual business unit level. By far the most significant business unit of the Group is Severn Trent Water Limited, which represents 91% of Group turnover and 89% of net trade receivables. Severn Trent Water has a statutory obligation to provide water and waste water services to domestic customers within its region. Therefore there is no concentration of credit risk with respect to its trade receivables from these services and the credit quality of its customer base reflects the wealth and prosperity of all of the domestic households within its region. In the current and prior year, the Group\u2019s joint venture, Water Plus, was the largest retailer for non-domestic customers in the Severn Trent region. The trade receivables and amounts shown as loans receivable from joint ventures are disclosed within note 41, Related party transactions. Credit risk is considered separately for trade receivables due from Water Plus and is considered immaterial as amounts outstanding are paid within 30 days. The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected credit loss allowance for all trade receivables, contract assets and accrued income. A collective provision is recorded for expected credit losses against assets for which no specific provision has been made. Expected credit losses for trade receivables are based on the historical credit losses experienced over the last nine years and reasonable forecasts of the future impact of external economic factors on the Group\u2019s collection of trade receivables. Debts are written off when there is no realistic expectation of further collection and enforcement activity has ceased. There were no amounts outstanding on receivables written off and still subject to enforcement activity (2022: nil). (ii) Contract assets The contract assets represent the Group\u2019s right to receive consideration from the MoD for services provided. On that basis the Group considers that the credit risk in relation to these assets is immaterial and therefore no provision for expected credit losses has been recognised (2022: nil). (iii) Loan receivable from joint venture As well as trade receivables from Water Plus the Group has advanced loans to its joint venture. These loans are assessed for impairment under the two stage impairment model in IFRS 9. b) Expected credit loss allowance (i) Trade receivables and accrued income The expected credit loss at 31 March 2023 and 2022 was as set out below. The loss allowance is based on historical credit losses adjusted for expected changes in cash collection. The loss rate disclosed is calculated by applying the loss allowance to the gross carrying amount for each age category. 2023 Expected loss rate % Gross carrying amount \u00a3m Loss allowance \u00a3m Net carrying amount \u00a3m Not past due 3 415.3 (13.4) 401.9 Up to 1 year past due 21 109.2 (22.8) 86.4 1 \u2013 2 years past due 32 66.2 (21.4) 44.8 2 \u2013 3 years past due 38 46.6 (17.5) 29.1 3 \u2013 4 years past due 41 29.6 (12.0) 17.6 4 \u2013 5 years past due 52 26.5 (13.9) 12.6 5 \u2013 6 years past due 56 18.8 (10.5) 8.3 6 \u2013 7 years past due 55 12.8 (7.0) 5.8 7 \u2013 8 years past due 64 8.3 (5.3) 3.0 8 \u2013 9 years past due 69 5.9 (4.1) 1.8 More than 9 years past due 96 7.5 (7.2) 0.3 746.7 (135.1) 611.6 2022 Expected loss rate % Gross carrying amount \u00a3m Loss allowance \u00a3m Net carrying amount \u00a3m Not past due 4 333.1 (11.7) 321.4 Up to 1 year past due 25 93.8 (23.1) 70.7 1 \u2013 2 years past due 39 63.3 (24.6) 38.7 2 \u2013 3 years past due 43 39.0 (16.7) 22.3 3 \u2013 4 years past due 55 32.2 (17.6) 14.6 4 \u2013 5 years past due 49 26.2 (12.8) 13.4 5 \u2013 6 years past due 54 16.2 (8.7) 7.5 6 \u2013 7 years past due 63 11.2 (7.1) 4.1 7 \u2013 8 years past due 69 7.4 (5.1) 2.3 8 \u2013 9 years past due 73 3.3 (2.4) 0.9 More than 9 years past due 100 5.2 (5.2) \u2013 630.9 (135.0) 495.9 Movements on the expected credit loss allowance were as follows: 2023 \u00a3m 2022 \u00a3m At 1 April 135.0 137.1 Charge for bad and doubtful debts 24.5 24.6 Amounts written off during the year (24.4) (26.7) At 31 March 135.1 135.0 (ii) Loan receivable from joint venture In previous years, the Group has determined that there has been a significant increase in the credit risk since inception relating to its loans receivable of \u00a376.4 million (2022: \u00a380.7 million) from Water Plus, in the light of significant losses incurred by Water Plus. Following a breakeven position from Water Plus in the current year, the Group determines that there continues to be credit risk since inception on the loan receivable balance from Water Plus. The Group has therefore assessed the lifetime expected credit loss of its loans to Water Plus at 31 March 2023 based on Water Plus\u2019s financial projections. The Group has maintained the expected credit loss provision at \u00a31.1 million (2022: \u00a31.1 million) resulting in a net loan receivable of \u00a375.3 million (2022: \u00a379.6 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-426": {
"value": "a) Credit risk (i) Trade receivables and accrued income Credit control policies and procedures are determined at the individual business unit level. By far the most significant business unit of the Group is Severn Trent Water Limited, which represents 91% of Group turnover and 89% of net trade receivables. Severn Trent Water has a statutory obligation to provide water and waste water services to domestic customers within its region. Therefore there is no concentration of credit risk with respect to its trade receivables from these services and the credit quality of its customer base reflects the wealth and prosperity of all of the domestic households within its region. In the current and prior year, the Group\u2019s joint venture, Water Plus, was the largest retailer for non-domestic customers in the Severn Trent region. The trade receivables and amounts shown as loans receivable from joint ventures are disclosed within note 41, Related party transactions. Credit risk is considered separately for trade receivables due from Water Plus and is considered immaterial as amounts outstanding are paid within 30 days. The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected credit loss allowance for all trade receivables, contract assets and accrued income. A collective provision is recorded for expected credit losses against assets for which no specific provision has been made. Expected credit losses for trade receivables are based on the historical credit losses experienced over the last nine years and reasonable forecasts of the future impact of external economic factors on the Group\u2019s collection of trade receivables. Debts are written off when there is no realistic expectation of further collection and enforcement activity has ceased. There were no amounts outstanding on receivables written off and still subject to enforcement activity (2022: nil). (ii) Contract assets The contract assets represent the Group\u2019s right to receive consideration from the MoD for services provided. On that basis the Group considers that the credit risk in relation to these assets is immaterial and therefore no provision for expected credit losses has been recognised (2022: nil). (iii) Loan receivable from joint venture As well as trade receivables from Water Plus the Group has advanced loans to its joint venture. These loans are assessed for impairment under the two stage impairment model in IFRS 9. b) Credit risk Operationally the Group has no significant concentrations of credit risk. It has policies in place to ensure that sales of products are made to customers with an appropriate credit history, other than in Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig, whose operating licences oblige them to supply domestic customers even in cases where bills are not paid. Amounts provided against accounts receivable and movements on the provision during the year are disclosed in note 21. Cash deposits and derivative contracts are only placed with high credit quality financial institutions, which have been approved by the Board. Group Treasury monitors the credit quality of the approved financial institutions and the list of financial institutions that may be used is approved annually by the Board. The Group has policies that limit the amount of credit exposure to any one financial institution. Credit risk analysis At 31 March the aggregate credit limits of authorised counterparties and the amounts held on short term deposits were as follows: Credit limit Amount deposited 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m Double A range 150.0 150.0 \u2013 \u2013 Single A range 770.5 710.5 \u2013 75.0 Triple B range \u2013 10.0 \u2013 \u2013 920.5 870.5 \u2013 75.0 The fair values of derivative assets analysed by credit ratings of counterparties were as follows: Derivative assets 2023 \u00a3m 2022 \u00a3m Single A range 82.8 52.6 Triple B range \u2013 6.2 82.8 58.8 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCreditRiskExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-427": {
"value": "b) Expected credit loss allowance (i) Trade receivables and accrued income The expected credit loss at 31 March 2023 and 2022 was as set out below. The loss allowance is based on historical credit losses adjusted for expected changes in cash collection. The loss rate disclosed is calculated by applying the loss allowance to the gross carrying amount for each age category. 2023 Expected loss rate % Gross carrying amount \u00a3m Loss allowance \u00a3m Net carrying amount \u00a3m Not past due 3 415.3 (13.4) 401.9 Up to 1 year past due 21 109.2 (22.8) 86.4 1 \u2013 2 years past due 32 66.2 (21.4) 44.8 2 \u2013 3 years past due 38 46.6 (17.5) 29.1 3 \u2013 4 years past due 41 29.6 (12.0) 17.6 4 \u2013 5 years past due 52 26.5 (13.9) 12.6 5 \u2013 6 years past due 56 18.8 (10.5) 8.3 6 \u2013 7 years past due 55 12.8 (7.0) 5.8 7 \u2013 8 years past due 64 8.3 (5.3) 3.0 8 \u2013 9 years past due 69 5.9 (4.1) 1.8 More than 9 years past due 96 7.5 (7.2) 0.3 746.7 (135.1) 611.6 2022 Expected loss rate % Gross carrying amount \u00a3m Loss allowance \u00a3m Net carrying amount \u00a3m Not past due 4 333.1 (11.7) 321.4 Up to 1 year past due 25 93.8 (23.1) 70.7 1 \u2013 2 years past due 39 63.3 (24.6) 38.7 2 \u2013 3 years past due 43 39.0 (16.7) 22.3 3 \u2013 4 years past due 55 32.2 (17.6) 14.6 4 \u2013 5 years past due 49 26.2 (12.8) 13.4 5 \u2013 6 years past due 54 16.2 (8.7) 7.5 6 \u2013 7 years past due 63 11.2 (7.1) 4.1 7 \u2013 8 years past due 69 7.4 (5.1) 2.3 8 \u2013 9 years past due 73 3.3 (2.4) 0.9 More than 9 years past due 100 5.2 (5.2) \u2013 630.9 (135.0) 495.9 Movements on the expected credit loss allowance were as follows: 2023 \u00a3m 2022 \u00a3m At 1 April 135.0 137.1 Charge for bad and doubtful debts 24.5 24.6 Amounts written off during the year (24.4) (26.7) At 31 March 135.1 135.0 (ii) Loan receivable from joint venture In previous years, the Group has determined that there has been a significant increase in the credit risk since inception relating to its loans receivable of \u00a376.4 million (2022: \u00a380.7 million) from Water Plus, in the light of significant losses incurred by Water Plus. Following a breakeven position from Water Plus in the current year, the Group determines that there continues to be credit risk since inception on the loan receivable balance from Water Plus. The Group has therefore assessed the lifetime expected credit loss of its loans to Water Plus at 31 March 2023 based on Water Plus\u2019s financial projections. The Group has maintained the expected credit loss provision at \u00a31.1 million (2022: \u00a31.1 million) resulting in a net loan receivable of \u00a375.3 million (2022: \u00a379.6 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-391": {
"value": "22 Cash and cash equivalents 2023 \u00a3m 2022 \u00a3m Cash at bank and in hand 34.2 40.4 Short-term deposits \u2013 75.0 34.2 115.4 \u00a318.4 million (2022: \u00a324.6 million) of cash at bank and in hand is restricted for use on the MoD contract and \u00a30.6 million (2022: \u00a30.5 million) is held as security for insurance obligations. Neither are available for use by the Group. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-392": {
"value": "23 Borrowings 2023 \u00a3m 2022 \u00a3m Current liabilities Bank overdraft 5.5 7.7 Bank loans 3.6 3.7 Other loans 300.0 346.7 Lease liabilities 8.3 7.1 317.4 365.2 Non-current liabilities Bank loans 709.4 778.8 Other loans 6,174.2 5,476.8 Lease liabilities 102.6 110.3 6,986.2 6,365.9 7,303.6 6,731.1 See note 34 for details of interest rates payable and maturity of borrowings. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-438": {
"value": "24 Categories of financial liabilities Note 2023 \u00a3m 2022 \u00a3m Fair value through profit and loss Interest rate swaps \u2013 not hedge accounted 10.0 37.0 Inflation swaps \u2013 not hedge accounted \u2013 3.7 10.0 40.7 Derivatives designated as hedging instruments Cross currency swaps \u2013 fair value hedges 0.9 \u2013 Interest rate swaps \u2013 cash flow hedges 0.4 2.6 1.3 2.6 Total derivative financial liabilities 11.3 43.3 Other financial liabilities Borrowings 23 7,303.6 6,731.1 Trade payables 25 122.7 89.1 Other payables 25 15.6 13.4 Total other financial liabilities 7,441.9 6,833.6 Total financial liabilities 7,453.2 6,876.9 Disclosed in the balance sheet as: Non-current liabilities Derivative financial liabilities 11.3 43.3 Borrowings 6,986.2 6,365.9 6,997.5 6,409.2 Current liabilities Borrowings 317.4 365.2 Trade payables 122.7 89.1 Other payables 15.6 13.4 455.7 467.7 7,453.2 6,876.9 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherNoncurrentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-428": {
"value": "24 Categories of financial liabilities Note 2023 \u00a3m 2022 \u00a3m Fair value through profit and loss Interest rate swaps \u2013 not hedge accounted 10.0 37.0 Inflation swaps \u2013 not hedge accounted \u2013 3.7 10.0 40.7 Derivatives designated as hedging instruments Cross currency swaps \u2013 fair value hedges 0.9 \u2013 Interest rate swaps \u2013 cash flow hedges 0.4 2.6 1.3 2.6 Total derivative financial liabilities 11.3 43.3 Other financial liabilities Borrowings 23 7,303.6 6,731.1 Trade payables 25 122.7 89.1 Other payables 25 15.6 13.4 Total other financial liabilities 7,441.9 6,833.6 Total financial liabilities 7,453.2 6,876.9 Disclosed in the balance sheet as: Non-current liabilities Derivative financial liabilities 11.3 43.3 Borrowings 6,986.2 6,365.9 6,997.5 6,409.2 Current liabilities Borrowings 317.4 365.2 Trade payables 122.7 89.1 Other payables 15.6 13.4 455.7 467.7 7,453.2 6,876.9 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherCurrentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-393": {
"value": "24 Categories of financial liabilities Note 2023 \u00a3m 2022 \u00a3m Fair value through profit and loss Interest rate swaps \u2013 not hedge accounted 10.0 37.0 Inflation swaps \u2013 not hedge accounted \u2013 3.7 10.0 40.7 Derivatives designated as hedging instruments Cross currency swaps \u2013 fair value hedges 0.9 \u2013 Interest rate swaps \u2013 cash flow hedges 0.4 2.6 1.3 2.6 Total derivative financial liabilities 11.3 43.3 Other financial liabilities Borrowings 23 7,303.6 6,731.1 Trade payables 25 122.7 89.1 Other payables 25 15.6 13.4 Total other financial liabilities 7,441.9 6,833.6 Total financial liabilities 7,453.2 6,876.9 Disclosed in the balance sheet as: Non-current liabilities Derivative financial liabilities 11.3 43.3 Borrowings 6,986.2 6,365.9 6,997.5 6,409.2 Current liabilities Borrowings 317.4 365.2 Trade payables 122.7 89.1 Other payables 15.6 13.4 455.7 467.7 7,453.2 6,876.9 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-394": {
"value": "25 Trade and other payables 2023 \u00a3m 2022 \u00a3m Current liabilities Trade payables 122.7 89.1 Social security and other taxes 10.9 11.1 Other payables 15.6 13.4 Accruals and receipts in advance 555.0 512.4 Deferred income 16.2 29.5 720.4 655.5 Non-current liabilities Accruals and receipts in advance 13.6 10.1 Deferred income 1,466.0 1,323.9 1,479.6 1,334.0 2,200.0 1,989.5 The accruals balance above includes \u00a3146.5m of contract liabilities (2022: \u00a3144.8m). Movements in this balance are set out in note 6 of the financial statements. Movements in the deferred income balance are set out in note 6 to the financial statements. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-395": {
"value": "26 Deferred tax An analysis of the movements in the major deferred tax liabilities and assets recognised by the Group is set out below: Accelerated tax depreciation \u00a3m Retirement benefit obligations \u00a3m Fair value of financial instruments \u00a3m Other \u00a3m Total \u00a3m At 1 April 2021 972.1 (27.8) (39.0) 0.7 906.0 Charge/(credit) to income 57.8 9.0 11.5 (6.6) 71.7 Charge/(credit) to income arising from rate change 307.0 (2.6) (10.5) 0.5 294.4 Charge/(credit) to equity \u2013 47.1 14.7 (4.9) 56.9 Charge/(credit) to equity arising from rate change \u2013 (6.2) (1.8) (0.4) (8.4) At 1 April 2022 1,336.9 19.5 (25.1) (10.7) 1,320.6 Charge/(credit) to income 49.2 15.5 14.4 (43.6) 35.5 Charge/(credit) to equity \u2013 (63.0) 0.5 (0.1) (62.6) At 31 March 2023 1,386.1 (28.0) (10.2) (54.4) 1,293.5 Deferred tax assets and liabilities have been offset. The offset amounts, which are to be recovered/settled after more than 12 months, are as follows: 2023 \u00a3m 2022 \u00a3m Deferred tax asset (92.6) (35.8) Deferred tax liability 1,386.1 1,356.4 1,293.5 1,320.6 Deferred tax is provided at the rate that is expected to apply when the asset or liability is expected to be settled. On 3 March 2021, the UK Government announced an increase in the rate of corporation tax from 19% to 25%, effective 1 April 2023. Deferred tax assets and liabilities were therefore remeasured at 1 April 2021 at the new rate of 25%. This resulted in an exceptional deferred tax charge in the income statement for 2022 of \u00a3294.4 million and a credit to reserves amounting to \u00a38.4 million. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-396": {
"value": "27 Retirement benefit schemes a) Defined benefit pension schemes (i) Background The Group operates a number of defined benefit pension schemes. The Severn Trent Pension Scheme and the Severn Trent Mirror Image Pension Scheme closed to future accrual on 31 March 2015, while the Dee Valley Water Limited Section of the Water Companies Pension Scheme, which is a sectionalised scheme, currently remains open to accrual. The defined benefit pension schemes cover increases in accrued benefits arising from inflation and pension increases. Their assets are held in separate funds administered by Trustees. The Trustees are required to act in the best interests of the schemes\u2019 beneficiaries. A formal actuarial valuation of each scheme is carried out on behalf of the Trustees at triennial intervals by an independent professionally qualified actuary. Under the defined benefit pension schemes, members are entitled to retirement benefits calculated by reference to their pensionable service and pensionable salary history, with inflationary pension increases applying in line with the scheme rules. The defined benefit pension schemes and the dates of their last completed formal actuarial valuations as at the accounting date are as follows: Date of last formal actuarial valuation Severn Trent Pension Scheme (STPS)* 31 March 2022 Severn Trent Mirror Image Pension Scheme (STMIPS) 31 March 2022 Water Companies Pension Scheme \u2013 Dee Valley Water Limited Section (DVWS) 31 March 2020 * The STPS is by far the largest of the Group\u2019s UK defined benefit schemes, comprising over 90% of the Group\u2019s overall defined benefit obligations. The defined benefit scheme assets have been updated to reflect their market value at 31 March 2023. Actuarial gains and losses on the scheme assets and defined benefit obligations have been reported in the statement of comprehensive income. Service cost, and the costs of administrating the scheme, are recognised in operating costs and interest cost is recognised in net finance costs. (ii) Amount included in the balance sheet arising from the Group\u2019s obligations under the defined benefit pension schemes 2023 \u00a3m 2022 \u00a3m Fair value of assets 1,785.3 2,659.4 Present value of the defined benefit obligations (2,064.7) (2,787.4) (279.4) (128.0) Presented on the balance sheet as: Retirement benefit obligation \u2013 funded schemes in surplus 5.7 17.5 Retirement benefit obligation \u2013 funded schemes in deficit (278.6) (137.6) Retirement benefit obligation \u2013 unfunded schemes (6.5) (7.9) Retirement benefit obligation \u2013 total (285.1) (145.5) Net retirement benefit obligation (279.4) (128.0) STPS, STMIPS, and DVWS 2023 \u00a3m 2022 \u00a3m Fair value of scheme assets Equities 188.4 478.1 Annuity policies 122.2 104.6 Corporate bonds 237.0 953.0 Liability-driven investment funds (\u2018LDIs\u2019) 259.2 642.4 Property 239.6 296.8 Buy and maintain credit \u2013 22.5 High-yield bonds \u2013 25.8 Cash 738.9 136.2 1,785.3 2,659.4 * In June 2021, the STMIPS Trustees completed the purchase of a bulk annuity contract with JUST, an insurance company, to secure the benefits of all members of the STMIPS. The Trustees continue to pay benefits to members as before the transaction, but these cashflows are now matched exactly by income from JUST. In March 2023, the DVWS also entered into a bulk annuity buy-in investment policy with JUST that covers the majority of the scheme obligations. Most of the assets have quoted prices in active markets, but there are equities, annuity policies, corporate bonds and LDI investments which are unquoted amounting to \u00a3419.0 million (2022: \u00a3496.0 million). Movements in the fair value of the scheme assets were as follows: 2023 \u00a3m 2022 \u00a3m Fair value at 1 April 2,659.4 2,600.4 Interest income on scheme assets 78.6 52.8 Contributions from the sponsoring companies 100.5 61.9 Return on plan assets (excluding amounts included in finance income) (922.0) 68.9 Scheme administration costs (4.3) (3.8) Benefits paid (126.9) (120.8) Fair value at 31 March 1,785.3 2,659.4 Movements in the present value of the defined benefit obligations were as follows: 2023 \u00a3m 2022 \u00a3m Present value at 1 April (2,787.4) (2,968.1) Current service cost (0.1) (0.2) Past service credit 8.3 \u2013 Interest cost (82.2) (59.5) Actuarial (losses)/gains arising from changes in demographic assumptions (16.2) 5.6 Actuarial gains arising from changes in financial assumptions 744.7 192.9 Actuarial losses arising from experience adjustments (58.7) (78.9) Benefits paid 126.9 120.8 Present value at 31 March (2,064.7) (2,787.4) The Group has an obligation to pay pensions to a number of former employees, whose benefits would otherwise have been restricted by the Finance Act 1989 earnings cap. Provision for such benefits amounting to \u00a36.5 million (2022: \u00a37.9 million) is included as an unfunded scheme within the retirement benefit obligation. The Group has assessed that it has an unconditional right to a refund of any surplus assets in each of the Schemes following settlement of all obligations to Scheme members and therefore the surplus in the DVWS has been recognised in full. (iii) Amounts recognised in the income statement in respect of these defined benefit pension schemes 2023 \u00a3m 2022 \u00a3m Amounts credited/(charged) to operating costs: Current service cost (0.1) (0.2) Past service credit 8.3 \u2013 Scheme administration costs (4.3) (3.8) 3.9 (4.0) Amounts charged to finance costs: Interest cost (82.2) (59.5) Amounts credited to finance income: Interest income on scheme assets 78.6 52.8 Total amount credited/(charged) to the income statement 0.3 (10.7) The actual return on scheme assets was a loss of \u00a3843.4 million (2022: gain of \u00a3121.7 million). Actuarial gains and losses have been reported in the statement of comprehensive income. (iv) Actuarial risk factors The schemes typically expose the Group to actuarial risks such as investment risk, inflation risk and longevity risk for so long as the benefits are not insured. Investment risk The Group\u2019s contributions to the schemes are based on actuarial calculations which make assumptions about the returns expected from the schemes\u2019 investments. If the investments underperform these assumptions in the long term then the Group may need to make additional contributions to the schemes in order to fund the payment of accrued benefits. Each scheme\u2019s investment strategy seeks to balance the level of investment return sought with the aim of reducing volatility and risk. In undertaking this approach, reference is made to both the maturity of the liabilities and the funding level of that scheme. A number of further strategies are employed to manage underlying risks, including liability-matching asset strategies, diversification of asset portfolios and interest rate hedging. Currently the STPS has a balanced approach to investment in equity securities, debt instruments and real estates. Due to the long-term nature of the scheme liabilities, the Group and the STPS Trustees consider it appropriate to invest a portion of the scheme assets in equity securities and in real estate to leverage the return generated by the fund. The STMIPS and DVWS are now primarily invested in bulk annuity insurance contracts with JUST, with a small residual amount of invested assets remaining. Inflation risk The benefits payable to members of the schemes are linked to inflation measured by the RPI or CPI, subject to caps. The Group\u2019s contributions to the schemes are based on assumptions about the future level of inflation. If inflation is higher than the levels assumed in the actuarial calculations then the Group may need to make additional contributions to the schemes in order to fund the payment of accrued benefits. The schemes use LDIs within the asset portfolios to hedge against the value of liabilities changing as a result of movements in long-term interest rate and inflation expectations. This structure allows the schemes to both hedge against these risks and retain capital investment in assets that are expected to generate higher returns. Longevity risk The Group\u2019s contributions to the schemes are based on assumptions about the life expectancy of scheme members after retirement. If scheme members live longer than assumed in the actuarial calculations then the Group may need to make additional contributions to the schemes in order to fund the payment of accrued benefits. (v) Actuarial assumptions The major financial assumptions used in the accounting valuation of the obligations for the STPS which represents by far the largest defined benefit obligation for the Group were as follows: 2023 % pa 2022 % pa Price inflation \u2013 RPI 3.3 3.6 Price inflation \u2013 CPI Pre 2030: 2.3 2.6 Post 2030: 3.2 3.5 Discount rate 4.8 2.8 Pension increases in payment 3.3 3.6 Pension increases in deferment 3.3 3.6 The assumption for RPI inflation is derived with reference to the difference between the yields on longer-term fixed rate gilts and on index-linked gilts. RPI is expected to be more closely aligned with CPI from 2030 onwards, which is reflected in the corresponding assumption for CPI inflation. In setting the discount rate, we construct a yield curve. Short dated yields are taken from market rates for AA corporate bonds. Long-dated yields for the curve are based on the average yield available on all long-dated AA corporate bonds. We project the expected cash flows of the schemes and adopt a single equivalent cash flow weighted discount rate taking account of this constructed yield curve. The mortality base table assumptions are based on those used in the latest triennial funding valuation of the STPS. The mortality assumptions adopted at the year end for accounting purposes and the life expectancies at age 60 implied by the assumptions are as follows: 2023 2022 Men Women Men Women Mortality table used S3PMA S3PFA_M S3PMA_L S3PFA_M Mortality table compared with standard table 98% 91% 112% 95% Mortality projections CMI 2021 CMI 2021 CMI 2021 CMI 2021 Long-term rate of future improvement per annum 1.0% 1.0% 1.0% 1.0% Weighting factor given to data for 2021 40% 40% 20% 20% Remaining life expectancy for members currently aged 60 (years) 25.8 28.6 26.5 28.5 Remaining life expectancy at age 60 for members currently aged 40 (years) 26.9 29.8 27.6 29.7 The calculation of the scheme obligations is sensitive to the actuarial assumptions and in particular to the assumptions relating to discount rate, price inflation (capped, where relevant) and mortality. The following table summarises the estimated impact on the Group\u2019s obligations from changes to key actuarial assumptions whilst holding all other assumptions constant. Assumption Change in assumption Impact on disclosed obligations Discount rate1 Increase/decrease by 0.1% pa Decrease/increase by \u00a326 million Price inflation2 Increase/decrease by 0.1% pa Increase/decrease by \u00a321 million Mortality3 Increase in life expectancy by 1 year Increase by \u00a372 million 1 A change in discount rate is likely to occur as a result of changes in bond yields and as such would be expected to be offset to a significant degree by a change in the value of the bond assets held by the schemes. 2 The projected impact resulting from a change in RPI reflects the underlying effect on pensions in payment, pensions in deferment and resultant pension increases. This would be expected to be offset by returns on LDI assets within the asset portfolios used to hedge against the value of liabilities, as set out in the inflation risk section of note 34(d). 3 The change in this assumption reflects the risk that life expectancy rates might increase. In reality inter-relationships exist between the assumptions, particularly between the discount rate and price inflation. The above analysis does not take into account the effect of these inter-relationships. Also, in practice any movement in obligations arising from assumption changes are likely to be accompanied by movements in asset values \u2013 and so the impact on the accounting deficit may be lower than the impact on the obligations shown above. In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet. (vi) Effect on future cash flows Contribution rates are set in consultation with the Trustees for each Scheme and each participating employer. The average duration of the benefit obligation at the end of the year is 13 years for STPS, 10 years for STMIPS and 12 years for DVWS. The most recently completed formal triennial actuarial valuations and funding agreements were carried out as at 31 March 2022 for the STPS and STMIPS and 31 March 2020 for DVWS. As a result of the STPS actuarial valuation, annual deficit reduction contributions of \u00a334.2 million were agreed, with the March 2023 payment having been increased in line with the annual increase in CPI to November 2022. Thereafter, future contributions for the STPS will also increase in line with CPI inflation until March 2027. The first two contributions in March 2023 and March 2024 are payable directly into the STPS and it is expected that payments in future years will be payable to a limited liability partnership that the Group and Trustee are in the process of setting up. Payments of \u00a38.2 million per annum through an asset backed funding arrangement will also continue to 31 March 2032 for the STPS. Further inflation linked payments of \u00a315.0 million per annum are being made through an additional asset backed funding arrangement, with payments having started in the financial year ending 31 March 2018 and continuing to 31 March 2031. These contributions will cease earlier should a subsequent valuation of the STPS show that they are no longer needed. There are no deficit reduction contributions payable by the Group for STMIPS and DVWS. b) Defined contribution pension schemes The Group also operates the Severn Trent Group Personal Pension, a defined contribution scheme, for its UK employees. The total cost charged to operating costs of \u00a322.4 million (2022: \u00a328.1 million) represents contributions payable to these schemes by the Group at rates specified in the rules of the scheme. As at 31 March 2023, no contributions (2022: nil) in respect of the current reporting period were owed to the schemes. Hafren Dyfrdwy operates two defined contribution pension schemes, neither of which were material in either the current or prior year. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-429": {
"value": "a) Defined benefit pension schemes (i) Background The Group operates a number of defined benefit pension schemes. The Severn Trent Pension Scheme and the Severn Trent Mirror Image Pension Scheme closed to future accrual on 31 March 2015, while the Dee Valley Water Limited Section of the Water Companies Pension Scheme, which is a sectionalised scheme, currently remains open to accrual. The defined benefit pension schemes cover increases in accrued benefits arising from inflation and pension increases. Their assets are held in separate funds administered by Trustees. The Trustees are required to act in the best interests of the schemes\u2019 beneficiaries. A formal actuarial valuation of each scheme is carried out on behalf of the Trustees at triennial intervals by an independent professionally qualified actuary. Under the defined benefit pension schemes, members are entitled to retirement benefits calculated by reference to their pensionable service and pensionable salary history, with inflationary pension increases applying in line with the scheme rules. The defined benefit pension schemes and the dates of their last completed formal actuarial valuations as at the accounting date are as follows: Date of last formal actuarial valuation Severn Trent Pension Scheme (STPS)* 31 March 2022 Severn Trent Mirror Image Pension Scheme (STMIPS) 31 March 2022 Water Companies Pension Scheme \u2013 Dee Valley Water Limited Section (DVWS) 31 March 2020 * The STPS is by far the largest of the Group\u2019s UK defined benefit schemes, comprising over 90% of the Group\u2019s overall defined benefit obligations. The defined benefit scheme assets have been updated to reflect their market value at 31 March 2023. Actuarial gains and losses on the scheme assets and defined benefit obligations have been reported in the statement of comprehensive income. Service cost, and the costs of administrating the scheme, are recognised in operating costs and interest cost is recognised in net finance costs. (ii) Amount included in the balance sheet arising from the Group\u2019s obligations under the defined benefit pension schemes 2023 \u00a3m 2022 \u00a3m Fair value of assets 1,785.3 2,659.4 Present value of the defined benefit obligations (2,064.7) (2,787.4) (279.4) (128.0) Presented on the balance sheet as: Retirement benefit obligation \u2013 funded schemes in surplus 5.7 17.5 Retirement benefit obligation \u2013 funded schemes in deficit (278.6) (137.6) Retirement benefit obligation \u2013 unfunded schemes (6.5) (7.9) Retirement benefit obligation \u2013 total (285.1) (145.5) Net retirement benefit obligation (279.4) (128.0) STPS, STMIPS, and DVWS 2023 \u00a3m 2022 \u00a3m Fair value of scheme assets Equities 188.4 478.1 Annuity policies 122.2 104.6 Corporate bonds 237.0 953.0 Liability-driven investment funds (\u2018LDIs\u2019) 259.2 642.4 Property 239.6 296.8 Buy and maintain credit \u2013 22.5 High-yield bonds \u2013 25.8 Cash 738.9 136.2 1,785.3 2,659.4 * In June 2021, the STMIPS Trustees completed the purchase of a bulk annuity contract with JUST, an insurance company, to secure the benefits of all members of the STMIPS. The Trustees continue to pay benefits to members as before the transaction, but these cashflows are now matched exactly by income from JUST. In March 2023, the DVWS also entered into a bulk annuity buy-in investment policy with JUST that covers the majority of the scheme obligations. Most of the assets have quoted prices in active markets, but there are equities, annuity policies, corporate bonds and LDI investments which are unquoted amounting to \u00a3419.0 million (2022: \u00a3496.0 million). Movements in the fair value of the scheme assets were as follows: 2023 \u00a3m 2022 \u00a3m Fair value at 1 April 2,659.4 2,600.4 Interest income on scheme assets 78.6 52.8 Contributions from the sponsoring companies 100.5 61.9 Return on plan assets (excluding amounts included in finance income) (922.0) 68.9 Scheme administration costs (4.3) (3.8) Benefits paid (126.9) (120.8) Fair value at 31 March 1,785.3 2,659.4 Movements in the present value of the defined benefit obligations were as follows: 2023 \u00a3m 2022 \u00a3m Present value at 1 April (2,787.4) (2,968.1) Current service cost (0.1) (0.2) Past service credit 8.3 \u2013 Interest cost (82.2) (59.5) Actuarial (losses)/gains arising from changes in demographic assumptions (16.2) 5.6 Actuarial gains arising from changes in financial assumptions 744.7 192.9 Actuarial losses arising from experience adjustments (58.7) (78.9) Benefits paid 126.9 120.8 Present value at 31 March (2,064.7) (2,787.4) The Group has an obligation to pay pensions to a number of former employees, whose benefits would otherwise have been restricted by the Finance Act 1989 earnings cap. Provision for such benefits amounting to \u00a36.5 million (2022: \u00a37.9 million) is included as an unfunded scheme within the retirement benefit obligation. The Group has assessed that it has an unconditional right to a refund of any surplus assets in each of the Schemes following settlement of all obligations to Scheme members and therefore the surplus in the DVWS has been recognised in full. (iii) Amounts recognised in the income statement in respect of these defined benefit pension schemes 2023 \u00a3m 2022 \u00a3m Amounts credited/(charged) to operating costs: Current service cost (0.1) (0.2) Past service credit 8.3 \u2013 Scheme administration costs (4.3) (3.8) 3.9 (4.0) Amounts charged to finance costs: Interest cost (82.2) (59.5) Amounts credited to finance income: Interest income on scheme assets 78.6 52.8 Total amount credited/(charged) to the income statement 0.3 (10.7) The actual return on scheme assets was a loss of \u00a3843.4 million (2022: gain of \u00a3121.7 million). Actuarial gains and losses have been reported in the statement of comprehensive income. (iv) Actuarial risk factors The schemes typically expose the Group to actuarial risks such as investment risk, inflation risk and longevity risk for so long as the benefits are not insured. Investment risk The Group\u2019s contributions to the schemes are based on actuarial calculations which make assumptions about the returns expected from the schemes\u2019 investments. If the investments underperform these assumptions in the long term then the Group may need to make additional contributions to the schemes in order to fund the payment of accrued benefits. Each scheme\u2019s investment strategy seeks to balance the level of investment return sought with the aim of reducing volatility and risk. In undertaking this approach, reference is made to both the maturity of the liabilities and the funding level of that scheme. A number of further strategies are employed to manage underlying risks, including liability-matching asset strategies, diversification of asset portfolios and interest rate hedging. Currently the STPS has a balanced approach to investment in equity securities, debt instruments and real estates. Due to the long-term nature of the scheme liabilities, the Group and the STPS Trustees consider it appropriate to invest a portion of the scheme assets in equity securities and in real estate to leverage the return generated by the fund. The STMIPS and DVWS are now primarily invested in bulk annuity insurance contracts with JUST, with a small residual amount of invested assets remaining. Inflation risk The benefits payable to members of the schemes are linked to inflation measured by the RPI or CPI, subject to caps. The Group\u2019s contributions to the schemes are based on assumptions about the future level of inflation. If inflation is higher than the levels assumed in the actuarial calculations then the Group may need to make additional contributions to the schemes in order to fund the payment of accrued benefits. The schemes use LDIs within the asset portfolios to hedge against the value of liabilities changing as a result of movements in long-term interest rate and inflation expectations. This structure allows the schemes to both hedge against these risks and retain capital investment in assets that are expected to generate higher returns. Longevity risk The Group\u2019s contributions to the schemes are based on assumptions about the life expectancy of scheme members after retirement. If scheme members live longer than assumed in the actuarial calculations then the Group may need to make additional contributions to the schemes in order to fund the payment of accrued benefits. (v) Actuarial assumptions The major financial assumptions used in the accounting valuation of the obligations for the STPS which represents by far the largest defined benefit obligation for the Group were as follows: 2023 % pa 2022 % pa Price inflation \u2013 RPI 3.3 3.6 Price inflation \u2013 CPI Pre 2030: 2.3 2.6 Post 2030: 3.2 3.5 Discount rate 4.8 2.8 Pension increases in payment 3.3 3.6 Pension increases in deferment 3.3 3.6 The assumption for RPI inflation is derived with reference to the difference between the yields on longer-term fixed rate gilts and on index-linked gilts. RPI is expected to be more closely aligned with CPI from 2030 onwards, which is reflected in the corresponding assumption for CPI inflation. In setting the discount rate, we construct a yield curve. Short dated yields are taken from market rates for AA corporate bonds. Long-dated yields for the curve are based on the average yield available on all long-dated AA corporate bonds. We project the expected cash flows of the schemes and adopt a single equivalent cash flow weighted discount rate taking account of this constructed yield curve. The mortality base table assumptions are based on those used in the latest triennial funding valuation of the STPS. The mortality assumptions adopted at the year end for accounting purposes and the life expectancies at age 60 implied by the assumptions are as follows: 2023 2022 Men Women Men Women Mortality table used S3PMA S3PFA_M S3PMA_L S3PFA_M Mortality table compared with standard table 98% 91% 112% 95% Mortality projections CMI 2021 CMI 2021 CMI 2021 CMI 2021 Long-term rate of future improvement per annum 1.0% 1.0% 1.0% 1.0% Weighting factor given to data for 2021 40% 40% 20% 20% Remaining life expectancy for members currently aged 60 (years) 25.8 28.6 26.5 28.5 Remaining life expectancy at age 60 for members currently aged 40 (years) 26.9 29.8 27.6 29.7 The calculation of the scheme obligations is sensitive to the actuarial assumptions and in particular to the assumptions relating to discount rate, price inflation (capped, where relevant) and mortality. The following table summarises the estimated impact on the Group\u2019s obligations from changes to key actuarial assumptions whilst holding all other assumptions constant. Assumption Change in assumption Impact on disclosed obligations Discount rate1 Increase/decrease by 0.1% pa Decrease/increase by \u00a326 million Price inflation2 Increase/decrease by 0.1% pa Increase/decrease by \u00a321 million Mortality3 Increase in life expectancy by 1 year Increase by \u00a372 million 1 A change in discount rate is likely to occur as a result of changes in bond yields and as such would be expected to be offset to a significant degree by a change in the value of the bond assets held by the schemes. 2 The projected impact resulting from a change in RPI reflects the underlying effect on pensions in payment, pensions in deferment and resultant pension increases. This would be expected to be offset by returns on LDI assets within the asset portfolios used to hedge against the value of liabilities, as set out in the inflation risk section of note 34(d). 3 The change in this assumption reflects the risk that life expectancy rates might increase. In reality inter-relationships exist between the assumptions, particularly between the discount rate and price inflation. The above analysis does not take into account the effect of these inter-relationships. Also, in practice any movement in obligations arising from assumption changes are likely to be accompanied by movements in asset values \u2013 and so the impact on the accounting deficit may be lower than the impact on the obligations shown above. In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet. (vi) Effect on future cash flows Contribution rates are set in consultation with the Trustees for each Scheme and each participating employer. The average duration of the benefit obligation at the end of the year is 13 years for STPS, 10 years for STMIPS and 12 years for DVWS. The most recently completed formal triennial actuarial valuations and funding agreements were carried out as at 31 March 2022 for the STPS and STMIPS and 31 March 2020 for DVWS. As a result of the STPS actuarial valuation, annual deficit reduction contributions of \u00a334.2 million were agreed, with the March 2023 payment having been increased in line with the annual increase in CPI to November 2022. Thereafter, future contributions for the STPS will also increase in line with CPI inflation until March 2027. The first two contributions in March 2023 and March 2024 are payable directly into the STPS and it is expected that payments in future years will be payable to a limited liability partnership that the Group and Trustee are in the process of setting up. Payments of \u00a38.2 million per annum through an asset backed funding arrangement will also continue to 31 March 2032 for the STPS. Further inflation linked payments of \u00a315.0 million per annum are being made through an additional asset backed funding arrangement, with payments having started in the financial year ending 31 March 2018 and continuing to 31 March 2031. These contributions will cease earlier should a subsequent valuation of the STPS show that they are no longer needed. There are no deficit reduction contributions payable by the Group for STMIPS and DVWS. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory",
"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
}
},
"fact-430": {
"value": "b) Defined contribution pension schemes The Group also operates the Severn Trent Group Personal Pension, a defined contribution scheme, for its UK employees. The total cost charged to operating costs of \u00a322.4 million (2022: \u00a328.1 million) represents contributions payable to these schemes by the Group at rates specified in the rules of the scheme. As at 31 March 2023, no contributions (2022: nil) in respect of the current reporting period were owed to the schemes. Hafren Dyfrdwy operates two defined contribution pension schemes, neither of which were material in either the current or prior year. ",
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"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-397": {
"value": "28 Provisions Insurance \u00a3m Regulatory \u00a3m Other \u00a3m Total \u00a3m At 1 April 2022 19.8 23.1 17.4 60.3 Charged to income statement 5.3 1.1 0.7 7.1 Other net additions \u2013 34.2 \u2013 34.2 Utilisation of provision (9.9) (7.4) \u2013 (17.3) Unwinding of discount \u2013 \u2013 0.2 0.2 At 31 March 2023 15.2 51.0 18.3 84.5 2023 \u00a3m 2022 \u00a3m Included in: Current liabilities 52.4 38.4 Non-current liabilities 32.1 21.9 84.5 60.3 Insurance includes provisions in respect of Lyra Insurance Guernsey Limited, a captive insurance company and a wholly owned subsidiary of the Group, and insurance deductions in Severn Trent Water Limited. The associated outflows are estimated to arise over a period of up to five years from the balance sheet date. Regulatory comprises provisions for works in response to legally enforceable undertakings to regulators, some of which are capital projects. The associated outflows are estimated to arise over a period of up to five years from the balance sheet date. Other provisions include provisions for dilapidations, commercial disputes, either from continuing or discontinued operations, and potential environmental claims. The associated outflows are estimated to arise over a period up to ten years from the balance sheet date. ",
"dimensions": {
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"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-431": {
"value": "29 Share capital 2023 Number 2022 Number Total issued and fully paid share capital 254,425,641 ordinary shares of 9717/19 p (2022: 253,410,074) 249.1 248.1 At 31 March 2023, 2,863,716 treasury shares (2022: 3,116,579) were held at a nominal value of \u00a32,803,427 (2022: \u00a33,051,131). On 25 May 2021 the Company issued 10,420,000 ordinary shares of 9717/19 p at 2,400p per share, through a placing, raising \u00a3245.3 million net of issue costs. Changes in share capital were as follows: Number \u00a3m Ordinary shares of 9717 /19p At 1 April 2021 242,259,862 237.2 Shares issued under the Employee Sharesave Scheme 730,212 0.7 Shares issued from equity placing 10,420,000 10.2 At 1 April 2022 253,410,074 248.1 Shares issued under the Employee Sharesave Scheme 1,015,567 1.0 At 31 March 2023 254,425,641 249.1 30 Share premium 2023 \u00a3m 2022 \u00a3m At 1 April 394.4 148.1 Share premium arising on issue of shares for Employee Sharesave Scheme 14.3 11.2 Share premium arising from equity placing \u2013 235.1 At 31 March 408.7 394.4 31 Other reserves Capital redemption reserve \u00a3m Hedging reserve \u00a3m Total \u00a3m At 1 April 2021 157.1 (55.4) 101.7 Total comprehensive income for the year \u2013 46.7 46.7 At 1 April 2022 157.1 (8.7) 148.4 Total comprehensive income for the year \u2013 1.9 1.9 At 31 March 2023 157.1 (6.8) 150.3 The capital redemption reserve arose on the redemption of B shares. The hedging reserve arises from gains or losses on interest rate swaps and energy swaps taken directly to equity under the hedge accounting provisions of IFRS 9. ",
"dimensions": {
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"language": "en",
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"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-398": {
"value": "29 Share capital 2023 Number 2022 Number Total issued and fully paid share capital 254,425,641 ordinary shares of 9717/19 p (2022: 253,410,074) 249.1 248.1 At 31 March 2023, 2,863,716 treasury shares (2022: 3,116,579) were held at a nominal value of \u00a32,803,427 (2022: \u00a33,051,131). On 25 May 2021 the Company issued 10,420,000 ordinary shares of 9717/19 p at 2,400p per share, through a placing, raising \u00a3245.3 million net of issue costs. Changes in share capital were as follows: Number \u00a3m Ordinary shares of 9717 /19p At 1 April 2021 242,259,862 237.2 Shares issued under the Employee Sharesave Scheme 730,212 0.7 Shares issued from equity placing 10,420,000 10.2 At 1 April 2022 253,410,074 248.1 Shares issued under the Employee Sharesave Scheme 1,015,567 1.0 At 31 March 2023 254,425,641 249.1 ",
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"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-399": {
"value": "30 Share premium 2023 \u00a3m 2022 \u00a3m At 1 April 394.4 148.1 Share premium arising on issue of shares for Employee Sharesave Scheme 14.3 11.2 Share premium arising from equity placing \u2013 235.1 At 31 March 408.7 394.4 31 Other reserves Capital redemption reserve \u00a3m Hedging reserve \u00a3m Total \u00a3m At 1 April 2021 157.1 (55.4) 101.7 Total comprehensive income for the year \u2013 46.7 46.7 At 1 April 2022 157.1 (8.7) 148.4 Total comprehensive income for the year \u2013 1.9 1.9 At 31 March 2023 157.1 (6.8) 150.3 The capital redemption reserve arose on the redemption of B shares. The hedging reserve arises from gains or losses on interest rate swaps and energy swaps taken directly to equity under the hedge accounting provisions of IFRS 9. ",
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"language": "en",
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"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-400": {
"value": "32 Capital management The Group\u2019s principal objectives in managing capital are: \u2013 to maintain a flexible and sustainable balance sheet structure; \u2013 to maintain an investment grade credit rating; \u2013 to access a broad range of sources of finance to obtain both the quantum required and lowest cost compatible with the need for continued availability; \u2013 to manage exposure to movements in interest rates to provide an appropriate degree of certainty as to its cost of funds; \u2013 to minimise exposure to counterparty credit risk; and \u2013 to provide the Group with an appropriate degree of certainty as to its foreign exchange exposure. The Group seeks to achieve a balance of long-term funding or commitment of funds across a range of funding sources at the best possible economic cost. The Group monitors future funding requirements and credit market conditions to ensure continued availability of funds. The Group has continued to monitor market conditions and limit its exposure to floating interest rate debt, which comprises 5% (2022: 4%) of our gross debt portfolio at the balance sheet date, with a further 28% (2022: 27%) of index-linked debt and 67% (2022: 69%) of fixed rate debt. Exposure to credit risk (excluding credit risk relating to amounts receivable from contracts with customers) is set out in note 34 b). Foreign exchange risk is set out in note 34 a) (ii). The Group has the following credit ratings: Moody\u2019s Standard and Poor\u2019s Fitch Severn Trent Plc Baa2 BBB BBB Severn Trent Water Baa1 BBB+ BBB+ The ratings were stable. A key metric in measuring financial sustainability and capital efficiency for companies in the water sector is RCV gearing. This is measured as Severn Trent Water Group\u2019s net debt plus Hafren Dyfrdwy Cyfyngedig\u2019s net debt divided by their combined RCV. Amongst other considerations, the Group takes into account Ofwat assumption at the Price Review (60% for AMP 7). At 31 March 2023 the Group\u2019s RCV gearing ratio based on the RCV in the Final Determination for AMP7 (FD RCV) was 60.7% (2022: 59.5%). The FD RCV excludes expenditure that was not in the PR19 Business Plan such as our Green Recovery Programme. This expenditure will be included in the opening RCV for AMP8. Where the expenditure has been incurred but is not yet included in the RCV, there is a mismatch in the RCV gearing ratio. We therefore also monitor our shadow RCV gearing ratio which adjusts the RCV for expenditure already incurred but not yet included in the RCV. The shadow RCV gearing ratio at 31 March 2023 was 60.0% (2022: 59.2%). The Group\u2019s dividend policy is a key tool in achieving its capital management objectives. This policy is reviewed and updated in line with Severn Trent Water\u2019s five year price control cycle and takes into account, inter alia, the planned investment programme, the appropriate gearing level achieving a balance between an efficient cost of capital and retaining an investment grade credit rating and delivering an attractive and sustainable return to shareholders. The Board has decided to set the 2022/23 dividend at 106.82 pence, an increase of 4.6% compared to the total dividend for 2021/22 of 102.14 pence. Our policy is to grow the dividend annually at no less than CPIH until March 2025. The Group\u2019s capital at 31 March was: 2023 \u00a3m 2022 \u00a3m Net cash and cash equivalents 28.7 107.7 Bank loans (713.0) (782.5) Other loans (6,474.2) (5,823.5) Lease liabilities (110.9) (117.4) Cross currency swaps 33.6 28.3 Loans receivable from joint venture 75.3 79.6 Net debt (7,160.5) (6,507.8) Equity attributable to owners of the company (970.6) (1,263.9) Total capital (8,131.1) (7,771.7) ",
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"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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},
"fact-401": {
"value": "33 Fair values of financial instruments a) Fair value measurements The valuation techniques that the Group applies in determining the fair values of its financial instruments on a recurring basis are described below. The techniques are classified under the hierarchy defined in IFRS 13 which categorises valuation techniques into Levels 1 \u2013 3 based on the degree to which the fair value is observable. The Group\u2019s valuation techniques are Level 2 unless otherwise stated below: 2023 \u00a3m 2022 \u00a3m Valuation techniques and key inputs Cross currency swaps Discounted cash flow Future cash flows are estimated based on forward interest rates from observable yield curves at the period end and contract interest rates discounted at a rate that reflects the credit risk of counterparties. The currency cash flows are translated at spot rate. Assets 34.5 28.3 Liabilities (0.9) \u2013 Interest rate swaps Discounted cash flow Future cash flows are estimated based on forward interest rates from observable yield curves at the period end and contract interest rates discounted at a rate that reflects the credit risk of counterparties. Assets 40.5 2.9 Liabilities (10.4) (39.6) Energy swaps Discounted cash flow Future cash flows are estimated based on forward electricity prices from observable indices at the period end and contract prices discounted at a rate that reflects the credit risk of counterparties. Assets 0.5 27.6 Inflation swaps Discounted cash flow Future cash flows on the RPI leg of the instrument are estimated based on observable forward inflation indices. Future cash flows on the CPI leg of the instrument are estimated based on the future expected differential between RPI and CPI (\u201cthe CPI wedge\u201d). Both legs are discounted using observable swap rates at the period end, at a rate that reflects the credit risk of counterparties. This is considered to be a Level 3 valuation technique. Assets 7.3 \u2013 Liabilities \u2013 (3.7) Changes in the carrying values of instruments that are measured using a Level 3 technique were as follows: Inflation swaps \u00a3m At 1 April 2021 (32.1) Net gains recognised in profit or loss 28.4 At 31 March 2022 (3.7) Net gains recognised in profit or loss 11.0 At 31 March 2023 7.3 These Level 3 instruments are valued using unobservable inputs. In valuing the inflation swaps, we have identified the unobservable input as the CPI wedge. A change of 10bps in the CPI wedge would result in a change in the carrying value of \u00a34.5 million. b) Comparison of fair value of financial instruments with their carrying amounts The Directors consider that the carrying amounts of all financial instruments, except those disclosed in the table below, approximate to their fair values. The carrying values and estimated fair values of other financial instruments are set out below: 2023 2022 Carrying value \u00a3m Fair value \u00a3m Carrying value \u00a3m Fair value \u00a3m Floating rate debt Bank loans 569.0 551.0 652.6 652.6 Other loans 146.8 157.9 147.8 161.4 Overdraft 5.5 5.5 7.7 7.7 721.3 714.4 808.1 821.7 Fixed rate debt Other loans 4,441.3 4,177.0 3,984.3 4,253.0 Lease liabilities 110.9 110.9 117.4 126.6 4,552.2 4,287.9 4,101.7 4,379.6 Index-linked debt Bank loans 144.0 137.1 129.9 149.5 Other loans 1,886.1 1,798.0 1,691.4 2,456.1 2,030.1 1,935.1 1,821.3 2,605.6 7,303.6 6,937.4 6,731.1 7,806.9 The above floating, fixed or index-linked classification does not take into account the impact of interest rate swaps or cross currency swaps. Fixed rate loans are valued using market prices for similar instruments, which is a Level 2 valuation technique. Index-linked loans are rarely traded and quoted prices are not considered a reliable indicator of fair value. Therefore, these loans are valued using discounted cash flow models with discount rates derived from observed market prices for a sample of bonds, which is a Level 2 valuation technique. Fair values of the other debt instruments are also calculated using discounted cash flow models with discount rates derived from observed market prices, which is a Level 2 valuation technique. ",
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"language": "en",
"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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},
"fact-432": {
"value": "a) Fair value measurements The valuation techniques that the Group applies in determining the fair values of its financial instruments on a recurring basis are described below. The techniques are classified under the hierarchy defined in IFRS 13 which categorises valuation techniques into Levels 1 \u2013 3 based on the degree to which the fair value is observable. The Group\u2019s valuation techniques are Level 2 unless otherwise stated below: 2023 \u00a3m 2022 \u00a3m Valuation techniques and key inputs Cross currency swaps Discounted cash flow Future cash flows are estimated based on forward interest rates from observable yield curves at the period end and contract interest rates discounted at a rate that reflects the credit risk of counterparties. The currency cash flows are translated at spot rate. Assets 34.5 28.3 Liabilities (0.9) \u2013 Interest rate swaps Discounted cash flow Future cash flows are estimated based on forward interest rates from observable yield curves at the period end and contract interest rates discounted at a rate that reflects the credit risk of counterparties. Assets 40.5 2.9 Liabilities (10.4) (39.6) Energy swaps Discounted cash flow Future cash flows are estimated based on forward electricity prices from observable indices at the period end and contract prices discounted at a rate that reflects the credit risk of counterparties. Assets 0.5 27.6 Inflation swaps Discounted cash flow Future cash flows on the RPI leg of the instrument are estimated based on observable forward inflation indices. Future cash flows on the CPI leg of the instrument are estimated based on the future expected differential between RPI and CPI (\u201cthe CPI wedge\u201d). Both legs are discounted using observable swap rates at the period end, at a rate that reflects the credit risk of counterparties. This is considered to be a Level 3 valuation technique. Assets 7.3 \u2013 Liabilities \u2013 (3.7) Changes in the carrying values of instruments that are measured using a Level 3 technique were as follows: Inflation swaps \u00a3m At 1 April 2021 (32.1) Net gains recognised in profit or loss 28.4 At 31 March 2022 (3.7) Net gains recognised in profit or loss 11.0 At 31 March 2023 7.3 These Level 3 instruments are valued using unobservable inputs. In valuing the inflation swaps, we have identified the unobservable input as the CPI wedge. A change of 10bps in the CPI wedge would result in a change in the carrying value of \u00a34.5 million. ",
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},
"fact-402": {
"value": "34 Risks arising from financial instruments The Group\u2019s activities expose it to a variety of financial risks: \u2013 market risk (including interest rate risk, exchange rate risk and other price risk); \u2013 credit risk; \u2013 liquidity risk; and \u2013 inflation risk. The Group\u2019s overall risk management programme addresses the unpredictability of financial markets and seeks to reduce potential adverse effects on the Group\u2019s financial performance or position. Financial risks are managed by a central treasury department (\u2018Group Treasury\u2019) under policies approved by the Board of Directors. The Board has established a Treasury Committee to monitor treasury activities and to facilitate timely responses to changes in market conditions when necessary. Group Treasury operates under the Group\u2019s Treasury Procedures Manual and Policy Statement and identifies, evaluates and hedges financial risks in close co-operation with the Group\u2019s operating units. The Board defines written principles for overall risk management, as well as written policies covering specific areas such as exchange rate risk, interest rate risk, credit risk and the use of derivative and non-derivative financial instruments. The Group\u2019s policy is that derivative financial instruments are not held for trading but may be used to mitigate the Group\u2019s exposure to financial risk. The types of derivative instruments held and the related risks are described below. Interest rate swaps are held to mitigate the Group\u2019s exposure to changes in market interest rates. Further details are set out in section a) (i) and note 35 b) (i). Cross currency swaps are held to mitigate the Group\u2019s exposure to exchange rate movements on amounts borrowed in foreign currencies. Further details are set out in section a) (ii) and note 35 a) (i). Energy swaps are held to mitigate the Group\u2019s exposure to changes in wholesale energy prices. Further details are provided in note 35 b) (ii). Severn Trent Water, the Group\u2019s most significant business unit, operates under a regulatory environment where its prices are linked to inflation measured by CPIH. In order to mitigate the risks to cash flow and earnings arising from fluctuations in CPIH, the Group holds debt instruments where the principal repayable and interest cost is linked to RPI/CPI/CPIH and the Group holds RPI/CPI swaps to mitigate the risk of divergence between RPI and CPIH. a) Market risk The Group is exposed to fluctuations in interest rates and, to a lesser extent, exchange rates. The nature of these risks and the steps that the Group has taken to manage them are described below. (i) Interest rate risk The Group\u2019s annual income and its operating cash flows are substantially independent of changes in market interest rates. The Group\u2019s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to the risk of adverse cash flow impacts from increases in interest rates. Borrowings issued at fixed rates expose the Group to the risk of interest costs above the market rate when interest rates decrease. The Group\u2019s policy is to maintain 40% to 70% of its interest-bearing liabilities in fixed rate instruments during AMP7. In measuring this metric, management makes adjustments to the carrying value of debt to better reflect the amount that interest is calculated on. Details of the adjustments made are set out below: 2023 \u00a3m 2022 \u00a3m Net debt (note 37) 7,160.5 6,507.8 Cash and cash equivalents 34.2 115.4 Loans receivable from joint venture 75.3 79.6 Cross currency swaps included in net debt at fair value 33.6 28.3 Fair value hedge accounting adjustments (20.1) (21.1) Exchange on currency debt not hedge accounted (22.3) (14.9) Interest bearing financial liabilities 7,261.2 6,695.1 The Group manages its cash flow interest rate risk by borrowing at fixed or index-linked rates or by using interest rate swaps. Under these swaps the Group receives variable rate interest and pays fixed rate interest calculated by reference to the agreed notional principal amounts. In practice the swaps are settled by transferring the net amount. These swaps have the economic effect of converting borrowings from variable rates to fixed rates. The Group has entered into a series of these interest rate swaps to hedge future interest payments beyond 2030. The following tables show analyses of the Group\u2019s interest bearing financial liabilities by type of interest. Debt which is hedged by interest rate swaps or cross currency swaps is included in the category after taking account of the impact of the swap. Debt raised in foreign currencies has been included at the notional sterling value of the payable leg of the corresponding cross currency swap since this is the amount that is exposed to changes in interest rates. Valuation adjustments that do not impact the amount on which interest is calculated, such as fair value hedge accounting adjustments, are excluded from this analysis. The net principal amount of unhedged swaps is shown as an adjustment to floating rate and fixed rate debt to demonstrate the impact of the swaps on the amount of liabilities bearing fixed interest. 2023 Floating rate \u00a3m Fixed rate \u00a3m Index- linked \u00a3m Total \u00a3m Overdraft (5.5) \u2013 \u2013 (5.5) Bank loans (543.6) (25.4) (144.0) (713.0) Other loans (83.0) (4,462.7) (1,886.1) (6,431.8) Lease liabilities \u2013 (110.9) \u2013 (110.9) (632.1) (4,599.0) (2,030.1) (7,261.2) Impact of swaps not matched against specific debt instruments 275.0 (275.0) \u2013 \u2013 Interest bearing financial liabilities (357.1) (4,874.0) (2,030.1) (7,261.2) Proportion of interest bearing financial liabilities that are fixed 67% Weighted average interest rate of fixed debt 4.11% Weighted average period for which interest is fixed (years) 9.7 2022 Floating rate \u00a3m Fixed rate \u00a3m Index- linked \u00a3m Total \u00a3m Overdraft (7.7) \u2013 \u2013 (7.7) Bank loans (625.4) (27.2) (129.9) (782.5) Other loans (104.3) (3,991.8) (1,691.4) (5,787.5) Lease liabilities \u2013 (117.4) \u2013 (117.4) (737.4) (4,136.4) (1,821.3) (6,695.1) Impact of swaps not matched against specific debt instruments 475.0 (475.0) \u2013 \u2013 Interest bearing financial liabilities (262.4) (4,611.4) (1,821.3) (6,695.1) Proportion of interest bearing financial liabilities that are fixed 66% Weighted average interest rate of fixed debt 3.84% Weighted average period for which interest is fixed (years) 9.2 Interest rate swaps not hedge accounted The Group has a number of interest rate swaps which are not accounted for as cash flow or fair value hedges. This has led to a credit of \u00a325.9 million (2022: \u00a325.2 million) in the income statement. Average contract fixed interest rate Notional principal amount Fair value 2023 % 2022 % 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m Pay fixed rate interest 1-2 years \u2013 4.98 \u2013 (50.0) \u2013 (2.2) 2-5 years \u2013 5.14 \u2013 (150.0) \u2013 (13.6) 5-10 years 5.46 5.46 (75.0) (75.0) (10.0) (21.2) 5.46 5.20 (75.0) (275.0) (10.0) (37.0) In addition to the above the Group has cross currency swaps that also swap fixed rate interest to floating (see below). Interest rate sensitivity analysis The sensitivity after tax of the Group\u2019s profits, cash flow and equity, including the impact on derivative financial instruments, to changes in interest rates at 31 March is as follows: 2023 2023 +1.0% \u00a3m -1.0% \u00a3m +1.0% \u00a3m +1.0% \u00a3m Profit or loss 2.3 (2.8) 9.7 (10.6) Cash flow (2.8) 2.8 (1.5) 1.5 Equity 2.3 (2.8) 9.7 (10.6) (ii) Exchange rate risk Except for debt raised in foreign currency, which is hedged, the Group\u2019s business does not involve significant exposure to foreign exchange transactions. Substantially all of the Group\u2019s profits and net assets arise from Severn Trent Water, which has very limited and indirect exposure to changes in exchange rates, and therefore the sensitivity of the Group\u2019s results to changes in exchange rates is not material. Certain of the Group\u2019s subsidiaries enter into transactions in currencies other than the functional currency of the operation. Exchange risks relating to such operations are not material but are managed centrally by Group Treasury through forward exchange contracts to buy or sell currency. These contracts led to nil charge (2022: nil) in the income statement. The Group has raised debt denominated in currencies other than sterling to meet its objective of accessing a broad range of sources of finance. The Group mitigated its exposure to exchange rate fluctuations by entering into cross currency swaps at the time that the debt was drawn down to swap the proceeds into sterling debt bearing interest based on SONIA. Where the terms of the receivable leg of the swap closely match the terms of the underlying debt, the swaps are expected to be effective hedges, hence the swaps have been accounted for as fair value hedges. The notional value and fair value of these swaps is shown in note 35 a) (i). The Group also has cross currency swaps with a sterling notional value of \u00a398.3 million (2022: \u00a398.3 million) which are not accounted for as fair value hedges. Economically these swaps act to mitigate the exchange rate risk of debt within the Group which is denominated in foreign currency and also swap the interest from fixed rate to floating, but they are not designated hedges under IFRS 9. This has led to income of \u00a37.1 million (2022: charge of \u00a32.3 million) in the income statement, as well as an exchange loss of \u00a37.4 million (2022: loss of \u00a36.6 million) on the underlying debt. The Group\u2019s gross and net currency exposures arising from currency borrowings are summarised in the tables below. These show, in the relevant currency, the amount borrowed and the notional principal of the related swap or forward contract. The net position shows the Group\u2019s exposure to exchange rate risk in relation to its currency borrowings. 2023 Euro \u20acm US Dollar $m Yen \u00a5bn Borrowings by currency (19.9) (180.0) (10.3) Cross currency swaps \u2013 hedge accounted 19.9 30.0 10.3 Cross currency swaps \u2013 not hedge accounted \u2013 150.0 \u2013 Net currency exposure \u2013 \u2013 \u2013 2022 Euro \u20acm US Dollar $m Yen \u00a5bn Borrowings by currency (19.9) (180.0) (2.0) Cross currency swaps \u2013 hedge accounted 19.9 30.0 2.0 Cross currency swaps \u2013 not hedge accounted \u2013 150.0 \u2013 Net currency exposure \u2013 \u2013 \u2013 b) Credit risk Operationally the Group has no significant concentrations of credit risk. It has policies in place to ensure that sales of products are made to customers with an appropriate credit history, other than in Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig, whose operating licences oblige them to supply domestic customers even in cases where bills are not paid. Amounts provided against accounts receivable and movements on the provision during the year are disclosed in note 21. Cash deposits and derivative contracts are only placed with high credit quality financial institutions, which have been approved by the Board. Group Treasury monitors the credit quality of the approved financial institutions and the list of financial institutions that may be used is approved annually by the Board. The Group has policies that limit the amount of credit exposure to any one financial institution. Credit risk analysis At 31 March the aggregate credit limits of authorised counterparties and the amounts held on short term deposits were as follows: Credit limit Amount deposited 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m Double A range 150.0 150.0 \u2013 \u2013 Single A range 770.5 710.5 \u2013 75.0 Triple B range \u2013 10.0 \u2013 \u2013 920.5 870.5 \u2013 75.0 The fair values of derivative assets analysed by credit ratings of counterparties were as follows: Derivative assets 2023 \u00a3m 2022 \u00a3m Single A range 82.8 52.6 Triple B range \u2013 6.2 82.8 58.8 c) Liquidity risk (i) Committed facilities Prudent liquidity management requires sufficient cash balances to be maintained; adequate committed facilities to be available; and market position to be closed out when required. Group Treasury manages liquidity and flexibility in funding by monitoring forecast and actual cash flows and the maturity profile of financial assets and liabilities, and by keeping committed credit lines available. At the balance sheet date the Group had committed undrawn borrowing facilities expiring as follows: 2023 \u00a3m 2022 \u00a3m 2 \u2013 5 years 800.0 1,100.0 5 years 100.0 \u2013 900.0 1,100.0 (ii) Cash flows from non-derivative financial instruments The following tables show the estimated cash flows that will arise from the Group\u2019s non-derivative net financial liabilities. The information presented is based on the earliest date on which the Group can be required to pay and represents the undiscounted cash flows including principal and interest. Interest and inflation assumptions are based on prevailing market conditions at the year end date. 2023 Undiscounted amounts payable: Floating rate \u00a3m Fixed rate \u00a3m Index-linked \u00a3m Trade and other payables \u00a3m Payments on financial liabilities \u00a3m Within 1 year (16.7) (473.5) (36.1) (149.2) (675.5) 1 \u2013 2 years (10.6) (153.7) (89.3) \u2013 (253.6) 2 \u2013 5 years (141.8) (906.6) (113.8) \u2013 (1,162.2) 5 \u2013 10 years (211.9) (2,002.1) (714.3) \u2013 (2,928.3) 10 \u2013 15 years \u2013 (905.4) (168.0) \u2013 (1,073.4) 15 \u2013 20 years \u2013 (1,064.8) (304.4) \u2013 (1,369.2) 20 \u2013 25 years \u2013 (152.9) (326.2) \u2013 (479.1) 25 \u2013 30 years \u2013 \u2013 (738.5) \u2013 (738.5) 30 \u2013 35 years \u2013 \u2013 (2,909.0) \u2013 (2,909.0) 35 \u2013 40 years \u2013 \u2013 (917.5) \u2013 (917.5) 40 \u2013 45 years \u2013 \u2013 (413.3) \u2013 (413.3) Total (381.0) (5,659.0) (6,730.4) (149.2) (12,919.6) Undiscounted amounts receivable: Loans due from joint ventures \u00a3m Trade and other receivables \u00a3m Cash and short-term deposits \u00a3m Receipts from financial assets \u00a3m Within 1 year 2.4 681.7 34.2 718.3 1 \u2013 2 years 7.3 3.3 \u2013 10.6 2 - 5 years 87.0 \u2013 \u2013 87.0 Total 96.7 685.0 34.2 815.9 2022 Undiscounted amounts payable: Floating rate \u00a3m Fixed rate \u00a3m Index-linked \u00a3m Trade and other payables \u00a3m Payments on financial liabilities \u00a3m Within 1 year (4.1) (404.4) (133.1) (113.5) (655.1) 1 - 2 years (317.3) (449.7) (32.7) \u2013 (799.7) 2 - 5 years (407.7) (1,175.7) (154.4) \u2013 (1,737.8) 5 - 10 years (111.4) (1,591.1) (593.1) \u2013 (2,295.6) 10 - 15 years \u2013 (731.7) (255.1) \u2013 (986.8) 15 - 20 years \u2013 (1,070.7) (280.5) \u2013 (1,351.2) 20 - 25 years \u2013 \u2013 (211.6) \u2013 (211.6) 25 - 30 years \u2013 \u2013 (727.2) \u2013 (727.2) 30 - 35 years \u2013 \u2013 (1,713.3) \u2013 (1,713.3) 35 - 40 years \u2013 \u2013 (2,082.6) \u2013 (2,082.6) 40 - 45 years \u2013 \u2013 (411.9) \u2013 (411.9) Total (840.5) (5,423.3) (6,595.5) (113.5) (12,972.8) Undiscounted amounts payable: Loans due from joint ventures \u00a3m Trade and other receivables \u00a3m Cash and short-term deposits \u00a3m Receipts from financial assets \u00a3m Within 1 year 3.3 547.9 115.4 666.6 1 \u2013 2 years 102.3 6.6 \u2013 108.9 2 - 5 years 12.5 \u2013 \u2013 12.5 Total 118.1 554.5 115.4 788.0 Index-linked debt includes loans with maturities up to 50 years. The principal is revalued at fixed intervals and is linked to movements in the RPI, CPI or CPIH. Interest payments are made biannually based on the revalued principal. The principal repayment equals the revalued amount at maturity. The payments included in the table above are estimates based on the forward inflation rates published by the Bank of England at the balance sheet date. (iii) Cash flows from derivative financial instruments The following tables show the estimated cash flows that will arise from the Group\u2019s derivative financial instruments. The tables are based on the undiscounted net cash inflows/(outflows) on the derivative financial instruments that settle on a net basis and the undiscounted gross inflows/ (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest and foreign currency rates derived from the forward curves existing at the balance sheet date. Actual amounts may be significantly different from those indicated below. Cross currency swaps 2023 Interest rate swaps \u00a3m Inflation swaps \u00a3m Energy swaps \u00a3m Cash receipts \u00a3m Cash payments \u00a3m Total \u00a3m Within 1 year 13.9 0.5 0.5 7.4 (6.1) 16.2 1 - 2 years 9.3 0.5 \u2013 7.5 (6.0) 11.3 2 - 5 years 12.1 2.0 \u2013 157.2 (125.1) 6.2 5 - 10 years 0.4 7.2 \u2013 47.7 (45.1) 10.2 10 - 15 years \u2013 (1.9) \u2013 82.8 (59.0) 21.9 35.7 8.3 0.5 302.6 (241.3) 105.8 Cross currency swaps 2022 Interest rate swaps \u00a3m Inflation swaps \u00a3m Energy swaps \u00a3m Cash receipts \u00a3m Cash payments \u00a3m Total \u00a3m Within 1 year (16.5) 0.2 28.0 6.2 (3.5) 14.4 1 - 2 years (16.6) 0.3 \u2013 6.2 (3.5) (13.6) 2 - 5 years (29.4) 1.3 \u2013 146.3 (120.3) (2.1) 5 - 10 years (25.0) 3.0 \u2013 39.3 (33.2) (15.9) 10 - 15 years \u2013 (5.7) \u2013 \u2013 \u2013 (5.7) 15 \u2013 20 years \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) (87.5) (9.1) 28.0 198.0 (160.5) (31.1) d) Inflation risk The Group\u2019s principal operating subsidiary, Severn Trent Water, operates under a regulatory environment where its prices are linked to inflation as measured by CPIH. Its operating profits and cash flows are therefore exposed to changes in inflation. In order to mitigate and partially offset this risk, Severn Trent Water has raised debt that pays interest at a fixed coupon based on a principal amount that is adjusted for the change in inflation during the life of the debt instrument (\u2018index-linked debt\u2019). The amount of index-linked debt at the balance sheet date is shown in section a) (i) Interest rate risk, and the estimated future cash flows relating to this debt are shown in section c) (ii) Cash flows from non-derivative financial instruments. Ofwat is moving the measure of inflation used in the economic regulatory model from RPI to CPIH over a period of time. In anticipation of this the Group has entered into CPI/RPI swaps with a notional value of \u00a3350 million (2022: \u00a3350 million) in order to mitigate the risk of divergence between inflation measured by CPIH and that measured by RPI. Inflation rate sensitivity analysis The finance cost of the Group\u2019s index-linked debt instruments varies with changes in CPI/CPIH/RPI rather than interest rates. The sensitivity at 31 March of the Group\u2019s profit and equity to changes in CPI/CPIH/RPI is set out in the following table. This analysis relates to financial instruments only and excludes any CPI/CPIH/RPI impact on Severn Trent Water\u2019s revenues and Regulatory Capital Value, or accounting for defined benefit pension schemes. 2023 2022 +1.0% \u00a3m -1.0% \u00a3m +1.0% \u00a3m -1.0% \u00a3m Profit or loss (16.4) 16.4 (14.8) 14.8 Equity (16.4) 16.4 (14.8) 14.8 ",
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"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-433": {
"value": "a) Market risk The Group is exposed to fluctuations in interest rates and, to a lesser extent, exchange rates. The nature of these risks and the steps that the Group has taken to manage them are described below. (i) Interest rate risk The Group\u2019s annual income and its operating cash flows are substantially independent of changes in market interest rates. The Group\u2019s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to the risk of adverse cash flow impacts from increases in interest rates. Borrowings issued at fixed rates expose the Group to the risk of interest costs above the market rate when interest rates decrease. The Group\u2019s policy is to maintain 40% to 70% of its interest-bearing liabilities in fixed rate instruments during AMP7. In measuring this metric, management makes adjustments to the carrying value of debt to better reflect the amount that interest is calculated on. Details of the adjustments made are set out below: 2023 \u00a3m 2022 \u00a3m Net debt (note 37) 7,160.5 6,507.8 Cash and cash equivalents 34.2 115.4 Loans receivable from joint venture 75.3 79.6 Cross currency swaps included in net debt at fair value 33.6 28.3 Fair value hedge accounting adjustments (20.1) (21.1) Exchange on currency debt not hedge accounted (22.3) (14.9) Interest bearing financial liabilities 7,261.2 6,695.1 The Group manages its cash flow interest rate risk by borrowing at fixed or index-linked rates or by using interest rate swaps. Under these swaps the Group receives variable rate interest and pays fixed rate interest calculated by reference to the agreed notional principal amounts. In practice the swaps are settled by transferring the net amount. These swaps have the economic effect of converting borrowings from variable rates to fixed rates. The Group has entered into a series of these interest rate swaps to hedge future interest payments beyond 2030. The following tables show analyses of the Group\u2019s interest bearing financial liabilities by type of interest. Debt which is hedged by interest rate swaps or cross currency swaps is included in the category after taking account of the impact of the swap. Debt raised in foreign currencies has been included at the notional sterling value of the payable leg of the corresponding cross currency swap since this is the amount that is exposed to changes in interest rates. Valuation adjustments that do not impact the amount on which interest is calculated, such as fair value hedge accounting adjustments, are excluded from this analysis. The net principal amount of unhedged swaps is shown as an adjustment to floating rate and fixed rate debt to demonstrate the impact of the swaps on the amount of liabilities bearing fixed interest. 2023 Floating rate \u00a3m Fixed rate \u00a3m Index- linked \u00a3m Total \u00a3m Overdraft (5.5) \u2013 \u2013 (5.5) Bank loans (543.6) (25.4) (144.0) (713.0) Other loans (83.0) (4,462.7) (1,886.1) (6,431.8) Lease liabilities \u2013 (110.9) \u2013 (110.9) (632.1) (4,599.0) (2,030.1) (7,261.2) Impact of swaps not matched against specific debt instruments 275.0 (275.0) \u2013 \u2013 Interest bearing financial liabilities (357.1) (4,874.0) (2,030.1) (7,261.2) Proportion of interest bearing financial liabilities that are fixed 67% Weighted average interest rate of fixed debt 4.11% Weighted average period for which interest is fixed (years) 9.7 2022 Floating rate \u00a3m Fixed rate \u00a3m Index- linked \u00a3m Total \u00a3m Overdraft (7.7) \u2013 \u2013 (7.7) Bank loans (625.4) (27.2) (129.9) (782.5) Other loans (104.3) (3,991.8) (1,691.4) (5,787.5) Lease liabilities \u2013 (117.4) \u2013 (117.4) (737.4) (4,136.4) (1,821.3) (6,695.1) Impact of swaps not matched against specific debt instruments 475.0 (475.0) \u2013 \u2013 Interest bearing financial liabilities (262.4) (4,611.4) (1,821.3) (6,695.1) Proportion of interest bearing financial liabilities that are fixed 66% Weighted average interest rate of fixed debt 3.84% Weighted average period for which interest is fixed (years) 9.2 Interest rate swaps not hedge accounted The Group has a number of interest rate swaps which are not accounted for as cash flow or fair value hedges. This has led to a credit of \u00a325.9 million (2022: \u00a325.2 million) in the income statement. Average contract fixed interest rate Notional principal amount Fair value 2023 % 2022 % 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m Pay fixed rate interest 1-2 years \u2013 4.98 \u2013 (50.0) \u2013 (2.2) 2-5 years \u2013 5.14 \u2013 (150.0) \u2013 (13.6) 5-10 years 5.46 5.46 (75.0) (75.0) (10.0) (21.2) 5.46 5.20 (75.0) (275.0) (10.0) (37.0) In addition to the above the Group has cross currency swaps that also swap fixed rate interest to floating (see below). Interest rate sensitivity analysis The sensitivity after tax of the Group\u2019s profits, cash flow and equity, including the impact on derivative financial instruments, to changes in interest rates at 31 March is as follows: 2023 2023 +1.0% \u00a3m -1.0% \u00a3m +1.0% \u00a3m +1.0% \u00a3m Profit or loss 2.3 (2.8) 9.7 (10.6) Cash flow (2.8) 2.8 (1.5) 1.5 Equity 2.3 (2.8) 9.7 (10.6) (ii) Exchange rate risk Except for debt raised in foreign currency, which is hedged, the Group\u2019s business does not involve significant exposure to foreign exchange transactions. Substantially all of the Group\u2019s profits and net assets arise from Severn Trent Water, which has very limited and indirect exposure to changes in exchange rates, and therefore the sensitivity of the Group\u2019s results to changes in exchange rates is not material. Certain of the Group\u2019s subsidiaries enter into transactions in currencies other than the functional currency of the operation. Exchange risks relating to such operations are not material but are managed centrally by Group Treasury through forward exchange contracts to buy or sell currency. These contracts led to nil charge (2022: nil) in the income statement. The Group has raised debt denominated in currencies other than sterling to meet its objective of accessing a broad range of sources of finance. The Group mitigated its exposure to exchange rate fluctuations by entering into cross currency swaps at the time that the debt was drawn down to swap the proceeds into sterling debt bearing interest based on SONIA. Where the terms of the receivable leg of the swap closely match the terms of the underlying debt, the swaps are expected to be effective hedges, hence the swaps have been accounted for as fair value hedges. The notional value and fair value of these swaps is shown in note 35 a) (i). The Group also has cross currency swaps with a sterling notional value of \u00a398.3 million (2022: \u00a398.3 million) which are not accounted for as fair value hedges. Economically these swaps act to mitigate the exchange rate risk of debt within the Group which is denominated in foreign currency and also swap the interest from fixed rate to floating, but they are not designated hedges under IFRS 9. This has led to income of \u00a37.1 million (2022: charge of \u00a32.3 million) in the income statement, as well as an exchange loss of \u00a37.4 million (2022: loss of \u00a36.6 million) on the underlying debt. The Group\u2019s gross and net currency exposures arising from currency borrowings are summarised in the tables below. These show, in the relevant currency, the amount borrowed and the notional principal of the related swap or forward contract. The net position shows the Group\u2019s exposure to exchange rate risk in relation to its currency borrowings. 2023 Euro \u20acm US Dollar $m Yen \u00a5bn Borrowings by currency (19.9) (180.0) (10.3) Cross currency swaps \u2013 hedge accounted 19.9 30.0 10.3 Cross currency swaps \u2013 not hedge accounted \u2013 150.0 \u2013 Net currency exposure \u2013 \u2013 \u2013 2022 Euro \u20acm US Dollar $m Yen \u00a5bn Borrowings by currency (19.9) (180.0) (2.0) Cross currency swaps \u2013 hedge accounted 19.9 30.0 2.0 Cross currency swaps \u2013 not hedge accounted \u2013 150.0 \u2013 Net currency exposure \u2013 \u2013 \u2013 ",
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"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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},
"fact-434": {
"value": "c) Liquidity risk (i) Committed facilities Prudent liquidity management requires sufficient cash balances to be maintained; adequate committed facilities to be available; and market position to be closed out when required. Group Treasury manages liquidity and flexibility in funding by monitoring forecast and actual cash flows and the maturity profile of financial assets and liabilities, and by keeping committed credit lines available. At the balance sheet date the Group had committed undrawn borrowing facilities expiring as follows: 2023 \u00a3m 2022 \u00a3m 2 \u2013 5 years 800.0 1,100.0 5 years 100.0 \u2013 900.0 1,100.0 (ii) Cash flows from non-derivative financial instruments The following tables show the estimated cash flows that will arise from the Group\u2019s non-derivative net financial liabilities. The information presented is based on the earliest date on which the Group can be required to pay and represents the undiscounted cash flows including principal and interest. Interest and inflation assumptions are based on prevailing market conditions at the year end date. 2023 Undiscounted amounts payable: Floating rate \u00a3m Fixed rate \u00a3m Index-linked \u00a3m Trade and other payables \u00a3m Payments on financial liabilities \u00a3m Within 1 year (16.7) (473.5) (36.1) (149.2) (675.5) 1 \u2013 2 years (10.6) (153.7) (89.3) \u2013 (253.6) 2 \u2013 5 years (141.8) (906.6) (113.8) \u2013 (1,162.2) 5 \u2013 10 years (211.9) (2,002.1) (714.3) \u2013 (2,928.3) 10 \u2013 15 years \u2013 (905.4) (168.0) \u2013 (1,073.4) 15 \u2013 20 years \u2013 (1,064.8) (304.4) \u2013 (1,369.2) 20 \u2013 25 years \u2013 (152.9) (326.2) \u2013 (479.1) 25 \u2013 30 years \u2013 \u2013 (738.5) \u2013 (738.5) 30 \u2013 35 years \u2013 \u2013 (2,909.0) \u2013 (2,909.0) 35 \u2013 40 years \u2013 \u2013 (917.5) \u2013 (917.5) 40 \u2013 45 years \u2013 \u2013 (413.3) \u2013 (413.3) Total (381.0) (5,659.0) (6,730.4) (149.2) (12,919.6) Undiscounted amounts receivable: Loans due from joint ventures \u00a3m Trade and other receivables \u00a3m Cash and short-term deposits \u00a3m Receipts from financial assets \u00a3m Within 1 year 2.4 681.7 34.2 718.3 1 \u2013 2 years 7.3 3.3 \u2013 10.6 2 - 5 years 87.0 \u2013 \u2013 87.0 Total 96.7 685.0 34.2 815.9 2022 Undiscounted amounts payable: Floating rate \u00a3m Fixed rate \u00a3m Index-linked \u00a3m Trade and other payables \u00a3m Payments on financial liabilities \u00a3m Within 1 year (4.1) (404.4) (133.1) (113.5) (655.1) 1 - 2 years (317.3) (449.7) (32.7) \u2013 (799.7) 2 - 5 years (407.7) (1,175.7) (154.4) \u2013 (1,737.8) 5 - 10 years (111.4) (1,591.1) (593.1) \u2013 (2,295.6) 10 - 15 years \u2013 (731.7) (255.1) \u2013 (986.8) 15 - 20 years \u2013 (1,070.7) (280.5) \u2013 (1,351.2) 20 - 25 years \u2013 \u2013 (211.6) \u2013 (211.6) 25 - 30 years \u2013 \u2013 (727.2) \u2013 (727.2) 30 - 35 years \u2013 \u2013 (1,713.3) \u2013 (1,713.3) 35 - 40 years \u2013 \u2013 (2,082.6) \u2013 (2,082.6) 40 - 45 years \u2013 \u2013 (411.9) \u2013 (411.9) Total (840.5) (5,423.3) (6,595.5) (113.5) (12,972.8) Undiscounted amounts payable: Loans due from joint ventures \u00a3m Trade and other receivables \u00a3m Cash and short-term deposits \u00a3m Receipts from financial assets \u00a3m Within 1 year 3.3 547.9 115.4 666.6 1 \u2013 2 years 102.3 6.6 \u2013 108.9 2 - 5 years 12.5 \u2013 \u2013 12.5 Total 118.1 554.5 115.4 788.0 Index-linked debt includes loans with maturities up to 50 years. The principal is revalued at fixed intervals and is linked to movements in the RPI, CPI or CPIH. Interest payments are made biannually based on the revalued principal. The principal repayment equals the revalued amount at maturity. The payments included in the table above are estimates based on the forward inflation rates published by the Bank of England at the balance sheet date. (iii) Cash flows from derivative financial instruments The following tables show the estimated cash flows that will arise from the Group\u2019s derivative financial instruments. The tables are based on the undiscounted net cash inflows/(outflows) on the derivative financial instruments that settle on a net basis and the undiscounted gross inflows/ (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest and foreign currency rates derived from the forward curves existing at the balance sheet date. Actual amounts may be significantly different from those indicated below. Cross currency swaps 2023 Interest rate swaps \u00a3m Inflation swaps \u00a3m Energy swaps \u00a3m Cash receipts \u00a3m Cash payments \u00a3m Total \u00a3m Within 1 year 13.9 0.5 0.5 7.4 (6.1) 16.2 1 - 2 years 9.3 0.5 \u2013 7.5 (6.0) 11.3 2 - 5 years 12.1 2.0 \u2013 157.2 (125.1) 6.2 5 - 10 years 0.4 7.2 \u2013 47.7 (45.1) 10.2 10 - 15 years \u2013 (1.9) \u2013 82.8 (59.0) 21.9 35.7 8.3 0.5 302.6 (241.3) 105.8 Cross currency swaps 2022 Interest rate swaps \u00a3m Inflation swaps \u00a3m Energy swaps \u00a3m Cash receipts \u00a3m Cash payments \u00a3m Total \u00a3m Within 1 year (16.5) 0.2 28.0 6.2 (3.5) 14.4 1 - 2 years (16.6) 0.3 \u2013 6.2 (3.5) (13.6) 2 - 5 years (29.4) 1.3 \u2013 146.3 (120.3) (2.1) 5 - 10 years (25.0) 3.0 \u2013 39.3 (33.2) (15.9) 10 - 15 years \u2013 (5.7) \u2013 \u2013 \u2013 (5.7) 15 \u2013 20 years \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) (87.5) (9.1) 28.0 198.0 (160.5) (31.1) ",
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"entity": "scheme:213800RPBXRETY4A4C59",
"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-403": {
"value": "35 Hedge accounting The Group uses derivative financial instruments to hedge exposures to changes in exchange rates and interest rates. Hedge accounting is adopted for such instruments where the criteria set out in IFRS 9 are met. Hedge ineffectiveness arises from credit risk, which is not hedged. a) Fair value hedges (i) Cross currency swaps The Group raises debt denominated in currencies other than sterling. Cross currency swaps are entered into at the time that the debt is drawn down to swap the proceeds into sterling debt bearing in order to mitigate the Group\u2019s exposure to exchange rate fluctuations. Where the terms of the receivable leg of the swap closely match the terms of the underlying debt, the swaps are expected to be effective hedges. At the year end the amounts of cross currency swaps designated as fair value hedges were as follows: Notional principal amount Fair value 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m Euro 11.4 11.4 6.4 7.4 US dollar 23.2 23.2 3.1 0.9 Yen 59.9 8.5 3.6 6.3 94.5 43.1 13.1 14.6 b) Cash flow hedges (i) Interest rate swaps The Group has entered into interest rate swaps under which it has agreed to exchange the difference between fixed and floating interest rate amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on future cash flow exposures arising from issued variable rate debt. Where the hedge is expected to be highly effective these interest rate swaps are accounted for as cash flow hedges. Details of interest rate swaps that have been accounted for as cash flow hedges are summarised below: Average contract fixed interest rate Notional principal amount Fair value Period to maturity 2023 % 2022 % 2023 \u00a3m 2022 \u00a3m 2023 \u00a3m 2022 \u00a3m 2-5 years 2.43 1.70 125.4 50.0 9.5 1.0 5-10 years 1.83 2.10 248.0 325.2 30.6 (0.7) 2.03 2.05 373.4 375.2 40.1 0.3 The Group recognised a loss on hedge ineffectiveness of \u00a31.3 million (2022: loss of \u00a30.6 million) in gains/losses on financial instruments in the income statement in relation to interest rate swaps. (ii) Energy swaps The Group enters into a series of energy swaps under which it agrees to exchange the difference between fixed and market prices of electricity at six-monthly intervals. No such energy swaps are currently active and the risk of changes in wholesale energy prices in the next year is managed through physical contracts. Details of energy swaps that have been accounted for as cash flow hedges are summarised below: Average contract price Notional contracted amount Fair value Period to maturity 2023 \u00a3/MWh 2022 \u00a3/MWh 2023 MWh 2022 MWh 2023 \u00a3m 2022 \u00a3m Less than 1 year 44.7 38.5 43,680 131,520 0.5 27.6 44.7 38.5 43,680 131,520 0.5 27.6 c) Cumulative fair value adjustments At the year end the cumulative fair value adjustments arising from the corresponding continuing hedge relationships were as follows: Carrying amount of hedged items Cumulative amount of fair value adjustments on the hedged items 2023 Assets \u00a3m Liabilities \u00a3m Assets \u00a3m Liabilities \u00a3m Cross currency swaps \u2013 (109.9) \u2013 (14.0) Interest rate swaps \u2013 (171.4) \u2013 \u2013 \u2013 (281.3) \u2013 (14.0) Carrying amount of hedged items Cumulative amount of fair value adjustments on the hedged items 2022 Assets \u00a3m Liabilities \u00a3m Assets \u00a3m Liabilities \u00a3m Cross currency swaps \u2013 (58.2) \u2013 (13.7) Interest rate swaps \u2013 (374.9) \u2013 \u2013 \u2013 (433.1) \u2013 (13.7) \u00a3109.9 million (2022: \u00a358.2 million) of the carrying amount of hedged items and \u00a314.0 million (2022: \u00a313.7 million) of the cumulative amount of fair value adjustments on the hedged items relates to fair value hedges. The remainder relates to cash flow hedges. ",
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"period": "2022-04-01T00:00:00/2023-04-01T00:00:00"
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"fact-404": {
"value": "36 Share based payment The Group operates a number of share based remuneration schemes for employees. During the year, the Group recognised total expenses of \u00a39.5 million (2022: \u00a38.3 million) related to equity settled share based payment transactions. The weighted average share price during the period was \u00a327.65 (2022: \u00a327.30). At 31 March 2023, there were no options exercisable (2022: none) under any of the share based remuneration schemes. a) Long Term Incentive Plan (LTIP) Under the LTIP, conditional awards of shares may be made to executive directors and senior staff. Awards are subject to performance conditions and continued employment throughout the vesting period. (i) Awards made under the LTIP The 2019, 2020, 2021 and 2022 LTIP awards are subject to Severn Trent Water\u2019s achievement of Return on Regulatory Equity in excess of the base return included within the Final Determinations over a three year vesting period. It has been assumed that performance against the LTIP non-market conditions will be 100% (2022: 100%). (ii) Awards outstanding Details of changes in the number of awards outstanding during the year are set out below: Number of awards Outstanding at 1 April 2021 692,189 Granted during the year 203,756 Vested during the year (230,003) Lapsed during the year (26,744) Outstanding at 1 April 2022 639,198 Granted during the year 215,103 Vested during the year (226,429) Lapsed during the year (14,713) Outstanding at 31 March 2023 613,159 Details of LTIP awards outstanding at 31 March were as follows: Number of awards Date of grant Normal Date of Vesting 2023 2022 July 2019 2022 \u2013 231,442 July 2020 2023 202,547 205,651 July 2021 2024 196,129 202,105 July 2022 2025 214,483 \u2013 613,159 639,198 The awards outstanding at 31 March 2023 had a weighted average remaining contractual life of 1.5 years (2022: 1.1 years). Details of the basis of the LTIP scheme are set out in the Directors\u2019 remuneration report on pages 141 to 163. b) Employee Sharesave Scheme Under the terms of the Sharesave Scheme, the Board may grant the right to purchase ordinary shares in the Company to those employees who have entered into an HMRC approved Save As You Earn contract for a period of three or five years. Options outstanding Details of changes in the number of options outstanding during the year are set out below: Number of share options Weighted average exercise price Outstanding at 1 April 2021 4,102,760 1,688p Granted during the year 884,726 2,307p Forfeited during the year (74,463) 1,734p Cancelled during the year (135,804) 1,811p Exercised during the year (730,212) 1,611p Lapsed during the year (4,608) 1,682p Outstanding at 1 April 2022 4,042,399 1,824p Granted during the year 1,112,373 2,183p Forfeited during the year (72,506) 1,968p Cancelled during the year (216,312) 2,113p Exercised during the year (1,015,567) 1,502p Lapsed during the year (7,749) 1,772p Outstanding at 31 March 2023 3,842,638 1,994p Sharesave options outstanding at 31 March were as follows: Number of awards Date of grant Normal Date of Vesting Normal Date of Vesting 2023 2022 January 2017 2022 1,633p \u2013 123,540 January 2018 2023 1,652p 111,115 112,993 January 2019 2022 or 2024 1,474p 216,309 1,101,868 January 2020 2023 or 2025 1,787p 829,908 885,178 January 2021 2024 or 2026 1,860p 855,384 943,311 January 2022 2025 or 2027 2,307p 732,604 875,509 January 2023 2026 or 2028 2,183p 1,097,318 \u2013 3,842,638 4,042,399 The options outstanding at 31 March 2023 had a weighted average remaining contractual life of 1.8 years (2022: 1.7 years). c) Fair value calculations The fair values of the share awards made and share options granted during the year were calculated using the Black Scholes method. The principal assumptions and data are set out below: 2023 2022 LTIP SAYE LTIP SAYE 3 year scheme 5 year scheme 3 year scheme 5 year scheme Share price at grant date (pence) 2,858 2,674 2,674 2,676 2,939 2,939 Option life (years) 3 3.3 5.3 3 3.3 5.3 Vesting period (years) 3 3 5 3 3 5 Expected volatility (%) 18.2 18.2 18.2 18.2 18.2 18.2 Expected dividend yield (%) 3.7 4.0 4.0 3.9 3.5 3.5 Risk free rate (%) n/a 3.5 3.6 n/a 0.1 0.1 Fair value per share (pence) 2,842 526 542 2,659 543 521 Expected volatility is measured over the three years prior to the date of grant of the awards or share options. Volatility has been calculated based on historical share price movements. The risk free rate is derived from yields at the grant date of gilts of similar duration to the awards or share options. The dividend yield is calculated using the expected dividend for the year divided by the share price at the date of grant. ",
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"fact-405": {
"value": "37 Cash flow statement a) Reconciliation of operating profit to operating cash flows 2023 \u00a3m 2022 \u00a3m Profit before interest and tax 508.8 506.2 Depreciation of property, plant and equipment 379.7 361.5 Depreciation of right-of-use assets 3.9 3.8 Amortisation of intangible assets 33.7 36.3 Pension service (credit)/cost (8.2) 0.2 Defined benefit pension scheme administration costs 4.3 3.8 Defined benefit pension scheme contributions (100.5) (61.9) Share based payment charge 9.5 8.3 Profit on sale of property, plant and equipment and intangible assets (2.2) (5.4) Release from deferred credits (16.4) (17.5) Contributions and grants received 40.2 42.8 Provisions charged to the income statement 7.1 14.8 Utilisation of provisions for liabilities (17.3) (12.3) Operating cash flows before movements in working capital 842.6 880.6 Increase in inventory (3.4) (1.2) Increase in amounts receivable (146.2) (87.6) Increase in amounts payable 60.3 99.9 Cash generated from operations 753.3 891.7 Tax received 6.1 \u2013 Tax paid (10.1) (1.2) Net cash generated from operating activities 749.3 890.5 b) Non-cash transactions Non-cash investing and financing transactions disclosed in other notes were: \u2013 Acquisition of infrastructure assets from developers at no cost and provisions in response to legally enforceable undertakings to regulators (note 17). \u2013 Acquisition of right-of-use assets (note 18). \u2013 Shares issued to employees for no cash consideration under the LTIP (note 36). c) Reconciliation of movement in cash and cash equivalents to movement in net debt Net cash and cash equivalents \u00a3m Bank loans \u00a3m Other loans \u00a3m Lease liabilities \u00a3m Cross currency swaps \u00a3m Loans due from joint venture \u00a3m Net debt \u00a3m At 1 April 2022 107.7 (782.5) (5,823.5) (117.4) 28.3 79.6 (6,507.8) Cash flow (79.0) 83.7 (452.7) 13.1 \u2013 (5.5) (440.4) Fair value adjustments \u2013 \u2013 0.9 \u2013 \u2013 \u2013 0.9 Inflation uplift on index-linked debt \u2013 (13.5) (193.9) \u2013 \u2013 \u2013 (207.4) Foreign exchange \u2013 \u2013 (7.4) \u2013 \u2013 \u2013 (7.4) Other non-cash movements \u2013 (0.7) 2.4 (6.6) 5.3 1.2 1.6 At 31 March 2023 28.7 (713.0) (6,474.2) (110.9) 33.6 75.3 (7,160.5) d) Liabilities from financing activities Bank loans \u00a3m Other loans \u00a3m Lease liabilities \u00a3m Total \u00a3m At 1 April 2021 (1,011.1) (5,471.3) (121.3) (6,603.7) Cash flow 238.5 (250.6) 12.1 \u2013 Fair value adjustments \u2013 2.9 \u2013 2.9 Inflation uplift on index-linked debt (6.9) (99.6) \u2013 (106.5) Foreign exchange \u2013 (6.6) \u2013 (6.6) Other non-cash movements (3.0) 1.7 (8.2) (9.5) At 1 April 2022 (782.5) (5,823.5) (117.4) (6,723.4) Cash flow 83.7 (452.7) 13.1 (355.9) Fair value adjustments \u2013 0.9 \u2013 0.9 Inflation uplift on index-linked debt (13.5) (193.9) \u2013 (207.4) Foreign exchange \u2013 (7.4) \u2013 (7.4) Other non-cash movements (0.7) 2.4 (6.6) (4.9) At 31 March 2023 (713.0) (6,474.2) (110.9) (7,298.1) ",
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"fact-406": {
"value": "38 Contingent liabilities a) Bonds and guarantees Group undertakings have entered into bonds and guarantees in the normal course of business. No liability (2022: nil) is expected to arise in respect of either bonds or guarantees. b) Claims under the Environmental Information Regulations 2004 regarding property searches Since 2016, the Group has received letters of claim from a number of groups of personal search companies (PSCs) which allege that the information held by Severn Trent Water Limited (STW) used to produce the CON29DW residential and also the commercial water and drainage search reports sold by Severn Trent Property Solutions Limited (STPS), is disclosable under the Environmental Information Regulations. In April 2020, a group of over 100 PSCs commenced litigation against all water and sewerage undertakers in England and Wales, including STW and STPS. The claimants are seeking damages, on the basis that STW and STPS charged for information which should have been made available either free, or for a limited charge, under the Environmental Information Regulations. STW and STPS are defending this claim. This is an industry-wide issue and the litigation is in progress. A timetable for the claim has recently been set by the court leading up to a stage 1 trial on the EIR legal issues only (not the other issues or amount of damages) which is scheduled to be held in November 2023. c) Ongoing combined sewer overflow investigations Ofwat and the Environment Agency are each conducting their own investigations into the waste water industry, to investigate compliance with the conditions of environmental permits. Ofwat has launched specific enforcement investigations against six sewerage companies, but Severn Trent is not included in those cases. The Environment Agency\u2019s investigation of all English sewerage companies is continuing and it is not yet clear what the outcome of those investigations will be. We have responded quickly and comprehensively to all questions from the regulators and have had open conversations with them on the issues under investigation. ",
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"fact-407": {
"value": "39 Financial and other commitments a) Investment expenditure commitments 2023 \u00a3m 2022 \u00a3m Property, plant and equipment contracted for but not provided for in the financial statements 634.9 354.7 In addition to these contractual commitments, Severn Trent Water Limited has longer term expenditure plans which include investments to achieve improvements in performance mandated by the Director General of Water Services (Ofwat) and to provide for growth in demand for water and waste water services",
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"fact-408": {
"value": "40 Post balance sheet events Following the year end the Board of Directors has proposed a final dividend of 64.09 pence per share. ",
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"fact-409": {
"value": "41 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not included in this note. Trading transactions between the Group and its joint venture Water Plus are disclosed below. 2023 \u00a3m 2022 \u00a3m Sale of services 259.5 259.8 Net interest income 3.9 2.5 263.4 262.3 Outstanding balances between the Group and the joint venture as at 31 March were as follows: 2023 \u00a3m 2022 \u00a3m Amounts due to related parties \u2013 (0.2) Trade and other receivables due from related parties 0.2 \u2013 Loans receivable from joint venture 75.3 79.6 75.5 79.4 The retirement benefit schemes operated by the Group are considered to be related parties. Details of transactions and balances with the retirement benefit schemes are disclosed in note 27. Remuneration of key management personnel Key management personnel comprise the members of STEC during the year, and non-executive directors of the Company. The remuneration of the directors is included within the amounts disclosed below. Further information about the remuneration of individual directors is provided in the audited part of the Directors\u2019 remuneration report on pages 151 and 160 to 163. 2023 \u00a3m 2022 \u00a3m Short term employee benefits 4.6 5.7 Service contract non-executive director benefits 0.9 0.7 Share based payments 5.4 6.6 10.9 13.0 ",
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"fact-410": {
"value": "42 Alternative performance measures (APMs) Financial measures or metrics used in this report that are not defined by IFRS are alternative performance measures (\u2018APM\u2019s). The Group uses such measures for performance analysis because they provide additional useful information on the performance and position of the Group. Since the Group defines its own APMs, these might not be directly comparable with other companies\u2019 APMs. These measures are not intended to be a substitute for, or superior to, IFRS measurements. a) Exceptional items Exceptional items are income or expenditure which individually or, in aggregate if of a similar type, should, in the opinion of the Directors, be disclosed by virtue of their size or nature if the financial statements are to give a true and fair view. In this context, materiality is assessed at the segment level. There were no exceptional items in the years ended 31 March 2023 and 2022. b) Adjusted earnings per share Adjusted earnings per share figures exclude the effects of net gains/losses on financial instruments, current tax on net gains/losses on financial instruments and deferred tax. The Directors consider that the adjusted figures provide a useful additional indicator of performance and remove non-performance related distortions. See note 14. c) Net debt Net debt comprises borrowings including remeasurements for changes in fair value of amounts in fair value hedging relationships, cross currency swaps that are used to fix the sterling liability of foreign currency borrowings (whether hedge accounted or not), net cash and cash equivalents, and loans to joint ventures. See note 37. d) Effective interest cost The effective interest cost is calculated as net finance costs, excluding net finance costs from pensions, plus capitalised finance costs divided by the monthly average net debt during the year. 2023 \u00a3m 2022 \u00a3m Net finance costs 362.6 269.4 Net finance costs from pensions (3.6) (6.7) Capitalised finance costs 56.6 34.5 415.6 297.2 Average net debt 6,720.6 6,292.2 Effective interest cost 6.2% 4.7% This APM is used as it shows the average finance cost for the net debt of the business. e) Effective cash cost of interest The effective cash cost of interest is calculated on the same basis as the effective interest cost except that it excludes finance costs that are not paid in cash but are accreted to the carrying value of the debt (principally indexation adjustments on index-linked debt). 2023 \u00a3m 2022 \u00a3m Net finance costs 362.6 269.4 Net finance costs from pensions (3.6) (6.7) Indexation adjustments (215.7) (106.5) Capitalised finance costs 56.6 34.5 199.9 190.7 Average net debt 6,720.6 6,292.2 Effective cash cost of interest 3.0% 3.0% This is used as it shows the average finance cost that is paid in cash. f) PBIT interest cover The ratio of PBIT to net finance costs excluding net finance costs from pensions. 2023 \u00a3m 2022 \u00a3m PBIT 508.8 506.2 Net finance costs 362.6 269.4 Net finance costs from pensions (3.6) (6.7) Net finance costs excluding net finance costs from pensions 359.0 262.7 ratio ratio PBIT interest cover ratio 1.4 1.9 This is used to show how the PBIT of the business covers the financing costs associated only with net debt on a consistent basis. In previous years we have reported adjusted PBIT interest cover. g) EBITDA and EBITDA interest cover The ratio of profit before interest, tax, exceptional items, depreciation and amortisation to net finance costs excluding net finance costs from pensions. 2023 \u00a3m 2022 \u00a3m PBIT 508.8 506.2 Depreciation (including right-of-use assets) 383.6 365.3 Amortisation 33.7 36.3 EBITDA 926.1 907.8 Net finance costs 362.6 269.4 Net finance costs from pensions (3.6) (6.7) Net finance costs excluding finance costs from pensions 359.0 262.7 EBITDA interest cover ratio 2.6 3.5 This is used to show how the EBITDA of the business covers the financing costs associated only with net debt on a consistent basis. h) Adjusted effective current tax rate The current tax charge for the year, excluding prior year charges and current tax on financial instruments, divided by profit before tax, net losses/ gains on financial instruments, exceptional items, and share of net profit/loss of joint ventures accounted for using the equity method. \u00a3m 2023 Current tax thereon \u00a3m \u00a3m 2022 Current tax thereon \u00a3m Profit before tax 167.9 \u2013 274.1 \u2013 Adjustments Share of net (profit)/loss of joint venture \u2013 \u2013 2.2 \u2013 Net (gains)/losses on financial instruments (21.7) \u2013 (39.3) \u2013 146.2 \u2013 237.0 \u2013 Adjusted effective current tax rate 0.0% 0.0% This APM is used to remove distortions in the tax charge and create a metric consistent with the calculation of adjusted earnings per share in note 14. Share of net (profit)/loss of joint ventures is excluded from the calculation because the (profit)/loss is included after tax and so the tax on joint venture profits is not included in the current tax charge. i) Operational cashflow Cash generated from operations less contributions and grants received. 2023 \u00a3m 2022 \u00a3m Cash generated from operations 753.3 891.7 Contributions and grants received (40.2) (42.8) Operational cashflow 713.1 848.9 This APM is used to show operational cash excluding the effect of contributions and grants received as part of capital programmes. j) Cash capex Cash paid to acquire property, plant and equipment and intangible fixed assets less contributions and grants received and proceeds on disposal of property, plant and equipment and intangible fixed assets. 2023 \u00a3m 2022 \u00a3m Purchase of property, plant and equipment 699.7 610.3 Purchase of intangible assets 40.0 36.3 Contributions and grants received (40.2) (42.8) Proceeds on disposal of property, plant and equipment (12.9) (9.5) Cash capex 686.6 594.3 This APM is used to show the cash impact of the Group\u2019s capital programmes. k) Capital investment Additions to property, plant and equipment and intangible fixed assets less contributions and grants received, assets contributed at no cost, and capitalised finance costs. 2023 \u00a3m 2022 \u00a3m Additions to property, plant and equipment 898.9 714.3 Additions to intangible assets 40.0 36.3 Contributions and grants received (40.2) (42.8) Assets contributed at no cost (105.0) (69.0) Capitalised finance costs (56.6) (34.5) Capital investment 737.1 604.3 Includes \u00a334.2 million (2022: \u00a315.3 million) of provisions for future capital expenditure arising from regulatory obligations (See notes 17 and 28). ",
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"value": "43 Subsidiary undertakings Details of all subsidiary undertakings as at 31 March 2023 are given below. Details of the joint venture are set out in note 19. All subsidiary undertakings have been included in the consolidation. Owned directly by Severn Trent Plc Country of operation and incorporation Percentage of share capital held Class of share capital held Athena Holdings Limited Hong Kong 100% Ordinary The following subsidiary undertakings all operate and are incorporated in the United Kingdom. The percentage of share capital held is 100% and the class of share capital held is ordinary. All subsidiary undertakings Aqua Deva Limited Severn Trent Green Power Group Limited Chester Water Limited Severn Trent Green Power Holdings Limited Debeo Debt Recovery Limited Severn Trent Green Power Limited Dee Valley Group Limited Severn Trent Holdings Limited Dee Valley Limited Severn Trent Investment Holdings Limited Dee Valley Services Limited Severn Trent LCP Limited Dee Valley Water (Holdings) Limited Severn Trent Leasing Limited East Worcester Water Limited Severn Trent Metering Services Limited Etwall Land Limited Severn Trent MIS Trustees Limited Hafren Dyfrdwy Cyfyngedig Severn Trent Overseas Holdings Limited M A Solutions (LINDUM) Ltd Severn Trent Pension Scheme Trustees Limited Midlands Land Portfolio Limited Severn Trent PIF Trustees Limited North Wales Gas Limited Severn Trent Property Solutions Limited Northern Gas Supplies Limited Severn Trent Reservoirs Limited Severn Trent (W&S) Limited Severn Trent Retail and Utility Services Limited Severn Trent Data Portal Limited Severn Trent Services (Water and Sewerage) Limited Severn Trent Draycote Limited Severn Trent Services Defence Holdings Limited Severn Trent Finance Holdings Limited Severn Trent Services Defence Limited Severn Trent Finance Limited Severn Trent Services Holdings Limited Severn Trent General Partnership Limited Severn Trent Services International (Overseas Holdings) Limited Severn Trent Green Power (Ardley) Limited Severn Trent Services International Limited Severn Trent Green Power (Bridgend) Limited Severn Trent Services Operations UK Limited Severn Trent Green Power (Cassington) Limited Severn Trent Solar Power Limited Severn Trent Green Power (CW) Limited Severn Trent SSPS Trustees Limited Severn Trent Green Power (Hertfordshire) Limited Severn Trent Trimpley Limited Severn Trent Green Power (North London) Limited Severn Trent Utilities Finance Plc Severn Trent Green Power (RBWM) Limited Severn Trent Water Limited Severn Trent Green Power (Wallingford) Limited Severn Trent Wind Power Limited Severn Trent Green Power (West London) Limited Severn Trent WWIF Limited Severn Trent Green Power Biogas Limited Wrexham Water Limited Severn Trent Green Power Composting Limited The Group owns 100% of the share capital of the following subsidiary undertakings. All subsidiary undertakings Country of operation and incorporation Class of share capital held Energy Supplies UK Limited United Kingdom A and B Ordinary Lyra Insurance Guernsey Limited Guernsey Ordinary Severn Trent Carsington Limited United Kingdom A and B Ordinary Unless stated below, the registered office of the aforementioned entities is Severn Trent Centre, 2 St John\u2019s Street, Coventry, CV1 2LZ, United Kingdom. Company Registered office Athena Holdings Limited One 33, Hysan Avenue, Causeway Bay, Hong Kong Dee Valley Limited Packsaddle, Wrexham Road, Rhostyllen, Wrexham, LL14 4EH Hafren Dyfrdwy Cyfyngedig Packsaddle, Wrexham Road, Rhostyllen, Wrexham, LL14 4EH Lyra Insurance Guernsey Limited St Martin\u2019s House, Le Bordage, St Peter Port, GY1 4AU, Guernsey Severn Trent General Partnership Limited 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ Severn Trent Green Power (Ardley) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (Bridgend) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (Cassington) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (CW) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (Hertfordshire) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (North London) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (RBWM) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (Wallingford) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power (West London) Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power Biogas Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power Composting Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power Group Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Severn Trent Green Power Holdings Limited The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB Subsidiary audit exemptions Severn Trent Plc has issued guarantees over the liabilities of the following companies at 31 March 2023 under section 479C of Companies Act 2006 and these entities are exempt from the requirements of the Act relating to the audit of individual accounts by virtue of section 479A of the Act. Company Company Number Chester Water Limited 2888872 Dee Valley Group Limited 4316684 Dee Valley Limited 2902525 Dee Valley Water (Holdings) Limited 4421854 East Worcester Water Limited 2757948 Etwall Land Limited 7559793 Severn Trent (W&S) Limited 3995023 Severn Trent Carsington Limited 7570384 Severn Trent Data Portal Limited 8181048 Severn Trent Draycote Limited 7681784 Severn Trent Finance Holdings Limited 6044159 Severn Trent Finance Limited 6294618 Severn Trent General Partnership Limited SC416614 Severn Trent Green Power (Ardley) Limited 5807721 Severn Trent Green Power (Hertfordshire) Limited 6771560 Severn Trent Green Power (North London) Limited 9689098 Severn Trent Green Power (West London) Limited 8308321 Severn Trent Green Power Composting Limited 4927756 Severn Trent Holdings Limited 5656363 Severn Trent Investment Holdings Limited 7560050 Severn Trent LCP Limited 7943556 Severn Trent Leasing Limited 6810163 Severn Trent Metering Services Limited 2569703 Severn Trent Overseas Holdings Limited 2455508 Severn Trent Reservoirs Limited 3115315 Severn Trent Services Holdings Limited 4395572 Severn Trent Services International (Overseas Holdings) Limited 3125131 Severn Trent Services International Limited 2387816 Severn Trent Retail and Utility Services Limited 2562471 Severn Trent Trimpley Limited 10690056 Severn Trent WWIF Limited 11966722",
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"value": "Severn Trent Centre 2 St John\u2019s Street Coventry CV1 2LZ",
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