false213800RPBXRETY4A4C592025-04-012026-03-31iso4217:GBPxbrli:sharesiso4217:GBP213800RPBXRETY4A4C592024-04-012025-03-31213800RPBXRETY4A4C592024-03-31ifrs-full:IssuedCapitalMember213800RPBXRETY4A4C592024-03-31ifrs-full:SharePremiumMember213800RPBXRETY4A4C592024-03-31ifrs-full:OtherReservesMember213800RPBXRETY4A4C592024-03-31ifrs-full:RetainedEarningsMember213800RPBXRETY4A4C592024-03-31213800RPBXRETY4A4C592024-04-012025-03-31ifrs-full:IssuedCapitalMember213800RPBXRETY4A4C592024-04-012025-03-31ifrs-full:SharePremiumMember213800RPBXRETY4A4C592024-04-012025-03-31ifrs-full:OtherReservesMember213800RPBXRETY4A4C592024-04-012025-03-31ifrs-full:RetainedEarningsMember213800RPBXRETY4A4C592025-03-31ifrs-full:IssuedCapitalMember213800RPBXRETY4A4C592025-03-31ifrs-full:SharePremiumMember213800RPBXRETY4A4C592025-03-31ifrs-full:OtherReservesMember213800RPBXRETY4A4C592025-03-31ifrs-full:RetainedEarningsMember213800RPBXRETY4A4C592025-03-31213800RPBXRETY4A4C592025-04-012026-03-31ifrs-full:IssuedCapitalMember213800RPBXRETY4A4C592025-04-012026-03-31ifrs-full:SharePremiumMember213800RPBXRETY4A4C592025-04-012026-03-31ifrs-full:OtherReservesMember213800RPBXRETY4A4C592025-04-012026-03-31ifrs-full:RetainedEarningsMember213800RPBXRETY4A4C592026-03-31ifrs-full:IssuedCapitalMember213800RPBXRETY4A4C592026-03-31ifrs-full:SharePremiumMember213800RPBXRETY4A4C592026-03-31ifrs-full:OtherReservesMember213800RPBXRETY4A4C592026-03-31ifrs-full:RetainedEarningsMember213800RPBXRETY4A4C592026-03-3102366619bus:Consolidated2025-04-012026-03-31023666192026-03-31023666192025-04-012026-03-3102366619bus:Consolidated2026-03-31xbrli:pure02366619bus:ChiefExecutive2025-04-012026-03-3102366619bus:Director12025-04-012026-03-3102366619bus:Chairman2025-04-012026-03-31023666192024-04-012025-03-3102366619bus:FullAccounts2025-04-012026-03-3102366619bus:ChiefExecutivebus:Consolidated2025-04-012026-03-3102366619bus:Director1bus:Consolidated2025-04-012026-03-3102366619bus:Audited2025-04-012026-03-3102366619bus:FRS1012025-04-012026-03-31
INVESTING IN THE FUTURE
DELIVERING FOR COMMUNITIES
Severn Trent Plc Annual Report and Accounts 2026
Strategic Report
How we bring our ‘performance-driven,
sustainability-led’ strategy to life
1 Group Highlights
2 Severn Trent at a Glance
4 Market Review – Water Sector
5 Our 2025-2030 Business Plan
6 Our Business Model
8 Chair’s Statement
10 Chief Executive’s Review
12 Our Performance and Key Performance Indicators
14 Delivering Outcomes our Customers CareAbout
19 Caring for People in our Region
24 A Driver of Positive Change
30 Running a Business that Goes Hand-in-Hand with Nature
30 Our Approach to Climate Change and Nature
42 Our Net Zero Transition Plan
53 Our EU Taxonomy Disclosure
56 Infrastructure Services Performance Review
57 Chief Financial Officer’s Review
64 Managing Risks and Opportunities
68 Our Principal Risks
74 Viability Statement
79 Stakeholder Engagement
84 Section 172 Statement
87 Non-Financial and Sustainability Information Statement
Governance
How we govern our business responsibly
88 Governance Overview
89 Compliance with the 2024 UK Corporate Governance Code
90 Governance Framework
91 Performance in the Round - Dividend 2025/26
92 Chair’s Introduction to Governance
94 Our Culture
96 Board Leadership and Company Purpose
98 Board of Directors
100 Division of Responsibilities
101 Board Activities
103 Board Performance Review
105 Nominations Committee Report
108 Audit and Risk Committee Report
114 Treasury Committee Report
116 Corporate Sustainability Committee Report
118 Directors’ Remuneration Report
122 Remuneration Policy Review
128 Remuneration for the Year in Review, at a Glance
129 Performance in the Round - Remuneration 2025/26
131 Company Remuneration at Severn Trent
135 Annual Report on Remuneration
146 Directors’ Remuneration Policy
153 Directors’ Report
156 Directors’ Responsibility Statement
Chief Executive’s
Review
Culture
in Action
Delivering
Outcomes
10
95
14
Financial
Statements
Our financial performance for the year
ended 31 March 2026
157 Independent Auditor’s Report
163 Consolidated Income Statement
163 Consolidated Statement
of Comprehensive Income
164 Consolidated Statement
ofChangesin Equity
165 Company Statement
ofChangesinEquity
166 Consolidated and Company
BalanceSheet
167 Consolidated Cash Flow Statement
168 Notes to the Financial Statements
Other
Information
220 Five-Year Summary
221 Glossary
223 Information for Shareholders
Contents
WELCOME TO OUR
ANNUAL REPORT 2026
Top cover image: Wanlip Sewage Treatment Works, Leicestershire
Bottom cover image: The Commons, Smethwick. Supported by the Severn Trent Community Fund. © Tod Jones
You can help us reduce our impact on the environment by signing up to receive your
Annual Report and other shareholder communications digitally rather than in print.
1 Regulated gearing is defined in note 35 to the financial statements.
2 Adjusted earnings and the weighted average number of ordinary shares for the purpose of adjusted earnings per share are defined in note 14 to the financial statements.
Our Reporting
Go Paperless
Severn Trent Water 2025
– 2030 Business plan
Community Fund
Annual Review
Gender and Ethnicity
Pay Gap Report
Customer
Vulnerability Strategy
Group profit before interest and tax (‘PBIT’) (£m)
Dividend per share (p)
Adjusted basic EPS (p) ²
Group turnover (£m)
Regulated Gearing (%) ¹
Basic earnings per share (‘EPS’) (p)
16.6%
1.4%
61.2%
45.9%
3.5%
64.5%
Group Highlights
2024/25 £590m
2023/24
£512m
2025/26 £861m
2024/25 £2,427m
2023/24
£2,338m
2025/26 £2,831m
2024/25 121.71p
2023/24
116.84p
2025/26 126.02p
2024/25 112.1p
2023/24
79.4p
2025/26 184.4p
2024/25 62.7%
2023/24
61.3%
2025/26 63.6%
2024/25 76.6p
2023/24
51.0p
2025/26 123.5p
Severn Trent Plc Annual Report and Accounts 2026 1
Strategic Report Governance Financial Statements
Stratford-upon-Avon
Cheltenham
Newtown
Redditch
Nuneaton
Evesham
Loughborough
Oswestry
Market Drayton
Stafford
Welshpool
Ludlow
Tamworth
Leek
Ashbourne
Rugby
Burton-
upon-Trent
Kidderminster
Bridgnorth
Buxton
Scunthorpe
Shipston-on-Stour
Stroud
Great Malvern
Ledbury
Cannock
Lichfield
Hathersage
Llanidloes
Monmouth
Llanfyllin
Bishops Castle
Knighton
Worksop
Newark-
on-Trent
Melton
Mowbray
Market
Harborough
Stoke-on-Trent
Derby
Matlock
Mansfield
Nottingham
Leicester
Shrewsbury
Telford
Wolverhampton
Birmingham
Coventry
Warwick
Worcester
Gloucester
RIVER SEVERN
RIVER DEE
RIVER TRENT
Wrexham
Llangollen
Chester
Severn Trent at a Glance
Our strategy to be ‘performance-driven, sustainability-led’ acknowledges our relentless
drive to deliver the performance that our stakeholders expect, inasustainable way.
We serve a diverse range of customers with different cultures, interests and experiences. Our region includessome
ofthe most affluent areas of the country as well assome of the most deprived. There are several large urban areas
inourregion, yetwe also serve predominantly rural counties and communities. It is aregion which is characterised
by,andbenefits from, itsdiversity.
How we are structured
Our regulated water and wastewater businesses are Severn Trent Water
and Hafren Dyfrdwy. The primary activities we focus on are:
Severn Trent Infrastructure Services
Infrastructure Services operates a UK-based portfolio that complements the Group’s core
competencies and is well positioned to capitalise on market opportunities in these areas:
Our purpose
Taking care of one
of life’s essentials
Driven by our strategy
Performance driven,
sustainability led
Scan tovisit our sustainability webpages or click here
We provide over nine million people across
our region with fresh, clean drinking water
every day.
Providing clean water
Operating Services provides
a variety ofoperational water
and wastewater services to
private businesses across
the UK.
Operating Services
Over 3.17 billion litres of wastewater
are treated every day, cleaned and
returned to the environment.
Treating wastewater
Severn Trent generates a proportion of its
own energy through a variety of sources,
including the anaerobic digestion of
sewage sludge.
Generating renewable energy
Network Services integrates
IWJS and Watertight, securing
critical operational capability,
retaining value and
strengthening resilience to
support our AMP8 delivery.
Network Services
Severn Trent Green Power
generates renewable energy
from anaerobic digestion,
hydropower, wind turbines
andsolar technology.
Green Power
Regulated water and wastewater businesses
Our Property Development
business manages the sale
ofsurplus land.
Property Development
Severn Trent Plc Annual Report and Accounts 2026 2
Strategic Report Governance Financial Statements
Stratford-upon-Avon
Cheltenham
Newtown
Redditch
Nuneaton
Evesham
Loughborough
Oswestry
Market Drayton
Stafford
Welshpool
Ludlow
Tamworth
Leek
Ashbourne
Rugby
Burton-
upon-Trent
Kidderminster
Bridgnorth
Buxton
Scunthorpe
Shipston-on-Stour
Stroud
Great Malvern
Ledbury
Cannock
Lichfield
Hathersage
Llanidloes
Monmouth
Llanfyllin
Bishops Castle
Knighton
Worksop
Newark-
on-Trent
Melton
Mowbray
Market
Harborough
Stoke-on-Trent
Derby
Matlock
Mansfield
Nottingham
Leicester
Shrewsbury
Telford
Wolverhampton
Birmingham
Coventry
Warwick
Worcester
Gloucester
RIVER SEVERN
RIVER DEE
RIVER TRENT
Wrexham
Llangollen
Chester
Having Courage
We always do the right thing andhave courage
to challenge the norm and speak up if things
aren’t quite right. We areprepared to step out
of our comfort zones and act with both today
and the future in mind.
Taking Pride
We make a difference for our customers every
day, owning problems and working with others
until they are solved. We take pride in what we
do and champion our work inthe communities
we work and live in.
Showing Care
We keep our promises to customers
andshow care by treating everyone
fairly and equally. We try to enhance
theenvironment around us and spend
every pound wisely.
Embracing Curiosity
We search out safe, better andfaster
waysof doing things through innovation
andare always curious and willing tolearn.
Our values
Social channels
Severn Trent Severn Trent severntrent
@severntrentofficial severntrent
Our regulated water and wastewater businesses
provide essential services to 4.7 million households
andbusinesses in a region stretching across the heart
ofthe UK, from the Bristol Channel to the Humber
andfrom North and Mid-Wales to the East-Midlands.
Hafren Dyfrdwy (water customers only)
Severn Trent Water
(waterandwastewater customers)
Urban areas, proportional by size
Severn Trent Water
(wastewatercustomers only)
Read more on page 19
Hafren Dyfrdwy
(waterandwastewater customers)
Severn Trent Plc Annual Report and Accounts 2026 3
Strategic Report Governance Financial Statements
There are 16 regional businesses supplying water services in England and Wales, serving around 60 million people. Of
these, 11also provide wastewater services, including Severn Trent Water and HafrenDyfrdwy. This year marked a period
of change for the sector, with the publication of the findings fromtheIndependent Water Commission’s review. While the
Government considers its plans for reform of the sector, we have been keeping a firm focus on delivering our current
2025-2030 Business Plan.
Working with our regulators and stakeholders
We are currently subject to regulation of our price and performance by economic, quality and environmental regulators, as outlined below.
You can read more about how we engaged with our regulators and other stakeholders this year. See pages 79 to 83.
Regulation and representation
The Consumer Council for Water (‘CCW’)
speakson behalf of water consumers in
Englandand Wales.
Natural England advises the Government
onthenatural environment in England and
helpsto protect nature and the landscape,
especially for plant and animal life in both
freshwater and on land.
The Drinking Water Inspectorate (‘DWI’)
independently checks that water supplies in
England and Wales are safe and that drinking
water quality is acceptable to consumers.
Natural Resources Wales (‘NRW’) is the
environmental regulator in Wales. It oversees how
the country’s natural resources are maintained,
improved and used, both now and in thefuture.
The Environment Agency (‘EA’) regulates
andallows us tocollect water from reservoirs,
rivers, and aquifers and return it to the
environment after ithas been used by our
customers and treated byus.
Ofwat is the economic regulator for the water
andwastewater industry in England and Wales.
Ofwat principally exercises its duty toprotect the
interests of customers through periodic reviews
ofcharges (price reviews) every fiveyears.
We also work with a range of other regulators, including:
• Health & Safety Executive to ensure that the health and safety of our employees, customers, visitors and supply chain is preserved;
• Ofgem, the economic regulator of gas and electricity markets whose remit extends to renewable energy generation; and
• Ofsted, the regulator for education, children’s services and skills, since our Academy became accredited.
Policy
The Department for Environment, Food & Rural Affairs (‘Defra’)
inEngland and the Welsh Government in Wales provide overall
strategic and policy direction for the industry and our regulators.
In July 2025, the Independent Water Commission published its final
report (the ‘Cunliffe report’), commissioned by the Government,
setting out recommendations for the most significant reforms to
theUK Water sector since privatisation. Both the UK and Welsh
Governments have responded positively to the report in their
respective White and Green Papers, committing to publishing
Transition Plans in response. The proposed reforms include
substantial changes to the regulatory landscape.
In England, a new single water regulator is expected to be created,
bringing together relevant functions currently undertaken by Ofwat,
the DWI, the EA and Natural England. In Wales, a separate economic
regulator is expected to be established.
We welcome the findings of the Cunliffe report and are working closely
with industry partners, governments and other stakeholders to support
the effective design and implementation of the proposed reforms.
Market Review – Water Sector
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 4
A strong start to AMP8
Every five years, water companies in England and Wales develop
business plans setting out how they intend to deliver for customers
and the environment over the next Asset Management Plan period (‘AMP’).
Severn Trent Water’s 2025-30 Business Plan (covering AMP8)
wasawarded ‘outstanding’ status by Ofwat during its 2024 Price
Review(‘PR24’) Final Determinations, in recognition of the level
ofambition demonstrated.
We have made a strong start to delivery, with 78% of outcome delivery
incentives (‘ODIs’) in green in the first year of AMP8. At £14.9 billion
(2022/23 prices), we have also kicked off our largest ever five-year
programme of investment, frontloading our expenditure to deliver
fasterfor customers.
£14.9 billion
2025-30 programme of investment
Delivering for our customers and the environment
£6.4 billion (2022/23 prices) of our 2025-30 programme is dedicated to
service and environmental enhancements. In our first year of delivery we
are making progress in areas customers care about, including reducing
internal sewer flooding incidents to a record low of 512 (against a regulatory
target of 650). We also outperformed our regulatory target for leakage
reduction for the eighth consecutive year – securing a three-year rolling
average of 342.3 Ml/d (against a target of 352.4 Ml/d).
At the same time, we remain committed to keeping bills affordable.
This year, we launched our largest ever affordability package, which
willprovide £575 million of support and help one in six households
withtheir bills by 2030. During the year, we have helped over 332,000
households through our affordability schemes.
More information on our delivery of outcomes this year is included on
pages 12 to 13.
Our full plans and Ofwat’s Final Determinations are available on
our websites. Scan the QR codes below to see our Business Plans.
Severn Trent
Water2025-2030
Business Plan
Hafren Dyfrdwy
2025-2030
Business Plan
Our 2025-2030 Business Plan
Improving our assets for future generations
Our acceleration of over £450 million (2022/23 prices) of AMP8 spend
intothe final two years of AMP7 has contributed to our strong start, with
capital investment levels smooth as we moved from AMP7 to AMP8.
As part of its PR24 Final Determinations, Ofwat included price control
deliverables (‘PCDs’) to track companies’ progress with delivering
investment programme outputs. We have achieved all of our year one
targets which cover water mains replacement and metering programmes.
We have also delivered ahead of schedule on several of our phosphorus
removal and storm overflow commitments.
Ofwat’s Final Determinations introduced a cost change (or ‘re-opener’)
process for AMP8, allowing companies to apply for additional investment
during the AMP in critical areas. Supported by 71% of households in
independently conducted research, and totalling £481 million (2022/23
prices), we have submitted investment proposals in two areas – asset
health and growth. This includes bringing forward investment in service
reservoirs, treated water storage tanks, boreholes and sewers, to help to
spread costs more fairly across current and future customers. It will also
support faster than forecast regional growth by creating new capacity for
the equivalent of around 11,000 people – taking our total AMP8 investment
in growth to over £750 million (2022/23 prices).
We have proposed that this additional investment, if agreed by Ofwat later
in 2026, should be added to the RCV and customers’ bills from 2027/28
– an approach that helps to smooth bill increases over the longer term
and means the impact over and above our existing plans by 2029/30 will
be an additional £8 on the average household bill.
Severn Trent Plc Annual Report and Accounts 2026 5
Strategic Report Governance Financial Statements
O
U
R
P
U
R
P
O
S
E
T
A
K
I
N
G
C
A
R
E
O
F
O
N
E
O
F
L
I
F
E
’
S
E
S
S
E
N
T
I
A
L
S
Performance
driven,
sustainability
led
D
E
L
I
V
E
R
I
N
G
O
U
T
C
O
M
E
S
O
U
R
C
U
S
T
O
M
E
R
S
C
A
R
E
A
B
O
U
T
A
D
R
I
V
E
R
O
F
P
O
S
I
T
I
V
E
C
H
A
N
G
E
C
A
R
I
N
G
F
O
R
P
E
O
P
L
E
I
N
O
U
R
R
E
G
I
O
N
G
O
E
S
H
A
N
D
-
I
N
-
H
A
N
D
W
I
T
H
N
A
T
U
R
E
R
U
N
N
I
N
G
A
B
U
S
I
N
E
S
S
T
H
A
T
The value we create for all stakeholders
Regulators, Government
andNon-Governmental
Organisations (‘NGOs’)
The policy framework for our sector is
setbythe UK and Welsh Governments.
Ourindustry is regulated by Ofwat, the EA
and others. Our infrastructure services
businesses drive competition in the market,
improving the quality and value in the water
sector supply chain.
Our customers
We aim to anticipate and meet changing customer
and wider societal needs, as well as improve and
protect the natural environment.
How we measure this
Outcome Delivery Incentive (‘ODI’) performance
(% of targets/measures met or exceeded)
Our colleagues
Our greatest asset is our experienced, diverse and
dedicated workforce. Our relationship with them
isopen and honest, and they are appropriately
supported, developed, and rewarded to encourage
them to be their best in all that they do.
How we measure this
Employee engagement score (out of 10)
Our communities
We support customers struggling to pay bills
andsupport communities through jobs, skills
training and funding for regional charities.
How we measure this
Severn Trent Community Fund (£m donated
tocharitable causes inourregion)
1
Our shareholders and investors
We create value for equity investors through
areliable, index-linked dividend, underpinned
by strong operational performance, and a
growing RCV, which will lead to higher returns
in the future.
How we measure this
Return on Regulated Equity (‘RoRE’) (%)
2
Our suppliers and contractors
Strong supplier relationships ensure sustainable,
high-quality delivery for the benefit of all
stakeholders, supporting our business operations
in line with our Code of Conduct andanti-slavery
and human trafficking commitments.
How we measure this
Average time to pay suppliers (days)
3
Our purpose
At Severn Trent, we are driven by our purpose
– taking care of one of life’s essentials.
United behind a clear social purpose, we work together to deliver positive outcomes
for our customers, colleagues, investors, regulators, the communities we serve
and the environment we depend on.
Now more than ever, we recognise that caring for one of life’s essentials truly matters to the families, businesses and
communities we serve. That’s why our values – Having Courage, Showing Care, Taking Pride and Embracing Curiosity –
are so important to us. To be a company people can trust, protect the environment, support our communities and deliver
the best value service, we must all live our values by Doing the Right Thing, every day – the Severn Trent way.
What we do
We provide essential water and wastewater
services to millions of customers across the
Midlands and Mid-Wales. We abstract, treat
and supply clean drinking water, collect and
treat wastewater, and safely return it to the
environment. Through sustained investment,
innovation and responsible operations, we
protect public health, support regional
growth and enhance the resilience of
waterand natural ecosystems.
Driven by our strategy
Our Business Model
1 During AMP7, we donated 1% of profit to the Community Fund. For AMP8, this has been capped at £2 million per year,
inclusive of all running costs, which continue to rise annually.
2 Based on the actual capital structure.
3 See page 21 for further information.
2024/25 83%
2025/26 78%
2024/25 £2m
2025/26 £1.8m
2024/25 34
2025/26 40
2024/25 8.6
2025/26 8.8
2024/25 9.7%
2025/26 13.7%
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 6
Collect raw water
We collect water from reservoirs, rivers and
underground aquifers across our region.
Collect wastewater
Our network of sewers and pumping stations collect
wastewater from homes and businesses and take
itto our wastewater treatment works.
Distribute clean water
Our network of pipes and our enclosed storage
reservoirs bring a continuous supply of clean water
direct to our customers’ taps.
Recycle water to the environment
We safely return treated water to rivers
and watercourses.
Clean raw water
Our groundwater and surface water
treatment works clean raw water to the highest
standards, producing consistently high-quality
drinking water.
Clean wastewater
We carefully screen and treat wastewater
at984treatment works, to meet stringent
environmental standards.
Customers enjoy our services
4.7 million households and businesses use our
services, delivered by a team of over 11,000
employees, and supported by our contact
centres,always ready to help.
Green energy
The green energy we generate through our
Infrastructure Services and regulated water and
wastewater business activities contribute to meeting our
net zero targets and keeping our energy costs down.
Our Business Model in Action
Severn Trent Plc Annual Report and Accounts 2026 7
Strategic Report Governance Financial Statements
Dear Shareholder
This year has been one of strong progress, important reflection and
continued commitment to serving our customers and communities.
Weenter AMP8 having made a strong start to the largest investment
programme in our history, with delivery already accelerating to bring
forward benefits for customers and the environment.
We have also seen meaningful momentum in the sector more widely,
withthe Independent Water Commission’s review marking a positive
steptowards long term direction for the industry. As we move further
intoAMP8, the expectations on water companies remain high. We are
supportive of the general direction of regulatory reform and rebuilding
public trust across the sector, and await further clarity which is expected
later in the year. This represents both a challenge and an opportunity,
andone that we are keen to support and help shape for the benefit of
thesector and, importantly, to help rebuild public trust.
Leadership transition
One of the most significant developments this year has been the leadership
transition from Liv Garfield to James Jesic, who became Chief Executive
Officer on 1 January 2026. The Board is immensely grateful to Liv for
more than a decade of outstanding service and is pleased that the
transition followed a well‑planned and rigorous internal and external
assessment process, reflecting strong long‑term succession planning.
James brings over 20 years of experience across Severn Trent, including
eight years on our Executive Committee where he has led customer
operations, commercial services and our multi‑billion‑pound capital
programme. His deep understanding of our network, his values‑driven
leadership, and his passion for innovation and customer service make
him exceptionally well placed to lead the business through AMP8 and
beyond. He has played a central role in strengthening our operational
performance and, most recently, has overseen the delivery of our
largest ever investment programme.
James has been clear with the Board: his approach will be evolution,
notrevolution. We welcome this. We have a sound strategy, a committed
team, and clear focus for this regulatory period. Our focus now is on
strong delivery, keeping customers and the environment at the heart
ofour decisions, and making sure our investment leads to impactful
improvements for our communities.
Sustaining strong environmental performance
Our environmental performance during the year reflects the sustained
attention given to environmental protection and operational resilience
across the Group. We are on track to achieve the EA’s 4* Environmental
Performance Assessment (‘EPA’) rating in 2025, which marks the seventh
consecutive year for the Company. Delivering consistently strong performance
over time requires continued vigilance and investment, particularly in
thecontext of increasingly demanding targets and heightened public
expectations. As we progress through the most ambitious investment
programme in our history, we are committed to putting our communities
and the environment at the forefront whilst we deliver meaningful and
visible improvements across our region.
During the year, we were disappointed to have experienced two Category1
pollution incidents
1
. While such incidents are thankfully rare,we consider
any serious pollution to be unacceptable. The Board engaged closely with
the Executive Team to understand the root causes, ensure full transparency
with our regulators, and oversee the steps being taken to prevent recurrence.
Whilst both incidents were unforeseen, we will learn from them, strengthen
controls where needed, and maintain our commitment to sector‑leading
environmental stewardship.
A Board focused on responsible oversight and long‑term value
Throughout the year, the Board continued to operate as a cohesive,
balanced and highly engaged group, combining deep industry expertise
with external perspectives across sustainability, customer experience,
finance, engineering and major project delivery. We have maintained
strong succession planning, ensured appropriate committee oversight,
and continued to hold management to account on performance, risk
andlong‑term value creation.
We enter AMP8 with a clear and aligned view of the risks and opportunities
ahead. Our Board culture remains one of constructive challenge and
humility: recognising that we serve customers first, and that our licence
to operate depends on delivering for them every day.
DELIVERING WITH PURPOSE
Chair’s Statement
Strong governance, disciplined long‑
term investment and a values‑led
culture guide the Company as we
support regional growth and protect
essential services. We remain focused
on resilience, sustainability and creating
enduring value for society, now and into
the future.
Christine Hodgson
Chair
Chair’s Statement
1 We are currently undergoing an appeal process in relation to a third serious pollution.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 8
Regulatory landscape and long‑term stewardship
We also enter an important period for the sector as the regulatory
landscape continues to evolve. Early signals from Government and
policymakers have been encouraging, with a clear recognition of the
needfor a framework that enables long‑term investment, supports
environmental leadership, and delivers better outcomes for customers.
In January, the Government published its White Paper response to the
Independent Water Commission’s report and in April appointed Dame
Julia Black to advise on the transition to water sector reform.
The Board shares management’s confidence in the long‑term growth
outlook for the sector, underpinned by inflation adjusted regulation,
essential infrastructure investment and strong delivery capability.
TheBoard continues to engage constructively with policymakers
andregulators, advocating for a regime that supports the scale of
investment required while maintaining fair and balanced expectations
forperformance. Whatever the final shape of the reforms, our priorities
remain unchanged: delivering on our commitments, operating transparently,
and maintaining the trust of the communities we serve.
Looking ahead
As we look to the year ahead, the Board’s priorities are clear:
• Supporting the CEO in his first year – James is already deeply
embedded in Severn Trent, with strong relationships across the
organisation and a clear vision for the years ahead. The Board will work
closely with him and the wider Executive Team to ensure continuity,
momentum and alignment around his priorities.
• Maintaining strong delivery – As we move into a period of significant
growth and investment, maintaining disciplined, high‑quality delivery
of our operational and capital commitments remains essential. The
Board will continue to oversee performance closely to ensure our
customers and stakeholders realise the benefits of the investment
wehave promised for the region.
• Upholding sector‑leading environmental performance –
Environmental stewardship remains a core Board priority. We
arefocused on delivering continuous improvements in ecological
outcomes, reducing long‑term pollution and spill averages, and
strengthening operational resilience across our asset base. While the
EPA provides an important external benchmark, our ambition extends
beyond individual measures, encompassing high standards across all
areas of environmental protection and in every community we serve.
• Improving customer experience across all service areas – The Board
is committed to driving better outcomes for customers, focusing on
improving service and experience at every touchpoint. Our ambition
isto raise the standard of service across the business and to enhance
the customer experience whenever they need to contact us.
• Driving innovation to support efficient, high‑quality delivery – With a
large capital programme ahead, innovation is fundamental to delivering
faster, smarter and more efficiently. The Board will continue to encourage
the adoption of new technologies and approaches that enable long‑term,
sustainable improvement.
• Strengthening cyber resilience – The threat of cyber attacks continues
to grow across all sectors. Ensuring the business is aware of the risks,
is well prepared, and supported by robust controls and business
continuity plans remains a critical priority for the Board.
We have made a strong start to this regulatory period alongside a smooth
leadership transition and look ahead with cause for optimism.
On behalf of the Board, I would like to thank our colleagues, customers,
partners and shareholders for their continued support. We are committed
to delivering reliable, affordable and sustainable services for the millions
of people who depend on us every day.
Christine Hodgson
Chair
Putting customers at the centre of everything we do
Providing outstanding customer service is at the heart of our purpose.
While we have industry‑leading Trustpilot scores and strong feedback
across many service areas, we recognise that our end‑to‑end customer
journey could be improved. The underlying message is unchanged:
wemust continue to improve the customer journey when they need
toreach out to us.
The Board has challenged management hard on this, and we are
encouraged by early signs from our migration to the Kraken customer
platform. Improved data segmentation and more intuitive digital journeys
are already enabling us to respond more effectively to customer needs.
This transition will take time, but it is unquestionably the right path and
weare working to ensure we deliver a step change in the quality of service.
Our commitment to affordability remains a priority. As a company serving
some of the most diverse communities in the country, we recognise the
pressure many households continue to face. While bills have risen again
this year, these increases are essential to fund the investment needed to
strengthen our network and protect the environment. To support those
most affected, we operate one of the largest and most comprehensive
assistance packages in the sector, providing tailored financial help to
around one in six households in our region. Alongside this, our employability
and community programmes continue to build skills, open access to
opportunities and improve long‑term resilience, ensuring our support
extends far beyond the bill itself.
Driving a performance‑driven culture
The Board remains immensely proud of our colleagues, whose commitment
has once again delivered strong operational and financial performance.
AMP8 has begun with momentum: delivering year‑on‑year reductions of
8% to our three‑year average leakage position, 41% reduction in storm
overflow spills, significant reduction in total pollutions and continued
investment in resilience across our wastewater network. Our capital
programme is progressing at pace, with expenditure in line with the
record levels set out in our Business Plan. Colleague engagement
remains amongst the top 5% of energy and utility companies globally,
atestament to the inclusive andpurpose‑driven culture that underpins our
performance, andour growing graduate pipeline further strengthens our
future capability andreinforces our commitment to long‑term excellence.
Investing for the long term
AMP8 represents the largest period of investment in Severn Trent’s
history, committing a record £14.9 billion to improving our water,
protecting our environment and supporting the communities we serve.
Aswe accelerate our investment programme, we remain focused on
delivering at pace across our regions, bringing forward tangible benefits
for customers and local communities. This investment is essential; it will
modernise ageing infrastructure, improve river health, expand capacity
tosupport population growth, andstrengthen resilience in the face of a
changing climate.
The Board maintains a relentless focus on efficiency, governance
andtherobustness of our supply chain. The progress we have made
oncapital efficiencies, vertical integration and direct procurement
givesus confidence that we can both deliver our programme and
createvalue for customers and shareholders.
Championing sustainability and trust
Over the past year we have continued to make strong progress on
sustainability, including maintaining high alignment with the EU
Taxonomy and achieving upgrades across key Environmental, Social
andGovernance (‘ESG’) indices. These external endorsements matter,
but what matters more is the underlying work: reducing emissions,
improving water quality, supporting biodiversity, and strengthening the
resilience of our operations. Our longstanding commitment to net zero
operational emissions by 2030 remains on track, driven by a shift to
renewable energy and electrification of our fleet, where available.
Severn Trent Plc Annual Report and Accounts 2026 9
Strategic Report Governance Financial Statements
Chief Executive’s Review
This is my first report as Chief Executive, and it comes at a defining
moment for our business and for our industry. The water sector is
inaperiod of unprecedented investment shaped by climate change,
population growth and rising expectations from customers and
regulators. Against that backdrop, I am proud of the progress our
teamshave made this year and confident in the foundations we have
builtfor long‑term success.
We have made a strong start to the regulatory period, and preparations
undertaken in the previous five years have enabled us to mobilise quickly,
scale delivery and maintain focus on what matters most: providing
resilient, high‑quality water standards and wastewater services,
improving outcomes for the environment, supporting our communities
and delivering value for customers and shareholders.
This year, we experienced significant weather extremes, including
extended periods of long drought followed by intense rainfall.
Theseconditions create more pressure on water and wastewater
networks and require operational excellence at every level. Despite this,
wecontinued to avoid temporary use bans, maintained high drinking
water quality and delivered improved outcomes across almost 80% ofour
operational measures. We earned £73 million in performance incentives
during the year, reflecting a culture that is focused on strong operational
performance for our customers and the environment.
We expect our regulated asset base to grow by around 10% per annum
between 2025 and 2030, and the growth opportunity extends well beyond
this period. We are investing to provide a resilient service for customers
and the environment against a backdrop of climate change, population
growth and increasing regulation. We are well positioned to deliver the
long‑term investment required responsibly and efficiently. In May, we
submitted proposals to Ofwat for additional funding of almost £600 million
for rebuilding and upgrading water storage tanks, securing the integrity
of ground water sources, sewer network upgrades and supporting
population growth across our region.
This year, we delivered a strong set of financial results, underpinning
ayear of robust operational performance and consistent delivery for
ourcustomers, the environment and shareholders. Our disciplined,
cost‑focused approach has further strengthened our financial position,
enabling us toinvest in our services while continuing to deliver value for
stakeholders. Reflecting this performance, and in line with our policy for
2025‑2030 of annual growth of CPIH, we have declared a final dividend
of75.62 pence per ordinary share for 2025/26. This gives a total dividend
for the year of 126.02 pence per ordinary share.
DELIVERING FOR ALL STAKEHOLDERS
Scaling delivery of the largest investment programme inourhistory
This year we invested £1.9 billion in our assets, the highest level of
capitalinvestment Severn Trent has ever delivered in a single year.
Our insourced delivery model has been a critical enabler, providing
greater control over cost and quality, increasing resilience and allowing
us to respond quickly as priorities evolve. Alongside this, collaborative
relationships with our extended supply chain of over 150 partners reduces
delivery risk and increases flexibility.
We have made good progress towards our capital efficiency target of at
least £500 million this regulatory period. We are also targeting around
£150 million of total operating cost efficiencies by 2030 through our ‘right
first‑time’ customer approach and scalable operational solutions.
With Artificial Intelligence (‘AI’) enabling us to forecast deterioration,
model a multitude of investment scenarios and optimise long‑term
planning, we are driving efficiency through improved decision‑making
and reduced waste.
Water resilience and quality for customers
During the summer of 2025, water demand reached exceptional levels
and our network performed strongly. We successfully treated and
supplied increased volumes of water whilst maintaining the high quality
our customers expect, reflective of our robust operations and long‑term
investment in our assets. 98% of our customers benefit from a second
source of supply, enhancing security and reducing vulnerability to asset
failure or extreme weather.
This year has seen particularly strong progress in leakage which, with an
8% year‑on‑year reduction to our three‑year average, is now at our lowest
ever level. Smart metering, pressure management, satellite detection
and AI enabled monitoring are embedded across the business, and we
arenow using no‑dig repair techniques on 44% of our communication
pipe repairs to reduce disruption and environmental impact.
Climate change is altering consumption patterns and increasing volatility
across the system. While we missed our per capita consumption target
this year, the underlying trend reinforces the need for sustained investment
in network resilience and customer water‑efficiency measures. We are
also investing £1.4 billion this regulatory period in water resources and
resilience, as well as supporting customers with water efficiency measures.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 10
Improvement in waste and the environment
During the year we invested around £1 billion in waste and continue to
make progress to protect and improve river health.
Storm overflows remain a critical focus, and with the support of our
supply chain we have now implemented over 3,000 solutions. We are
seeing the benefits of our proactive investments in the previous
regulatory period. In 2025, average spills reduced by 41% to 15 spills per
storm overflow asset, outperforming our regulatory target and earning
£10 million in reward.
We reduced pollution incidents by 35% year‑on‑year, and invested
inbuilding in‑house capabilities and improved responsiveness when
there is an issue.
Despite remaining confident of retaining the highest rating of 4* in
theEA’s Environmental Performance Assessment for theseventh
consecutive year, we were disappointed to have had two
1
confirmed
serious pollution events in 2025 and we know we can do better. Itis worth
noting the EA commended our prompt response and our mitigating
actions and we have implemented findings from our detailed root
causeanalyses to help prevent future incidents.
By bringing reactive sewerage services in‑house and strengthening our
waste operating model, we have improved our ability to respond quickly
and effectively when customers need us most, resulting in our best ever
internal sewer flooding performance and continued reductions in
external flooding incidents.
Advances in data, digital tools and AI are transforming wastewater
operations. We are using predictive analytics to forecast daily demand,
storm impacts, flooding risks and sewer blockages enabling proactive
intervention and reduced service disruption.
Biodiversity performance was one of our strongest areas this year,
reaching the financial reward cap. We delivered 510 biodiversity
units,restored habitats across the region and reinforced our
long‑termcommitment to protecting the natural environment
alongsideessential infrastructure.
Customer service improvements
Over the 23 years I have been in the business, I have experienced first
hand the great work our teams do to deliver for our customers everyday,
and I believe there is an opportunity to do more. Improving experience for
customers is one of our priorities to drive the business forward.
The performance incentive measure of customer experience, C‑MeX, is
scored using data from customer surveys which is benchmarked against
the UK Customer Satisfaction Index. We incurred a penalty during the
year and are taking actions to drive improvements to customer service.
We are making it easier for customers to contact us through several
platforms and are focused on a ‘right first‑time’ approach to fix issues at
source and reduce hand‑offs between departments. The implementation
of our new billing system, Kraken, represents a step change in capability,
using AI to validate readings, flag anomalies and support faster, more
accurate resolution ofcustomer queries.
We have also strengthened our regional customer service presence,
opening new contact centres in Birmingham and Leicester and creating
over 180 social recruitment roles for the people in our region aspart of
our insourcing strategy. But it is much more than just C‑MeX. Improved
customer experience will help drive efficiency and increase customer
advocacy.
We recognise our role in supporting housing needs driven by population
growth, and through our long‑term relationships with developers, we
continue to support this growth across our region, delivering new
connections efficiently and earning maximum reward under the
Developer Measure of Experience (‘D‑MeX’).
Making a positive difference for our communities
Severn Trent plays an important role in our community ‑ we live and work
amongst our customer base every day. This year we reached more than
15,000 people through targeted community programmes, empowering
our local communities to thrive in the job market by delivering job fairs
and helping people build skills, improve employability and access
fulfilling work.
Through our affordability schemes, we provided meaningful bill support
to over 332,000 households who need it most and we work directly in
communities to promote water efficiency, raise awareness of available
support and help customers manage their bills.
We now employ more than 11,000 people and invest in training through
our designated Academy, and this year we welcomed over 160 graduates
and apprentices. Engagement remains high at 8.8, reflecting a culture
that values inclusion, development and shared purpose.
Looking ahead
As a proud Midlander, it is a privilege to lead Severn Trent at such a pivotal
time, and I look forward to the period of growth ahead. I am optimistic about
the future and confident Severn Trent will continue to embrace what is
next, delivering on the challenges and opportunities ahead.
I want to thank our people for their dedication, our customers for their
trust and our stakeholders for their continued support. I am grateful too
for the counsel, challenge and support from Christine and the Board.
Finally, I would like to thank Liv Garfield for her exceptional leadership
over the previous 11 years. The energy, passion and determination she
embedded into the Severn Trent culture will continue as we deliver our
ambitious five‑year plan.
James Jesic
Chief Executive
James delivering one of his 70 All People Roadshows,
where teams discussed priorities for the year ahead
1 We are currently undergoing an appeal process in relation to a third serious pollution.
Severn Trent Plc Annual Report and Accounts 2026 11
Strategic Report Governance Financial Statements
Our Performance and Key Performance IndicatorsOur Performance and Key Performance Indicators
Customer Contacts About Water
Quality (number of complaints)
9,111
ODI Target: 9,267
2025/26
9,111
2024/25
9,011
2023/24
7,696
Description:
The number of complaints about taste,
odour and appearance that we receive.
Strategic
objectives:
O
Stakeholders:
Remuneration:
Water Supply Interruptions
(average number of minutes)
00:05:41
ODI Target: 00:05:00
2025/26
00:05:41
2024/25
00:04:34
2023/24
00:06:40
Description:
The average number of minutes
lost per customer.
Strategic
objectives:
O
Stakeholders:
Remuneration:
Customer Measure of Experience
(‘C-MeX’) (Index)
62.04
2025/26
62.04
2024/25
74.43
2023/24
74.18
Description:
An industry view of customers’
experience, measured through
quantitative and qualitative metrics,
and industry benchmarking and UKCSI.
Strategic
objectives:
O
Stakeholders:
Remuneration:
Developer Measure of Experience¹
(‘D-MeX’) (Index)
88.27
2025/26
88.27
2024/25
92.16
2023/24
91.90
Description:
An industry view of developers’
experience, measured through
quantitative and qualitative metrics,
and industry benchmarking.
Strategic
objectives:
O
Stakeholders:
Remuneration:
Employee Engagement
(score out of 10)
8.8
2025/26
8.8
2024/25
8.6
2023/24
8.6
Description:
Employee engagement score out of 10.
Strategic
objectives:
P
Stakeholders:
Remuneration:
Lost Time Incidents
(‘LTIs’) (per 100,000 hours worked)
0.11
2025/26
0.11
2024/25
0.09
2023/24
0.08
Description:
Number of employees unable to work
due to injury or illness from their job.
Strategic
objectives:
P
Stakeholders:
Remuneration:
Customer Bill Support
(Number of customers)
332,713
2025/26
332,713
2024/25
281,067
2023/24
212,793
Description:
Number of customers supported
withtheir bills.
Strategic
objectives:
P
Stakeholders:
Remuneration:
Social Value
(Cumulative number of customers)
41,342
2025/26
41,342
2024/25
26,078
2023/24
10,675
Description:
Our Societal Strategy, launched in
2022 aims to reach 100,000 people in,
or at risk of, water poverty by 2030.
Strategic
objectives:
P
Stakeholders:
Remuneration:
Performance: Stakeholders:
Strategic objectives:
Key
Outperformance against target
Remuneration:
Linked
Not linked
Underperformance against target
In line with target
Customers
Communities
Suppliers and Contractors
Colleagues
Shareholders and Investors
Regulators and Government
P
E
O
P
L
E
C
H
A
N
G
E
O
U
T
C
O
M
E
S
N
A
T
U
R
E
Delivering Outcomes our Customers Care About
Running a Business that Goes Hand‑in‑Hand with NatureCaring for People in our Region
A Driver of Positive Change
C O
P N
1 88.27 is our Q3 score. Our Q4 score will not be released until June 2026.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 12
2 Our FY25 performance has been restated following Ofwat’s recategorisation of build‑over flooding from External Sewer Flooding to Internal Sewer Flooding.
3 These are reactive repairs due to network bursts, therefore, fewer repairs against target indicate better performance. Although we did not meet our ODI target this year, we remain within
the regulatory deadband and incurred no penalty.
4 We are currently undergoing an appeal process in relation to a third serious pollution.
Internal Sewer Flooding²
(number of incidents)
512
ODI Target: 650
2025/26
512
2024/25
640
2023/24
775
Description:
The number of sewer flooding incidents
that occur inside customer properties.
Strategic
objectives:
O
Stakeholders:
Remuneration:
External Sewer Flooding²
(number of incidents)
6,123
ODI Target: 6,445
2025/26
6,123
2024/25
6,939
2023/24
6,656
Description:
The number of sewer flooding incidents
that occur in customer gardens,
driveways and external buildings.
Strategic
objectives:
NO
Stakeholders:
Remuneration:
Leakage
(Ml/d) (three-year average)
342.3
ODI Target: 352.4 Ml/d
2025/26
342. 3
2024/25
371.3
2023/24
392.1
Description:
The average volume of water that
leaksfrom our water network
eachday(measured as a three‑year
rolling average).
Strategic
objectives:
O
Stakeholders:
Remuneration:
Mains Repairs
3
(number of repairs)
6,034
ODI Target: 5,636
2025/26
6,034
2024/25
4,922
2023/24
4,705
Description:
The number of repairs to our
groundmains network as a
resultofburst mains.
Strategic
objectives:
O
Stakeholders:
Remuneration:
Storm Overflows
(average spill count)
15.0
2025/26
15.0
2024/25
25.4
2023/24
24.9
Description:
The average number of spills per site,
EA definition.
Strategic
objectives:
NO
Stakeholders:
Remuneration:
Pollutions
4
(number of incidents)
178
ODI Target: 234
2025/26
178
2024/25
274
2023/24
239
Description:
The number of pollution incidents that
occur from our activities.
Strategic
objectives:
NO
Stakeholders:
Remuneration:
Sewer Collapses
(number of collapses)
646
ODI Target: 726
2025/26
646
2024/25
587
2023/24
698
Description:
Number of sewer collapses in our
network, impacting service and/or
theenvironment.
Strategic
objectives:
NO
Stakeholders:
Remuneration:
Unplanned Outages (percentage of
loss of peak week production capacity)
1.33%
ODI Target: 2.14%
2025/26
1.33%
2024/25
1.46%
2023/24
1.94%
Description:
The unplanned loss of peak week
production capacity at our water
treatment sites.
Strategic
objectives:
O
Stakeholders:
Remuneration:
Biodiversity
(biodiversity units)
512.5
ODI Target: 0
2025/26
512.5
2024/25
-
2023/24
-
Description:
Change in biodiversity units from
baseline survey, where targets are
seton an industry comparative basis.
New definition for AMP8.
Strategic
objectives:
NO
Stakeholders:
Remuneration:
Net Zero
(gas emission reduction)
27%
2025/26
27%
2024/25
25%
2023/24
30%
Description:
Targeting a 46% reduction in Scope 1
and 2 emissions by 2031, from a
2019/20 baseline.
Strategic
objectives:
NO
Stakeholders:
Remuneration:
Self‑Generation (total renewable
energy generation, GWh)
855
2025/26
855
2024/25
847
2023/24
757
Description:
Total generation of renewable
electricity and biomethane generation.
Strategic
objectives:
NO
Stakeholders:
Remuneration:
Reasons for Not Achieving Good Status
(% of bodies with at least one ‘RNAGS’)
<9%
2025/26
<9%
2024/25
10.8%
2023/24
14.0%
Description:
Measurement of specific issues that
negatively affect water quality.
Strategic
objectives:
N
Stakeholders:
Remuneration:
Severn Trent Plc Annual Report and Accounts 2026 13
Strategic Report Governance Financial Statements
Water is central to our customers’ daily lives, and we take
that responsibility seriously. We value the trust they place
in us, which is why we work hard to keep water flowing,
manage wastewater safely, and support our customers
and communities in using water wisely.
Customer experience
We are committed to giving our customers the highest standard of
service, a commitment shared by everyone across our organisation.
Ourfocus is on ensuring every interaction delivers a consistently
positiveand reliable experience.
Customer Measure of Experience (‘C-MeX’)
C-MeX is the water industry’s customer satisfaction measure, overseen
by Ofwat and based on independent surveys of customers’ views across
four areas: Water, Waste, Retail and Experience.
For AMP8, Ofwat has updated the weightings used in the C-MeX
calculation. The three service components – Water, Waste and Retail –
now carry greater emphasis, with 66.7% of our scores based on the
customer service survey, equally covering operational contacts, and
billing and general enquiries. The Experience element, assessing
customer perception of Severn Trent, now has a reduced weighting,
contributing 33.3% to the total score. Additionally there is a sector wide
adjustment for UKCSI. This has historically been a challenging metric
forus, with our May 2026 score ranking us 11th place when compared
tothe rest of the sector. Unfortunately, this means we are at the
maximum ODI penalty for this measure.
• Across Water, C-MeX performance improved and we are supporting
strong improvements in our customer engagement through greater
use of digital channels. The year presented significant operational
challenges, including record consumption and a 55% increase in
burst mains between June and October compared to last year, due
todry conditions. Despite this, record leakage repair was delivered,
returning leakage to historical lows by September without detriment
to C-MeX performance.
• In Waste, improved response capacity and coordination delivered
faster attendance and more effective resolution, supporting strong
performance during extreme weather in December and January,
contributing to a 45% reduction in complaints, over the last two years.
Building on this progress, our specialist waste capability is being
strengthened to improve first-time diagnosis and resolution and
reduce repeat contact.
Flood Management is also being reinforced through a dedicated
Customer Flooding Performance Team, improving network insight,
reducing repeat flooding risk, and supporting timely, sustainable
interventions for customers and the environment.
• In Retail, improvements continue in customer access and first-time
query resolution, supporting further service improvements. Migration
to the Kraken platform is nearing completion, with only a small number
of the most complex accounts, including those involving debt or bespoke
tariffs, yet to transition.
Our Strategy
DELIVERING OUTCOMES OUR
CUSTOMERS CARE ABOUT
In this section:
Customer experience 14
Water 16
Wastewater 17
Environmental performance 18
Customer contact centres
During the year, a fourth fully insourced customer contact centre
was established in Edgbaston, increasing capacity and service
resilience. We have onboarded 104 new regional roles supported
bysector-specific training, increasing our total customer contact
headcount to 377.
The second year of our Learning, Employability and Preparation
(‘LEAP’) into Work programme has been successful, with strong
partnerships formed with local Job Centres and roles secured
for66individuals, some within our contact centres. Throughout
thisgrowth, we have remained committed to fostering a strong,
customer-first culture focused on continuous improvement.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 14
• In Experience, the latest Customer Experience Survey reaffirms that
affordability, environmental impact and water quality remain customers’
top priorities. In response, we are strengthening affordability support,
improving transparency on environmental performance, and highlighting
investments that enhance resilience and reduce leakage. Through our
It’s In Our Nature campaign and ongoing service improvements, we
continue to align our actions with the communities we serve.
Developer Measure of Experience (‘D-MeX’)
Ofwat has updated its methodology for calculating D-MeX for AMP8,
meaning that results are not directly comparable with previous years.
However, we are pleased to have maintained our position as one of the
leading companies in the sector, achieving a score of 88.27, as at March
2026. Our Q3 score demonstrates that we continue to deliver a consistent,
first-class experience for our developer customers engaging with us on
new connection services.
Our teams work hard to understand the differing and evolving needs of
our developer customers, offering a tailored and personal approach to
service delivery. This includes building long-term relationships with
larger developers and key industry stakeholders, while offering enhanced
support and touchpoints for one-off or smaller transactional customers.
We are also continuing to invest in and enhance our digital service offering,
ensuring customers can engage with us easily and through the channel
that works best for them.
Customer bill support
This AMP, we launched our largest ever affordability package, worth
£575 million, marking a significant step forward in supporting customers
facing financial pressures. By 2030, our ambition is to assist around
700,000 households in need of support – equivalent to one in six of
ourcustomers.
We provide a wide range of assistance tailored to different needs,
including bill reduction schemes, debt write-offs, payment matching,
payment breaks and short-term payment arrangements. We also work
closely with trusted partners to offer additional support, such as debt
advice and income maximisation services. For customers experiencing
severe hardship, we can also help with the purchase of essential
household items including cookers, washing machines and fridge-
freezers. Over the winter, we distributed 244 electric blankets to help
customers struggling with cold temperatures and rising energy costs.
332,000+
households supported
£127.4 million
support provided
This year alone, we have provided £127.4 million of support to over
332,000 households through our affordability schemes. This includes
around 27,000 customers we proactively identified as eligible for the
BigDifference Scheme and automatically enrolled, ensuring they receive
the ongoing support they are entitled to. This work will support our 2030
ambition to more than double the number of customers receiving a bill
reduction through our Big Difference Scheme, extending support to almost
500,000 households, of which we have already supported more than half
in our first year. Through these actions, we continue to strengthen our
commitment to supporting customers who need it most.
Social Value
Since launching in November 2022, our Social Impact Strategy has
focused on tackling the root causes of water poverty by building skills
andcreating routes into good work across our communities.
We provide targeted support to customers facing immediate financial
pressures while building long-term economic resilience through
place-based partnerships and convening employers to expand
accessto opportunity.
We are investing in skills and employability through schools outreach,
placements and internships. To date, we have reached over 40,000
people towards our ambition to support 100,000 people in, or at risk of,
water poverty.
It’s In Our Nature campaign
Local pupils signing water pipes ahead of installation in Derbyshire
Severn Trent Plc Annual Report and Accounts 2026 15
Strategic Report Governance Financial Statements
Upstream leakage reporting
Following Ofwat’s review of how leakage is calculated, we are
improving how we monitor and report leaks on our larger upstream
pipes. We are transitioning to a more proactive, detailed approach,
called Flow Balance. During AMP7, we transitioned some of the
network to this new methodology, with the remainder planned for
AMP8. To support the transition we have established a permanent
upstream detection team and strengthened our data analysis
capability, alongside expanding upstream monitoring and metering.
These changes mean we are finding and fixing more leaks earlier.
Historically, we found and repaired around 540 upstream leaks
annually; this has increased to over 800 this year, having proactively
surveyed around half of the upstream network.
Network investment
We take pride in our network and remain committed to ongoing
investment to strengthen our asset base.
We continue to replace older, higher-risk pipework through our
largest ever mains renewal programme, targeting 1,389 km of
pipework in AMP8.
From April 2015 to March 2025, we have installed around 1,330km
ofnew water mains and plan to deliver almost the same output in
halfthe time. This year, we replaced 219.9 km of mains through fully
in-house design and delivery, exceeding our PCD target of 208.4 km,
and achieving 16% of our AMP8 target, striving to improve pressure
management further.
Customer contacts about water quality
The quality of our customers’ drinking water is central to our purpose,
and delivering safe, clean and wholesome water is a responsibility we
take great pride in at Severn Trent. Wholesome water is drinking water
that meets all legal UK quality standards, contains nothing harmful to our
health, and is acceptable in appearance, taste and smell. Throughout the
year, we continued to outperform our regulatory target of 9,267, which for
AMP8 is also inclusive of social media contacts for water quality, receiving
a total of 9,111 drinking water quality complaints. This reflects sustained
improvements in the quality of water delivered at the tap.
We will continue to prioritise year-on-year reductions in water quality
contacts, supported by a strengthened flushing programme and enhanced
proactive maintenance. We remain committed to innovation and
industry-leading performance, using advanced design tools and network
analytics to identify priority areas and minimise customer impact.
Delivering Outcomes our Customers Care About continued
Water
Leakage
We are pleased to have outperformed our leakage target for the eighth
consecutive year and have maintained last year’s record-low level of
leakage. Our three-year average outturned at 342.3 Ml/d against a target
of 352.4 Ml/d, keeping us on positive trajectory towards a 31.6% reduction
by 2030 and 50% by 2045, from 2017/18 performance, having continued
toreduce leakage year-on-year.
Our focus on finding and fixing leaks has led to around 48,000 network
repairs, 6% more than last year, and our enhanced pressure control
delivered 16 Ml/d of additional leakage benefit. We continue to support
customers in identifying and repairing leaks on their own pipework, with
86% of these leaks being repaired by customers, supporting a reduction
of overall water loss.
We continued to build on AMP7’s Green Recovery investment by expanding
our smart-metering programme. We now have more than 570,000 smart
meters installed, with over 230,000 installed and upgraded this year,
strengthening leakage control, consumption reduction and customer
insight as we move towards our plan to install more than onemillion
meters during AMP8.
Teams installing a smart meter, Coventry
Mains repair
Mains repairs performance is heavily influenced by weather conditions,
and this year we experienced both the hottest, driest recorded summer
and a severe cold spell in December and January.
Performance was strong at the start of the year, supported by continued
investment in our network. However, ground movement in July increased
burst main repairs in the month, with higher-than-normal levels continuing
through August and September as the ground took longer than usual to
recover, and the typical seasonal improvement was delayed.
Further pressure was experienced over winter. January 2026 saw our highest
number of January bursts on record at 1,177 repairs driven by freeze–
thaw conditions affecting the network. The combined effects of extreme
summer heat and winter weather temporarily impacted performance.
Despite this, fewer bursts in February and March helped stabilise the
network, allowing usto recover performance and avoid any penalty.
Water supply interruptions
While the five-minute regulatory target was not met in the first year of AMP8,
we outperformed our AMP7 average by over 3 minutes. This year’s outcome
was influenced by adverse weather conditions, which placed additional
pressure on the network.
In particular, Storm Goretti in January 2026 contributed 31 seconds to
theannual average interruption time, resulting in a total performance
of5 minutes and 41 seconds. Prolonged hot and dry weather during July
and August also led to increased ground movement and a higher number
of burst mains, with interruption events during these months increasing
by 95% compared with the previous year.
Innovating water quality monitoring
During 2025, our River Monitoring Team developed an innovative
pumped kiosk system that continuously samples river water, analyses
quality, and transmits data to our teams in near real time. Samples
are safely returned to the river following analysis. Operating every
15 minutes, this live data enables us to adjust our operational
processes promptly in response. This year we have started our
pre-install works for 30 monitors, supporting our long-term
ambitionto deploy up to 1,000 river monitors during AMP8.
Unplanned outage
This year, we outperformed both our 2.14% target and our 1.40% AMP7
average, with performance at 1.33%. 87% of outages arose from
groundwater sites, with the remaining 13% attributable to surface
watertreatment works.
Water quality issues accounted for 0.64% of the overall 1.33% ODI impact,
of which 0.27% related to treatment outages that commenced prior to the
current year and would not have been included under the AMP7 framework.
Although significant interruption events are 27% higher than last year’s
exceptionally strong performance, they remain 57% lower than the year
prior, reflecting continued underlying improvements in network resilience.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 16
Wastewater
Sewer floodings
This year, we have achieved record-low internal sewer flooding
performance, at 512 incidents. This represents a 20% reduction in
incidents year-on-year.
External sewer flooding remains a key focus, and we are pleased to
havestarted this AMP with better performance than the previous year.
Werecorded 6,123 external flooding incidents, a 12% reduction year-on-
year. Performance was primarily driven by two factors: blockages, often
caused by sewer misuse, and hydraulic flooding, associated with heavy
rainfall. Of our external incidents, 313 were hydraulic incidents and 5,810
were attributable to flooding other caused (‘FOC’). We review all repeat
hydraulic incidents with the aim of installing mitigation measures to prevent
future customer impacts. This includes the creation of our specialist
investigation and flooding resolution team, ensuring customers receive
faster and more effective support with repeat issues.
We recognise that any sewer flooding is unacceptable for customers, and
we continue to strengthen our service. Alongside improving our waste
operating model, which has reduced our response times to reported
waste incidents, we have stood up a dedicated team of flooding liaison
roles to work with local groups, improve our flooding response, build
community relationships and strengthen local resilience plans.
20%
reduction in internal flooding
incidents year on year
12%
reduction in external flooding
incidents year on year
Pollutions
During the year, two confirmed serious pollution incidents occurred
atLubbesthorpe and Cheslyn Hay, which were classified by the EA as
Category 1
1
. The incidents resulted from unforeseen failures of assets
thatwere operating effectively and within service life. The failures were
not reasonably predictable and were compounded by third-party factors.
Both incidents were contained and mitigated promptly. Technical reviews
have been completed and relevant asset management and operational
controls have been reinforced. The incidents reflect the operational
complexity of managing a network of over 93,000 km and the importance
of continued robust asset management and operational oversight.
Wanlip Sewage Treatment Works, Leicestershire
Severn Trent tanker at Finham Sewage Treatment Works, Coventry
We have outperformed our pollution target by 24% during the year,
benefiting from our monitor installation programme and daily executive
reviews. We also built upon our operational capability to prevent and
minimise our total pollutions. Our Waste Operational Control Centre
Teams are now fully established and act as the controlling mind for
incident response, improving coordination and decision-making across
the network. Our Pollution Response Teams and Incident Response
Teams play a significant role in limiting impacts and successfully
preventing escalation. Our Pollution Incident Reduction Plan (‘PIRP’)
targets a reduction of 30% by the end of AMP8.
Risk is being further reduced through the Proactive Implementation
andMaintenance Team, which delivers proactive maintenance and rapid
pump station overhauls at higher risk sites, as well as our new dedicated
team of ecologists, who are key in recommending actions that minimise
environmental impact. We have also enhanced our digital and predictive
capabilities through the continued rollout of Storm Harvester and the
launch of the FRIEDA App, supporting faster evidence capture and more
effective mitigation. Alongside these initiatives, we delivered industry-
leading proactive repair programmes and completed our largest ever
network cleanse, strengthening resilience and reducing future risk.
Looking ahead, our focus remains on completing and embedding these
initiatives. From this year, pollution performance across the sector will
beassessed under the EA’s new guidance for reporting and assessing
water industry regulation incidents (‘WIRI’), introducing stricter reporting
requirements and revised assessment criteria. This is expected to increase
incidents attributed to water companies, even where these have been
driven by third-party behaviours (including fly tipping, misuse of the
sewer network, damaged assets and agricultural run-off), and will
setanew baseline for future assessment.
We support robust environmental protection and transparent reporting.
As the impact of the new reporting regime becomes clearer, we will keep
our targets under review to ensure they remain appropriate and stretching.
Regardless of changes to reporting or assessment, our priority and
commitment remains unchanged: preventing pollution from happening
inthe first place and improving outcomes for the environment, our
customers and the communities we serve.
Storm overflows
In 2025, storm overflow spills decreased by 41% compared with 2024,
driven by a combination of sustained, significant investment and drier
weather conditions over the calendar year. Our targeted spills reduction
programme has delivered over 2,700 solutions, including new storm
tanks, cutting-edge treatment technology and upgrades across our
network. This has positively reduced the average spill count from
25.4peroverflow in 2024 to 15.0 in 2025, demonstrating meaningful
progress in reducing environmental impact despite periods of high
intensity rainfall across the winter months.
Our performance also reflects the strength of our industry-leading
GetRiver Positive programme, launched in 2022, which set out a
seriesofambitious pledges to ensure the long-term health of the
region’sriversand waterways. You can find out more about our
progresson pages24 to 29.
1 We are currently undergoing an appeal process in relation to a third serious pollution.
Severn Trent Plc Annual Report and Accounts 2026 17
Strategic Report Governance Financial Statements
Delivering Outcomes our Customers Care About continued
Environmental Performance
Environmental Performance Assessment (‘EPA’)
We have achieved the highest possible EPA rating of 4* for the last six years, and we are confident that we will achieve this rating again for 2025,
whichwould make it seven consecutive years – an unprecedented achievement within the sector.
No other UK water company has previously achieved more than three consecutive years at 4* status.
2025 EPA performance 2025 EPA green target 2025 performance 2025 status
Serious pollution incidents 1 or fewer 2
1
Amber
Pollution incidents per 100,000 km 182 or fewer 178
1
Green
Discharge permit compliance 99% 99.3% Green
Self-reporting of pollutions 80% ² 87.5% Green
Water Industry National Environment Programme (‘WINEP’) Delivery 100% 100% Green
Sludge disposal 98.2% 98.2% Green
1 We are currently undergoing an appeal process in relation to a third serious pollution.
2 Also requires that we report at least 90% of our incidents from Pumping Stations and Wastewater Treatment Works.
Overall, EPA targets are more stringent in 2026 than in 2025. The new WIRI guidance published by the EA will not impact our pollution incident
performance ratings for 2026 and 2027, as the EA will not assign ratings while the new baseline is being established under the updated framework.
Current understanding is that industry performance during 2026 and 2027 will inform the pollution incidents target for 2028. As a result, the WIRI
changes are likely to lead to a significant increase in the number of recorded pollution incidents, reflecting more comprehensive monitoring, rather
than a deterioration in performance.
Floating treatment wetlands, Witches Oak Water Treatment Works, Derbyshire
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 18
Our strategy
CARING FOR
PEOPLE IN OUR REGION
In this section:
Building our future skills 19
An inclusive place to work 20
Rewarding and looking after our people 21
Supporting our customers who need
us most
21
Caring for people sits at the heart of our purpose. This year
we accelerated our Wonderfully You Diversity & Inclusion
(‘D&I’) Strategy, underpinned by a clear ambition: to deliver
brilliant service for customers, provide fulfilling careers
for colleagues, and create meaningful opportunities for
people across our region to step into work and out of
waterpoverty. In doing so, we continue to turn purpose
intopractical impact, fully aligned with our ‘performance-
driven, sustainability-led’ approach.
Building our future skills
We continue to invest in the people who power our business today, and
those who will shape it in the years ahead. Our priority is building the
skills, capability and experience our sector will need over the long term,
ensuring we can continue delivering brilliant customer service and
fulfilling our role as a purposeful Company.
A significant part of this work involves addressing sector-wide skills gaps.
Through schools outreach, employability programmes, work placements
and internships, we are widening access to careers in water and strengthening
our future talent pipeline. These initiatives also support our commitment
to help 100,000 people out of water poverty by providing support to
individuals to develop the confidence, skills and opportunities needed to
secure sustainable work – whether within Severn Trent or beyond.
This year, we delivered high-quality early career experiences, hosting 85
paid interns and placement students, and offering unpaid work experience
to over 254 young people. We continued to broaden participation in our
outreach programmes through partnerships with education and community
organisations. During the year, we supported students from Hereward
College and established a new partnership with Transition2 in Derby.
Hereward College provides further education for young people with a
range of complex disabilities and learning difficulties.
We remain focused on equipping our people with the technical,
operational and leadership capabilities needed to serve customers
today,while building future-focused skills in areas such as digital
operations, environmental science, engineering and customer service.
Our in-house Academy enables us to adapt training in line with regulatory
and technological change. Its flexible facilities provide safe, practical
environments where colleagues can develop essential skills to serve
ourcustomers and communities effectively.
In the last 12 months, 944 of our colleagues have achieved promotions
and a further 869 have moved roles within the business, growing their
skills and embracing new challenges. This represents 18% of our
workforce. A further 39 colleagues have been promoted to Business
Leader within the year.
Graduates at Finham Sewage Treatment Works, Coventry
Severn Trent Plc Annual Report and Accounts 2026 19
Strategic Report Governance Financial Statements
Caring for People in our Region continued
Gender representation
Directors Senior Managers Graduates and Apprentices All Employees
Number % Number % Number % Number %
Female
4
50 23
42.6 91
26.1
3,272 28.3
Male 4 50 31 57.4 257 73.9 8,272 71.7
Ethnicity representation
Directors Senior Managers Graduates and Apprentices All Employees
Number % Number % Number % Number %
Asian/Asian British 1 12.5 4 7.4 51 14.7 983 8.6
Black/African/Caribbean/
Black British 0 0 0 0 12 3.4 337 3
Mixed/Multiple Ethnic Group 1 12.5 1 1.9 15 4.3 251 2.2
Other Ethnic Group 0 0 0 0 4 1.1 53 0.5
Not specified/prefer not to say 0 0 0 0 38.5 12.4 1,469 12.9
White British or Other White
(including minority-white groups) 6 75 49 90.7 223 64.1 8,298 72.8
You can read more about our approach to Board diversity in our Nominations Committee Report on pages 105 to 107.
Our gender and ethnicity pay gap
In March 2026, we published our online Gender and
Ethnicity Pay Gap Report. Our median gender pay
gap moved from 8.2% to 5.4% and the mean gap
fell from 1.9 % to 0.5%. Median and mean ethnicity
pay gaps decreased to 6.9% from 10.1% and from
7.6% to 6.1% respectively. Further details can be
found in our full report which is available online.
Further details on employee pay can be found in our
Directors’ Remuneration Report (pages 118 to 145).
An inclusive place to work
Our approach to inclusion is values-led and centred on individuals.
Werecognise how different backgrounds, experiences and perspectives
strengthen our performance and decision-making. Through inclusive
leadership practices, targeted development, inclusive policies and
colleague-led networks, we foster a culture where people are supported
to thrive and contribute at their best, placing us in the top 5% of energy
and utility companies for engagement and inclusion.
The final FTSE Women Leaders Review for the 2021–2025 cycle recognised
our continued progress. As at 31 October 2025, women represented
62.5% of our Board and 44.1% of senior leaders, placing us fourth
overallfor women on the Board and in the top quartile for senior
leadership representation.
Looking ahead, we remain focused on strengthening representation
anddeepening inclusion of all kinds across all teams, ensuring every
colleague can contribute fully and confidently.
As part of our statutory reporting obligations, we also provide a gender
breakdown across our senior management and wider workforce. As at
31 March 2026, our Executive Committee comprised four female and
fivemale members (44.4% and 55.6% respectively). Across our broader
senior leadership population – which includes the Executive Committee
– 23 colleagues (42.6%) were female and 31 (57.4%) were male. Within
thewider organisation, female representation stood at 28.3% (3,272
colleagues) with male representation at 71.7% (8,272 colleagues).
In line with the requirements of the UK Corporate Governance Code
andthe Companies Act 2006, the gender and ethnicity breakdown of
Directors, Senior Managers and all employees as at 31 March 2026 is
presented in the table below. Senior Managers refers to our Executive
Committee and Senior Management Team.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 20
Rewarding and looking
after our people
Fairly rewarding our people
We are committed to ensuring our people are fairly rewarded and share
in the success they help create. All colleagues participate in our annual
bonus plan, aligning everyone with key organisational objectives and
recognising collective achievement. Our defined contribution pension
scheme further supports long-term financial wellbeing by trebling
employee contributions up to 15% of salary.
Employees can also become part-owners of the Company through
ourall-employee Sharesave Scheme, which continues to see strong
engagement with almost 70% participation, which is one of the highest
rates in the FTSE100, including many colleagues saving the maximum
£500 per month. We are particularly proud that so many choose to retain
their shares, demonstrating confidence in the Company’s future and
belief in its long-term performance.
Looking after our people
Over the past year, we continued to build on our strong foundations
inhealth, safety and wellbeing, ensuring colleagues feel supported,
protected and able to work with confidence every day.
We maintained a strong safety performance, achieving a Lost Time
Incident (‘LTI’) rate of 0.11 per 100,000 hours worked. As we prepare
forthe increased activity of AMP8, we launched Everybody Safe – a
refreshed, company-wide approach designed to strengthen our safety
culture and equip colleagues and contractors with the tools and clarity
needed to work safely in more complex environments. Colleague
feedback has been central to this work, with health and safety
scoring9.2out of 10 in our annual engagement survey.
We have continued to evolve our health and safety framework, updating
our Group Policy, strengthening process safety capability and enhancing
assurance processes across teams. This includes more consistent
standards, improved oversight and closer integration between operational
and specialist teams. We also progressed improvements across our
estate, including enhancements to electrical safety, lightning protection
and chemical gas store security, ensuring our working environments
remain safe, resilient and compliant.
We are also contributing to wider sector progress, working with Water UK
to share insight and best practice in areas such as work-related violence
and reporting of incidents with the potential for serious harm. This collective
approach supports faster learning across the sector and helpsimprove
safety outcomes for everyone.
Looking ahead, our priority remains the same: creating a safe, supportive
and well cared for environment where every colleague can perform at
their best. Through continued investment in culture, capability and
systems, we remain steadfast in our commitment that nobody is ever
hurtor made unwell by what we do.
Fair pay and working conditions
We remain committed to fair, responsible employment practices. As
anaccredited Living Wage Employer, we also require all suppliers to
paythe real Living Wage and to meet clear, prompt payment expectations.
We aim to pay 95% of our small suppliers within 30 days, and for the
period to31 March 2026 our average payment time was 40 days. The
increase in average days reflects transitional impacts associated with
theimplementation of our e-invoicing solutions which is being actively
monitored as we embed the system.
In April 2024, we became an accredited Living Hours Employer,
reinforcing our commitment to secure and predictable work. This
includes ensuring contracts reflect actual hours worked, offering at
least16 hours a week (with flexibility to request fewer), and providing
aminimum of four weeks’ notice for changes to working patterns.
Supporting our customers
who need us most
Keeping bills affordable remains a priority for us. Our average
combined household bill continues to be the second lowest in England,
with the 2026/27 bill expected to be around £587 per year, well below
the national average. At the same time, we are investing significantly
toimprove services while doing everything we can to keep costs down
forour customers.
We recognise that many households still need support. Between 2025
and2030 we will double the number of households eligible for help
through a new £575 million support package, enabling nearly 700,000
households to access reduced bills.
We continue to widen access to our wider range of support schemes,
including the Big Difference Scheme, WaterSure and the Customer
Assistance Scheme, ensuring customers can receive help when they
need it most.
Alongside financial support, we are committed to identifying and assisting
customers who require additional help. 11.8% of our customers are now
registered on our Priority Services Register, enabling them to receive
tailored communication, personalised assistance and priority support
during incidents. We continue proactive outreach to make sure those
whowould benefit are identified and supported.
Social mobility index
We have once again been recognised as one of the country’s top-
performing companies for improving social mobility. For the seventh
consecutive year, we have been placed in the top 10 on the Social Mobility
Index, ranking second overall, something we are immensely proud of.
TheSocial Mobility Index assesses UK employers on their commitment
toensuring people from all social backgrounds have equal access
toopportunities.
Community Fund
Our customers, and the communities we live in, are at the heart of
everything we do. That’s why in 2020 we decided to support local
charitiesand community groups with over £20 million of support in
theten years from 2020. Since launching our Severn Trent Community
Fund, wehave awarded over £11 million to around 900 organisations,
helping to strengthen communities and enhance local environments.
In2025/26, the Fund distributed £1.8 million to 92 organisations.
As part of our commitment to social mobility, we also ring-fence £50,000
each year for a dedicated bursary programme delivered in partnership
with the Social Mobility Foundation, supporting disadvantaged young
people to access education and career opportunities. This year almost
£40,000 has been donated.
Severn Trent Plc Annual Report and Accounts 2026 21
Strategic Report Governance Financial Statements
Caring for People in our Region continued
SOCIAL IMPACT
DELIVERING LONGTERM SOCIAL
IMPACTACROSS OUR REGION
Our Social Impact Strategy is built on a clear ambition: to tackle the underlying causes of water poverty by improving
affordability, developing skills and creating pathways into employment across the communities we serve. Since launching
inNovember 2022, the strategy has evolved into a coherent, place-based model that supports customers at every stage
– from immediate financial pressure to long-term economic resilience.
Affordability as the foundation
Affordability remains the most significant challenge facing many
ofour customers. We currently support over 300,000 customers
through our financial support schemes, a figure expected to rise
to700,000 by the end of AMP8.
Our approach focuses on proactive engagement and building trust
in communities with the highest levels of deprivation. This includes
targeted campaigns to improve awareness of the support available,
as well as deeper partnerships with local organisations and
charities who help us reach those most at risk of water poverty.
Place-based community impact
Our strategy focuses on Birmingham, Coventry, Derby and
Leicester, areas where higher deprivation, youth unemployment
and water poverty mean our efforts can deliver the greatest
impact. Across these areas, our programmes have scaled
significantly, reaching around 40,000 people and delivering
approximately £15 million in social value to date.
Our place-based model is built on long-term school partnerships,
recruitment pathways linked to local job opportunities, whether
with us or other employees via our Big Boost job fairs, and tailored
support for those facing the greatest barriers. This approach
ensures our work translates into meaningful and lasting
opportunities for local residents.
Supporting aspiration and skills
from an early age
Our ambition to build long-term economic resilience starts early.
Through a structured ‘funnel’ approach, we aim to inspire young
people, raise aspirations and build confidence from primary school
through to employment.
Since launching our Social Impact Strategy in 2022, over 20,000
pupils across Birmingham, Coventry, Derby and Leicester have
taken part in Discovery Days, work experience and our delivery in
schools, including 19 multi-year school partnerships in areas of
high deprivation. This early engagement helps build skills, raise
career awareness and create clear pathways into work experience,
employability programmes and our early talent routes.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 22
Flagship Programmes
Pathways into employment
Practical exposure to the workplace plays a critical role in
improving employability. We have committed to delivering 500
work experience placements annually, prioritising young people
without existing networks and pupils from our partner schools.
Wehave exceeded that ambition by providing over 800 face-to-face
work experience places and a further 900 virtual placements this
year. Our portfolio of work readiness programmes offers tailored
opportunities for individuals at different stages, whether close to
work or facing significant and complex barriers.
Joining Severn Trent through LEAP
LEAP is a two-day employability programme delivered with the
JobCentre Plus, supporting unemployed candidates to navigate
the recruitment process. We offer jobs through LEAP to people
experiencing barriers to work, like Lavender.
After two years of unemployment and low confidence, Lavender
joined LEAP. With tailored support, she secured a role at our
Leicester Water Centre, became a top performer, and was
promoted to Leakage Specialist within 10 months.
Driving inclusive
recruitment and job creation
We continue to drive inclusive recruitment and create employment
opportunities across our region. Our contact centres in Leicester
andEdgbaston have already created over 180 new roles in the first
year of AMP8. We have widened access by removing academic entry
requirements for apprenticeships where feasible and all graduate
degree grades. We fully utilise our apprenticeship levy, prioritising
job created having drawn down 3.4% more than last year.
Our approach is recognised by partners such as Coventry City
Council and the West Midlands Combined Authority (‘WMCA’),
andwe recently achieved a ‘Gold’ charter mark from the Social
Recruitment Advisory Group, alongside a Social Value Award.
LEAP (Learning,
Employability
&Preparation)
400+
participants since
September2024.
c.22%
conversion into Severn Trent
employment.
84 hires
made to date, in the first
recruitmentwave.
Big Boost
Job Fairs
6 job fairs
held in Coventry, Birmingham,
LeicesterandDerby.
c.3,000
attendees to hear about
jobswith SevernTrent,
oursupply chain and
otherregional employers.
88%
felt more confident with their
jobsearchafterattending.
Care experienced
programme
Delivered
through a 12 employer
consortium, which we
leadasregional convener.
38
young people took part in the
programme lastyear with an
87% completion rate.
Job Rotation (with
CoventryCityCouncil)
12-week
paid placements designed
tobuild meaningful
workexperience.
50
participants, 64% NEET
priortojoining.
49%
went on to achieve
positiveoutcomes.
Youth Trailblazer (WMCA)
8-week
paid placements for young people who are NEET.
Severn Trent Plc Annual Report and Accounts 2026 23
Strategic Report Governance Financial Statements
Our strategy
A DRIVER OF
POSITIVE CHANGE
In this section:
Pledge 1 25
Pledge 2 26
Pledge 3 27
Pledge 4 28
Pledge 5 29
Since launching Get River Positive in 2022, we have remained
focused on reducing our impact on river systems and
contributing to their long-term resilience, guided by five
pledges that shape our ambition and actions. Over the
pastyear, wehave continued to make strong progress,
supported bytargeted investment, close collaboration
withpartners and communities, and a shared commitment
toimproving the natural environment.
Healthy rivers are vital to ecosystems and to the wellbeing of the
communities we serve. We remain committed to investing in innovative,
sustainable approaches that build resilience over the long-term.
We recognise and welcome the increased scrutiny of river health and
thedrive for stronger environmental protection. This aligns with our
ownambitions and the high standards we set for ourselves.
In response to this evolving landscape, we have undertaken a review
ofour priorities and targets to ensure Get River Positive continues to
alignwith customer and community expectations and demonstrates
clearleadership on river health.
Our AMP7 commitments are complete and we are using the learnings
towork on the next phase, which we will deliver by 2030. We will outline
new targets and ambitions in the next annual report, including our
progress against them.
To find out more about
howwe are making a
difference to rivers in
ourregion, subscribe
toournewsletterhere.
PLEDGE 1:
Ensure storm overflows
and sewage treatment
works do not harmrivers
PLEDGE 2:
Create more opportunities
for everyone to enjoy our
region’s rivers
PLEDGE 3:
Support others
toimprove and
careforrivers
PLEDGE 4:
Enhance our rivers and
create new habitats so
wildlife can thrive
PLEDGE 5:
Be open and transparent
about our performance
and our plans
Our Get River Positive Pledges
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 24
Pledge 1 – Ensure storm overflows and sewage treatment works do not harm rivers
We continue to invest in our industry-leading storm overflow spill reduction programme, targeting improvements
where they deliver the greatest benefit for river health.
Since launching the programme in 2024, we have completed more than
3,000 upgrades, delivered by a dedicated team completing an average
of21 schemes each week. These range from increased stormwater
storage capacity to new treatment solutions and network interventions
that reduce storm overflow spills.
Our data is now beginning to evidence the impact of this work. Defra
recognised this progress in its Storm Overflow Discharge Reduction
PlanProgress Report (December 2025), confirming that we exceeded
ourregulatory targets and ended 2025 with an average of 16 discharges
(September2024–August 2025).
We have worked hard this year to reduce the rolling annual average
spillnumber further to 15. This large scale engineering programme
alongwith drier weather, has delivered a 41% improvement in spill
frequency performance in 2025 compared to 2024.
Reducing harm
Pledge 1 extends beyond reducing the use of storm overflows; it
also focuses on our wider contribution to river health. To strengthen
our understanding of river ecosystems and enhance our capability for
future monitoring, we are investigating the introduction of environmental
DNA (‘eDNA’) analysis and Microbial Source Tracking (‘MST’) into our
programme. These techniques will provide valuable insight into the
sources of bacteria in our catchments, helping us identify the most
effective interventions to improve rivers for drinking water abstraction
and recreational use.
Across the UK, only a small proportion of waterbodies currently meet good
ecological status. In 2024/25 we reduced our contribution to the Reasons
for Not Achieving Good Status (‘RNAGS’) to 10.8%, with a further reduction
to less than 9% in 2025/26. We are delivering measurable progress in
restoring river health and enhancing the resilience of river systems.
To date, we have addressed our impacts completely on 181 waterbodies,
and we remain on track to achieve our sector leading target of no
morethan 2% of RNAGS arising from our treatment works and
stormoverflowsby 2030.
Phosphorus from everyday sources enters our sewers, and we are the
last line of defence before it reaches rivers. In 2025, we cut phosphorus
released from our sewage treatment works by over 38%, protecting
localwaterways. Customers expect strong performance and resilience
toclimate change, including more severe weather and flooding. As
thesepressures intensify, we focus on minimising river impacts and
strengthening long-term environmental resilience across our region.
Flooding continues to be a significant concern for the communities
we serve, and we work closely with partner organisations to ensure
thatboth our operations and network are robust enough to meet
increasing demand. Flood risk in our region is shaped by a range of
factors, particularly surface water management, and we are one of
several organisations that play a key role in addressing these challenges.
We proactively develop schemes that enhance resilience and mitigate
flood risk where this is needed, working alongside local authorities,
the EA and other partners. We have also recruited a dedicated
community flooding team to work proactively with partner agencies,
supporting customers during flood events alongside our operational
colleagues, and helping communities become more resilient to
flooding. We also continue to engage with developers tosupport the
correct implementation of Sustainable Drainage Systems (‘SuDS’),
using our statutory consultee role to highlight concerns and
recommend capacity improvements where required toenable
sustainable growth.
Ready for extreme weather
Following the improvements made through our storm overflow
reduction programme, we have undertaken improvements at
nearly half of our sites, which supports our continuous drive
towards resilience. However, we do see limitations during
extremewet weather events.
Over the past year, we have experienced a variety of weather
extremes – ranging fromaprolonged dry spell that led to
droughtconditions across the Midlands, to almost double
thelevelof rainfall in November 2025 compared with 2024.
In November 2025, Storm Claudia brought a prolonged period
ofintense wet weather, with some areas receiving a full month’s
typical rainfall in just sixdays. Despite these conditions, our
network recorded 32 spills per millimetre of rain, demonstrating
asignificant improvement in performance.
In comparison, during Storm Babet in October 2023, before
ourlatest interventions, the network experienced 168 spills
permillimetre of rainfall. This sharp reduction highlights
theeffectiveness of the upgrades we have delivered. After
implementing new solutions, we are seeing materially fewer
spills,including during extreme weather events.
Weather will always influence spill numbers, but these examples
show that our sustained investment and targeted engineering
interventions are making the network more resilient and delivering
tangible benefits for customers, communities and the environment.
2%
We remain on track to achieve
oursector-leading target of no
morethan 2% of RNAGS by 2030
<9%
Contribution to the RNAGS
reduced to 8.9% in 2025/26
Severn Trent Plc Annual Report and Accounts 2026 25
Strategic Report Governance Financial Statements
A Driver of Positive Change continued
Pledge 2 – Create more opportunities for everyone to enjoy our region’s rivers
Pledge 2 focuses on improving the quality of the local environment and creating opportunities for people to enjoy
our rivers and visitor sites.
The quality of the local environment directly influences the wellbeing
ofthe communities we serve, and rivers are central to this. Creating
opportunities to access rivers and our visitor sites remains a priority.
We are focusing on increasing opportunities for people to enjoy natural
spaces while continuing to enhance the environments we look after.
Ourvisitor sites provide high-quality blue green spaces for local
communities, and we continue to invest in making these spaces
accessible, safe and enjoyable.
Following the success of our first supervised open water swimming trial
at Carsington Water in 2024, we worked with our onsite sailing operator
– who achieved Beyond Swim accreditation – to enable regular managed
swim sessions in 2025. We also partnered with an event organiser to
plan a triathlon at the site. However, unprecedented dry weather during
spring and summer 2025 led to significantly reduced water levels, and
all planned activities were cancelled to protect participant safety and
maintain experience standards. Our commitment to these activities
remains unchanged and we plan to progress events at Carsington
Waterand expand, with similar opportunities across additional sites
from 2026 onwards.
Bathing water designations in Shropshire
In May 2024, Ludlow, Shrewsbury and Ironbridge were officially
designated as bathing water sites. This reflects the long-standing
commitment of local community groups who have championed
theirrivers. As designated sites, these waterbodies are now
formallymonitored by the Environment Agency for bacterial
pollutionduringthebathing season.
Through Ofwat’s PR24 Final Determination, funding has been
confirmed to investigate what would be required to meet bathing
waterstandards in a way that is sustainable, proportionate and
affordable for customers. In Shrewsbury and Ironbridge, this work
isprogressing through Ofwat’s large-scheme gated process, which
allows time to build robust evidence before decisions are taken on
future investment. In Ludlow, improvements are being delivered
through existing programmes, building on earlier investment and
ongoing regulatory requirements.
Initial assessments for Shrewsbury and Ironbridge indicate that
meeting bathing water standards could require investment of
several hundred million pounds in the assets for which we are
responsible as awater company. As the bathing water designations
were confirmed after our PR24 business plan was agreed, any
additional investment would need to be funded across our wider
customer base. We have recently conducted customer research to
understand their views on this investment. To ensure this approach
remains fair and affordable, Ofwat has established a staged approval
process, with funding released only once feasibility, costsand
deliverability have been independently assessed.
Over the past year, our focus has been on developing the robust
evidence needed to support informed, long-term decision-making.
Wehave completed extensive desk-based studies across both
catchments and, in September 2025, began onsite investigations
intodrainage systems, river flows, sources of bacterial pollution
andlocal ecology. This work will inform realistic timescales and
helpidentify the most effective and affordable solutions.
Shrewsbury’s historic and flood-prone town centre, alongside
Ironbridge’s UNESCO World Heritage status, means that solutions
must carefully balance environmental improvements with the
protection of heritage, landscape and the local economy.
Progress in Ludlow and the wider catchment
At the same time, we are progressing improvements across the
widercatchment. In Ludlow, we have moved into the next phase
ofourBathing Rivers programme, building on progress delivered
through theGreen Recovery programme. Improving river health is
ashared responsibility, and while we are tackling the elements we
control, including storm overflows, sewers and treatment works,
wecontinue to work with partners to address wider pressures such
asagriculture, urban runoff and misconnections.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 26
Pledge 3 – Support others to improve and care for rivers
Restoring the health of our rivers is a challenge far too great for any single organisation to solve alone.
By working alongside other industries, local residents, river user groups,
schools and environmental partners, we can deliver far greater impact.
Whether supporting restoration schemes, partnering with wildlife trusts
or collaborating with farmers to reduce diffuse pollution, we remain
committed to making a meaningful difference together.
Supporting community-led river improvements
Our Community Fund continues to strengthen local initiatives that
protectand enhance river environments. Over the past year, we
investedaround £20,000 in a project dedicated to revitalising river
health,enabling the purchase of an electric boat for river clean ups.
Thisnew capability is already improving the reach and efficiency of
community-led restoration activity.
Partnering with farmers to improve water quality
Farmers play a crucial role in protecting water quality, and our ongoing
collaboration across the region is helping reduce the agricultural
pressures on river systems. Through strong relationships, technical
support and targeted investment, particularly via our flagship Severn
Trent Environmental Protection Scheme (‘STEPS’), we are delivering
long-term improvements in both land and water management.
This year, we revamped STEPS to align with the new AMP, opening the
first round of funding to more farms than ever before. We introduced
greater flexibility and a wider set of options tailored to different farm
systems, helping enhance soil health and prevent pollutants such as
pesticides, nitrates and Cryptosporidium from entering river systems.
474
applications for
STEPSoptions and
maintenance in 2025
320
farms represented across
45catchments
To date, we have provided nearly £1.5 million in STEPS grants
tosupport on-farm initiatives that improve water quality.
Employee volunteering
Our colleagues continue to support our mission through volunteering.
This year, 202 employees dedicated over 1,100 hours to river related
projects delivered in partnership with the Canal & River Trust,
helping to protect and improve rivers and canals across our region.
202
employees
1,100
volunteering hours
River Rangers and community engagement
Our River Rangers and wider environmental teams remain at the
heart of our river protection work. They are out in the field year
round, checking assets, sampling water quality and carrying out
hands-on restoration across rivers, brooks and streams.
6,604
riverside inspections
inthelastyear
1,650
people engaged with on the
riverside and 157 meetings
attended with community groups
These conversations help build shared understanding, strengthen
relationships and support collective action for healthier rivers.
Severn Trent Plc Annual Report and Accounts 2026 27
Strategic Report Governance Financial Statements
A Driver of Positive Change continued
Pledge 4 – Enhance our rivers and create new habitats so wildlife can thrive
At the heart of our work lies a steadfast commitment tonature protection and restoration. Biodiversity guides
everydecision and action, shaping how we manage water and nurture the environments we all depend on.
Our approach goes beyond compliance; we believe robust landscapes and
flourishing wildlife are essential pillars of a sustainable future. Guided by
our ambition to be ‘performance driven, sustainability led’, we are forging
ahead with innovative, eco-friendly solutions that lay the groundwork for
habitats to prosper and for nature to rebound by 2030.
Ofwat’s Final Determination has levelled the playing field for all water
companies, with a common Outcome Delivery Incentive for all biodiversity
work, using the Biodiversity Net Gain (‘BNG’) matrix. This led us to
rethink how we drive biodiversity improvements, ensuring we not
onlycomply with the latest regulations but also embrace innovative,
forward-thinking approaches.
Our ecology team continues to lead these efforts and this year we hired
11additional ecologists to drive environmental improvements. They are
restoring habitats across our estate, developing Biodiversity Action Plans
(‘BAP’) for each of our sites, and undertaking biodiversity benchmarking
in partnership with The Wildlife Trust. This work began at Tittesworth and
will extend toa total of five sites by 2030.
We significantly outperformed our biodiversity targets in 2025/26,
creating and enhancing over 31 km of habitat on third-party land –
equivalent to around 300 biodiversity units – helped by strong
partnerships with local farmers.
In 2020, the Great Big Nature Boost committed to improving habitats
across 5,000 hectares of land in the Midlands however, by 2025, we
exceeded that target, improving 16,200 hectares. We also pledged to
plant1.3 million trees by 2027 and have now planted over 1 million.
Theland improved for biodiversity during AMP7 will require ongoing
management to ensure habitats continue to establish and thrive.
Wehavepledged to fund our partners to complete this essential
maintenance and will continue to support these locations to secure
long-term ecological benefit.
Otter in the River Trent, Nottingham
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 28
Pledge 5 – Be open and transparent about our performance and our plans
Over the year, we strengthened our commitment to openness and transparency in several key areas.
We continued to develop the work we do with our Get River Positive
Advisory Panel. Welcoming a new agricultural representative, Martin
Lines, CEO of Nature Friendly Farming and also introducing Steve Frost,
anew member from The Angling Trust, after Stuart Singleton-White
leftthe organisation. The panel’s expertise and constructive challenge
play an important role in shaping and scrutinising our work to support
healthierrivers. They help ensure that we stretch ourselves operationally
and remain focused on fulfilling our pledges and our ambition to go
further than just regulatory requirements.
Improving access to information
We continued to update our storm overflow map, showing planned
andcompleted improvements at each Combined Sewer Overflow
(‘CSO’)across ournetwork. These updates make it easier for
communities to see the progress being made on the CSOs and
waterbodies that matter most tothem.
We also significantly strengthened how we share Event Duration
Monitoring (‘EDM’) information. Moving from annual publication
toquarterly updates was a major step forward and this year we
advancedfurther still by releasing monthly ‘stop–start’ data, giving
communities a more immediate view of network performance.
Our Event Duration Monitors operated for an average of 96.3% of the
timeduring 2025, and weare working hard to ensure our monitoring
equipment is functioning reliably across the region. Alongside this, we
arecontinuing toinvest in new technologies and innovative methods to
maintain – and further improve – the accuracy and availability of our data.
This year we also published our Open Data Strategy, enhancing the
accessibility and usability of our datasets by improving documentation,
adopting industry standard formats and licences, and providing richer
contextual information. Collaboration with sector peers, customers and
stakeholders remains central to building trust and supporting a more
transparent water environment.
Continuous water quality monitoring
We continued preparations for the rollout of our Continuous Water Quality
Monitoring Programme, a key tool to help us deliver the requirements of
the Environment Act2021. This programme will give a clearer picture
ofriver health by continuously monitoring conditions upstream and
downstream of our assets.
In 2025/26 our focus has been on building the capability needed for
long-term delivery. We have been testing different technologies across a
variety of watercourses, securing access for installations, and developing
robust systems to manage and process high volume data so that results
remain accurate, trusted and easy to interpret.
By 31 March 2030, we will have around 1,000 monitors across 500
prioritysites, agreed with the Environment Agency and focused on
environmentally sensitive or heavily used locations such as Sites of
Special Scientific Interest (‘SSSIs’), Special Areas of Conservation (‘SAC’)
and Designated Bathing Waters. Rollout is being staged, beginning where
better insight will deliver the greatest environmental benefit.
Each monitor will record temperature, turbidity, ammonia, pH and
dissolved oxygen, helping to build a long-term baseline for ecological
health. It is important to note that these devices are not designed to detect
bacteria or indicate whether water is safe for recreational use; they
support environmental recovery and help guide future investment.
Supporting citizen science
We continue to work with organisations across the region to strengthen
citizen science, helping build shared understanding of river health.
Thisyear, we completed our Catchment Systems Thinking Cooperative
(‘CaSTCo’) collaboration with the Severn Rivers Trust, which helped
develop and refine methods for citizen scientists tomonitor bacteria in
theRiver Teme. This work will support wider community-led monitoring
and contribute to more granular, high-qualityevidence on river conditions.
Severn Trent storm overflow map
Scan the QR code to
view the Severn Trent
Storm Overflow Map
While no single organisation can secure the future of our rivers
alone, we remain committed to playing our full part – reducing
ourown impact, investing in long-term solutions and working
collaboratively with those who share our ambition. Through
continued partnership, innovation andtransparency, we will
keepdriving improvements that support healthier, more
resilientwaterways for the communities we serve.
Severn Trent Plc Annual Report and Accounts 2026 29
Strategic Report Governance Financial Statements
Double Materiality Assessment Overview
Financial impact on our business
Potential impact on people and the environment
Access to quality water for
allcustomers at all times
Robust governance
over sustainability
matters
A resilient and
sustainable
water supply
A skilled workforce
A fair, inclusive and
safeworkplace
GHG emissions reduction
Making a net-positive impact on the environment
Support for vulnerable
customers and communities
An ethical and
compliantbusiness
Effective response to
extremeweatherevents
Strong asset
resilience
Active in enhancing
riverwater quality
Our Strategy
RUNNING A BUSINESS THAT GOES
HAND-IN-HAND WITH NATURE
In this section:
Our approach to climate change and nature 30
Net Zero Transition Plan (‘NZTP’) 42
Report on energy 52
EU Taxonomy disclosure 53
We rely on the natural environment to deliver our services to customers and we know
thatclimate change bringsuncertainty. This presents both risk and opportunity. As we
build momentum across our investment programme, our focus is on building resilience
ina changing future. Our capital value will grow, our activities will become more carbon
efficient and our capability to respond to extreme weather will increase.
Our approach to climate change and nature
We manage the risks and opportunities of climate change and nature using tools and processes that interlink
across our risk management, strategy and governance. As a reminder, last year we conducted ourdouble
materiality assessment (see below) to identify the topics material to our stakeholders and our business, and
weuse the Locate, Evaluate, Assess, Prepare (‘LEAP’) process recommended by the Taskforce onNature-
related Financial Disclosures (‘TNFD’) to understand our material impacts and dependencies on nature.
Weplanand adapt in different scenarios (see page 31) and set targets to measure our progress (see page 40).
Wealso report here against the Task Force on Climate-related Financial Disclosures (‘TCFD’) requirements.
What is double materiality?
If a sustainability topic has the potential to affect both our business resilience (financial materiality) and
peopleor the planet (impact materiality), it is said to have ‘double materiality’. Financial materiality to us is
£20 million, as established through our risk management processes, and impact materiality was established
using stakeholder views on what is important to them. The 12 topics material to both our business and our
stakeholders are summarised here and reported on in more detail throughout this report.
Our material topics are
reported across this report:
See
page
Delivering Outcomes our
Customers Care About
14–18
Caring for People
in our Region
19–23
A Driver of
PositiveChange
24–29
Running a Business
that Goes Hand-In-Hand
with Nature
30–55
Locate
the Company’s
interface
with nature.
L
E
Evaluate
and consider nature
dependencies
and impacts.
A
Assess
the material risks
and opportunities.
P
Prepare
steps towards
responding
and reporting.
To identify and assess our
interactions with nature we
use the LEAP structure:
Severn Trent Plc Annual Report and Accounts 2026 30
Strategic Report Governance Financial Statements
Climate and nature strategies
Our culture embraces nature as a partner. We rely on it to deliver our services, whether through using water resources, supporting biodiversity,
ortobuild natural flood defences and nature-based solutions for our treatment processes. Our strategies centre on three key pillars:
Climate change increases flood risk, water scarcity and drought pressures. We learn from these events and model how impacts may change in
future.This builds our resilience in uncertainty and helps us plan for different scenarios. Analysing impacts from the 2025 drought has further
informed refinements to our approach; better site-level data is helping us to direct investment to vulnerable areas; and asset-specific scenario
work(on sewers, boreholes and distribution service reservoirs) is being used to risk-assess our asset health measures. Our investment in recent
yearshas already secured a second source of water supply for 98% of customers, ensuring strong resilience in a changing future.
Climate-related scenario analysis
We model using temperature scenarios to plan for uncertainty and understand the investment needed. This ensures we remain resilient to future
change, building plans into our business model, changing our strategies and reflecting location-specific dependencies across the management of
ourvalue chain (as set out on pages 34 to 35). The temperature scenarios we use model Representative Concentration Pathways (‘RCPs’) and range
from a1.5°C Paris-aligned ambition to 4°C ‘business as usual’ (i.e. if insufficient global action is taken), and vary depending on regulatory requirements:
Planning document
Water Resources
Management Plan
(‘WRMP’)
Drainage and
Wastewater
Management Plan
(‘DWMP’)
Long-Term Delivery
Strategy (‘LTDS’)
Climate change
riskassessment inour
Climate Change
Adaptation Report
Climate change risk
assessment for
Bioresources sites
Climate change risk
assessment for three asset
classes (gravity sewers,
distribution service
reservoirs, boreholes)
Date published
2024 2023 2024 2024 Provided to the
Environment
Agency2024.
Internally 2026
Scenarios used
RCP 6.0 after testing,
RCP8.5 and RCP 2.6
‘2°C and 4°C pathways’
Equivalent to RCP 6.0,
RCP 8.5 and RCP 2.6
RCP 6.0, RCP 8.5
and RCP 2.6
RCP 6.0 and RCP 8.5 RCP 6.0 RCP 6.0 and RCP 8.5
Time points assessed
2070 2024, 2028 2050 2024, 2050, 2100 2025, 2050 2025, 2050, 2100
How scenarios
werechosen
Framework guidance
from Ofwat.
Framework guidance
from Ofwat.
PR24 guidance from
Ofwat.
To enable us to plan for
2°C and assess risks
for 4°C by 2100.
Guidance from the
Environment Agency.
To enable us to plan for 2°C
and assess risks for 4°C by
2100, covering the expected
life of the assets involved.
Investing for resilience and
adapting to climate change
Climate change mitigation and
our Net Zero Transition Plan
Protecting and enhancing nature
and the environment
1.
Investing for resilience and adapting to climate change
1 2 3
To predict changes over future decades and fund outcomes for customers in any scenario, we model the uncertainties. We use a core pathway
andthree adaptive pathways that allow us to change our approach. The adaptive pathways use a collection of assumptions and over a thousand
‘what if’ scenarios (read more in our LTDS) based on external triggers that affect our investment choices. These pathways are:
• Climate-triggered change (in different temperature scenarios, presenting physical risks);
• Societal shifts (as consumer behaviour changes, presenting transitionrisks); and
• Government-led change (such as new policy or legislation, presenting transition risks).
Our adaptive pathways
15
20
25
30
Total AMP totex (£bn)
2030
Trigger: Accelerated Environmental Act
Trigger: Climate change worsens
Trigger: Water demand targets met
2040
Trigger: Market and supply chain respond with innovation
Trigger: Climate change triggers inland migration
Trigger: Customers value wider benefits
2025 2030 2035 2040 2045 2050
Climate triggered change (£bn) Societal shifts (£bn)Government-led legislation change (£bn)
Core pathway (£bn)
Severn Trent Plc Annual Report and Accounts 2026 31
Strategic Report Governance Financial Statements
We continue to focus on nature-positive solutions that will support
habitatrecovery by 2030:
Habitat Enhancement – We exceeded our previous target to improve
5,000 hectares of land, enhancing 16,200 hectares in AMP7. We recognise
the importance of targeted biodiversity improvement in increasing
resilience to climate change, as well as the wider benefits to the
environment. We are now targeting 15% Biodiversity Net Gain (‘BNG’) on
all capital and infrastructure projects that require ecological appraisals
(exceeding the UK Environment Agency target of 10%). We are also
working in partnership with the National Forest, investing nearly
£1 million in the management of 600 hectares, funding landowner
grants,habitat improvements and ecological monitoring.
Aligning to the Global Biodiversity Framework
As we explore nature transition planning, we continue to challenge
ourbusiness with performance targets on nature and learn from
otherbusinesses on their approaches to nature positivity. Read more:
• Our Nature-related ODIs See pages 12 to 13.
• Our River Pledges See pages 24 to 29.
• Our climate and nature metrics and targets See page 40.
• On our Sustainability webpages.
We are an active member of the GFI water sector working group, working
closely with the WWF-UK to develop guidance on Nature Positive Transition
Pathways which supports private sector action on nature in the UK.
Our biodiversity
enhancement
This map shows the areas
where wehave positively
impacted the environment
across our region, improving
biodiversity in a range of
habitats and locations, and
we are committed to doing
more in AMP8. These
habitats deliver multiple
benefits, including carbon
sequestration, flood
mitigation, improved water
quality, andreduced
operational risks from
extreme weather.
Grassland and scrub also
support healthy soils, which
are essential for sustainable
land management and in
reducing pollution run-off
from land (diffuse pollution).
We work with third parties
onmoors, heathlands and
peatlands, which all help
regulate andfilter water,
prevent erosion and store
carbon. Theirrestoration
cuts greenhouse gas
emissions, improves river
resilience andimproves
rawwater quality.
3.
Protecting and enhancing nature and the environment
Running a Business that Goes Hand-in-Hand with Nature continued
• Our Net Zero Transition Plan on pages 42 to 51 sets out our
Paris-aligned pathway to net zero.
• We plan to invest £295 million this AMP to support delivery of
ournear-term targets. Preparations are underway to mobilise
resources and roll out novel technologies at scale.
• Our emissions may rise as we scale up investment, but we expect
tohitour 46% reduction target in Scope 1 and 2 emissions by 2031.
• We continue to share lessons learned from our Net Zero Hub and
industry forums.
• We chair the Water UK Energy Managers Forum and co-chair the
WaterCarbon Network.
• As our 2026 targets mature, we are building new targets and developing
our plans, which will reflect SBTi guidance when finalised in 2027 and
challenge us to do more. These will incorporate our Scope 3 ambitions.
2.
Climate change mitigation and our Net Zero Transition Plan
Key
Reedbed Scrub Grassland Woodland
Grassland
ReedbedWoodland
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 32
The Audit and Risk Committee supports Board oversight
of climate-related and nature-related risks as part of
the Group’s broader risk and control environment.
The Committee considers ESG-related matters
through its review of enterprise risk management
updates, performance and assurance processes,
andoversight of compliance with applicable
environmental, sustainability and wider
regulatoryreporting requirements.
Frequency
• The Committee met six times this year.
The Committee oversees the integration of ESG
objectives, targets and metrics within the Group’s
remuneration framework, aligning executive
remuneration with strategic priorities and long-term
value creation.
Frequency
• The Committee met six times this year.
The Board continues to consider and assess climate-
and nature-related risks and opportunities as part of
its oversight of strategy, performance and long-term
planning. Climate and nature considerations are
embedded within the Group’s strategic decision-making
and enterprise risk management processes, supported
by established governance and reporting arrangements.
The Board reviews environmental and sustainability-
related matters, including principal climate- and
nature-related risks, physical risks and key
environmental impacts and dependencies. Oversight
is supported by the Board’s committee structure,
withdetailed review by the Corporate Sustainability
Committee and, where relevant, the Audit and Risk
Committee, informed by management reporting and
external perspectives.
The Board monitors progress against climate- and
nature-related plans, objectives and targets, and
iskept informed of material stakeholder, customer
and community engagement outcomes, ensuring
sustainability considerations are integrated into the
Group’s overall strategic direction.
Frequency
• The Boards met five times this year.
Many Board members serve across
multiple Board Committees, helping to
ensure coordinated decision-making that
considers risk, remuneration, funding and
sustainability together.This structure
enables the Board to maintain a holistic
view of the connections between climate,
nature, organisational risk and long-term
strategy. Our governance framework is
detailed on page 90.
Board expertise and policy evaluation
• The Board has strong collective
experience and a diverse range of
skills(see skills matrix on page 88).
• Sustainability-related skills and
experience are considered, where
appropriate, as part of Board succession
planning and overall Board composition.
• Review and approval of our policies,
including Doing the Right Thing,
Anti-Slavery and Human Trafficking
Statement (links to which are included
in our ESG Databook) and supporting
governance documents ensures the
Board is kept informed andinvolved in
protecting human rights,driving the
culture of the organisation and driving
due diligenceoncommunity impacts.
• Our policies also set expectations
forsupply chain partners to respect
therights of local communities and
theworkforce, and to consider their
impact. Our approach to Human
Rightsincorporates all of our policies
toprotect our impacted stakeholders.
We also have processes to manage,
mitigate andremediate any adverse
impacts onhuman rights, for example
inthe event of sewer flooding.
• We are committed to the UN Guiding
Principles, OECD Guidelines and The
UNGeneral Assembly Resolution 76/300
on rights to a healthy environment.
Advocacy, lobbying and wider
stakeholderengagement
We advocate for stronger river health and
habitat protections, engaging government
and regulators to shape environmental
policy. We are working with the Green
Finance Institute to develop nature transition
plan guidance for businesses, lobbying for
nature positive frameworks, and participating
in policy consultations. Engagement with
local communities, farmers and landowners,
NGOs and customers is structured through
our stakeholder engagement processes
(readmore on pages 79 to 83) to ensure we
makeinformed decisions and understand
our impact.
Remuneration
Our remuneration framework embeds
climate and nature objectives in boththe
all-employee bonus and our Long-Term
Incentive Plan, aligning incentives across
the organisation. More information is set
out in the Directors’ Remuneration Report
on pages 118 to 121.
The Executive Committee, led by the CEO,
isresponsible for the implementation of the
Group’ssustainability strategy and for managing
climate-related and nature-related risks and
opportunities within day-to-day operations. It
oversees delivery against sustainability objectives
andtargets, integrates climate and nature
considerations into business planning and
decision-making, and provides regular
reportingtothe Board and its Committees.
Frequency
• The Executive Team meets weekly and reviews
operational and performance information.
The Group’s senior management team is responsible
for delivering the Group’s sustainability strategy
atanoperational level. This includes embedding
climate- and nature-related considerations into
day-to-day management, overseeing delivery against
sustainability objectives and regulatory requirements,
and monitoring risks and performance.
Senior management provides regular updates to
theExecutive Committee and supports reporting
tothe Board and its Committees as required.
Frequency
• Monthly functional performance reviews.
• Six-monthly Group senior management meetings
are held for a full day tocascade key messages.
Board oversight of sustainability matters is supported
by the Corporate Sustainability Committee through its
consideration of material sustainability topics relevant
to the Group’s strategy and long-term objectives.
In fulfilling this role, the Committee reviews
management reporting on climate-, environmental-
and social-related matters, alongside emerging
sustainability developments, to inform effective
oversight and governance. The Committee operates
within established governance arrangements,
enabling the timely escalation of sustainability
matters to the Board where appropriate.
Frequency
• The Committee met four times this year.
Climate and Nature Governance
To ensure we stay on track, maintain transparency, and consider our broad range of interactions with nature and the climate, we operate with robust
governance over our activities and responsibility sits at all levels of our organisation:
Boards of Severn Trent Plc and Severn Trent Water Limited
Senior Management Team
Corporate Sustainability Committee
Remuneration Committee
Audit and Risk Committee
CEO and Executive Committee
Severn Trent Plc Annual Report and Accounts 2026 33
Strategic Report Governance Financial Statements
Our Value Chain is complex and has multiple touchpoints with the environment
This diagram sets out our material dependencies and impacts on nature and theenvironment across our value chain, ourpriority locations (which are
managed across our network), and associated climate risks and opportunities. The TNFD symbols denote the drivers allocated in our Enterprise Risk
Management (‘ERM’) system for each material risk in that area of the value chain.
Land/freshwater/
ocean
We protect water quality and natural
habitats across peatlands, rivers,
and our land through partnerships,
innovation and volunteering.
Resource use and
replenishment
We use treatment wetlands,
like Hinckley, to recycle sludge
whilst also boosting nature by
creating rich wildlife habitats.
Pollution and
pollution removal
Our 24/7 Pollution and Incident
Response Teams provide rapid
deployment and smarter pollution
management, improving response
times and supporting cleaner rivers.
Invasive non-
native species (‘INNS’)
Our new Biosecurity Team is
developing smarter ways to
manage INNS risks and
improve affected sites.
Climate
change
Our climate change approach is
set out in this report on pages
30 to 41 and in our Climate
Change Adaptation Report.
Nature indicators of risk and opportunity
Distribute clean water
Collect and clean raw water for distribution
Our operations use:
• 136 groundwater sources.
• Two sensitive designated areas.
• Zero water-stressed locations.
• 212 boreholes and eight springs
from nine distinct aquifers.
• 48 surface water sources - 18
indesignated sites.
Principal Risk 2
Dependencies:
• Surface and groundwater.
• Rainfall.
• Natural water purification.
• Soil water retention.
• Natural flood defences.
Impacts:
• Over-abstraction causes harm
torivers, wildlife and aquatic
ecosystems.
• Storing raw water promotes
wetland habitats and biodiversity.
We use over 50,000 km of clean
water pipes to supply drinking
water to customers.
Dependencies:
• Stable soil to reduce bursts
or leakage.
Principal Risk 2
Impacts:
• Energy required to pump
andpressurise water.
• Emissions reduction through
renewable energy use.
• Preventing leakage to
conservewater (see page 16).
Many of our public green spaces
are in designated areas like
ancient woodland, areas of
outstanding natural beauty
andnational parks, including:
• Reservoirs.
• Farmland.
• Woodland.
They support many
recreational activities like:
• Angling.
• Sailing.
• Cycling.
• Walking.
We generate energy through:
• Solar.
• Wind.
• Hydro.
• Anaerobic digestion
ofsewagesludge.
• Anaerobic digestion
offoodwaste.
• Crop digestion.
Dependencies:
• Availability of wind,
sunlightandwater.
• Availability of food waste.
• Successful crop growth.
• Using a mix of energy
sourcesreduces reliance
onanysingle resource.
Impacts:
• Solar farms change land use.
• Renewable energy reduces
fossil fuel reliance and
emissions impact.
Provision of green spaces Renewable energy production
Our two commercial forestry sitescover
over 2,900 hectares at Lake Vyrnwy
and the Upper Derwent Valley. Both
are UKWAS-certified andsupport
biodiversity, water quality and
recreation, while also producing timber.
Dependencies:
• Clean air.
• Clean water.
Impacts:
• Spread of invasive non-native
species through visitor movement.
• Transfer of water and soils.
• Water quality and ecosystem
health impacted by activities.
Severn Trent Plc Annual Report and Accounts 2026 34
Strategic Report Governance Financial Statements
Upstream thinking – place-based planning
Working with Warwickshire Wildlife Trust on the River Avon we
created a water resilience assessment that identifies opportunities to:
• Reduce flooding.
• Enhance biodiversity.
• Balance nutrients along the River Avon.
We are also developing a commercial platform to:
• Help landowners access carbon and BNG funding around the
River Idle.
• Support nature-based solutions that improve water resilience.
We operate over 93,000 km of sewer
pipes, collecting around 3.17 billion
litres of wastewater each day,
withmany treatment assets in
designated areas:
• 153 in National Parks.
• 255 in Areas of Outstanding
Natural Beauty.
• 79 in Ancient Woodlands.
Principal Risk 3
Dependencies:
• Natural flood and storm defences.
• Rainfall volumes that do not
exceed network capacity.
Impacts from treating wastewater:
• Energy use.
• Carbon emissions.
• Chemicals use.
Thousands of litres of treated
water is discharged into rivers
every day from our wastewater
treatment works.
Dependencies:
• Microorganisms for
treatment processes.
• Healthy aquatic ecosystems
tosafely receive effluent.
Principal Risk 7
Impacts:
• Final effluent can impact
river water quality and must
meet permit requirements.
• Treated effluent can
restore river volumes
and support wildlife.
Collect and clean wastewater Recycle water to the environment
In line with TNFD guidance, we define sensitive locations as areas
important for biodiversity, high ecosystem integrity, rapid decline
in ecosystem integrity, high physical water risks, or areas of
importance for ecosystem service provision. The biggest habitat
type in our region is standing open water and canals, followed by
broadleaved, mixed and yew woodland, and neutral grassland.
Each SSSI in these areas has abespoke management plan to
reduce harm to ecosystem services we rely on. These and our
nature priority locations aresummarised in our ESG Databook.
More detail is included in our
NaturalCapital Accounts within our
Sustainability Report onour website.
Construction and civil engineering
maintain our networks and assets,
improving services for customers
and the environment.
Dependencies:
• Stable soils.
• Sediment retention.
• Flood mitigation.
Principal Risk 2
Impacts:
• Vegetation clearance may
fragment habitats.
• Trenching can cause erosion.
• Sediment can runoff to rivers
and lakes.
• Using BNG and our internal
netgainpolicy in our schemes
helps to offset habitat loss
anddisturbance.
Construction projects
Severn Trent Plc Annual Report and Accounts 2026 35
Strategic Report Governance Financial Statements
Running a Business that Goes Hand-in-Hand with Nature continued
Climate and Nature Risk Management
To manage each of the climate-related and nature-related risks to our business, we use our central ERM system and surrounding processes, which
focus on the direct operations in our value chain (i.e. not upstream or downstream risks). Climate and nature drivers are integrated into this system
toensure all risks are identified, assessed and managed with climate and nature in mind. We manage risk using time horizons and scenarios inwhich
each risk might occur, to identify the right planning approach and to invest in our assets and processes to mitigate risks effectively. We continue to
relyon regulatory approval to fully fund our risk mitigation plans, but we are set up to drive efficiencies and maximise the resources we are granted.
How do risk time horizons interact with climate time horizons and our planning processes?
Our planning cycles are largely determined by our regulators such as Ofwat, so the risk time horizons align with these cycles. We incorporate
climatescenarios into our risk management process according to these time horizons too, using only a 2°C scenario for risks managed within
thenext25 years, and both 2°C and 4°C for longer-term risks.
Scenario modelling supports at a strategic level to reassess risks to ouroperations now and in the future, and we revisit our investment plans to ensure
our decisions drive resilience. Our strategies cascade across the business into policies, process documents and planning tools that ensure operational
and tactical decisions consider climate change and nature. These processes are set out in more detail across the following key documents:
How do we manage risk?
Every six months, Risk Coordinators engage with senior management across the business to review existing risks and identify, assess andrecord all
new risks. Identification of climate-related and nature-related risks and drivers is integrated into these reviews, which include assessing the size and
scope of each risk, and outcomes are recorded inthe ERM system. This system and our underlying operational risk management system incorporate
detail on the impact of climate change and nature on specific assets, enabling us to effectively manage strategic and tactical asset investment plans
with climate change and nature in mind. More detail on example
mitigation actions for our Principal Risks is set out on pages 68 to 73.
Our ERM system includes:
• All business risks with potential financial impact of £20 million
orover(increased from £10 million to reflect the increased
scaleofourbusiness).
• All climate-related and nature-related risks with potential financial
impact of£20 million or over, and climate and nature drivers that
exacerbate existing risks, allocated toeach ERM risk.
• Likelihood and financial impact for each ERM risk.
• Climate scenarios and time horizons over which the risk is managed.
• Mappings to Principal Risks and our value chain for all ERM risks.
Standard Operating Procedures document and instruct on all tasks to ensure compliance. Local Operating Procedures
set out operating parameters, local conditions and local instructions, specific to sites, locations or assets.
Site level and operational plans
Time horizons and strategic plans
What is financial impact?
Many of our most material risks are exacerbated by climate change or
nature change, and particularly by changes in the weather. This means
managing these risks is harder and our mitigation plans need greater
investment. Set out on the next page are the financial impacts if our
controls and mitigations fail. Climate change is only one driving factor.
As a result of our controls and mitigations, including the large-scale
investments that focus on managing the wider risks, as reflected on
our balance sheet, no risk poses a material threat to our financial
resilience and no financial statement adjustments have been made.
Five-year business plans set out our
commitments in the medium term
Caring for the environment 2021-25
(2026-30 in progress) Nature
strategies to manage our
environmental interactions.
Drought Plan 2022-27 (2027-32 in
progress) Managing resources in
dry and drought years, balancing
customers and the environment.
Pollution Incident Reduction Plan
(PIRP) 2025-30 Action plan to
address and minimise pollutions
related to our operations.
Climate Adaptation Report 2025-30
Assessing and addressing our
climate risks.
PR24 Business Plan 2025-2030
Our investment plans.
Tactical management to deliver
performance targets
Protecting and Enhancement of SSSIs
Bespoke plans for all SSSIs, including risk
management, monitoring and remediation.
Drinking Water Safety Plans (‘DWSPs’)
Assess drinking-water hazard parameters
using a source – pathway – receptor model.
Biodiversity Enhancement Plan
(‘BEP’) to deliver BNG target, including
non-mandatory sites, target shortfalls,
and post-delivery change control.
Championing Pollinators 2023
Guidance on pollinator protection to support
nature recovery.
Biodiversity Action Plan
Safeguarding species and habitats, planning
investment and catchment-based solutions.
Our long-term plans
incorporate future
uncertainty including
climate change
LTDS
Whole value chain strategy
identifying future risks
and opportunities.
DWMP 2025-50
Environmental protection
plans to limit our impact
inachanging climate with
agrowing population.
WRMP 2025-50
Ensuring sustainable water
resources for the future.
Addressing longer-term
challenges through our
strategic direction
Strategic Direction
Statement
Addressing long-term
challenges like climate
change and evolving
regulation.
Medium-term:
3-5 years
Long-term:
6-25 years
Longer-term:
26 years+
Short-term:
0-2 years
Climate horizon to 2050 (0 to 25 years) 2°C
Climate horizon to 2100
(26 to 75 years) 2°C and 4°C
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 36
How is climate change and nature reflected in risk reporting?
Material ERM risks for every Principal Risk affected by climate change or nature (as set out on pages 68 to 73) are summarised in the table below.
All ERM risks with climate or nature drivers are summarised in the graphs on page 38.
Physical riskTransition risk
Key
Warmer, wetter winters Legal/policy change
Freshwater use change
Resource replenishment
Technology change PollutionsLand use changeHotter, drier summers Extreme weather
Principal Risk Example ERM Risks
Climate
and nature
risk drivers
Nature impact
drivers
Climate
scenario
Risk
likelihood
(%)
Financial
impact
Risk
management
time horizon
We do not supply a safe and
securesupply of drinking
watertoourcustomers.
Failure to ensure our network
isresilient to meet supply
requirements in future AMPs.
2°C 10-20% £320
million
6-25 years
Failure to address increased
demand for water due to
populationgrowth and
changingweather conditions.
2°C 10-20% £35
million
6-25 years
We do not transport and
treatwastewater effectively,
impacting ourability to return
clean water totheenvironment.
Failure to safeguard future
wastewatertreatment capacity to
meetfuture demand or increased
environmental obligations.
2°C 2-10% £100
million
6-25 years
Failure to ensure waste capacity
network is resilient to meet
futuredemand.
2°C 10-20% £180
million
6-25 years
We fail to effectively mitigate
ourenvironmental impact and
actasasteward of natural
capital while ensuring our
operations remainresilient to
the effects ofclimate change.
Failure to abstract sufficient
rawwater for our customers
orover-abstract, damaging
thenaturalenvironment.
2°C 10-20% £35
million
3-5 years
Uncertainty of regulatory,
legislative and government
reforms could fundamentally
impact our operating
environment and
strategicambitions.
Failure to comply with CSO
permitsor meet evolving
stakeholder expectations.
2°C 10-20% £50
million
0-2 years
Managing material risks locally
As an example of one of our material risks, managing raw water quality requires controls such as sampling, which we do for more than
40potential hazards like metals, nitrates, bacteria and pesticides. We carry out catchment risk assessments at set frequencies, or as
required,andwork with third parties on interventions. We manage the risks from source to tap, with controls in each stage, to ensure
thehighest quality of our water for customers:
Surface water and ground
water catchment area risks
Treatment risks Storage risks
Distribution
network risks
Risks at customer
properties
Examples of controls assessed at surface water catchments are:
• Farming for Water: pesticides, nitrate and cryptosporidium.
• Peatland Restoration.
• Bathing Rivers Scheme.
• Dee Water Protection Zone.
• ST Tenancy Catchment Conditions.
• Biosolids BAS.
Severn Trent Plc Annual Report and Accounts 2026 37
Strategic Report Governance Financial Statements
Running a Business that Goes Hand-in-Hand with Nature continued
How does this impact our financial statements?
Climate and nature risks undoubtedly impact how we operate and plan
investments, but as they are long-term in nature and hard to predict, there
isn’t a present or quantifiable financial impact that can be reflected in the
financial statements. In addition, many impacts we model are recoverable
through future revenues, due to the regulatory mechanism that funds our
activities through future customer bills, but we strive for balance between
building resilience and maintaining affordability. Our key dependency is
on submitting an adequate business case for these impacts to be funded,
which we recognise as an ERM risk as we approach each new planning
cycle. And whilst our assets need to work harder, they won’t be impaired,
they will grow and improve as we invest at an unprecedented scale to
build on our resilience.
Climate change and nature drivers exacerbate our risks and are integral
factors in how we manage our response. Significant events, like the
drought experienced this summer, increase operational costs. This year
we spent £10 million moving water around our network to maintain
supply. As the climate changes, these costs are increasingly likely, but so
is the risk of significant outage. The graphs below demonstrate the scale
of the risks we manage over different time horizons, in different events,
toreduce the impact of climate change and increase our resilience.
Climate driver risk horizon
Nature driver risk horizon
Invasive Alien
Species
Introduction
Pollution
Resource Use
Replenishment
Land/Freshwater/
Ocean Use Change
Invasive Alien
Species
Introduction
Pollution
Resource Use
Replenishment
Land/Freshwater/
Ocean Use Change
Invasive Alien
Species
Introduction
Pollution
Resource Use
Replenishment
Land/Freshwater/
Ocean Use Change
Short-term (0-2) Medium-term (3-5) Long-term (6-25)
200
100
600
500
800
700
900
1,000
400
300
0
£million
Financial impact
Water Waste Bioresources Groupwide
200
100
600
500
800
700
900
1,000
400
300
0
Technology
Policy/Legal
Extreme
Weather
Warmer
Wetter
Winters
Hotter Drier
Summers
Technology
Policy/Legal
Extreme
Weather
Warmer
Wetter
Winters
Hotter Drier
Summers
Technology
Policy/Legal
Extreme
Weather
Warmer
Wetter
Winters
Hotter Drier
Summers
Short-term (0-2) Medium-term (3-5) Long-term (6-25)
£million
Financial impact
Water Waste Bioresources Groupwide
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 38
Climate-related and nature-related opportunities
As we invest to meet fixed long-term targets; reducing CSO spills, leakage and GHG emissions; the uncertainty of climate change can mean our
investment grows. This increases the capital value of our business and delivers material opportunities across a range of areas:
Opportunity type Financial benefit Our activities
Resource
efficiency
Reduced operating costs,
reduced financial risk
GHG leak detection and monitoring reduces wastage and methane emissions.
Smart meters improve water efficiency and support demand management.
Net Zero Hub partnerships enable trials in low-carbon wastewater treatment technologies.
Use of technology, data & analytics in GHG reporting creates insights for better governance.
Green energy markets and increasing our renewable energy investment both work to
manage operating costs and reduce our environmental impact.
Alternative technologies in asset construction and our operations will cut carbon intensity.
Markets
Cheaper borrowing costs
Access to Green finance through our Sustainable Finance Framework, EU Taxonomy reporting
and sustainability-linked funding enables more impactful investment and access to a wider
range of debt costs.
Nature-based
solutions and
Biodiversity
enhancement
Reduced operating costs,
increased revenue
Invasive species removal, including at Witches Oak, reduces costs associated with
damageremediation.
Local Nature Recovery Strategies (‘LNRSs’) for our region intersect with priority zones for
nature, creating higher BNG values and promoting targeted restoration, which supports our
Biodiversity ODI.
Tree planting provides habitat, ecosystems and carbon reduction and alleviates flooding.
Nature-based solutions like treatment wetlands and water course improvements reduce
ourcosts, limit our impact on the environment and create habitats for wildlife.
Circular economy
and materials
Increased revenue
Low-carbon products can be made from our waste, such as using the cellulose that comes
from toilet paper, which can be used as a low-carbon construction material, supporting a
circular economy.
Severn Trent Plc Annual Report and Accounts 2026 39
Strategic Report Governance Financial Statements
Physical risk
Transition risk
Measure
Climate and nature
risk drivers Metric & target 2024/25 2025/26
Capital
deployed
thisyear**
We do not provide a safe and secure supply of drinking water to our customers
Per Capita consumption
1
8.5% reduction by 2030 (2019/20 baseline) 0.4% -0.3%
(increase)
£1 million
Leakage reduction
1
31.6% reduction by 2030 (2019/20 baseline) 16.8% 23.3% £232 million
We do not transport and treat wastewater effectively, impacting our ability to return clean water to the environment
Internal sewer flooding
1
Maximum incidents of 16.83 per 10,000 sewer connections
(compared to in year target value)
640
(565)
512
(650)
£76 million
External sewer flooding
1
6,939
(3,397)
6,123
(6,445)
River water quality
1
57% reduction in phosphorus from treatment works
discharge by 2030 (2020 baseline)
New target 38% £6 million
Serious pollution incidents
1
Maximum of zero serious pollution incidents in year New target 2
2
£178 million
Total pollution incidents
1
Maximum of 182 per 100,000 km of sewer length in year New target 178
2
Combined sewer overflows
1
Maximum of 16.88 spills per year on average 25.4 15.0 £36 million
We fail to effectively mitigate our environmental impact and act as a steward of natural capital, while ensuring our operations remain
resilient to climate change
Capital carbon reduction
1
5% average reduction in capital carbon by 2030 for ODI
qualifying projects delivered in AMP8 (2024/25 baseline)
New target 29.61%
£0.6 million
Carbon pricing***
Increased percentage of capital projects applying the
approved external carbon price of £248/tCO₂e year-on-year
New target 1%
Net Zero Transition Plan*
100% reduction in operational emissions by 2030
(2019/20baseline)
15% 26% £17 million
Uncertainty of regulatory, legislative and government reforms could fundamentally impact our operating environment
and strategic ambitions
Community Fund
Donate £20 million by 2030 (cumulative), targeting
£2 million per year
£11.6 million £13.3 million n/a
Biodiversity
enhancements
1
15% biodiversity net gain (0.73 units per 100 km²) across
capital and infrastructure projects from 2026 to 2030
New target 1.38 units per
100 km²
£3 million
1.3 million trees planted by 2027 (from 2019/20) 1 million 1.1 million
Big Difference Scheme Support 700,000 households (cumulative) by 2030 203,722 531,405 £125 million
Metrics and Targets
We measure our progress and our impact on the environment using a range of performance metrics and targets. We align these to our Principal Risks
and stages of the value chain to demonstrate how strong performance in these areas supports active management of risk. The metrics for Severn
Trent Water (as the material operational entity in our Group) are set out below against transition risks and opportunities (arising from the response
toclimate change) and physical risks and opportunities (through actual impacts of climate change). They are all measured over medium-term time
horizons (i.e. across the next three to five years).
Climate and nature metrics and targets
1 These metrics are associated with either our ODIs or other regulatory metrics, reported in line with methodologies defined by Ofwat or the EA, and may change as regulations change in
future. They are subject to independent limited assurance by Jacobs. More detail can be found in our Annual Performance Report and on pages 12 to 13 of this report.
2 We are currently undergoing an appeal process in relation to a third serious pollution.
For further detail on core and additional TNFD metrics, including those not currently reported, please refer to our ESG Data Book.
Cross-industry metrics
Cross-industry metrics are marked above with an asterisk* or are reported elsewhere in this report as set out in the table below:
Cross-industry metrics (ISSB) Read more
*GHG emissions NZTP – pages 42 to 52
Physical risks – the amount and percentage of assets or business activities vulnerable to physical risks Climate and Nature Risk Management – pages 36 to 38
Transition risks – the amount and percentage of assets or business activities vulnerable to transition risks Climate and Nature Risk Management – pages 36 to 38
Climate-related opportunities – the amount and percentage of assets or business activities aligned with
climate-relatedopportunities
Climate-related and nature-related opportunities – page 39
**Capital deployment – the amount of capital expenditure, financing or investment deployed towards
climate-related risks and opportunities
Metrics and targets table – above
***Internal carbon prices (amount and explanation of how it is used) Metrics and targets table – above
Remuneration (% remuneration recognised in current period that is linked to climate-related considerations,
and how these are factored in)
Directors’ Remuneration Report – pages 118 to 121
Risk metricsOpportunity metrics
Running a Business that Goes Hand-in-Hand with Nature continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 40
Strategy
How we report our activity
We embrace the reporting requirements on nature and climate, which increase business accountability and transparency; something we have always
taken very seriously. We are early adopters of nature reporting created by the TNFD and have progressed our disclosure this year to consider all
recommendations. Using the frameworks set out by the TNFD, the TCFD and the Companies (Strategic Report) (Climate-related Financial Disclosure)
Regulations 2022 (‘CFD’), we report our activity using the structure set out below, and are preparing for full disclosure under UKSustainability
Reporting Standards (‘SRS’) in future. More information can be found across this report:
Requirement/Recommendation Read more
(CFD a) Describe the Company’s governance arrangements in relation to assessing and managing
climate-related risks and opportunities.
Governance Framework page 90
Board Skills page 88
Board Activities page 101
Board Performance Review page 103
(TCFD a) Describe the Board’s oversight of climate-related risks and opportunities.
(TNFD a) Describe the Board’s oversight of nature-related dependencies, impacts, risks and opportunities.
(TCFD b) Describe management’s role in assessing and managing climate-related risks and opportunities.
(TNFD b) Describe management’s role in assessing and managing nature-related dependencies, impacts, risks
andopportunities.
(TNFD c) Describe the organisation’s human rights policies and engagement activities, and oversight by the
Board and management, with respect to Indigenous peoples, local communities, affected and other
stakeholders, in the organisation’s assessment of, and response to, nature-related dependencies,
impacts,risks and opportunities.
Climate and Nature Governance
page 33
Section s172 Statement page 84
Severn Trent sustainability web pages
(CFD d) Describe the principal climate-related risks and opportunities arising in connection with the Company’s
operations, and the time periods by reference to which risks and opportunities are assessed.
(CFD e) Describe the actual and potential impacts of the principal climate-related risks and opportunities
onthe Company’s business model and strategy.
(CFD f) Analyse the resilience of the Company’s business model and strategy, taking into consideration
different climate-related scenarios.
(TCFD a) Describe the climate-related risks and opportunities the organisation has identified over the short,
mediumandlong term.
(TNFD a) Describe the nature-related dependencies, impacts, risks and opportunities the organisation has
identifiedoverthe short, medium and long term.
(TCFD b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses,
strategy and financial planning.
(TNFD b) Describe the effect nature-related dependencies, impacts, risks and opportunities have had on the organisation’s
business model, value chain, strategy and financial planning, as well as any transition plans or analysis in place.
(TCFD c) Describe the resilience of the organisation’s strategy, considering different climate-related scenarios, including
a 2°C or lower scenario.
(TNFD c) Describe the resilience of the organisation’s strategy to nature-related risks and opportunities taking
into consideration different scenarios.
Our Principal Risks pages 68 to 73
Our Value Chain pages 34 to 35
Climate-related and nature-related
opportunities page 39
Climate and Nature Strategies
pages 31 to 32
Net Zero Transition Plan
pages 42 to 52
EU Taxonomy Disclosure
pages 53 to 55
(TNFD d) Disclose the locations of assets and/or activities in the organisation’s direct operations and, where possible,
upstream and downstream value chain(s) that meet the criteria for priority locations.
Our Value Chain pages 34 to 35
(CFD b) Describe how the business identifies, assesses and manages climate-related risks and opportunities.
(TCFD a) Describe the organisation’s processes for identifying and assessing climate-related risks.
(TNFD a) Describe the organisation’s processes for identifying, assessing and prioritising nature-related dependencies,
impacts, risks and opportunities in its upstream and downstream value chain(s).
(CFD c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into
thebusiness’ overall risk management process.
(TCFD b) Describe the organisation’s processes for managing climate-related risks.
(TNFD b) Describe the organisation’s processes for managing nature-related dependencies impacts, risksandopportunities.
(TCFD c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the
organisation’s overall risk management.
(TNFD c) Describe how processes for identifying, assessing, prioritising and monitoring nature-related risksare
integrated into and inform the organisation’s overall risk management processes.
Climate and Nature Risk Management
pages 36 to 38
Our Value Chain pages 34 to 35
Managing Risks and Opportunities
pages 64 to 67
Our Principal Risks pages 68 to 73
(CFD g) Describe the targets used by the Company to manage climate-related risks and to realise
climate-related opportunities, and performance against those targets.
(CFD h) Describe the key performance indicators used to assess progress against targets used to manage
climate-related risks and realise climate-related opportunities, and the calculations on which those
keyperformance indicators are based.
Net Zero Transition Plan
pages 42 to 52
Metrics and Targets page 40
(TCFD a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with
itsstrategy and risk management process.
(TNFD a) Disclose the metrics used by the organisation to assess nature-related risks and opportunities in line with
itsstrategy and risk management process.
(TNFD b) Disclose the metrics used by the organisation to assess and manage the dependencies and impacts on nature.
(TCFD b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (‘GHG’) emissions
and the related risks.
GHG emissions table page 50
(TCFD c) Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets.
This disclosure complies with the requirements of the Companies Act 2006 as amended by the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (‘CFD’).
Our reporting is consistent with all 11 TCFD recommendations, in accordance with Listing Rule 6.6.6R, and we have aligned our reporting to all 14 TNFD recommendations. This means we
consider the ‘Recommendations of the Task Force on Climate-related Financial Disclosures’ published in June 2017, the supplementary guidance entitled ‘Implementing the Recommendations
of the TCFD’ published in October 2021 and ‘Recommendations of the Taskforce on Nature-related Financial Disclosures’ published in September 2023.
Governance
Risk management
Metrics and targets
Severn Trent Plc Annual Report and Accounts 2026 41
Strategic Report Governance Financial Statements
2019 2021 2022
20232024
2026 2027 2050
2025
Set Triple
Carbon
Pledge
100% renewable
electricity
contract signed
Mobilisation of
resources to roll out
novel reduction
technologies
Met SBTi 70%
engagement
target
Publish stand-alone
transition plan with
updated SBTi targets
andplans
Net zero across
Scopes 1,2 & 3
Further
development
of Scope 3
plans
Set net zero
ambition across
Scopes 1, 2 & 3
Measuring and
starting to reduce
emissions
Engaging with
our supply chain
Achieved
Advancing Tier of
the Carbon Trust’s
Route to Net Zero
Standard
Peer
collaboration on
reducing Scope 3
and developing
roadmaps
Start of
bespoke capital
carbon ODI
Set target to reduce
methane emissions
(by intensity) by 30%
by 2033
Advisory vote
approved updated
Net Zero Plan
WE ARE HERE
Set SBT in line
with 1.5°C
pathway
Advisory vote
approved climate
change plans
Net Zero
Hub
launched
Improved data
quality and
accuracy
Running a Business that Goes Hand-in-Hand with Nature continued
Net Zero Transition Plan
Overview
Our commitment to mitigating and adapting to climate change remains a
critical priority. As illustrated, we are heavily reliant on nature to provide
our services.
The UK Government’s “A New Vision for Water” White Paper reinforces
priorities to reduce pollution and improve water quality and includes
theneed to act on climate change. This is important as complying with
both existing and future regulation will likely increase our emissions.
What are we aiming for?
As a Group, we have committed to achieving net zero operational carbon
emissions by 2030. By this date, we also aim to use 100% renewable
energy sources and switch to 100% electric vehicles where available.
Together, these targets are known as our Triple Carbon Pledge.
We have Science Based Targets (‘SBTs’) to reduce Scope 1 and 2 emissions
by 46% by 2031, in line with a 1.5°c pathway, and for 70% of our supply chain
(by emissions) to have set an SBT by 2026. Our performance against these
targets is shown on page 49.
We also have an ambition across Severn Trent Plc to meet net zero across
Scopes 1, 2 and 3 by 2050, and an intensity target to reduce our methane
emissions by 30% by 2033.
Ensuring resilience
As we deliver an unprecedented £14.9 billion investment plan over this
AMP to strength the resilience of our services to a changing climate,
regulatory standards and growing population, we will remain focused
onkeeping bills affordable whilst reducing emissions.
The prolonged drought we experienced, during the warmest spring and
summer on record, in 2025 underlines the need to adapt our operations.
Increasingly extreme weather patterns are heightening both demand-
side pressures and supply-side risks, making energy security a core
component of climate resilience planning. In response, we have placed
even greater emphasis on energy efficiency, power resilience, and
expanding low-carbon energy generation, in line with the Government’s
energysecurity strategy.
Learning as we progress our plans
We are taking bold steps to lead our sector in reducing greenhouse
gasesunique to our sector. We recognise that real world performance
will differ from modelled forecasts from new and innovative technologies.
Through our Net Zero Hub, we have gained valuable insight into how
different conditions influence the effectiveness of these technologies.
Aswe move into the next phases, we will adapt deployment to ensure
wedeliver on all of our business and customer priorities.
Evolving our plans
Our Scope 3 emissions will continue to increase as a proportion of
ouremissions. However, despite increased investment in line with our
Business Plan, our Scope 3 emissions have fallen due to decarbonisation
within the UK electricity and cement sectors, benefiting us through lower
emission factors. Through our engagement target, we have built a strong
foundation by supporting our supply chain to develop the knowledge and
capability needed to reduce emissions. This is reinforced by targeted
action to lower the carbon intensity of our capital programme, though
thebenefits will take time to be fully realised. We will develop more
detailed Scope 3 plans as SBTi guidance is finalised in 2027 and will
setthese out in our future NZTP.
An overview of our key milestones on our climate change journey are
shown in our roadmap below.
Our net zero roadmap
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 42
57%
Major sources:
• Capital carbon
• Chemicals
• Purchased goods and services
Emissions that are created by a
company’s value chain through
theproducts and services it
purchases from others.
Of these, capital carbon emissions
from construction and maintenance
ofour assets are thelargest.
31%
• Combustion of fossil fuels
• Process and fugitive emissions
• Transport
Direct emissions that are owned
orcontrolled by a company and
itsoperations.
Of these, our process emissions –
nitrous oxideand methane
emissions fromour wastewater
and sludge treatment processes
– are the most significant.
12%
100% of our import supply is
renewable-backed electricity,
reducing our market-based Scope 2
emissions to zero, effective from 2020.
Emissions that a company indirectly
causes, which come from the energy
itpurchases from others.
Our emission
profile and
definitions against
all three scopes
S
C
O
P
E
3
S
C
O
P
E
2
S
C
O
P
E
1
Understanding our carbon footprint
Net zero in AMP8
Our plans to reduce our most material Scope 1
emissions – nitrous oxide and methane emissions
arising from our wastewater and sludge treatment
processes (our process emissions) – are moving
intothenext phase.
Learning as we innovate
We are mobilising resources to be able to deploy emission
reductiontechnologies across our wastewater treatment sites.
Theuse of Membrane Aerated Biofilm Reactor (‘MABR’), digital
twinand cover-and-treat technologies reduces energy use and
production of N
2
O.
Our focus this year has been on testing the feasibility of where and
how best to deploy the technologies that we have been trialling at our
Net Zero Hub. We have undertaken site surveys; installed extensive
monitoring; validated proof of concept; and, for the digital twin, issued
tenders for services like modelling and system integration partners.
We are learning how specific conditions at individual sites and
assetsaffect performance. These insights have been shared
acrossthe sector through dedicated working groups and with
international partners via conferences. Further data and final trials
willbe important to maximise learning as we prepare for wider
deployment and to ensure the most cost-efficient route is taken.
What do we mean by operational net zero?
To achieve operational net zero and minimise our impact on climate change, we will reduce ourdirect (and some indirect outsourced)
emissions as far as possible by 2030, and then remove any residual emissions from the atmosphere. This may include the use of self-
generated ‘offsets’ through renewable energy sales and ‘insets’ through supporting our supply chain to reduce emissions. We will only
consider use of high-quality external offsets if it is absolutely necessary.
Severn Trent Plc Annual Report and Accounts 2026 43
Strategic Report Governance Financial Statements
Activated sludge
processes (‘ASP’)
Final settlement
tanks
Digital twin (32 sites)
MABR (13 sites)
Primary settlement
tanks
Liquor treatment
plant (‘LTP’)
To river
Cover and treat (23 sites)
Cake pads
Anaerobic
digesters
Thermal Hydrolysis Plant
(‘THP’)
Secondary
containment
Dewatering
Elovac
(system for degassing of sludge,
18 sites)
Industrial Emissions Directive (‘IED’)
(cover all tanks)
Find and fix
(all biodigestion sites)
Activated sludge
processes (‘ASP’)
Final settlement
tanks
Digital twin (32 sites)
Membrane Aerated Biofilm
Reactor (‘MABR’)
(13 sites)
Primary settlement
tanks
Liquor treatment
plant (‘LTP’)
To river
Cover and treat (23 sites)
Cake pads
Anaerobic
digesters
Thermal Hydrolysis Plant
(‘THP’)
Secondary
Containment
Dewatering
Elovac
(system for degassing of sludge,
18 sites)
Industrial Emissions Directive (‘IED’)
(cover all tanks)
Find and fix
(all biodigestion sites)
For process optimisation we have
deployed ammonia feed control across
two of our largest works, Wanlip and
Stoke Bardolph, to optimise our
algorithms, and reduce N
2
O emissions
andelectricity consumption.
Two trials of MABR showed that N
2
O
is lower than anticipated and is
dependent on the size and performance
of anoxic zones within the ASP lanes.
Consequently, we can target sites with
anoxic zones with the right conditions
tosuppress N
2
O effectively.
By verifying and comparing forecasts
with real-world observations, we can
understand the dedicated support
operational staff need to realise the
benefits from a digital twin model.
Treatment of N
2
O is impacted by
humidity, temperature and flux control.
We are assessing the impact of these
inour cover and treat programme.
Asset condition and location is
keytoaccommodating installation
ofElovac in a safe way, which reduces
fugitive emissions from sludge
storageand dewatering.
Methane spotlight
Our methane intensity target is a 30% reduction by
2033(which accounts for approximately one third of
ourScope 1 emissions). It is a potentshort-lived GHG,
which means any reduction in methane contributes to
arapid reduction in global warming potential. To build
our real-time understanding of emissions, we have
invested in more monitoring cameras. These are used
to validate the impact of the asset changes shown in the
diagram above. Results inform how we operate our
biogas assets, and our maintenance programme now
uses automated workflow toensure effective repairs
are raised as soon as aleak is found. These inform
aforward-looking plan tostop any future leaks.
Observed emissions are lowerthanpreviously
estimated (see page 51 for reporting methodology).
Six digester tanks at our largest wastewater treatment
site, Minworth, have nowhad their floating roofs
replaced with fixed roofs. Drone surveys are now
showing no emissions from covered tanks, as shown
inthe photo. All floating roofs will bereplaced or
decommissioned by 2030.
Wastewater recycling – key sources of Nitrous Oxide (N
2
O)
Bioresources – key sources of methane (CH
4
)
Net Zero in AMP8 continued
Running a Business that Goes Hand-in-Hand with Nature continued
Severn Trent Plc Annual Report and Accounts 2026 44
Strategic Report Governance Financial Statements
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20312030 2032 2033 2034 2035
600
400
500
300
200
100
0
-200
-100
ktCO
2
e
SBT Scope 1 and 2
1.5°C target
Operational emissions
Energy exports Ambition Net emissions
Delivered performance Funded 2025-2030 plans Medium-term transition plans
Our journey to net zero
Our investments will deliver performance improvements for customers
and the environment as quickly as possible. External factors affect our
emissions, such as the size of the population we serve, the severity of
impacts from climate change and tightening policy and regulation. For
example, the prolonged drought during the year presented significant
operational challenges to ensure uninterrupted water supply to customers.
We operated at full capacity to maintain service levels, which limited
ourflexibility in adapting and reducing energy.
Our customers still expect us to mitigate our impact on climate change,
balancing growth and impact across a wider range of benefits. For
example, our catchment management programme supports flood risk
reduction, river quality improvement, biodiversity improvement and
alsocarbon sequestration, providing a great example of balancing
wideroperational needs with the need to reduce emissions. We expect
toachieve our goal as we collaborate across the business to identify
thebestoperational, technological, and economical route to meeting
ourclimate targets.
Key
Operational emissions
(market-based)
Energy
exports
Net
emissions
SBT Scope 1 and 2
1.5°C target
Ambition
Funded and medium-term plans
Other drivers, such as reducing leakage
and managing the demand for water in
both household and non-household
customers, offer significant opportunity
to further reduce our emissions.
Achieving our goal
We have options to claim
emission reductions from
other activities including our
renewable energy exports.
We aim to cut our GHG emissions by 220
ktCO
2
e between 2026 and 2030, which is a 41%
reduction from our baseline towards our SBT
Scope 1 and 2 reduction target. This builds on
the significant progress we have already
made, with a 27% reduction to date against our
SBT of 46% by 2031 (against a 2019/20
baseline). In 2025/26, our reported location-
based Scope 1 and 2 total GHG emissions was
529 ktCO
2
e compared to a 2019/20 baseline of
561 ktCO
2
e. A summary table is on page 50.
Building energy security
We are investing to strengthen asset resilience so we can meet customer demand under increasingly
challenging conditions, with a clear focus on using energy more efficiently. Electricity makes up around
70% of our energy use, so we have introduced proactive and predictive maintenance to ensure pumps
are serviced and replaced at optimal intervals. This improves reliability and reduces operational costs,
even if it does not affect our market-based emissions. This approach is increasingly important as fixed
energy costs continue to rise, driven in part by recent grid upgrades and government policy changes
that place unavoidable cost pressures on businesses.
F
o
r
e
c
a
s
t
6
4
0
3
8
5
C
u
r
r
e
n
t
ktCO
2
e
Severn Trent Plc Annual Report and Accounts 2026 45
Strategic Report Governance Financial Statements
-15 0
-200
-100
-50
650
600
550
500
450
400
350
300
250
200
150
100
50
0
2030
Do nothing
Process
emissions
Green
tariff
Renewable
energy exports
Fossil fuel
phase down
Green
fleet
2030
Net emissions
ktCO
2
e
Energy exports Electricity Fleet and haulages Process emissions Fossil fuelsReduction Net emissions
Scope 1 and 2 reduction waterfall
Combined, our total Scope 1 and 2 GHG emissions are forecast to rise
to 640 ktCO
2
e (location-based) by 2030, if no action is taken. The residual
emissions relate to heat, fuel emissions and process emissions.
Our funded plans aim to deliver an estimated reduction of 502 ktCO
2
e
intotal by 2030 versus a ‘do nothing’ scenario, leaving a 100 kt gap that
we need to address in order to achieve operational net zero by 2030.
There are inherent uncertainties associated with innovative solutions
and therefore the reduction associated with each technology is likely
tochange over time.
This is being validated through the extensive testing and measurement
being undertaken at our Net Zero Hub and Resource, Recovery and
Innovation centre (‘R2IC’).
Meeting statutory environmental improvements will require us to
treatlarger volumes of water, which in turn increases asset use and
nitrous oxide emissions. As we transition from planning into delivery,
our updated forecast uses more conservative assumptions. Our
understanding will continue to improve as we expand our monitoring
programme from nine sites today to more than 100 sites by 2030.
GHG ODI update
We are in the first year of our new common ODI for operational GHG
emissions, which has helped to bring more focus to the carbon impact
of our operational decisions and to deliver better outcomes for our
customers. Further detail on our ODI performance can be found in
ourAnnual Performance Report (‘APR’), which will be published
ontheRegulatory Hub on our website in July 2026.
Our Infrastructure Services
Our two regulated businesses, Severn Trent Water and Hafren Dyfrdwy,
make up the majority of our operational emissions at 97%. Within
Infrastructure Services, Severn Trent Operating Services is committed
toreducing emissions by engaging with customers and suppliers.
Itpublishes an annual update on its Carbon Reduction Plan.
Severn Trent Green Power aims to build a balanced portfolio through
increasing generation of renewable energy in solar and potentially wind,
as well as a significant increase in biomethane capacity via site expansion,
and in new-build opportunities and acquisitions. Green Power has also
started dedicated methane monitoring, along with targeted monitoring of
GHG emissions to better understand how individual assets are performing.
Transitioning our fleet
Whilst we have begun decarbonising our car and light commercial
vehicle (‘LCV’) fleet, solutions for larger and more complex vehicles
arestill not currently readily available. We have started to deploy
hydrotreated vegetable oil selectively, as a transition fuel, for large
andplant vehicles, focusing on securing the most appropriate and
responsible sources available. For car and LCVs, we will electrify the
remainder of our fleet in line with the natural replacement cycle of
vehicles to ensure a cost-effective approach. This means there will
besome parts of our fleet that are not fully electric by 2030, including
c.60% of our LCVs and all HGVs and 4x4s.
Running a Business that Goes Hand-in-Hand with Nature continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 46
Key
Scope 1
Scope 2
(market-based)
Scope 3 Energy exports
Net emissions
1.5C Aligned reductions
Scope 2
Scope 1
Scope 3
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 203 0 2031 2032 2033 2034 2035
600
800
1,000
1,200
200
400
0
-200
Energy exports
1.5°C Aligned reductions
Net emissions
Delivered performance 2025–30 plans Medium-term transition plans
ktCO
2
e
Our Scope 3 challenge
The scale of investment over the next decade means that Scope 3 emissions may increase before they fall. Some of this may be offset by continued
decarbonisation within the UK electricity and cement sectors. Addressing capital carbon and adopting alternative solutions at scale to reduce GHG
emissions remain essential to achieving our long-term ambition. To do this, we will work closely with our suppliers.
Understanding our footprint
Robust data sets are critical to identify hotspots and reductions in our capital projects emissions associated with construction and maintenance
ofourassets. We have developed a more granular carbon calculator to guide design decisions. In parallel, we have strengthened governance to
ensuremandatory completion. Our bespoke ODI on capital carbon includes projects at two lifecycle stages and is part of this governance framework.
For purchased goods and services, we continue to collect volumetric data for chemicals which makes up 8% of Scope 3 emissions. We are trialling
newAI-enabled software that analyses supplier data to provide supplier-specific emissions information. This will allow the emissions we report
tomore accurately reflect reduction actions taken across our supply chain.
Engaging with our supply chain
Our supply chain partners are critical to addressing emissions by offering alternative
approaches, techniques and materials focused on decarbonisation, whilst also
reflecting good value for our customers. Our engagement target is designed to build
the knowledge and capability that our supply chain partners need to understand and
reduce their emissions, so they can in turn help to reduce ours. To support this, we
have engaged with many suppliers to explain the importance of emissions reductions,
the business benefits, and the process ofsetting a Science Based Target. Recognising
thediversity of our supply chain, we have focused on building practical capability via
providing tailored resources and training. This year, for example, we partnered with
aspecialist provider to help SMEs to build their own company-specific action plans.
In the next phase, we will focus on improving the accuracy of supplier-specific and
product-specific emissions which will strengthen decision-making; through software
solutions and further supplier engagement. We will continue to work closely with our
supply chain to support their delivery of reduction targets. Building upon our existing
Sustainable Procurement training, we have added dedicated carbon learning pathways
to further build knowledge across our Procurement teams.
Severn Trent’s support has been
a core part of our sustainability
journey. Their collaborative approach
and guidance, and engagement with
our Executive Team, helped us chart
a successful course through the
SBTiprocess, crafting plans that
willget us to net zero.
Ben Hawkins
Head of Strategic Projects, AVOVE
Severn Trent Plc Annual Report and Accounts 2026 47
Strategic Report Governance Financial Statements
Trials and research
1.
Capital carbon: Working in collaboration
Reducing capital carbon requires collaboration across our sector,
our supply chain, and partners beyond our industry, including
research and testing of alternative solutions such as those set out
here. We are building a bank of case studies, and running sessions
across our engineering and construction teams to capture practical
insights and strengthen collective knowledge andcapability.
Our quarterly Capital Carbon Innovation Forum – set up to
collaborate on low-carbon solutions – is well attended by our
capital delivery partners. Through this forum we have delivered
updates from ourEnvironment and Sustainability Design Manual
which details bestpractice in the selection, design and construction
of assets. This includes guidance to avoid use of cement with 70%
or more Portland cement, in favour of lower-carbon cement.
At our sewage treatment works at Hungarton in Leicestershire,
wehave used an aggregate alternative product, Ecofill. This
technology transforms on-site in-situ clays and subsoils into
anaggregate replacement suitable for temporary roads. This
eliminates the need to use large volumes of aggregate or concrete;
significantly reducing lorry movements otherwise required to
transport these materials to site, saving 31 tCO
2
e as well as
reducing noise and traffic.
2.
Purchased goods and services:
Exploring low/no chemical solutions
3.
Sold products: Managing emissions
associated with recycling of biosolids to land
We know that reducing the use of chemicals will be key to minimising
Scope 3 emissions. We have begun trials on low and no chemical
treatment solutions at Brinklow wastewater treatment works,
testing coagulant recovered from sludge as a replacement for
commercially purchased coagulant, with early results indicating
significant potential cost and carbon savings.
We plan to use Hydrex – a coagulant made from black acacia tree
bark – at our wastewater treatment plant in South Kilworth, to
meet tightening ammonia and new phosphorus permits. Hydrex
reduces the amount of ferric needed and is effective at removing
biochemical oxygen demand (‘BOD’), solids and fat, oils and grease,
significantly lowering the load on secondary treatment and the
need for additional assets. We estimate this will reduce embodied
emissions by 160 tCO
2
e and operational carbon by 1,500 tCO
2
e over
the lifetime of the asset, alongside time and cost savings.
Once we treat sludge to the required standards, it is converted
intobiosolids which is spread on agricultural land. This reduces
demand for chemical fertilisers. During the application of biosolids
to land, small quantities of nitrous oxide are emitted. To address
this we are investing in:
1
Advanced sludge treatment technologies to enhance biosolid
quality which further improves biosolid stability.
2
Converting a proportion of our biosolids into pellets, which may
enable biosolids to be spread on land over more of the year.
3
Alternative treatment technologies, such as transforming
sewage sludge into sustainable transport fuels and materials.
Running a Business that Goes Hand-in-Hand with Nature continued
One of our quarterly Capital Carbon Innovation Forums
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 48
Our Climate Change Targets
• We are on target to reach 100% electric cars
and c.38% electric LCVs by 2030.
• We have gone out to tender to secure supply
ofour LCVs until 2031, to provide better
availability and market leading solutions.
However, further deployment of electric LCV
and larger vehicles is challenged by the
availability of suitable vehicles, the growth
inour own fleet and the lack of funding for
public infrastructure.
• We have started to deploy HVO selectively as a
transition fuel, focusing on securing the most
appropriate and responsible sources available.
100%
electric vehicles, where available by 2030
• Preparations are underway to roll out novel
technologies to reduce process emissions
atscale using insights from our Net Zero Hub
and R2IC.
• Emissions for both methane and nitrous oxide
– where they are monitored – are lower than
previously estimated.
• We have retained REGOs and RGGOs generated
by energy exports, which reducesour net
operational emissions.
• Emissions from our transport fleet have increased
slightly due to insourcing of operational teams;
and business travel has increased slightly due
to categorisation changes in reporting.
• Our emission intensity has continued to
decrease year on year.
• Preparations are underway to roll out novel
technologies to reduce process emissions
atscale using insights from our Net Zero
HubandR21C.
• Emissions for both methane and nitrous
oxide- where they are monitored – arelower
than previously estimated.
• For transport fleet, emissions have increased
slightly due to insourcing of operational teams.
Whilst our electric fleet has increased in size,
overall emissions have decreased reflecting
grid decarbonisation.
Net Zero
operational emissions Scope 1
and 2 by 2030 from a 2019/20 baseline
46% reduction
in Scope 1 and 2 emissions by
2031 from a 2019/20 baseline
100% Target0% Baseline
26%
100% Target
0% Baseline
27%
70%
of our supply chain (by emissions) having set a Science-Based Target by 2026
• Since setting the target, over 262 suppliers
have set a SBT for their organisation; building
the knowledge and capability to collectively
address emissions.
• Due to a changing supplier base, regulated
tender cycles and validation timescales,
performance includes organisations who have
set a SBT or have formally set or agreed to set
one through SBTi.
• Emissions are calculated using spend-based
data. Capital spend has increased in line with
our business plan, so we are expanding our
supply chain, meaning more organisations,
including less mature SMEs, are required to
seta SBT.
• We have provided extensive and targeted
support to supply chain partners, to gain
business buy-in and build their internal
capability to understand and address their
ownemissions.
100% Target
0% Baseline
100%
100% Target
0% Baseline
100%
100% energy from renewable sources by 2030 (covering both electricity and gas)
• We continue to procure 100% renewable-
backed electricity.
• Consumption of natural gas has reduced
slightly due to issues with one of the engines
for some of the year.
• We generated slightly less energy this year
(1,919GWh), including biogas, as some assets
were unavailable, and lower levels of hydro
power were generated due to lower rainfall.
Our Triple Carbon PledgeOur Science Based Targets
100% Target0% Baseline
• The sold product category measures primarily
our treated sludge. Due to a sector change in
reporting methodology, there has been a 25%
reduction in emissions from sold products,
despite a slight increase in sludge volumes
andpopulation growth.
• Propane accounts for 40% of the overall
emissions from sold products, which is used to
meet national gas regulations for biomethane.
• Higher sludge treatment also allows us to
produce higher volumes of biogas, and we
areinnovating to extract resources like
ammonia from wastewater. This could
increase emissions from sold products in
thefuture. As a consequence, we will revisit
this target in line with updating our targets.
13.5%
reduction in emissions from the use of sold products by 2031
100% Target0% Baseline
25%
28%
87%
Severn Trent Plc Annual Report and Accounts 2026 49
Strategic Report Governance Financial Statements
Running a Business that Goes Hand-in-Hand with Nature continued
Summary of our greenhouse gas performance
The following table shows our greenhouse gas
performance and accounts, which is the source
dataforourperformance on page 49.
Our emissions have fallen by 27%, showing significant progress towards
our SBT of a 46% reduction by2031 against a 2019/20 baseline. This has
been achieved, in part, duetoan updated reporting methodology for our
process emissions (please refer to the detail on page51), which is also
reflected in a marginal decrease in our Scope 1 emissions since 2024/25.
Ouremissions, per £million turnover, have also continued to decrease.
• For Scope 2 overall, despite increased treatment and pumping to meet
water demand, due to the driest spring in 132 years and hottest
summer on record, consumption of electricity increased. However,
emissions overall fell as a result of reduced grid emission factors.
Ouruse of natural gas has reduced slightly due to engine outages.
• We continue to report zero emissions from our 100% renewable-
backed electricity tariff in market based emissions.
• Our transport fleet has grown in size and so have the associated
emissions, due tofurther insourcing of operational teams.
• We have retained certificates we generate for both renewable
electricity and bio-methane, which means our net operational
emissions have decreased by 26% against a 2019/20 baseline
progressing us towards our net zero operational emissions target.
• The proportion of propane required to export biomethane into the
gasnetwork is slightly lower this year than in 2024/25, meaning that
emissions are slightly lower even with higher export levels.
• Our Group level commitment to fleet electrification continues, with 28%
of our fleet now electric vehicles (‘EVs’) with 892 vehicles due to growth
in our business. Of these, 78% of fleet cars and 18% of LCVs are EVs.
This year we have also improved the accuracy of EV charging data and
off-site/home charging are assumed to use non-renewable sources
and are reported under market-based emissions. We have installed
538 charging units at employee homes.
• Our business travel has increased due to both insourcing of operational
teams and a categorisation change of reporting.
Annual operational emissions – location- and market-based
Operational Emissions, tCO
2
e 2025/26 2024/25 2019/20
Scope 1 – Combustion of fossil fuels on site
1, 2
61,632 64,771 18,363
Scope 1 – Process emissions – Revised methodology
1
295,049 305,612 325,325
Scope 1 – Process emissions – CAW methodology
2
437,066
2
441,932
2
451,184
2
Scope 1 – Transport fleet
1, 2
27,524 23,820 17,860
Scope 1 Total emissions 384,205 394,203 361,548
(526,222)
2
(530,523)
2
(487,407)
2
Scope 2 Emissions (Electricity purchased for own use) – location-based 145,010 156,759 199,635
Scope 2 Emissions (Electricity purchased for own use) – market-based 292 501 163,581
Scope 1+ 2 Total emissions (location-based) 529,215 550,962 561,183
(671,232)
2
(687,283)
2
(687,042)
2
Scope 1+ 2 Total emissions (market-based) 384,496 394,704 525,129
(526,514)
2
(531,024)
2
(650,988)
2
Scope 3 Emissions (Business travel) 3,450 1,496 1,447
Scope 3 Emissions (Outsourced bioresource activities) 3,355 2,979 3,187
Scope 3 Emissions (Electricity transmission and distribution) 15,154 13,855 16,985
Total annual gross operational emissions (location-based) 551,173 569,293 582,802
(693,191)
2
(705,613)
2
(708,661)
2
Total annual gross operational emissions (market-based) 406,455 413,034 546,748
(548,473)
2
(549,355)
2
(672,607)
2
Emissions reduction from renewable REGO certificates retired -4,185 0 -12,924
Emissions reduction from biomethane RGGO certificates retired -42,294 0 -46,954
Total annual net operational emissions (market-based) 359,976 413,034 486,870
(501,993)
2
(549,355)
2
(612,729)
2
Gross Location based operational GHG emissions of Severn Trent per £m turnover 195 235 316
(245)
2
(291)
2
(384)
2
1 Methodology based on direct monitoring and updated emission factors reported as two-year rolling average. See page 51 for detail.
2 The Carbon Accounting Workbook (‘CAW’) has been our historical and industry standard reporting method for process emissions, so is provided for transparency and comparison.
Allcumulative figures shown in ( ) include the CAW method.
Avoided emissions
Generation of energy from anaerobic digestion within Severn Trent Water and Severn Trent Green Power businesses provides us with the opportunity
to export renewable energy to the grid. This energy displaces natural gas and electricity that might have come from fossil fuel sources. We estimate the
benefit of these avoided emissions below, versus average grid emissions factors for electricity and natural gas in the UK. These emissions are also now
shown in retained certificates.
Avoided emissions (tCO
2
e) 2025/26 2024/25 2019/20
Estimated emissions benefit of the renewable electricity we export 26,206 34,030 20,002
Estimated emissions benefit of the renewable biomethane we export 42,691 82,067 0
Total avoided emissions 68,897 116,097 20,002
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 50
Biogenic emissions
Our out-of-scope biogenic emissions come from the release of CO
2
associated with non-fossil fuel or organic sources. It includes emissions from
biogas combustion along with biomethane production and consumption. These have reduced in line with a slight reduction in biogas generation.
Biogenic emissions (tCO
2
e) 2025/26 2024/25 2019/20
Biogenic emissions 287,354 297,069 219,691
Greenhouse gas reporting method
We report our Group greenhouse gas emissions in tonnes of carbon dioxide equivalent (tCOe) for the period from 1 April 2025 to 31 March 2026
alongside the prior year, to enable clear year-on-year comparison. Reporting covers operations within the UK and follows the Greenhouse Gas (‘GHG’)
Protocol, using a financial control boundary which include assets we own and operate and where we can directly influence emissions. Our disclosures
include Scope 1 emissions; Scope 2 emissions (both location-based and market-based); and ten relevant Scope 3 categories.
Method for calculating process emissions
Process emissions from wastewater and sludge treatment are calculated using our ‘Revised methodology’ (295,049 tCO
2
e) which uses a combination of
direct monitoring and emission factors. We have directly monitored nitrous oxide emissions for the last five years, now covering 43% of our wastewater
treatment. We report direct monitoring at facility level where available, using a two-year rolling average to account for seasonal fluctuations and
understanding of the science. For the remainder, we used the UKWIR Carbon Accounting Workbook (‘CAW’) methodology, which now uses IPCC global
factors. This has been applied to our historical emissions to enable comparison. However, our monitored data shows that emissions are lower than
theglobal emission factors set out by the IPCC.
For methane emissions we report monitored data using the CAW methodology. However, we now undertake monitoring covering 65% of our sludge
treatment processes at Severn Trent. This also shows that methane emissions are lower than using CAW methodology.
For transparency, applying the UKWIR (IPCC) methodology alone would result in Group process emissions of 437,066 tCO
2
e. As we further increase
ourdirect monitoring we will use more of this primary data, where available, and then extrapolate across our estate. From the data we currently have
available from our monitors, this would result in Group process emissions of c.220,000 tCO
2
e which we believe is more representative of our asset base.
Assuring our data
The Group’s non-financial assurer, Jacobs, was engaged to perform independent limited assurance in accordance with the International Standard on
Assurance Engagements on greenhouse gas statements (‘ISAE3410’) over our GHG processes and data reported in the tables on page 50 and on this page.
Jacobs’ assurance included both the ‘CAW methodology’ and the ‘Revised methodology’ related to process emissions. Jacobs raised an elevated
reporting risk on the basis that we had chosen not to follow the standard CAW methodology for nitrous oxide. This decision was based on our assessment
that the revised methodology showed closer alignment with our measured data and we therefore believe it is a more accurate record of our actual
process emissions. Ouraim over time is to measure process emissions using primary data specific to location, where possible, and we are working
towards that. For full transparency, we have included both data lines in the tables on page 50.
Scope 3
Despite an increase in expenditure of 16%, our Scope 3 emissions remained broadly the same from 2024/25 as a result of decarbonisation across
theUK (primarily from grid electricity). There have been several reporting method updates which are outlined below.
1) Updated emission factors means that emissions from Purchased Goods and Services have only risen by 4% despite an increase in expenditure of
32% (category 1).
2) Lower emission factors UK wide – in electricity and cement – mean that emissions in Capital Goods (our largest category) have reduced by 14%.
Weactively seek to drive further reductions in Capital Goods, supported by our bespoke regulatory incentive for capital carbon (category 2).
3) The emission factor for sludge to land has been updated for reporting in 2025/26 following a sector wide decision to exclude methane from the
CAWmethodology (category 11).
4) Transmission and Distribution now includes electricity upstream extraction and production to align with changes to regulatory reporting
toOfwat(category 3).
5) Categorisation of business travel between Scope 1 and Scope 3 has been updated to accurately report journeys completed in personal and company
vehicles (category 6).
Scope 3 Emissions (tCO
2
e) 2025/26 2024/25 2019/20
1) Purchased Goods & Services 206,511 199,323 161,171
2) Capital Goods 311,319 360,718 250,546
3) Fuel & Energy related activities -T&D 59,912 18,417 21,148
3) Fuel & Energy related activities -WTT 19,480 19,045
4) Upstream Transportation & Distribution 28,593 25,313 18,963
5) Waste Generated in Operations 21,137 19,030 6,440
6) Business Travel 3,459 1,496 1,447
7) Employee Commuting 8,596 7,674 3,471
8) Upstream leased assets 2,394 3,092 NA
9) Downstream transportation & Distribution NA NA NA
10) Processing of Sold Products NA NA NA
11) Use of Sold Products 24,769 39,113 32,907
12) End of Life treatment of sold products NA NA NA
13) Downstream Leased Assets 11,175 9,139 10,469
14) Franchises NA NA NA
15) Investments NA NA NA
Total Scope 3 697,345 702,360 506,562
Severn Trent Plc Annual Report and Accounts 2026 51
Strategic Report Governance Financial Statements
Running a Business that Goes Hand-in-Hand with Nature continued
Report on Energy
In line with energy and carbon reporting requirements, we have reported our energy consumption and generation for the
last five years across the Severn Trent Group, which is also source data for the carbon emissions reported on page 50.
Energy performance
This year we have seen an increase in overall energy consumption, with
our gross electricity consumption rising to 1,056 GWh. This was driven by
environmental factors including the warmest summer on record, which
increased our water demand to unprecedented levels, and required
additional pumping of water into our reservoirs to refill them. This was
then followed by a period of significant rainfall, including named storm
events during autumn 2025, which increased energy demands across
thewastewater network.
Energy efficiency
Managing energy consumption is ever more important due to the
combination of extreme weather events and increased regulatory
requirements as tighter permit restrictions require additional processing.
Measures taken this year have ranged from replacing aged and inefficient
assets, pump system optimisation, continued on-site operational
engagement and monthly business energy forums. We have also
reviewed our standards in line with improving technologies, to
mandatemore energy efficient assets such as motors.
In parallel, we have an internal forum on power resilience, which includes
comprehensive reviews of site-level and national outage preparedness.
We also work closely with local Distribution Network Operators (‘DNOs’)
to gain data insights which we use to inform our investments, like
identifying locations for additional backup power supplies. As part of
thisstrategy, we have procured mobile generators and have deployed
enhanced power quality monitoring to strengthen overall system insight
and reliability.
Our newly launched internal Energy Savers
campaign highlights the importance of
working together to operate efficiently.
Evenduring periods of high demand, such
ashot, dry weather when water use peaks,
everyone plays a part in using energy
wiselyin running our assets.
This year we have also reviewed our Energy Management Policy to ensure
we still adhere to best practice outlined in ISO 50001, the International
Energy Management Standard.
Energy generation
We continue our longstanding commitment to energy self-generation,
transforming waste into biogas, which powers Combined Heat and Power
(‘CHP’) engines to produce electricity and heat. This circular approach
underpins a diverse renewable portfolio spanning biogas, solar, wind,
hydro, and crop digestion – strengthening our energy resilience and
independence while reducing carbon emissions.
In 2025/26, we generated 855 GWh of renewable energy across the Group,
with further growth ahead. Our four new large-scale solar farms, now in
delivery phase, will generate up to 185 GWh annually, reinforcing our
energy security.
Energy costs and risk management
We continue to apply our energy risk management policy, including our
electricity and gas hedging strategy, to reduce exposure to market
volatility. This approach enables us to secure future energy purchases
and manage price risk across future years. Although wholesale prices
had eased from recent highs, geopolitical tensions in the Middle East
havereintroduced volatility, and prices remain above pre-2020 levels.
Atthe same time, wholesale costs now represent a smaller share of our
total energy bill, with ongoing grid investment and Government policy
changes placing further upward pressure on third-party charges.
Methodology
All information is collected from metered data for electricity and gas
imports and exports. Biomethane combustion data is calculated using
assumptions based on metered data, and fuel use is reported based on
financial records of fuel purchased. We apply assumptions on standard
calorific values to convert all liquid and gas fuel types to a common
energy metric (GWh), and the data is reported for the period 1 April 2025
to 31 March 2026. All energy usage reported is within the UK. Our energy
performance table aligns with Streamlined Energy and Carbon Reporting
guidelines and has been verified through our third-line assurance process.
1 Renewable energy generation includes solar, wind, sewage anaerobic digestion, crop
anaerobic digestion and hydro which is all backed by renewable accreditations.
2 Non-renewable generation includes natural gas CHP.
3 Biomethane is generated and exported to the grid and includes propane as a proportion of
our biomethane exports due to requirements of the gas network’s acceptance tests, all
backed by renewable accreditations (excluding propane).
4 Biogas generated and combusted on site.
5 All electricity imported is backed by renewable accreditations since April 2020.
6 Fuel (mobile) includes transport, fleet and business travel.
7 Fuel (other) includes stationary applications including back-up generation.
8 Electricity includes import and self-generation including biogas and now also includes
consumed on site.
Type All data in GWh unless stated otherwise 2025/26 2024/25 2023/24 2022/23 2021/22
2019/20
(baseline)
Consumption Electricity
8
1,056 1,009 983 976 964 974
Natural Gas 289 303 241 233 208 44
Liquid Fuel
6,7
146 136 121 107 104 96
Consumption excluding Biogas 1,491 1,448 1,345 1,317 1,277 1,115
Biogas
4
1,008 1,041 799 843 921 1,061
Total Consumption 2,499 2,488 2,144 2,160 2,198 2,175
Generation
Renewable electricity
1
340 351 300 306 330 378
Non-renewable electricity
2
56 65 63 48 43 0
Biomethane
3
515 496 457 403 336 181
Generation excluding Biogas consumed 911 912 820 757 709 559
Biogas
4
1,008 1,041 799 843 921 1,061
Total Generation 1,919 1,953 1,619 1,599 1,630 1,619
Import
Electricity
5
818 757 769 775 752 780
Natural Gas 289 303 241 233 208 44
Fuel (mobile)
6
114 101 93 76 73 76
Fuel (stationary)
7
32 34 28 31 31 20
Total Import 1,253 1,196 1,131 1,116 1,064 921
Export
Renewable Electricity -158 -164 -149 -153 -160 -184
Biomethane
3
-515 -496 -457 -403 -336 -181
Total Export -673 -660 -606 -556 -496 -364
Total (generation+import+export) 2,499 2,488 2,144 2,160 2,198 2,175
Intensity ratios Energy Imported per unit of Revenue GWh/£m 0.44 0.49 0.48 0.52 0.55 0.50
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 52
EU Taxonomy Disclosure
Our strategy is to focus investment that drives social and environmental value whilst being transparent about the impact we have. In this disclosure,
wereport voluntarily against the EU Taxonomy. This framework uses two key themes: ‘eligibility’ – business activities listed in the taxonomy that have
the potential to contribute to one of six environmental objectives; and ‘alignment’ – meeting technical screening criteria to substantially contribute to
one ofthese objectives whilst preventing significant harm
1
to any other. We reflect the ‘minimum social safeguards’ defined by the taxonomy within
ourpolicies, ensuring our actions have protections in place for customers, employees and across our supply chain and local communities.
Against the six environmental objectives set by the taxonomy we report alignment to three:
Reporting against this system provides us with valuable insight into improvement areas, strengthening our resilience. We use these insights to drive
meaningful action across our key operating companies
2
.
Our approach to the EU Taxonomy assessment is independently assured by DNV Business Assurance Services UKLimited (‘DNV’) and the
assurance statement is available on our website. Our approach is structured in three stages:
1. Eligibility Assessment – Reviewing
regulations to identify our eligible activities,
working with subject matter experts. We track
all of our interpretations of legislation and any
assumptions made during this process in a
technical paper that is independently assured.
2. Activity Analysis – Assessing each activity
against the technical screening criteria, Do No
Significant Harm (‘DNSH’) requirements and
Minimum Social Safeguards, reassessing
each year. We use software to support this
review and ensure criteria are fully reviewed.
3. Financial Mapping – Using our existing
financial system to map the financial ‘KPIs’
forall eligible and aligned activities, i.e.
Turnover, Operating expenditure (‘Opex’)
andCapital expenditure (‘Capex’).
1
Climate change
mitigation
(‘CCM’)
2
Climate change
adaptation
(‘CCA’)
3
Sustainable use
andprotection of
water and marine
resources (‘WTR’)
4
Transition
to a circular
economy (‘CE’)
5
Pollution
prevention and
control (‘PPC’)
6
Protection and
restoration of
biodiversity and
ecosystems (‘BIO’)
Our update for 2025/26
We continue to report eligibility against five of the six environmental
objectives and now report alignment to three of these. This year, we made
progress in the following areas:
• We now report alignment to the CCA objective for 10% of our Capex,
reflecting the momentum across the organisation to build resilience
and proactively plan for a changing climate.
• We concluded our climate change risk assessments for Severn Trent
Green Power Limited and Severn Trent Services Operations UK
Limited, contributing 1% to our Capex alignment this year.
• We continue to focus investment on pollution prevention, and take our
impact on the environment very seriously. We reduced the number of
total pollutions this year, but had two confirmed pollutions classified
asserious by the EA
3
. Applying the DNSH criteria of the taxonomy, we
have excluded activities from our alignment calculation to reflect this,
representing 1% of our eligible Capex.
• Our overall alignment remains high – 95% of our Capex aligns to
taxonomy objectives, remaining at the same level as reported in 2024/25.
A Focus on DNSH
DNSH – Pollution prevention and control
Pollution prevention remains a top priority. To report taxonomy
alignment, the DNSH requirements on pollution prevention define
permissible pollutant levels based on UK legislation and EA
targets. We determine alignment using the full suite of EA
measures, reflecting our commitment to strong performance
across all pollution metrics. We remain green on all but one
measure, with amber performance for the two serious pollution
incidents this year. To meet the DNSH criteria we should have
nomore than one. Therefore, we have identified and excluded
activities within our waste operations in the areas impacted.
Wecontinue to invest in our people, assets and processes to
strengthen and improve our performance.
Our alignment
We report alignment to three objectives, CCM, WTR and CCA and
have eligible activities across two other objectives, CE and BIO
(although with minimal spend this year). Wecontinue to identify
opportunities to expand this. The visual below summarises the
eligible and aligned activities across our Capex profile, as this
reflects how we manage our business and is most material to us.
CCM Aligned
Capex
CCM Eligible and not aligned
CCA Aligned
WTR Aligned
Not eligible
72%
4%
10%
13%
1%
1 The definition of ‘significant harm’ applied in our analysis follows the EU Taxonomy’s Do No Significant Harm (‘DNSH’) principle, supported by equivalent UK legislation such as guidance
issued by the Environment Agency. We take this action planning extremely seriously and have embedded related objectives across our organisation.
2 Severn Trent Water Limited, Hafren Dyfrdwy Cyfyngedig, Severn Trent Green Power Limited and Severn Trent Services Operations UK Limited.
3 We are currently undergoing an appeal process in relation to a third serious pollution.
95%
Severn Trent Plc Annual Report and Accounts 2026 53
Strategic Report Governance Financial Statements
Running a Business that Goes Hand-in-Hand with Nature continued
* Our final alignment percentages of 90% of Turnover, 72% of Opex and 95% of Capex were subject to third line assurance by DNV. Totals are derived from the statutory accounts included
within this report. Opex here excludes depreciation and the charge for bad and doubtful debts. Capex excludes fair value adjustments to assets adopted at nil cost.
Our aligned activities
Set out below is a summary of our analysis for the financial year 2025/26, outlining our eligibility and alignment for the 17 activities we report, against
five of the six climate and environmental objectives.
EU Taxonomy activity Objective
Severn Trent activity that
aligns to the criteria
Turnover
(£m)
Opex
(£m)
Capex
(£m)
Turnover
(%)
Opex
(%)
Capex
(%)
Construction, extension
andoperation of water
collection, treatment
andsupply systems
CCM Water network+ Aligned 499 149 238 18% 11% 11%
CCA Aligned 73 14 40 3% 1% 2%
CCM Eligible 11 0 0 0% 0% 0%
Renewal of water
collection,treatment
andsupply systems
CCM Water network+ Aligned 718 369 398 25% 26% 19%
CCA Aligned 2 1 1 0% 0% 0%
CCM Eligible 31 0 0 1% 0% 0%
Construction, extension and
operation of waste water
collection and treatment
CCM Water network+ Aligned 670 201 870 24% 14% 40%
CCA Aligned 116 35 185 4% 2% 8%
CCM Eligible 14 4 17 1% 0% 1%
Anaerobic digestion
ofsewage sludge
CCM Bioresources Aligned 47 23 17 2% 2% 1%
CCM Eligible 174 83 61 6% 6% 3%
Afforestation CCM Biodiversity and conservation Aligned 6 2 5 0% 0% 0%
Composting of bio-waste CCM STGP Aligned 3 3 0 0% 0% 0%
Electricity generation
usingsolar photovoltaic
technology
CCM STGP Aligned 3 1 0 0% 0% 0%
Electricity generation
fromwind power
CCM STGP Aligned 4 1 0 0% 0% 0%
Electricity generation
frombioenergy
CCM STGP Eligible 6 4 0 0% 0% 0%
Anaerobic digestion
ofbio-waste
CCM STGP Aligned 54 34 14 2% 2% 1%
Cogeneration of heat/cool
and power from bioenergy
CCM STGP Eligible 6 4 0 0% 0% 0%
Climate change mitigation Aligned 2,004 781 1,542 71% 55% 72%
Eligible 201 95 79 7% 7% 4%
Climate change adaptation Aligned 191 50 226 7% 3% 10%
Water Supply WTR Water resources,
Waternetwork+
Aligned 179 46 69 6% 3% 3%
Sustainable urban Drainage
Systems (‘SuDS’)
WTR SuDS Aligned 0 0 2 0% 0% 0%
Urban Waste Water
Treatment
WTR Waste network+ Aligned 157 151 195 6% 11% 9%
Eligible 3 2 1 0% 0% 0%
Nature-based solutions for
flood and drought risk
prevention and protection
WTR Catchment management,
reedbeds
Aligned 12 4 10 0% 0% 1%
Sustainable use and protection of water and marine resources Aligned 349 201 277 12% 14% 13%
Eligible 3 2 1 0% 0% 0%
Conservation, including
restoration, of habitats,
ecosystems, and species
BIO Biodiversity and conservation Eligible 0 0 0 0% 0% 0%
Protection and restoration of biodiversity and ecosystems Eligible 0 0 0 0% 0% 0%
Phosphorus recovery
fromwaste water
CE Innovation Eligible 0 0 0 0% 0% 0%
Transition to a circular economy Eligible 0 0 0 0% 0% 0%
Aligned activities* (A) Total aligned activities 2,544 1,032 2,045 90% 72% 95%
Eligible activities (B) Total eligible (and not
aligned)activities
204 97 80 7% 7% 4%
Non-eligible activities (C) 83 304 29 3% 21% 1%
All activities (A+B+C) Total business activities 2,831 1,433 2,154 100% 100% 100%
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 54
Our gap analysis 2025/26
Since our first EU Taxonomy disclosure, we have increased alignment
byover 20 percentage points across all three financial KPIs, and continue
to use this as a tool to focus investment. Our strengthened processes and
high levels of organisational engagement give us greater insight on areas
for improvement, driving action and setting ambitious future objectives.
We continue to challenge the gaps between eligibility and alignment
andbuild on the success of prior years to increase the positive impact
wehave. Set out below are our current gaps between eligibility and
alignment for Capex across all objectives, alongside the next steps
identified to address them.
Our EU Taxonomy work to date reflects the momentum and pace of
progress across our organisation, with stronger assessments, clearer
DNSH safeguards and more activities aligned to the taxonomy’s objectives.
By deepening transparency and sharpening how we link our investment
toenvironmental value, we’re strengthening both our resilience and
ourimpact. We’ll carry this progress forward, continuing to focus on
theareas wherewe can deliver the greatest benefit for nature, our
customers and the communities we serve.
Current
eligibility
Pollutions
prevention
in waste
Conservation
& Forest
management plans
Current
alignment
99%
0%
Sludge
containment
3%
1%
95%
Gap analysis – Total Capex in year 2025/26
Activity Next steps Objective
Alignment
opportunity
Construction,
extension and
operation of
waste water
collection and
treatment
• Continued focus on
pollution causes and
prevention measures
through immediate and
proactive investment.
CCM
£17
million
(2025/26)
Conservation
and forest
management
• Implement a process to
calculate and analyse
the climate benefit of
forest management
activities.
• Adapt conservation
management plans and
finalise physical climate
risk assessments.
CCM
and BIO
£ future
Anaerobic
digestion of
sewage sludge
• Continuing the rollout
ofour £274 million
investment plan for
sludge containment
andrisk mitigations
forIED across AMP8.
CCM
£61
million
(2025/26)
Activity assessment methodology: This disclosure follows the EU Taxonomy Delegated Acts: the Climate Delegated Act (EU) 2021/2139 for climate criteria and DNSH; the Disclosure Delegated
Act (EU) 2021/2178 for reporting requirements; and the Environmental Delegated Act (EU) 2023/2486 for non-climate environmental objectives.
Severn Trent Plc Annual Report and Accounts 2026 55
Strategic Report Governance Financial Statements
Infrastructure Services Performance Review
Infrastructure Services brings together our Operating
Services, Green Power, Property Development and
thenewly formed Network Services businesses. The
addition of Network Services strengthens the Group’s
operational resilience, supports delivery of our AMP8
commitments, and contributes to long-term value
creation beyond the regulated business. Progress
acrossthis portfolio is strengthening the skills, capability
and capacity needed to drive improved customer and
environmental outcomes while generating long-term
sustainable strategic value for stakeholders.
Network Services
Network Services was established following the acquisition of
Industrial Water Jetting Systems Holdings Limited (‘IWJS’) and
Watertight, businesses providing civils, jetting, CCTV and sewer
rehabilitation capability. As the first phase of our supplier integration
strategy, these acquisitions secure critical operational capability,
retainvalue within the Group and strengthen resilience. Together
theyadd over 300 skilled colleagues and a fleet of specialist vehicles,
supporting efficient delivery of our AMP8 Business Plan and reinforcing
our long-term Infrastructure Services growth trajectory.
Green Power
Green Power remains the UK’s largest producer of renewable energy
from food waste, operating more than ten anaerobic digestion facilities
alongside wind, solar and hydro assets.
In 2025/26, the business generated around 325 GWh giving enough
renewable energy power to 120,000 homes, while continuing to
broaden its variety of renewable technologies, supporting the Group’s
energy resilience and contributing to long-term environmental value.
This is further supported by planned expansion of our solar generation,
which is expected to deliver over 200 Gwh of incremental generation
growth over the next three years, mostly through Project Verona, which
comprises four large-scale solar farms. In 2025/26, weawarded the
construction contract to BELECTRIC and secured a15-year power
purchase agreement, supporting our long-term operational resilience.
Property Development
Our operational footprint continues to evolve as innovation enables
us to release surplus land for redevelopment across the region.
We remain on track to deliver £150 million PBIT from surplus land
sales between 2017 and 2032, reaffirmed through performance this
year. Since 2018, we have sold land with planning permission for 1,650
homes and 1.7 million sq. ft. of commercial space, supporting more
than 2,000 jobs. In 2025/26, the business delivered £4.6 million profit, a
£1 million increase year-on-year, reflecting strong planning progress
and growing engagement in natural-capital and biodiversity opportunities,
which are enhancing the quality and potential of our land portfolio.
Looking ahead
Infrastructure Services is developing into a strategic enabler
of resilience and growth for the Group. With strengthened
capability across all business areas and early momentum
withinNetwork Services, we are increasingly well positioned to
support delivery of our AMP8 commitments and the decades of
investment ahead.
Operating Services
Operating Services delivers long-term water and wastewater
management for the Ministry of Defence (‘MoD’), as well as water
hygiene and legionella control, compliance services and conveyancing
searches. These businesses continue to generate stable, predictable
income supported by multi-year contracts.
Aqualytix strengthened its market position through both organic
growth and strategic acquisitions. The acquisition of Reigate
Environmental Services in April 2025 enhanced our presence in
thewater treatment market, while acquisition of Howlett Associates
inJanuary 2026 expanded our water hygiene and legionella control
footprint and improved regional integration with specialist services.
Across water and wastewater services, we continue to support
the MoD estate, broadening infrastructure services and growing
our project portfolio with the MoD and external customers. Oren
Environmental delivered increased capital schemes, supporting both
the Mining Remediation Authority and Severn Trent Water’s maintenance
and enhancement programmes through natural capital solutions.
Severn Trent Searches delivered a resilient performance despite
subdued conditions in the residential property market, with stable
commercial volumes and operational efficiencies contributing to
apositive outcome.
HomeServe continued to provide plumbing and drainage emergency
cover services to Severn Trent customers. The migration to Kraken
presented short-term operational challenges and is expected to
enhance capabilities over the longer term.
Further information on Infrastructure Services’ performance
is provided in the CFO’s review on pages 57 to 63.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 56
Chief Financial Officer’s Review
We have delivered strong financial performance in the year and in
linewith expectations, with PBIT of £861 million, an increase of 46%.
Thisdemonstrates the resilience of the sector’s regulatory model
inchallenging times against a backdrop of global economic uncertainty,
and higher than forecast inflation.
This year’s financial results do not reflect the benefits of our performance
incentives and other regulatory income earned in the year. Our total
regulatory income was £1,078 million (2024/25: £1,013 million), reflecting
strong performance against the regulatory model in the year and the
value generated from the index-linked uplift on our growing regulatory
asset base.
Looking forward, we are monitoring the potential challenges from higher
energy costs, and the impacts of higher oil prices on our input costs from
chemicals and pipes made from materials derived from petrochemicals.
We have hedged around 90% of energy costs to March 2029 including all
of our expected consumption for next year at prices set before the conflict
in the Middle East increased energy prices. A significant benefit of our
regulatory model is its link to CPIH inflation along with over 50% of our
totex protected by relevant indices.
A summary of our financial performance for the year is set out below:
Group turnover was £2,831 million (2024/25 £2,427 million) up
£404 million (16.6%), driven by higher revenues in our Regulated Water
and Wastewater business (up £380 million) mainly from tariff increases,
but also from higher consumption during the drought period. In our
Infrastructure Services business we saw growth from higher recoveries
on our Ministry of Defence (‘MoD’) contract in Operating Services and the
acquisition of two Network Services businesses.
Group PBIT was up £271 million (45.9%) to £861 million. Regulated Water
and Wastewater PBIT grew by £264 million driven by the higher revenue.
In Infrastructure Services, EBITDA was £8 million higher.
Net finance costs were £58 million (24%) higher than the prior
yearat£302 million. Average net debt was up 19% at £9,237 million
(2024/25: £7,755 million) and higher inflation in the year increased the
cost of our index-linked debt by £22 million. Our effective interest cost
was 4.8% (2024/25: 4.3%), with most of the increase due to higher
interestrates on new debt raised.
Our adjusted effective tax rate of nil remained unchanged from 2024/25
and, as expected, there was no current tax payable in the year due to the
capital allowances derived from the investment in our asset base. The tax
charge of £153 million reflects our full effective tax rate this year of 29.2%,
higher than the statutory rate of 25% due to prior year true-ups.
Group profit after tax was £371 million (2024/25: £229 million) and our
adjusted basic EPS was 184.4 pence (2024/25: 112.1 pence) reflecting the
increase in earnings. Basic EPS was 123.5 pence (2024/25: 76.6 pence).
Our balance sheet remains strong. At 31 March 2026 we held cash and
short term deposits amounting to £796 million (2025: £1,048 million).
Ouradjusted net debt was £10,054 million (2025: £8,545 million) and
ourregulated gearing was 63.6% (2025: 62.7%).
2026
£m
2025
£m
Change
£m %
Turnover 2,831 2,427 404 16.6
PBIT 861 590 271 45.9
Net finance costs (302) (244) (58) (23.8)
Losses on financial instruments, share of results of joint venture and impairment
ofloansreceivable (35) (26) (9) (34.6)
Profit before tax 524 320 204 63.8
Tax (153) (91) (62) (68.1)
Profit for the year 371 229 142 62.0
Helen Miles
Chief Financial Officer
Severn Trent Plc Annual Report and Accounts 2026 57
Strategic Report Governance Financial Statements
Chief Financial Officer’s Review continued
Our net pension deficit on an IAS 19 basis is £21 million (2025: £120 million).
We paid contributions of £72 million, in line with our funding plan. Actuarial
assumptions reduced the deficit by £39 million split evenly between
changes in financial assumptions derived from market rates and
changesto demographic assumptions to align with the latest funding
valuation for the STPS. In line with our hedging strategy, these changes
were partially offset by reductions in the value of hedging assets but
overall the scheme’s assets delivered a return of £108 million in the year.
Net finance costs from unwinding of the discount on the opening deficit
were £7 million and there were administration costs of£4 million.
Operational cash flow was £1,212 million, (2024/25: £869 million) as
EBITDA increased by £311 million. Cash capex was £1,884 million, up
£346 million due to the increasing capital programme. Net cash outflow
before changes in net debt was £1,402 million (2024/25: outflow of
£1,278 million).
Severn Trent Water’s RoRE (Return on Regulated Equity) for the year,
based on our actual capital structure, was 13.7%, 840 bps above the base
return of 5.3%. Outperformance came mainly from financing, reflecting
our outperformance against the iBoxx index when raising new debt and
the benefit of a lower proportion of index-linked debt, as well as the
benefit of tax allowances on our capital programme and strong
performance against our ODI and PCD regulatory targets delivering
rewards of £73 million, with 78% of our ODI measures in reward.
Our proposed final dividend of 75.62 pence (2024/25: 73.03 pence), is in
line with our inflation-linked dividend policy and payable on 15 July 2026.
Turnover increased by £380 million compared to 2024/25 driven
bya£378 million increase in core revenue. The movement in core
revenuecomprises:
• An increase of £66 million from the annual CPIH increase in prices
• A £358 million real change in allowance due to tariff increases
• A £45 million reduction due to the year-on year change in ODIs billed
• A £41 million reduction to Developer and Third Party revenue
• Other small increases of £40 million
Other revenue streams contributed a £3 million increase to turnover
year-on-year with £7 million reduction to infrastructure renewal
income, mostly in relation to HS2 work, which offsets in infrastructure
renewals expenditure and a £10 million increase to income streams
such as bulk water, OWC (‘other water company’) collection
commission and tankered trade waste.
Net labour costs of £252 million were 3% higher than 2024/25.
Investment in additional headcount to drive operational improvements
in key strategic business areas such as pollutions, and to deliver the
step up in our capital programme increased gross labour costs by
£83 million. Annual pay increases, which take effect from 1 July
eachyear, increased costs by £25 million. These increases were
offsetby a step up in capitalised salaries, reflecting the step up
inthecapital programme.
Net hired and contracted costs increased by £43 million (16%), £19 million
of which relates to a planned step-up in licence costs for our new billing
system, Kraken, and a further £15 million due to additional tankering to
manage the impacts of the prolonged drought and prevent pollutions.
Operational efficiencies of £7 million have been generated through our
no-dig pipe repair solution, which allows us to complete jobs faster, with
lower need for excavation and gang costs.
Regulated Water and Wastewater
Turnover for our Regulated Water and Wastewater business was £2,629 million (2024/25: £2,249 million) and PBIT was £850 million
(2024/25: £586 million).
2026
£m
2025
£m
Change
£m %
Turnover 2,629 2,249 380 16.9
Net labour costs (252) (245) (7) (2.9)
Net hired and contracted costs (318) (275) (43) (15.6)
Power (183) (192) 9 4.7
Bad debts (46) (35) (11) (31.4)
Other costs (360) (321) (39) (12.1)
(1,159) (1,068) (91) (8.5)
Infrastructure renewals expenditure (136) (149) 13 8.7
Depreciation (484) (446) (38) (8.5)
PBIT 850 586 264 45.1
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 58
Power costs were £9 million or 5% lower period-on-period, driven
bythe lower wholesale weighted average hedged price of electricity
onimports (around £23/MWh lower). This was partly offset by
increased consumption at our Water Treatment sites during the
hotsummer months.
Bad debt charges increased by £11 million but remained broadly flat
as a proportion of household revenue at 2.1% (2024/25: 2.0%).
Other costs were £39 million higher compared to 2024/25. Higher
business rates and regulatory fees resulted in a £13 million increase
to costs year-on-year. A further £17 million is driven by increased
plant hire and material usage to manage extreme weather events and
mitigate pollutions. The remaining variance is driven by a number of
smaller increases such as chemical and sludge recycling costs.
Infrastructure renewals expenditure was £13 million lower compared
to 2024/25, £7 million of which is due to lower HS2 activity, which
offsets the same amount of lower infrastructure revenue above.
Theremaining reduction is driven by a higher proportion of
capitalworks.
Depreciation of £484 million was £38 million higher due to our
increasing asset base driven by our significant capital investment.
Return on Regulatory Equity (‘RoRE’)
RoRE is a key performance indicator for the regulated business
andreflects our combined performance on totex, ODIsandfinancing
compared to the base return allowed in the FinalDetermination.
Severn Trent Water’s RoRE, based on our actual capital structure,
forthe year ended 31 March 2026 is set out in the following table:
2025/26
%
Base return 5.3
Enhanced RoRE reward 0.3
Totex performance 0.2
ODI and PCD outperformance 1.2
Financing outperformance 3.9
Tax outperformance 2.8
Return on Regulatory Equity
(basedontheactualcapitalstructure) 13.7
We have delivered RoRE of 13.7% in the year, outperforming the base
return by 8.4% as a result of:
• delivery against our Performance Incentives with outperformance
of 1.2%, driven by strong performance across the majority of ODI
measures, with 78% meeting or exceeding regulatory targets and
astrong start on our PCDs;
• financing performance of 3.9%, driven by our AMP8 financing
strategy of maintaining a low level of index-linked debt; and
• the tax benefit of full expensing of certain capital expenditure.
Regulatory performance measures
In addition to RoRE we have developed further performance measures
to highlight aspects of value created by the Group that are not reflected
in our financial performance indicators. These are set out below.
Economic Equity Value Added
Our first measure gives an indication of the economic value generated
by the Group over the AMP to date.
Our Economic Value Added metric measures the growth in our RCV
andour investment in our non-regulated business net of changes in
netdebt, pension liabilities and cash tax. We measure this over the
AMPperiod:
2025/26
£m
AMP8
opening
£m
Value
added
£m
Economic RCV 15,314 13,657 1,657
Revenue earned not billed 510 501 9
Regulated economic value 15,482 14,158 1,666
Other Group investments 52
Change in net debt, pensions and tax (1,414)
Retained economic equity value added 304
Cashflows to equity holders 371
Economic equity value added 675
The components of Economic RCV are shown below
2025/26
£m
AMP8
opening
£m
Value
added
£m
FD RCV 15,367 13,657 1,710
Blind year RCV adjustments (33) (33)
Other (20) (20)
Economic RCV 15,314 13,657 1,657
Blind year adjustments arise from true ups to estimates that were
included in the PR24 Final Determination in relation to the year ended
31 March 2025. They represent the difference between the amount
estimated and the final amount.
Other comprises a number of small adjustments to the RCV at the start
ofthe new AMP.
Regulatory income
This measure reflects income that will be recognised in IFRS financial
statements in future years. IFRS financial statements do not currently
reflect rights that we have earned in the period to bill additional revenue
in future periods.
In addition, the inflation accretion on the principal amount of our
index-linked debt is charged to finance costs in our IFRS financial
statements but the inflation uplift on our RCV is not recognised under
IFRS. Our regulatory income metric includes the benefit of inflation on
RCV and the cost of inflation on index-linked debt for Severn Trent Water
and Hafren Dyfrdwy combined.
2025/26
£m
2024/25
£m
Adjusted IFRS earnings
(seefinancialstatementsnote14) 554 336
Change in revenue earned not billed 9 263
RCV inflation 515 414
Total regulatory income 1,078 1,013
Severn Trent Plc Annual Report and Accounts 2026 59
Strategic Report Governance Financial Statements
Chief Financial Officer’s Review continued
The movement in revenue earned not billed in the year is set out below
inits major components:
Revenue
£m
ODIs
£m
Totex
£m
True-ups
£m
Total
£m
At 1 April 2025 85 141 299 (24) 501
Inflation 6 9 23 (2) 36
Earned in year 47 73 13 (35) 98
Billed in year (17) (54) (61) 7 (125)
Change in year 36 28 (25) (30) 9
At 31 March 2026 121 169 273 (54) 510
Revenue is an adjustment for the difference between revenue billed and
the amount allowed in the Final Determination. These adjustments are
generally billed two years in arrears.
ODI rewards earned in a given period can be recovered through revenue
after two years (or carried forward further at the Company’s choice). This
is shown net of tax, in current prices.
Differences between totex spent and the amount allowed are ‘shared’
with customers in the following AMP. Part of this difference is recovered
through adjustments to revenue (included here) and the remainder
through adjustments to the RCV.
The regulatory model includes a number of ‘true-ups’ for differences
from original assumptions arising through the AMP and recovered from
customers in the next AMP. These true-ups include cost ofdebt, third
party services and delayed delivery cashflow mechanism and brought
forward from AMP7: tax, land sales, cost of debt and the RPI-CPIH wedge.
Infrastructure Services
2026
£m
2025
£m
Change
£m %
Turnover
Operating Services and other 124 100 24 24.0
Green Power 83 83 – –
Network Services 23 – 23 N/A
230 183 47 25.7
EBITDA
Operating Services and other 26 21 5 23.8
Green Power 24 23 1 4.3
Network Services – – – –
Property Development 5 3 2 66.7
55 47 8 17.0
Infrastructure Services turnover was £230 million (up 25.7%) and
EBITDA was £55 million (up 17%). This includes the performance
ofthetwo Network Services acquisitions, IWJS and Watertight
Management Limited(‘Watertight’), thatwere completed on
31 Julyand1 August2025respectively.
In our Operating Services and Other businesses, turnover increased
by£24 million due to recovery of higher charges from water and
wastewater suppliers in our MoD contract, the acquisition of Reigate
Environmental Services Limited and higher project revenue in Oren
Services, our reed bed business.
EBITDA was £26 million, £5 million higher mainly due to the additional
wholesaler charges above, partly offset by a refund of legal costs in
relation to the Environmental Information Request (‘EIR’) case in 2024/25
and bid costs relating to the retender of the MoD contract which expires
in 2030.
In Green Power, turnover was £83 million, flat year-on-year as a result of
generation mix and higher export prices. This was offset by slightly lower
generation (2 GWh) due to lower hydro activity over the drought period
and downtime for asset replacements.
Network Services includes our two new acquisitions. IWJS provides
sewer rehabilitation and jetting services, removing sewer blockages to
prevent pollutions and sewer flooding events. Watertight was one of
ourkey civil engineering suppliers and brings experience in complex
mains renewals, infrastructure upgrades and incident response.
Bothbusinesses were acquired as part of a strategic vertical integration
of the Severn Trent Water supply chain, securing this element of the
supply chain and creating opportunities for Infrastructure Services to
benefit from the increased sector investment over AMP8 and beyond.
These businesses have contributed additional revenues to the period
of£23 million and EBITDA of £2 million before acquisition costs
of£2 million.
Profits from Property Development were £5 million, up £2 million.
Ourlong-term plans to deliver £150 million profit by 2032 remain
ontrack.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 60
Corporate and other
Corporate costs were £15 million (2024/25: £20 million). The decrease
includes £3 million due to lower Executive Directors’ variable pay and
£2 million lower professional costs as 2024/25 included legal fees
incurred in relation to the collective action claim brought against
SevernTrent Water at the Competition Appeal Tribunal, which was
subsequently dismissed.
Our other businesses, which comprises our captive insurance company,
generated PBIT of £1 million (2024/25: £1 million).
Net finance costs
Net finance costs for the year were £58 million (24%) higher than the
prior year at £302 million. Average net debt was up 19% at £9,237 million
(2024/25: £7,755 million) and higher inflation in the year increased the
cost of our index-linked debt by £22 million. Our effective interest cost
was 4.8% (2024/25: 4.3%), with most of the increase due to higher
interest rates on new debt raised.
We issued £1,657 million of new debt at tight pricing with low credit
spreads compared to the sector average and within the regulatory
allowed cost of debt, and agreed a £100 million bilateral term loan which
was undrawn at 31 March. Our effective cash cost of interest (excluding
the RPI uplift on index-linked debt and pensions-related charges) was
higher at 3.8% (2024/25: 3.4%).
Capitalised interest of £150 million was £47 million higher year-on-year,
due mainly to increased capital work in progress compared to the
previous year and also the higher cost of debt.
Our earnings before interest, tax depreciation and amortisation (EBITDA)
interest cover was 4.6 times (2024/25: 4.5 times) and PBIT interest cover
was 2.9 times (2024/25: 2.5 times). See note 46 for further details.
Gains/losses on financial instruments
We use financial derivatives solely to hedge risks associated with our
normal business activities including:
• Exchange rate exposure on foreign currency borrowings;
• Interest rate exposures on floating rate borrowings;
• Exposures to increases in electricity prices; and
• Changes in the regulatory model from RPI to CPIH.
We hold interest rate swaps with a net notional principal of £433 million
floating to fixed, and cross currency swaps with a sterling principal of
£3,133 million, which economically act to fix the sterling liability on certain
foreign currency borrowings.
We revalue the derivatives at each balance sheet date and take the
changes in value to the income statement, unless the derivative
ispartofa cash flow hedge.
Where hedge accounting is not applied, if the risk being hedged does not
impact the income statement in the same period as the change in value
of the derivative, then an accounting mismatch arises and there is a net
charge or credit to the income statement. During the year there was a
net gain of £41 million (2024/25: net loss of £18 million) in relation to
these instruments, partly offset by the exchange loss on the related
currency loan (2024/25: gain of £11 million).
Note 11 to the financial statements gives an analysis of the amounts
charged to the income statement in relation to financial instruments.
As part of our power cost management strategy, we have fixed the
wholesale price for around 90% of our estimated wholesale energy
usage to March 2029 including all of our expected consumption for
2026/27 through physical hedges with suppliers and natural hedges
from the export of self-generated energy.
Share of loss of joint venture
Our share of Water Plus’s result for the year was a loss of £5 million
(2024/25: loss of £22 million). The brought forward carrying value of our
investment in Water Plus was £2 million. As we do not have an obligation
to contribute to the losses in excess of our investment, we have
restricted the loss recognised in our income statement to the value
ofour investment at the start of the year, £2 million.
Taxation
We are committed to paying the right amount of tax at the right time,
andwere pleased to be awarded the Fair Tax Mark for the seventh
consecutive year. We pay a range of taxes, including business rates,
employer’s national insurance and environmental taxes such as the
Climate Change Levy as well as the corporation tax shown in our tax
charge in the income statement.
2026
£m
2025
£m
Tax incurred:
Corporation tax – –
Business rates and property taxes 100 97
Employer’s National Insurance 63 47
Environmental taxes 7 7
Other taxes 7 6
177 157
Further details on the taxes and levies that we pay can be found in our
report “Explaining our Tax Contribution 2025/26”, which will be made
available at www.severntrent.com/sustainability-strategy/reports-and-
publications/tax/ when our Annual Report and Accounts is published
inJune.
The corporation tax charge for the year recorded in the income statement
was £153 million (2024/25: £91 million) and we made net corporation tax
payments in the year of £0.4 million (2024/25: £0.4 million). The difference
between the tax charged and the tax paid is summarised below:
2026
£m
2025
£m
Tax on profit on ordinary activities 153 91
Tax effect of timing differences (139) (85)
Under/(over) provisions in previous years (14) (6)
Net tax paid in the year – –
No tax was paid relating to the year as the allowances available from full
expensing resulted in a loss for tax purposes (2024/25: nil).
Severn Trent Plc Annual Report and Accounts 2026 61
Strategic Report Governance Financial Statements
Chief Financial Officer’s Review continued
Note 12 in the financial statements sets out the tax charges and credits
inthe year, which are described below.
The current tax charge for the year was £3 million, which arose from
adjustments to tax provisions from previous years (2024/25 nil). The
deferred tax charge was £150 million (2024/25: £91 million).
Our effective tax rate was 29.2% (2024/25: 28.4%), which is higher than
the UK rate of corporation tax of 25% in both years mainly due to prior
year true-ups and permanent differences arising from costs that are not
deductible for tax.
Our adjusted effective current tax rate was nil (2024/25: nil) (see note 46).
UK tax rules specify the rate of tax relief available on capital expenditure.
Typically this is greater in the early years than the rate of depreciation
used to write off the expenditure in our accounts. In the current and
previous year a significant proportion of our capital expenditure qualified
for 100% deduction for tax in the year of spend.
The impact of this timing difference applied across our significant and
recurring capital programme tends to reduce our adjusted effective
current tax rate and corporation tax payments in the year. Under IFRS
accounting, we make a provision for the tax that we would pay in future
periods, if the depreciation charge arising on expenditure for which tax
relief has already been received is not offset by further tax allowances in
those periods. However, the nature of our business, including a significant
rolling capital programme and the long lives of our assets, means we do
not expect these timing differences to reverse for the foreseeable future,
and they may never do so. This is the most significant component of our
deferred tax position.
Our net deferred tax provision is reduced by the benefit of taxable losses
amounting to £2,392 million (2024/25 £1,768 million) that we have
incurred as a result of the capital allowances claimed under the super
deduction and full expensing.
Profit for the year and earnings per share
Total profit for the year was £371 million (2024/25: £229 million).
Basic earnings per share was 123.5 pence (2024/25: 76.6 pence). Adjusted
basic earnings per share was 184.4 pence (2024/25: 112.1 pence). For
further details see note 14.
Cash flow
2026
£m
2025
£m
Operational cashflow 1,212 869
Cash capex (1,884) (1,538)
Net interest paid (341) (254)
Purchase of subsidiaries net of cash acquired (35) (14)
Net loans repaid by joint venture 20 –
Net proceeds/(payments) for swap terminations 2 (1)
Free cash flow (1,046) (938)
Dividends (371) (356)
Issue of shares 15 16
Change in adjusted net debt from cash flows (1,402) (1,278)
Non-cash movements (107) (79)
Change in adjusted net debt (1,509) (1,357)
Opening adjusted net debt (8,545) (7,188)
Closing adjusted net debt (10,054) (8,545)
2026
£m
2025
£m
Net cash and cash equivalents 788 1,045
Bank loans (785) (785)
Other loans (10,087) (8,798)
Lease liabilities (104) (111)
Accounting adjustments on debt 83 33
Loans due from joint venture 51 71
Adjusted net debt (10,054) (8,545)
Operational cash flow was £1,212 million (2024/25: £869 million).
Theincrease arose mainly from higher EBITDA.
Net cash capex increased to £1,884 million (2024/25: £1,538 million), our
highest ever level of investment, reflecting our fast start on our AMP8
capital programme.
Our net interest payments of £341 million (2024/25: £254 million) were
higher than the previous year due to the impact of higher net debt,
andanincrease in the effective cash cost of interest (which excludes
thenon–cash indexation charge on index linked debt).
The benefits of the full expensing capital allowances meant that we had
no taxable profit in the year and no tax paid.
We received £15 million from the exercise of options under the employee
Save As You Earn share scheme (2024/25 £16 million). Our dividends
paidincreased in line with our policy to increase by CPIH each year
duringAMP 8.
These cash flows, together with accounting adjustments to the carrying
value of debt, resulted in an increase in adjusted net debt of £1,509 million
(2024/25: increase of £1,357 million).
At 31 March 2026 we held £788 million (2025: £1,045 million) in net cash
and cash equivalents. Average debt maturity was around 12 years
(2025: 13 years). Including committed facilities, our cash flow
requirements are funded until August 2027.
Adjusted net debt at 31 March 2026 was £10,054 million
(2025: £8,545 million). Regulated gearing was 63.6% (2025: 62.7%).
The estimated fair value of debt at 31 March 2026 was £2,248 million
lower than book value (2025: £1,051 million lower). The change in the
difference between book and fair value is largely due to the impacts of
inflation expectations on the fair value of our index-linked debt and of
higher interest rate expectations on our fixed-rate debt.
Our policy for the management of interest rates is that at least 40% of our
borrowings should be at fixed interest rates, or hedged through the use
ofinterest rate swaps or forward rate agreements. At 31 March 2026
interest rates for 64% (2025: 66%) of our gross debt of £10,984 million
were fixed; 14% were floating and 22% were index linked. We continue
tocarefully monitor market conditions and our interest rate exposure.
Our long-term credit ratings are:
Long-term ratings Severn Trent Plc
Severn Trent
Water Outlook
Moody’s Baa2 Baa1 Stable
Fitch BBB BBB+ Stable
We invest cash in deposits with highly rated banks and liquidity funds.
Weregularly review the list of counterparties and report this to the
Treasury Committee.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 62
Pensions
We have three defined benefit pensions arrangements, two from
SevernTrent and one from Dee Valley Water. The schemes are closed
tofuture accrual.
The most recent formal actuarial valuation for the Severn Trent
PensionScheme (‘STPS’), which is by far the largest of the schemes,
wascompleted as at 31 March 2025. The future funding plan agreed
withthe Trustee was unchanged from the 2022 valuation (save for
inflationary uplifts where applicable) and includes:
• Deficit reduction payments of £40 million to be made each year
until31 March 2027, with the March 2026 payment having been
increased inline with the annual increase in CPI to November 2025.
Thereafter future contributions for the STPS increase in line with CPI
inflation. The contributions are paid into a limited liability partnership
that the Group and Trustee have set up. It is expected that all future
deficit reduction contributions will continue to be paid into this limited
liability partnership, which is recognised as an asset of the Scheme.
• Payments under an asset-backed funding arrangement of £8.2 million
per annum to 31 March 2032, which will only continue if the Scheme’s
assets are less than the Scheme’s Technical Provisions; and
• Inflation-linked payments of £15 million per annum under an asset-
backed funding arrangement, with payments having started in the year
ended 31 March 2018, potentially continuing to 31 March 2031, although
these contributions will cease earlier should a subsequent valuation
ofthe STPS show that these contributions are no longer needed.
The Severn Trent Mirror Image Pension Scheme (‘MIPS’), which
represents around 4% of the Group’s defined benefit liabilities, benefits
from a bulkannuity buy-in. Under the buy-in, the liabilities of this scheme
willbemet by an insurance policy and as a result the Group’s risk
issubstantially reduced.
Hafren Dyfrdwy participates in the Dee Valley Water Limited Section of
the Water Companies Pension Scheme (‘DVWS’). DVWS funds are
administered by trustees and held separately from the assets of the
Group. DVWS is closed to new entrants. The most recent formal actuarial
valuation of DVWS was completed as at 31 March 2023 and no deficit
reduction contributions are required. The DVWS also benefits from a bulk
annuity buy-in insurance policy that covers the majority of the scheme
obligations and in March 2024 the DVWS closed to future accrual.
No deficit reduction contributions are payable for MIPS or DVWS.
On an IAS 19 basis, the net position (before deferred tax) of all of the
Group’s defined benefit pension schemes was a deficit of £21 million
(2025: £120 million). To calculate the pension deficit for accounting
purposes, IAS 19 requires corporate bond yields to be used as the
basisfor the discount rate of our long-term liabilities, irrespective
ofthenature of the scheme’s assets or their expected returns.
On an IAS 19 basis, the funding level increased to 99%
(31 March2025: 93%).
The movements in the net deficit during the year were:
Fair value
of scheme
assets
£m
Defined
benefit
obligations
£m
Net deficit
£m
At 1 April 2025 1,677 (1,797) (120)
Amounts credited/(charged)
toincomestatement 89 (102) (13)
Actuarial gains taken to reserves 14 26 40
Net contributions received
andbenefits paid (47) 119 72
At 31 March 2026 1,733 (1,754) (21)
The income statement includes:
• Scheme administration costs of £4 million
• Interest on scheme liabilities and expected return on the scheme
assets – together a net cost of £7 million.
• Past service cost of £2 million relating to unfunded obligations relating
to enhanced benefits on redundancy granted in previous years.
Higher interest rate expectations increased the discount rate by 30bps.
Inflation expectations have also increased by around 30bps since the
previous year end. The impacts of these changes are broadly offsetting,
but reduced liabilities by £18 million.
Demographic assumptions were updated to align with the recent funding
valuation. This reduced liabilities by £19 million.
The actual outturn in the year for inflation was slightly higher than
previous assumptions and this increased scheme liabilities by £11 million.
The overall return on scheme assets was £14 million higher than the
interest return derived from the discount rate.
Contributions paid to the STPS in the year included:
• The amounts due under the asset-backed funding arrangements
(£31 million); and
• The deficit reduction payment of £41 million, which was paid
toourLLPfunding vehicle.
Dividends
In line with our policy for AMP7 to increase the dividend by at least CPIH
each year, the Board has proposed a final ordinary dividend of 75.62 pence
per share for 2025/26 (2024/25: 73.03 pence per share). This gives a total
ordinary dividend for the year of 126.02 pence (2024/25: 121.71 pence).
The final ordinary dividend is payable on 15 July 2026 to shareholders
onthe register at 29 May 2026.
Severn Trent Plc Annual Report and Accounts 2026 63
Strategic Report Governance Financial Statements
Managing Risks and Opportunities
We operate a robust risk management framework to identify, assess
andmitigate risks effectively in order to deliver our strategic objectives.
2025/26 External Environment
2025/26 marked a pivotal transition for the water industry in England
andWales as we entered AMP8. This period represented the beginning
ofa record £104 billion investment programme aimed at delivering
transformative change in the areas that matter most to customers
andstakeholders, including improving environmental performance
andlong-term resilience.
This also marked the start of a ‘once-in-a-generation’ reform of the
water industry, supported bythe Independent Water Commission’s
report and subsequent Defra White Paper, which together outline
recommendations that will influence regulation beyond 2030. These
proposed changes will create significant opportunities, and our
framework will ensure we are well-positioned to respond.
Geopolitical tensions including the on-going wars in Ukraine and the
Middle East impact the global and UK economy, disrupting supplies
offueland other commodities. At the same time, challenges such
ascyber security and climate change are placing increasing demands
onorganisations to strengthen their resilience and adapt to a rapidly
changing environment. Emerging technologies and the opportunities
andrisks they bring, are also reshaping the external environment.
Collectively, these dynamics underline the need for proactive,
forward-looking risk management.
2025/26 Internal Environment
We have accelerated AMP8 investment (c. £15 billion) to ensure a
strongstart. Key areas of focus include improving water and wastewater
services, upgrading critical infrastructure, enhancing river health,
andreducing storm overflow spills, while keeping bills affordable.
OurAMP8 plan was awarded the ‘Outstanding’ rating by Ofwat.
Our performance-driven culture continues to be a core strength,
supporting sustained regulatory outperformance. Our ability to
maintaina record of over 30 years without a hosepipe ban further
demonstrates the effectiveness of proactive planning and our
commitment to maintaining a secure water supply.
Our growth ambitions continue to ensure we invest in our people,
technology (including AI), and new businesses to secure the capabilities
we need for the future. This is underpinned by an ongoing commitment
torisk management. Our ability to identify and capture opportunities
isstrengthened through external partnerships and the adoption of
emerging technologies. As a result, we are in a strong position to
accelerate growth and deliver long-term benefits for customers,
communities and the wider region.
Risk Management Process
Risk management principles are embedded throughout the business
and are a core component of our overarching structure that allows us
to achieve our strategic priorities. Our established Enterprise Risk
Management (‘ERM’) cycle enables a consistent approach and is divided
into four main stages which help us to identify, assess and evaluate,
mitigate and monitor, and report and assure our risks. This ensures
significant risk events, including emerging risks, are managed within
our risk appetite and supported by appropriate assurance.
Our ERM team oversees the ERM Policy, which forms part of the
governance process and supports our values and culture. Our risk
network, including Risk Owners and Risk Coordinators, helps to
embed and drive effective risk management across the business.
TheRisk Governance Framework supports the effective management
of risks which are focused on the short to long term and a standardised
criteria is used to consider the likelihood and impact of risk, including
financial and reputational. A strong culture of continuous improvement
ensures we are constantly evolving our approach and applying best
practice. Our framework also outlines the responsibilities across Severn
Trent which are underpinned by effective communication channels.
• Risks and opportunities
areidentified across our
operations, from theshort
to long term.
• Horizon scanning enables
the early detection of
emerging risks and trends.
• Insights gathered
from business areas
(e.g.Risk Owners and
RiskCoordinators).
• PESTLE and SWOT tools
are utilised.
• Risk appetite is discussed
and agreed.
• A standardised approach
isadopted for assessing
the likelihood and impact
of risks.
• Tools are utilised to assess
risks (e.g. risk bow ties).
• Cross-departmental
groups analyse data to
generate insights and
tofacilitate risk-based
decision making.
• Deep dives with relevant
SMEs to understand risks
and how they could evolve
over time.
• Robust controls arelinked
to causes and consequences.
• Reviews are performed
toensure risks continue
tobe aligned with our
riskappetite.
• Working groups are
in place for key areas
to ensure there are
effective mitigations
andmonitoring.
• Regular risk reviews
ensure they remain
appropriately managed.
• Regular reporting through
well-established
governance structures.
• A comprehensive view of
existing and emerging risks.
• Oversight from the
ERM team.
• Assurance activities are
performed by Internal Audit.
• Feedback mechanisms
arein place (top-down
andbottom-up).
2.
Assess &
Evaluate
Continuous improvement and communication
3.
Mitigate
& Monitor
4.
Report
& Assure
1.
Identify
ERM Cycle
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 64
Risk Reporting
Risk information is combined to provide a consolidated view across the Group. Our significant risks are reported to the Executive Committee and Board for
review and challenge every six months. Reports include details of control effectiveness and action plans to improve where necessary. Critical risk information
is also reported to the Audit and Risk Committee. Our ERM risks are linked with our licence obligations to enhance compliance-focused risk reporting.
Risk Ownership, Management and Oversight
1st line of assurance
Strategic Planning:
• Develop longer-term, holistic riskresponse
plans(e.g. WRMP, DWMP).
• Establish critical controls for ensuring the
effectiveness of our operations.
Operational Functions:
• Operate controls in their daily activities.
• Assess risk at an operational level.
ERM Risk Owners and Coordinators:
• Ensure risk-related information is up to date.
• Adhere to our risk management framework
andwork with SME’s to develop, implement
andmonitor controls.
2nd line of assurance
Central ERM Team:
• Apply the Risk Management Framework
andestablish best practice risk processes.
• Own the ERM system and report key risk
information, including response plans
andtolerance.
• Provide guidance and training for
therisknetwork.
Strategic Risk Forum:
• Share insights into emerging risks and areas
forfurther analysis.
• Reviews and validates key ERM information.
Executive Reviews:
• Perform reviews to support and challenge.
• Report on matters related to risk and ensure risk
is integral to management decisions and actions.
3rd line of assurance
Internal Audit:
• Provide assurance for significant risk
mitigationstrategies.
• Develop a three-year Internal Audit Plan which
isagreed with the Audit and RiskCommittee.
• Assess the effectiveness of risk programmes
bytesting controls.
• Evaluate the internal control environment.
• Complete reviews in line with Global Internal
Audit standards and the Internal Audit Code
ofConduct.
External Assurance:
• Independent testing and assurance of our
controlsthrough sampling procedures.
• Our main independent non-financial assurance
provider is Jacobs.
Our Risk Management Framework
Risk Approach
The risk management approach allows us to utilise our three lines
ofassurance model and combine top-down with bottom-up risk
management. This combination of approaches is necessary to remain
agile and respond to a continuously changing environment, and
consequently, a changing risk landscape. Our approach cannot,
anddoesnot, seek to eliminate all risk entirely, but ensures we can
effectively navigate the challenges and opportunities we face, only taking
risks in line with our risk appetite, which was discussed throughout
theyear and with the Audit and Risk Committee and Board. The Risk
Management Framework below also outlines the responsibilities
acrossSevern Trent and incorporates robust reporting.
Board
Set strategy
and objectives
Execute
business plans
and activities
Embed risk and internal
control management
Risk sponsorship
Report and escalate
risks/concerns
Risk oversight
Executive Committee
Audit and Risk Committee
Risk Network
The Board:
• Sets the risk culture.
• Defines and reviews the risk appetite.
• Challenges the level of risk taken to pursue the Company’s objective.
• Makes risk-informed decisions and provides oversight for key strategicrisks.
• Is responsible for effective risk oversight of enterprise-wide risks atGroup level.
• Undertakes an annual assessment of Principal Risks.
• Provides insight and challenge to horizon scanning.
The Audit and Risk Committee:
• Supports the Board in monitoring significant risks and tracking progress
against risk mitigation plans.
• Approves the ERM Policy.
• Reviews the outputs from assurance activity to ensure that risks and opportunities
are being effectively managed.
• Provides insights and challenges to horizon scanning and emerging risks.
The Executive Committee:
• Supports the Board in the management and oversight of risk.
• Assesses the level of risk to achieve the Company’s objectives.
• Individual members of the Executive Committee are assigned
relevant ERM risks and the underlying risk mitigation strategies.
• Sets and evaluates risk tolerances.
Risk Network:
• Cross functional network of colleagues to ensure risks are
effectively identified and managed, with appropriate oversight.
• Includes Risk Owners, Risk Coordinators and colleagues
whoprovide oversight, implement controls and support
riskgovernance.
Severn Trent Plc Annual Report and Accounts 2026 65
Strategic Report Governance Financial Statements
Managing Risks and Opportunities continued
Emerging and Topical Risk Themes
We define Emerging Risks as upcoming events which present uncertainty,
and those that we are currently monitoring as apotential threat. These
Emerging Risks are not yet fully quantifiable, but we monitor developments
carefully. The Executive Committee, Audit and Risk Committee and Board
have carried out a robust assessment of the Group’s Emerging Risks.
Emerging Risk management ensures potential risks are identified,
withplans evaluated to bolster the Group’s preparedness should they
materialise. Our processes aim to identify new and changing risks at
anearly stage and analyse them thoroughly to determine the potential
exposure for the Group.
We continually identify and monitor Emerging Risks using top-down
andbottom-up processes. Ourrisk network uses techniques such
ascross-functional workshops and Political, Economic, Sociological,
Technological, Legal and Environment (‘PESTLE’) analysis.
We closely monitor Emerging Risks that may, withtime, become complete
ERM risks and incorporated into the existing corporate risk reporting
process; be superseded by new Emerging Risks; or cease tobe relevant,
as the internal and external environments in which we operate evolve.
The horizon-scanning exercise utilises insights from internal stakeholders
and external publications, including the National Risk Register and Global
Risk Report (World Economic Forum). This is critical to reflect the
interconnectivity with national and global riskenvironments.
During 2026, proactive horizon scanning and thematic analysis will remain
essential components of our risk management approach. This will help
usanticipate emerging trends and stay prepared for both potential threats
and new opportunities in an increasingly unpredictable landscape, while
continuing to protect our customers, colleagues and shareholders.
Evolving Political,
Regulatory
and Legislative
Landscape
Principal Risk 7
Short- to long-term
The UK water sector is entering major regulatory
reformunder the Government’s “A New Vision for
Water”, which proposes replacing Ofwat with a single
regulator overseeing economic, environmental and
water-quality compliance. Future regulation is expected
to focus on earlier interventions, tighter discharge and
abstraction controls, and stronger customer protections
via a new ombudsman. A Government Transition Plan
isexpected later in 2026. The overall policy direction
isfocused on long-term resilience and sustainability
which is aligned to our strategy.
• Continued constructive engagement with key stakeholders
to ensure we remain informed and proactively prepare for
potential changes.
• We consider future regulatory and statutory performance
expectations in our short- to long-term plans to ensure
weare prepared.
• Our established Risk Management Framework, policies
andtraining ensure our ongoing compliance withapplicable
laws and regulations and are updated to reflect changes.
• We monitor changes through our ERM risks, horizon
scanning and detailed risk assessments (e.g. PESTLE).
Resilience
to Climate Change
Over the summer, extended dry periods tested
resilience, but avoiding a hosepipe ban demonstrated
strong forward planning and supply security. Winter
then brought exceptionally wet weather, including six
named storms since October 2025. Our teams responded
effectively and met environmental obligations despite
network pressures. We continue to strengthen how
wemanage variable water availability, water quality
changes, abstraction pressures and more frequent
extreme weather. Our priority remains building
sustainable resilience and a network able to adapt
toevolving conditions.
• Our AI-enabled modelling of strategic options, combined
with our ongoing commitment to targeted investment,
ensures we both mitigate the risks and capitalise on the
opportunities presented by climate change. This work
directly informs our short-, medium- and long-term
planning, including the WRMP, DWMP, SDS and LTDS.
• All ERM risks are evaluated for relevant climate drivers,
and we continue to upskill our risk network, including
workshops, to ensure appropriate mitigations are
consistently in place.
• We conduct regular risk assessments to determine whether
additional climate adaptation measures are required.
Resilience
to Geopolitical
Confrontation
Escalating geopolitical conflicts are increasing the risk
of major supply-chain and market disruption. This
could undermine energy security and wider economic
stability, driving inflationary and resource security
pressures. The situation in the Middle East could also
impact future Bank of England interest rate decisions.
Heightened instability is also slowing global logistics,
with missile activity and maritime threats affecting
regional shipping and aviation routes, including the
Strait of Hormuz which 20% of the world’s oil supply is
routed through, and could impact fuel supplies.
Resilience to external shocks is critical.
• A significant proportion of AMP8 total expenditure (54%) is
protected from inflation through the regulatory framework.
• Energy costs are hedged.
• Supplier assessments of financial resilience and wider
global economic factors.
• Early-warning indicators are used to proactively identify
emerging supply-chain risks and support both tactical
andstrategic decision-making.
• Mapping the sources of our raw materials to understand
and mitigate any vulnerabilities.
• Contingency plans are developed in response to our risk
assessments and are subject to regular review to ensure
they remain appropriate.
Evolving
CyberRisks
Principal Risk 6
Short- to long-term
The 2026 Global Economic Forum Risk Report identifies
cyber insecurity as a leading global risk, reflecting the
increasing frequency and sophistication of cyber
attacks targeting both businesses and governments.
Heightened geo-economic confrontation may further
expediate cyber risk exposure. Cyber risk is also
recognised as a potential adverse consequence of
emerging technologies, including quantum computing.
• We closely monitor internal and external developments,
with emerging cyber risks reviewed through established
committees and forums.
• AI technologies are being leveraged to further enhance
ourcyber resilience against AI-driven threats.
• Strong internal and external networks support
intelligence-sharing on emerging threats.
• We perform robust testing to ensure we have appropriate
plans, with learnings applied.
• Standalone ERM risks track key causes, consequences
andcontrols.
Principal Risks
Drivers Key Mitigating Factors
Topical Risk Themes
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 66
Our Board
The Board has demonstrated strong leadership
and a commitment to maintaining a robust security
culture, supported by regular discussions on the
evolving security landscape and the recognition of
the continued need for investment, vigilance and
responsiveness. This included a dedicated cyber
readiness deep-dive, covering threat detection,
incident response capabilities, supply chain
dependencies and data governance arrangements.
During the year the Board also participated in
acyber incident simulation, with further details
set out on page 93. The exercise was designed
toreplicate the pressure, pace and uncertainty
of a real cyber attack, strengthening Board-level
preparedness and decision making.
Our Approach
Our ‘Being Prepared’ framework integrates
incident management, business continuity and
emergency planning to ensure we have the
capabilities, resources and plans required
toremain resilient. Sustained investment in
resilience, rigorous scenario testing and strong
governance oversight ensure we continue to
strengthen our ability to withstand, respond to
and recover from the most significant threats to
our operations. The level of cyber risk exposure
remains unchanged as our control environment
continues to evolve in line with external threats.
We have also established a Cyber Defense
Committee to provide strategic leadership
anddecision making in the event of an incident.
Business continuity
Security and resilience remain a Principal Risk
(page71), reflecting our responsibility to deliver
essential services and protect critical national
infrastructure from malicious activity. We also
recognise how they are intrinsically linked to all
ourPrincipal Risks. Heightened geo-political
tensionsand recent high-impact cyber incidents
arereflected in our Emerging Risks and PESTLE
analysis. We adopt a‘when, not if’ mindset, with
astrong focus on preparedness and proactive risk
management. Our business continuity arrangements
aredesigned to safeguard operational resilience
andcustomer service, while prioritising the
safetyandwell-being of our colleagues during
significantdisruption.
• Our security and resilience framework provides an integrated
approach to identifying threats and strengthening resilience,
supported by a dedicated cyber security function.
• Business impact analysis informs the identification of critical services,
with robust continuity plans and defined service-level agreements for
business-critical IT.
• Long-term strategic investment in people, processes and technology
ensures our security capabilities continue to evolve in line with the
changing risk landscape, with a strong focus on proactive cyber
controls to reduce exposure.
• Clear accountabilities, including a Chief Information Security Officer,
which are supported by regular awareness and training. Company-wide
exercises ensure colleagues can identify threats and respond effectively.
• Our arrangements are regularly tested, including Board-level
involvement and support from external partners, providing an
opportunity to test key areas including decision-making, escalations
and crisis communications.
• The Board and management also engage with external networks to
share intelligence and best practice, strengthening collective preparedness.
• In the event of an incident, the appropriate operational, tactical or
strategic teams are activated immediately. Clearly defined roles and
responsibilities enable a coordinated and efficient response, supported
by processes that have been consistently proven to be effective.
• Robust communication protocols ensure timely engagement with
operational teams, the Board, regulators and key third parties. This
enables clear oversight and support throughout the incident lifecycle.
• Established decision-making pathways focus on rapid containment
and prioritisation, safeguarding the continuity of essential services.
• Rotas are in place to protect colleagues’ well-being and ensure
sufficient resources are maintained across critical activities.
• Post-incident reviews are undertaken following all exercises and any
activation of the incident management process.
• Relevant security breaches across all sectors are reviewed to understand
the root cause and emerging themes. The effectiveness of responses
are evaluated to identify areas for improvement and further strengthen
organisational resilience.
• Reporting is provided to stakeholders, setting out the incident timeline
and ensuring that lessons learned are captured, shared and addressed
on a timely basis.
Our Risk Appetite
All businesses are exposed to a variety of uncertainties and need to take
on a degree of risk to achieve strategic objectives. Given the nature of
ourservices, our operations carry inherent risks that must be managed
proactively and responsibly. We are committed to managing these risks in
line with the scale and criticality of our infrastructure, with a clear focus
on protecting the environment and safeguarding the health, safety and
wellbeing of our colleagues and the communities we serve. Our sector is
subject to high levels of political, regulatory and financial security, and we
recognise the importance of our stakeholders’ evolving expectations and
the impact of climate change when we are planning and responding to risk.
Within the Group, our businesses have different risk priorities and tolerances:
• Our regulated water and wastewater businesses are monopoly
providers, regulated and characterised by relatively stable,
inflation-linked cash flows.
• Infrastructure Services have more variable cash flows and operate
inless predictable and more competitive environments.
We will only take risks that are thoroughly understood, can be effectively
managed, and are in line with our purpose, values and strategy. The Board
monitors the Group’s risk profile to ensure there is an appropriate balance
between risk and leveraging opportunities which are critical
fordelivering our strategic objectives. Additionally, the Board
considers risks, and combinations of risks in the short, medium
andlong term. Our risk appetite is reviewed by the Audit and Risk
Committee and approved by the Board. We have classified our
riskappetite statements as Zero, Low, Medium and High. When
distinguishing between Zero and Low appetite, the key differentiating
factor is the degree of control we have over the risk. For example,
although we have a Zero tolerance mindset for any escape of sewage
negatively impacting the environment, a Zero risk appetite is neither
practical or feasible given the length of our sewer network (over
90,000 km) and risk of inappropriate products entering the network.
Wastewater is also more exposed to external factors and regulatory
changes beyond our control. In addition, the EA’s new WIRI guidance
may introduce new reporting requirements, including responsibility
for pollution incidents that are caused by third parties. In contrast,
water quality is largely within our control through robust sampling
across our network and dosing management. Please see pages 68
to 73 for our risk appetite statements.
See page 68
Examples of business continuity activities
BeforeDuringAfter
Severn Trent Plc Annual Report and Accounts 2026 67
Strategic Report Governance Financial Statements
Our Principal Risks
In accordance with the 2024 UK Corporate Governance Code,
The Board and Audit and Risk Committee are responsible for
determining the nature and extent of the Principal Risks of the
business. Our Principal Risk profile is updated each year to reflect
the changing risk landscape. The Board and Audit and Risk
Committee have completed a robust review and assessment of
thePrincipal Risks facing the Group, including those that would
threaten its business model, future performance, solvency or
liquidity. This review ensures we have appropriate coverage for
risks which have the potential to:
• adversely impact the safety or security of the Group’s
employees, customers, communities and assets;
• have a material impact on the financial or operational
performance and resilience of the Group;
• impede achievement of the Group’s strategic objectives and
financial targets; and/or
• adversely impact the Group’s reputation or stakeholder expectations.
Risks relating to our longer-term prospects and the viability of the
Group have been assessed. You can read our Viability Statement on
pages 74 to 78.
Principal Risk Risk mitigation examples Key updates in the year
1. Health and Safety
Due to the nature of our operations,
we could endanger the health and safety
of our people, contractors and members
of the public.
• Our ‘Everybody Safe’ strategy embraces the
vision statement ‘nobody gets hurt or is made
unwell by what we do’.
• Our Health, Safety and Wellbeing (‘HSW’)
Framework protects our colleagues,
contractors and communities.
• Policies and standards are regularly reviewed
to ensure compliance.
• Competency framework and mandatory
training are regularly monitored.
• Work closely with our supply chain to drive
performance, including monthly executive level
engagement, safety and assurance forums, and
the sharing of insights from root cause analysis
and assurance findings.
• Health and safety bulletins are cascaded across
the Group and our supply chain.
• Incidents and near misses are tracked, resolved
promptly and reviewed for lessons learned.
• We have continued to strengthen our HSW
framework and updated our Group Policy.
• Our Safety, Health, Environment and Quality
Assurance working group, comprising of
operational teams, is a key component of our
three lines of assurance model and has fostered
a positive HSW learning culture where best
practice is consistently shared.
• We launched Team Manager Pathway Training
toequip our team managers with the technical,
leadership and behavioural capabilities
required to lead high performing teams,
including effective Health and Safety
management and the safe operation of our sites.
• Process Safety Leadership Training has been
implemented covering key elements of the
framework to strengthen our capability in
managing associated risks and controls. The
programme will continue throughout 2026/27.
• We continue to contribute to sector-wide
improvements through working with Water UK
to share insights on high-impact incidents,
strengthening safety outcomes and supporting
positive change.
Change in year
Strategic objective
Outcomes
People
Change
Stakeholders
KPIs
• Lost Time Incident (‘LTI’) rate,
seepage 12.
Risk appetite statement
We have a Zero risk appetite for health
and safety risks that could lead to serious
injury, fatality, or significant occupational
illness. We adopt a zero tolerance approach
for risks brought on by unsafe actions.
As part of our embedded ERM cycle, we reviewed our Principal Risks and
reduced the total from 11 to 10 by consolidating the nature and climate
risks into a single Principal Risk. Each of the Principal Risks are assessed
to ensure we have appropriate risk strategies and there is an alignment
with our strategic objectives and ERM risks.
Severn Trent Water is the principal regulated subsidiary of the Group, and
this structure is reflected in how we categorise and report our Principal
Risks. For each Principal Risk reported on the following pages we include:
• examples of risk mitigation strategies;
• how each Principal Risk is aligned to our stakeholders and the
strategicobjectives of our corporate strategy;
• how we have reviewed changes to the risk profile since the last report,
assessing the potential impact and likelihood based on the control
effectiveness and changes (internal and external). The ratings
indicatewhether the risk exposure has increased, decreased
ornosignificant change; and
• key indicators which are used to track changes in the risk profile
andensure appropriate actions are taken to prevent the Principal
Riskfrom materialising.
Our Principal Risks have also been assessed to determine how they
areimpacted by climate change, and more details can be found in our
TCFD and TNFD disclosures on pages 30 to 41.
Key
Change in year
Increase in risk exposure
Decrease in risk exposure
No change in risk exposure
Re-scoped
New risk
Stakeholder key
Customers Colleagues Communities
Shareholders and Investors
Suppliers and Contractors
Regulators and Government
Risk Appetite
High appetite Medium appetite Low appetite Zero appetite
Approach
to risk
The business is willing to take greater risks/
pursue opportunities that are understood
and managed within defined boundaries.
Some degree of risk taking under
theright conditions. A balanced and
informed approach to risk taking.
Reluctant to take risk and will chose
thelowest risk option. Takes a prudent
approach to risk taking.
Refusal of any risk, taking all necessary
actions to prevent occurrence.
Risk vs.
reward
Reasonable risks taken with negatives
accepted when pursuing objectives.
Measured approach to
achievingobjectives.
Not willing to incur negative impacts
when delivering objectives.
The priority is on risk avoidance and
willnot accept any level of exposure.
Risk
tolerance
Flexibility in risk tolerance. Limited in risk tolerance. Low risk tolerance. Zero risk tolerance.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 68
Principal Risk Risk mitigation examples Key updates in the year
2. Infrastructure failure and
asset resilience (Water)
We do not provide a safe and secure
supply of drinking water to our customers.
• Mandatory water quality competency training
isin place for key operational staff.
• 24/7 Control Centre oversight with real time
telemetry from network loggers.
• Water quality operational processes,
standardsand procedures are routinely
reviewed and updated.
• Ongoing asset health monitoring, maintenance
and enhancement across the network.
• Investment continues to enhance our in-house
capability to accelerate response times.
• Comprehensive resilience plans are fully
embedded and integrated into our strategic
planning.
• We collaborate across the sector on Strategic
Resource Options (‘SROs’) to strengthen
long-term national and regional water supplies.
• Strategic modelling, utilising machine learning,
assesses supply and demand scenarios,
including climate change impacts.
• Business continuity plans are established, with
experienced teams ready to manage incidents.
• WRMP sets out long-term water supply
security, including climate change resilience.
• Witches Oak Water Treatment Works
incorporates advanced on-site filtration
processes, including granular activated
carbonwhich is used to remove PFAS.
• Enhancements are underway of treatment
processes at key sites, including UV
installationat Strensham.
• Draft 2027-2032 Drought Plan approved
byDefra, outlining how we will manage
resources during dry and drought conditions
while balancing customer, environmental and
economic considerations.
• Over 175,000 smart meters installed, helping
toreduce customer consumption.
• Continued deployment of no-dig technology,
enabling faster repairs with less disruption
andlower environmental impact.
• Network resilience strengthened through
enhanced pressure management.
• Upstream Leakage Strategy launched, with
adedicated team targeting more challenging
trunk main leaks.
• Innovative tools deployed, including drones,
forleak detection and emergency response.
• Derwent Valley Aqueduct maintenance
programme commenced to improve the
resilience of a key strategic asset.
• £422 million Mains Renewal Programme
underway, replacing 1,400 km of mains.
• AMP8 transfer, expansion and increased output
capital schemes, as set out in WRMP24 have
commenced across a number of sites.
Change in year
Strategic objective
Outcomes
Nature
People
Change
Stakeholders
KPIs
• CRI (index), seepage 12.
• Supply interruptions (no. of minutes),
seepage 12.
• Leakage % (Ml/d), seepage 13.
• Customer contacts about water quality
(number of complaints), see page 12.
Risk appetite statement
We have a Zero risk appetite for any
provision of water to customers that is
unsafe for public consumption.
We have a Low risk appetite for a
disruption to water services which result
in a loss of supply to our customers.
3. Infrastructure failure and
asset resilience (Waste)
We do not transport and treat wastewater
effectively, impacting our ability to return
clean water to the environment.
• Leading sector-wide river quality improvements
through the Get River Positive campaign, ensuring
oversight and delivery of relevant environmental
commitments, greater transparency, and
stronger stakeholder engagement.
• Strategic modelling, such as for the Drainage
and Wastewater Management Plans, utilises AI
to assess potential changes to the demand on
our wastewater network. This enables us to
proactively manage the impact on our service
and any potential damage to the environment.
• 24/7 control centres monitor our asset
performance, including real-time telemetry
coverage.
• 24/7 Incident Response Teams provide extra
support during events, including delivering
additional tankers.
• Key operational employees complete mandatory
training programmes to ensure continued
competence with evolving standards.
• Educational programmes for customers to
promote safe use of the wastewater system,
including appropriate disposal of wet wipes
andcooking fat.
• Monitoring all sites with Flow to Full Treatment
permit requirements via our dedicated Flow
Performance Team.
• Progressing our sector-leading CSO
Improvement Plan andour 2025-30 PIRP.
• Asset health monitoring, maintenance and
enhancement across the network.
• Operational resilience enhanced through three
new specialist proactive and response teams
including a dedicated Pollution Team.
• Through our WINEP Programme, work has
commenced on the £320 million Wanlip
Treatment Works to meet future capacity
requirements and environmental standards.
Progress was shared with Ofwat during a site
visit in March 2026 as part of our Enhanced
Engagement programme.
• £46 million investment across 416 priority
sewage pumping stations has commenced,
improving power resilience and condition-
based monitoring.
• AI optimisation tool developed in conjunction
with a third-party to identify appropriate
network upgrades, through balancing
performance and costs.
• Increased nature-based treatment innovation
through additional roll out of reed beds.
• Over 3,000 CSO spill reduction interventions
delivered, including valves, storage tanks,
weirheight adjustments and smart controls.
• AI-powered Storm Harvester platform deployed
to predict responses to storms and proactively
reduce spills, pollutions and flooding.
• Bio Block trial launched to proactively address
sewer blockages using non-toxic organisms.
• AI-supported digital twin trial at Strongford
improving real-time performance insight and
optimisation.
• In-house capability enhanced through
acquisition of IWJS, strengthening sewer
services, waste management and industrial
cleaning expertise.
Change in year
Strategic objective
Outcomes
Nature
People
Change
Stakeholders
KPIs
• Internal sewer flooding (no. of
incidents), seepage 13.
• External sewer flooding (no. of
incidents), seepage 13.
• Storm Overflows (average spill count),
see page 13.
• Pollutions (no. of incidents), seepage 13.
Risk appetite statement
We have a Low risk appetite for an
operational failure of our wastewater
assets or processes that could negatively
impact the environment.
Severn Trent Plc Annual Report and Accounts 2026 69
Strategic Report Governance Financial Statements
Our Principal Risks continued
Principal Risk Risk mitigation examples Key updates in the year
4. Customer service
and experience
We do not meet the needs of our
customers or anticipate changing
expectations through the level of
customer experience we provide.
• Our specialist Digital Team proactively monitors
activity, enabling timely customer engagement
on planned and reactive work.
• Robust incident management processes, with
specific procedures to support vulnerable
customers during service impacting events.
• Service Level Agreements are clearly
communicated to customers who require
assistance.
• The Priority Service Register enables us to
provide personalised support and the right
assistance to customers who need it most.
• Customer insights utilised for our Business
Plan (e.g. in-depth interviews) to ensure
customer views are reflected.
• Our Developer Services Team works proactively
with new build developers to ensure effective
planning and connection processes.
• A dedicated Non-Household Customer Team
maintains active engagement with market
retailers to support service and performance.
• Cost of living and community outreach events
across our region to help raise awareness of
our support schemes and services.
• Kraken customer platform continues to be
embedded, with 99% of customer accounts
migrated. The platform provides AI-intuitive
tools that enhance frontline capability
andsupport our ambition for excellent
customer service.
• Customer communications tailored across all
channels, from community drop-ins to social
media, ensuring effective message delivery
andappropriate customer engagement.
• One of the largest affordability support
packages in the sector, with over 335,000
households receiving financial assistance this
year. A new ‘Bill Help Hub’ has been launched,
enabling customers to easily access support.
• Over 11% of our customers supported through
the Priority Services Register or financial
support, enhancing accessibility and financial
resilience for those who need it most.
• Engaged with people across our region through
our Societal Strategy, supporting our ambition
to help customers out of water poverty by
addressing underlying causes and creating
employment opportunities. See pages 19 to 23
for further detail.
• We are compliant with the new Guaranteed
Standards Scheme, ensuring our customers
can expect a high level of service.
Change in year
Strategic objective
Outcomes
Nature
Change
Stakeholders
KPIs
• C-MeX (index), seepage 12.
• D-MeX (index), seepage 12.
• Water quality complaints
(no.ofcomplaints), seepage 12.
• Customer bill support (number
ofcomplaints), seepage 12.
Risk appetite statement
We have a Low risk appetite for not getting
it right first time for our customers, and
providing outstanding customer service
isat the heart of what we do.
5. Supply chain and capital
project delivery
Insufficient resilience in the supply chain
impacts the deliverability of the capital
programme (time, cost, quality).
• Supplier agreements provide a flexible and
diverse supply chain.
• Robust gated capital processes ensure strong
governance and assurance throughout the
project delivery lifecycle.
• Commercial audits are carried out across
thesupply chain.
• Regular performance reviews, including
Director and CEO level meetings, to track
KPIsand assess suppliers and markets.
• Ongoing training strengthens contract
management capability.
• Robust verification of supply chain financial
stability use lead indicators and multi-source
credit agency monitoring.
• Targeted supply chain audits cover modern
slavery, health and safety and cyber security.
• EcoVadis assessments are used to assess
suppliers’ sustainability risk and maturity.
• Asset Planning prioritisation aligns delivery
needs with supply chain capacity.
• Capital Delivery Team restructured to
reflectthe scale of the capital programme.
• Insourcing of key activities, combined with
theaccelerated scale-up of the capital
programme have enabled the delivery
ofsignificant capital investment.
• Our supplier heat mapping has provided
ongoing monitoring and early warning
insightsacross our contracted supply chain.
• Regularly monitored the financial stability
ofcritical suppliers to ensure continuity
andmitigate risk.
• Continuity plans tested jointly with our Security
and Resilience Team to validate preparedness.
• Digital Business Case process enhanced to
improve financial forecasting through to AMP9
and streamline programme planning.
• Annual compliance review completed,
confirming capital delivery suppliers meet
contractual and regulatory requirements,
withadditional focus on health and safety
andmodern slavery.
• In-house capability strengthened through the
acquisitions of Watertight and IWJS, adding
specialist expertise to support capital delivery.
Change in year
Strategic objective
Outcomes
Change
Stakeholders
KPIs
• Number of project milestones
completed on time (no.ofprojects).
• Ratio of critical single source supplier (%).
Risk appetite statement
Our AMP8 capital programme includes
ahigh number of time-bound regulatory
commitments and we have a Low risk
appetite for not achieving these. External
risks are constantly monitored and
mitigated as far as possible.
We have a Medium risk appetite for
pursuing supply-chain related business
opportunities (e.g. new acquisitions)
thatalign with our strategic objectives
andimprove our resilience.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 70
Principal Risk Risk mitigation examples Key updates in the year
6. Security and resilience
Core operational capabilities are
compromised through physical,
peopleortechnological threats.
• Cyber Security Steering Committee,
Information Security Team and Data
PrivacyOfficer provide ongoing oversight
ofsecurity threats.
• A dedicated Security Team and Alarm
ReceivingCentre monitor and respond
toourcritical sites.
• Proactive and robust support for our
monitoring technology, with appropriate
maintenance plans.
• Mandatory annual cyber training and a
robustoperational security programme
strengthens readiness.
• Operational and office locations have
businesscontinuity, crisis management
anddisaster recovery plans.
• Regular internal and third-party testing
assesses the resilience of our networks,
systems and sites.
• A comprehensive vulnerability management
framework includes penetration testing,
behavioural alerts, patching processes,
datadisposal and access controls.
• Third-party IT Partners provide additional
capability to mitigate risks and enhance
technical standards.
• Security standards and ‘what if’ scenarios
areembedded across teams.
• Security investigation process is documented,
including root cause analysis.
• The current cyber security threat level continues
to increase in complexity and severity.
• Applied learnings from recent external cyber
incidents to strengthen our resilience and
response capabilities.
• We have continued on track with the delivery
ofour Zero Trust Architecture Plan anddelivery
roadmap, which will utilise AI technologies to
enhance our cyber resilience.
• Progressing key AMP8 security-related
programmes to ensure we evolve with the
risklandscape.
• Continued engagement with the National
CyberSecurity Centre and the wider water
industry through established forums
andcommunication channels.
• Regular engagement with the DWI to discuss
cyber security threats and our processes.
• Continued compliance, including the Security
ofNetwork & Information Systems Regulations
and Security and Emergency Measures Direction.
• Cyber testing has been completed during
theyear to ensure our readiness in the event
ofan incident.
• Regular internal communications to reinforce
key messages and mandatory cyber e-learning
continues to be completed by colleagues.
Change in year
Strategic objective
Outcomes
People
Change
Stakeholders
KPIs
• Critical application recovery testing.
• E-learning completion and awareness.
• Phishing click-through rates (%).
• Cyber incidents initial response
andclosure times.
Risk appetite statement
We have a Low risk appetite
foracyberattack which
causesoperational disruption.
7. Political, legal and
regulatory
Uncertainty of regulatory, legislative
andGovernment reforms which could
fundamentally impact our operating
environment and strategic ambitions.
• We actively engage with the UK Government,
MPs, Welsh Government, regulators and
widerstakeholders on the future direction
ofthe sector.
• Established Governance Framework,
supported by policies and training, ensures
ongoing compliance with applicable laws
andregulations, and is regularly reviewed
tocapture changes.
• Investment plans are reviewed on a regular
basis to reflect changes in legislation,
regulation and business priorities.
• External legal advisers provide updates
onforthcoming legislative changes affecting
the Group.
• Our Licence to Operate Compliance Framework
ensures adherence to legal, statutory and
regulatory obligations, with leadership
completing declarations twice yearly.
• Key updates to regulations and legislation
arecommunicated across the business with
training updated on a timely basis as required.
• Ongoing horizon scanning ensures preparedness
for political, legal and regulatory change.
• We maintain transparent and proactive
engagement with regulators and
policymakersthrough regular reporting,
sitevisits and consultations (e.g., WIRI).
• Actively preparing for policy and regulatory
changes arising from the Cunliffe review
andsubsequent “A New Vision for Water”
WhitePaper.
• In line with the Economic Crime and
CorporateTransparency Act 2023, we
havefurther strengthened governance
andfraud prevention controls.
• Working with Defra, the EA and Water UK
onfuture sludge-to-land regulations to
ensurecontinued environmental protection
andcompliance.
• We have cross-departmental working groups
preparing for upcoming changes, including
aPFAS working group proactively planning
ahead of potential regulatory changes.
Change in year
Strategic objective
Outcomes
Nature
People
Change
Stakeholders
KPIs
• We continue to monitor the external
environment for regulatory, legislative
andGovernment reforms.
Risk appetite statement
We constantly monitor, prepare for and
engage with changes in the policy and
legislative environment and maintain
aLow risk appetite for operational
orprocess weaknesses that could
increase the risk of non-compliance.
Severn Trent Plc Annual Report and Accounts 2026 71
Strategic Report Governance Financial Statements
Our Principal Risks continued
Principal Risk Risk mitigation examples Key updates in the year
8. Financial liabilities
Failure to responsibly manage our
financial position to maintain financial
resilience and a strong funding platform,
and effectively manage market volatility.
• The Group’s treasury activity is overseen by
ourTreasury Committee, with support from
dedicated advisers.
• The Group has a diversified capital structure,
interms of both tenor and access to global
debtmarkets.
• The Group maintains liquidity headroom of at
least 15 months in line with the Board-approved
Liquidity Policy and the Group has committed
credit facilities for five years.
• Group cash balances are deposited across
arange of investment-grade counterparties
tospread and mitigate risk.
• The proportion of the Group’s debt maturing in
any AMP period does not exceed 40% of the
Group’s total debt, to reduce refinancing risks.
• Treasury policy statements and procedure
manuals are reviewed at least annually.
• The Company is represented on the Investment
Committee of the scheme and the Investment
Policy is formally approved by the CFO.
• Our pension deficit recovery plans are agreed
by the Trustees and the Company. The plans
state the cash contributions required from
Severn Trent, with inflation and equity risks
managed through appropriate hedging
strategies to manage downside risks,
withregular monitoring.
• During the year we raised c.£1.8 billion of
funding to maintain appropriate levels of
liquidity, which is in excess of our 15-month
Treasury Policy.
• We have continued our focus on diversifying
funding sources, including two EUR bonds,
adebt issue in the CHF market and
privateplacements with Norwegian
andJapanese investors.
• We have accelerated delivery of our capital
programme and are on track with our
fundingrequirements.
• The level of investment risk in the Severn Trent
Pension Scheme (‘STPS’) has reduced over the
last 12 months with the funding position hitting
two derisking triggers.
• Investment during the year has focused on
insourcing to provide increased resilience
andflexibility in capital delivery.
• We are implementing AI-driven predictive
forecasting within our financial and operational
planning, combining historical data, external
indicators and machine learning to support
long-term planning, resilience and investment
decision across the Group.
• We have worked closely with the Trustees
ofthedefined benefit pension schemes and
pension advisers to meet the requirements
ofthe schemes, including those set by the
Pension Regulator.
• The 2025 triennial valuation of the STPS has
been finalised with a contribution plan where
we expect the scheme will become fully funded
within AMP8.
Change in year
Strategic objective
Outcomes
Change
Stakeholders
KPIs
• Months of liquidity (no. of months),
seepage 115.
• Pension deficit (£m), seepage 58.
Risk appetite statement
We have a Low risk appetite for breaching
our Board-approved Liquidity Policy.
9. Climate change,
environment and biodiversity
We fail to ensure our operations remain
resilient to the effects of climate change
and effectively mitigate our environmental
impact as a steward of natural capital.
• We use scenario planning and data modelling
toassess climate and nature-related impacts
on critical ecosystems and conversely, their
impact on our operations.
• Our Corporate Strategy, Business Plan, WRMP
and DWMP set out a robust long-term approach
to future climate change and nature challenges.
• We remain committed to net zero operational
emissions by 2030, supported by 100%
renewable energy ambition, a low-carbon fleet
and continued investment in our Net Zero Hub.
• Our Get River Positive pledges reflect our
commitment to delivering positive outcomes
forcommunities and the environment.
• Through our regional Get Nature Positive
initiative, we work with regulators and
stakeholders to protect biodiversity.
• Strategic plans and ODI commitments drive
biodiversity enhancement and environmental
protection, including pollution reduction
initiatives, biodiversity improvements and
relevant compliance-related activities.
• Catchment management practices help
reducethe impacts of pesticides, fertilisers
andnutrients through collaboration
withlandowners.
• Our in-house ecology expertise strengthens
our capability to enhance biodiversity across
the region.
• Early adopters of TNFD reporting, with
disclosures now aligned to all recommendations.
• We chair the Water UK Energy Managers Forum
and co-chair the Water Carbon Network, where
we share knowledge and embed learnings.
• Enhanced Greenhouse Gas governance through
improved technology, data and analytics.
• Alternative construction and operational
technologies are reducing carbon intensity.
• Continued focus on nature-positive solutions
tosupport habitat recovery by 2030.
• Set a target of 15% Biodiversity Net Gain
onallcapital and infrastructure projects,
whichexceeds the 10% UK requirement.
• Through an on-going partnership with the
National Forest, we have invested c.£1.2 million
to manage 870 hectares, fund landowner grants
and support habitat improvements and monitoring.
• Significant investment in climate change
mitigation and our Net Zero Transition Plan.
• We have published our fifth EU Taxonomy
disclosure on pages 53-55 demonstrating
alignment to climate change mitigation (‘CCM’),
adaptation (‘CCA’) and water (‘WTR’)objectives.
• Our Biodiversity Strategy and Action Plan
havedriven targeted actions to safeguard
andenhance key habitats and species
acrossour region.
Change in year
Strategic objective
Outcomes
People
Change
Stakeholders
KPIs
• Please refer to the Metrics and Targets
section of our TCFD and TNFD
disclosures, seepages 40-41.
Risk appetite statement
We have a Medium risk appetite
whenevaluating opportunities to
useinnovative techniques to improve
ourresilience to climate change and
reduce our environmental impact.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 72
Principal Risk Risk mitigation examples Key updates in the year
10. People and culture
Failure to maintain a workforce with
theright capability, skill set and values
todrive the Group’s strategy.
• ‘Doing the Right Thing’ sets out who we are,
what we stand for and how we work, ensuring
our values are clear and consistently embedded
across the organisation.
• Robust recruitment strategy which is focused
on attracting top talent with the desired skills
for both now and in the future.
• Dedicated apprenticeships and graduate
schemes available to ensure we have the
rightskills for the future.
• Our Ofsted-accredited Academy facilitates
thetraining and upskilling of our colleagues
toembrace technological advancements.
Wehavean effective training programme
tailored for each business area.
• The Academy uses a combination of the
latesttechnology, for example virtual reality,
simulation and online learning. These all help
to ensure our colleagues are equipped with the
right skills to adapt to a changing environment.
• Our D&I Strategy and our ‘Wonderfully You’
D&Iambition helps to ensure we reflect the
communities we serve.
• We are committed to growing brilliant people
with the right skills to deliver the best service
for our customers. Our Academy has a training
syllabus which includes more than 650 courses.
• Our in-house technical apprenticeship
programme continues to upskill our frontline
workforce, supporting 132 learners this year,
while maintaining a 100% pass rate and retaining
98.5% of apprentices within Severn Trent.
• We launched our new Business Leader
Development Pathway, a refreshed,
experience-led approach to leadership learning.
• We are helping colleagues across Severn Trent
to use AI tools safely and effectively through
e-learning, lunch and learns and hands-on
workshops, ensuring we effectively embrace
new technology.
• The tenure of colleagues continues to be
aboveaverage, Glassdoor rankings support
thatSevern Trent is one of the top companies
towork for. Our annual engagement score
(8.8out of a possible 10 points) keeps us in
thetop5% of businesses globally.
Change in year
Strategic objective
Outcomes
Nature
People
Change
Stakeholders
KPIs
• Employee engagement score,
seepage 12.
Risk appetite statement
We have a Low risk appetite for failing to
attract and retain colleagues with the
right capabilities and behaviours to deliver
our strategic ambitions, whilst protecting
stakeholder trust.
Severn Trent Plc Annual Report and Accounts 2026 73
Strategic Report Governance Financial Statements
Viability Statement
Assessment of current position and long-term prospects
The Directors’ assessment of the Group’s current financial position
issetout in the Chief Financial Officer’s review on pages 57 to 63.
Important aspects of that assessment that are most relevant to
theassessment of viability are:
• The Group’s RCV gearing at 65%, is within Ofwat’s acceptable range;
• The Group has sufficient cash and available facilities to fund its
financial commitments, including returns to debt and equity investors,
operating and capital expenditure until August 2027.
• The Group’s credit ratings from two agencies (Fitch and Moody’s) are
two notches above the investment grade base level and are stable.
• The defined benefit pension deficit decreased to £21 million in the year,
and we are in line with our deficit reduction plan in the most recently
completed triennial valuation.
Severn Trent Water, the Group’s principal subsidiary, is a regulated
long-term business characterised by multi-year investment programmes
and relatively stable revenues. The water industry in England and Wales
issubject to economic regulation rather than market competition and
Ofwat, the current economic regulator, has a statutory obligation to
secure that water companies can (in particular through securing
reasonable returns on their capital) finance the proper carrying out of
their statutory functions. Ofwat meets this obligation by setting price
controls for five-year Asset Management Periods (‘AMPs’) including
mechanisms that reduce the risk of variability in revenues from the
regulated business in the medium term by adjusting future revenues
tobalance over or under recovery compared to the original plan.
The final determination for PR24, the price review for AMP8, was issued
19 December 2024 and the base case for our assessment of viability for
the period to 2030 is based on our business plans within this.
When considering the Group’s prospects beyond 2030, it is necessary
tomake assumptions about the regulatory framework that will apply
forthe period 2030-2035 (‘PR29’), and in particular the transition to a
new regulator from 2030 onwards. The UK Government’s “A New Vision
for Water” White Paper published on 20 January 2026 confirmed the
planned abolition of Ofwat and the creation of a new single integrated
regulator, combining the economic, environmental, water quality and
governance functions currently spread across several bodies. While
thedesign and statutory framework of the new regulator will not be
finalised until legislation is enacted, the White Paper signals an ongoing
commitment to a regulatory model that supports long-term investment,
sustainable returns, and a fair deal for customers and investors. We
have therefore reflected this in our assumptions for the base case for
the period beyond2030.
We also considered:
• Ofwat’s statutory duty to secure that companies can finance the proper
carrying out of their functions;
• The outcome of Ofwat’s final determination and Severn Trent Water’s
assessment of this;
• Severn Trent Water’s financial structure, which is within Ofwat’s
acceptable range;
• Severn Trent Water’s plans for AMP8, the successful execution of which
would deliver benefits to all stakeholders and financial incentives that
would help to further strengthen our financial resilience in the period
beyond 2030; and
• Severn Trent Water’s longer range plans, set out in our Water
Resources Management Plan and Drainage and Wastewater
Management Plan.
We have significant investment programmes, largely funded through
access to capital markets. Our strategic funding objectives reflect the
long-term nature of the Severn Trent Water business and we seek to
obtain a balance of secure long-term funding at the best possible
economic cost. Our Treasury Policy requires us to maintain sufficient
liquidity to cover cash flow requirements for a rolling period of at least
15 months to limit the risk of restricted access to capital markets. Our
Group treasury team actively manages our debt maturity profile to spread
the timing of refinancing requirements and to enable such requirements
to be met under most market conditions. The weighted average maturity
of debt at the balance sheet date was 12 years.
Our Business Plan for AMP8 included a significant increase in the size of
our investment programme, and we are confident that we will continue
toraise finance to fund this into the future. The Group has a strong and
demonstrable track record of raising both debt and equity, with access
tocapital markets on favourable terms through a range of instruments,
including long-dated public bonds, private placements and index-linked
issuances. Investor demand for Severn Trent Water credit has remained
consistently robust, supported by the stability of the regulated revenue
model, our investment-grade credit ratings and our transparent financing
strategy. The Group has access to a diverse range of capital markets,
having successfully raised debt finance in Japan, Switzerland, the United
States of America and Europe, as well as the United Kingdom. We also
recognise the requirement for equity funding to play its part, and to that
end we raised £1 billion in a private placing of equity in October 2023.
The Group actively engages with investors, constantly monitors availability
of funding and mitigates funding risk by considering diversity of funding
sources alongside pricing, when raising new debt.
We have an established process to assess the Group’s prospects. The
Board undertakes a detailed assessment of the Group’s strategy on an
annual basis and the output from this assessment sets the framework
forour medium-term plan, which we update annually.
Our medium-term plan reflects the Group’s prospects and considers
thepotential impacts of the principal risks and uncertainties. We perform
stress tests to assess the potential impact of combinations of those risks
and uncertainties. The plan also considers mitigating actions that we
might take to reduce the impact of such risks and uncertainties, and
thelikely effectiveness of those mitigating actions.
Period of assessment
The Board considered several factors in determining the period covered
bythe assessment. The long-term nature of our principal business,
together with relatively stable revenues and a model of economic
regulation that places a duty on the regulator to secure that water
companies can finance the proper carrying out of their functions,
supporta longer period of assessment.
However, the changing nature of regulation of the Water industry and
theuncertain geopolitical and macroeconomic outlook increase the
uncertainty inherent in our financial projections. We have an established
planning and forecasting process and the Board considers that the
assessment of the Group’s prospects is more reliable if based on an
established process. Our latest medium-term plan extends in detail
totheend of the AMP8 period in 2030, with less detailed projections
looking beyond this.
Whilst a longer period of assessment introduces greater uncertainty
because the variability of potential outcomes increases as the period
considered extends, Ofwat set an expectation that companies should
lookbeyond the end of the next AMP when assessing viability.
Bearing this in mind, together with the long-term nature of our business;
the enduring demand for our services; our established planning process;
and the changing nature of the regulation of the Water industry in England
and Wales, the Board has determined that seven years is an appropriate
period over which to assess the Group’s prospects and make its viability
statement this year.
Assessment of viability
In assessing our future prospects, we have considered the potential
effects of risks and uncertainties that could have a significant financial
impact under severe but plausible scenarios. While we have estimated
the size of each of the severe but plausible scenarios described below,
wehave grouped scenarios with similar impact types together and
performed stress testing for the scenario with the greatest impact.
Where the scenario occurs at a point in time, we have assumed that
itoccurs at the point in the plan with the lowest headroom.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 74
The risks and scenarios tested are described below.
Risk assessed Severe but plausible scenario Stress tests applied
Due to the nature of our operations, we
could endanger the health and safety
ofourpeople, contractors and members
ofthe public.
Serious injury, ill health or death of
employees, contractors or members
ofthepublic as a result of what we do.
An extreme one-off event.
We do not provide a safe and secure supply
of drinking water to our customers.
Catastrophic breach of a large raised
reservoir (>25,000 cubic metres).
Service failure leads to increased operating
expenditure or failure to meet performance
commitment targets.
An extreme one-off event.
Totex underperformance in
each year of the forecast.
ODI penalty in a single year.
ODI penalty in every year.
We do not transport and treat wastewater
effectively, impacting our ability to return
clean water to the environment.
An extreme breach in a sludge lagoon at
alarge sewage treatment works.
Service failure leads to increased operating
expenditure or failure to meet performance
commitment targets.
An extreme one-off event.
Totex underperformance in
each year of the forecast.
ODI penalty in a single year.
ODI penalty in every year.
A financial penalty.
We do not meet the needs of our customers
or anticipate changing expectations
through the level of customer experience
we provide.
Our customer performance is well
belowtheir expectations across a
rangeofmeasures.
ODI penalty in a single year.
ODI penalty in every year.
Insufficient resilience in the supply chain
impacts the deliverability of the capital
programme (time, cost, quality).
Significant increase in capital
programmecosts.
Service failure leads to increased operating
expenditure or failure to meet performance
commitment targets.
Totex underperformance in
each year of the forecast.
ODI penalty in a single year.
ODI penalty in every year.
Core operational capabilities are
compromised through physical, people
ortechnological threats.
A cyber attack results in a critical loss of
personal data leading to regulatory action.
An extreme one-off event.
A financial penalty.
Uncertainty of regulatory, legislative
andGovernment reforms which could
fundamentally impact our operating
environment and strategic ambitions.
A breach of law or regulations results
inasignificant one-off penalty.
Failure to deliver regulatory obligations
andexpected performance levels.
Failure to provide water network and
treatment capacity to meet requirements
infuture AMPs.
Failure to safeguard wastewater network
andtreatment capacity to meet demand
orincreased environmental obligations
infutureAMPs.
A financial penalty.
ODI penalty in a single year.
ODI penalty in every year.
Totex underperformance in
each year of the forecast.
Failure to responsibly manage our financial
position to maintain financial resilience and
a strong funding platform, and effectively
manage market volatility.
Rising interest rates increase result
inasignificantly higher cost of debt.
Higher interest rates for two years.
We fail to effectively mitigate our
environmental impact and act as
astewardof natural capital, while
ensuringour operations remain
resilienttothe effects of climate change.
Service failure leads to increased operating
expenditure or failure to meet performance
commitment targets.
Failure to deliver regulatory obligations
andexpected performance levels.
Totex underperformance
in each year of the forecast.
ODI penalty in a single year.
ODI penalty in every year.
Failure to maintain a workforce with
theright capability, skill set and values
todrive the Group’s strategy.
Failure to adapt leads to operational
inefficiencies and increased expenditure.
Totex underperformance
in each year of the forecast.
Severn Trent Plc Annual Report and Accounts 2026 75
Strategic Report Governance Financial Statements
Viability Statement continued
We also applied stress tests relating to economic factors: lower inflation and higher interest rates, and a combined scenario taking into consideration
totex underperformance, ODI penalties and a financial penalty.
We assessed the impacts of the scenarios on our financial metrics, credit metrics and debt covenants. Where the result of the stress test indicated
more than a limited impact, a risk of a downgrade of credit rating or a breach of a bank covenant, we considered what mitigating actions would be
available and whether they would be sufficient to mitigate the potential impact of the stress test.
The table below sets out the stress tests applied, potential impacts and the mitigating actions that would be available to address the impacts.
Stress test
applied
Amount
modelled
Potential impacts on viability
without mitigating action Mitigation available
An extreme one-off
event – a one-off impact
of £300 million at the
point in the forecast with
the lowest headroom
A one-off impact of
£300 million at the point
in the forecast with the
lowest headroom.
Increased gearing and
deterioration in credit metrics
that, without mitigating action,
might lead to a downgrade in
ratings although still at
investment grade.
Engage with ratings agencies to discuss
theshort-term nature of the impacts.
Manage liquidity by temporarily reducing
working capital.
Close out derivative financial instruments
inasset positions to generate cash.
Consider new sources of funding, including
hybrid debt.
Reprofile capital programme to ease
short-term pressure on ratings.
Consider reducing dividend in the year
ordowngrading the Dividend Policy.
Totex
underperformance
An increase in totex of
around £300 million in
each year of the forecast.
Pressure on earnings and cash
flows, but with average earnings
higher than the dividend indicated
by our current policy.
Increased gearing and significant
deterioration in credit metrics
that, without mitigating action
might lead to a downgrade
although still at investment grade.
Cost reduction programme focused on
reducing discretionary expenditure to
supportprofitability.
Manage liquidity by temporarily reducing
working capital.
Close out derivative financial instruments
inasset positions to generate cash.
Consider new sources of funding,
includinghybrid debt.
Consider downgrading the Dividend Policy.
ODI penalty in a
singleyear
A penalty of £130 million
in a single year.
The penalty would flow through
revenue two years after the
performance commitment was
breached. In that year, profit
remains higher than the
expecteddividend to be paid.
Increased gearing and
deterioration in credit
metricswith limited impact
tocredit ratings.
Accelerate recognition of accumulated
ODIrewards not yet taken.
Engage with ratings agencies to discuss
theshort-term nature of the impacts.
Manage liquidity by temporarily reducing
working capital.
Consider reducing dividend in the year.
ODI penalty in every year A penalty of £20 million in
each year of the forecast.
The penalties would flow through
revenue two years after the
performance commitment
wasbreached, leading to a
deterioration in credit metrics
that, without mitigating action,
might lead to a downgrade in
ratings although still at
investment grade.
Engage with ratings agencies to discuss
theshort-term nature of the impacts.
Manage liquidity by temporarily reducing
working capital.
Consider reducing dividend in the year.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 76
Stress test
applied
Amount
modelled
Potential impacts on viability
without mitigating action Mitigation available
Financial penalty A penalty of £274 million
in a single year (c.10% of
appointee turnover).
Lower profits lead to dividend
cover less than one in the third
year of assessment. Profits
remain above dividend
declaredthereafter.
Deterioration in credit metrics
that, without mitigating action,
might lead to a downgrade
although still at investment grade.
Manage liquidity by temporarily reducing
working capital.
Close out derivative financial instruments
inasset positions to generate cash.
Consider new sources of funding, including
hybrid debt.
Combined scenario An increase of totex
ofaround £300 million
ineach year, an ODI
penalty of £130 million in
one year, and a one-off
impact of £300 million
inone year.
Significant reduction in
profitability and cash flow.
Significant increase in gearing
and deterioration in credit
metrics that, without mitigating
action, might lead to a risk of
downgrade in credit ratings
below investment grade and
abreach of covenants.
Engage with ratings agencies and banks to
discuss the impacts on ratings and covenants.
Manage liquidity by temporarily reducing
working capital.
Close out derivative financial instruments
inasset positions to generate cash.
Cost reduction programme focused on
reducing discretionary expenditure to
supportprofitability.
Reprofile capital programme.
Consider downgrading the Dividend Policy.
Sustained lower
inflation
New debt financed at
4%above base case
assumptions.
Pressure on profit and cash,
butwith average earnings higher
than the dividend indicated by our
current Policy.
Increased gearing and
deterioration in credit metrics
that, without mitigating action
might lead to a downgrade
incredit ratings below
investmentgrade.
Engage with ratings agencies to discuss
theshort-term nature of the impacts.
Cost reduction programme focused on
reducing discretionary expenditure to
supportprofitability.
Our Dividend Policy is index-linked and
therefore low inflation would reduce the
dividend payable. We would also consider
downgrading the Dividend Policy.
Higher interest rates An increase in totex of
around £300 million in
each year of the forecast.
Reduction in profit.
Deterioration in credit metrics
that, without mitigating action,
might lead to a downgrade in
ratings below investment grade.
Engage with ratings agencies to discuss
theimpacts and the regulatory true-up
mechanism that would mitigate the impacts
inthe longer term.
Cost reduction programme focused
onreducing discretionary expenditure
tosupport profitability.
Manage liquidity by temporarily reducing
working capital.
Consider reducing dividend in the years
impacted, or downgrading the Dividend Policy.
Severn Trent Plc Annual Report and Accounts 2026 77
Strategic Report Governance Financial Statements
Viability Statement continued
The mitigating actions available are described in more detail below:
In selecting which mitigating actions to apply, we would seek to balance the
interests of all stakeholders and, in particular, would prioritise mitigating
actions that would not lead to a breach of our commitments to customers.
We have significant funding requirements to refinance existing debt that
falls due for repayment during the period under review and to fund our
capital programme. Under all scenarios considered, the Group would
remain solvent and have access to sufficient funds in normal market
conditions. Our Treasury Policy requires that we retain sufficient
liquidityto meet our forecast obligations, including debt repayments
forarolling 15-month period.
In making its assessment, the Board has made the following key assumption:
• Any period in which the Group is unable to access capital markets
toraise finance during the period under review will be shorter than
15 months.
On this basis, the stress tests indicated that none of these scenarios,
including the combined scenario, would result in an impact to the
Group’sexpected liquidity, solvency or debt covenants that could not
beaddressed by mitigating actions and are therefore not considered
threats to the Group’s viability.
We have also undertaken a reverse stress test to consider the scale of
adverse conditions that would threaten the Group’s long-term viability in
the period of lowest forecast headroom, before and after the application
of the mitigating actions detailed above. The reverse stress test indicates
that the point at which the Group’s viability would be threatened lies
materially beyond the impacts modelled in the Group’s most severe
plausible scenarios. This analysis supports the Directors’ conclusion
thatthe Group remains viable over the period of the Viability Statement.
Governance and assurance
The Board reviews and approves the medium-term plan on which this
Viability Statement is based. The Board also considers the period over
which it should make its assessment of prospects and the Viability
Statement. The Audit and Risk Committee supports the Board in
performing this review. Details of the Audit and Risk Committee’s
activityin relation to the Viability Statement are set out in the Audit
andRisk Committee’s report on page 109.
Mitigating action Details
Engage with ratings
agenciesandbanks
While ratings agencies and banks apply formulaic calculations as part of their ratings and covenant
assessments, judgment is also applied. Where a threshold for a particular rating is breached or a
covenantratio not met, a downgrade might not be applied or a temporary covenant waiver might be
granted if the agency/bank considers the situation to be temporary and likely to reverse in the near future.
Manage liquidity by temporarily
reducing working capital
We would seek to accelerate collection of amounts receivable with particular focus on overdue accounts.
We would work with our suppliers to negotiate longer credit terms where appropriate.
Cost reduction programme We would review discretionary expenditure to identify costs that could be avoided or reduced without
adetrimental impact to customer service.
Reprofile capital programme By deferring elements of capital expenditure, we could mitigate the impact of significant events on our
cash flow and smooth the effect on key ratios over a number of years, reducing the size of the impact
inany one year. The size of the deferral would be limited by the targets set out in our PCDs, a new
mechanism of targets set by Ofwat for AMP8 to ensure timely delivery of specific schemes.
Close out derivative financial
instruments in asset positions
Derivative financial assets such as swaps can be closed out with the agreement of the counterparty,
generating cash in the short term.
Consider new sources of funding,
including hybrid debt
The Group has access to a wide range of capital markets and maintains a diverse range of funding
sources. However, there are instruments that we do not currently use that would be available when
more traditional funding was not. Hybrid debt instruments are a form of debt that has some of the
characteristics of equity, for example a bond that features an option to convert to equity.
Consider reducing dividend
intheyear
Our approved Dividend Policy for AMP8 is to grow the dividend by CPIH each year. If necessary, we
wouldconsider diverging from this Policy to deal with short-term pressure on credit metrics or ratings.
Consider downgrading
theDividend Policy
In circumstances where the pressure on metrics, ratings or covenants was sustained, we would
consider amending our dividend policy for the AMP to relieve the pressure while giving investors
abasisto set their expectations for returns.
This Statement is subject to review by PwC, our External Auditor, as part
of their Corporate Governance statement procedures, as set out in their
audit report on pages 157 to 162.
Assessment of viability
The Board has assessed the viability of the Company over a seven-year
period to March 2033, taking into account the Company’s current position
and principal risks.
Based on that assessment, the Directors have a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period to 31 March 2033.
Going Concern Statement
In preparing the financial statements, the Directors considered
theCompany’s ability to meet its debts as they fall due for a
periodof one year from the date of this report. This was carried
outin conjunction with the consideration of the Viability Statement
Assessment above.
The Directors have reviewed the cash and committed facilities
available to the Group alongside a cash flow forecast extending
beyond the period considered for this Going Concern Statement.
The Directors have considered the potential impacts, in the
periodof one year from the date of this report, resulting from
thescenarios described in the Viability Statement set out in
thissection.
The Directors are satisfied that the Group will have sufficient
fundsto continue to meet its liabilities as they fall due for at least
12 months from the date of approval of the financial statements,
and that the severe but plausible downside scenarios considered
indicate that the Group will be able to operate within the amount
and terms (including relevant covenants) of existing facilities.
On this basis the Directors considered it appropriate to adopt
thegoing concern basis in preparing the financial statements.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 78
Stakeholder EngagementStakeholder Engagement
Who are our stakeholders?
We are focused on driving long-term
sustainable performance for the
benefit of our customers, communities,
shareholders, the environment and
wider stakeholders.
This section provides insight into how the
Company engages with its stakeholders and
how their views help inform our priorities and
decision-making.
Understanding what matters most to our
stakeholders is fundamental to the way the
Board discharges its duties. The Board seeks
tomaintain open and constructive dialogue
withkey stakeholder groups to ensure their
perspectives are properly considered when
shaping strategy, assessing risk and making
decisions over the long term. Further detail on
the Board’s approach is set out in our Section
172 Statement (‘s.172’) on pages 84 to 86. The
Statement explains how the Board has had
regard to the matters set out in s.172 of the
Companies Act 2006 and provides examples
ofhow the Board engaged with stakeholders
during the year, with particular emphasis on
how stakeholder views have influenced Board
discussions and outcomes.
The principles that underpin s.172 are not
confined to the boardroom. They are embedded
within our culture and reflected in decision-
making across the business, supported by the
Board setting the right tone from the top.
In line with the requirements of the Companies
Act 2006, the information within this section is
incorporated by cross reference in the Governance
Report on pages 88 to 156. Additional
information on our approach to sustainability
and stakeholder engagement is also available
on the sustainability pages of our website.
S
U
P
P
L
I
E
R
S
A
N
D
C
O
N
T
R
A
C
T
O
R
S
R
E
G
U
L
A
T
O
R
S
A
N
D
G
O
V
E
R
N
M
E
N
T
O
U
R
C
U
S
T
O
M
E
R
S
O
U
R
C
O
L
L
E
A
G
U
E
S
S
H
A
R
E
H
O
L
D
E
R
S
A
N
D
I
N
V
E
S
T
O
R
S
O
U
R
C
O
M
M
U
N
I
T
I
E
S
Our
stakeholders
Our customers
In serving our customers, we want to provide strong service delivery over
thelong term.
Our colleagues
We strive to maintain an open and constructive relationship with our colleagues,
supporting their development and recognising their contributionin ways that
encourage them to perform at their best.
Our communities
Our aim is to be a force for good in the communities we serve and, in doing so,
create value for all our stakeholders.
Our shareholders and investors
Continued access to capital is vital to the long-term performance of our business.
We work to ensure that our shareholders, investors and investment research
analysts have a strong understanding of our strategy, performance, ambition
and culture. Many of our shareholders are also our customers, colleagues
and pensioners.
Our suppliers and contractors
Along with our colleagues, our suppliers support us in delivering for our
customers. Strong supplier relationships ensure sustainable, high-quality
delivery for the benefit of all stakeholders.
Regulators, Government and Non-Governmental
Organisations (‘NGOs’)
The policy framework for the water sector in England and Wales is set by the
English and Welsh Governments respectively. We seek to engage constructively
to achieve the best outcomes for customers and the environment. Below the
policy framework, our industry is regulated by Ofwat, the EAand others. We
agree commitments with our regulators and report ourperformance against
these. We work closely with our regulators to shapeour industry and to help
ensure the right outcomes for customers, communities and the environment.
Severn Trent Plc Annual Report and Accounts 2026 79
Strategic Report Governance Financial Statements
Christine Hodgson gaining insight on the customer journey with the Warwickshire CSO Improvement Team
Stakeholder Engagement continued
Our Customers
As our customers’ expectations change, we need to evolve our
approach and delivery of our services to ensure we continue
tomeetthem. Everyone who works for, and with, Severn Trent
isfocused on improving service delivery for customers. Our
continuous engagement with them ensures that we are able
tounderstand what matters to them and deliver further
improvementsin service, both now and over time.
Company engagement
We offer different channels of communication to suit our customers’
needs and our dedicated Care and Assistance Team is trained to
provide the extra help that may be needed. We also have a team of
partnership specialists embedded across our communities to help
increase awareness and support customers who may struggle to
communicate with us over the phone or online.
We also engage and learn from our customers in a variety of different
ways, including:
• Ongoing tracker survey to monitor customer perceptions, including
satisfaction, affordability, trustworthiness, reputation and awareness
of our service and communications.
• Six-monthly survey and qualitative research exploring customers’
concerns and their priorities for Severn Trent.
• Frequent surveys on a wide variety of topics amongst our online
customer research community, TapChat.
• Engagement with CCW’s Severn Trent Water Voice panel – monthly
surveys and a six-monthly Accountability Session with Severn
Trent’s senior leaders.
Board engagement
In line with Ofwat’s Consumer Involvement Rule, of which the Board
receive quarterly updates, the Board maintains a clear line of sight
overhow customer views and experiences inform decision-making,
receiving assurance on the effectiveness of customer engagement and
the extent to which customer insights inform strategy and performance.
Board members gain additional insight on the customer journey first
hand through site visits, which allow them to observe the hard work
ofour teams in delivering our essential services to customers and
ourcommunities. You can read more about site visits undertaken
bythe Board on page 102.
What mattered most to our customers
• Affordability and value for money.
• Water quality.
• Responsible investment.
• Understanding how Severn Trent spends customers’ money.
• Environmental performance, especially river water quality.
• Leakage reduction and resilience of supply.
• Good customer service and operational performance.
• Assistance in times of need and vulnerable circumstances.
How we delivered following engagement feedback
• Strong progress in leakage with an 8% year-on-year reduction to our
three-year average, now at our lowest ever level.
• 11.8% of our customers signed up to our Priority Services Register.
• Provided over £127.4 million worth of support to over 332,000
customers through our affordability support schemes this year.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 80
Our Colleagues
The culture of our organisation is critical to our success. Our
colleagues are highly engaged across our organisation, supported
by an open and trusting environment that fosters collaboration.
Weoffer opportunities for all of our colleagues to contribute ideas
and suggestions and express their perspectives.
Company engagement
Employee voice means different things to different people and, as
such, we use multiple employee engagement initiatives to ensure
theviews and perspectives of our colleagues are fully understood.
These include:
• Regular leadership events, attended by all of our leaders
andteammanagers.
• Company, business and local Trade Union forums.
• Open dialogue through face-to-face line manager and
departmentalmeetings.
• Our Company-wide channels, including updates on our intranet
‘OnTap’, our weekly news roundup ‘News Splash’, monthly
TeamTalks and Van Chat, our weekly podcast.
• CEO-led all-people roadshows.
Our annual employee engagement survey, conducted by an independent
research company to ensure the results are anonymous, helps us to
understand what is going well and where we can improve. In 2025, our
overall engagement score was 8.8 out of a possible 10, maintaining
our highest ever score and keeping us in the top 5% of energy and
utility businesses globally.
Board engagement
Providing opportunities for our colleagues to stay connected with
the direction of the Company and be involved in business decisions
is a key part of our culture. Our chosen employee engagement
mechanism, the Company Forum which meets four times a year,
facilitates this in a structured way.
Through the Company Forum, we engage with all levels of employees
on ways of working and matters of strategic significance to the Group,
ensuring employee views and insights are considered. It is jointly
chaired by the Director of Capital and Commercial Services and the
Joint Secretary of one of our Trade Unions, Unison. Board members
are invited to attend and participate and, over the last 12 months,
Christine Hodgson and Sharmila Nebhrajani, as well as former CEO
Liv Garfield and current CEO James Jesic, have attended to listen to the
discussions and talk about their areas of responsibility and interests.
The agenda is wide-ranging and topics for discussion this year have
included our Societal Strategy, our annual employee engagement
results, our Women’s Welfare programme, occupational health,
learning and training at our Academy and Company-wide initiatives
such as diversity and inclusion strategies. The Company Forum
isfurther used to explain how Executive Remuneration aligns with
wider company pay policies.
Additionally, a ‘Meet the Board’ lunch in November 2025 provided
ourcolleagues with the opportunity to meet the Board in an informal
setting. Moreover, regular updates on Company performance,
year-end results and significant change programmes are provided
tothe Board.
The Board discuss people matters at every meeting through a standing
update in the Chief Executive’s report. Our People Strategy is presented
annually and the Board reviews a dashboard of workforce-related
matters twice a year, along with reports from our Speak-Up channels
at every Audit and Risk Committee meeting. Talent and succession
planning and diversity and inclusion discussions are also held
regularly at the Nominations Committee.
What mattered most to our colleagues
• Health, safety and wellbeing.
• Delivering for our customers, communities and the environment.
• A diverse and inclusive workplace.
• Opportunities to reach full potential.
• An open and honest environment.
• Fair pay and reward.
How we delivered following engagement feedback
The wealth of insights gathered through our colleague engagement
channels are used to inform our strategic decisions. They also highlight
the issues that matter most to colleagues and where we need to focus
our attention. We identified key areas for improvement throughout the
year and developed detailed action plans in collaboration with our
Senior Leadership Team. These included:
• Further developing our colleague networks.
• Achieving 2nd on the Social Mobility Index (top 10 for the last
sevenyears).
• A Glassdoor ranking of 4.5/5.
• Delivered more than 290,000 learning hours through our
Academythis year.
Tom Delay with Severn Trent colleagues at the ‘Meet the Board’ lunch
Van Chat
Severn Trent Plc Annual Report and Accounts 2026 81
Strategic Report Governance Financial Statements
Stakeholder Engagement continued
Our Communities
We have a unique link to the communities we serve. The vast
majority of our colleagues live and work in these communities
and are also our customers. Our purpose is to take care of one of
life’s essentials. We work hard to provide our essential services
to our customers 24 hours a day, 365 days a year.
Company engagement
• Our Employability Scheme inspires our people and makes
arealdifference to people’s lives.
• Our people volunteer through our Community Champions
programme and NeighbourGOOD scheme, working to
improveour communities and environment.
• Regular community workshops and drop-in sessions
areheldacross our region.
Board engagement
The Board is committed to building and maintaining constructive
relationships with community stakeholders, seeking to understand
their perspectives and taking these into account where relevant in
Board discussions and decision-making. Through an emphasis on
openness and inclusivity, the Board aims to ensure that community
views are appropriately heard and considered. Ongoing engagement
with our communities helps to strengthen these relationships and
supports the Board in making informed decisions that take
account of the interests of a broad range of stakeholders.
• The Board receives regular presentations on the progress and
impact of the Company’s Societal Strategy, highlighting key
achievements, challenges and future plans.
• Annual updates are provided to the Corporate Sustainability
Committee on the allocation and impact of the Community Fund,
Social Value and affordability initiatives including success stories
and metrics that demonstrate the benefits to local communities.
• The Board undertakes regular engagement with Government
officials and elected representatives on water and environment-
related issues.
What mattered most to our communities
• Environmental protection including river health, climate change,
water quality, biodiversity and wildlife protection.
• Investment and maintenance improvements – impact and disruption.
• Local employment and job creation.
• Economic contribution.
• Cost of living pressures.
How we delivered following engagement feedback
• Hosted six ‘Big Boost’ events across Birmingham, Coventry
andDerby, with c.3,000 attendees.
• Hosted 500 students through a Discovery Day.
• Over 950 hours of employee time volunteered to support
schools, reaching nearly 7,000 students.
• Implemented 11,000 enhancements at storm overflows across
our region to reduce spills.
• We delivered an uplift of 510 biodiversity units and continued
toenhance habitats across our region, including planting or
rejuvenating 45 km of hedgerow, planting 10,000 trees and
restoring 207 acres of habitat.
• Financial support was given to care leavers through our
BigDifference Scheme.
• £1.8 million awarded to 92 organisations through our
Community Fund this year.
Shareholders and Investors
It is important that investors have confidence in the organisation
and how it is managed. Investors are critical to ensuring that
continued investment can be made to deliver improved outcomes
for our customers, communities and the environment. Our intention
is to drive value for all of our stakeholders, delivering a high-quality,
sustainable service both now and over the long term.
Company engagement
During the year, we held around 230 investor meetings and met
with 208 existing and potential investors, representing 78.67% of
our share register. The meetings focused on the Group’s financial
performance, our commitment to the environment, our positive
outlook on AMP8 and customer affordability.
Investor meetings are primarily attended by our CEO, CFO and
Head of Investor Relations, although other Executive Committee
members also attend where appropriate. The Chair and individual
Directors regularly engage with major shareholders to understand
their views on governance and performance against our strategy.
Board engagement
Our AGM gives the Board the opportunity to present to attending
shareholders and answer their questions. Board members also
participate in investor meetings and presentations and the Board
as a whole receives updates on shareholder activity from the
CEOand CFO at every meeting. The Chair regularly undertakes
engagement with major shareholders to understand their views.
The Board regularly receives briefings on market commentary
andshareholder analysis. The Board also receives both an annual
market update and defence strategy analysis, with support and
advice from the Group’s external brokers.
What mattered most to our shareholders and
investors
• CEO transition.
• Regulatory reform.
• Financial performance and returns.
• Delivery of capital programme.
• Environmental leadership.
• Climate-related risk management.
• Growth and affordability.
• Company culture.
How we delivered following engagement feedback
• Regulatory Return of 17.2%.
• RCV growth.
• Interim Group dividend for 2025/26 of 50.40 pence.
• Final Group dividend for 2025/26 of 75.62 pence.
• All resolutions received over 95% of votes in favour at our
2025AGM.
• Published our annual Allocation and Impact report alongside
our updated Sustainable Finance Framework.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 82
Regulators, Government and NGOs
Our regulators and the Government influence the long-term
national water strategy and environmental priorities, which
have the potential to impact how all businesses operate.
Our relationships with the Government, our regulators and
other agencies support us in ensuring that we deliver for
ourcustomers, communities and the environment, whilst
investing in a responsible way and providing value-for-money
services to our customers.
Company engagement
• Regular meetings with our regulators at management level
including the EA, NRW, Natural England, Ofwat, the DWI
andDefra.
• Regular engagement with Government officials and elected
representatives on water and environment-related issues.
Board engagement
The Board has an established engagement programme with our
regulators and Government bodies to inform and improve the
Board’s direct understanding of their perception of the Company’s
performance, its key issues and areas of future focus.
Maintaining an open and constructive dialogue with regulators
isapriority for the Board. By building strong relationships with
regulators and the Government, Severn Trent can better serve its
customers, communities and the environment and contribute to
the long-term sustainability of the water sector.
What mattered most to our regulators
• Outcomes for customers, the environment and long-term
operational and financial resilience.
• Performance against regulatory targets.
• Trust and transparency.
• Governance and compliance.
• Environmental impact.
• Sustainable procurement.
How we delivered following engagement feedback
• See pages 12 to 13 for our performance during the year.
• Ensuring a resilient supply chain.
• Sharing knowledge and expertise to find solutions and
opportunities for innovation.
• Developing responsible business strategies and achieving
continuous sustainable development.
• Meeting shared targets for growth and development.
John Whitby MP, visiting Severn Trent’s Bakewell Sewage
Treatment Works, Derbyshire
Suppliers and Contractors
Good relationships with our supply chain partners help ensure
projects are delivered on time, to a high quality and at efficient
costs. Our AMP8 capital programme is the largest in our history,
our investment plans therefore require a resilient and engaged
supply chain. We take a proactive approach to supplier relationship
management, with a dedicated Supplier Relationship Manager
overseeing strategic engagement across our supply chain.
Fostering strong relationships with our suppliers and contractors
ensures alignment with our operational goals and collaboration
on long-term value creation.
Company engagement
We maintain an open, ongoing dialogue with our suppliers and
contractors through regular formal and informal meetings. Clear
governance arrangements for all strategic suppliers, including
Executive-level meetings focused on relationship development,
support this. We operate Key Performance Measures (‘KPMs’)
across the majority of our supply base to track delivery, safety,
quality, sustainability and commercial performance.
Our supply chain partners are also critical to the delivery of our
sustainability ambitions, and we are committed to building supplier
capability through our partnership with the Supply Chain
Sustainability School to support them.
Our 2025/26 highlights include:
• Achieved a second consecutive CDP (formerly the Carbon
Disclosure Project) ‘A’ for Supplier Engagement, with all key
capital partners holding science-based targets.
• Enhanced supplier maturity through EcoVadis, showing a
predominantly low-risk supply base.
• Continued collaboration on climate innovation and delivered
employability programmes supporting communities at risk of
water poverty.
Board engagement
The Board receives updates on suppliers and contractors from the
Executive Team. This includes periodic updates on key
procurement and capital expenditure matters focusing on current
opportunities and challenges. The Board is also kept informed of
key changes to supplier relationships, supply chain logistics and
opportunities for value creation in the supply chain and approves
our Anti-Slavery and Human Trafficking Statement each year.
What mattered most to our suppliers
• Health and safety and worker welfare.
• Predictable and consistent work opportunities, which allow
them to plan and invest in their business growth.
• Opportunities to scale up their operations through collaboration
on larger projects and capacity-building initiatives.
• Emphasis on sustainable and environmentally-friendly
practices, including the use of low-carbon technologies and
nature-based solutions.
• Integration of innovative technologies, such as smart meters
and AI-driven solutions, to enhance efficiency and sustainability.
• Strong, collaborative relationships, fostering mutual growth
andsuccess.
• Clear communication and transparent reporting on project
progress, financial performance and future plans.
• Fair engagement and payment terms.
How we delivered following engagement feedback
• Over 150 suppliers in our supply chain.
• Net Zero Hub at Strongford.
• Carbon Trust accredited.
Severn Trent Plc Annual Report and Accounts 2026 83
Strategic Report Governance Financial Statements
Section 172 Statement
Stakeholder engagement is integral to how we shape and
deliver our strategy and is essential to the long-term
sustainable success of the Company. The Board considers
the needs of all stakeholder groups, including our colleagues,
customers, suppliers, shareholders, regulators and the
communities we serve, along with the long-term
implications of every major decision.
Our engagement processes help the Board understand what matters
most to our stakeholders. Regular updates from management, employee
engagement forums, and customer insight reporting and supplier
reviews provide the Board with the necessary information to inform
Boarddiscussions and decision-making. The principles of s.172 are
embedded across the business and guide decision-making at every
level.These principles are reinforced by a clear tone from the top
andareincorporated into our governance and risk processes.
All significant Board decisions undergo an s.172 evaluation to assess
theirlong-term implications and their impact on different stakeholder
groups. While it is not always possible to deliver positive outcomes for
allstakeholders, the Board carefully balances competing priorities
andacts in the way it considers most likely to promote the long-term
success of the Company.
Further detail on how the Board has had regard to each s.172 matter
during 2025/26, including examples of key decisions and related
stakeholder considerations, is set out on the following pages.
s.172 factor Relevant disclosure Page
The likely consequences of any decision in the long term Corporate Strategy 2 to 3
Our Business Model 6 to 7
Performance Review 12 to 56
Dividend Policy 154
Sustainability 30 to 55
The interests of the Company’s employees Corporate Strategy 2 to 3
Performance Review 12 to 56
Caring for Our People 19 to 23
Diversity and Inclusion 20
Employee Engagement 81
Whistleblowing 111
Company Culture 94 to 95
The need to foster business relationships with suppliers,
customersand others
Corporate Strategy 2 to 3
Responsible Payment Practices 21 and 155
Performance Review 12 to 56
Modern Slavery 117
Sustainability 30 to 55
Our Business Model 6 to 7
Whistleblowing 111
The impact of the Company’s operations on the community
andtheenvironment
Corporate Strategy 2 to 3
Sustainability 30 to 55
Corporate Sustainability Committee Report 116 to 117
The desirability of the Company maintaining a reputation
forhighstandards of business conduct
Corporate Strategy 2 to 3
Market Review 4
Whistleblowing 111
Internal Controls and Risk Management 64 to 67 and
110 to 111
Sustainability 30 to 55
The need to act fairly as between members of the Company Corporate Strategy 2 to 3
Stakeholder Engagement 79 to 83
Annual General Meeting 97
Dividend Policy 154
Sustainability 30 to 55
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 84
Principal Decisions in 2025/26
Our approach, below, sets out how the Board is supported in
carefully considering all the relevant factors in selecting the best
course of action to ensure the long-term success of the Company:
Board decision
• Follow-up actions with Board oversight, as required.
• Engagement and dialogue with stakeholders,
asrequired.
Board information
• Leadership and management receive training on
Directors’ duties to ensure awareness of the Board’s
responsibilities.
• Stakeholder engagement activities are recorded and
detail included is in Board papers where applicable.
• Board papers requiring approval include a
tablesetting out s.172 factors, including customer
andcommunity implications, and relevant
informationrelating to them where applicable.
Board strategic discussion
• The Group’s culture ensures that there is proper
consideration of the potential impacts of decisions
onstakeholders, both now and over time.
• The Board receives independent third party assurance
on the quality of information presented and receives
assurance from management where appropriate.
• The Chair ensures decision-making is sufficiently
informed by s.172 factors and wider considerations.
• s.172 factors are considered in the Board’s
discussions on strategy, including how they underpin
long-term value creation and the implications for
business resilience.
How the Board engages
with our stakeholders
Our customers
• Service delivery for customers is discussed at every Board
meeting.
• Customer perceptions of value for money are reported to our
Corporate Sustainability Committee.
• Customer-shareholders engage with the Board and submit
questions in advance of, or in person at, our AGM.
• Customer views are shared with the Board through updates on
C-MeX and Licence Condition G relating to vulnerable customers.
Our colleagues
• Members of the Board attend Company Forum sessions and
Colleague Network meetings and provide feedback at Board
meetings.
• The Board regularly meets with employees at Board and
Committee meetings, during regular site visits and as part
oftheir induction.
• The Board considers employee engagement survey results
andsteps taken to address feedback.
• The Remuneration Committee reviews workforce policies
andpractices and makes recommendations to the Board.
• Company purpose and culture, talent development and our
people strategy are discussed at Board and Nominations
Committee meetings.
• Employee-shareholders have the opportunity to meet the
Boardand submit questions at the AGM.
Our communities
• Members of the Board attend community events to engage
withthe communities we serve.
• Employees who live and work in our communities meet the
Boardat the Company Forum, AGM and through Board site visits.
• Community engagement is recognised by the Board as
fundamental to maintaining trust, particularly in areas affected
by significant investment and infrastructure activity.
Shareholders and investors
• The Chair hosts governance roadshows annually to meet
withinvestors, hear views and answer questions, as well
asreceivingfeedback.
• The Chair, Senior Independent Director, CEO, CFO and certain
Non-Executive Directors attend investor meetings and feedback
is reported to the Board.
• Regular meetings take place between the Investor Relations
Team and the Chair to discuss feedback from investors.
• The Head of Investor Relations gives an update to the Board
onaregular basis through the Board CFO Report, and the
Investor Relations Strategy is discussed by the Board annually.
Suppliers and contractors
• The Board receives updates on the Group’s capital programme
atevery meeting. Updates include engagement activity with the
supply chain.
• Commercial performance is discussed at every Board meeting,
including an update on our relationships with suppliers, as
appropriate.
• Our Corporate Sustainability Committee regularly monitors
progress on sustainability in our supply chain.
• The Board approves annually the Group’s Anti-Slavery and
Human Trafficking Statement.
Regulators and Government
• Regulatory matters are considered by the Board, including
business plans, the WRMP and Scheme of Wholesale Charges.
• To deepen Board-level understanding of our regulators, our
Chairand Non-Executive Directors meet with regulators
including Ofwat, the EA and DWI.
• Regulatory consultation updates are considered by the Board
andBoard Committees as appropriate.
Severn Trent Plc Annual Report and Accounts 2026 85
Strategic Report Governance Financial Statements
Context
Outcomes and impact on long-term sustainable success
Consideration of s.172 impacts by
the Boardin its decision-making
Supporting customers who are struggling with the cost of essential services
remains a central element of our purpose and long-term strategy. In May 2025,
the Board undertook a dedicated deep dive into affordability and vulnerability,
recognising the increasing pressures on household finances and the need to
ensure that help is accessible, fair and effective.
The discussion formed a core part of the Board’s oversight of our wider
£575 million AMP8 affordability package, including the ambition to support
around one in six households across our region.
The Board reviewed the effectiveness of existing schemes, the evolving needs
of vulnerable customers and the enablers required to strengthen support
through to 2030.
Insights from these discussions, alongside customer research and engagement
feedback from the CCW and other partners, informed the Board’s decisions on
how to evolve our strategy.
The Board’s review strengthened the Company’s approach to affordability and
vulnerability for AMP8 and reinforced its commitment to support households
most in need. Key outcomes included:
• confirming the scale and scope of the £575 million support package,
enablingnearly 700,000 households to benefit by 2030;
• enhancing the role of data, partnerships and proactive outreach to support
customers earlier;
• increasing focus on targeted support for priority groups, including those
withadditional needs, via the Priority Services Register (‘PSR’); and
• maintaining a clear link between affordability support and long-term trust,
customer outcomes and community wellbeing.
Through this work, the Board reaffirmed its commitment to ensuring that
affordability and vulnerability support remains at the heart of Severn Trent’s
social purpose, helping customers through financial difficulty today while
supporting resilient communities for the future.
Customers and Communities
The Board placed significant emphasis on the needs of customers experiencing
financial vulnerability and the long-term social impact of affordability interventions.
The deep dive highlighted the increased demand for support and the importance
of ensuring that no customer fears their bill.
The Board reviewed performance against existing initiatives, including the Big
Difference Scheme, payment matching, water efficiency support and tailored
repayment plans. Consideration was given to how improvements in early
identification, outreach and data-driven triage could enhance the reach and
impact of support.
Colleague insights and customer feedback reinforced the value of clear
communication, simple application processes and proactive engagement.
TheBoard also acknowledged the critical importance of widening access to
thePSR, particularly for customers with additional needs during incidents.
Regulators
Affordability remains a central priority for both Ofwat and CCW, and the Board
considered the expectations set out in Licence Condition G (our customer-
focused licence condition), alongside CCW commentary and emerging
regulatory guidance. In 2025, the Board also engaged directly with CCW’s
ChiefExecutive, who was invited to a Board meeting and whose insights into
customer needs and expectations informed and enriched the discussion.
The Board acknowledged the regulatory emphasis on fairness, transparency
and the evidence-based targeting of support. These principles helped shape
theBoard’s view on how future measures should be designed, monitored and
reported to stakeholders.
Shareholders and Investors
The Board noted that long-term trust and stable investor confidence are
influenced by how companies respond to affordability challenges. A sustainable
and well-managed affordability strategy supports good regulatory relationships
and helps secure the social licence needed to deliver record levels of investment.
The Board assessed the financial implications of expanding support and the
balance between affordability interventions and delivering AMP8 commitments,
ensuring the approach remained responsible, transparent and aligned with
investor expectations.
Colleagues
The Board considered the experience of colleagues delivering support
tocustomers at the front line. Feedback emphasised the importance of
givingcolleagues the tools, training and support to provide empathetic,
tailoredassistance.
The Board also recognised that many of our colleagues are themselves
customers and therefore bring valuable personal insight into the everyday
challenges households across our region face. This dual perspective
strengthens the quality and sensitivity of the support provided and reinforces
the importance of ensuring policies remain fair, accessible and grounded in
realcustomer experience.
The Board further acknowledged the role of colleagues across customer
service, operational teams and community outreach in identifying vulnerability
early and helping customers access the right support.
Affordability and Vulnerability Support
Section 172 Statement continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 86
Non-Financial and Sustainability Information Statement
This section of the Strategic Report constitutes the Non-Financial and Sustainability Information Statement of Severn Trent Plc, produced to comply
with sections 414CA and 414CB of the Companies Act 2006. The information listed in the table below is incorporated by cross reference.
The policies mentioned above form part of Severn Trent’s Group policies, which act as the strategic link between our purpose and values and how
wemanage our day-to-day business. During the year, the Board determined that the policies remain appropriate, are consistent with the Company’s
values and support its long-term sustainable success.
Approval
This Strategic Report was approved by the Board.
By order of the Board.
Didar Dhillon
Group General Counsel and Group Company Secretary
19 May 2026
Reporting requirement and Severn
Trent’sMaterial Areas of Impact
Relevant Group Policy on
severntrent.co.uk Additional Information
Our key stakeholders Customer Policy
Group Data Protection Policy
Group Commercial Policy
Stakeholder Engagement, pages 79 to 83
s.172 Statement, pages 84 to 86
Board Activities, pages 101 to 102
Climate and environment
• Delivering net zero
• Managing risks and opportunities
• Carbon performance, metrics and targets
• Climate-related financial disclosures
• Managing impacts on the natural
environment and biodiversity
Group Environment Policy TCFD and TNFD disclosures and Net Zero
TransitionPlan, pages 30 to 52
EU Taxonomy, pages 53 to 55
Corporate Sustainability Committee Report,
pages116 to 117
Stakeholder Engagement, pages 79 to 83
s.172Statement, pages 84 to 86
Employees
• Protecting health, safety and wellbeing
• Investing in training and learning
• Culture and ethics
• Reward and benefits
• Employee voice
• Promoting inclusion and diversity
Group Health, Safety
andWellbeingPolicy
Group Speak-Up Policy
Group Human Resources Policy
Caring for People in our Region, pages 19 to 23
Stakeholder Engagement, pages 79 to 83
Gender and Ethnicity Pay Gap, pages 20 and 134
Our Culture, pages 94 to 95
Governance Report, pages 88 to 156
Audit and Risk Committee Report, pages 108 to 113
Directors’ Remuneration Report, pages 118 to 145
Social matters
• Societal Strategy
• Affordability support
• Paying a fair share of tax
• Community Fund
Anti-Slavery and Human
TraffickingStatement
Diversity within our Workforce
Governance Report, pages 88 to 156
Corporate Sustainability Committee Report, pages
116 to 117
Human rights, anti-corruption
and anti-bribery
The Group operates a zero-tolerance
approach to human rights abuses, bribery
and corruption, with key risks arising
managed through its Financial Crime
andAnti-Bribery Policy framework,
duediligence and controls, training
andSpeak-Up procedures, with further
detail available on the Group’s website
assupplementary information.
Group Financial Crime, Anti-Bribery
andAnti-Corruption Policy
Group Conflicts of Interest Policy
Group Security Policy
Group Competition and Competitive
Information Policy
Governance Report, pages 88 to 156
Audit and Risk Committee Report, pages 108 to 113
Anti-Slavery and Human Trafficking, page 117
Description of Principal Risks
andimpactofbusiness activity
Managing Risks and Opportunities, pages 64 to 67
Our Principal Risks, pages 68 to 73
Our Emerging Risks, pages 66
Our Business Model, pages 6 to 7
Description of the Business Model Our Business Model, pages 6 to 7
Non-Financial Key Performance Indicators Strategic Report, pages 1 to 87
Key Performance Indicators, pages 12 to 13
Governance S.172 Statement, pages 84 to 86
Sustainability Governance, page 33 and pages 116 to 117
Severn Trent Plc Annual Report and Accounts 2026 87
Strategic Report Governance Financial Statements
GOVERNANCE OVERVIEW
Board Composition
Board Skills
Accounting
Brands
Commercial procurement
Construction/Infrastructure delivery
Corporate Finance/Treasury
Customer
Large capital programmes
M&A
People management
Political affairs
Regulation
Science and engineering
Societal
Strategy
Sustainability, including climate change
Technology/Innovation/Cyber
Utility sector
Chair and Non-Executive Director tenure
2 years
1 year
6 years
4 years
6 years
3 years
Nick Hampton
Richard Taylor
Tom Delay
Sarah Legg
Christine Hodgson
Sharmila Nebhrajani
Contents
Board Independence
4
Independent
Non-Executive
Directors
1
Gender representation
4
Female
4
Male
1
Executive
Directors
Minority ethnic representation
6
White
2
Minority
Ethnic
The purpose of this report is to demonstrate the Board’s approach to corporate governance, which is underpinned
byreporting against the 2024 UK Corporate Governance Code (the ‘Code’). It provides an overview of the work of the
Board and its Committees across the year.
89 Compliance with the 2024 UK Corporate Governance Code
90 Governance Framework
91 Performance in the Round – Dividend 2025/26
92 Chair’s Introduction to Governance
94 Our Culture
96 Board Leadership and Company Purpose
98 Board of Directors
100 Division of Responsibilities
101 Board Activities
103 Board Performance Review
105 Nominations Committee Report
108 Audit and Risk Committee Report
114 Treasury Committee Report
116 Corporate Sustainability Committee Report
118 Directors’ Remuneration Report
122 Remuneration Policy Review
128 Remuneration for the Year inReview, at a Glance
129 Performance in the Round – Remuneration 2025/26
131 Company Remuneration at Severn Trent
135 Annual Report on Remuneration
146 Directors’ Remuneration Policy
153 Directors’ Report
156 Directors’ Responsibility Statement
* All data on this page is as at 19 May 2026.
Chair (Independent
on appointment)
2
Senior
Independent
Director
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 88
Compliance with the 2024 UK Corporate Governance Code
We believe good corporate governance is about effective oversight,
including how we instil confidence in our stakeholders, both in how we
perform and in how we report on that performance. The Board confirms
that throughout the financial year ended 31 March 2026, the Company
hasapplied the Principles and has complied with all relevant Provisions
of the Code, as issued by the Financial Reporting Council (‘FRC’). A full
copy of the Code is available at www.frc.org.uk. The Board considers
thatthe Company’s governance arrangements are appropriate for its
size,complexity and strategy, and that they support the long-term
sustainable success of the Company.
The requirements under Provision 29 take effect from 1 April 2026. This
means the Board will provide its first declaration on the effectiveness
ofmaterial controls in our 2026/27 Annual Report and Accounts.
TheBoard has received regular updates on the Company’s readiness
forthe new requirements under Provision 29, including the internal
controls assurance work underway to support the future declaration.
TheCompany is well positioned for these requirements, reflecting the
maturity of its existing internal control and assurance arrangements
thathave been previously established to meet its regulatory licence-to-
operate obligations.
The Audit and Risk Committee remains dedicated to open and transparent
reporting, and this page sets out where shareholders can evaluate how
the Company has applied the Principles of the Code and where content
can be found in this Annual Report.
• The role of the Board is set out in the Governance Report
on pages 100 to 102.
• The Chair’s Introduction to Governance can be found on
pages 92 to 93.
• How the Board engages with stakeholders is detailed on
pages 79 to 83 and 85.
• The Board’s Section 172 Statement is included on
pages 84 to 86.
• An overview of our purpose and values, including how these
wereestablished, is set out on pages 6 and 96 to 97.
• How the Board oversees the Company’s strategy is detailed
on pages 14 to 29.
• A list of our Group policies and practices can be found on
page 87.
• How we assess risk and our Viability Statement is set out on
pages64 to 78.
• Our strategy, including performance against our ODIs and KPIs,
can be found on pages 12 to 13 and 14 to 29.
The Group’s long-term sustainable success is contingent on our commitment to the highest standards of corporate
governance, and the Board continues to be guided in its approach through the application of the Code.
Board Leadership and Company Purpose
The Governance Framework set out on page 90 provides an
overview of the Board Committees in place at Severn Trent.
Furtherdetails of each Committee are provided in the respective
Committee reports and a table setting out attendance at meetings
during the year can be found on page 100.
The division of responsibilities between the Chair, Chief Executive
Officer and Senior Independent Director (‘SID’) is clearly defined on
page 100 and set out in writing within our Charter of Expectations,
which is available on our website.
Division of Responsibilities
Details about the composition of the Board, along with individual
Board members’ biographies and tenure, are onpages 98 to 99.
The outputs of this year’s internal Board Performance Review are
set out on pages 103 to 104.
The Nominations Committee Report is on pages 105 to 107
andprovides information on the Committee’s work this year,
including Board succession planning.
Composition, Succession and Evaluation
Our approach to risk and our assessment of our Principal Risks are
outlined on pages 64 to 73.
Our climate and nature-related financial disclosures are set out on
pages 30 to 41.
The Audit and Risk Committee Report, set out on pages 108 to 113,
provides details of the Committee’s review of our risk and control
environment, our fair, balanced and understandable process, and its
responsibilities relating to Internal and ExternalAudit.
Audit, Risk and Internal Control
The Remuneration Committee, comprising only Non-Executive
Directors, is responsible for developing the Remuneration
Policyand determining Executive and Senior Management
remuneration. The Directors’ Remuneration Report, which
includesthe proposed updates to the Directors’ Remuneration
Policy, can be found on pages 118 to 145.
Remuneration
Board site visit to Witches Oak Water Treatment Works, April 2026
Severn Trent Plc Annual Report and Accounts 2026 89
Strategic Report Governance Financial Statements
Governance Framework
Strong governance underpins the delivery of our strategy, reflecting our commitment to accountability, responsible
decision-making and long-term sustainable performance. The framework reflects the Board’s overall responsibility for
governance, internal controls and transparent reporting embedded in our well-established culture of Doing the Right Thing.
Board Committees
Chief Executive Officer
Supports the Chief Executive Officer to ensure effective operational delivery.
Oversees the Steering Committees and Working Groups that support
operational delivery of the Group’s strategy.
Disclosure Committee
Oversees the Group’s compliance with its disclosure and regulatory
obligations, ensuring disclosures are materially accurate, reliable
andtimely, and supported by appropriate assurance.
The Board
Responsible for the long-term sustainable success of Severn Trent.
It sets the Company’s purpose and strategy, determines risk appetite,
overseesinternal controls, and promotes a strong culture.
The Board delegates specific responsibilities to its Committees made
upofNon-Executive Directors, which provide independent oversight
andrigorous challenge on its behalf.
Accountable for delivery and operational performance.
Supported by the Executive Team, develops and implements
theGroup’sstrategyandcommercial objectives.
James Jesic BSc (Hons),
PhD, MIChemE, CEng
Chief Executive Officer
Executive Committee
Helen Miles ACMA
Chief Financial Officer
Executive Committee |
Disclosure Committee
Shane Anderson BA (Hons) Econ
Director of Strategy
andRegulation
Executive Committee |
Disclosure Committee
Jude Burditt BA (Hons)
Director of Customer Solutions
Executive Committee
Steph Cawley BA (Hons), MSC
Director of Customer Operations
Executive Committee
Didar Dhillon BA (Hons), GLDP
Group General Counsel and
Company Secretary
Executive Committee |
Disclosure Committee
Paul Baxter BEng
Director of Capital Delivery
Executive Committee
Neil Morrison BSc (Hons),
FCIPD, FRSA
Director of Human Resources
Executive Committee
Bob Stear MEng (Hons), PhD,
MCIWEM, CWEM, FIWater
Chief Engineer
Executive Committee
Severn Trent Executive
Committee
Corporate
Sustainability
Oversees the
sustainability strategy
and related risk.
Read more on pages
116to117
Nominations
Oversees Board
composition, succession
and independence.
Read more on pages
105 to 107
Remuneration
Oversees and determines
executive remuneration
packages, the Group’s
remuneration policy
andoutcomes.
Read more on pages
118to145
Treasury
Oversees
treasury strategy
and funding risk.
Read more on pages
114to115
Audit
and Risk
Oversees financial
reporting, risk
management and internal
control effectiveness.
Read more on pages
108to113
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 90
Performance in the Round – Dividend 2025/26
The Board undertook a structured assessment of
SevernTrent’s performance in the round as part of
itsconsideration of whether it was appropriate for the
Company to pay a dividend in respect of the financial year
without compromising its ability to deliver on customer,
environmental and regulatory obligations. This assessment
was undertaken alongside the Board’s wider responsibilities
for ensuring long- term success, financial resilience and the
sustainable delivery of the regulated business.
How the Board approached its consideration
The Board focused on demonstrating that any dividend payment was justified and
reflected strong operational performance for customers and the environment,
didnot compromise Severn Trent’s ability to meet its statutory and regulatory
obligations, and supported the Company’s long-term stakeholder outcomes.
In reaching its determination, the Board considered performance across all key
areas of delivery, covering customers, environmental performance and river
health, operational delivery, people and communities, and financial resilience.
Board assessment of performance
Following this assessment, the Board concluded that Severn Trent delivered strong
overall performance during the year, particularly when considered over time and
inthe context of demanding operating conditions, including periods of extreme
drought conditions and exceptional rainfall, and heightened regulatory scrutiny.
The Board also considered areas where performance did not yet meet itsambition
and confirmed that these were actively addressed as part of its overall assessment.
Financial resilience and dividend judgment
The Board assessed the proposed dividend in the context of the Company’s financial
performance, distributable reserves and balance sheet resilience. It concluded that
the dividend:
• was fully supported by distributable reserves;
• did not impact regulated gearing, which remained below the levels required
tomaintain strong credit ratings;
• did not compromise covenant compliance, liquidity or the ability to finance
futureinvestment; and
• remained consistent with the assumptions underpinning the PR24 Business Plan.
The Board further noted that the dividend reflected performance delivered, rather
than short-term financing effects, and preserved long-term financial resilience and
was considered affordable, responsibly financed, and consistent with long-term
financial resilience.
Regulatory standing and stakeholder relationships
The Company’s regulatory and reputational position was assessed as very strong.
Ofwat has awarded Severn Trent’s PR24 Business Plan an ‘Outstanding’ rating, and
theCompany continues to sit in the top category for financial resilience. Severn Trent
is one of only two companies to have achieved net ODI outperformance in every year
of the 2020-25 AMP period, with cumulative outperformance of £434 million (pre-tax),
and is expected to deliver the highest positive ODI outperformance in the first year of
AMP8 at £54.48 million in 2022/23 prices. Constructive engagement with Ofwat, Defra,
the Environment Agency and other stakeholders continues, with regular senior-level
interactions and strong shareholder engagement supporting confidence in governance
and performance.
In forming this judgment:
• Supporting customers in need was assessed as strong by the Board in
several key areas. During the year, 36,000 customers were enrolled onthe
Company’s Big Difference Scheme, an increase of 11,000 on the previous
year, delivering over £6 million in bill savings, supported by £25 million of
shareholder-funded assistance. In addition, 153,000 customers were
proactively moved to metered billing where this resulted in financial benefit,
generating average annual savings of £255 per customer. While household
customer experience remains an area for improvement, the Board noted
clear quarter-on-quarter improvement and was satisfied that credible,
funded plans are in place to accelerate progress. This includes commitments
to invest approximately £5 million in contact centre capacity and wider
service improvements to help deliver better outcomes for customers.
Performance in Developer Services continued to be sector leading, while
outcomes for business customers have also improved significantly over
the year, supported by enhanced data quality and service levels.
• Environmental performance and river health demonstrated sustained,
industry-leading delivery over multiple years. The Board noted that
Severn Trent was on track to achieve an unprecedented seventh
consecutive years of an EPA 4* rating from the EA, anoutcome the Board
regarded as significant given the increasingly challenging environmental
targets. The Board also recognised the significant investment and
reduction in storm overflow spills, with a 41% year-on-year reduction,
andcontinued reductions in the Company’s operational contribution
toRNAGS and improvements in river health, with CSOs down to an
average of 15 spills this year from 25.4 spills lastyear. We remain
on-track to be responsible for less than 2% RNAGS by 2030.
• Operational delivery experienced a strong start to AMP8. 78% of
performance commitments that mean the most to customers were
forecast to be delivered, with particular strengths in leakage reduction,
reductions in sewer floodings and improved biodiversity outcomes.
Leakage performance remains sector-leading, representing the lowest
level of leakage ever achieved and the eighth consecutive year of meeting
targets. Internal sewer flooding is forecast at a best-ever performance,
while external sewer flooding continues to improve year on year. Forecast
ODI performance and PCD rewards were regarded by the Board as evidence
of effective execution, operational capability and disciplined risk management.
• People and communities remained a central consideration. The Board
noted continued focus on workforce safety, investment in future skills
through expanded graduate and apprenticeship programmes, and
meaningful community impact, including the award of nearly £1.75 million
across 92 organisations, supporting nearly 630,000 people through the
Community Fund during the year. The Company’s wider Social Impact
Strategy has supported 39,000 people at risk of water poverty to date
andhas received external recognition for socially inclusive recruitment
andaccountability practices.
Board determination
Taking performance, resilience and future obligations together, the Board
concluded that Severn Trent has demonstrated strong and improving delivery for
customers and the environment, robust operational and financial performance,
and effective management of risks.
Following its assessment, and in accordance with the Company’s formal Dividend
Policy, the Board concluded that the proposed Group dividend would not adversely
affect the financial health of the Company. The decision was underpinned by strong
performance in the round and over time, and the Board was satisfied that the
payment of a dividend for the year was responsible, balanced and consistent with
itsduties to customers, the environment and shareholders.
Further detail on the Board’s approach to performance in the round for
remuneration purposes is set out in the Remuneration Report from page 118.
Further detail specifically on Severn Trent Water’s performance and dividends is
set out in the Severn Trent Water Annual Report and Annual Performance Report.
Severn Trent Plc Annual Report and Accounts 2026 91
Strategic Report Governance Financial Statements
Dear Shareholders
I am pleased to introduce our Governance Report for 2025/26, on behalf
ofyour Board. This has been a year ofsignificant leadership transition,
heightened public andregulatory scrutiny, and continued focus on
strengthening the frameworks and behaviours that underpin effective
governance and long-term trust. Throughout the year, the Board has
remained focused on maintaining robust oversight, supporting the
Executive through change, and upholding the highest standards of
transparency, accountability and corporate governance in the interests
ofour customers, stakeholders and the communities we serve.
Chair’s Introduction to Governance
Strengthening Board Leadership & Seamless CEO Succession
Effective succession planning is a core element of the Board’s governance
framework and has continued to be an area of focus during the year.
Following a structured process overseen by the Nominations Committee,
James Jesic was appointed Chief Executive Officer with effect from
1 January 2026. The transition was managed to ensure continuity of
leadership andstrategic clarity, supported by a phased handover from
LivGarfield. The Board is grateful for Liv’s leadership and for her support
in enabling a smooth and orderly transition. The Board remains focused on
maintaining the appropriate balance of skills, experience and independence
to support effective oversight and the delivery of its strategic priorities
through AMP8 and beyond.
Remuneration Policy Engagement
During the year, we also undertook a comprehensive review of our
Directors’ Remuneration Policy to ensure it remains aligned with
thescale, complexity and ambition of AMP8, and continues to support
sustainable long-term performance. These updates are being made to
ensure the Policy can support our AMP8 ambitions through a rebalanced
focus on long-term incentives, together with market benchmarked
packages, that enable us to attract and retain the calibre of leadership
required for the years ahead. As part of this, the Remuneration Committee
is proposing measured enhancements to strengthen the link between
reward, delivery and long-term value creation, including an increased
emphasis on long-term incentives and strengthened shareholding
requirements for Executive Directors.
We have engaged extensively with our major shareholders and proxy
advisers throughout the review, and I am grateful for the constructive
andtransparent dialogue that has helped to shape our final proposals.
Wewill be putting the updated Policy forward for shareholder approval
atthis year’s Annual General Meeting. Further detail on the proposed
changes, the engagement undertaken and our wider approach to
remuneration can be found in the Directors’ Remuneration Report
onpages118 to 145.
Maintaining Trust Through Strong Stakeholder Governance
The Board continued to shape and monitor the culture of the organisation
through regular engagement with colleagues, site visits and feedback
from our workforce engagement forums. These insights remain
invaluable in ensuring our culture continues to support both our
AMP8commitments and our long-term purpose.
Rebuilding and strengthening public trust across the water sector remains
a central priority for the Board. We have continued to invest significant time
in engaging with customers, regulators, investors, colleagues, community
organisations, MPs and local councils and environmental groups. This
includes customer engagement forums, regulatory dialogue, colleague
forums and deep-dive sessions on environmental performance, cyber
resilience and data quality. Further information is available within the
Board’s activities disclosure on page 101.
We know that maintaining trust requires more than just listening; it
requires clear actions and openness about where we must improve.
Thisyear’s performance included areas of strong delivery but also
challenges such as two serious pollution incidents
1
. Both incidents
wereunforeseen and the Board closely oversaw management’s
responseto the incidents and lessons-learned, reinforcing our
commitment totransparency and remediation.
Christine Hodgson
Chair, Severn Trent Plc
Governance Highlights
CEO succession:
James Jesic appointed January 2026
Board independence retained at:
75%
Gender representation:
50%
Female
50%
Men
4
customer forums
2
site visit
230
investor meetings
Stakeholder engagement:
1 We are currently undergoing an appeal process in relation to a third serious pollution.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 92
Cyber Security, Data Integrity & Operational Resilience
With cyber threats intensifying across all regulated sectors, and a
number of high-profile breaches across the retail and manufacturing
sectors, the Board reinforced its oversight of cyber resilience this year.
We held a dedicated cyber readiness deep-dive session covering
detection capabilities, incident response, supply chain dependencies
anddata governance. Reflecting the Board’s view that cyber risk should
be managed on a ‘when’ not ‘if’ basis, management has been tasked
withdeveloping and rigorously testing detailed business continuity and
response plans. Such plans must focus on building operational resilience,
ensuring the business can continue to deliver its core services under
arange of adverse scenarios. This includes strengthening processes,
governance and capabilities so that critical activities can be sustained,
even in the face of significant disruption.
During the year, the Board took part in a live cyber incident simulation,
which you can read more about below.
Board Activities & Governance Focus Areas in 2025/26
Across the year, the Board and its Committees focused on a broad
programme of work including leadership transition, AMP8 delivery,
customer outcomes, risk management, environment, culture and
workforce engagement, financial resilience and Provision 29
preparedness.
The Board also completed its annual performance review, which
reaffirmed that we continue to operate effectively, with strong
collaboration, open dialogue and constructive challenge, supported
byhigh-quality information and engagement with management and
stakeholders. The review highlighted the Board’s strong strategic focus,
values-led culture and effective Committee oversight. A small number of
enhancements were identified, including continued focus on the agenda
and Board reporting, and we are already taking these actions forward
aspart of our commitment to continuous improvement.
Looking Ahead
The year ahead will be pivotal as we continue to deliver on our AMP8
commitments, strengthen performance in priority areas, embed our
leadership transition and respond to evolving regulatory expectations.
The Board remains fully committed to supporting management
whileproviding rigorous oversight, ensuring Severn Trent remains
acompany trusted to deliver for its customers, communities,
environment and shareholders.
Christine Hodgson, CBE
Chair, Severn Trent Plc
How the Board spent its time in 2025/26
40.3% 12.9% 7.3% 12.1% 21.0% 6.5%
Strategy &
AMP8 delivery
Risk, audit
& cyber
People &
culture
Customer &
stakeholder
outcomes
Investment
& financial
resilience
Environmental
performance
Strengthening Board Cyber Resilience
As part of our continued focus on operational resilience, the
Boardparticipated in a live cyber incident simulation during the
year. This exercise replicated the pressure, pace and uncertainty
ofa real cyber attack, enabling Board members to test decision-
making, escalation routes, crisis communication and regulatory
reporting in a realistic environment.
The session was exceptionally valuable, strengthening our
understanding of the evolving threat landscape and reinforcing
theimportance of robust governance, clear lines of accountability
and rapid, coordinated action. The Board demonstrated strong
engagement throughout and has since enhanced its oversight
through more frequent reporting and deeper scrutiny of cyber
resilience plans.
This exercise has only sharpened our focus to ensure we remain
prepared, informed and confident in our ability to protect the
essential public services our customers rely on every day.
Severn Trent Plc Annual Report and Accounts 2026 93
Strategic Report Governance Financial Statements
Our Culture
Why culture matters to the Board
Our culture is one of Severn Trent’s greatest strengths and continues to be a powerful differentiator at a time of
heightened scrutiny across the water sector. Shaped over many years, it is defined by service, integrity, delivery
anddeep regional pride and has again underpinned our progress in 2025/26.
It is also a culture that drives consistent outperformance, with
colleagues embracing high standards of operational excellence,
environmental stewardship and customer care. This is reflected in
oursector-leading ODI performance, continued strong environmental
ratings and the momentum behind our record investment programme.
Our culture underpins how we think, act and make decisions across the
Group, supporting sound judgement, responsible leadership and the
delivery of high-quality services. Guided by Doing the Right Thing, it is
reinforced through robust performance management, open feedback,
and an emphasis on learning when things go wrong.
The Board sets clear expectations and leads by example, upholding
the same standards expected of colleagues across the Group. To
reinforce this alignment, all Directors complete a suite of mandatory
training covering topics including Anti Bribery, Corporate Corruption
and Fraud, Cyber Security, Doing the Right Thing, GDPR, Market Abuse
and Modern Slavery. Completing this shared training framework
ensures that Directors operate to the same cultural expectations and
behavioural standards as colleagues. Our culture continues to be a
lens through which the Board assesses organisational performance,
capability and future resilience.
How the Board assesses and assures cultural alignment with purpose,
values and strategy
The Board draws on structured insight and direct engagement to
assess whether our culture aligns with our purpose and values and
is consistently demonstrated across the business. Insight gathered
through site visits, Meet Our Board sessions and the Company Forum
provides a candid view of how colleagues experience openness,
leadership visibility and safety in their day-to-day roles.
This is complemented by certain indicators, including colleague
surveyresults, Speak Up themes, safety performance, wellbeing
dataand customer feedback. Together, these sources give the Board
visibility of behaviours in practice and highlight areas where action
maybe required.
The Board also considers leadership and succession decisions as an
important indicator of cultural alignment. The appointment of James
Jesic as our new CEO demonstrates the strength of our internal talent
pipeline and the resilience of our culture. With more than 20 years
experience inoperational and customer-facing roles, this appointment
reinforces our focus in developing leaders who understand our regions,
live our values andembody our cultural DNA.
This continuity reinforces cultural alignment, ensuring stability,
ambition and a shared sense of responsibility for delivering AMP8
withpace and integrity.
How the Board accesses employee voice
The Board has considered the Code’s three recommended workforce
engagement mechanisms and continues to believe that Severn Trent’s
multi-channel colleague engagement method provides an effective
andrepresentative workforce view. The Corporate Sustainability
Committee and the Board receive regular reports on colleague
views,cultural indicators and workforce trends.
Whilst we do not operate a single designated workforce engagement
Non-Executive Director, our collective model offers deeper and more
frequent opportunities for engagement across a broad cross-section
ofthe workforce. The Board keeps this approach to engagement under
review and will continue to assess its effectiveness annually.
Company Forum
Severn Trent’s chosen workforce engagement mechanism is the
Company Forum, an established structure that brings together
colleagues and Trade Union representatives together with members
ofthe Board and the Executive Committee. This mechanism enables
regular, structured dialogue and ensures that the workforce voice
informs the Board’s understanding of culture, strategic execution
andthe realities of day-to-day operations.
Non-Executive and Executive Directors attend sessions on a rotational
basis, giving the attending Director direct exposure to workforce views
and enabling employees to hear first-hand about the issues the Board
is discussing, including strategic priorities, performance, and emerging
risks. The Company Forum agenda is deliberately broad ranging from
customer service and operational performance to wellbeing, safety,
technology adoption and cultural themes, allowing our Directors to
gain deeper insight into how strategy is being delivered across various
functions, teams and locations.
The Company Forum plays a critical role in helping the Board
understand the lived experience of colleagues across a diverse
rangeof roles, seniority levels, and demographic backgrounds.
Following each meeting, the attending Directors provide a formal
report to the Board summarising the insights, themes raised, and
anyemerging issues requiring consideration. This allows the Board
toensure workforce perspectives are meaningfully incorporated
intoBoard-level discussions.
Across this year’s sessions, key themes have included operational
learning maturity, personal safety and wellbeing, customer impact,
early career development and local leadership presence. The Board
also observed shifts compared with the prior year, with discussions
becoming more learning and delivery-focused, technology conversations
moving towards stabilisation, behavioural change and operational
readiness, wellbeing themes broadening to personal security and
preventative support, and early career pathways becoming more
evidence-based with measurable outcomes.
Read more in our Stakeholder Engagement section from page 79.
O
u
r
v
a
l
u
e
s
:
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 94
Culture in Action
Developing our culture and capability through
early career pathways
Our early career pathways strengthen our culture by widening
access,removing barriers and supporting people to thrive from
dayone. Across apprenticeships, graduate roles and social
recruitmentprogrammes, we focus on values-based potential
ratherthan background, building confidence, belonging and work
readiness in young people.
With high completion rates and strong transitions into roles, these
pathways are helping us grow the capability we need for the future,
embedding our culture early, broadening our talent pipeline and
supporting long-term workforce resilience.
Early careers to professional – strengthening
pipeline,culture and retention
Individuals on early career pathways benefit from values-based
recruitment, inclusive supportand clear development pathways that
help them transition successfully into professional roles. By combining
mentoring, skills building and real-world experience, these early
career programmes demonstrate how our culture is lived in practice
and how we build capability for the long term.
Journey snapshot
• 18-24 months structured learning plus a six-month transition.
• Values-based entry routes with widened accessibility.
• Strong progression into permanent roles and broadening
offutureskills.
• High completion rates and positive colleague experience
reinforce our culture.
How this reflects our culture
• Creates belonging and psychological safety from day one.
• Provides leadership visibility and two-way challenge.
• Strengthens colleague voice through early exposure to forums
and networks.
• Embeds safety, integrity and collaboration through everyday experience.
Our culture remains aligned with our purpose and values and continues
to support long-term sustainable success. Ongoing focus areas include
colleague voice, leadership visibility and capability building to ensure
our culture remains embedded and future ready.
To build a rounded view of colleague experience and how culture is embedded across the Group, the Board draws on a range of complementary
insight sources. Together, these insights inform the Board’s assessment of how culture is embedded across the Group and ensure that any areas
requiring focus or assurance are identified and acted upon.
Direct engagement:
Our ‘Meet Our Board’ events, site
visitsand operational deep dives,
giveDirectors first hand exposure
tocolleague perspectives and
workplaceculture in practice.
Employee voice and engagement:
Insights are provided from the annual
employee engagement survey, pulse
surveys and feedback gathered through
listening channels, including workforce
comments raised during engagement
events and the Company Forum.
Workforce policies and practices:
Regular reporting on people policies,
wellbeing, leadership, development,
andSpeak Up themes, enable the Board
to understand how consistently our
purpose, values and expected behaviours
are reflected across the Group.
Severn Trent Plc Annual Report and Accounts 2026 95
Strategic Report Governance Financial Statements
Board Leadership and Company Purpose
An effective Board
An effective Board not only requires the right mix of skills and experience,
but also a diversity of perspectives and thinking styles shaped by Directors’
varied backgrounds. As outlined in their biographies on pages 98 to 99,
our Board brings together a broad and complementary range of capabilities,
forming a balanced and effective leadership team focused on the
long-term sustainable success of the Group.
The skills matrix on page 88 highlights the key areas of expertise
thattheBoard has identified as particularly valuable for the effective
oversight of the Company and execution of our strategy. The matrix
setsout the specific skills that directors bring to the boardroom, ensuring
we maintain a broad set of skills, strong strategic challenge and robust
governance. The skills matrix is reviewed at least annually to ensure
continuing alignment with the evolving needs of our business, both today
and in the future. It is aligned with our strategic priorities, to ensure the
Board remains fully equipped to oversee the delivery of our strategy
andpurpose, while providing constructive, high-quality challenge to
ourexperienced Executive Committee.
The Board provides strong leadership and direction, ensuring that
theCompany’s purpose, values and culture remain aligned with its
long-term strategy. Directors have focused on the areas most critical
tosustainable success, including AMP8 delivery, environmental
performance, customer outcomes, resilience and affordability. This
workis supported by comprehensive reporting and regular engagement
across the business and with external stakeholders, giving Directors
deep insight into operational realities and stakeholder expectations.
The Board’s effectiveness is reinforced through continuous review
andacommitment to high-quality governance. Together, these
elements ensure decisions are made with independence, clarity and
along-term perspective, supporting value creation for customers,
communities and shareholders.
More detail on this year’s performance review can be found on page 103.
Board composition
The Chair, SID and Non-Executive Directors areappointed for three-year
terms, with each Director standing for annual re-election by shareholders
following the outcomes of the Boardperformance review. Directors’
Letters of Appointment are available on the Severn Trent Plc website.
The Nominations Committee regularly reviews the Board’s composition
and effectiveness, considering the balance of skills, tenure, experience
and independence, in line with the Board Diversity Policy. New Board
appointments follow a formal, rigorous and transparent process led by
the Nominations Committee, although all appointment decisions remain
reserved to the Board.
Further detail on the Committee’s work appears on pages 105 to 107.
The Board recognises that diversity of background, experience and
perspective enhances decision-making and long-term performance.
Inthe latest FTSE Women Leaders Review, Severn Trent ranked 4th for
female representation at Board level, reflecting our ongoing commitment
to diversity and inclusion. Progress also continues on ethnic diversity,
consistent with the Parker Review expectations, ensuring the Board
reflects the communities we serve.
These outcomes underscore our commitment to fostering an inclusive
environment where diverse thinking strengthens Board discussions
anddecisions.
Performance against our Board Diversity Policy and related targets
isset out in the Nominations Committee Report on pages 105 to 107.
Board leadership and long-term success
The Board is responsible for safeguarding the long-term success of
Severn Trent by providing clear strategic leadership and ensuring our
objectives remain firmly aligned with the Company’s purpose and values.
We have a strong and highly capable Board whose breadth of professional
backgrounds, sector knowledge and technical expertise positions Severn
Trent to deliver on the scale and ambition of AMP8. Directors bring deep
knowledge and experience across regulated utilities, sustainability,
finance, large scale capital delivery, technology and operational
transformation, equipping the Board to oversee the record levels
ofinvestment and rapid execution required over this AMP.
Upholding the highest standards of governance is central to the Board’s
role. Throughout the year, the Board provided effective oversight of
performance, financial resilience, risk management and stakeholder
engagement, supporting decision-making that prioritises long-term
value for customers, communities, employees and shareholders. The
diversity of skills and perspectives across the Board enables robust,
balanced and well informed discussions characterised by constructive
challenge and independent judgment.
During the year we delivered smooth transitions into key leadership roles,
including the appointment of our new Senior Independent Non-Executive
Director, Nick Hampton, in April 2025 and the transition toJames Jesic as
Chief Executive Officer on 1 January 2026. Both appointments reflect the
Board’s focus on leadership continuity, with their extensive operational
and customer experience supporting the next phase of our AMP8 delivery.
Development, training and resources
In line with the Code, the Board ensures all Directors maintain the
necessary skills and knowledge to discharge their responsibilities
effectively. Ongoing development is tailored to the evolving external
environment and the needs of the business.
The Board regularly reviews training priorities with the Group Company
Secretary, drawing on professional advisers and subject matter experts
for targeted updates. These sessions cover a broad range of strategic,
operational and regulatory topics and support informed decision-making.
During the year, the Board participated in a number of deep dive sessions,
including on:
• delivery plans for AMP8;
• environmental performance;
• customer affordability and vulnerability;
• exceptional weather preparedness;
• innovation and AI; and
• diversity and inclusion.
Directors also have access to an up to date online resource library containing
governance materials, Investor Relations and regulatory briefings, and
further reading on legislative developments and best practice.
As at the date of this report, our Board comprised the Chair (who was independent on appointment), five Independent
Non-Executive Directors and two Executive Directors. The details of their career backgrounds, relevant skills, Committee
membership, tenure and external appointments can be found within their individual biographies on pages98 to 99.
Further detail on the role of the Chair and members of the Board can be found on pages 100 to 101.
The Board believes that its current composition provides an effective balance of experience, independence and
sector-relevant skills to support delivery of the Group’s strategy and regulatory commitments.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 96
Board induction
A structured and tailored induction programme is provided for each
newNon-Executive Director. This includes meetings with the Chair,
fellowNon-Executive Directors, the Chief Executive, Chief Financial
Officer, Group General Counsel and Company Secretary, and members
ofthe Executive Committee andSenior Management. New Directors
undertake site visits across water and wastewater operations and
capitalprojects, gaining insight intothe Group’s activities, strategy,
culture and regulatory framework.
Directors also receive briefings on their statutory duties and on the
expectations of Ofwat for Directors of regulated water companies. In
linewith regulatory expectations, prospective Directors also meet with
Ofwat prior to formal appointment. Feedback from new Directors and
findings from the Board performance review inform enhancements to
theinduction process, with induction materials available to all Directors
through a dedicated online manual.
Feedback continues to indicate that the induction programme provides an
effective foundation for new Directors to contribute quickly and confidently.
Board independence
The Board ensures strong independent oversight, with Non-Executive
Directors providing challenge and holding the Executive Team to account.
The Chair meets Non-Executive Directors privately to support open
discussion, and all Directors have access to the Group General Counsel
and Company Secretary and independent advice when needed.
The independence of our Non-Executive Directors is assessed annually
by the Nominations Committee and as part of the Board performance
review. The Nominations Committee and Board consider that there are no
business or other circumstances that are likely to affect the independence
of any Non-Executive Director and that all Non-Executive Directors
continue to demonstrate independence.
Read more in the Nominations Committee Report on pages 105 to 107.
All the Non-Executive Directors who served during 2025/26 were
considered by the Board to be independent for the purposes of the Code
and the Chair was considered to be independent upon her appointment.
In accordance with the Code, all Directors will retire at this year’s AGM
and submit themselves for election or re-election by shareholders. Each
of the Non-Executive Directors seeking appointment are considered to be
independent in judgment and character.
External directorships
Board members may hold external directorships and other outside
business interests, and we recognise the valuable perspective that
widerboardroom experience brings. Directors are required to obtain
formal approval from the Board ahead of undertaking any new external
appointments and before accepting an additional role, and we closely
monitor both the nature and number of these external appointments
toensure they do not compromise the time commitment required for
theirroles at Severn Trent, and in line with shareholder advisory group
guidelines. Our Non-Executive Directors commit sufficient time to their
duties in accordance with the expectations set out in our Charter of
Expectations, which is available on our website.
Details of the Directors’ external directorships can be found in their
biographies on pages 98 to 99.
Schedule of Matters Reserved to the Board
To ensure the Board maintains oversight of the areas material to the
delivery of the Group’s strategy and purpose, the Board undertakes an
annual review of the Matters Reserved to the Board. The latest review
took place in March 2026 and the Board agreed that the Schedule
contained areas appropriate to require Board involvement, including in
relation to strategy, structure and capital, financial reporting, controls
and communication with stakeholders. The Schedule of Matters Reserved
to the Board is available on the Severn Trent Plc website.
Strategy
Well evaluated strategic decisions are essential to delivering our strategy
andachieving our purpose of taking care of one of life’s essentials. The
Board is responsible for approving the Group’s strategy and ensuring
theframework is in place for its effective delivery, acting in the interests
ofallstakeholders.
During the year, the Board oversaw the continued implementation of
theGroup’s corporate strategy. Alongside standing strategic items at
each Board meeting, the Board holds an annual Strategy Day with the
Executive Committee to consider the Company’s strategic direction over
the short, medium and long term.
Responsibility for the development and execution of the Group’s strategy
and commercial objectives rests with the Chief Executive, supported by
the Executive Committee.
Stakeholder engagement
Stakeholder engagement is central to our strategy and, as such,
adetailed disclosure setting out stakeholder engagement activity
conducted during the year is included within our Strategic Report
onpages 1 to 87. The Board ensures that the Company engages
effectivelywith its stakeholders and encourages a two-way dialogue in
order that the decisions made by the Board take into account the views
of,and potential impacts on stakeholders. Our dedicated Section 172
Statement on pages 84 to 86 sets out how the Board has considered
andcontemplated the interests of all of our key stakeholders.
An overview of the Board’s engagement with stakeholders is set out
onpages 79 to 83 and page 85.
Annual General Meeting (‘AGM’)
Our 2025 AGM was held on 10 July 2025, at which 82.97% of our shareholders
voted on the resolutions put forward. We were delighted toreceive in
excess of 95% votes in favour for all of our resolutions. Shareholders
were able to submit questions to the Board in advance ofthe AGM and
toraise questions during the meeting.
The 2026 AGM will be held at 10.00am on Thursday, 9 July 2026.
Fulldetails on how to attend and the resolutions being proposed for
shareholder approval are set out in the Notice of Meeting available
ontheSevern Trent Plc website.
Severn Trent Plc Annual Report and Accounts 2026 97
Strategic Report Governance Financial Statements
Board of Directors
Christine Hodgson CBE
BSc (Hons), FCA
Chair
James Jesic
BEng (Hons), PhD, MIChemE, CEng
Chief Executive
Helen Miles
ACMA
Chief Financial Officer
Tom Delay CBE
BSc (Hons), MBA, CEng, MIMechE
Independent Non-Executive Director
Appointed:
Independent Non-Executive Director
on 1 January 2020, Chair on 1 April
2020.
Appointed:
Chief Executive on 1 January 2026.
Appointed:
Chief Financial Officer Designate
on 1 April 2023, Chief Financial Officer
on 6 July 2023.
Appointed:
Independent Non-Executive Director
on 1 January 2022.
Career and experience:
Until her appointment as Chair of
theSevern Trent Board, Christine
was the Executive Chair of Capgemini
UK Plc. Christine joined Capgemini
in1997 and built her career in a
variety of roles including CFO
forCapgemini UK Plc and for the
Global outsourcing business, CEO
ofTechnology Services North West
Europe and theGlobal Head of
Corporate SocialResponsibility.
Christine was previously Senior
Independent Director and Chair
oftheRemuneration Committee
atStandard Chartered Plc.
In January 2020, Christine was
appointed Commander of the
Orderof the British Empire in
theQueen’s New Year Honours
forservices to education.
Career and experience:
James is Chief Executive Officer
ofSevern Trent, appointed on
1January 2026, following more
thantwo decades with the Company.
James has held senior leadership
roles across the business, including
Customer Operations Director and
Capital and Commercial Services
Director, and became a member of the
Executive Committee in 2017. He was
also appointed Managing Director
of Hafren Dyfrdwy, Severn Trent’s
licensed entity in Wales, in 2020.
James has a proven track record of
delivering industry-leading financial
and environmental performance,
driving operational transformation,
and leading Severn Trent’s
multi-billion-pound capital
investment programme.
Career and experience:
Helen joined Severn Trent in
November 2014 as the Chief
Commercial Officer, and in 2020
became the Capital and Commercial
Services Director, before being
appointed as Chief Financial Officer
Designate in April 2023 and formally
taking on the role of Chief Financial
Officer in July 2023.
Helen was previously Chief Financial
Officer for Openreach, part of the BT
Group. Prior to the BT Group, Helen
worked in a variety of organisations
including Bass Taverns, Barclays
Bank and Compass Group.
Career and experience:
Tom was Chief Executive of the
Carbon Trust from 2001 until
March2024. During that time,
hegrew the company to become
aworld leader, advising businesses
and governments on carbon emissions
reduction and the development of
low-carbon technologies, markets
andbusinesses.
A chartered engineer with extensive
experience of the energy sector,
Tomworked for Shell for 16 years
ina variety of commercial and
operational roles before moving
intomanagement consultancy with
McKinsey and Company and then
asa Principal with the Global
EnergyPractice of AT Kearney.
In 2018, Tom was appointed
Commander of the Order of the
BritishEmpire by the Queen for
services to sustainability in business.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
Christine has extensive board and
governance experience, as well as
adeep understanding of business,
finance, technology and leadership.
She is a committed advocate of the
need for companies to serve all their
stakeholders effectively and deliver
their social purpose. Christine is a
Fellow of the Institute of Chartered
Accountants in England and Wales.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
James a chartered engineer with
aPhD in Chemical Engineering, is
recognised for delivering growth,
leading transformation, and
championing sustainability. His
exceptional technical expertise and
strategic leadership are underpinned
by a passion for innovation, operational
excellence, and creating long-term
value for customers, communities,
and shareholders.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
An experienced finance professional,
Helen has delivered major business
transformation and infrastructure
projects within the Group and across a
variety of sectors including telecoms,
leisure and banking. Helen brings a
breadth of operational and commercial
knowledge to the Board, having worked
within a range of regulated businesses.
Helen has recent and relevant financial
experience as a member of the Chartered
Institute of Management Accountants.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
Tom brings extensive experience
insustainability, strategy and the
energy sector including advising on
the transition to low-carbon economy.
He contributes to the Board’s
oversight on climate-related risks
and opportunities, supporting the
Group’s approach to long-term
resilience and sustainability
ambitions. His external perspective
strengthens consideration of stakeholder
and regulatory developments.
Other key appointments:
– Chair of Whitbread Plc
– Chair of Newton Group
HoldingsLimited
– Non-Executive Director
ofSpencerStuart
Other key appointments:
– Managing Director of Hafren Dyfrdwy
Other key appointments:
– Non-Executive Director of
Breedon Group Plc
– Director of Water Plus Limited
Other key appointments:
– Chair and Non-Executive Director
ofChapter Zero
C
Corporate Sustainability
Committee
N
Nominations
Committee
R
Remuneration
Committee
T
Treasur y
Committee
D
Disclosure
Committee
E
Executive
Committee
Committee
Chair
A
Audit and Risk
Committee
Key
N C E NCR ED
Severn Trent Plc Annual Report and Accounts 2026 98
Strategic Report Governance Financial Statements
Nick Hampton
MA (Hons)
Senior Independent Non-Executive
Director
Sarah Legg
MA, MSc, FCMA, FCT
Independent Non-Executive Director
Sharmila Nebhrajani OBE
MA (Hons), ACA
Independent Non-Executive Director
Richard Taylor
BSc (Hons), FCA
Independent Non-Executive Director
Appointed:
Independent Non-Executive Director
on 4 April 2025, Senior Independent
Director on 1 May 2025.
Appointed:
Independent Non-Executive Director
on 1 November 2022.
Appointed:
Independent Non-Executive Director
on 1 May 2020.
Appointed:
Independent Non-Executive Director
on 1 April 2024.
Career and experience:
Nick was appointed Chief Executive of
Tate & Lyle Plc in April 2018, having
joined the Company in September
2014 as Chief Financial Officer. Prior
to joining Tate & Lyle, Nick held a
number of senior roles over a 20-year
career at PepsiCo, including Senior
Vice President and Chief Financial
Officer, Europe from 2008, and from
2013 as PepsiCo’s President, West
Europe Region and Senior Vice
President Commercial, Europe.
UntilApril 2025, Nick was the
SeniorIndependent Director of
GreatPortland Estates Plc, where
hehad served on the Board since
October 2016. Nick holds a Master’s
degree in Chemistry from St John’s
College, Oxford University.
Career and experience:
Sarah has spent her entire career
infinancial services with HSBC in
various finance leadership roles.
Shehas been the Group Financial
Controller, a Group General Manager,
and also Chief Financial Officer for
HSBC’s Asia Pacific region. Sarah
previously spent eight years as a
Non-Executive Director on the
boardof Hang Seng Bank Limited,
aHong Kong listed bank.
Sarah also serves as the Chair of
Hafren Dyfrdwy, the Group’s Welsh
regulated entity.
Career and experience:
In her executive career, Sharmila
spent 15 years at the BBC, latterly
asChief Operating Officer for BBC
Future Media and Technology, and
was previously Chief Executive at
Wilton Park. Previous Non-Executive
roles include Deputy Chair of the
Human Fertilisation and Embryology
Authority and Chair of the Human
Tissue Authority, and she also has
served on the board of the Pension
Protection Fund.
Sharmila was appointed Officer of
theOrder of the British Empire in 2014
for services to medical research.
Career and experience:
Richard is Managing Director
andChairman of Greenhill & Co
International, an investment bank
focused on providing financial advice
globally on significant mergers and
acquisitions, restructuring, financing
and capital advisory to companies and
other organisations. Prior to joining
Greenhill in 2020, Richard was
Chairman of Global Corporate and
Investment Banking at Barclays Plc,
where he had been since 2011. Prior to
joining Barclays, Richard spent nearly
11 years at Bank of America Merrill
Lynch, where he was Head of UK and
Ireland Corporate and Investment
Banking. Richard holds a degree in
civil engineering and is a great
advocate for organisations which
demonstrate strong social purpose.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
Having held a number of senior roles
in large, multinational businesses,
Nick brings to the Board extensive
experience in general management,
finance, investor relations, strategy
and M&A, information systems and
procurement. Nick has recent and
relevant financial experience from
hisprevious roles as Chief Financial
Officer at Tate & Lyle Plc and Chair
ofthe Audit Committee at Great
Portland Estates Plc.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
Sarah brings to the Board wide-
ranging corporate finance and
significant audit and risk experience
gained in the financial services sector.
Sarah has recent and relevant
financial experience as a Fellow
ofboth the Chartered Institute of
Management Accountants and the
Association of Corporate Treasurers.
Sarah is the Group’s designated
Non-Executive Director in respect
ofCyber Security.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
Sharmila has vast board and
governance experience, gained in a
variety of roles spanning the private
sector, public sector and NGOs. A
chartered accountant, she brings
insight from a wide range of regulated
sectors, including medicine, bioethics,
financial services and the media.
Skills and attributes which support
our strategy and deliver long-term
sustainable success:
Richard brings to the Board extensive
strategy, corporate finance, risk
management and M&A experience.
Richard has recent and relevant
financial experience gained through
his roles in the banking and finance
sectors and as a Fellow of the Institute
of Chartered Accountants in England
and Wales.
Other key appointments:
– Chief Executive of Tate & Lyle Plc
Other key appointments:
– Non-Executive Director of
LloydsBanking Group Plc
– Non-Executive Director
ofManGroup Plc
– Non-Executive Director
ofHafrenDyfrdwy
Other key appointments:
– Chair of the National Institute for
Health and Care Excellence
– Non-Executive Director of ITV Plc
– Non-Executive Director of Halma Plc
Other key appointments:
– Managing Director and Chair
ofGreenhill & Co. International LLP
N RA T NR C NT RAC NA T
Non-Executive Director serving for
part of the year
Kevin Beeston
FCMA
Kevin stepped down from the Board on 30 April 2025, having served
as an Independent Non-Executive Director since 1 June 2016, and
Senior Independent Non-Executive Director since 20 July 2016. The
Board thanks Kevin for the experience, insight and constructive
challenge he brought to the Board during his tenure.
Severn Trent Plc Annual Report and Accounts 2026 99
Strategic Report Governance Financial Statements
Division of Responsibilities
Chair
Christine Hodgson
– Leads our Board and is
responsible for its effectiveness.
– Fosters a culture of inclusivity
and transparency and sets the
tone from the top.
– Guides the Board in shaping
long-term strategy, ensuring
alignment with the Company’s
purpose.
– Sets agendas and ensures timely
dissemination of information to
the Board, to support sound
decision-making and allow
forconstructive discussion,
challenge and debate, in
consultation with the CEO, CFO
and Group General Counsel
andCompany Secretary.
– Responsible for scrutinising the
performance of the Executive
Committee and overseeing the
annual Board Performance
Review process.
– Facilitates contribution from
all Directors and ensures that
effective relationships exist
between them.
– Ensures that the views of all
stakeholders are understood
and considered appropriately
in Board discussion and
decision-making.
– Responsible for the composition
and evolution of the Board,
together with the Nominations
Committee and SID.
Senior Independent
Non-Executive Director
Nick Hampton
In addition to their responsibilities
as a Non-Executive Director, the SID
also carries out the following duties:
– Supports the Chair in the delivery
of their objectives.
– Acts as an alternative contact
forshareholders should they
havea concern that is unresolved
by the Chair, CEO or CFO.
– Leads the appraisal of the
Chair’sperformance with the
Non-Executive Directors.
– Undertakes a key role in
succession planning for the
Board, alongside the Board
Committees, Chair and
Non-Executive Directors.
Independent Non-Executive Directors
Tom Delay, Sarah Legg, Sharmila Nebhrajani, Richard Taylor
– Promote high standards of
integrity and corporate
governance.
– Uphold the cultural tone of the
Company and support diversity
and inclusion.
– Constructively challenge and
assist in the development of
long-term strategy by providing
independent insight and support
based on relevant experience.
– Monitor the delivery of strategy
by the Executive Committee and
measure the performance of
management within the risk
andcontrol framework set
bythe Board.
– Satisfy themselves that
internalcontrols are robust
andthat the External Audit is
undertaken properly.
– Engage with internal and
external stakeholders and
feedback insights to the
Board,including in relation
toemployees and the culture
oftheCompany.
– Have a key role in succession
planning for the Board, together
with the Board Committees,
Chair and SID.
– Serve on and, as required,
chairvarious Committees
oftheBoard.
The roles of Chair and Chief Executive are separately held and their
responsibilities are well defined, set out in writing in the Charter of
Expectations, and regularly reviewed by the Board. The Chair and the
other Non-Executive Directors meet routinely without the Executive
Directors, and individual Directors meet outside formal Board meetings
in order to gain first-hand experience of our operations and engage with
our workforce. The Executive Directors meet weekly as part of the
Executive Committee to attend to the ongoing management of the Group.
Any significant operational and market matters are communicated to
theNon-Executive Directors on a timely basis outside of Board meetings.
TheBoard is supported by the Group General Counsel and Company
Secretary, to whom all Directors have access for advice and corporate
governance services.
Non-Executive Directors
Board and Committee Meeting Attendance 2025/26
Director
Board
(inc. strategy day)
Audit and Risk
Committee
Corporate Sustainability
Committee
Nominations
Committee
Remuneration
Committee
Treasury
Committee
Christine Hodgson 7/7 - 4/4 4/4 6/6 -
Liv Garfield 5/7 - - - - -
James Jesic 2/7 - - - - -
Helen Miles 7/7 - - - - -
Kevin Beeston 1/7 - - - 1/6 -
Sharmila Nebhrajani 7/7 - 4/4 4/4 6/6 -
Tom Delay 7/7 - 4/4 4/4 - -
Sarah Legg 7/7 6/6 4/4 4/4 - 5/5
Richard Taylor 7/7 6/6 - 4/4 6/6 5/5
Nick Hampton 7/7 6/6 - 4/4 6/6 5/5
Changes to Board composition in the 2025/26 financial year: James Jesic was appointed to the Board on 1 January 2026 and Liv Garfield retired from the Board on 31 December 2025.
Kevin Beeston retired from the Board on 30 April 2025.
Executive Directors
Group General Counsel and Company Secretary
Didar Dhillon
– Ensures sound information flows to the Board in order for the Board to function
effectively and efficiently, in support of balanced decision-making.
– Advises and keeps the Board updated on Listing and Transparency Rule requirements
and on best-practice corporate governance developments.
– Facilitates a comprehensive, individually tailored induction for newly appointed
Directors and oversees the Board’s professional development programme.
– Ensures compliance with Board procedures and provides support to the Chair.
– Co-ordinates the annual performance review of the Board in conjunction with the Chair.
– Facilitates the Board’s ongoing engagement with employees.
– Ensures monthly reporting to the Board on regulatory and legal risks so the Board
is fully sighted on emerging issues.
Group General Counsel and Company Secretary
Chief Financial Officer
Helen Miles
– Manages the Group’s financial
affairs and proposes policies
tosupport sound financial
decision-making. The CFO’s
Review can be found on
pages57to 63.
– Supports the CEO in the
implementation and
achievement of the Group’s
strategic objectives.
– Oversees Severn Trent’s
relationships with the
investment community.
– Represents Severn Trent
externally to all stakeholders,
including government, regulators,
customers, Pension Trustees for
the Company’s defined benefit
pension schemes, lenders,
suppliers and the communities
we serve.
Chief Executive Officer
James Jesic
– Represents Severn Trent
externally to all stakeholders,
including government, regulators,
customers, suppliers and the
communities we serve.
– Sets the cultural tone of the
organisation in line with the
Group’s purpose and values.
– Facilitates a strong link between
the business and the Board to
support effective communication.
– Develops and implements the
Group’s long-term strategy,
asapproved by the Board,
throughleadership of the
Executive Committee.
– Responsible for overall delivery of
all strategic objectives, ensuring
that decisions made and actions
taken support the Group’s
long-term sustainable purpose.
– Promotes and conducts Group
activities with the highest
standards of integrity, probity
andcorporate governance.
TheCEO’s Review can be found
onpages 10 to 11.
There are clear divisions between Executive and Non-Executive responsibilities, which ensure accountability and oversight.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 100
Board Activities
These pages provide an overview of the key matters discussed by the
Board throughout the year, reflecting a year in which the scale and pace
of AMP8 delivery, coupled with changing legislation on environmental
and customer performance, meant the Board devoted significant time
to ensuring strong oversight of operational execution, investment
delivery and cultural alignment. While not exhaustive, they offer clear
insight into the Board’s discussions and how its work remains focused
on delivering our strategy (see page 14).
The Board follows a structured meeting schedule and forward agenda,
supported by the Group Company Secretary. The forward agenda is
structured to ensure appropriate focus on AMP8 delivery, customer
experience, regulatory engagement, environmental outcomes and
financial resilience, while remaining flexible enough to incorporate
emerging risks such as cyber resilience and supply chain capacity. Each
meeting is built around an agenda agreed by the Chair, Chief Executive
Officer and Group General Counsel and Company Secretary to ensure
time is used effectively.
A typical Board meeting will comprise the following elements:
• Reports from Board Committee Chairs outlining key discussions
andmatters requiring the Board’s attention.
• Updates from each Company Forum, supplemented by reflections
fromattending Directors.
• Performance reporting, including the CEO Overview, CFO Report
andOperational Performance Reports, with emphasis on customer
delivery, environmental performance and progress against key
AMP8 milestones and ODI trajectories.
• Deep dive papers on strategic priorities, opportunities and risks
toassess progress and determine any required actions.
• Legal and governance updates, including delegated authority
arrangements, whistleblowing procedures and approval of the
Anti-Slavery and Human Trafficking Statement.
• Regular regulatory updates and regulator attendance.
Further detail on the Board’s key considerations during 2025/26 is included
in the Section 172 Statement on pages 84 to 86. After each meeting, the
Chair typically holds a private session with the Non-Executive Directors,
providing space for open discussion without Executive Directors or Senior
Management. These sessions help maintain independent judgment and
support effective strategic challenge.
Ahead of most scheduled meetings, the Non-Executive Directors
alsomeet informally – either alone, with the full Board and the Group
General Counsel and Company Secretary, with members of the Executive
Committee, or occasionally with external attendees such as regulatory
representatives. These discussions strengthen working relationships,
bring in external perspectives, and enable reflection on wider strategic,
operational and regulatory matters.
Key activities
The Board sets the approach to risk management and
oversees the effectiveness of our internal controls,
including our governance framework.
Key matters considered by the Board, with the support
ofthe Audit and Risk Committee, during the year included:
• Enterprise risk oversight and risk appetite
• Cyber security, data and technology resilience
• Emerging risks
• Safety, security and regulatory compliance
(e.g.,SSSIs, reservoir safety)
• Insurance, authorisation arrangements, and
governance frameworks
• Annual governance assessments and control
effectiveness reviews
Outcomes
More robust risk management and governance
frameworks, enhancing assurance, cyber resilience
andlong-term operational stability.
Key approvals during the year
• Annual Risk Appetite Statement
• Annual review of Principal Risks
Stakeholders
Stakeholders
Internal controls, risk management and governance
Stakeholder key
Customers Colleagues Communities
Shareholders and Investors
Suppliers and Contractors
Regulators and Government
Key activities
The Board sets the Company’s strategy and spent
significant time in the year considering its strategic
execution. Key matters considered during the
yearincluded:
• Long-term environmental strategy, including the
NetZero Transition Plan
• Regulatory frameworks including PR24 deliverability
• Innovation, technology and AI strategy
• Customer vulnerability, affordability and consumer
engagement
• Strategic growth and commercial development
• Major environmental and asset management strategies
• Board strategy deep dives (e.g., water quality, capital
innovation, biosolids)
Outcomes
Sharper strategic focus on long-term environmental
resilience, regulatory readiness and innovation, ensuring
the business is well positioned for future growth.
Key approvals during the year
• Water Resource Management Plan 2025
• Long-term Net Zero Ambition and our Net Zero
Transition Plan
• Pollution Incident Reduction Plan
• WICS Compliance Statement
• Approval of Indicative Wholesale Charges for 2026/27
Strategic, regulatory and environmental
Severn Trent Plc Annual Report and Accounts 2026 101
Strategic Report Governance Financial Statements
Key activities
The Board is responsible for monitoring and assessing
the culture of the Group. Key matters considered during
the year included:
• Employee voice and engagement
• Workforce policies, culture and Code of Conduct oversight
• Diversity, equity and inclusion progress
• Health, safety and wellbeing performance
• Whistleblowing and ethical conduct review
Outcomes
A more inclusive, values-led culture reinforced
throughactive employee engagement, strengthened
workforce policies and continued focus on wellbeing
andrepresentation.
Key approvals during the year
• Approval of Anti-Slavery and Human Trafficking
Statement 2025
Key activities
The Board receives updates on the Company’s financial
performance at each meeting and oversees the financial
strategy across the Group. Key matters considered
during the year included:
• Year-end reporting and financial planning
• Group-wide budget, funding and treasury strategy
• Dividend decisions (Group and subsidiary)
• Investor relations approach and shareholder engagement
• Pensions, tax, and wider financial risk management
• Long-term financial policy, including AMP8
dividend strategy
Outcomes
Disciplined financial stewardship supporting sustainable
investment, resilient cash flows and strong long-term
value for shareholders and stakeholders.
Key approvals during the year
• Establishment of Australian Medium-Term
NoteProgramme
• Annual Report and Accounts 2024/25
• Annual Performance Reports 2024/25
• Viability and Going Concern
Key activities
The Board is responsible for monitoring and assessing
talent and succession planning within the Group. Key
matters considered during the year included:
• Organisation-wide talent review
• Executive and senior leadership succession planning
• Leadership diversity and future workforce needs
• Annual Board Performance and effectiveness review
Outcomes
Enhanced leadership capability and clear succession
pipelines ensuring organisational resilience and
readinessto deliver long-term strategic priorities.
Key approvals during the year
• CEO Succession
• Board Diversity Policy
• Gender and Ethnicity Pay Gap Report 2025
Stakeholders
Stakeholders
Stakeholders
Culture, Diversity and Inclusion
Financial
Talent and Succession Planning
Board wastewater site visit
In April 2026, the Board visited Severn Trent’s Hayden and
StokeOrchard sites to see how investment is improving service
for customers and strengthening environmental performance.
AtStoke Orchard, the Board viewed upgrades that help the site
manage higher flows more reliably, supporting better river health
and reducing the risk of spills during heavy rainfall.
Board members also saw new monitoring technology that
helpsteams spot issues earlier and modern lining methods that
protectpipes from leaks and groundwater entering the network.
The visit gave the Board valuable insight into how operational
improvements directly benefit customers, communities and
long-term asset resilience.
Board Activities continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 102
Board Performance Review
Ensuring high-quality governance, effective oversight
and continuous improvement.
Board Performance Review Cycle
During the year, the Board completed its 2025/26 internal performance
review, the third year of its three year evaluation cycle. The review
considered the effectiveness of the Board and its Committees, including
the quality of challenge and decision making, the culture of open dialogue,
and how effectively Directors and the Executive Team work together to
deliver the Company’s strategic objectives.
The review also assessed Board composition, including the balance of
skills, experience, independence and diversity, and how these support
effective collaboration and robust discussion. Diversity is recognised as
akey contributor to Board effectiveness, bringing a range of perspectives
and constructive challenge.
The Board’s three year performance review cycle is aligned with the Code
and the Corporate Governance Institute’s Principles of Good Practice,
supporting continuous improvement in Board effectiveness, composition
and diversity.
2025/26 Board Performance Review Findings
The review confirmed that the Board continues to operate effectively, with
strong strategic debate, constructive challenge and a positive, values‑led
culture. Directors highlighted high‑quality information flows, supported
by site visits and external speakers at meetings, and a strong working
dynamic between the Board, Executive Directors and Senior Management.
The Board’s strategic focus, collaboration with the Executive Team and
engagement across the organisation were all viewed as key strengths.
Stakeholder engagement remains robust, particularly with regulators,
government and the workforce. Committees were assessed as highly
effective with strong Chair leadership, and relationships around the
Board table continue to be open and constructive.
2025/26 Board performance review process
Stage 1
Review & Plan
Stage 2
Input & Discuss
Stage 3
Evaluate & Report
Stage 4
Consider & Agree
Stage 5
Monitor & Track
A detailed,
independent
assessment of the
Board, Committees
and individual
Directors.
With a focus on
stakeholder engagement
and Board contribution
to strategy and
organisational culture.
With a focus on
Board dynamics,
Board composition
and succession.
Y
e
a
r
1
(
2
0
2
3
/
2
4
)
Y
e
a
r
2
(
2
0
2
4
/
2
5
)
Y
e
a
r
3
(
2
0
2
5
/
2
6
)
I
n
t
e
r
n
a
l
l
y
l
e
d
l
i
g
h
t
e
r
-
t
o
u
c
h
r
e
v
i
e
w
E
x
t
e
r
n
a
l
l
y
f
a
c
i
l
i
t
a
t
e
d
r
e
v
i
e
w
I
n
t
e
r
n
a
l
l
y
l
e
d
i
n
t
e
r
m
e
d
i
a
t
e
-
l
e
v
e
l
r
e
v
i
e
w
The 2025/26 performance
review confirms a highly
effective Board, strong
governance foundations
and a clear commitment to
continuous improvement.
To shape the 2025/26 performance review,
theGroup General Counsel and Company
Secretary drew on insights from the 2023/24
externally‑facilitated review, the 2024/25
internal reviewand Code expectations.
Afocused questionnaire was developed
tocapture Directors’ views on Board
performance acrosskey areas, including
accountability, oversight, strategy, value
creation, culture, behaviours, stakeholder
engagement and thequality of information
provided to the Board and its Committees.
Directors completed the questionnaire and
participated in comprehensive one‑to‑one
meetings with the Group General Counsel and
Company Secretary. Separate discussions
were held to assess the effectiveness of
theCEO, CFO and Group General Counsel
andCompany Secretary, led by the Chair,
whiletheSID oversaw the Chair’s own
performance review.
The Group General Counsel and Company
Secretary consolidated all responses,
identifying key themes and potential actions.
Asummary of the findings was prepared
forthe Chair to review, and the final report
waspresented to the Board at its March
2026 meeting.
The findings were used to agree a set of actions,
formally recorded for implementation and
monitoring. The review outcomes also
informed recommendations on the appointment
and reappointment of Directors, including
breadth of skills, independence, time
commitment and individual performance.
The Board continues to oversee progress
against agreed actions to ensure timely
delivery. The Nominations Committee also
plays a key role in monitoring actions relating
to Board succession, composition, recruitment
and induction.
Severn Trent Plc Annual Report and Accounts 2026 103
Strategic Report Governance Financial statements
The Board agreed the following focus areas for the coming year:
Priorities for 2026/27
Progress on 2024/25 actions
Recommendation:
Opportunities to strengthen
risk management framework,
including enhancing horizon
scanning to identify potential
emerging or low‑likelihood,
high‑impact risks.
Sharpen strategic priorities and direction
Action:
Refine Board forward agenda to protect time for strategic discussion
on emerging themes, strategic priorities and new CEO priorities.
Continue to improve the quality, focus and structure
ofBoardpapers
Action:
Review Board paper templates and guidance, to enable
thestreamlining and clarity of reporting packs.
Consider how culture is being embedded and
reportedtotheBoard
Action:
Continue to provide the Board with visibility of the Company culture.
Explore additional routes for customer insight and other
broader stakeholder engagement
Action:
Give greater prominence to customer service. Receive regular
reports on how customer insights feature in related Board decisions
in line with the new Ofwat Consumer Involvement obligations.
Continue to strengthen regulatory capability and sustainability
discussions to include wider resilience themes
Action:
Continue to keep under review the appropriate balance of
dedicated regulatory and sustainability briefings and regulator
attendance at Board meetings.
Ensure robust leadership succession and alignment with
long‑term value creation
Action:
Maintain a strong, forward‑looking approach to Board and Executive
succession, while ensuring remuneration arrangements continue to
support long‑term sustainable value creation for shareholders.
Recommendation:
Further enhancements to
Board agendas could include
dedicating more time to
strategic opportunities,
customer insight and
innovation/AI, and scheduling
key legal and governance
items earlier where helpful.
Recommendation:
Notwithstanding the high
quality of Board reporting,
and excellent progress made
in enhancing reporting
during the year, there was an
opportunity for reports to be
more succinct and executive
summaries to be crisper.
Recommendation:
The introduction of ‘Meet
theBoard’ events had
beenvery positive. It was
considered that these could
be held more frequently
moving forward.
Progress to date:
Horizon scanning and
‘black swan’ considerations
embedded into risk cycle.
Initial Progress:
An initial review of the forward agenda has been undertaken to
check overall coverage of the right matters, alongside preserving
space for future strategic matters.
Initial Progress:
We are reviewing Board paper guidance and templates and have
added some optional AI tools on the Board paper platform to
support with sharper, focused Board discussions.
Initial Progress:
We will continue to share insights on Company culture with
theBoard through ongoing employee engagement activities
andregular feedback channels, such as QUEST.
Initial Progress:
Initial steps have been taken to incorporate more customer‑focused
discussions into the Board forward agenda. Board papers have also
been updated to highlight customer considerations alongside other
Section 172 factors.
Initial Progress:
External speakers diarised to attend certain Board meetings
throughout the year, as appropriate.
Initial Progress:
Succession planning remains a regular item for the Nominations
Committee, with updates to the Board. Consultation on the AMP8
Remuneration Policy took place during the year, with details of the
proposed policy on page 122 to 127.
Progress to date:
Board agendas continue to
evolve to sharpen strategic
focus and ensure appropriate
attention on the right matters.
Progress to date:
Feedback from last year’s
review led to clearer, more
focused Board papers. We
continue to refine guidance,
templates and the use of AI to
ensure continued progress.
Progress to date:
‘Meet the Board’ sessions
arenow a regular part of
ourstakeholder engagement
programme and continue
toprovide valuable
two‑wayinsight.
Board Performance Review continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 104
Nominations Committee Report
Documents available at severntrent.com
Board Diversity Policy
‘Wonderfully You’, our Diversity and Inclusion Strategy
Charter of Expectations
Committee Terms of Reference
Committee membership and attendance
All members of the Committee are Independent Non-Executive Directors,
with the exception of the Chair of the Board (who was independent on
appointment). Only Committee members are entitled to attend meetings;
the Chief Executive, Director of Human Resources, Group General
Counsel and Company Secretary, senior management and external
advisers may attend by invitation. The Committee is authorised to
obtainexternal professional advice as required.
Membership and attendance during 2025/26 are shown in the table
onpage 100.
Board composition
The Committee remains satisfied that all key roles have credible
succession and contingency plans in place. The Committee considers
succession and contingency planning at each of its meetings and continues
tomake appropriate recommendations to the Board as necessary.
The Committee continued to strengthen our succession plans to ensure
that both the Board and the Executive Team maintain the right balance
ofskills, diversity and experience, building on the strong foundations
established in previous years. Recognising the importance of a robust
anddiverse leadership pipeline, we placed particular focus on executive
succession to support Severn Trent’s long-term strategy and operational
delivery. During the year, alongside completing the CEO succession process
and appointing a new Non-Executive Director, the Committee undertook
acomprehensive review of senior management talent across the Group.
These changes ensured that the Board and Executive Team continues to
have an appropriate blend of experience, skills and independence. The
Committee will continue to prioritise planning for upcoming Non-Executive
Director retirements to maintain the Board’s balance and effectiveness.
Enhanced review of independence
The Board recognises the value of experience but remains mindful of
theCode requirements, which expects Non-Executive Directors to be
subject to rigorous review after six years. In line with this, the Committee
undertook an assessment of the independence, time commitment and
contribution for Christine Hodgson who reached the end of her current
term in January 2026, and Sharmila Nebhrajani who will reach the end
ofher term in May 2026. The Committee and Board concluded that both
Non-Executive Directors continue to demonstrate independence, effective
challenge and strong commitment, and remain well placed to act in the
long-term interests of all stakeholders, with reappointment subject to
shareholder approval at the upcoming 2026 AGM.
Board performance review
An internally facilitated Board performance review concluded that the
Board and its Committees continue to operate effectively. The review
identified a small number of opportunities for enhancement, including
refining Board objectives and increasing visibility of executive succession
planning. The Chair held one-to-one meetings with each Director to
discuss their performance and development, and the Senior Independent
Director carried out the annual review of the Chair’s performance.
Christine Hodgson
Chair of the Nominations
Committee
Dear Shareholder
I am pleased to present the work of the Nominations Committee over the
past year as we continued to ensure that the Board has the right balance
of skills, experience, knowledge and diversity to provide effective leadership
and support the long-term success of the Company. We also maintained
strong oversight of the Executive Committee’s succession plans to ensure
a stable and capable leadership team for the years ahead.
A major area of focus this year was the CEO succession process, which
was completed following a thorough and objective process. Succession
remains a key priority for any well-governed Board and given Liv Garfield’s
lengthy and successful leadership of the Group over the past 11 years, the
Board had been regularly assessing its succession plans. The process
undertaken was rigorous, assessing the operational, financial and wider
stakeholder management requirements of the role, against a strong
anddiverse field of candidates. James Jesic emerged as the standout
candidate, and the Board unanimously approved his appointment as CEO.
James’ promotion to CEO created a vacancy in the Executive Team,
andwe were delighted with the depth of internal talent which allowed
forthe appointment of Paul Baxter to the critical role of Capital Delivery
Director. Paul brings considerable operational experience gained across
many areas of Severn Trent and provided a seamless transition.
Following the announcement of Kevin Beeston’s retirement as Senior
Independent Director on 30 April 2025, Nick Hampton was appointed as
an Independent Non-Executive Director on 4 April 2025 and subsequently
succeeded Kevin as Senior Independent Director, effective from 1 May
2025. Nick also joined the Audit and Risk, Remuneration, Treasury and
Nominations Committees. Further details on his career and experience
areprovided on page 99. Nick’s breadth of experience, combined with his
commercial and operational insight, strengthens the Board’s capability
aswe continue to grow the Group sustainably and maintain strong
delivery for our customers and the communities we serve.
Diversity and Inclusion remains a priority for the Board. During the year,
we reviewed the Board Diversity Policy and progress against its objectives,
confirming that and the Company continues to meet all the Listing Rules
diversity targets, and ensuring the Board reflects the diversity of our
region and stakeholder base. The Committee also maintained oversight of
the Company’s wider talent and succession plans for the Board and senior
leadership, building on the successful executive transitions delivered
during the year. In collaboration with management, we continued to
enhance internal succession pipelines, with a strong emphasis on
developing future leaders with the potential to step into senior positions.
As part of our broader governance responsibilities, we reviewed Directors’
independence, external commitments and conflict authorisations. The
Committee concluded that all Non-Executive Directors remain independent,
fully able to commit the required time to their roles, and are not overboarded.
These recommendations were approved by the Board.
Further details of the Committee’s activities during the year are set out
inthis report.
Christine Hodgson
Chair of the Nominations Committee
Severn Trent Plc Annual Report and Accounts 2026 105
Strategic Report Governance Financial Statements
Nominations Committee Report continued
Succession Planning
• Considering Non-Executive Director succession, including tenure,
diversity and the skills matrix.
• Overseeing Executive succession planning for the CEO, CFO,
andExecutive Committee, considering composition, capability
development and longer-term succession readiness.
• Reviewing the criteria for Non-Executive and Executive Director
appointments and recommended the appointments of James Jesic
as CEO, and Nick Hampton as Non-Executive Director and Senior
Independent Non-Executive Director.
Board Composition
• Reviewing the composition of the Board and Committees, ensuring
alignment with the skills, experience and diversity needed for
current and future strategic priorities.
• Reviewing Director independence, including all external
commitments, overboarding considerations and conflicts of interest.
• Overseeing Executive Committee and senior leadership succession,
including talent development programmes.
• Reviewing and applying the Board Diversity Policy, ensuring
alignment with the UK Listing Rules and best practice.
• Monitoring progress against diversity objectives and discussing how
diversity supports Board effectiveness.
Governance
• Reviewing and recommending updates to the Committee’s Terms
ofReference, concluding they remain appropriate.
Key Areas of focus in 2025/26
In the year ahead, the Nominations Committee will continue to
support the Board in ensuring it is appropriately composed to
provide effective leadership, challenge and oversight, both now and
over the longer term. Succession planning will remain a key focus,
with regular reviews of Board and Executive succession to support
continuity and alignment with the Company’s strategic priorities.
The Committee will maintain oversight of Board composition,
independence and tenure, ensuring an appropriate balance of skills,
experience and perspectives, informed by performance evaluations
and evolving governance expectations. Promoting diversity and
inclusion at Board and senior management level will remain a
priority, with continued oversight of progress against the Severn
Trent Board Diversity Policy.
Through this work, the Committee aims to ensure the Board
remains effective, diverse and well positioned to support the
long-term success of Severn Trent Plc.
Looking Ahead
Diversity on our Board
The Committee and Board continue to drive the agenda of diversity
acrossthe Group in setting the right tone from the top and are proud of
the progress being made to date. The Nominations Committee reviews
the Board Diversity Policy (the ‘Policy’) on an annual basis and makes
recommendations to the Board where it identifies changes that can
bemade to contribute further to improving the diversity of the Board,
Committees and Executive Committee.
The Annual Statement on Board Diversity Targets can be found below,
and the main objectives contained in the Policy, along with an overview
ofthe action taken to implement the Policy, are set out on pages 106.
Thefull Policy is available on the Severn Trent Plc website.
* All data is at 31 March 2026
Board diversity targets
As at 31 March 2026, the Board
met all three targets set out in
theBoard Diversity Policy, which
align with the Listing Rules’
diversity and inclusion
requirements. The Company also
met the FTSE Women Leaders
Review recommendations and
theParker Review target for
ethnic minority representation,
and in several areas exceeded
theUK Listing Rules on gender
and ethnic diversity.
Above target
On target
Below target
Board Diversity Policy target:
At least 40% of the individuals on
the Board of Directors are women
50%
50% of the individuals on the
Board of Directors are women.
Board Diversity Policy target:
At least one of the senior positions
(Chair, Chief Executive, Senior
Independent Director, Chief
Financial Officer) on the Board of
Directors is held by a woman
2
The Chair is a woman.
The Chief Financial Officer
isawoman.
Board Diversity Policy target:
At least one member of the
Board of Directors is from a
minority ethnic background,
defined by reference to
categories recommended by
theOffice for National Statistics
(‘ONS’) excluding those listed,
bythe ONS, as coming from
awhite ethnic background
2
Two members of the Board of
Directors are from minority
ethnic backgrounds.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 106
Data concerning gender and ethnicity representation is collected directly
from all individual Board and Executive Committee members through a
Diversity and Inclusion Monitoring Form (the ‘Form’) which is issued for
completion on an annual basis. The Form asks individuals to disclose
their gender and ethnicity using the options included on the Form, which
align with the detail in the left-hand columns of the tables above and
includes the option to not specify an answer. This data is collated by
theCompany Secretariat and held securely and in accordance with
theGroup’s data protection processing and retention guidelines.
Gender representation as at 31 March 2026
Severn Trent Plc Board
Severn Trent Plc
Executive Committee
Number of Board
members
Percentage of
the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
Executive
Management
Percentage of
Executive
Management
Men 4 50 2 6 66.7
Women 4 50 2 3 33.3
Not specified/prefer not to say 0 0 0 0 0
Ethnicity representation as at 31 March 2026
Severn Trent Plc Board
Severn Trent Plc
Executive Committee
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
Executive
Management
Percentage of
Executive
Management
White British or Other White (includingminority‑white groups) 6 75 4 8 88.9
Mixed/Multiple Ethnic Groups 1 12.5 0 0 0
Asian/Asian British 1 12.5 0 1 11.1
Black/African/Caribbean/Black British 0 0 0 0 0
Other Ethnic Group 0 0 0 0 0
Not specified/prefer not to say 0 0 0 0 0
Board Diversity Policy Objective
Objective Implementation
Ensure that the Board and senior management comprise
individuals with a range of skills, experience, knowledge,
perspectives and backgrounds.
Board and senior management succession planning arrangements are regular items
for discussion at Nominations Committee meetings. In addition, during the year, the
Board reviewed the internal talent pipelines within the organisation and the activities
undertaken to develop and retain our people.
Focus on the development of a pipeline of diverse high-
calibre candidates for all senior management roles.
Only engage search firms who are signed up to the
voluntary code of conduct for executive search firms.
During the year, the Board engaged Russell Reynolds to support the appointment of
Nick Hampton as Non-Executive Director and Senior Independent Director. Russell
Reynolds has no other connections with the Company. As part of the CEO succession
process, the Board engaged Spencer Stuart to provide external assessment and
market mapping. Following this process, James Jesic was appointed as Chief Executive
Officer. Christine Hodgson is an Independent Director on the Board of Spencer Stuart.
The Board considered Christine’s external role and was satisfied that appropriate
safeguards were in place to manage any potential conflict of interests.
Ensure that Board and senior management candidate lists
are inclusive according to the widest definition of diversity.
The Board and Nominations Committee recognise the importance and benefits of
greater diversity, including gender diversity, social and ethnic background and cognitive
and personal strengths, throughout the organisation, including on the Board itself. On
instruction of an executive search firm, the specification will ensure that candidates
with no listed company board experience are fully considered.
Consider candidates for Board and senior management
appointments from a wide pool, including those with no
listed company experience.
Oversee plans for diversity and inclusion across the
business and receive regular updates in relation to these.
The Board receives a dedicated update on diversity and inclusion at least annually, with
interim updates forming part of regular reports from the Director of Human Resources.
Severn Trent Plc Annual Report and Accounts 2026 107
Strategic Report Governance Financial Statements
Audit and Risk Committee Report
Dear Shareholder
I am pleased to introduce this year’s report, which outlines how the Audit
and Risk Committee has supported the Board in safeguarding the integrity
of the Group’s financial, regulatory and narrative reporting.
Over the year, the Committee oversaw the effectiveness and independence
of Internal Audit and the External Audit, monitored the robustness of the
Group’s internal control framework, and reviewed the processes enabling
the Board to assess principal risks and risk appetite. This included regular
consideration of the Group’s top and emerging risks, the effectiveness
ofthe Enterprise Risk Management (‘ERM’) Framework, and the adequacy
of management’s actions to mitigate material risk exposures, within the
context of the approved risk appetite. I maintained regular dialogue with
Committee members, management and both our outgoing and incoming
External Auditors toensure we received the information and insight
needed to provide informed challenge and assurance. As part of the
transition to PwC, Imet regularly with the new auditors to understand
and review audit planning and ensure audit quality. I also spent time with
our wider internal audit and assurance teams to understand at a more
detailed level their planning processes and capabilities.
The Board maintains internal controls and risk management systems in
relation to financial reporting, designed to ensure the accuracy, integrity
and reliability of the Group’s external reporting. These include a defined
control environment with clear structures, delegated authorities and
Groupaccounting policies; structured financial reporting processes; and
procedures to identify and manage financial reporting risks, including
those arising from significant accounting judgments. The Audit and Risk
Committee oversees financial controls, key judgments, audit findings
andfinancial reporting risks, supported by control activities such as
reconciliations, segregation of duties and system-based controls, and
bymanagement review, internal audit and external audit. The Board
reviewed the effectiveness of these systems during the year and up to
thedate of approval of this Annual Report and Accounts and concluded
that they operated effectively. Details of the significant matters
considered are set out on page 113.
Following a thorough assessment, we advised the Board that the Annual
Report is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position,
performance, business model and strategy. The External Auditor
performs its statutory audit in accordance with applicable auditing
standards, relevant laws and regulations, and PwC’s audit report
canbefound on pages 157 to 162.
During the year, we reviewed and agreed management’s recommendation
that the Company’s long-term Viability Statement should continue to
cover a seven-year period. This remains appropriate given the nature
ofthe water sector’s regulatory framework and Ofwat’s duty to ensure
that companies can finance the proper carrying out of their functions
(seepages 74 to 78). The Committee also dedicated substantial time
toreviewing and challenging the Group’s ERM processes and the
effectiveness of internal controls in mitigating risk. More detail on our
approach to managing risks and opportunities is available onpages 64
to67. Strengthening and evidencing material controls inreadiness for
Provision 29 of the Code was a particular area of focus toenable the
Board’s declaration required next year.
We continued to oversee key areas of environmental and climate-related
reporting supported by independent assurance and working alongside
the Corporate Sustainability Committee. We also maintained oversight
ofmajor regulatory and technology programmes, including assurance
over the implementation of Kraken, our customer platform migration.
The Committee oversees the Group’s whistleblowing arrangements on
behalf of the Board. The Board annually reviews their effectiveness and
receives reports on significant matters to support oversight of culture, risk
and stakeholders. The Board remains satisfied that these arrangements
enable proportionate, independent investigations and appropriate follow
up actions. The annual Board performance review confirmed that the
Committee continues to operate effectively, and that members bring
astrong mix of financial expertise and relevant sector experience.
Further details of Committee members’ backgrounds can be found
onpages 98 to 99.
I would like to thank Committee members, management, Internal
Audit,PwC and Jacobs for their ongoing commitment and constructive
engagement throughout the year.
Sarah Legg
Chair of the Audit and Risk Committee
Committee Membership and Attendance
All members of the Committee are Independent Non-Executive Directors
of the Board. The Committee Chair is a member of the Treasury Committee
and Corporate Sustainability Committee providing good linkage across
the related areas of reporting and risk management.
The Board considers that all members of the Committee have recent and
relevant financial experience and competence relevant to the sector,
with the Chair and the majority of the Committee members being
qualified accountants. Membership of the Committee during 2025/26
isshown in the meeting attendance table on page 100.
Only members of the Committee can attend the meetings. Other regular
attendees that attend by invitation of the Committee include, the Chair
ofthe Board, Chief Executive, Chief Financial Officer, Group General
Counsel and Company Secretary, Group Financial Controller, Head of
Group Internal Audit, Head of Group Compliance, Risk and Assurance,
other members of senior management, representatives from the
External Auditor, PwC, and non-financial regulatory and technical
External Assurer, Jacobs.
Sarah Legg
Chair of the Audit
and Risk Committee
Documents available at severntrent.com
Non-Audit Services Policy
Explaining Our Tax Contribution
Our Tax Strategy
Group Financial Crime, Anti-Bribery and Anti-Corruption Policy
Internal Audit Charter
Charter of Expectations
Committee Terms of Reference
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 108
Internal Audit and Assurance
• Consideration of Internal Audit reports presented to the Committee
in order to satisfy itself that management had resolved, or was in the
process of resolving, any outstanding issues or actions.
• Review and approval of the Internal Audit Plan and approach for the
upcoming year.
• Appraisal of the quality and effectiveness of Internal Audit and the
effectiveness of the current co-source arrangements.
• Consideration of findings of the assurance relating to regulatory
submissions.
Internal Controls and Risk Management
• Evaluation of the effectiveness of the Group’s ERM processes and
procedures and internal control systems, and integration of the
components of the risk framework into Board and Committee
reporting, prior to making a recommendation to the Board.
• Oversight of management’s preparations for future compliance
withProvision 29 of the Code, including updates on the approach to
material controls, progress on the controls assurance programme,
and early review of control assessments.
• Oversight of the control environment, maintenance and development
of finance systems, particularly regarding the migration of
customers to a new technology platform, Kraken.
• Review of updates on legal, regulatory, corporate governance and
ethical matters, and monitoring of fraud reporting and incidents of
whistleblowing, including a review of the adequacy of the Group’s
whistleblowing processes and procedures, prior to reporting to
theBoard on this activity.
• Oversight and monitoring of the Group’s compliance with the
BriberyAct 2010, including a review of the adequacy of the
anti-bribery, corruption and fraud processes and procedures
andassociated policies.
External Audit
• Oversaw the onboarding of PwC as incoming external auditors,
which included providing structured briefings and access to key
materials to ensure the audit team are fully briefed with
organisational context, processes and reporting requirements.
• Management of the relationship for the statutory audit, including
thekey audit risks and level of materiality applied by PwC, audit
reports from PwC on the financial statements and the areas of
particular focus for the audit.
• Consideration and agreement of the statutory audit fee for the
yearended 31 March 2026.
• Review and approval of the non-audit services provided by the
External Auditor, and related fees.
• Oversight of External Auditor independence.
Financial and Regulatory Reporting
• Review and discussion of reports from the CFO on the financial
statements, considering management’s significant accounting
judgments and the policies being applied, and assessment
ofthefindings of the statutory audit in respect of the integrity
ofthefinancial reporting of full-year and half-year results.
• Assessment of the integrity of regulatory documents relating
toSevern Trent Water, including the Annual Performance Report
prior to submission to Ofwat and the Pollution Incident Reduction
Plan prior to submission to the EA.
• Review of the Annual Report and Accounts to provide a
recommendation to the Board that, as a whole, it is ‘fair,
balancedand understandable’.
• In-depth review of specific disclosures which relate to areas
underthe remit of the Committee, including TCFD, TNFD and
theEUTaxonomy.
• Challenge and scrutiny of management’s detailed assessment
oftheGroup’s long-term viability and its ability to continue as a
goingconcern. In doing so, the Committee took into account the
risks facing the business, and its ability to withstand a number of
severe but plausible scenarios in isolation and combination. Having
considered management’s assessment, the Committee recommended
to the Board the long-term Viability Statement, set out on pages 74
to 78, and the Going Concern Statement, on page 78, for inclusion in
the Annual Report and Accounts.
• Considering the response to a letter received from the FRC seeking
further information on the transactions thatestablished Severn
Trent Water’s investment in SevernTrent Trimpley Limited, the
purpose of these transactions and the judgments underlying the
accounting treatment within the Severn Trent Water financial
statements, noting that there was no impact on the Severn Trent Plc
financial statements;
• We answered the FRC’s questions in full and on 23 May 2025 we
received confirmation from the FRC that they had no further
questions on these matters and had closed their enquiry. The FRC
did not require any changes to the accounting treatment within
the Severn Trent Water financial statements other than making
updates to our critical accounting judgments. The FRC’s summary
of its review of this matter is available on its website
1
.
• The Committee has reviewed the responses given to the FRC and
confirmed that they remain valid, noting that a formal plan to
repay the inter-company loan that formed part of the structure,
had been established, in line with the timetable set out in the response
to the FRC.
1 The FRC’s website also includes its Corporate Reporting Review Operating Procedures
which set out the scope and limitations of its review. Its letters are written on the basis
that the FRC (which includes its officers, employees and agents) accepts no liability
forreliance on them by the company or any third party, including but not limited to
investors and shareholders.
Governance
• Review and approval of the Committee’s Terms of Reference
duringtheyear, prior to making a recommendation to the Board.
Incompleting its review, the Committee concluded that the
TermsofReference remained appropriate and reflected the
dutiesof theCommittee.
The Committee has an extensive agenda focusing on the audit, risk, internal controls and assurance processes within the business which
itdealswith in conjunction with management, the External Auditor, Internal Audit, Finance and Compliance, Risk and Assurance Teams.
Key Areas of focus in 2025/26
In the year ahead, the Committee will continue to support the Board
in overseeing the integrity of the Group’s financial and regulatory
reporting, risk management and internal controls.
The Committee will focus on reviewing interim and year-end
reporting, overseeing external audit and assurance, monitoring
principal and emerging risks, progressing readiness for Provision 29
ofthe Code, and maintaining oversight of cyber, data protection,
whistleblowing and compliance matters.
Looking Ahead
The Committee confirms its compliance with the FRC’s Audit Committees
and the External Audit: Minimum Standard, including requirements on
membership, independence and financial competence, including the
review of External Audit effectiveness. Members maintain their sector
relevant expertise through formal training, external briefings and regular
updates on emerging accounting, audit and regulatory developments.
The Committee regularly holds private discussions with the Head of
Group Internal Audit and representatives from the External Auditor
andExternal Assurer separately, without management present.
The Chair ofthe Committee regularly holds separate one-to-one meetings
with theCFO, Head of Financial Control, Head of Group Internal Audit,
Head ofGroup Compliance, Risk and Assurance, External Auditor and
with Committee members outside of scheduled meetings to better
understand any issues or areas for concern.
The Committee is authorised to seek external legal or other independent
professional advice as it sees fit but did not need to do so during the year.
Severn Trent Plc Annual Report and Accounts 2026 109
Strategic Report Governance Financial Statements
Audit and Risk Committee Report continued
Fair, balanced and understandable reporting
The External Auditor considered any material
inconsistencies across the Strategic Report,
Directors’ Report and governance disclosures
based on audit knowledge and applicable
legal and regulatory requirements.
The External Auditor presented the results
ofits audit work. The significant issues the
Audit and Risk Committee considered were
consistent with those identified by the External
Auditor in itsreport (see pages 157 to 162 for
more detail).
1.
Regular Disclosure
Committee review
2.
Year End Steering
Groupreview
3.
Internal Audit
verification and
oversight
4.
FBU
assessment
5.
External Auditor
considered
6.
Recommendation
to the Board
The Board considers, based on the assurance received from the Audit and Risk Committee and the governance processes outlined below, that
the 2025/26 Annual Report and Accounts (‘ARA’) is fair, balanced and understandable (‘FBU’) and provides shareholders with the information
necessary to assess the Company’s position, performance, business model and strategy.
Internal controls and risk management
Internal Audit
Internal Audit is an independent assurance function available to the
Board, Audit and Risk Committee and all levels of management, and
isakey element of the Group’s corporate Governance Framework.
Additional support is provided by co-source partners.
Co-source arrangements are reviewed regularly, and we believe
thisstructure adds value, through greater access to specific areas
ofexpertise, increased ability to flex resources, and the ability to
challenge management independently. Co-source specialists
continuetobring expertise to support the team and delivery of
theInternal Audit Plan where relevant.
Internal Audit Plan and actions
The role of Internal Audit is to provide independent and objective
assurance that the Group’s risk management and internal control
systems are well designed and operate effectively, and that any
correctiveaction is taken in a timely manner.
A three-year strategic audit planning approach is applied, from which
Internal Audit develops an annual risk-based plan; this facilitates an
efficient deployment of resource in providing assurance coverage over
time across the whole business. The Committee’s role is to review and
challenge the plan, specifically whether the key risk areas identified as
part of our ERM process are being audited with appropriate frequency
and depth. Individual Committee members also bring an external view of
risks the Company may be exposed to. Once approved by the Committee,
regular reporting enables the Committee to monitor delivery of the
Internal Audit Plan and ensure that Internal Audit performs its work in
accordance with the mandatory aspects of the International Professional
Practice Framework of the Chartered Institute of Internal Auditors (the
‘CIIA’), with integrity, honestly, diligently, responsibly, and objectively,
without conflicts of interest.
Following the completion of each planned audit, Internal Audit seeks
feedback from management and reports to the Committee on the
findings, including any action that may be required. Where any failings or
weaknesses are identified in the course of the review of internal control
systems, management puts in place robust actions to address these on
atimely basis. No material weaknesses were identified during the year.
Action closure is reported to, and monitored by, the Committee, thereby
demonstrating the strong focus management places on closing audit
actions and ensuring timely completion.
The Internal Audit function also liaises with the External Auditor, discussing
relevant aspects of their respective activities which ultimately supports
the assurance provided to the Committee and Board.
The Disclosure Committee reviewed the
ARA throughout drafting and completed a
detailed FBU assessment before reporting
to the Audit and Risk Committee.
Internal Audit reviewed the ARA, oversaw
verification of factual disclosures and
reported its findings to the Audit and
RiskCommittee.
The Year End Steering Group reviewed the
ARA to ensure balance and consistency
acrossthe narrative and financial statements.
This work was overseen by the Disclosure
Committee, whose members are not involved
in drafting content.
The Audit and Risk Committee reviewed and
approved the process supporting the FBU
assessment and confirmed that all key
matters reported to the Board had been
appropriately reflected in the ARA.
On the basis of this work, the Audit and Risk
Committee recommended to the Board that
the FBU statement could be made. The Board’s
declaration is included in the Directors’
Responsibility Statement on page 151.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 110
Effectiveness
An independent External Quality Assessment (‘EQA’) of the Internal Audit
function was undertaken in December 2025, in accordance with the
Institute of Internal Auditors’ Global Internal Audit Standards, which
requires an external assessment at least every five years.
The assessment found that Internal Audit is highly regarded across the
business, with stakeholders consistently valuing its insight, constructive
challenge and support on risk and control matters.
The Committee considered the findings of the EQA and welcomed
thepositive assessment of the function’s maturity, independence and
effectiveness. Actions arising from the review have been incorporated
into Internal Audit’s ongoing quality and improvement plan. Taking the
EQA outcomes and its own oversight into account, the Committee is
satisfied that Internal Audit remains an effective, independent and
valuedprovider of assurance over the Group’s risk management
andinternal control framework.
Internal controls
An internal control system can provide reasonable but not absolute
assurance against material misstatement or loss, as it is designed to
manage rather than eliminate the risk of failure to achieve business
objectives. The Committee reviews the Group’s internal control systems
and receives updates on the findings of Internal Audit’s investigations at
every meeting, prior to reporting any significant matters to the Board,
which retains overall responsibility for the effectiveness of the full suite
ofinternal controls across the Group.
The Committee has oversight of the Group’s preparations to ensure
compliance against the Code, particularly in relation to the introduction
ofthe new Provision 29. We are fully committed to ensuring that the
Group’s audit and governance arrangements reflect best practice
andaddress any new requirements within the expected timeframes.
Aspart of this, during the year, a detailed review of the Group’s systems,
processes and procedures was undertaken by the Committee in order
toprovide assurance to the Board that the Group’s internal control
systems, including those which cover financial reporting, continue
tooperate effectively.
Further to the reports received by the Committee, which set out the
Group’s processes, systems and assurance procedures, the Committee
concluded that it has complied with its obligations under the Code in
relation to the assessment of risk and monitoring and review of the
effectiveness of internal controls and risk management. The Committee
is pleased to confirm that, based on its review and monitoring activities,
ithas not been made aware of any material control weaknesses in the
Group’s internal controls systems and risk management framework
andhas not identified any itself from its work.
Risk management
The Group has an ERM process in place through which our Principal
Risks and related controls are identified and assessed. The Board has
overall responsibility for setting the Group’s risk appetite and ensuring
that there is an effective risk management framework in place and has
delegated responsibility for review of the risk management methodology
and effectiveness of internal controls to the Committee. The Committee
reviews the processes for, and outputs from, the Group’s ERM activity,
through which our Principal Risks and related controls are identified.
Italso reviews the effectiveness of the risk management system on
behalf of the Board and keeps under review ways in which the control
andassurance arrangements can be enhanced. The Committee is
complemented by a Strategic Risk Forum and the Severn Trent Executive
Committee, comprising senior leaders from across the Group’s operations,
which adds value by assisting the Committee in reviewing the risk
management system, internal controls that mitigate risks and
undertaking reviews of assurance risk reports prior to Audit and
RiskCommittee meetings.
The Committee also received regular updates on emerging risks,
including developments in cyber security, climate-related exposure
andchanges in the political and regulatory landscape.
The Head of Group Compliance, Risk and Assurance also undertook a
review of the integration of the components of the ERM framework into
Board and Committee reporting, prior to making a recommendation to
the Board. During the year, the Committee spent a considerable amount
of time reviewing the Group’s ERM processes and procedures, with good
progress made in enhancing its effectiveness during the year. The Committee
also reviewed the Group’s Risk Appetite Statements for each Principal
Risk and recommended this for consideration and approval by the Board.
Youcan read more about this important work on pages 68 to 73.
The Committee received half-yearly reports from the Head of Group
Compliance, Risk and Assurance, detailing the significant risks and
uncertainties faced by the Group. Each risk submitted for review
includesan assessment of the overall risk status, status of the control
environment and a summary of the risk mitigation plan to take the risk
tothe target risk position, which needs to be in line with the risk appetite.
The risk mitigation plan covers action plans to improve controls where
this has been assessed as necessary and assesses whether actions are
on target, with the correct prioritisation in place. Further details of the
Group’s risk management systems and controls and Principal Risks can
be found in the Strategic Report on pages 64 to 73.
Whistleblowing
At Severn Trent we foster a culture of trust, honesty and openness.
Weare proud of our approach to whistleblowing, which encompasses
theenvironment we create in our business to encourage reporting of
potential wrongdoing, the support we give to whistleblowers and our
thorough investigation of concerns.
We are committed to maintaining a culture in which colleagues feel safe
to raise concerns. Our Speak Up Policy sets clear expectations of ethical
behaviour and provides confidential channels for reporting, including our
independent helpline, Safecall. Colleagues may also raise issues through
management or HR, ensuring multiple accessible routes to speak up.
All concerns are investigated independently, with outcomes reported to
the Committee and significant matters escalated directly to the Board.
Themes and lessons learned are shared across the business to support
continuous improvement.
Our arrangements are reviewed regularly by Internal Audit and
independent external assurers and benchmarked annually against
industry practice. The Board conducts a formal annual review of the
effectiveness of the whistleblowing framework and remains satisfied
thatit enables proportionate, independent investigation and appropriate
follow up, while supporting broader oversight of culture, risk and
stakeholder engagement.
Severn Trent Plc Annual Report and Accounts 2026 111
Strategic Report Governance Financial Statements
Audit and Risk Committee Report continued
External Auditor
The Committee has primary responsibility for overseeing the relationship
with the External Auditor, including assessing its performance, effectiveness
and independence annually, and making a recommendation to the Board
in respect of its reappointment or removal.
Tender and appointment
As set out in the 2024/25 Annual Report, a competitive tender process
was undertaken in accordance with regulations requiring audit tenders at
least every 10 years. The tender concluded with the Committee recommending
to the Board that PwC be proposed as the Group’s External Auditor at
the2025 AGM for the financial year ended 31 March 2026. PwC were
subsequently appointed by shareholders at the 2025 AGM.
The Company has complied with the provisions of the Competition and
Markets Authority’s 2014 Order during the year under review regarding
audit tendering and the provision of non-audit services. There are no
contractual obligations that restrict the Committee’s choice of auditor;
therecommendation is free from third-party influence; and no auditor
liability agreement has been entered into.
Effectiveness and competence
Oversight of PwC’s transition and first-year audit
During the year, the Committee took an active role in overseeing
thetransition from Deloitte to PwC to ensure an orderly and well
controlled handover.
The Committee reviewed PwC’s transition plan, including their proposed
audit approach, key areas of focus, resource allocation and team structure.
The Committee also received PwC’s formal independence and objectivity
confirmations and assessed the robustness of their onboarding processes,
including familiarisation sessions with management and review of prior
year audit files.
Throughout the transition period, the Committee received regular
updates from PwC to monitor progress, provide early visibility of any
issues and ensure transparency in their audit planning. The Committee
received additional updates to ensure appropriate knowledge transfer
between Deloitte and PwC to support a smooth commencement of the
2025/26 audit.
The Committee continued to monitor PwC’s performance over the course
of the first year’s audit and the full effectiveness review of PwC will be
finalised upon completion of their first year’s audit.
Audit
Transition
Timeline
Independence & objectivity confirmation
Appointment
at AGM 2025
Knowledge
Transfer
Transition planning meetings
Interim audit
planning updates to
the Committee
Start of 2025/26
audit fieldwork
Independence
The Committee regards independence of the External Auditor as crucial
in safeguarding the integrity of the audit process and takes responsibility
for ensuring the relationship between the Committee, the External
Auditor and management remain appropriate.
The Committee recognises that independence is also a key focus for
theExternal Auditor, and PwC has confirmed that it has complied with
itsownethics and independence policies, which are consistent with the
FRC’s Revised Ethical Standard 2024. This includes the External Auditor’s
assurances that all of its partners and staff involved with the audit are
independent of any links to the Group and that none of its employees
working on our audit hold any shares in Severn Trent Plc.
PwC provides confirmation of independence during the planning
stageofthe audit, disclosing matters relating to its independence
andobjectivity. There were no independence issues raised in respect
ofthe2025/26 audit.
The Committee also develops and recommends to the Board the Group’s
policy on non-audit services and associated fees paid to the External
Auditor, to ensure the External Auditor is not providing any additional
services which could impede its independence. You can read more
aboutthis policy below.
Non-audit services
To preserve objectivity and independence, the External Auditor is not
asked to provide other services unless it is in the best interests of the
Company that these are provided by the External Auditor rather than
another supplier, in accordance with our Non-Audit Services Policy
(the‘Policy’).
We reviewed the Policy during the year to reflect the FRC’s Revised
Ethical Standard 2024. No substantial changes were required to the
Company’s existing arrangements.
The Policy requires Committee approval for all such non-audit services.
The Policy also prohibits aggregate fees for non-audit services in excess
of 70% of the average audit fee for the previous three financial years.
Non-audit services for which the External Auditor may be used include
audit-related services required by statute or regulation and other audit
orassurance services as set out in the Ethical Standard.
Details of the audit and non-audit fees and the significant work
undertaken during the year are set out in the table on the following
page,and in note 7 to the financial statements. The more significant
non-audit services provided by PwC were the audits of financial
information contained within Sections 1 and 2 of Regulatory Accounts
included within the Severn Trent Water and Hafren Dyfrdwy Annual
Performance Reports and the independent review of the Company’s
half-yearly financial report.
In approving these non-audit fees, the Committee considered the
overallratio of non-audit fees to audit fees and, given the scope of work,
considered that PwC was best placed to perform these services. Where
PwC was chosen, this was as a result of its detailed knowledge of our
business and understanding of our industry, as well as demonstrating
that it had the necessary expertise and capability to undertake the work
cost effectively whilst maintaining objectivity and independence.
Ahead of commencing its shadowing of the 2024/25 audit, PwC had
confirmed to the Committee that all non-audit services that had been
provided by PwC previously had been transitioned to other suppliers.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 112
Nature of service Reason for PwC’s appointment Fees (£’000)
Audit-related assurance services
Interim review This work is allowed by Ethical Standards and is expected to be performed
by the External Auditor.
150
Assurance of regulatory returns Audit of Sections 1 and 2 of the Regulatory Accounts included in the Severn
Trent Water and Hafren Dyfrdwy Annual Performance Reports is closely
related tothe External Auditor’s statutory audit work and the two assignments
are performed in parallel.
230
Sub-total
380
Other assurance services
Reporting under Group financing documents These documents require reports and it is normal practice for the
External Auditor to provide these.
8
Other assurance This comprises assurance services performed as part of the year
endreporting process and subscription to PwC accounting literature.
10
Sub-total
18
Total 2025/26 non-audit fees 398
Audit and non-audit fees (£m)
£1.4m
2023/24 – Total fees
£1.5m
2024/25 – Total fees
£2.0m
2025/26 – Total fees
Statutory audit – the Company Statutory audit – subsidiaries Audit-related assurance services Other assurance services
Significant matter How the matter was addressed by the Committee
Going concern basis
for the financial
statements and
long-term Viability
Statement
The Committee reviewed and challenged the evidence and assumptions underpinning the use of the going concern assumption in preparing the
accounts and in making the statements in the Strategic Report on going concern and long-term viability. In particular, the Committee considered
severe but plausible scenarios modelled in relation to the Company’s Principal Risks, noting the stress tests performed by management and the
potential mitigating actions identified. Our Business Model can be found on pages 6 to 7. Principal Risks and uncertainties can be found on pages
68 to 73. The Viability Statement can be found on pages 74 to 78 and the Going Concern Statement on page 78.
Determination of
theprovision for
impairment of trade
receivables in Severn
Trent Water Limited
At 31 March 2026, the provision in the Group’s financial statements was £151 million and the charge for the year was £46 million. Severn Trent
Water Limited has a statutory obligation to continue to supply water and wastewater services to customers even when their bills are unpaid. This
increases the risk of bad debts. In addition, it has a large and diverse customer base which requires impairments against trade receivables to be
assessed on a systematic basis. The Committee challenged management’s change in its approach to the assessment of the impact of changes in
the link between macroeconomic conditions and the Group’s bad debt experience, noting the consistency in collection performance over a long
period that included: the impacts of various significant events including the economic impacts of the Brexit referendum and its implementation;
the Covid-19 pandemic; the Russian invasion of Ukraine; and cost of living pressures. The Committee considered the work performed by the
External Auditor and the conclusions they reached regarding the adequacy of the provision. The Committee determined that no adjustment to
the amounts recorded was required.
The proposed
classification of costs
between operating
expenditure and
capital expenditure
inSevern Trent
WaterLimited
Severn Trent Water Limited has a significant capital programme that includes projects made up of combinations of expenditure and activities,
some of which are recognised as property, plant and equipment and some of which are recognised as operating costs. For most of the expenditure
this distinction is clear but there is an element where subjective judgments are required to determine the appropriate accounting treatment.
The Committee considered the application of the Group’s accounting policies in relation to capital expenditure during the year. The Committee
enquired of management whether the policies had been applied consistently from year to year. The Committee considered the results of
theExternal Auditor’s work and discussed the conclusions with the External Auditor. The Committee determined that no adjustment to
theamounts recorded was required.
Determination of
theamount of the
Group’s retirement
benefit obligations
At 31 March 2026, net retirement benefit obligations amounting to £21 million were recognised. The net obligation recognised on the balance
sheet is the difference between the fair value of the schemes’ assets at the balance sheet date and the present value of the benefits expected
to be paid to members of the schemes. This requires assumptions to be made for the expected age of retirement and longevity of members,
future inflation rates and increases to benefits. It is also necessary to determine an appropriate discount rate to calculate the present value
of the estimated gross obligations. Management takes advice from external qualified actuaries who perform the calculation of the present
value of the benefits based on the assumptions set by management. The Committee scrutinised the assumptions underlying the valuation
ofthe obligations and obtained explanations for the significant reduction in the deficit recorded. The Committee considered whether the
assumptions, taken as a whole, were appropriate, taking into account the work of the External Auditor and the benchmark information
provided. The Committee also scrutinised the methodologies applied in assessing the fair values of the schemes’ assets, and considered
thatthe assumptions and methodologies were reasonable, and that no adjustment was required to the draft financial statements.
Significant matters considered and addressed in relation to the financial statements
The Committee looked carefully at those aspects of the financial statements that require significant accounting judgements or where there isestimation
uncertainty. These areas are explained in note 4 to the financial statements. The Committee also considered the accounting treatment for revenue and accrued
income. It received detailed reports from both the CFO and the External Auditor on these areas and on any other matters which they believed should be drawn to
the Committee’s attention. The Committee discussed the range of possible treatments both with management and with the External Auditor, confirming that the
judgments made by management were robust and supportable. Forall the matters described below, the Committee concluded that the treatment adopted in the
financial statements was appropriate.
0.1
0.2
0.3
0.8
0.1
0.2
0.3
0.8
0.2
0.2
0.5
1.1
Severn Trent Plc Annual Report and Accounts 2026 113
Strategic Report Governance Financial Statements
Treasury Committee Report
Committee Membership and Attendance
All members of the Committee are Independent Non-Executive Directors
of the Board. Membership of the Committee during 2025/26 is shown in
the meeting attendance table on page 100. Only members of the Committee
have the right to attend Committee meetings. Other regular attendees
who attend meetings at the invitation of the Committee include the Chair
of the Board, the Chief Executive Officer, the Chief Financial Officer, the
Group Treasurer, the Group Financial Controller, the Group General
Counsel and Company Secretary and representatives from the Group’s
debt advisers, Rothschild & Co. None of these attendees are members
ofthe Committee.
The Committee is authorised to seek external legal or other independent
professional advice (in addition to that provided by its debt advisers) as it
sees fit, but did not need to do so during the year.
Role of the Treasury Committee
During the year, the Committee supported the Board by overseeing
theGroup’s treasury strategy, funding position and financial risk
management as the business entered its largest ever investment
programme under AMP8. In a volatile market and evolving regulatory
environment, the Committee focused on maintaining strong liquidity,
resilience and access to diversified funding, while reviewing the
effectiveness of treasury policies, internal controls and governance.
Working closely with the CFO, the Treasury Team and external advisers,
the Committee provided challenge and oversight on key developments
and is satisfied that the Group’s treasury arrangements are robust
andwell positioned to support delivery of the Group’s strategy. Further
detail on the work of the Committee in the year is provided overleaf.
Documents available at severntrent.com
Sustainable Finance Framework
Sustainable Bond Allocation and Impact Report
Charter of Expectations
Committee Terms of Reference
Dear Shareholder
I am pleased to present the report of the Treasury Committee for the
year ended 31 March 2026.
This has been a year of significant activity as the Group entered its current
five-year investment programme (AMP8). Our total expenditure for AMP8
is £14.9 billion which represents a significant increase from AMP7. As at
31 March 2026, the Group maintained £0.8 billion of cash and £1.6 billion
of committed bank facilities. The Group’s funding plan during AMP8
anticipates further increases in the Group’s debt and hedging levels.
The backdrop for the Group’s funding plan is one of increased market
volatility, evolving regulatory expectations and continued scrutiny of
thewater sector. In the light of this and the increased scale and pace
offunding for AMP8, the Committee has been particularly focused
onthe Group’s funding strategy, approach to risk management and
onits delivery plan.
During the year the Committee reviewed the Treasury function’s policy
framework and the Committee’s Terms of Reference. This resulted in
limited amendments to ensure they are aligned fully with the Group’s
funding objectives. In addition, the Committee reviewed the effectiveness
of the Treasury function’s internal controls.
The Committee receives regular updates from the Treasury Team
onthe Group’s debt portfolio, and this includes details of recent debt
issuance and associated hedging.
The Committee noted the very proactive approach of the Executive
Team with debt investors and credit rating agencies. This has enabled
the Group to deliver its largest ever annual fund raising, accessing a
variety of markets andinvestors, and this sets up the Group well for its
funding programme for the rest of AMP8 and beyond.
The annual Board performance review process, which was facilitated
internally this year, included an assessment of our performance as a
Committee and I am pleased that the review concluded that we operate
effectively, and that the Board takes assurance from the high quality
ofour work.
The Board is satisfied that Committee members bring a wide range
offinancial experience across various industries and all members
havecompetence relevant to our sector, with significant recent
andrelevant financial experience. Further information about each
Committee member is contained in their individual biographies
whichcan be found on pages 98 to 99.
I am extremely grateful to the Executive Team, our advisers and my
fellow Committee members for their excellent contribution during
ayear of significant activity.
Richard Taylor
Chair of the Treasury Committee
Richard Taylor
Chair of the Treasury
Committee
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 114
Funding and Capital Markets Activity
The Committee oversaw a significant programme of funding activity
tosupport delivery of AMP8. Over the year, the Group issued over
£1.8 billion of new debt (including an undrawn £100 million term loan),
across multiple markets (including Euro, Swiss Franc, Norwegian
Krone and Japanese Yen) building on the strong issuance momentum
achieved in 2024/25.
The Committee also reviewed a number of bank financing actions,
including approval of additional bilateral bank facilities totalling
£417 million, supporting diversification of lender relationships and
strengthening the banking group ahead of the planned refinancing of
the Group’s revolving credit facilities. In January 2026, the Committee
approved entry into a new £100 million bilateral term loan with an
existing relationship bank.
Investor engagement continued across UK, European and international
markets, ensuring the Group remained well positioned to access funding
as required. The Committee reviewed the funding and treasury risk
management plan for the 2026/27 financial year, recommending it to
the Board. The Committee remained supportive of the Group’s strategy
of maintaining flexible and diversified access to global debt markets.
Liquidity and Financial Resilience
The Committee received regular updates on the Group’s liquidity
position and continued to monitor compliance with its liquidity policy.
As at 31 March 2026, the Group maintained £0.8 billion of cash and
£1.6 billion of committed bank facilities, providing liquidity headroom
inexcess of the minimum 15-month requirement.
The Committee reviewed the funding plan for AMP8. The Committee
noted the expected funding requirement of between £1.5 billion and
£2 billion in 2026/27, reflecting refinancing of maturing debt and ongoing
capital investment. The Committee also received updates on the planned
refinancing of the Group’s revolving credit facilities, noting preparatory
work to engage lenders and optimise the refinancing timetable.
Treasury Risk Management
The Committee continued to oversee the Group’s management of
interest rate, inflation, energy price risk and foreign exchange risks,
noting that the Group maintained a balanced portfolio across fixed,
floating and index linked debt. The Committee also reviewed the
Group’s increased use of derivatives linked to AMP8 issuance activity,
including cross currency and interest rate swaps.
During the year, the Committee approved a number of updates to the
Treasury Policy Statement, ensuring that the policy remains aligned
totheincreased scale and pace of AMP8 treasury activity.
Sustainable Finance
The Committee oversaw continued application of the Group’s existing
Sustainable Finance Framework, and publication of a new Framework
incorporating stronger alignment with International Capital Market
Association (‘ICMA’) Green Bond Principles, improved EU Taxonomy
mapping, the inclusion of Blue and Nature Bonds, and enhanced impact
reporting in line with ICMA guidelines. The Committee oversaw the
continued application of the Group’s Sustainable Finance Framework,
which remains an important component of the Group’s funding
strategy. It also reviewed updates to the Sustainable Finance Policy
noting the framework is applied appropriately while maintaining
flexibility and cost effectiveness.
Internal Controls and Treasury Governance
The Committee reviewed the effectiveness of internal controls across
all treasury activities and received assurance that the control environment
remained robust. Enhancements during the year included updates
tothe Treasury Business Continuity Plan and improvements to
counterparty risk methodologies.
Pension Matters
The Committee received regular updates on the Group’s defined
benefit pension schemes, covering funding, investment strategy and
the IAS19 position. In January 2026, the Committee noted the Trustee’s
updated Statement of Investment Principles, noting the introduction of
supporting policies covering hedging, asset allocation, rebalancing
and derisking triggers.
Advisor Review
The Committee carried out its annual review of treasury advisers and
concluded that the quality and strategic insight provided remained
strong. The Committee also confirmed continued engagement with its
advisers to support the Group’s funding strategy and market activity.
Key Areas of focus in 2025/26
In the year ahead, the Committee will continue to support the
Group’s strategy to ensure it remains appropriately funded to
support the delivery of AMP8. Key areas of attention will include:
• overseeing further capital markets activity across a range
ofcurrencies and markets;
• monitoring liquidity headroom and ensuring continued
compliance with the Group’s liquidity policy;
• considering the impact of RPI reform on the Group’s existing
index-linked debt;
• supporting the refinancing of the Group’s core bank facilities;
• continuing to review treasury risks and controls as the volume
offunding and derivatives activity increases further in AMP8;
• monitoring macroeconomic and political conditions and
assessing their potential impact on the Group’s funding strategy
and delivery plan; and
• ensuring the treasury framework continues to evolve in line with
best practice and the Group’s long-term strategic priorities.
Looking Ahead
Severn Trent Plc Annual Report and Accounts 2026 115
Strategic Report Governance Financial Statements
Corporate Sustainability Committee Report
Tom Delay
Chair of the Corporate
Sustainability
Committee
Documents available at severntrent.com
• Anti-Slavery and Human Trafficking Statement
• ESG Databook
• Charter of Expectations
• Committee Terms of Reference
Committee Membership and Attendance
All members of the Committee are Independent Non-Executive Directors,
except for Christine Hodgson, who was independent on appointment.
Membership of the Committee during 2025/26 is shown in the meeting
attendance table on page 100. Other regular attendees that attend by
invitation include, the Chief Executive, Group General Counsel and
Company Secretary, Head ofStrategy and Group Transformation, Group
Environment Policy Lead, other members of senior management and
external guest speakers.
As part of its annual cycle, the Committee reviewed its Terms of
Reference and confirmed that they remain appropriate, accurately
reflecting the way the Committee discharges its duties.
Dear Shareholder
I am pleased to present the Corporate Sustainability Report for the year
ended 31 March 2026.
Our focus throughout this year has been on ensuring that sustainability
continues to drive long-term resilience and value across the business,
reflecting the rising expectations of regulators, investors and the
communities we serve.
In particular, the Committee prioritised strengthening climate
resilience, advancing nature recovery and ensuring affordability
considerations remain central to long-term decision making. In
thiscontext, the Committee placed increased emphasis on resilience
and adaptability, focusing on how effectively climate, regulatory and
affordability risks are anticipated and embedded into forward planning
and long-term decision making. In a year shaped by significant policy
and regulatory change, including the Government’s “New Vision for
Water” and Ofwat’s Climate Change Principles, the Committee used
these developments to actively shape its oversight of climate resilience,
nature recovery and wider customer outcomes, maintaining a clear
focus on long-term stability and strategic alignment.
Social value remained a core focus, with continued progress in
programmes supporting communities across our region.
We further supported improvements to the Group’s sustainability
reporting, endorsing clearer, more concise disclosures, stronger
alignment across TCFD, TNFD and EU Taxonomy, and preparation for
the introduction of UK Sustainability Reporting Standards in 2026/27.
The Committee also maintained a strong focus on the quality and
robustness of sustainability data and disclosures, recognising the
increasing importance of reliable, decision-useful information for
ourstakeholders.
This year’s internally facilitated Board Performance Review included
anevaluation of our Committee’s effectiveness. The review confirmed
that the Committee continued to operate effectively, with strong Board
confidence in the quality of its oversight. As expectations continue to
evolve, the Committee remains committed to ensuring our sustainability
strategy stays focused, ambitious and aligned to long-term value creation.
I would like to thank my fellow Committee members and colleagues
fortheir insight, challenge and commitment throughout the year.
Tom Delay
Chair of the Corporate Sustainability Committee
Role of the Corporate Sustainability Committee
The Corporate Sustainability Committee supports the Board in overseeing
the Group’s approach to sustainability and wider corporate responsibility.
It reviews the development and delivery of the Group’s sustainability
strategy, monitors performance against key environmental, social and
governance priorities, and considers emerging risks and opportunities,
including those related to climate change. The Committee also oversees
relevant policies and significant sustainability-related disclosures, and
reports regularly to the Board on matters within its remit.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 116
Environmental Sustainability and Resilience
The Committee reviewed major sector developments to ensure our
oversight remained aligned with the evolving regulatory landscape.
This included scrutiny of how resilience considerations were
embedded into planning and decision-making, and how emerging
regulation and scenario analysis informed long-term priorities.
TheCommittee emphasised the importance of adaptive governance
toensure plans remained resilient as external conditions evolved.
Weoversaw the continued strengthening of the Group’s climate
adaptation approach, supporting a more integrated and forward-looking
assessment of long-term risks and resilience across the business.
We reviewed AMP8 biodiversity plans, including a strengthened habitat
baseline, and supported enhanced in-house ecological capability and
improved engagement with landowners to deliver river health and
biodiversity outcomes.
Progress towards net zero was monitored through the Capital
CarbonODI, with a focus on embedding stronger design standards
andgovernance into AMP8 to reduce capital carbon. Broader
oversightincluded environmental performance, sustainable
abstraction and water resource management, circular economy
principles, and emerging environmental risks and priorities.
ESG Reporting and Controls
The Committee oversaw continued enhancements to sustainability
reporting and controls, improving the clarity, consistency and
decision-usefulness of disclosures and supporting alignment with
TCFD, TNFD and the EU Taxonomy, as well as readiness for UK
Sustainability Reporting Standards from 2026/27.
We noted continued strong Carbon Disclosure Project (‘CDP’)
performance, achieving an ‘A’ rating for climate and water, and
oversaw improvements to sustainability data governance and
controlsto support external assurance and alignment with
Provision29 of the Code.
Further details are available on our website.
Human Rights and Modern Slavery
The Committee maintained oversight of human rights and modern
slavery risks across the business, including supply chain considerations.
Our full Anti-Slavery and Human Trafficking Statement can be found
on our website.
Social Impact and Affordability
The Committee oversaw progress on the Social Impact Strategy,
including initiatives addressing affordability, poverty and youth
unemployment and, reviewed evidence of improved outcomes in
work-readiness, employee retention and progression.
Discussions on customer vulnerability, regional inequalities and the
need for targeted support deepened the Committee’s understanding
ofaffordability pressures across the region.
Insights from these discussions, together with the review of Social
Impact Strategy performance and outcomes, has informed oversight
and challenge of the forward planning of support programmes, with
afocus on ensuring they remain targeted and effective.
ESG-related Reward and Remuneration
In line with its remit, the Committee recognises the importance of
ensuring that executive remuneration and incentives appropriately
reflect the Group’s environmental, social and customer priorities over
the long term. Where relevant, the Committee provided sustainability
related insight to the Remuneration Committee to support alignment
with the Group’s long-term sustainability objectives.
Further detail on the Group’s remuneration framework and
performance measures is set out in the Directors’ Remuneration
Report and Remuneration Policy (pages 118 to 152).
Scan the QR code to visit the ESG Databook
Scan the QR code to visit the
Anti-Slavery and Human Trafficking Statement
Key Areas of focus in 2025/26
In the year ahead, the Committee will continue to focus on
adaptiveoversight, ensuring that resilience considerations
remainembedded as AMP8 delivery progresses and external
expectations continue toevolve.
Key focus areas will include:
• providing robust oversight of delivery against AMP8 environmental
priorities, with particular emphasis onoperational execution,
regulatory performance andlong-term value creation;
• maintaining oversight of resilience and adaptability in forward
planning, including how climate adaptation, water scarcity,
nature recovery and affordability considerations are reflected
ininvestment decisions and managed as delivery progresses;
• continuing to focus on climate-related risks and opportunities,
nature-positive outcomes and customer impacts, recognising
the need for plans and governance arrangements to remain
responsive to evolving external conditions;
• monitoring progress across key AMP8 programmes over time,
including climate adaptation, biodiversity and net zero, to ensure
learning informs future planning and prioritisation;
• maintaining oversight of the evolving external sustainability and
regulatory landscape, supporting timely and effective challenge
as expectations continue to change; and
• ensuring governance arrangements, controls and assurance
processes remain fit for purpose, as regulatory, reporting and
delivery requirements evolve.
Looking Ahead
Severn Trent Plc Annual Report and Accounts 2026 117
Strategic Report Governance Financial Statements
Directors’ Remuneration Report
Dear Shareholder
On behalf of the Remuneration Committee of Severn Trent (the ‘Committee’),
I am pleased to present our Remuneration Report for 2025/26. This report
explains the remuneration outcomes for our Executive Directors and
wider workforce for the financial year ended31 March 2026.
A key focus for the Committee this year has been the review of
ourDirectors’ Remuneration Policy, including how we ensure strong
alignment to the performance delivered for our stakeholders. I would
liketo thank our shareholders for their continued support forour
approach to executive remuneration.
Introduction
This year marks the beginning of a new five-year regulatory period,
AMP8, which is intentionally ambitious and includes our largest ever
investment programme to enhance outcomes for customers and the
environment. The first year ofAMP8 has been another period of
sector-leading performance for Severn Trent, delivered against a
backdrop of heightened public scrutiny and regulatory change.
The Committee’s focus throughout the year has been to ensure that the
Committee’s decisions fairly reflect this performance, remain aligned
with the interests of our stakeholders, and support the long-term
success of the Company. However, as explained in more detail below,
due to the application of Ofwat’s new regulatory framework on
performance-related pay (‘PRP’), the final outcomes we are able
todeliver to Executive Directors this year will not adequately reflect
oursector-leading performance.
This year, we will be seeking shareholder approval for a new
Remuneration Policy, which is set out on pages 146-152 and
explainedin more detail later in this letter and on pages 122-127.
Performance for the year under review
2025/26 represented a significant step up in ambition as Severn Trent
entered AMP8, with increased investment and stretching commitments
for customers, communities and the environment. Against this backdrop,
the Company delivered another very strong year of performance,
continuing todemonstrate its position as a leading performer in the sector.
Environmental performance remained a key area of focus. We are
highlyconfident of achieving the maximum Environmental Performance
Assessment (‘EPA’) rating of 4* for a seventh consecutive year, a level
of consistency unmatched in the sector. Performance on Combined
Sewer Overflow (‘CSO’) spill reduction continued to improve materially,
alongside further reductions in pollution incidents, while leakage was
maintained at its lowest ever level. These outcomes reflect sustained
investment and a continued focus on long-term environmental improvement.
Improving outcomes for customers also remained a priority. Progress
was made in modernising customer systems andoperating models,
which will underpin service improvements overAMP8. However, while
performance improved across a number of customer andasset health
measures, including internal and external sewer flooding, the Committee
is disappointed that the Company has still not managed to improve the
customer experience. The Board expects to see faster improvement in
this area in 2026/27. The Committee therefore welcomes the introduction
of a new measure into the bonus to drive greater efficiency and improved
outcomes. More detail on this measure is provided later in this report.
The business has continued to place significant emphasis on financial
resilience. During the year, Severn Trent again outperformed regulatory
expectations, maintaining a strong balance sheet, disciplined financing
arrangements and an investment-grade credit rating. This financial
strength is critical to supporting the scale of investment required through
AMP8 whilst protecting the interests of customers and investors.
Finally, Severn Trent continued to demonstrate a strong commitment to
its social purpose. Through its Social Impact Strategy and Community
Fund, the Company supported a wide range of initiatives aimed at
improving access to employment and supporting vulnerable
communities across the region.
Sharmila
Nebhrajani OBE
Chair of the
Remuneration
Committee
Quick links
Remuneration Policy Review 122
Remuneration for the Year in Review, at a Glance 128
Performance in the Round - Remuneration 2025/26 129
Aligning our Remuneration for the Year Ahead to
ourStakeholdersand Strategic Ambitions 130
Company Remuneration at Severn Trent 131
Wider Workforce Considerations
and our Approach to Fairness 132
Annual Report on Remuneration 135
Committee Governance 144
Directors’ Remuneration Policy 146
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 118
2025/26 bonus outcomes
A consistent bonus design operates throughout the organisation, the full
detail of which is set out on page 128.
Consistent with the broader performance of the business, our performance
against the stretching targets set for the specific metrics within the annual
bonus has been particularly strong in 2025/26. Details of outcomes on the
individual metrics are as follows:
• Profit Before Interest and Tax (‘PBIT’): Despite very challenging
operating conditions, including the driest summer since records began
and one of the wettest ever winters, Severn Trent’s relentless focus on
efficiency and cost management helped deliver 46% PBIT growth year
on year, to £861million. As a result, this metric paid out at full stretch.
• Outcome Delivery Incentives (‘ODIs’): Despite the reduced ODI
opportunity and more challenging targets that came with the start
ofthe new AMP, Severn Trent delivered outstanding performance.
78%of our ODI measures met or exceeded the stretching regulatory
commitments, helping deliver a net ODI reward of £56 million in
2025/26. This excellent performance for customers and the
environment means this metric paid out at stretch.
• EPA 4*: Severn Trent is highly confident of achieving an EPA 4* rating
for anunprecedented seventh year in a row, resulting in maximum
payout for the wider business.
• CSO solutions: Despite an increase in the complexity of the solutions
needing to be implemented, 2025/26 saw the delivery of a further 1,100
CSO solutions in the year, exceeding the stretch performance level set.
These enhancements will help us tackle spills more effectively going
forwards, and drive improvement inour average spills as we move
through AMP8.
• CSO spill reduction: Exceptionally strong performance on this metric
delivered an outturn of 15 average spills. This was well ahead of
theregulatory target set by Ofwat (18.8), which was also used as the
required target for this binary metric. As a result, this element of the
bonus paid out in full.
• Health & Safety: Continued strong safety performance (Lost Time
Incident (‘LTI’) rate of 0.11) resulted in payout midway between target
and stretch.
The combined outcome of this performance would have resulted in a
payout of 98% of the maximum. However, in line with our philosophy of
ensuring stretching targets for PRP, the EPA 4* element, representing
10% of the bonus, included a binary underpin for Executive Directors,
whereby if the EPA serious pollutions metric was not ‘green’, the amount
payable on this element of the bonus would be zero.
Unfortunately, two serious pollution incidents were attributed to Severn
Trent in 2025
1
. The Company did not agree that the incidents met the
threshold for Category 1 classification and formally appealed the
assessments, however, those appeals were unsuccessful. Consequently,
the EPA serious pollutions underpin was triggered, which resulted in a
reduction to formulaic outcomes for those Executive Directors in role at
the time of the incidents. The new Chief Executive Officer, who was not
anExecutive Director at the time, was not impacted by this underpin.
As a result, the formulaic outturn of the bonus was 98% of the maximum
opportunity for the CEO and 88% of maximum opportunity for the CFO
andformer CEO, Liv Garfield. However, as described below, despite the
strength of performance reflected in this outcome, no bonus will be paid
to the CFO and former CEO. For the CEO, half of the bonus will be deferred
into shares for three years, in line with the Policy applicable to 2025/26.
Ofwat’s PRP Prohibition Rule
Ofwat’s PRP Prohibition Rule (the ‘Rule’) was finalised in June 2025,
coming into effect for PRP relating to years beginning on or after 1 April
2024. Under this framework, the payment ofPRP is prohibited in respect
of a year when one of four standards (Consumer Matters, Environment,
Financial Resilience and Criminal Liability) has not beenmet.
However, the Rule operates on a binary basis, such that a single
breachofa single standard results in full prohibition, regardless of
overall performance or materiality. Through the year, the Committee
hasrepeatedly voiced its concerns to Government and our regulators
regarding aspects of the Rule’s practical operation, believing that its
lackof proportionality risks unintended consequences, including failing
todifferentiate pay outcomes between strong and poor performers in
thewater sector, and undermining the ability of the sector to attract
andretain the leadership capability required to deliver sustained
improvement for customers and the environment.
We are therefore particularly frustrated that, despite Severn Trent’s
impressive sector-leading performance across a broad range of metrics
in 2025/26, the conclusions reached by the Committee on the appropriate
bonus payout have been overruled by Ofwat’s Prohibition Rule, and have
prevented us paying any bonus this year to those Executive Directors who
were in place at the relevant time (Liv Garfield and Helen Miles). This is
due to Severn Trent triggering the environmental standard of the rule,
asa result of the two Category 1 pollution incidents referred to earlier.
While the Committee recognises the seriousness of any Category 1
incident, this outcome illustrates our misgivings regarding the lack
ofproportionality in the current framework and the failure to take
broader operational performance into account. Given our acute
concernsregarding the longer-term impact on recruitment and
retention,the Committee will continue to engage with Ofwat on this
matter, with the ambition to have a fair and proportionate regime that
better addresses persistent performance failures, rather than penalise
organisations demonstrably delivering sector-leading performance in
theround. Forfurther information on annualremuneration outcomes
andthe impactofthePRPProhibition, please see page 128.
The four standards in Ofwat’s PRP Prohibition Rule
Consumer matters
• Breached a principal statutory duty where
Ofwat decides that the breach does warrant
afinancial penalty or states that it would have
imposed such a penalty but for undertakings
provided; OR,
• Failed to comply with any enforcement order
linked to such a breach.
1.
Environment
• Given a 1-star EPA rating for the last
calendar year; OR,
• Incurred a Category 1 pollution for the
last calendar year.
2.
Financial resilience
• Breached its licence requirement in the PRP
year to hold a sufficient credit rating; OR,
• Failed to subsequently comply with an
enforcement order or undertaking linked
tothe licence breach.
3.
Criminal liability
• Received a sentence in the PRP year,
following a conviction for a criminal offence,
unless the court has made low culpability or
low harm findings against the Company.
4.
1 We are currently undergoing an appeal process in relation to a third serious pollution.
Severn Trent Plc Annual Report and Accounts 2026 119
Strategic Report Governance Financial Statements
Directors’ Remuneration Report continued
2023 Long-Term Incentive Plan (‘LTIP’) vesting
Vesting under the 2023 LTIP reflected the Company’s strong
performance over the three-year period. Performance against the
Return on Regulated Equity (‘RoRE’) measure significantly exceeded
Ofwat’s allowance, resulting in fullvesting of this element. On the
sustainability component of the award, aligned to the Company’s
environmental commitments, two out of the four binary metrics paid
out, with scope 3 supply chain engagement and the rollout of our Net
Zero Hub both exceeding the targets. However, both scope 1 and 2
emissions reduction, and self-generation of renewable energy, fell
marginally short and did not pay out. Overall, this resulted in 10% of the
sustainability component vesting, out of a maximum of 20%,
demonstrating the level of stretch in the targets set by the Committee.
Severn Trent RoRE performance versus the sector across AMP7
-8%
-6%
-4%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
2020/21 2021/22 2022/23 2023/24 2025/26
Sector data
for 2025/26
not available
until July 2026
2024/25
RoRE
Median - UQ Severn TrentLQ - Median
The remaining element of the 2023 LTIP award, which assesses
upper-quartile performance relative to sector peers, will be
confirmedinJuly 2026 and reported in next year’s report.
2022 Upper Quartile (‘UQ’) LTIP vesting
Vesting under the upper-quartile element of the 2022 LTIP was confirmed
during the year, marking the fifth consecutive year in which this element
has vested in full and demonstrating Severn Trent’s sustained
outperformance relative to the wider sector.
LTIP outcomes and the impact of Ofwat’s PRP Prohibition Rule
It is noted that both the 2022 and 2023 LTIP awards are outside of the
scope of Ofwat’s Prohibition Rule, as they were granted before the
applicable period in the Rule. However, the LTIP awards granted since
2024 will be subject to a reduction, on a pro-rata basis, if the Rule applies
for a particular year. As a result of triggering the rule in 2025/26, we will
be required to reduce the value of the 2024 and 2025 LTIP awards by at
least one sixth each when they vest, in July 2027 and July 2028
respectively. The impact of these adjustments will be reflected in future
remuneration reports. This further exacerbates our concerns around
recruitment and retention.
Assessment of Performance in the Round
In assessing remuneration outcomes, the Committee considered
performance in the round, taking into account outcomes for customers,
the environment, shareholders and employees. Having done so, the
Committee concluded that the formulaic outcomes appropriately
reflected overall performance and no discretion was required. The
Committee’s full assessment of Performance in the Round is set out
indetail on page 129.
As noted above however, the Committee’s assessment of outcomes on
theannual bonus was overridden in 2025/26 by Ofwat’s PRP Prohibition
Rule. While we must clearly abide by the law and comply with the outcome,
the Committee reiterates its belief that this outcome is neither proportionate
nor reflective of the Company’s broader performance for shareholders,
customers and the environment.
AMP8 Remuneration Policy review
As signalled in last year’s report, the Committee undertook a review
ofthe Directors’ Remuneration Policy during the year, earlier than the
usual triennial cycle. This reflected the increased scale and complexity
ofAMP8, alongside the importance of ensuring that the Policy remains
capable of attracting, retaining and motivating a high-calibre leadership
team in a challenging and evolving regulatory environment.
AMP8 represents the most ambitious investment programme in Severn
Trent’s history, with a £14.9 billion plan to deliver stretching commitments
for customers, communities and the environment. Against this backdrop,
and informed by updated benchmarking, the Committee concluded that
arebalancing of the overall remuneration package towards long-term
incentives was appropriate, better aligning executive reward with the
long-term interests of stakeholders.
During the year, the Committee engaged extensively with shareholders,
proxy advisers and the regulator on its proposals. Feedback received
hasbeen thoughtful and constructive, and has played an important role
inshaping the final Policy put forward in this report.
The principal changes proposed to the Policy are set out clearly in the
Remuneration Policy Review section of this report on pages 122 to 127,
with the full detail of the proposed 2026 Policy set out on pages 146 to 152.
In summary, the four key changes are:
• A reduction in the annual bonus maximum, from 120% to 100% of
salary for the CEO and CFO;
• A greater emphasis on long-term incentives, through an increase
toLTIP award levels (to 400% of salary for the CEO and 350% for
theCFO, from 200% and 175% respectively);
• An increase to minimum shareholding requirements, to 400% of
salary for the CEO and 350% for the CFO (from 300% and 200%
respectively); and
• The removal of mandatory bonus deferral once the relevant
shareholding requirements are met.
CEO succession
The year also marked an important transition in leadership. Following
thedeparture of Liv Garfield after more than ten highly successful years
as CEO, the Board appointed James Jesic to the role, following a rigorous
internal and external recruitment process. The Committee is pleased that
the Company’s focus on succession planning enabled a smooth transition,
with remuneration arrangements applied in line with the existing Policy
and best practice. James Jesic’s starting salary of £775,000 is 11% below
our former CEO, positioning his salary below the lower quartile compared
to benchmark. Liv has been treated as a ‘good leaver’ for the purposes of
outstanding share awards, following the application of discretion by the
Committee. Full details are set out on page 135.
Remuneration for the year ahead
In line with the revised Policy, the Committee has considered remuneration
arrangements for the year ahead, including base salaries, incentives and
fees. Executive Director salary decisions have taken into account individual
experience, role scope and market positioning, while remaining mindful
of the importance of alignment with the wider workforce. Further detail
isset out in the relevant sections of this report.
Base salaries and fees
As part of the AMP8 Policy review, the Committee noted that Helen’s
salary was positioned around the lower quartile of our benchmarking
peer group. Helen has been in role for over three years (appointed 1 April
2023) and has performed exceptionally during that period. The scope of
Helen’s role has been expanded to include responsibility for additional
non-regulated businesses within the Group, for which the Board has
significant growth ambition. Helen’s leadership will play a key part in
driving this growth. Taking the above factors into account, the Committee
decided to increase her salary to £615,000, effective from 1 January 2026.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 120
The next annual review of Executive Director salaries will be in 2027.
Negotiations for the salary increase for the wider workforce are ongoing
asat the date of this report. Recognising that the wider workforce
increase is one of the reference points in the decision, fees for the Chair
and Non-Executive Directors for the year ahead have yet to be determined.
However, it has been agreed in principle that percentage increases will
beno higher than that agreed for the wider workforce.
2026/27 bonus
While we are down-weighting the bonus as part of rebalancing the overall
package towards the longer term, it remains an important incentive
mechanism to drive performance on an annual basis in critical areas for
customers and the environment, including ODI and CSO performance.
With the bonus metrics being cascaded down through the whole
organisation, this also ensures alignment with the wider workforce
onkeyperformance measures.
Having evaluated the structure of the bonus ahead of the new financial
year, the Committee concluded that a minor rebalancing of metrics
wasrequired for 2026/27. Customer satisfaction levels across the
watersector remain firmly in the spotlight, with the sector as a whole
experiencing a recent decline. Severn Trent’s lack of progress in this area
also remains a frustration, so now therefore seems like an opportune
moment to introduce a customer satisfaction metric to the bonus
structure, which we have done in the form of repeat contacts, with a
weighting of 10%. Repeat contacts occur where a customer has to get in
touch with us more than once to resolve the same issue. This is a clear
and measurable way of identifying poor customer service, and reflects
how effective we are at providing first-contact resolution, which we
believe is critical to driving improvements in customer satisfaction.
To make way for this new metric, we have decided to remove the EPA
element from the bonus structure. Historically, the EPA provided a
holistic assessment that well-managed companies could work towards,
and felt they were able to influence outcomes through a focus on performance
improvement. However, recent changes proposed by the Environment
Agency (‘EA’) have created much greater uncertainty, meaning the
outcome on this element of the bonus could be heavily influenced by
factors outside of management’s control, reducing its effectiveness
within the bonus structure.
Whilst the removal of the EPA metric reduces the environmental
weighting in the bonus, we note that it remains significant, at 29%,
andthis allows us to increase the focus on customers, with 23% of
thebonus now linked to customer metrics.
All other elements of the bonus structure remain the same as in 2025/26,
so the resulting structure for the 2026/27 annual bonus is as follows:
29%
40%
7.5%
7.5%
14%
13%
10%
8%
PBIT
Customer
satisfaction
CSO spills reduction
Advanced CSO
enhancements
Environmental
ODIs
environmental
link
23%
Customer link
27%
Total ODIs
Customer and
Asset Health ODIs
Health and
Safety
2026 LTIP award
Our LTIP structure was designed to deliver balanced outcomes for all our
stakeholders, which has been achieved through an equal split between
financial and non-financial measures. The non-financial measures consist
of a selection of environment, customer and community measures to ensure
the interests of all of our stakeholders are considered. The Committee
reviewed the existing structure and determined that it remains fit for
purpose. The performance measures and weightings forthe 2026 LTIP
award are set out in the chart below:
Financial Non-Financial
Financial
(RoRE)
30%
is linked to
environmental
performance
Environment
(Carbon Reduction)
Communities
(Social Value)
Environment
(Reasons for
Not Achieving
Good Status
(‘RNAGS’))
Customer
(Price Control
Deliverables ('PCDs'))
50% 10%
20%
10%
10%
It is the Committee’s view that the specific targets which have been set for
each metric represent a genuinely stretching level of outperformance and
directly align with the Company’s strategy and Business Plan. Further
detail on the targets can be found on page 126.
The Committee will assess the value of the 2026/27 annual bonus and the
2026 LTIP award at the end of their respective performance periods, and
will ensure that the final outturn reflects all relevant factors, including
anassessment of broader Performance in the Round.
Closing remarks
Looking ahead to AMP8, the Committee remains focused on ensuring
thatSevern Trent’s remuneration framework is capable of supporting
delivery of one of the most ambitious investment programmes the sector
has ever undertaken. The proposed Remuneration Policy has been designed
to strengthen long-term alignment with shareholders, customers and
theenvironment, while remaining fit for purpose in an increasingly
challenging regulatory context.
In shaping the Policy, the Committee has paid particular attention to the
growing risks around recruitment and retention of high-calibre executive
talent. The scale and complexity of AMP8 underscores the importance
ofmaintaining a remuneration framework that is competitive and aligned
with long-term value creation.
The Committee is grateful for the constructive engagement received
fromshareholders during the year, which has directly informed the
finalproposals set out in this Report. At a time of heightened complexity
and delivery risk for the sector, we believe the proposed Remuneration
Policy is both necessary and proportionate, and is firmly in the long-term
interests of the Company and its stakeholders. The Committee therefore
seeks your support on the proposed Remuneration Policy at the
forthcoming Annual General Meeting, recognising its importance in
enabling Severn Trent to attract, retain and motivate the leadership
capability required todeliver successfully through AMP8.
Sharmila Nebhrajani OBE
Chair of the Remuneration Committee
Severn Trent Plc Annual Report and Accounts 2026 121
Strategic Report Governance Financial Statements
Remuneration Policy Review
Context for the review
In April 2025, Severn Trent commenced its most ambitious five-year AMP.
The scale of the investment we have committed to deliver (£14.9 billion)
represents a material step change from previous AMPs and will need to
be delivered alongside thestretching performance targets we have set
across customer, environmental and community measures. Our AMP8
delivery ambition now sits within a complex backdrop of heightened public
and Government scrutiny of the water sector, a changing regulatory and
legislative landscape, and an expectation that companies must do more to
drive rapid and sustainable performance improvements. Our successful
execution of this step change in investment and performance is expected
to deliver significant long-term value for all our stakeholders.
Delivery on this scale will require the very best executive talent. The
overarching duty of the Remuneration Committee is therefore to ensure
our remuneration structures attract, secure, and fairly reward the
calibre of leadership required to run a high-performing, critical national
infrastructure organisation, and pay them in a way that is motivational
and aligned with investor and broader stakeholder interests.
We signalled in last year’s report that we might conduct a Policy review
earlier than the usual triennial timeline requires. With the first year of
AMP8 behind us, we now have a clear understanding of the challenges
and opportunities that this investment period will bring. As discussed on
page 119, we now also have greater clarity on the impact of Ofwat’s Rule
following its finalisation in June 2025. We believe now is therefore the
opportune point to review and refine our Policy such that it can support
and reinforce our long-term success.
Throughout the Policy review, the Committee has remained acutely
conscious of the evolving regulatory environment, in particular the
impact of the Rule. The Committee continues to have serious concerns
about howthe Rule will operate in practice, including how it will interact
with the Environment Agency’s Water Industry Regulatory Incidents
(‘WIRI’) framework. Under the revised WIRI guidance (which came into
effect from 1 January 2026, but was still draft at the point of our initial
consultation), pollution incidents caused by third parties are expected
tobe increasingly attributed to water companies. Combined with
thebinary nature of the Rule, PRP outcomes are likely to be driven
byfactors beyond management control or accountability, preventing
fair,market-aligned, and performance-linked reward.
As discussed on page 119, the Committee continues to engage
constructively with regulators and the Government as the
framework evolves. In the meantime, the Committee considers it
appropriate to proceed with the proposed Policy, which it believes
best balances proportionality, long-term performance alignment
and shareholder outcomes.
As the regulatory framework settles and the combined effect of
thePRPrule and WIRI guidance becomes clearer in practice, the
Committee recognises that it may be appropriate to undertake a
furtherreview of the remuneration approach, should this interaction
riskproducing outcomes that are no longer well aligned with
performance or the original intent ofthe regime.
Key objectives for the 2026 Policy review
Support Severn Trent’s sector-leading performance, particularly through AMP8, for the benefit of all
stakeholders.
1.
Secure and fairly reward high-calibre leadership to deliver sustainable financial and operational outcomes.
2.
Balance evolving market practice with the requirements of Ofwat and its successor regulators.
3.
Responsibly maintain market competitiveness and governance best practice for a FTSE100 listed
company in line with the 2024 UK Corporate Governance Code and other investor guidance.
4.
Preserve strong stakeholder engagement and support by ensuring we have a Remuneration Policy that
has clarity in both its purpose and its execution.
5.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 122
Four principal changes are proposed to the Policy:
Reduce annual bonus maximum from 120% to 100% of salary for both CEO and CFO.
1.
Increase LTIP award levels to 400% of salary for the CEO and 350% for the CFO (from 200% and 175%).
2.
Increase minimum shareholding requirements to 400% of salary for the CEO and 350% for the CFO.
3.
Remove mandatory bonus deferral once the relevant shareholding requirements are met.
4.
Overview of the proposed Remuneration Policy
The changes being proposed as part of the review are evolutionary, notrevolutionary, and are intended to ensure that the Policy remains appropriate to
the scale, ambition and delivery challenges of AMP8, whilecontinuing to align executive reward with long-term shareholder interests. The overarching
objective of the Policy review was to strengthen the link between remuneration outcomes and sustained long-term performance, without compromising
the Company’s commitment toresponsible pay, robust governance and regulatory compliance.
At the heart of the proposed Policy is a re-balancing between short-
andlong-term incentives. The annual bonus maximum for Executive
Directors will be reduced to 100% of salary, which will be one of the
lowest across the FTSE 100. The re-balancing of incentives will see LTIP
award levels increase to 400% and 350% of salary, for the CEO and CFO,
respectively. This shift reflects the long-term nature of the business and
is intended toreinforce executive focus on sustained performance over
AMP8 and beyond. This long-term orientation is particularly important
given the multi-decade nature of investment required across the water
sector, where strategic decisions and capital deployment made today will
shape customer outcomes, environmental performance and shareholder
value over many years. We will also continue to set highly stretching
performance targets for both annual bonus and LTIP awards, an
approachwhich has helped underpin our sector-leading performance.
The Committee firmly believes this re-balanced approach provides a
more appropriate alignment between executive decision making and the
long-term interests of shareholders and other stakeholders. To further
enhance alignment with shareholder interests we will also increase
theminimum shareholding requirements, to 400% of salary for the CEO
and 350% for the CFO, from 300% and 200% respectively. These levels
position shareholding above the upper quartile of our peer group, and
reinforce the expectation that Executives maintain a substantial personal
investment in the Company over time. In this context, the new Policy will
also remove the requirement for further bonus deferral once these
enhanced shareholding requirements have been met, while maintaining
robust malus and clawback provisions.
The re-balanced packages will support our objective of ensuring market
competitive reward to reflect the scale and complexity of the business,
which can continue to drive sustained sector-leading performance.
Incalibrating proposed award levels, the Committee has continued to
adopta robust and responsible approach to benchmarking, which is
oneof many factors taken into account. We considered market data for
companies of similar size and complexity (FTSE 30-100), but critically we
excluded those in financial services or with significant global exposure.
The targeted increase to LTIP awards ensures that total reward outcomes
for exceptional performance will be more appropriately positioned
against this market context, reflective of Severn Trent’s upper-quartile
scale within the peer group, but without increasing fixed pay or introducing
alternative or less transparent structures. Further detail on our
benchmarking approach can be found on page 124.
Shareholder Consultation
We have remained committed to an open and ongoing dialogue with our
shareholders on our approach to executive pay. In support of the Policy
review, we have engaged widely, with shareholder feedback taken on
board by the Committee in finalising the proposed Policy and how we
willimplement it.
Our initial engagement covered our largest 30 shareholders, representing
around 75% of the register. The Committee was encouraged by the
positive engagement we had from many of our shareholders, who
understood the challenges we were facing and expressed broad support
for the overall direction of the proposals, particularly the continued
emphasis on performance-related pay, the re-balancing of incentives
towards long-term outcomes through the LTIP, and the strengthening
ofshareholding requirements. There was also strong support for the
Committee’s thoughtful and responsible approach to market benchmarking.
A key theme in the feedback was the importance of ensuring that the
newPolicy remains sufficiently competitive especially in scenarios of
sustained exceptional performance, given the scale of delivery expected
through AMP8 and the challenges and uncertainties in the regulatory
environment, while maintaining robust governance discipline and the
focus on performance.
Based on the feedback received in the first round of engagement, the
Committee refined the proposal, in particular recalibrating LTIP award
levels to further re-balance packages towards the long-term. A second
round of consultation was then undertaken, including with the proxy
voting agencies, which indicated continued support for the proposals.
Severn Trent Plc Annual Report and Accounts 2026 123
Strategic Report Governance Financial Statements
Responsible and robust approach to remuneration benchmarking
Recognising the huge ambition and complexity within Severn Trent’s
long-term plans, the Committee is acutely aware of the need to retain,
attract and motivate an experienced and highly-effective leadership
team that can deliver the changes and improvements required. At the
same time, the Committee recognises the need for market benchmarking
to be both robust and responsible, ensuring that it can support
proposals which are fair and do not unnecessarily inflate executive
reward. The market data considered by the Committee in this Policy
review was based on the approach we disclosed in last year’s report,
and has been welcomed by our shareholders in consultation.
The starting point for our peer group was companies ranked between
30 and 100 in the FTSE by market capitalisation (the ‘FTSE30-100’),
based on Severn Trent’s current ranking of around 50th. As shown
inthe chart below, this creates a group in which Severn Trent is one
ofthe largest companies, with market capitalisation in the upper
quartile compared to the group.
We also acknowledged that some companies within the FTSE30-100
could be argued to operate a sufficiently different type of business
towarrant exclusion from the group. In particular, we recognise the
increased number of FTSE companies materially increasing incentive
award levels as a result of exposure to the US talent market.
Therefore, we continued to sensibly exclude from the peer group
companies within the financial services sector and those with
significant global exposure.
We recognise our position as a regional regulated monopoly. However,
we strongly believe that effectively leading a modern water company
and navigating the challenges it brings is equally comparable to the
demands faced by the leaders of others in our peer group. Severn
Trent is by no means a simple business. Our Executive Directors
havecritical responsibilities to deliver safe and reliable water and
wastewater services to 4.7 million households and businesses, as
wellas manage and motivate a growing workforce of over 11,000
employees. Our AMP8 plan is hugely ambitious, with significant levels
of capital investment and performance improvements required. We
also operate within a complex regulatory environment, requiring the
careful management of a wide range of stakeholders, and amidst the
increasingly demanding backdrop of climate change, population growth,
customer affordability challenges, an ageing network of assets and a
heightened ambition to minimise the impact our operations have on
the environment. Furthermore, we have significant ambition within
our rapidly growing non-regulated segment, in which we aim to more
than double EBITDA to £100 million in 2030.
2.1
Proposed
Policy
2.8
LQ
£2.5m
Median
£2.9m
UQ
£3.2m
(£m)
0
1
2
3
4
5
Current
Policy
Total compensation benchmarking – target
CEO
The analysis is based on total target compensation, which comprises salary and pension, as well as short- and long-term incentives, and assumes
that incentives pay out at 50% of maximum (assuming no impact from the Rule). As illustrated below, the CEO’s total compensation based on
thecurrent Policy would be positioned close to the bottom of the group, an unsustainable market position given Severn Trent’s upper quartile
positioning on market capitalisation. The proposed Policy would position the CEO closer to, but still below, the median of the Group.
The FTSE30-100 group, after exclusions, includes: Auto Trader, Barratt Redrow, Berkeley Group, BT, Centrica, Easyjet, Howden Joinery,
JSainsbury, Kingfisher, Land Securities, Londonmetric Property, Marks & Spencer, Next, Persimmon, Rightmove, Segro, SSE, Taylor Wimpey,
Unite Group, United Utilities and Whitbread.
Market capitalisation of peer group (£bn)
Lower
Quartile
(‘LQ’) £3.4bn
Median (‘M’) £4.3bn Upper Quartile (‘UQ’) £8.7bn
Severn
Trent
£9.3bn
Remuneration Policy Review continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 124
Total pay over five
years Year 1 Year 2 Year 3 Year 4 Year 5
Fixed pay
Annual bonus
(Subject to Ofwat’s
PRP Prohibition
Rule. Malus and
clawback provisions
also apply.)
LTIP
(Subject to Ofwat’s
PRP Prohibition
Rule. Malus and
clawback provisions
also apply.)
Shareholding
requirement
1 Where the shareholding requirement has been met, the bonus will not be subject to deferral and will be paid fully in cash.
Safeguards
Stretching
performance
targets
Ensuring PRP outcomes
reflect appropriate levels
ofoutperformance.
See more detail below.
Deferral
and holding
periods
50% of bonus deferred
into shares with a
three-year holding
period, where
shareholding
requirements are not
met. Vested LTIP shares
are subject toa two-
year holdingperiod.
Performance
in the Round
assessment
Confirming formulaic
outcomes are appropriate
andjustified in the
context of broader
business performance.
Malus and
clawback
provisions
Allowing the
Committee to reduce
or recoup anypast
incentivepayments ifnew
information emerges.
See more detail on
page127.
Minimum
shareholding
requirements
400% of salary for theCEO,
and 350% forthe CFO.
Post-employment
shareholding requirement
to retainin-employment
shareholding for twoyears.
Summary of Remuneration Policy and Implementation for 2026/27
The tables below illustrate the balance of pay and time period of each element of the Policy for Executive Directors, and how we plan to implement the
Policy in 2026/27.
Salary: reviewed annually,
noprescribed maximum
Benefits: market competitive
Pension: aligned to wider workforce
Up to 100% of salary
Based on performance measured
over one financial year
50% in cash
1
50% in shares
1
Three-year deferral period
No further performance conditions
Executive Directors’ minimum shareholding requirements:
CEO: 400%
Other Executive Directors: 350%
Post-employment shareholding requirement applies: Leavers must maintain their in-employment shareholding
requirement (or actual shareholding, if lower) for two years following cessation of employment.
How does the Committee set and review performance targets?
The Committee has a well-established process for setting stretching targets to ensure that incentives drive our strategic outcomes and deliver
value for our stakeholders.
Management proposes targets for thebonus
and the LTIP, taking into consideration the
AMP8 Business Plan, Company strategy,
theBoard-approved budget, historical
performance, consensus forecasts,
stakeholder expectations and wider market
and economic conditions. The Committee
reviews the proposed targets (including the
underlying assumptions) to ensure they are
suitably stretching but also realistic.
Following this review, the Committee
approves the targets.
At the end of the performance period (one
year for the bonus and three years for the
LTIP), the formulaic outcomes ofeach
performance measure are assessed on a
standalone basis, including those that are
independently verified by our economic
regulator, Ofwat. The UQ element for LTIP
awards can only be measured once data for
all Water and Sewerage Companies (‘WaSCs’)
is available. A specific Committee meeting is
scheduled for this purpose.
The Committee assesses whether formulaic
outcomes are fair in the context of overall
business performance and service delivery
for customers and the environment. The
Committee has a well-established process
toreview formulaic outcomes and, as part
ofthis process, independent external advice
issought whereby the Committee looksat
Performance in the Round. TheCommittee
has the ability to exercise discretion to adjust
formulaic incentive outcomes.
Read more on page 129.
1. Review and approve targets 2. Assess performance 3. Determining final outcomes
Two-year holding period
No further performance
conditions
Up to 400% of salary
Three-year performance period
Severn Trent Plc Annual Report and Accounts 2026 125
Strategic Report Governance Financial Statements
Element Implementation for 2026/27
Base salary
James Jesic was appointed to the CEO role on a salary of £775,000, effective from 1 January 2026.
The salary for our CFO, Helen Miles, was increased to £615,000 on 1 January 2026, as part of the Policy review,
and reflected the growth in her responsibilities.
The next annual review of Executive Director salaries will be in 2027.
Benefits
Normal company benefits provision.
Pension
The Company contribution and/or cash allowance is 15% of base salary for both the CEO and CFO, aligned with
the opportunity available to the majority of the wider workforce.
Annual bonus
The maximum bonus opportunity has been set at 100% for both the CEO and CFO.
Performance measures (as a % of maximum) are: PBIT (40%), ODIs (27%), CSOs (15%), customer satisfaction (10%),
H&S (8%).
The Committee considers the forward-looking targets to be commercially sensitive but full disclosure of the targets
and performance outcome will be set out in next year’s Directors’ Remuneration Report.
LTIP
Grant levels for the 2026 LTIP have been set at 400% for the CEO and 350% for the CFO.
The measures, targets and vesting levels have been set out in the table below.
1 Threshold performance on RoRE will pay out 37.5% of salary for the CEO and 29.2% of salary for the CFO. Target performance on RoRE will pay out at 150%
ofsalary for the CEO and 116.7% for the CFO.
All-employee
share plans
Participation in the all-employee share plan (Sharesave) on the same basis as all employees.
Shareholding
Requirement
CEO – 400% of salary.
CFO – 350% of salary.
Post-employment shareholding requirement applies.
See page 141 for further details on shareholding requirements and outstanding share awards.
Measure Sub-measure Weighting Threshold Target Maximum
Financial RoRE
1
50% Ofwat’s base
return
1.39x Ofwat’s
base return
Upper quartile performance
compared to the other WaSCs
in the sector.
Environment Cumulative scope 1 and 2
emissions reduction against
2019/20 baseline by31 March
2029.
10% 36% reduction 42% reduction 48% reduction
Self-generation – total
renewable generation
by31 March 2029.
10% 815 GWh 840 GWh 865 GWh
RNAGS – cumulative reduction
by 31 March 2029.
10% Reduction of 80 Reduction of 101 Reduction of 122
Customer PCDs – % assessed as ‘green’
RAGstatus, as per our reporting
to Ofwat, at 31 March 2029.
10% 7 0% ‘green’ 85% ‘green’ 100% ‘green’
Communities Social Value generated between
1 April 2026 and 31 March 2029.
10% £14.5 million £16.0 million £17.5 million
Summary of Remuneration Policy and Implementation for 2026/27 continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 126
Caring for people in our region
Robust and comprehensive malus/
clawback provisions
As shown on page 125, our executive remuneration framework
contains a range of safeguards to ensure we align executive
rewardwith performance, shareholder interests, and regulatory
requirements. The malus and clawback provisions form an
importantpart of this framework.
Under these provisions, the Committee may reduce or recoup incentive
payments if certain ‘trigger’ events occur within a period of three
years from the award of a bonus or the vesting of an LTIP award.
The trigger events represent a comprehensive range of scenarios
aligned to best practice guidance and FTSE100 market practice.
Thelist of trigger events has also been expanded under the new
Policyto ensure full alignment with the relevant requirements
ofOfwat’s PRP Rule.
Another key safeguard in our framework is the use of bonus deferral,
LTIP holding periods, and shareholding guidelines, all of which are
primarily intended to create a direct alignment between our Executive
Directors and our shareholders. Under the proposed Policy, once an
Executive has met their shareholding guideline, and sufficient alignment
has therefore been created, deferral will no longer be mandated.
The Committee recognises that deferral also provides one of the
available routes for effecting the implementation of the malus
provision. We therefore reviewed the malus and clawback provisions,
including all supporting policy and procedure, and concluded that
they would remain robust and enforceable following the proposed
change to deferral. The malus and clawback provisions form part of
Delivering outcomes our customers care about
O
P
the service contracts for our Executive Directors and the Committee
would have the ability to adjust a range of in-flight awards or reclaim
remuneration paid and/or shares subject to holding requirements,
ifrequired in the circumstances.
Triggering events:
• Financial misstatement
• Errors in calculation
• Misconduct
• Reputational damage
• Regulatory censure
• Corporate failure of the Company
• Failures of risk management or of the operational
systemsandcontrols
• Any of the events described in Ofwat’s PRP Prohibition Rule
The target is intentionally stretching. A significant proportion
ofoursocial value comes from supporting individuals who face
thegreatest barriers to work, including care experienced young
people, young people who are NEET (Not in Education,
Employment or Training), and those who have been long-term
unemployed, into jobs. Helping these individuals into sustainable
roles requires intensive support, multiple touchpoints and pastoral
care that goeswell beyond traditional recruitment. As we progress
through AMP8, the challenge increases, as our programmes
become morefocused on people further from the labour market,
who requireeven greater levels of support.
There are multiple variables to manage to deliver our social
value targets, including attracting and retaining high volumes
of apprentices and graduates, and engaging with a range
ofexternal partners to support delivery. Together, these
challenges make the measure genuinely stretching and
reflective of real world complexity.
Performance against the LTIP measure is assessed using the
Government endorsed National TOMs (Themes, Outcomes and
Measures) framework. This provides a consistent, externally
benchmarked basis for valuing outcomes and ensures that higher
social value is only attributed where we deliver deeper, evidence-
based impact, for example supporting individuals with significant
barriers into sustained employment. Our results are independently
verified each year through the Social Value Portal, giving
assurance over both our methodology and delivery. This ensures
that LTIP outcomes reflect genuine, measurable benefit for the
communities we serve.
Social value
Delivering long-term social impact is central to our purpose.
Itreflects our commitment to customers today, and our
responsibilityto help build stronger, more resilient
communitiesacross our region. That is why Social Value
formspartofour LTIP.
Our social impact work is about supporting people at risk of water
poverty to develop skills, confidence and pathways into good jobs.
These are life-changing outcomes that rely on deep community
partnerships and take time to achieve. To achieve our ambitious
goals,we need the whole Company to support on the multi-year
delivery plan, making this metric well suited tolong-term reward.
Case Studies
Severn Trent Plc Annual Report and Accounts 2026 127
Strategic Report Governance Financial Statements
Executive Director shareholdings % of base salary
Remuneration for the Year in Review, at a Glance
Performance-Related Pay Outcomes (before the impact of Ofwat’s PRP Prohibition Rule)
(% of maximum)
PBIT
Max.
2025/26 Bonus
40% 27%
10% 8%15%
10%
1
6%15%
40% 27%
53.3%
26.7%
26.7%
2
20%
10%
53.3%
2023 LTIP
Outturn
ODIs CSOs EPA 4* H&S RoRE multiplier Sustainability RoRE UQ
100%
0
100%
0
0.03
James Jesic
CEO
Helen Miles
CFO
Fixed Salary Benefits and pension Variable Annual bonus LTIP standard element LTIP UQ element
0.20 0.40 0.60 0.80 1.00 1.20 1.400.00
1.60
0.19 0.22 0.29 0.74
0.100.54 0.56 0.12 1.33
2025/26 single figure outcomes (£m)
CEO
CFO
FY26 shareholding requirement Shares counting towards shareholding requirement Unvested subject to continued employment Unvested subject to performance
% of
salary
600% 700%400%200% 500%300%100%0
800%
129.4%
52.7% 126.5%
293.5% 119.7% 281.7%
Impact of Ofwat’s PRP Prohibition Rule
1 The binary underpin on the EPA 4* metric was triggered for Helen Miles and the former CEO, Liv Garfield, so this element of the bonus will pay out at zero for them. James Jesic
is not impacted because he was not in role at the time of the triggering incidents.
2 The outcome of the RoRE UQ stretch element (26.7%) will not be known until July 2026, when comparative RoRE performance is published by Ofwat.
3 As with the binary underpin, James Jesic is not impacted by Ofwat’s PRP Prohibition Rule, due to the triggering incidents occurring prior to his appointment as CEO.
4 The 2023 LTIP is out of scope of Ofwat’s PRP Prohibition Rule.
Annual bonus metrics:
formulaic outcome
PBIT (40%)
100%
2.5% above stretch target, and
46% higher than 2024/25
ODIs (27%)
100%
83% above stretch target and
expected to be sector leading
CSOs (15%)
100%
41% reduction in average
spills vs 2024/25
EPA (10%)
100%
1
Highest EPA rating for a
seventh consecutive year
H&S (8%)
75%
Continued strong safety
performance of 0.11 LTIs
Formulaic
payouts
(% of max)
CEO:
98%
CFO:
88%
Former CEO:
88%
1
Performance
in the round
outcome
Committee
assessment:
The overall outcomes
of the annual bonus
and LTIP are
appropriate,
justifiable and
explainable, and the
Policy has operated
as intended.
See further detail on
page 129.
CEO:
No impact
3
CFO:
• 2025/26 bonus
prohibited in full
• 2024 and 2025
LTIP awards each
to be reduced by
1/6th on vesting
Former CEO:
• 2025/26 bonus
prohibited in full
• 2024 and 2025
LTIP awards each
to be reduced by
1/6th on vesting
Impact of Ofwat’s
PRP Prohibition
Rule
CEO:
98%
CFO:
0%
Former CEO:
0%
ABS final payout
for 2025/26
(% of max)
Severn Trent Plc Annual Report and Accounts 2026 128
Strategic Report Governance Financial Statements
Factors considered by the Committee
Performance in the Round - Remuneration 2025/26
In overseeing remuneration outcomes, the Committee ensures that performance is assessed in the round and over time through a number of lenses,
incorporating a variety of stakeholder perspectives. This assessment examines whether formulaic incentive outcomes are justifiable and explainable
inthe context of overall business performance for customers, the environment and wider stakeholders. It also considers other factors, including
regulatory investigations, environmental compliance beyond the measures contained in the incentive schemes, health and safety performance,
treatment of the wider workforce, and societal matters such as support for our local communities. Of fundamental importance to the Committee’s
assessment are the principles of proportionality and culpability. Any adjustments to the formulaic outturn must be proportionate in terms of the
eventthat triggered the adjustment, and there must be clear culpability of management, through their actions, decisions or lack thereof.
Independent assessment
Decision in determining whether any adjustment is required to remuneration outcomes
Application of Ofwat’s PRP Prohibition Rule, to determine if PRP can be paid for the year
An independent assessment of Performance in the Round was provided by the Committee’s independent external remuneration advisers.
Following this review, the Committee confirms that the overall outcomes of the annual bonus and LTIP are appropriate,
justifiableandexplainable, and that the Policy has operated as intended. The Committee also confirms that no use
hasbeenmadeofmalusorclawbackprovisions during the year.
Although the Committee was satisfied that overall performance warranted the payment of PRP as determined by the formulaic outturns, due
totriggering the environmental standard within the Rule, Severn Trent is prohibited from paying the 2025/26 annual bonus to Liv Garfield
(former CEO) and Helen Miles (CFO), as they were both Executive Directors at the time of the triggering incidents. James Jesic was not however,
so he will receive the formulaic outturn of the bonus.
Delivery for
customers
With 27% of the 2025/26 annual bonus structure based on ODI performance, and the financial rewards of ODIs flowing into
the Company’s RoRE performance, customer performance metrics are embedded within the formulaic calculation of
Executive remuneration. In assessing Performance in the Round, the Committee considered the Company’s performance
across all of its performance commitments both over time and relative to the performance of other WaSCs. While our
overall ODI reward is a strong indicator of customer performance, the Committee looks wider, considering performance
on individual ODIs, such as leakage, internal floodings and C-Mex, as well as progress on broader customer initiatives,
including technology investment to improve the customer experience.
Environmental
performance
For 2025/26, environmental measures make up 39% of the annual bonus, through a combination of environmental
ODIs (14%), EPA 4* rating (10%) and CSO measures (15%). Beyond the formulaic outturn, the Committee considered
the Company’s performance against abroad range of environmental performance indicators, supported by deep dives
into the following key areas:
• The EA’s overall EPA framework, including Company performance against all of the measures that make up the EPA
rating, both inyear and over time.
• CSO performance, including improvement activity underway and planned.
• Progress against the Company’s stated environmental commitments, including the Get River Positive pledges, and the
Company’s ambition to be net zero for operational emissions by 2030.
Financial
performance and
resilience
Whilst 40% of the 2025/26 bonus is based on Group PBIT performance, and this subsequently feeds into the RoRE
performance that influences the LTIP outturn, not all measures of the Company’s financial performance are readily visible
inthis top-level number. The Committee therefore considered other factors when assessing the Company’s financial
performance in the round, including gearing and financial resilience, progress on capital investment plans and RCV growth.
Impact on our
communities
The Committee considered the long-term value creation for the mutual benefit of our customers and communities,
supported by deep dives into the following key areas:
• Affordability, and the role the Big Difference Scheme has played in supporting customers.
• The impact the Severn Trent Community Fund has had in supporting community initiatives.
• Progress achieved on our Social Impact Strategy, which aims to support 100,000 people at risk of water poverty
over 10 years.
Alignment to wider
workforce
In addition to the Committee’s annual update on workforce policies and practices, the Committee considered the
alignment between Executive remuneration outcomes and the wider workforce experience, supported by reviews
of the following key areas:
• Assessment of employee policies and benefits, including performance management, talent programmes and
skillsdevelopment.
• Internal and external benchmarks of employee experience – including maintenance of the Company’s best ever
employee engagement score and very high Sharesave participation rate.
• Health and safety performance, including our people, supply chain and the customers and communities we serve.
Stakeholder
relationships
The Committee reviews the strength and status of the Company’s relationship with key stakeholders, including its
regulators, regional MPs, local business forums and shareholders.
Severn Trent Plc Annual Report and Accounts 2026 129
Strategic Report Governance Financial Statements
RoRE
(50%)
O
N
P
C
RoRE is a key performance indicator for the water sector,
reflecting the key opportunities that companies have (such
astotex, financing and ODIs) to outperform the regulatory
allowances set out in their Final Determinations.
Achieving maximum outturn
requires significant outperformance
against Ofwat’s base return, and
requires us to be upper quartile
compared to the wider sector.
Carbon
Reduction
(20%)
O
N
C
Companies have a huge responsibility to reduce their carbon
emissions and our ambitions are significant. Focus on
renewable energy generation and Scope 1 and 2 emission
reductions is fundamental to our plan to reach operational
netzero by 2030.
Targets aligned with our bold
trajectory to achieve net zero
operational carbon emissions
by2030, 20 years ahead of
Government net zero targets.
RNAGS
(10%)
O
N
C
We take responsibility for the health of our region’s rivers,
andare delivering capital investment to reduce our impact
onthem, to help ensure our communities can enjoy them for
generations to come.
Aligned to our ambition to
significantly accelerate the
improvement of river health, so our
operations account for just 2% of
RNAGS by 2030 (from 10.8% in 2025).
PCDs
(10%)
O
N
C
PCDs are agreed with Ofwat and designed as powerful incentives
to ensure delivery of the outcomes we have committed to deliver
for our customers and the environment in AMP8, such as
increasing water resilience and improving river quality.
Maximum payout requires 100%
of PCDs to be assessed as ‘green’
RAG status, as per our reporting
toOfwat.
Social Value
(10%)
O
P
C
Our Societal Strategy aims to address the underlying causes of
poverty in our region in a landmark scheme designed to help
people recognise their potential and improve their work
prospects, asmeasured through the delivery of Social Value.
Aligned to our hugely ambitious
programme to support 100,000
people out of water poverty over
10 years.
Measures
(weighting %)
Link to our
strategy
Link to our
stakeholders Why it is important How targets are stretching
PBIT
(40%)
O
PBIT is a key financial measure for Severn Trent,
demonstrating our ability to control costs and deliver
financial returns for our shareholders, which includes
manyof our employees.
Aligned to the stretching PBIT
budget set by the Board, which
requires delivery of significant
year-on-year growth.
ODIs
(27%)
O
N
P
C
Our ODIs are designed with customers to make sure our
objectives align with things that matter most to them.
Theyare agreed with Ofwat and aim to drive performance
across customer and environmental measures.
Requires significant
outperformance against Ofwat’s
own stretching performance
expectations.
CSOs
(15%)
O
N
C
In line with Pledge 1 of our five river pledges, we will
reducethe number of CSO spills and deliver advanced
CSOenhancements, bringing benefits to the health of
ourregion’s waterways, now and into the future.
Targets set by reference to Severn
Trent’s CSO reduction plan, which
isthe most ambitious in the sector.
Customer
Satisfaction
(10%)
O
P
C
This measure focuses on improving the customer
experience by minimising the number of chase calls we
receive. It is a clear and measurable way of identifying poor
customer service.
Targets set by reference to historic
performance, with stretch
representing a 20% improvement
on prior year.
Health &
Safety
(8%)
P
We believe passionately that no one should be hurt or made unwell
by what we do. This metric, which focuses on reducing LTIs, helps
our people strive for improvements across all aspects of our
operations, keeping themselves and those around them safe.
Target set by reference to external
benchmarking, with an LTI rate that
is considered industry leading.
Aligning our Remuneration for the Year Ahead
toourStakeholders and Strategic Ambitions
The approach to remuneration across the Group ensures all
employees are rewarded and incentivised to deliver Severn Trent’s
‘performance driven, sustainability-led’ strategy. Delivering against
this strategy is critical to the creation of long-term value for our
stakeholders: customers, communities, employees, shareholders,
suppliers, contractors and regulators.
In determining the right performance measures for our incentive plans, the
Committee seeks to strike a balance between short- and long-term financial,
operational and sustainability goals. As we are a long-term business, actions
taken in a single year flow through to longer-term performance.
We operate a consistent bonus scheme across the Group, which reflects
our belief that all our employees play a part in the creation of value for
our stakeholders.
The diagram below illustrates the performance measures that we use
within our incentives and explains how they help deliver the Company’s
strategic goals as well as delivering balanced outcomes for all of our
stakeholders, driving long-term performance for the benefit of all groups.
2026/27 Annual Bonus2026 LTIP
Stakeholder key
Customers Communities
Shareholders and Investors
Sustainability andESG
Employees Suppliers and Contractors
Regulators and Government
Our
corporate
strategy
Outcomes
Nature
People
Change
N
O
P
C
P
E
O
P
L
E
C
H
A
N
G
E
O
U
T
C
O
M
E
S
N
A
T
U
R
E
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 130
This section sets out the steps we take to make sure that our pay and
reward framework is transparent and fair, beyond Executives and
Senior Management, in a way that is meaningful and useful.
The table below sets out details of how the cascade of the reward
framework applies across different levels within the organisation,
combined with a summary of the information which the Committee
hasreceived as part of its annual review process.
Pay and alignment across the business
Alongside our thriving culture and inclusive working environment, our
reward framework is designed to attract, motivate and retain people who
are inspired by Severn Trent’s purpose, and who live our values every day.
Our reward package recognises the great performance of our employees,
as we deliver our essential services to customers across the region, and
is designed to fairly reward all colleagues throughout the organisation.
The terms and conditions from which our employees benefit evolve in line
with external practice and new initiatives from within Severn Trent. We
pride ourselves on keeping pace with trends in talent management and
acquisition, and skills development, in order to motivate, develop and
retain a positive working environment.
This section of the report also covers our CEO pay ratios, and our gender
and ethnicity pay gap reporting.
Company Remuneration at Severn Trent
Eligibility
No. of
employees
covered
Remuneration
element Details and implementation at Severn Trent Committee focus areas
All employees
11,544 (as at
31 March
2026)
Salary • The increase in average annual salary across the workforce in 2025/26 was 2.8%.
• The Company has real Living Wage and real Living Hours employer accreditation
and reviews employment terms and salaries in this context.
• Enhanced visibility on salary ranges within the organisation to enable fairness
andtransparency.
• Wider workforce
increases versus the
Executive population.
• Differences across
employee groups.
• Benchmarking against
market rates.
Benefits • All employees are eligible to participate in our flexible benefits scheme, which we
believe is one of the best in the industry and is designed to support physical, mental
and financial wellbeing.
• Ensuring a consistent
approach is applied across
the business for benefits.
• Reviewing the breadth of
benefit offerings.
Pension • We offer a market-leading defined contribution pension scheme and double any
contributions that employees make (up to a maximum of 15% of salary).
• Employer pension contributions for Executive Directors are aligned with the
broader workforce.
• We are proud that over 97% of our employees are members of the pension scheme
and 61% pay contributions above the minimum of 3%.
• Alignment of pension
contributions across the
workforce.
• Support levels for workers
approaching retirement.
Annual bonus • All of our people share in our success by participating in our all-employee Annual
Bonus Scheme, ensuring all employees are aligned with the same measures and
rewarded for achieving our key objectives.
• At all levels, performance outcomes are measured against the same metrics.
• Our frontline colleagues and team managers benefit from a fixed bonus payment.
• Bonus opportunities vary by grade.
• We also operate some sub-schemes in Infrastructure Services, to reflect specific
business needs.
• A consistent design is
operated throughout
thebusiness.
• Details of performance
measures and targets.
• Malus and clawback
provisions are in place.
Sharesave • All employees of the Severn Trent Group can participate in the Save As You Earn
Scheme – Sharesave.
• Enables all colleagues to share in the long-term success of the Company, aligning
participants with shareholder interests.
• Significant take-up of this benefit with almost 70% of employees participating in the
scheme, and nearly a quarter of those saving the maximum £500 per month.
• Participation rates.
Management and
Senior Management
482 LTIP • The LTIP is available to Executive Directors, the Executive Committee and some
members of Senior Management, eligibility for which is reviewed annually.
• The LTIP is designed to deliver balanced outcomes for all of our stakeholders,
driving long-term financial and non-financial performance for the benefit of all
groups. The retention of shares by Executive Directors for the longer term also
supports a shared ownership culture in the Group.
• The performance period is three years, with 50% based on RoRE performance
and50% on a range of non-financial measures.
• The Executive Directors are subject to an additional two-year post-vesting
holdingperiod.
• LTIP opportunities vary by role from 25% of salary to 400% of salary.
• Eligibility.
• Cost.
• Dilution.
• Details of performance
measures and targets.
• Malus and clawback
provisions are in place.
Executive
Directors and
Executive
Committee
9 Shareholding
requirements
• Shareholding requirements as a % of salary are in place. For 2025/26, these were:
300% for CEO, 200% forCFO and 100% for members of the Executive Committee.
• Supports alignment of Executives’ interests with shareholders.
• A post-employment shareholding requirement was introduced for Executive
Directors as part of the 2021 Policy.
• Requirements versus
actual shareholdings.
Our supply
chain
• All colleagues across Severn Trent are paid in line with the real Living Wage,
forwhich we hold accreditation.
• We expect this of all new contracts within our supply chain and detail this within
ourSustainable Supply Chain Charter.
Severn Trent Plc Annual Report and Accounts 2026 131
Strategic Report Governance Financial Statements
All of our employees benefit from:
Market competitive pay
We balance competitive pay for employees with responsible use of our customers’ money. As a real Living
Wage employer, we are committed to paying all our direct employees and our supply chain a wage based
onthe cost of living today. We also closely monitor the rates of pay of people who are training with us, to
make sure they remain fair and competitive and have established pay frameworks to ensure transparency,
alignment to the external market and parity between our new talent cohorts.
Sharing in success
We want our employees to share in our success, and our all-employee bonus plan ensures everyone in the
business is aligned with the same measures and rewarded for achieving our key objectives. We also offer a
Sharesave Scheme, which gives employees a chance to save up to £500 per month over three or five years,
with the option to buy Severn Trent Plc shares at a discounted rate at the end of the period. This is hugely
popular, with almost 70% of our employees choosing to participate.
Flexibility
We provide a flexible benefits scheme for all, which we believe is amongst the best in the industry. It recognises
that our people’s life, wellbeing, family and finances all play a part in how they feel about coming to work,
and the scheme is structured accordingly. It includes a broad range of physical, mental and financial
wellbeing offerings, as well as leisure and retail opportunities, and charitable giving. We also have a range
of family leave policies, including a FTSE-leading Maternity and Adoption Policy, which enable our employees
to work around the demands of a busy family life.
Building a career
As a major regional employer, we recognise the importance of equipping our colleagues with the skills for
now and the future. Our focus is on both leadership and technical development across the whole organisation.
We support the development of colleagues at all stages of their career, from foundation apprenticeships and
graduate entrants, through to higher level apprenticeships and Masters degrees. Our aim is to ensure that
every employee feels competent and confident in their everyday work.
An opportunity to save for the future
We know many of our colleagues want to be able to save for their future security. We offer a market-leading
defined contribution pension scheme and double any contributions that employees make (up to a maximum
of15% of salary), regardless of level or seniority. When colleagues get closer to retirement, we provide
education and support to help plan for the next stage of their lives. We are proud that over 97% of our people
aremembers of the pension scheme and 61% pay contributions above the statutory minimum of 3%.
Diversity and inclusion
At Severn Trent, diversity is a huge part of who we are as a business, how we operate and how we continue
to deliver against our bold ambitions. We positively celebrate diversity and inclusion, and embrace every
individual’s contribution. We believe that we have all been shaped by different things – whether it is our
backgrounds, upbringings, life experiences or cultures – and it is those things that make us brilliant at work.
Embracing those differences means we can deliver at our absolute best for our customers, communities
and the environment.
Investing in the community
We launched our Societal Strategy in November 2022 to support 100,000 people over 10 years who are at
risk of water poverty. Our focus has been on skills development, training, and employment across areas of
high deprivation within our region. We have proudly supported more than 40,000 people, generating nearly
£15 million of Social Value since 2022. This is supported by our employee volunteering programme, which
gives all employees two paid days per year to participate in voluntary work in our communities.
The Severn Trent culture is fundamental to our success as a business.
We want our people to feel they are in a work environment which enables
everyone to contribute fully and be the best they can be. We are proud of
our achievements, with our annual employee engagement score being
thehighest it has ever been, placing us in the top 5% of energy and utility
businesses globally.
The Committee and management are committed to fair pay across
theorganisation. We continue to see diversity and inclusion as central
toeverything we do, and we are pleased to see the commitment that
management has in reducing pay gaps. More detail can be found
onourpay gaps on page 134.
Wider Workforce Considerations and our Approach to Fairness
We recognise how critical our people are in delivering improvements for our customers, the environment, and wider
stakeholders, and as such, we seek to create an inclusive working environment, reward our employees in a fair and
equitable manner, and provide fulfilling careers.
To ensure the voice of our employees is heard, we have an active
Company employee forum which meets every quarter to discuss
business challenges and opportunities. The Company Forum is chaired
jointly by a member of the Executive Committee and the Trade Unions.
Members include representatives from HR, joint Trade Unions and
employees from our other business area employee forums. The
objectives of the Company Forum are to:
• involve employees by sharing information on the future of our business
and the water industry;
• work together on issues that affect our employees; and
• work in partnership to deliver better solutions to improve the way we work.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 132
The Company’s approach to remuneration is consistent for all employees,
as outlined on page 131 and in our 2026 Policy.
The table below shows how the CEO’s total single figure of remuneration
compares with the equivalent figures for employees occupying the 25th,
50th and 75th percentiles. We have chosen Option A under the Regulations
for the calculation, which takes into consideration the full-time equivalent
basis of all employees and provides a representative result of employee
pay conditions across the Company.
Total pay and benefits for all have been calculated as at 31 March 2026,
inaccordance with the single figure methodology, and are based on
full-time equivalent pay and benefits. We have not omitted any pay
elements from the calculation. The median CEO ratio is consistent with
the pay and progression policies for the Company’s employees as a whole.
For the financial year ended 31 March 2026, Liv Garfield was CEO until
31 December 2025 and James Jesic was CEO from 1 January 2026. In
calculating the CEO pay ratio we have therefore used the aggregate of the
amounts set out in the single figure table on page 135 which reflect their
respective periods of service as CEO.
The median CEO pay ratio has decreased from 67.4 to 34.8 year on year,
driven by a combination of:
• The change in CEO during the year, with the new CEO, James Jesic,
starting on a lower salary than his predecessor, and having an LTIP
vesting which was granted before he became CEO, and therefore at
alower level; and
• The impact of Ofwat’s PRP Prohibition Rule, which resulted in the
payment of Liv Garfield’s annual bonus for 2025/26 being prohibited
infull. More details on the impact of the Rule are set out on page 119.
The Committee is satisfied that the individuals identified within each
relevant percentile appropriately reflect the employee pay profiles at
those quartiles and that the overall picture presented by the ratios is
consistent with our pay, reward and progression policies. Over the
long-term, it is reasonable to expect there to be a degree of volatility year
on year in the CEO pay ratio given that the CEO’s single figure is made up
of a higher proportion of performance-related pay than that of our
employees, in line with the expectations of our shareholders and the
Company’s remuneration approach. This introduces a higher degree of
variability each year which affects the ratio. It should be noted that all
employees in the Company who meet the service requirement are eligible
to receive a bonus based on the same broad Company performance
conditions. This ensures all employees share in the success of the
Company.
Additional factors to note for this year’s CEO pay ratio are as follows:
• Long-term incentives are provided in shares, and therefore any
increase in share price over the three years, as has been observed
when previous LTIP awards have vested, can magnify the impact of
along-term incentive award vesting in a particular year.
• None of the lower quartile, median or upper quartile employees
identified this year are participants in the LTIP. If the value of the LTIP
isexcluded from the CEO total remuneration pay ratio calculation, the
ratios would be as follows:
• To employee at the 25th percentile: 30.5
• To employee at the 50th percentile: 23.0
• To employee at the 75th percentile: 18.8
The table below sets out the base salary and total pay benefits details
forthe CEO and employees at the 25th, 50th and 75th percentiles.
The Relationship Between the Remuneration
oftheCEOandallEmployees
CEO pay ratio
CEO 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
Total single figure (£’000)
1
2,765.1 3,084.0 3,948.4 3,116.9 3,203.8 3,432.4 1,826.2
Ratio of CEO’s single total remuneration figure shown:
To employee at the 25
th
percentile 84.5 92.8 116.0 91.1 86.3 88.2 46.0
To employee at the 50
th
percentile 65.7 72.3 90.8 71.0 67.0 67.4 34.8
To employee at the 75
th
percentile 53.9 59.8 75.3 58.9 55.0 55.4 28.4
Ratio of CEO’s single total remuneration figure shown to the median
Executive Committee member: 1.7
1 Figures for 2025 have been restated to reflect the updated 2022 LTIP award values and outturn, based on the share price at the date of vesting and including dividend equivalents in respect of vested shares.
CEO 2025/26
Base salary (£’000)
• Employee at the 25
th
percentile 31.8
• Employee at the 50
th
percentile 37.7
• Employee at the 75
th
percentile 47.1
Total pay and benefits (£’000)
• Employee at the 25
th
percentile 39.7
• Employee at the 50
th
percentile 52.6
• Employee at the 75
th
percentile 64.4
Severn Trent Plc Annual Report and Accounts 2026 133
Strategic Report Governance Financial Statements
The full Gender and Ethnicity Pay Gap Report can be found online at severntrent.com.
This outlines the methodology and definitions, and includes insight on what we are doing about our
pay gaps, as well as how we think about Diversity and Inclusion more broadly at Severn Trent.
Gender and Ethnicity Pay Gap Reporting
We are delighted to have published our fourth combined Gender and Ethnicity Pay Gap Report.
Gender pay gap
Gender pay gap reporting legislation came into force in April 2017 and
requires all UK employers with 250 or more employees to publish
annual information illustrating pay differences between male and
female employees. We reported our gender pay gap in March 2026 in
line with statutory requirements, based on figures from 5 April 2025.
The difference in hourly pay between
male and female employees in 2025 is:
Median
5.4%
Mean
0.5%
The difference in annual bonus pay
between male and female employees in 2025 is:
Median
-0.5%
Mean
-64.3%
Our median gender pay gap has decreased to 5.4% in 2025, from 8.2% in
2024, and is now at its narrowest since reporting began. We have made
innovative and sustained efforts over successive years to increase
female representation across the organisation. This includes new
strategies targeting better recruitment, retention, and progression of
women. We believe this is the key factor in delivering the improvements
seen in our gender pay gap.
Our mean gender pay gap has also decreased to its lowest reported
level of 0.5% in 2025 from the 1.9% seen in 2024. This continues to be
driven by the high proportion of women in our management and Senior
Management roles.
Our median gender bonus gap remains relatively stable with small
fluctuations caused by one-off recognition vouchers and long service
award payments. Our mean gender bonus gap continues to be as a
result of the high percentage of women in our Executive and Senior
Management populations.
Ethnicity pay gap
In our fourth year of publishing our ethnicity pay gap information,
themedian gap is 6.9% (2024: 10.1%) and the mean gap is 6.1%
(2024: 7.6%).
The difference in hourly pay between white
and minority ethnic employees in 2025 is:
Median
6.9%
Mean
6.1%
The difference in annual bonus pay between
white and minority ethnic employees in 2025 is:
Median
0.0%
Mean
30.6%
Since the launch of our first D&I strategy in 2021, we have seen a
gradual increase in the percentage of ethnic minority employees,
rising to 15% at April 2025. We are particularly pleased to see strong
growth over the last year, with ethnic minority representation
increasing from 13% to 15%, coinciding with the launch of our
refreshed D&I strategy in 2024. We are making good progress with
our ambition for a workforce which represents the communities we
serve, at 18.9% minority ethnic background.
We believe the narrowing we have seen in our ethnicity pay gaps is
dueto the ethnic minority talent which has joined us in recent years
beginning to progress through the organisation, alongside efforts to
attract a more diverse range of applicants for roles throughout the
various levels of the Company.
Upper quartile
Upper middle quartile
Lower middle quartile
Lower quartile
Overall
Upper quartile
Upper middle quartile
Lower middle quartile
Lower quartile
Overall
Men
White
Median
Women
Minority ethnic
Mean
16
2018 202520242022202120202019
1
4
1
2
1
0
8
6
4
2
0
2023
Gender pay gap (%)
2025 Pay distributed by gender:
2025 Pay distributed by ethnicity:
Scan todownload our
2025 Genderand
Ethnicity Pay Gap Report
69%
87%
31%
13%
22%
13%
21%
12%
42%
22%
29%
15%
78%
87%
79%
88%
58%
78%
71%
85%
The Relationship Between the Remuneration oftheCEOandallEmployees continued
Severn Trent Plc Annual Report and Accounts 2026 134
Strategic Report Governance Financial Statements
Annual Report on Remuneration
The annual report on remuneration and the annual statement will be put to an advisory shareholder vote at the AGM on 9 July 2026.
Total single figure of remuneration (audited)
The table below sets out the total single figure of remuneration received by the Executive Directors for 2025/26 (or for performance periods ended
in2025/26 in respect of long-term incentives) and 2024/25 for comparison.
Where necessary, further explanations of the values provided are included below. The table and the explanatory notes have been audited.
Executive
Directors
Financial
year ended
31 March
Salary
(£’000)
1
Benefits
(£’000)
2
Pension
(£’000)
3
Other
(£’000)
4
Fixed pay
and benefits
sub-total
(£’000)
Annual
bonus
(£’000)
5
LTIP
standard
element
(£’000)
LTIP UQ
element
(£’000)
LTIP total
(£’000)
6
Variable
remuneration
sub-total
(£’000)
Total
remuneration
(£’000)
7
James Jesic
CEO
2025/26 193.8 4.8 29.1 0.9 228.5 224.7 287.4 N/A 287.4 512.2 740.7
2024/25 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Helen Miles
CFO
2025/26 541.9 16.4 81.3 0.0 639.5 0.0 562.0 125.0 687.0 687.0 1,326.5
2024/25 498.0 16.5 74.7 0.0 589.2 499.0 343.8 119.1 462.9 961.9 1,551.1
Liv Garfield
former CEO
2025/26 646.5 13.4 97.0 0.0 756.9 0.0 N/A 328.7 328.7 328.7 1,085.6
2024/25 829.6 18.9 124.4 0.0 972.9 831.2 1,314.9 313.3 1,628.2 2,459.4 3,432.3
1 Salaries are shown before the deductions of benefits purchased through the Company’s salary sacrifice scheme, such as pension contributions.
2 Benefits include a green travel allowance of £15,000 p.a., family-level private medical insurance, life assurance worth six times salary and participation in an incapacity benefits
scheme. This also includes benefit-in-kind relating to electric vehicles.
3 The Executive Directors’ maximum pension contribution is aligned with the wider workforce at 15%. Neither of the Executive Directors accrued benefits under any defined contribution
pension plans during the year or have participated in a defined benefits scheme whilst an Executive Director.
4 This figure relates to the difference between the market price and the discounted option price relating to a SAYE option granted during the financial year.
5 James Jesic’s annual bonus is paid 50% in cash and 50% in shares, with the portion deferred into shares subject to continued employment for three years but with no further
performance conditions attached. See page 137 for further details of the annual bonus outturn for 2025/26.
6 For 2025/26, the value of the LTIP is based on the outcome of the standard element of the total potential 2023 LTIP vesting, plus the UQ element of the 2022 LTIP. For 2024/25, the value
ofthe LTIP is based on the standard element of the total 2022 LTIP vesting, plus the UQ element of the 2021 LTIP. The prior year LTIP figure has been restated using the share price at the
date of vesting and includes dividend equivalents in respect of vested shares. Details of share prices used to calculate these values are set out on pages 138-139.
7 The 2025/26 total remuneration figures include £125.0k for the CFO and £328.7k for the former CEO in respect of UQ performance for the 2022 LTIP, which is published one year in
arrears and therefore relates to the 2024/25 remuneration figure. The figure for the CEO is not disclosed, as this was awarded to him prior to him becoming an Executive Director.
8 The single figure values for James Jesic reflect the amounts he has earned since he became an Executive Director, on 1 January 2026.
9 Liv Garfield stepped down from the Board on 31 December 2025. Her 2025/26 single figure amount therefore reflects what she had earned up to that point. Further details are set
out below.
Treatment of former CEO’s remuneration on stepping down (audited)
Liv Garfield stepped down as CEO and Executive Director of Severn Trent Plc on 31 December 2025. Her remuneration arrangements were
treated inline with the shareholder approved Policy. This section sets out the remuneration arrangements that were agreed by the Committee.
Employment and notice
• Liv remained employed by the Company until 30 April 2026.
• She continued to receive her salary (£291.1k), pension contributions (£43.7k), and contractual benefits (£5.7k) until that date. Total payments
for the four month period to 30 April 2026 were therefore £340.4k.
Annual bonus
• Liv remained eligible for the annual bonus for the financial year ending 31 March 2026, although as noted previously, due to Ofwat’s PRP
Prohibition Rule being triggered, she will not be paid a bonus in relation to 2025/26.
Share awards
• All outstanding awards remain subject to the terms of the relevant share plans. The Committee made the decision to apply discretion, with
Liv being treated as a ‘good leaver’ for the purposes of outstanding share awards.
• Outstanding LTIP awards granted in 2023, 2024 and 2025 will continue to vest on their normal dates and subject to the original performance
conditions.
• The 2024 and 2025 awards will be pro-rated to her leave date and reduced by one sixth due to triggering Ofwat’s PRP Prohibition Rule in2025/26.
The maximum number of shares that could vest will therefore be 38,668 for the 2024 LTIP award, and 18,390 for the 2025 LTIP award.
• For the 2023 award, as Liv remained in employment until the end of the performance period, no pro-rating will be applied, and it is out of
scope of Ofwat’s PRP Prohibition Rule.
• Vested LTIP shares will remain subject to the standard two-year holding period and malus/clawback provisions.
• Liv will not receive an LTIP award in 2026.
• Outstanding deferred share awards granted in 2023, 2024 and 2025 will vest on the original vesting date. The maximum number of shares
that could vest under each award will be 6,521, 12,131 and 15,524 respectively.
Other payments and arrangements
• No other payments for loss of office have, or will, be made.
• Liv’s two-year Post Employment Shareholding Requirement (‘PESR’) period, which requires her to hold 300% of salary in shares,
commenced the day after she stepped down from the Board, on 1 January 2026.
Payments to former Directors
Outside of the payments made to the former CEO explained above, there have been no other payments made in relation to former Directors
during the year.
Severn Trent Plc Annual Report and Accounts 2026 135
Strategic Report Governance Financial Statements
Annual Report on Remuneration continued
Remuneration of the CEO
The total remuneration for the CEO over the last 10 financial years is shown in the table below. The annual bonus payout and LTIP vesting level as a
percentage of the maximum opportunity is also shown.
Year ended 31 March 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2026
CEO
Liv
Garfield
Liv
Garfield
Liv
Garfield
Liv
Garfield
Liv
Garfield
Liv
Garfield
Liv
Garfield
Liv
Garfield
Liv
Garfield
Liv
Garfield
James
Jesic
Total remuneration (£’000)
1
2,424.0 2,193.5 2,478.8 2,765.1 3,084.0 3,948.4 3,116.9 3,203.8 3,432.4 1,085.6 740.7
Annual bonus (% of maximum) 75.8% 60.4% 58.5% 74.0% 63.8% 81.0% 38.5% 60.9% 82.5% 0.0% 98.0%
LTIP vesting (% of maximum) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
3
70.0%
4
63.3%
1 2018 onwards includes any SAYE grants made during the year, as well as dividend equivalents in respect of vested LTIP shares.
2 On a formulaic basis, Liv’s bonus for 2025/26 should have been 88.0%, but payout was reduced to 0% due to the impact of Ofwat’s PRP Prohibition Rule.
3 The vesting of the 2022 LTIP award was reported in the 2024/25 Directors’ Remuneration Report as 80% of maximum. In light of UQ performance being achieved, the UQ element of the 2022
LTIP award has since vested in full. To reflect this, the LTIP vesting percentage for 2025 has been restated. The additional LTIP value arising from the full vesting of the UQ element (£328.7k)
is included in the total remuneration value for 2025/26.
4 The value of the 2023 LTIP award for 2025/26 is based on the Committee’s assessment of the vesting of the standard element of the LTIP. The UQ element cannot be measured until the end
of July 2026; such vesting, if any, will form part of the total remuneration value for 2026/27.
Total shareholder return (‘TSR’)
The graph below shows the value at 31 March 2026 of £100 invested in Severn Trent Plc on 1 April 2016 compared with the value of £100 invested in
theFTSE100. The FTSE100 was chosen as the comparator index because the Company is a constituent of that index. The intermediate points show
thevalue of the intervening financial year ends.
250
Severn Trent Plc TSR FTSE100 TSR
Total shareholder return (£)
2016 2017 2018 2024 2025
2026
2022202120202019
200
150
100
50
0
2023
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 136
Benefits for 2025/26 (audited)
The value of benefits is based on the cost to the Company and there is no pre-determined maximum limit. The range and value of the benefits offered
are reviewed periodically. We show below the benefits received by the individual Executive Directors in the year, and their typical annual value where
possible.
Benefits for 2025/26 (audited) Typical annual value 2025/26
Green travel allowance £15,000
Private medical insurance £2,108
Life assurance Up to 6x salary
Personal accident cover As per the Group-wide Policy
Biennial health screening £822 per health screen
Incapacity benefits Worth 75% of salary for a period of five years (subject to qualifying criteria)
Annual bonus outturn for 2025/26 (audited)
Our all-employee annual bonus ensures that all of our people, from Executive Directors to our frontline employees, are aligned with the same
measures and rewarded appropriately for achieving key objectives. Full detail on the Company’s performance during the financial year can be found in the
Strategic Report.
Bonus element
Threshold
(0% payable)
Target
(50% payable)
Maximum
(100% payable)
Stretching
targets Actual Weighting
Outcome
achieved
Group PBIT
49% growth
vsprior year £861m£760m £800m £840m 40% 40%
Customer and
Environment ODIs
Sector leading
£56m£20m £25m £30m 27% 27%
Combined Sewer
Overflows (‘CSOs’)
1
Sector leading
See
footnote 10% 50% 100% 15% 15%
EPA Rating
Sector leading
Highly
confident
of EPA 4* 10% 10% / 0%N/A N/A Achieved
Health and Safety
Sector leading 0.110.17 0.13 0.09 8% 6%
Total 100% 98% / 88%
1 Our CSOs element is split into two equally weighted sections for reduction in CSO spills and completion of agile CSO solutions. The outcome represents full payout on the CSO spills element
(average spills per CSO of 15.0 versus a binary target of 18.8), and maximum outcome against the CSO solutions element (achievement of 1,100 versus threshold of 600, target of 800 and
maximum of 1,000).
2 This measure only pays out if we achieve the highest EPA 4* rating. It also includes a binary underpin, whereby the EPA serious pollutions metric needs to be ‘green’ for the previous calendar
year for the metric to pay out. Although we are highly confident of achieving EPA 4* for the seventh consecutive year, due to two serious pollutions in 2025, this metric was ‘amber’, so
thiselement was reduced from 10% to azero payout for our CFO, Helen Miles, and former CEO, Liv Garfield. Our new CEO, James Jesic, was not an Executive Director at the time of the
incidents, so he is not impacted by the underpin.
3 Measured as number of Lost Time Incidents divided by number of hours worked multiplied by 100,000.
4 As explained on page 119, due to the impact of Ofwat’s PRP Prohibition Rule, the 2025/26 payout for the CFO and former CEO will be reduced from 88% to 0%.
Severn Trent Plc Annual Report and Accounts 2026 137
Strategic Report Governance Financial Statements
Annual Report on Remuneration continued
Deferred shares under the Annual Bonus Scheme (including awards granted during the year)
One half of the bonus earned in respect of performance during 2024/25 was deferred into shares, as detailed below:
Award Basis of award
Number of
shares
granted
1
Grant
date
Face value of
award at grant
(£’000)
Vesting
date
Three-day average
share price used for
grant calculations
Liv Garfield
2025 Annual Bonus Scheme
relating to 2024/25
Deferred
bonus
15,524
05/06/2025
415.5
05/06/2028 26.77
Helen Miles 9,319 249.4
1 Annual bonus shares are deferred shares which are subject to continued employment, but are not subject to further performance conditions.
LTIP outturn
LTIP awards vesting in relation to performance in 2025/26 (audited)
The outcome of the 2023 LTIP award is based on performance over the three-year period from 1 April 2023 to 31 March 2026. This is the sixth LTIP
award vesting that includes a stretch measure relative to the UQ performance of the other WaSCs.
With 80% of the 2023 LTIP award being based on our RoRE performance, it was critical that the targets set in relation to it were sufficiently
stretching, so as toonly reward genuinely impressive performance. To ensure this, the Committee adopted a dual approach for the target, which
required achieving amultiple of 1.39x the allowed base return from Ofwat to earn the standard element, plus a further target of being UQ versus
thebroader sector to achieve stretch payout. For maximum payout on this element, the approach ensured both a material return over and above
thebase regulatory allowance, and that Severn Trent be one of the top performers in the sector.
The remaining 20% of the LTIP was based on four sustainability measures. These measures comprise of a combination of enabling measures and
delivery measures, all of which are linked to our Triple Carbon Pledge commitments and the strategy we have to deliver it. Our carbon ambitions
are significant and, if achieved, will result in us being net zero on our Scope 1 and 2 operational emissions by 2030. The strategy and workstreams
which underpin this, and on which the LTIP measures are based, are correspondingly ambitious.
The table below shows the 2023 LTIP award vesting schedule for performance levels as a percentage of salary:
RoRE Sustainability
Threshold FD 1.39x FD
UQ RoRE
performance relative
to WaSCs
Scope 1&2
emissions
reduction
Self-
generation
target
Scope 3
supply chain
engagement
Roll-out of Net
Zero hub
Total
maximum
CEO 16% 64% 96% 6% 6% 6% 6% 120%
CFO 20% 80% 120% 7.5% 7.5% 7.5% 7.5% 150%
Former CEO 30% 120% 160% 10% 10% 10% 10% 200%
We note that the vesting schedule for the CEO (James Jesic) applies to the awards that were granted prior to his Board appointment at a level of 120%
of salary.
2023 LTIP award: standard RoRE element
The standard RoRE element of the 2023 LTIP award measures the Company’s performance against RoRE set by Ofwat’s Final Determination. Over the
three-year period of the 2023 LTIP award, the Company achieved a RoRE of 2.14x against the target of 1.39x the base RoRE return.
Based on the performance levels set out above, this results in full vesting of the standard RoRE element of the 2023 LTIP award, which is equivalent to 53.3%
of maximum for the total 2023 LTIP award for the CEO and CFO, and 60% of maximum for the former CEO. Full details are set out in the table below.
Standard proportion of 2023 award (Absolute RoRE plus sustainability elements)
Total
number
ofshares
granted
Value of
award at
grant
(£’000)
End of
performance
period
Standard
element of
award
vesting
(%max)
Number of
shares
vesting
Vesting
date
Value
attributable to
share price
movement
(£’000)
Value
of LTIP
shares
vesting
(£’000)
Value of
dividend
equivalents
due
(£’000)
Value of
standard
element of LTIP
(single figure)
(£’000)
James Jesic
13,543 368.3
31/03/2026
63.3% 8,577
27/07/26
25.5 258.7 28.7 287.4
Helen Miles 26,477 720.0 63.3% 16,769 49.8 505.8 56.2 562.0
Liv Garfield 57,094 1,552.6 70% 39,966 118.7 1,205.5 133.9 1,339.4
1 For James and Helen, this figure includes 53.3% vesting for the standard RoRE element, plus 10% vesting for the sustainability element. For Liv, it includes 60% vesting for the standard
RoRE element, plus 10% vesting for the sustainability element.
2 The appreciation in share price over the vesting period has increased the value of the LTIP awards by the amount shown in the table. Based on the average share price over the final three
months of the performance period of £30.16 , this equates to 844 shares for James, 1,651 shares for Helen and 3,936 shares for Liv.
3 Based on the average share price over the final three months of the performance period of £30.16, as the awards will not be released until July 2026.
4 Based on dividends paid in the period since the date of grant to 31 March 2026.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 138
2023 LTIP award: UQ RoRE element
The UQ element of the 2023 LTIP award cannot be measured, and so the associated vesting will not be known until the end of July 2026, when
comparable statistics for the other WaSCs are published and provided to Ofwat; such vesting, if any, will therefore be disclosed in the 2026/27
Directors’ Remuneration Report.
2023 LTIP award: sustainability element
The sustainability element of the 2023 LTIP award measures the Company’s performance against four different binary measures aligned with our
environmental commitments to reach net zero operational emissions by 2030. Over the three-year period of the 2023 LTIP, the Company achieved
thefollowing:
Measure Description Target Actual Weighting
Outcome
achieved
Scope 1 & 2
emissions reduction
Achieving a cumulative reduction in our Scope 1 & 2 emissions of 30%
against a 2019/20 baseline (of 508.4 kT) by 31 March 2026.
30% 27% 5% 0%
Self-generation Achieving an outturn of 137 GWh additional generation from the 2019/20
baseline of 486 GWh, enabling a minimum total renewable generation of
623 GWh by 31 March 2026.
623 GWh 621 GWh 5% 0%
Scope 3 supply chain
engagement
To have suppliers representing 70% of our Scope 3 emissions
committed to a Science-Based Target at 31 March 2026.
70% 71% 5% 5%
Roll-out of Net Zero Hub Achieving a cumulative reduction in Scope 1, 2 and 3 emissions of 15 kT
by 31 March 2026. 15.0 kT 15.3 kT 5% 5%
20% 10%
2022 LTIP UQ RoRE element
As reported last year, the standard element of the 2022 LTIP award vested in full, being equivalent to 80% and 73.3% of maximum for the total 2022
LTIP award for the former CEO and CFO respectively. Full vesting was based on delivering UQ RoRE performance relative to the other WaSCs over
thethree-year performance period to 2024/25 (the UQ element). Vesting under the UQ element of the 2022 LTIP award was only known at the end
ofJuly 2025 when comparable statistics for the other WaSCs were published and provided to Ofwat. We now know that Severn Trent achieved UQ
performance, and therefore the UQ element is included in the 2025/26 single figure for the former CEO and CFO (equivalent to 20% and 26.7%
ofmaximum of the total 2022 LTIP award respectively).
No discretion has been exercised by the Committee to override the formulaic outturns of either the 2022 or 2023 LTIP awards.
The table below reflects the vesting of the UQ element of the 2022 LTIP award (as a percentage of the maximum award). The 2022 LTIP vested at
100% of maximum when the standard and UQ elements are combined.
UQ element of 2022 award
Total
number
ofshares
granted
Value of
award at
grant
(£’000)
End of
performance
period
UQ element of
award vesting
(% max)
Number of
shares
vesting
Vesting
date
Value
attributable to
share price
movement
(£’000)
Value
of LTIP
shares
vesting
(£’000)
Value of
dividend
equivalents
due
(£’000)
Value of UQ
element of LTIP
(single figure)
(£’000)
Liv Garfield
52,951 1,517.6
31/03/2025
20.0% 10,590
24/07/2025
(13.3) 290.2 38.5 328.7
Helen Miles 15,102 432.8 26.7% 4,027 (5.0) 110.4 14.6 125.0
1 The depreciation in share price over the vesting period has reduced the value of the LTIP awards by the amount shown in the table, which means there was no value attributable to share
price appreciation.
2 Based on the three-day average share price to 24 July 2025 of £27.41.
3 Based on dividends paid in the period since date of grant to 24 July 2025.
Severn Trent Plc Annual Report and Accounts 2026 139
Strategic Report Governance Financial Statements
Annual Report on Remuneration continued
Breakdown of the LTIP single figure value
The LTIP single figure amounts include share price movement between grant and vesting, as well as any dividend equivalents.
For 2025/26, the reportable LTIP figures are the standard RoRE element of the 2023 LTIP award, the sustainability element of the 2023 LTIP award,
and the UQ element of the 2022 LTIP award. For 2024/25, the reportable LTIP figures are the standard RoRE and sustainability elements of the 2022
LTIP award and the UQ element of the 2021 LTIP award.
The table below shows the comparative value of each of the elements included in the single figures.
CEO CFO
2024/25
1
2025/26
2
2024/25
1
2025/26
2
Standard RoRE element N/A 242.1 250.0 473.3
Sustainability element N/A 45.1 93.8 88.7
UQ RoRE element N/A N/A 119.1 125.0
LTIP total in single figure values (£’000) N/A 287.4 462.9 687.0
1 For the 2024/25 valuation, the share price used for the standard RoRE and sustainability elements was based on the share price on vesting of the 2022 LTIP, of £27.41. The UQ RoRE element
was calculated using the share price on vesting of the 2021 LTIP, of £25.14.
2 For the 2025/26 valuation, the share price used for the standard RoRE and sustainability elements was based on the average share price over the final three months of the performance
period, of £30.16. The UQ RoRE element was calculated using the share price on vesting of the 2022 LTIP, of £27.41.
3 As per the regulations, figures are not included for James Jesic in respect of the 2024/25 UQ element, as he was not an Executive Director during the performance period.
LTIP awards granted during the year (audited)
2025 LTIP award
Number of
shares
granted
Grant
date
Face value of
award at grant
(£’000)
End of
performance
period
Vesting
date
Three-day average
share price used for
grant calculations
James Jesic 15,162
01/07/2025
415.7
31/03/2028 25/07/2028 £27.42Helen Miles 32,162 881.9
Liv Garfield 61,232 1,679.0
1 LTIP awards are conditional share awards subject to performance conditions, as set out below.
2 The three days used for the average share price calculation were 26, 27 and 30 June 2025.
2025 LTIP
Award
Financial Non-Financial
1
Max
outturn
(% salary)
RoRE Environmental Customers Communities
Threshold
FD baseline
(% salary)
1.39x FD
(% salary)
UQ performance
relative to
WaSCs
(% salary)
Scope 1 and
2 reduction
Self-
generation RNAGS PCDs Social Value
Vesting for
performance
CEO 10% 40% 60% 12% 12% 12% 12% 12% 120%
CFO 14.6% 58.3% 87.5% 17.5% 17.5% 17.5% 17.5% 17.5% 175%
Former CEO 18.8% 75% 100% 20% 20% 20% 20% 20% 200%
1 For the non-financial measures, if threshold performance targets were met, these elements would vest at 2.25% of salary for the CEO, 3.28% for the CFO and 3.75% for the former CEO.
Performance measure details
Measure Sub-measure Weighting Threshold Target Maximum
Financial RoRE 50% Ofwat’s base
return
1.39x Ofwat’s
base return
Upper quartile performance
compared to the other
WaSCsinthesector
Environment Cumulative scope 1 and 2 emissions reduction
against 2019/20 baseline by 31 March 2028
10% 34% reduction 40% reduction 46% reduction
Self-generation – total renewable generation
by31March 2028
10% of 751 GWh of 775 GWh of 799 GWh
RNAGS – cumulative reduction by 31 March 2028 10% Reduction of 59 Reduction of 74 Reduction of 89
Customer PCDs – % assessed as ‘green’ RAG status, as
perourreporting to Ofwat, at 31 March 2028
10% 7 0% ‘green’ 85% ‘green’ 10 0% ‘gr e en’
Communities Social Value generated between 1 April 2025
and31March 2028
10% £10 million £11.5 million £13 million
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 140
Executive Director shareholdings
Shareholding requirement
The Committee believes it is an essential part of the Policy that Executive Directors become material shareholders, and this is evidenced
bythenumber of shares held by both Executive Directors. The retention and build-up of equity is important in a long-term business such
asSevern Trent as it encourages decisions to be made on a long-term sustainable basis for the benefit of all stakeholders.
The Executive Directors have built significant shareholdings during their employment with the Company and have also increased their
shareholdings further through personal share purchases.
The following table sets out the minimum shareholding requirements and the shareholdings of the Executive Directors. The shareholding
requirement must be built up over five years and then subsequently maintained. The shareholding requirements for the CEO and CFO
remainedunchanged in 2025/26.
Executive Director shareholdings % of base salary
Shareholding
requirement
Shares counting towards
shareholding requirement
1
Unvested subject to
continued employment
2
Unvested subject to
performance
3
CEO 300% 129.4% 52.7% 126.5%
CFO 200% 293.5% 119.7% 281.7%
1 Represents beneficially owned shares as well as shares held in trust as part of the annual bonus deferred share awards (of which 47% are deducted to cover statutory deductions).
2 Represents 2023 LTIP shares (where the performance period is now complete) which are subject to an ongoing vesting period and a two-year holding period post-vesting, plus shares held
as part of the Sharesave Scheme. This value assumes that the UQ element of the 2023 LTIP vests in full.
3 Represents the 2024 and 2025 LTIP awards which are subject to ongoing performance.
Directors’ shareholdings and summary of outstanding share interests (audited)
Directors
Beneficially
owned
LTIP
shares
1,2
Annual bonus
shares
3
SAYE
options
Shareholding
requirement
as a % of salary
Current
shareholding
asa%of salary
% shareholding
requirement
achieved
James Jesic
1 January 2026 – present 24,571 43,906 14,859 1,029 300% 129% 43%
Helen Miles
1 April 2023 – present 47,697 79,895 20,230 0 200% 294% 147%
Non-Executive Directors
Christine Hodgson
1 January 2020 – present 7,486 – – – – – –
Nick Hampton
4 April 2025 – present 1,500 – – – – – –
Tom Delay
1 January 2022 – present 300 – – – – – –
Sarah Legg
1 November 2022 – present 1,912 – – – – – –
Sharmila Nebhrajani
1 May 2020 – present 231 – – – – – –
Richard Taylor
1 April 2024 – present 2,911 – – – – – –
Former Directors
Liv Garfield
Resigned 31 December 2025 461,087 108,443 34,176 875 300% 1,696% 565%
Kevin Beeston
Resigned 30 April 2025 5,996 – – – – – –
1 LTIP awards are conditional share awards subject to ongoing performance conditions.
2 Additional dividend equivalent shares may be released where provided in the rules.
3 Annual bonus shares are deferred shares which are not subject to further performance conditions.
4 The share price used to calculate the percentage of the shareholding guideline achieved for both current and former Directors was £30.90 (as at 31 March 2026). The guideline figures
include unvested annual bonus shares (47% deducted to cover statutory deductions).
5 The shareholdings of former directors are shown at the date of stepping down from the Board.
There has been one change to the Directors’ interests in the ordinary share capital of the Company between those set out above and 19 May 2026. This
relates to the exercise of James Jesic’s 2023 Sharesave scheme, on 1 May 2026, which increased James’ holding by 164 shares.
Severn Trent Plc Annual Report and Accounts 2026 141
Strategic Report Governance Financial Statements
Annual Report on Remuneration continued
Chair and Non-Executive Directors’ fees (audited)
The Chair, Senior Independent Director and Non-Executive Directors are appointed for a three-year term, subject to annual re-election by
shareholders at the AGM following the annual Board Performance Review process. The current Letters of Appointment are available on the
Severn Trent Plc website.
Negotiations for the salary increase for the wider workforce are ongoing as at the date of this report. Recognising that the wider workforce
increase is an important reference point in the decision, salaries for the Executive Directors and fees for the Chair and Non-Executive Directors
for the year ahead have yet to be determined. However, it has been agreed in principle that percentage increases will be no higher than that
agreed for the wider workforce.
Chair and Non-Executive Fees effective from 1 July 2025 (audited)
Annual fee increases take effect from 1 July each year. The table below shows the fee structure currently in place. As described above, any changes for
the year ahead will be no higher than the percentage increase agreed for the wider workforce.
Operation Fees 2025/26 (£’000)
Chair’s fee 353.3
Fee paid to all Non-Executive Directors 68.0
Supplementary fees:
• Senior Independent Director 17.3
• Audit and Risk Committee Chair 19.6
• Corporate Sustainability Committee Chair 17.3
• Remuneration Committee Chair 19.6
• Treasury Committee Chair 18.4
Chair and Non-Executive Fees paid for the year ending 31 March 2026 (audited)
The table below sets out all amounts received by Non-Executive Directors during the year for their services to the Severn Trent Plc Board. These
amounts comprise of their fees only; Non-Executive Directors do not receive benefits from the Company, but are reimbursed for any reasonable
business expenses incurred.
Fees 2024/25 (£’000) Fees 2025/26 (£’000)
Christine Hodgson 1 January 2020 – present 335.7 349.9
Nick Hampton 4 April 2025 – present 0.0 82.3
Tom Delay 1 January 2022 – present 81.0 84.5
Sarah Legg 1 November 2022 – present 83.2 86.8
Sharmila Nebhrajani 1 May 2020 – present 83.2 86.8
Richard Taylor 1 April 2024 – present 80.1 85.6
Former Directors
Kevin Beeston Resigned 30 April 2025 81.0 6.8
Percentage change in the remuneration of the Executive Directors and Non-Executive Directors
The Committee looks to ensure that the approach to fair pay is implemented in practice throughout the Group, and monitors year-on-year changes
between the movement in salary, benefits and annual bonus for the CEO between the current and previous financial year compared with that of the
average employee.
The Committee has elected to use the average earnings per employee, as this avoids the distortions that can occur to the Group’s total wage bill
asaresult of the movements in the number of employees.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 142
The Committee monitors this information carefully to ensure that there is consistency in the fixed pay of the Executive Directors and Non-Executive
Directors compared with the wider workforce. Also, this information demonstrates the Company’s approach to having an all-employee bonus
throughout the organisation with employees and the CEO benefiting when the Company does well.
Salary/Fees Benefits Bonus
21/22 22/23 23/24 24/25 25/26 21/22 22/23 23/24 24/25 25/26 21/22 22/23 23/24 24/25 25/26
Executive Directors
James Jesic – – – – – – – – – – – – – – –
Helen Miles
4
– – – 3.8% 8.8% – – – (24.3)% (0.3)% – – – 31.5% (100)%
Non–Executive Directors
5
Christine Hodgson 1.7% 2.3% 2.9% 4.5% 4.2% – – – – – – – – – –
Nick Hampton – – – – – – – – – – – – – – –
Tom Delay – 19.3% 8.2% 4.5% 4.2% – – – – – – – – – –
Sarah Legg – – 8.9% 25.5% 4.2% – – – – – – – – – –
Sharmila
Nebhrajani 8.7% 8.3% 17.8% 4.5% 4.2% – – – – – – – – – –
Richard Taylor – – – – 6.9% – – – – – – – – – –
Former Directors
Liv Garfield 2.3% 2.3% 2.8% 4.5% (22.1)% (3.1)% 5.3% 1.8% 2.7% (29.4)% 30.0% (51.3)% 62.8% 42.3% (100)%
Kevin Beeston
6
6.8% 4.9% 2.7% 4.5% (91.6)% – – – – – – – – – –
Colleagues
Average per
employee 2.1% 3.4% 6.8% 6.4% 2.8% 0.3% 2.8% (1.0)% (2.9)% (6.5)% 9.9% (41.6)% 67.2% 28.9% 4.9%
1 The salary/fees, benefits and bonus figures shown are based on full-time equivalent comparisons.
2 The benefits figures include green travel allowance and family-level private medical insurance for senior and middle managers.
3 The figures shown are reflective of any bonus earned during the respective financial year. Bonuses are paid in the following June.
4 As per the regulations, figures are not included for James Jesic in respect of 2024/25 and earlier, as he did not become and Executive Director until 1 January 2026. Similarly, figures are not
included for Helen Miles in respect of 2022/23 and earlier, as she did not become an Executive Director until 1 April 2023.
5 Non-Executive Directors receive fees only and do not receive any additional benefits or bonus payments.
6 Retired from the Board on 30 April 2025.
Please see previous Directors’ Remuneration Reports for historical details of events that impact the changes in remuneration, such as role changes,
joiners and leavers.
Relative importance of spend on pay
The table below shows the expenditure of the Company on staff costs against dividends paid to shareholders for both the current and prior financial
periods and the percentage change between the two periods.
Relative importance of the spend on pay
2024/25
£m
2025/26
£m % change
Staff costs
552.8 670.7 21.3%
Dividends
356.0 371.3 4.3%
There were no other significant payments or distributions to shareholders, including share buybacks, in either the current or prior year.
External directorships
James Jesic does not hold any external directorships outside of the Severn Trent Group.
Helen Miles has been a Non-Executive Director at Breedon Group Plc since April 2021, and retains any fees associated with this appointment.
Service contracts for Executive Directors
Copies of the service contracts for the Executive Directors are available for inspection at the Company’s registered office during normal business hours.
All Directors will retire at this year’s AGM and submit themselves for appointment or reappointment by shareholders at the AGM on 9 July 2026. James
Jesic and Helen Miles have service contracts which provide for a notice period of one year. Non-Executive Directors do not have service contracts; their
Letters of Appointment can be found on the website and are available for inspection at the Company’s registered office during normal business hours.
Name Date of service contract Nature of contract Notice period Termination payments
James Jesic 01/01/2026
Rolling 12 months
Payments for loss of office comprise a maximum
of12months’ salary and benefits only.
Helen Miles 01/04/2023
Severn Trent Plc Annual Report and Accounts 2026 143
Strategic Report Governance Financial Statements
The Remuneration Committee’s agenda for 2025/26
The Committee carries out an annual review of remuneration elements,
policies and processes. This process was introduced in 2019 for the
Committee to expand its responsibility to oversee and review wider
workforce pay and policies, and to ensure they are designed to support
the Company’s desired culture and values.
The Committee believes that the context and knowledge shared is a useful
underpin to ensure that our future decision-making around Executive and
Senior Management pay supports fair and equal remuneration throughout
the entire workforce.
Committee Governance
Review of the current Policy, to ensure it remained optimally
structured to retain and motivate Executives through AMP8.
Review of Performance in the Round for 2025/26 ahead of approving
the formulaic outturns for the 2025/26 annual bonus and the 2023
LTIPaward.
Review of the Company’s incentive scheme structures, ensuring
alignment with regulatory guidance and broader stakeholder priorities.
Consideration of an independent update, provided by Alvarez & Marsal
(‘A&M’), on current market practice and future remuneration trends.
Completion of its annual assessment on wider workforce policies
andpractices, including updates on:
• changes to our default defined contribution pension investment
fund to deliver more optimal long-term retirement outcomes
for members;
• going beyond the statutory requirements for neonatal care, offering
full pay for up to 12 weeks;
• expansion of our physiotherapy offering, including the introduction
of on-site appointments;
• the Severn Trent 2025 Gender and Ethnicity Pay Gap Report; and
• alignment of Executive and wider workforce annual pay increases.
The Committee reported to the Board on these matters.
Committee member attendance at the Company Forum to share
guiding remuneration principles with employee and Trade Union
representatives.
Review of the expenses claim procedure for the Chair and CEO.
Review and approval of the Committee’s Terms of Reference
duringthe year, prior to making a recommendation to the Board.
Incompleting its review, the Committee concluded that the Terms
ofReference remained appropriate and reflected the manner in
whichthe Committee was discharging its duties.
Key areas of focus
Ensuring fairness and alignment with the wider workforce
Each year, the Committee is presented with interim and annual updates that set out developments in Severn Trent’s wider workforce pay policies and
practices. The provision of these reports meets the requirements of the Code. The Committee continues to be engaged onthemechanisms for how
thereward framework is applied across different levels within the organisation, which in turn has been shared inthis report.
Meeting attendance in 2025/26
Committee Members 09/04/25 14/05/25 23/07/25 13/11/25 16/01/26 05/03/26
Sharmila Nebhrajani
Christine Hodgson
Richard Taylor
Nick Hampton
Kevin Beeston
1
1. Kevin Beeston resigned from the Board on 30 April 2025.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 144
What the Committee will look at in 2026/27
The Company remains committed to continuous improvement of terms and conditions. We pride ourselves on keeping pace with trends in talent
management and acquisition, and skills development, in order to motivate, develop and retain a positive working environment, to ensure the best
prospects for the long-term success of the Company.
Governance matters
The Committee’s performance was assessed as part of the internally facilitated Board Performance Review. The Committee is regarded as operating
effectively and it is noted that the Board takes assurance from the quality of the Committee’s work.
2025 AGM shareholder voting outturn
Resolution Votes for Votes against Votes withheld
Approve Directors’ Remuneration Report
249,163,730 2,976,194 59,502
(98.82%) (1.18%)
2024 AGM shareholder voting outturn
Resolution Votes for Votes against Votes withheld
Approve Directors’ Remuneration Policy
234,640,456 11,185,775 88,369
(95.45%) (4.55%)
Committee advisers
To ensure that the Company’s remuneration practices are in line with
best practice, the Committee has appointed independent external
remuneration advisers, A&M. This appointment in2024 followed a formal
selection process. A&M attends meetings of the Committee.
A&M is a member of the Remuneration Consultants Group Code of
Conduct and adheres to this Code in its dealings with the Committee.
The Committee reviews the appointment of its advisers annually and
issatisfied that the advice it receives is objective and independent.
Fees, on a time-spent basis, for the advice provided by A&M to the
Committee during the year were £113.7k excluding VAT. A&M has not
provided any other consultancy or advisory services during the year
andthere are no connections between A&M and individual Directors
tobedisclosed.
The CEO, CFO, Director of Human Resources and the Head of Reward and
HR Operations also attend meetings, by invitation, to provide advice and
respond to specific questions. Such attendances specifically excluded any
matters concerning their own remuneration. The Group General Counsel
and Company Secretary acts as secretary to the Committee.
Sharmila Nebhrajani OBE
Chair of the Remuneration Committee
Below are some of the focus areas for the Committee during 2026/27:
Implementation of new Policy
Ongoing review of the AMP8
Remuneration Policy to ensure it
remains optimally structured and
balanced to retain and motivate
Executive Directors to deliver our
hugely ambitious AMP8 plans, and
driverapid and sustained performance
improvements for customers and
the environment.
Employee wellbeing
The Committee will continue to review
the support we provide to employees
across all three pillars of wellbeing
(physical, mental and financial) to
ensure we are embodying our value of
‘Showing Care’ as much as possible.
Fair and transparent pay
Continued commitment to monitor
andevaluate developments in our pay
framework and the review of Executive
pay in line with the wider workforce.
We will continue to clarify the
contribution of unique role types
toensure an equal and fair reward
package that is representative of
roleswith similar skill types.
Severn Trent Plc Annual Report and Accounts 2026 145
Strategic Report Governance Financial Statements
Directors’ Remuneration Policy
This section contains Severn Trent Plc’s proposed Directors’ Remuneration Policy (the ‘Policy’) that will govern
andguide the Company’s future remuneration payments to Directors. The Policy described in this section is
intended to apply for three years and will be applicable from the date of approval by shareholders at the
Company’s2026 Annual General Meeting (‘AGM’).
Summary of changes to the proposed Remuneration Policy
Four changes to the Policy are proposed:
• Reduce annual bonus maximum from 120% to 100% of salary for CEO and CFO;
• Increase LTIP award levels to 400% (CEO) and 350% (CFO) of salary (from 200% and 175%);
• Increase shareholding requirements to 400% (CEO) and 350% (CFO) of salary; and
• Remove bonus deferral once shareholding guidelines are met.
Base salary Pension Benefits
Purpose and
link to strategy
To recruit and reward Executive Directors of a suitable calibre for the role and duties.
Operation Salaries for individual Executive Directors are reviewed annually by the Committee and normally take effect from 1 July.
When determining the salary of the Executive Directors, the Committee takes into consideration a number of factors including
the scale and complexity of the Company, the scope and responsibilities of the role, the skills, experience and contribution of
the individual, the Committee’s assessment of the competitive environment including consideration of market data for similar
roles, Company performance, affordability, the wider economic environment and internal relativities.
Maximum
opportunity
There is no prescribed maximum salary.
Current salary levels of the Executive Directors are set out in the Annual Report on Remuneration on page 126.
The Committee will take account of the factors outlined in this table when considering salary increase for Executive Directors.
This includes consideration of the average increase for the employee population, although increases above this level may be
awarded, if considered appropriate, to reflect the range of factors described in this table.
Performance
measures
Not Applicable.
Purpose and
link to strategy
To provide pension arrangements comparable with similar companies in the market to enable the recruitment and retention
ofExecutive Directors.
Operation Executive Directors may participate in a defined contribution scheme and/or receive a cash supplement in lieu of pension.
Maximum
opportunity
For Executive Directors, the Company contribution to a pension scheme and/or cash allowance is aligned to the maximum
available to members of the Severn Trent Group Personal Pension (the majority of the wider workforce), which is currently
15%of salary.
Performance
measures
Not Applicable.
Purpose and
link to strategy
To provide competitive benefits in the market to enable the recruitment and retention of Executive Directors.
Operation Current benefit provision includes a green travel allowance, family-level private medical insurance, life assurance, personal
accident insurance, health screening, an incapacity benefits scheme and other incidental benefits and expenses.
The Committee recognises the need to maintain suitable flexibility in the benefits provided to ensure it is able to support the
objective of securing the calibre of executive talent required. The Committee may therefore determine that Executive Directors
should receive additional benefits if appropriate, taking into account factors such as relevant market practice, the role and
circumstances of the Executive Director and the Company, and the impact of the regulatory environment.
Therefore, additional benefits or allowances to support a particular objective may be paid if appropriate in the circumstances.
For example, should an executive be required to relocate working location, then relocation, disturbance and expatriate
allowances, and tax equalisation may be paid as appropriate. Such allowances may be delivered in cash or shares.
Directors will be reimbursed for any reasonable business expenses incurred in the course of their duties, including the tax
payable thereon.
The Executive Directors are able to participate in HMRC tax-advantaged all-employee share plans on the same terms as other
eligible employees.
Maximum
opportunity
There is no pre-determined maximum limit. Benefits are set at a level which the Committee determines is reasonable and
appropriate and the value may vary depending on the benefit provided and the market cost of the benefit given the individual’s
personal circumstances.
The maximum limit under tax-advantaged all-employee plans are as set by HMRC.
Performance
measures
Not Applicable.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 146
Annual Bonus LTIP
Purpose and
link to strategy
To encourage improved financial, operational and environmental performance, and to ensure Executive Directors reach their
shareholding guidelines through the partial deferral of payment into long-term shares.
Operation Bonuses are based on performance measured over one financial year.
Where an Executive Director has not met their shareholding guideline, 50% of the bonus is paid in cash and 50% in shares
which vest after three years, subject to continued employment.
Any exercise of discretion by the Committee will be communicated to shareholders in full in the following year’s Directors’
Remuneration Report.
Recovery and dividend equivalent provisions apply (see explanatory notes).
Maximum
opportunity
The maximum annual bonus in respect of a financial year is 100% of salary.
Performance
measures
The performance measures and targets for the annual bonus are selected annually to align with the business strategy and
thekey drivers of performance set under the regulatory framework, and may comprise financial, operational, strategic or
environmental metrics. The annual weighting between the various metrics may vary depending on the key priorities of the
business for the year ahead. Robust and demanding targets are set, taking into account the operating environment and
priorities, market expectations and the business plan for the year ahead.
For the current financial year, the performance measures are:
• Profit Before Interest and Tax (‘PBIT’) (40%)
• Outcome Delivery Incentives (‘ODIs’) (27%)
• Combined Sewer Overflow (‘CSO’) spills (7.5%)
• Advanced CSO enhancements (7.5%)
• Customer satisfaction, as measured by repeat contacts (10%)
• Health and safety (8%)
The Committee retains discretion to use different or additional measures or weightings in future years to ensure that the
bonusframework appropriately supports the business strategy and objectives for the relevant year.
For threshold performance, 0% of maximum opportunity will normally be paid. For target performance 50% of maximum
opportunity will be paid.
The Committee retains discretion to change the performance measures, weightings and/or targets during the performance
year if there is a significant and material event which causes the Committee to believe the original measures, weightings and
targets are no longer appropriate.
The Committee may also make adjustments to the amount of bonus earned resulting from the application of the performance
measures, if the Committee believes that the bonus outcomes are not a fair and accurate reflection of underlying business
performance and stakeholder experience.
Purpose and
link to strategy
To encourage strong and sustained improvements in financial performance, in line with the Company’s strategy and long-term
shareholder returns.
Operation Awards are granted annually under the LTIP and will vest subject to continued employment and, in normal circumstances,
performance over a period of three years. Awards may be granted in the form of conditional shares or nil-cost options.
A two-year holding period will apply to vested shares following the three-year vesting period.
Recovery and dividend equivalent provisions apply (see explanatory notes).
Maximum
opportunity
The maximum LTIP award in respect of a financial year is 400% of salary.
Award sizes to be granted during 2026 are set out on page 126.
Performance
measures
The LTIP will be based on a combination of financial and non-financial measures. Financial measures will normally constitute
at least 50% of the LTIP performance measures. The non-financial measures will be made up of a selection of metrics which
may include environment, customer and/or communities measures.
For the first LTIP awards under this Policy, the following measures will apply:
• Return on Regulatory Equity (‘RoRE’) – 50%
• Environmental performance, comprising 20% on carbon reduction and 10% on reduction of Reasons for Not Achieving Good
Status (‘RNAGS’).
• Long-term customer performance through Price Control Deliverables (‘PCDs’) – 10%
• A communities-related performance measure, focused on creating Social Value – 10%
Up to 25% of an award may vest for threshold performance.
The Committee will review the measures, weightings and targets before each grant to ensure they remain appropriate.
Different performance measures, targets and/or weightings may be set for future LTIP awards to reflect the business
strategyand regulatory framework operating at that time.
The Committee retains discretion to change the performance measures, weightings and/or targets during the performance
period, if there is a significant and material event which causes the Committee to believe the original measures, weightings
andtargets are no longer appropriate.
The Committee may make adjustments to the amount earned resulting from the application of the performance measures,
ifthe Committee believes that the LTIP outcomes are not a fair and accurate reflection of business performance.
Severn Trent Plc Annual Report and Accounts 2026 147
Strategic Report Governance Financial Statements
Share ownership guidelines
Purpose and
link to strategy
To encourage strong shareholder alignment both during and after employment with the Company.
Operation The Company operates shareholding requirements under which Executive Directors are expected to build and maintain
ashareholding in the Company.
The CEO is expected to build and maintain a holding of shares to the value of 400% of salary, and other Executive Directors
350% of salary.
Executive Directors are expected to retain all of the net of tax number of shares they receive through the LTIP and deferred
bonus vesting until the shareholding requirements have been met.
In addition, a post-employment shareholding requirement applies to Executive Directors who leave the Company. Leavers
must maintain their in-employment shareholding requirement (or actual shareholding, if lower) for two years following
cessation of employment.
The enforcement mechanism for the Post-Employment Shareholding Requirement is facilitated through the Employee Benefit
Trust (‘EBT’). On LTIP vesting, shares are transferred to the EBT (net of tax and National Insurance liabilities) to be held on
behalf of the Executive Directors for two years following cessation of employment. Shares purchased by Executive Directors
utilising their own funds are not included in the Post-Employment Shareholding Requirement.
Maximum
opportunity
Not Applicable
Performance
measures
Not Applicable
Notes to the Policy table
Dividend equivalents
Dividend equivalents may be applied to vesting awards under the deferred
bonus and LTIP. Dividend equivalents are based on the dividends that
could have been acquired on the vested shares during the vesting period.
Awards may be settled in shares or cash.
Recovery provisions
All elements of the incentive framework are subject to malus and
clawback provisions, which the Committee may invoke in circumstances
which include:
• Financial misstatement
• Errors in calculation
• Misconduct
• Reputational damage
• Regulatory censure
• Corporate failure of the Company
• Failures of risk management, or of operational systems and controls
• Any of the events described in Ofwat’s PRP Prohibition Rules
In such circumstances, the Committee has discretion to:
• Require a participant to repay some or all of the cash or shares
received under the annual bonus at any time up to the third anniversary
of award; and
• Reduce (including down to zero) an LTIP award prior to vesting and/or
require, at any time within three years of vesting, a participant to return
part or all of the value of the award received.
The timeframe for these recovery provisions reflects the period over
which the Company’s processes and systems are likely to uncover any
ofthe circumstances listed above.
Selection of performance measures and targets
The Committee selects performance measures for the annual bonus and
LTIP which appropriately support the business strategy and objectives for
the relevant periods.
Performance targets applying to the annual bonus and LTIP are determined
annually by the Committee, and are set at an appropriately stretching level
based on a number of internal and external reference points. Annual bonus
targets are set by reference to the budget where possible and are agreed
bythe Board. LTIP targets reflect the Board’s long-term plan, prevailing
industry and regulatory context, and expectations of what will constitute
appropriately challenging long-term performance levels.
The structure of the non-financial measures and targets will vary based
on the nature of the target set (e.g. for milestone targets it may not always
be practicable to set such targets using a graduated scale and so vesting
may take place in full for strategic targets if the criteria are met in full).
Full disclosure of targets and the verification process for measures will
be disclosed in future Directors’ Remuneration Reports.
Discretion
The Committee has discretion in several areas of the Policy. The Committee
may also exercise operational and administrative discretions under relevant
plan rules approved by shareholders as set out in those rules.
The discretions cover aspects such as the timing of grant and vesting of
awards, determining the size of the award (subject to the Policy limits),
the treatment of leavers, retrospective adjustment of awards (e.g. for a
rights issue, a corporate restructuring or for special dividends) and, in
exceptional circumstances, the discretion to adjust previously set targets
for an incentive award if events happen which cause the Committee to
determine that it would be appropriate to do so. In exercising such
discretions, the Committee will take into account generally accepted
market practice, best practice guidelines, the provisions of the Listing
Rules and the Company’s approved Remuneration Policy.
Directors’ Remuneration Policy continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 148
The Committee reserves the right to make any remuneration payments
and/or payments for loss of office (including exercising any discretions
available to it in connection with such payments), notwithstanding that
they are not in line with the Policy where the terms of the payment were
agreed (i) before this Policy came into effect, or (ii) at a time when the
relevant individual was not a Director of the Company and, in the opinion
of the Committee, the payment was not in consideration for the individual
becoming a Director of the Company. For these purposes ‘payments’
includes the Committee satisfying awards of variable remuneration and,
in relation to an award over shares, the terms of the payment are ‘agreed’
at the time the award is granted.
The Committee may make minor amendments to the Policy (for
regulatory, exchange control, tax or administrative purposes ortotake
account of a change in legislation) without obtaining shareholderapproval.
External directorships
Executive Directors are permitted to take on external Non-Executive
directorships, though normally only one other appointment, to bring a
further external perspective to the Group and help in the development
ofkey individuals’ experience. In order to avoid any conflicts of interest,
allappointments are subject to the approval of the Board, on the
recommendation of the Nominations Committee. Executive Directors
arepermitted to retain the fees arising from such appointments.
Salary, benefits
and pension
These will normally be set in line with the Remuneration Policy for existing Executive Directors.
The Committee, where appropriate, may set salary levels below the market reference salary at the time of appointment, with
the intention of bringing the salary levels in line with the market as the individual gains the relevant experience. In such cases,
subsequent increases in salary may be higher than the general rises for employees until the target positioning is achieved.
Annual bonus
Maximum annual participation will be set in line with the Company’s Policy for existing Executive Directors and will not exceed
100% of salary.
LTIP
Maximum annual participation will be set in line with the Company’s Policy for existing Executive Directors and will not exceed
400% of salary.
Maximum variable
remuneration
In addition, the Committee has discretion to include any other remuneration component or award which it feels is appropriate
taking into account the specific circumstances of the recruitment, subject to the limit on variable remuneration set out below.
The maximum variable remuneration which may be granted is 500% of salary (excluding any buyouts).
‘Buyout’ of
incentives forfeited
on cessation of
employment
Where an individual forfeits remuneration with a previous employer as a result of appointment to the Company, the Committee
may make compensatory payments or awards to facilitate recruitment. In determining an appropriate structure for such
awards, the Committee will consider all relevant factors including the form of award, time horizons and any performance
conditions of the forfeited remuneration. There is no limit on the value of such compensatory awards, but theCommittee’s
intention is that the value awarded would be no more generous than the broadly equivalent economic valueofthe forfeited
remuneration.
Relocation policies
In instances where the new Executive Director is required to relocate or spend significant time away from his/her normal
residence, the Company may provide additional compensation to reflect the cost of relocation for the Executive Director.
Thelevel of the relocation package will be assessed on a case-by-case basis but will take into consideration any cost of
livingdifferences/housing allowance, disturbance allowances and schooling.
Internal
promotions
In the case of an internal appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out
according to the terms on which it was originally granted. Otherwise their remuneration would be set applying the principles
set out above.
The Company’s Policy when setting fees for the appointment of new Non-Executive Directors is to apply the Policy which applies to current
Non-Executive Directors, which is set out on page 151.
Service contracts and Letters of Appointment
Executive Directors are appointed on contracts with notice periods of 12 months. The policy on payments for loss of office is set out in the next section
and detail on the current contracts is provided on page 143. Copies of the service contracts of the Executive Directors and the Letters of Appointment of
the Non-Executive Directors are available for inspection at the Company’s registered office during normal business hours.
Approach to recruitment and promotion
The Company’s approach is for the remuneration of any new Executive Director to be assessed in line with the principles applied to the existing
Executive Directors. The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a preferred candidate
with the appropriate calibre and experience needed for the role.
Severn Trent Plc Annual Report and Accounts 2026 149
Strategic Report Governance Financial Statements
Policy on payments for loss of office
When determining any loss of office payment for a departing Executive Director, the Remuneration Committee will always seek to minimise the cost to
the Group while complying with the contractual terms agreed, and seeking to reflect the circumstances in place at the time.
The remuneration related elements of the current contracts for Executive Directors are shown in the table below, together with details of the treatment
on cessation of employment.
Element Treatment on cessation of employment
General The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages
clauses. If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in
each case. There are no contractual arrangements that would guarantee a pension with limited or no abatement on severance
orearly retirement. There is no agreement between the Company and its Directors or employees providing for compensation
forloss of office or employment that occurs because of a takeover bid.
The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any
claim arising in connection with the termination of an Executive Director’s office or employment.
Salary, benefits
and pension
These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
Annual bonus Good leaver reason
(i)
Performance conditions will be measured at the bonus
measurement date. Bonus will normally be pro-rated for the
period worked during the financial year.
Other reason
No bonus will be payable for year of cessation.
Discretion
The Committee has the following elements of discretion:
• To determine that an Executive Director should be treated as a good leaver and receive a bonus for the year of cessation; it is
the Committee’s intention to use this discretion only in circumstances where there is an appropriate business case which will
be explained in full to shareholders.
• To determine whether to pro-rate the bonus for time; the Remuneration Committee’s normal policy is to pro-rate for time. It is
the Committee’s intention only to use discretion not to pro-rate in circumstances where there is an appropriate business case,
based on the circumstances of the Executive Director’s departure. Use of discretion will be explained in full to shareholders.
• The bonus would be paid at the same time as for the other Executive Directors and, if the Executive has left employment by that
date, it may be paid solely in cash.
Annual bonus
deferred share
awards
Good leaver reason
(i)
All subsisting deferred share awards will vest on the
originaltimeline.
Other reason
All subsisting deferred share awards will vest on cessation
withthe exception of summary dismissal of the participant,
when any deferred share award held by the individual shall
lapseimmediately on such termination.
Discretion
The Committee has the following elements of discretion:
• To determine whether deferred shares should vest at the end of the original deferral period or at the date of cessation; the
Committee will make this determination depending on the reason for cessation.
• To determine whether to pro-rate the maximum number of shares for time from the date of grant to the date of cessation;
theCommittee’s normal policy is not to pro-rate awards for time. The Committee will determine whether to pro-rate based
onthe reason for cessation.
LTIP Good leaver reason
(i)
Subsisting awards continue to be capable of vesting on a
pro-rated time and performance basis.
Other reason
All subsisting awards will lapse on cessation.
Discretion
The Committee has the following elements of discretion:
• To determine that an Executive Director should be treated as a good leaver such that LTIP awards continue to be capable of
vesting; it is the Committee’s intention to use this discretion only in circumstances where there is an appropriate business
casewhich will be explained in full to shareholders.
• To allow awards to vest, and to measure, at the date of cessation. The Committee will make this determination depending
onthe reason for cessation.
• To determine whether to pro-rate for time; the Committee’s normal policy is to pro-rate awards based on the proportion of
theperformance period which has elapsed to the date of cessation. In circumstances where there is an appropriate business
case based on the circumstances of the Executive Director’s departure, the Committee may use discretion and not pro-rate.
Use of discretion will be explained in full to shareholders.
Directors’ Remuneration Policy continued
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 150
Non-Executive Directors normally serve terms of three years. They do
not have service contracts. Instead, Non-Executive Directors are engaged
by Letters of Appointment which are terminable by either party with no
notice period and no compensation in the event of such termination,
otherthan accrued fees and expenses. All directors are subject to
annualappointment or reappointment at the AGM.
Element Treatment on cessation of employment
Holding Periods Where cessation of employment occurs during any holding period, the LTIP award will continue as normal. However, the
Committee retains discretion to allow the award to vest when cessation of employment occurs in certain circumstances, such as:
• Where the reason for departure is death, disability or ill-health;
• Where there are extenuating factors which impact at the time of departure (such as unforeseen changes to personal
circumstances); or
• Any other reason, permitted by the Committee in its absolute discretion in any particular case, except where termination
isfor dishonesty, fraud, misconduct or other circumstances justifying summary dismissal (in which cases it is very likely
anyoutstanding LTIP awards would lapse on cessation regardless).
(i) Good leaver reasons include injury, ill-health or disability, redundancy or retirement (in each case, as determined by the Committee) and death. The Committee also retains an overall
discretion to determine that an individual be treated as a good leaver.
Outplacement services and reimbursement of legal costs may be provided where appropriate. Any statutory entitlements or sums to settle or
compromise claims in connection with a termination would be paid as necessary. Outstanding savings/awards under the SAYE and the legacy
ShareIncentive Plan would be transferred in accordance with the terms of the plans as approved by HMRC.
Policy on change of control
The change of control provisions applying to incentive awards are set out in the relevant plan rules and are summarised below.
Element Operation Discretion
Annual bonus Pro-rated for time and
performance to the date of the
change of control.
The Committee has discretion regarding whether to pro-rate the bonus for time; the
Committee’s normal policy is that it will pro-rate the bonus for time. In circumstances
where there is an appropriate business case, the Committee may use discretion and not
pro-rate. Use of discretion will be explained in full to shareholders.
Annual bonus
deferred share
awards
Subsisting deferred share awards
will vest on a change of control.
The Committee has discretion regarding whether to pro-rate the awards for time; the
Committee’s normal policy is that it will not pro-rate awards for time. The Committee
willmake this determination depending on the circumstances of the change of control.
LTIP Subsisting LTIP awards will vest
on a change of control, pro-rated
for time and performance. The
holding period will not apply on
change of control.
The Committee has discretion regarding whether to pro-rate the LTIP awards for time;
theCommittee’s normal policy is that it will pro-rate the LTIP awards for time. In
circumstances where there is an appropriate business case, the Committee may use
discretion and not pro-rate. Use of discretion will be explained in full to shareholders.
Chair and Non-Executive Directors
The Remuneration Policy for Non-Executive Directors, other than the Chair, is determined by the Chair and Executive Directors. The fee for the Chair
isdetermined by the Remuneration Committee (without the Chair present). No changes to the 2024 Policy are proposed.
Non-Executive Directors
Purpose and
link to strategy
To recruit and retain Non-Executive Directors of a suitable calibre for the role and duties required.
Operation The fees for the Non-Executive Directors (excluding the Chair) are determined by the Board. The fees for the Chair are
determined by the Committee.
The fee for Non-Executive Directors encompasses a basic fee and may also include supplementary fees for other Board duties,
including the role of Senior Independent Director and for chairing the Board Committees. The Chair receives a single fee in
respect of all Board duties. Fees are paid monthly. Fees are currently paid in cash, but the Chair and/or Non-Executive
Directors may receive part of their fee(s) in company shares.
Directors will be reimbursed for any reasonable business expenses incurred in the course of their duties, including the tax
payable thereon.
The fees for the Non-Executive Directors and Chair are set taking into account the time commitment of the role and market
rates in comparable companies. The fees are normally reviewed annually (but not necessarily increased), effective from 1 July.
In exceptional circumstances, fees may also be paid for additional time spent on the Company’s business outside of normal duties.
Non-Executive Directors do not participate in any variable remuneration or receive any other benefits.
Maximum
opportunity
Details of the current fee levels for the Non-Executive Directors are set out on page 142.
The fee levels are set subject to the maximum limits set out in the Company’s Articles of Association.
Severn Trent Plc Annual Report and Accounts 2026 151
Strategic Report Governance Financial Statements
Application of the Remuneration Policy
The charts below provide an illustration of what could be received by each
of the Executive Directors under the new Remuneration Policy in respect
of the 2026/27 package. These charts are illustrative, as the actual value
will depend on business performance in the year 2026/27 (for the annual
bonus) and in the three-year period to 2028/29 (for the LTIP), as well as
share price performance to the date of the vesting of LTIP awards in 2029.
The maximum scenario also includes an additional bar which shows the
impact of 50% share price growth on the LTIP outcome over the relevant
performance period to show how the package value is aligned to
shareholders. It is a key part of our Remuneration Policy to align
interestsof the Executive Directors and shareholders through
theprovision of a substantial element of remuneration in shares.
Increasesinthe value of remuneration through an increase in share
priceare evidence of the direct link between the interests of the two.
Note: Minimum pay is fixed pay only (i.e. salary + benefits + pension). On-target pay includes fixed pay, 50% of the maximum bonus (equal to 50% of salary for both the CEO and the CFO) and
50% vesting of the LTIP awards (with grant levels of 400% of salary for the CEO and 350% of salary for the CFO). Maximum pay includes fixed pay and assumes 100% vesting of both the annual
bonus and the LTIP awards. Salary levels (which are the base on which other elements of the package are calculated) are based on those applying at 1 July 2026. The value of taxable benefits
is the cost of providing those benefits in the year ended 31 March 2026 on an annualised basis. The Executive Directors are also permitted to participate in HMRC tax advantaged all-employee
share plans, on the same terms as other eligible employees, but they have been excluded from the above graph for simplicity.
Linkage to all-employee pay
The Committee reviews changes in remuneration arrangements in the
workforce generally as we recognise that all employees play an important
role in the success of the Company. Severn Trent is committed to creating
an inclusive working environment and to rewarding employees throughout
the organisation in a fair and transparent manner. When making decisions
on executive pay, the Committee considers wider workforce remuneration
and conditions to ensure that they are aligned on an ongoing basis. In
particular, the Committee considers wider workforce salary increases
when determining those for Executive Directors. We believe that employees
throughout the Company should be able to share in the success of the
Company. Therefore, the annual bonus scheme is cascaded throughout
the organisation and all employees may participate in the HMRC tax
advantaged Save As You Earn (‘SAYE’) scheme.
As part of our commitment to fairness, the ‘Company Remuneration
atSevern Trent’ section on page 131 sets out the steps we take to make
surethat our pay and reward framework below Executives and Senior
Management, is transparent in a way that is meaningful and useful.
This section also includes more information on our wider workforce
payconditions, our gender and ethnicity pay statistics and our CEO
payratio disclosure.
Although the Committee takes into account the pay and conditions
ofother employees, the Company did not consult with employees
whendeveloping the Policy. There are however a number of different
mechanisms in place to gather feedback from employees, including
onremuneration. Relevant feedback is presented to the Board to help
toinform decision-making.
Consideration of shareholder views
The views of the Company’s shareholders are very important and
theCommittee welcomes constructive feedback with respect to
theremuneration policies or structure. In developing this Policy,
theCommittee Chair engaged extensively with major shareholders
outlining proposals and the rationale for these. Feedback received
wastaken on board when finalising the Policy.
Directors’ Remuneration Policy continued
Salary Benefit and Pensions Annual Bonus Long-term share awards Share price appreciation
Remuneration (£’000)
Minimum On-target Maximum Maximum with
50% share
price growth
Minimum On-target Maximum Maximum with
50% share
price growth
Chief Executive Chief Financial Officer
910
2,848
4,785
6,335
2,107
3,491
4,567
24%
47%
13%
2%
13%
49%
24%
12%
2%
12%
65%
54%
14%
5%
27%
15%
85%
16%
3%
16%
62%
18%
3%
18%
51%
15%
85%
15%
5%
29%
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
724
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 152
Directors’ Report
The Directors of Severn Trent Plc present their Annual
Report together with the audited consolidated financial
statements for the year ended 31 March 2026. The
Directors’ Report, prepared in accordance with the
requirements of the Companies Act 2006 and the UK
Listing Rules (‘UKLR’), and Disclosure and Transparency
Rules, comprises the Governance Report (pages 88 to 156),
the Directors’ Report (pages 153 to 155) and the Shareholder
Information section at the back of this report. As permitted
by legislation, some of the matters required to beincluded
in the Directors’ Report have instead been included in the
Strategic Report on pages 1 to 87, as the Board considers
them to be ofstrategic importance.
Specifically, these are:
• the Performance Review on pages 12 to 13, which provides detailed
information relating to the Group, its business model and strategy,
operation of its businesses and the results andfinancial position for
theyear ended 31 March 2026;
• future business developments (throughout the Strategic Report);
• details of the Group’s policy on addressing the Principal Risks and
uncertainties facing the Group, which are set out in the Strategic
Report on pages 1 to 87;
• information on the Group’s greenhouse gas (‘GHG’) emissions
andenergy consumption for the year ended 31 March 2026 on pages52
to 53;
• how we have engaged with our people and stakeholders on pages 79 to 83;
and
• business relationships (throughout the Strategic Report).
Board
Directors and their interests
Biographies of the Directors currently serving on the Board, or who have
served on the Board during 2025/26, are set out onpages 98 to 99. Asset
out in the Notice of Meeting, all Directors will retire at this year’s Annual
General Meeting (‘AGM’) and submit themselves for reappointment or, in
the case of James Jesic, appointment by shareholders. All Directors
seeking reappointment were subject toaformal and rigorous performance
review, further details of whichcanbe found on pages 103 to 104.
Details of Directors’ service contracts are set out in the Directors’
Remuneration Report on pages 118 to 145. The interests of the Directors
in theshares of the Company are also shown on page 141 of that report.
Conflicts of interest
Directors have a statutory duty to avoid situations in which they have,
ormay have, interests that conflict with those of Severn Trent Plc. The
Company has in place procedures for managing conflicts ofinterest. The
Articles of Association (the ‘Articles’) also contain provisions to allow the
Board to authorise potential conflicts of interest so that a Director is not
inbreach of his or her duty under company law. Should a Director become
aware that he or she has an interest, directly or indirectly, in an existing
orproposed transaction with Severn Trent Plc, he or she must notify the
Board in accordance with the Articles and statute. Directors have a
continuing duty to update any changes to their interests.
Insurance and indemnities
The Company maintains Directors’ and Officers’ liability insurance in
respect of legal action that might be brought against its Directors and
Officers. As permitted by the Company’s Articles, and to the extent
permitted by law, the Company indemnifies each of its Directors and
other Officers of the Group against certain liabilities that may be
incurredas a result of their positions with the Group. The indemnities
were in force throughout the tenure of each Director during the last
financial year and are currently in force. Severn Trent Plc does not
haveinplace any indemnities for the benefit of the External Auditor.
Business relationships
Pages 79 to 83 and 87 demonstrate how the Directors have had regard to
key stakeholders and how the effect of that regard influenced the
principal decisions taken by the Company during the financial year and
are therefore incorporated into the Directors’ Report by cross reference.
Employees
The average number of employees within the Group is shown in note 8 to
the financial statements. Severn Trent Plc believes a diverse and inclusive
workforce is a key factor in being a successful business. Through our
diversity and equal opportunities policies, the Company seeks to ensure
that every employee, without exception, is treated equally and fairly and
that all employees are aware of their responsibilities. This means more
than ensuring that we do not discriminate in any way – we want to create
and maintain an inclusive culture which reflects a diverse population.
Severn Trent believes that no one should be hurt or made unwell
bywhatwe do and we remain committed to driving improvements
inourperformance.
We are an equal opportunities employer and welcome applications
fromall individuals.
All of our training, promotion and career development processes
areinplace for all of our employees to access, regardless of their
gender,ethnicity, age orability. The provision of occupational health
programmes is of crucial importance to Severn Trent with the aim of
keeping our employees fit, healthy and well. We also provide expert
counselling support across awide range of issues through our
EmployeeAssistance Programme.
The Company is committed to being an inclusive employer and to
supporting disabled people to participate fully and fairly in employment.
During the financial year, the Company applied policies and practices
designed to ensure equal opportunity, retention, and progression for
disabled employees.
(a) Recruitment and selection
The Company gives full and fair consideration to applications for
employment from disabled persons, having regard to their individual
aptitudes and abilities. Recruitment processes are designed to be inclusive,
and applicants are encouraged to request reasonable adjustments at
anystage of the recruitment process. Selection decisions are based on
objective role requirements, and managers are supported to ensure
thatdisabled candidates are assessed fairly and without disadvantage.
(b) Retention, support and training when an employee
becomesdisabled
Where an employee becomes disabled during their employment, the
Company aims to support the continuation of their employment wherever
practicable. This includes access to a comprehensive Occupational Health
service to assess individual needs and provide professional advice to
support employees and managers. Reasonable adjustments are considered
and implemented where appropriate, including adjustments to duties,
working arrangements, equipment, or the working environment. The
Company operates a Workplace Adjustment Passport to capture agreed
adjustments and ensure continuity of support where roles or managers
change. Employees are also supported to access appropriate training
toenable them to continue effectively in their role or, where necessary,
totransition to an alternative suitable role.
Severn Trent Plc Annual Report and Accounts 2026 153
Strategic Report Governance Financial Statements
Directors’ Report continued
(c) Training, career development and promotion
Disabled employees are supported to access training, career development
and promotion opportunities on an equal basis with other employees.
Learning and development programmes are designed to be inclusive,
andreasonable adjustments are available to support participation. The
Company promotes a culture where employees feel confident to discuss
support needs and request adjustments, helping to remove barriers to
progression and enabling disabled employees to develop and progress
their careers.
Additional information on our diversity aims and progress can be found
onpages 20, 81 and 103.
Employee engagement
Due to our commitment to transparent and best practice reporting, we
have included the sections on our people on pages 19 to 23 of the Strategic
Report, as the Board considers these disclosures to be of strategic
importance and they are therefore incorporated into the Directors’ Report
by cross reference. Pages 81 and 85 demonstrate howDirectors have
engaged with employees and how they have had regard to employee
interests and the effect of that regard, including the principal decisions
taken by the Company during the financial year. The Company also
encourages greater employee involvement in the Group’s performance
through share ownership. To help align employees’ interests with the
success of the Company’s performance, we operate an HMRC-approved
all-employee plan, the Severn Trent Sharesave Scheme (‘Sharesave’),
which is offered to UK employees on an annual basis. Almost 70% of
Severn Trent’s employees now participate in Sharesave, including many
colleagues saving the maximum of £500 per month.
Contributions for political purposes
Severn Trent does not, and has not, made political donations. However,
given the broad ranging definitions of support defined in the Companies
Act, which include sponsorship, subscriptions, payment of expenses,
paidleave for employees fulfilling public duties, and support for bodies
representing the business community in policy review or reform,
wehavean established practice of tabling a precautionary political
donationsresolution at our AGM on an annual basis.
Severn Trent’s policy is not to make any donations for political purposes
inthe UK, or to donate to EU political parties or incur EU political
expenditure. Accordingly, neither Severn Trent Plc nor its subsidiaries
made any political donations or incurred political expenditure in the
financial year under review.
Relevant audit information
In the case of each Director in office at the date the Directors’ Report
is approved:
• so far as the Director is aware, there is no relevant audit information
of which the Group’s and Company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a Director
in order to make themselves aware of any relevant audit information
and to establish that the Group’s and Company’s auditors are aware
of that information.
Shares
Dividends
An interim dividend of 50.40 pence per ordinary share was paid on
12 January 2026. The Directors recommend a final dividend of 75.62
pence per ordinary share to be paid on 15 July 2026 to shareholders
onthe register of members on 29 May 2026. This would bring the
totaldividend for 2025/26 to 126.02 pence per ordinary share
(2024/25: 121.71 pence). The payment of the final dividend is subject
toshareholder approval at the 2026 AGM. You can read more about
theprocess that the Board followed in assessing the Company’s
Performance in the Round in the context of determining whether
torecommend a dividend on page 91.
Dividend Policy
In January 2025, the Board approved our Dividend Policy for the period
2025-2030. With effect from 1 April 2025, dividends during the AMP8
period will increase by annual growth of CPIH.
The Dividend Policy reflects our strong operational delivery and financial
performance, the Final Determination, and our robust balance sheet and
financial resilience. When determining the Dividend Policy, the Board
considered various scenarios and sensitivities, and reviewed the impact
of adverse changes in inflation and interest rates on key metrics. The
Board believes that the Dividend Policy is commensurate with a
sustainable investment grade credit rating.
Capital structure
Details of the Company’s issued share capital and of the movements
during the year are shown in note 32 to the Company financial statements.
The Company has one class of ordinary shares which carries no right to
fixed income. Each share carries the right to one vote at General Meetings
of the Company. The issued nominal value of the ordinary shares is 100%
of the total issued nominal value of all share capital. There are no specific
restrictions on the size of a holding or on the transfer of shares, which are
both governed by the general provisions of the Articles and prevailing
legislation. The Directors are not aware of any agreements between
holders of the Company’s shares that may result in restrictions on the
transfer of securities or on voting rights. Details of employee share
schemes are set out in note 39 to the financial statements. No person has
any special rights of control over the Company’s share capital and
allissued shares are fully paid.
Change of control
There are a number of agreements that take effect after, or terminate
upon, a change of control of the Company, such as commercial contracts,
bank loan agreements, property lease arrangements and employee
share plans. None of these are considered to be significant in terms of
their likely impact on the business of the Group as a whole. There are
noagreements between the Company and its Directors or employees
thatprovide for compensation for loss of office or employment because
ofa takeover bid.
With regard to the appointment and resignation of Directors, the Company
is governed by its Articles, the Code, Companies Act 2006 and related
legislation. The Articles may be amended by Special Resolution of the
shareholders. The powers of Directors are described in the Severn Trent
Plc Matters Reserved to the Board document and the Articles, both of
which can be found on our website.
Authority to allot shares
Under the Articles, the Directors haveauthority to allot ordinary shares,
subject to the aggregate nominal amount limit set at the 2025 AGM.
AttheAGM held on 10 July 2025, shareholders granted the Directors
authority, in accordance with section 551 of the Companies Act 2006,
toallot ordinary shares in the capital of the Company and to grant
rightsto subscribe for, or to convert any security into, ordinary shares.
This authority permits the Directors to allot ordinary shares up to
anaggregate nominal value of £98,117,660. Authority will again be sought
by shareholders at this year’s AGM to allot up to an aggregate nominal
valueof £98,456,779.
Authority to purchase shares
The Company was given authority at its AGM in 2025 to make market
purchases of ordinary shares up to a maximum number of 30,068,315
ordinary shares. During the year, no ordinary shares have been repurchased.
Authority will again be sought from shareholders at thisyear’s AGM to
purchase up to a maximum of 30,172,238 ordinary shares. TheDirectors
believe that it is desirable to have the general authority to buy back the
Company’s ordinary shares in order to provide maximum flexibility in the
management of the Group’s capital resources. However, the authority
would only be used if the Board was satisfied at the time thatto do so
would be in the best interests of shareholders.
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 154
Employee Benefit Trust
For shares held by the Severn Trent Employee Share Ownership Trust,
the Trustee abstains from voting.
Substantial shareholdings
The following disclosure is based on notifications received by the
Company in accordance with the Disclosure Guidance and Transparency
Rules and information provided by shareholders directly to the Company.
As at 31 March 2026, the Company had received the following disclosures
of interests representing 3% or more of the Company’s voting rights.
Name of Holder
Number of Ordinary
shares
Voting rights held
(%)
Qatar Holding LLC 34,855,379 11.58
ClearBridge Group 10,476,600 3.48
Legal & General Investment
Management 10,455,376 3.47
Atlas Infrastructure 10,454,899 3.47
Vanguard Group 8,272,535 2.75
As at 19 May 2026, the Company had received no disclosures of interests
representing 3% or more of the Company’s voting rights. Thepercentage
of voting rights detailed above was calculated at the time the relevant
disclosures were made, in accordance with DTR 5.
Annual General Meeting
A copy of the Notice of Meeting for the 2026 AGM can be found on the
Severn Trent Plc website.
Other
Disclosures required under Listing Rule 6.6.4R
The information required to be disclosed under UKLR 6.6.1R can be
located in the following pages of this Annual Report:
Section Information to be included Location
(1) A statement of the amount of interest
capitalised
Page 180
(3) Details of long-term incentive schemes Pages 138 to 140
(2), (4) – (13) Not applicable Not applicable
Principal activity
The principal activity of the Group is to treat and provide water and
remove wastewater in the UK. Details of the principal joint ventures,
associated and subsidiary undertakings of the Group as at 31 March 2026
are shown in note 47 of the financial statements.
Areas of operation
During the course of 2025/26, the Group had activities and operations
inthe UK.
Research and development
Innovative use of existing and emerging technologies will continue to be
crucial to the successful development of new products and processes for
the Group and our products must continue to deliver value for customers.
Expenditure on research and development for the year totalled £5 million.
Internal controls
Details of our internal control framework can be found in the Audit
andRisk Committee Report on pages 108 to 112.
Treasury management
Details on our Treasury Policy and treasury management are set out in
the ChiefFinancial Officer’s Review on pages 57 to 63.
Post balance sheet events
Details of post balance sheet events are set out in note 44 to the
financialstatements.
Supplier payment policy
Individual operating companies within the Group are responsible for
establishing appropriate policies with regard to the payment of their
suppliers and prompt payment policies are reviewed on a regular basis.
The companies agree terms and conditions under which business
transactions with suppliers are conducted. It is Group policy that,
provided a supplier is complying with the relevant terms and conditions,
including the prompt and complete submission of all specified documentation,
payment will be made in accordance with agreed terms. It is also Group
policy to ensure that suppliers know the terms on which payment will
take place when business is agreed. You can read more about how we
have worked with our suppliers and contractors on page 85. For the
payment practices reporting period ended 31 March 2026, the average
time to pay for Severn Trent Water Limited was 40 days.
Carbon footprint
The Board considers environmental matters to be of strategic importance
and therefore relevant information contained in the sections covering
ourNet Zero Transition Plan (‘NZTP’) and the information required under
the Task Force on Climate-related Financial Disclosures and Taskforce
onNature-related Financial Disclosures on pages 30 to 52 of the Strategic
Report is incorporated into the Directors’ Report by cross reference. Our
NZTP includes our annual report on GHG emissions alongwith details of
our energy consumption across the Group and howwe manage energy
use.
Accounts of Severn Trent Water andHafrenDyfrdwy
Separate Annual Reports for each of Severn Trent Water Limited and
Hafren Dyfrdwy Cyfyngedig will be made available on their respective
websites in due course. Additionally, Annual Performance Reports for
each ofSevern Trent Water and Hafren Dyfrdwy are prepared and
provided toOfwat. Copies will be made available on their respective
websites induecourse.
By order of the Board
Didar Dhillon
Group General Counsel and Company Secretary
19 May 2026
Severn Trent Plc Annual Report and Accounts 2026 155
Strategic Report Governance Financial Statements
Directors’ Responsibility Statement
The Directors are responsible for preparing the Annual
Report and Accounts 2025/26 in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial statements
foreach financial year. Under that law, the Directors have prepared the
Group financial statements in accordance with UK-adopted international
accounting standards and the Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law).
Under company law, Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state
ofaffairs of the Group and the Company, and of the profit or loss of the
Group for that period. In preparing the financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted international accounting
standards have been followed for the Group financial statements and
United Kingdom Accounting Standards, comprising FRS 101 have been
followed for the Company financial statements, subject to any material
departures disclosed and explained in the financial statements;
• make judgments and accounting estimates that are reasonable
andprudent; and
• prepare the financial statements on the going concern basis unless
itisinappropriate to presume that the Group and Company will
continuein business.
The Directors are responsible for safeguarding the assets of the Group
and Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and the
company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable them
to ensure that the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and Accounts 2025/26,
takenas a whole, is fair, balanced and understandable and provides
theinformation necessary for shareholders to assess the Group’s and
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the
Governance Report, confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards,
giveatrue and fair view of the assets, liabilities, financial position
andprofit of the Group;
• the Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising
FRS 101, give a true and fair view of the assets, liabilities and financial
position of the Company; and
• the Strategic Report includes a fair review of the development
andperformance of the business and the position of the Group
andCompany, together with a description of the principal risks
anduncertainties that it faces.
This responsibility statement was approved by the Board of Directors
on19 May 2026 and is signed on its behalf by order of the Board:
James Jesic
Chief Executive
19 May 2026
Helen Miles
Chief Financial Officer
19 May 2026
Strategic Report Governance Financial Statements
Severn Trent Plc Annual Report and Accounts 2026 156
Report on the audit of the financial statements
Opinion
In our opinion:
• Severn Trent Plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of the
state of the group’s and of the parent company’s affairs as at 31 March 2026 and of the group’s profit and the group’s cash flows for the year then
ended;
• the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards as applied in
accordance with the provisions of the Companies Act 2006;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise:
• the Consolidated and Company balance sheet as at 31 March 2026;
• the Consolidated income statement for the year then ended;
• the Consolidated statement of comprehensive income for the year then ended;
• the Consolidated statement of changes in equity for the year then ended;
• the Company statement of changes in equity for the year then ended;
• the Consolidated cash flow statement for the year then ended; and
• the notes to the financial statements, comprising material accounting policy information and other explanatory information.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs(UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in Note 7, we have provided no non-audit services to the parent company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
• Following our assessment of the risk of material misstatement of the consolidated financial statements, we identified one component where
weperformed a full scope audit of its complete financial information due to size.
• We further identified two components where we performed audit procedures over specific financial statement line items.
• All in-scope components were audited by the UK group engagement team.
• In addition, the group engagement team performed audit procedures over centralised functions and financial statement line items, the group
consolidation and financial statement disclosures.
• The parent company is comprised of one reporting unit which was subject to a full scope audit by the group engagement team for the purposes
oftheparent company financial statements
Key audit matters
• Valuation of the ECL provision for household trade receivables in Severn Trent Water Limited (group)
• Capital Programme expenditure in Severn Trent Water Limited (group)
• Recoverability of investments in subsidiary undertakings (parent)
Materiality
• Overall group materiality: £34,400,000 based on 4% of Profit before Interest and Tax.
• Overall parent company materiality: £55,700,000 based on 1% of Total assets.
• Performance materiality: £25,800,000 (group) and £41,700,000 (parent company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Independent auditors’ report
to the members of Severn Trent Plc
Severn Trent Plc Annual Report and Accounts 2026 157
Strategic report Governance Financial statements
Independent auditors’ report
to the members of Severn Trent Plc continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
ofthe current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit
ofthe financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter How our audit addressed the key audit matter
Valuation of the ECL provision for household trade receivables in Severn
Trent Water Limited (group)
Refer to the audit and risk committee report and note 23 for trade and
other receivables – group and company.
The Group’s provision for expected credit losses on household trade
receivables in Severn Trent Water Limited is a key audit matter due to
continued industry-wide scrutiny and the level of audit effort required
inassessing the appropriateness of management’s methodology and
assumptions relative to other areas of the audit.
The provision represents a substantial proportion of gross household
trade receivables and is determined using a multi-step expected credit
loss (“ECL”) model. This model is based on historical write-off experience
for older debt categories, adjusted for recent cash collection performance,
and considers the impact of future external economic factors.
We evaluated management’s accounting policy with reference to the
relevant accounting standards and assessed the design and implementation
of relevant controls over the application of the accounting policy.
We have performed a look back test on the ECL provision as at 31 March
2025 by verifying the level of write-offs which occurred during the year
to31 March 2026 to assess management’s ability to estimate accurately.
We obtained a detailed understanding of how management calculate
theECL provision. We considered historical and recent cash collection
trends to assess whether past experience remains a reasonable basis
forestimating future recoverability and evaluated whether collections are
materially sensitive toplausible macroeconomic risks.
We reperformed management’s ECL calculation to test the mathematical
accuracy and integrity of the model and assessed the completeness of
balances being assessed for ECL.
On a sample basis we tested the key data inputs in the ECL model
beingbilling, cash collections and the ageing of debt balances.
We assessed how severe a deterioration in collections would be required
to result in a material misstatement, and considered whether such a
scenario was plausible given the regulated nature of the business and
observed collection performance.
We tested the ECL disclosures made by management and assessed
compliance with accounting standards.
Capital Programme expenditure in Severn Trent Water Limited (group)
Refer to the audit and risk committee report, note 4 for significant
accounting judgments and key sources of estimation uncertainty and note
17 for property, plant and equipment - group.
Due to the high level of judgement exercised between allocating costs
tocapital or operating expenditure there is potential for misstatement
between the statement of financial position and the income statement
andtherefore has been designated as a key audit matter.
We evaluated management’s accounting policy for the recognition and
classification of capital expenditure in accordance with relevant accounting
standards. Our procedures included assessing the design and implementation
of relevant controls over the application of the accounting policy.
We obtained a detailed analysis of total expenditure split by capital
expenditure, operating expenditure/infrastructure renewal expense and
own work capitalised. We performed analytical procedures over the
percentage of total expenditure capitalised.
We performed a controls-based test for a sample of projects that have
moved through authorisation gates in the year to ensure the judgement
foramounts designated as capital is appropriate.
We tested staff and other costs capitalised and the model management
use to apportion these costs to capital expenditure. We challenged the
judgements applied by management in making this apportionment.
Recoverability of investments in subsidiary undertakings (parent)
Refer to note 21 for investments in subsidiaries – company.
Investment in subsidiary undertakings are accounted for at cost less
provision for impairment. Investments are tested for impairment if
indicators exist. If such indicators exist, the recoverable amounts of
theinvestments in subsidiary undertakings are estimated in order
todetermine the extent of the impairment loss, if any. Any such
impairment loss is recognised in the income statement.
A review for indicators of impairment was performed by the directors,
including considering the latest available forecasts and developments
inthe Group during the year. The assessment identified no impairment
indicator in respect of the investment in subsidiary undertakings.
We evaluated the directors’ determination of whether there were any
indicators of impairment with specific consideration given to the following:
• the market capitalisation of the group, which is significantly in excess
ofthe investments balance, noting that substantially all of the market
capitalisation is considered to be in relation to one indirect subsidiary
(Severn Trent Water Limited) of the parent company;
• the trading results of the Company’s subsidiaries which are no worse
than expected and are not expected to be worse in future periods; and
• any significant changes with an adverse impact in relation to the
technological, market, economic or legal environment in which the
Company’s subsidiaries operate, noting that there were no such changes.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 158
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
takinginto account the structure of the group and the parent company, the accounting processes and controls, and the industry in which they operate.
The group financial statements are a consolidation of multiple components across the UK, comprising the group’s operating businesses and
centralised functions.
In establishing the overall approach to the Group audit, we identified one component which, in our view, required an audit of their complete financial
information due to its’ size. We also performed audit procedures over specific financial statement line items of two other components to ensure
sufficient coverage within the group consolidation. All in-scope component work was performed by the Group engagement team. The Group
consolidation, centralised balances and financial statement disclosures were audited by the Group audit team.
The parent company is comprised of one reporting unit which was subject to a full scope audit by the group engagement team for the purposes of the
parent company financial statements.
The impact of climate risk on our audit
In planning our audit, we considered the potential impact of climate change on the Group’s financial statements. We made enquiries of the directors to
understand the process for assessing climate-related risks and opportunities, the extent of the potential impact of climate change risk on the Group’s
financial statements and the Group’s preparedness for this. The TCFD statement describes and explains how climate change could have an impact on
the group’s business. Using our knowledge of the business we considered whether the risks identified are consistent with our knowledge of the business
and remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any additional
risks of material misstatement, or material inconsistencies between the financial statements and the other climate related information presented.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – group Financial statements – parent company
Overall materiality £34,400,000. £55,700,000.
How we determined it 4% of Profit before Interest and Tax 1% of Total assets
Rationale for benchmark applied Profit before Interest and Tax is a key metric
forboth internal and external stakeholders
andis a commonly used benchmark to
measurebusiness performance.
The parent company does not trade and
therefore total assets is considered to
bethemost appropriate benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality
allocated across components was £26,800,000 to £32,600,000. Certain components were audited to a local statutory audit materiality that was also
less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of
overall materiality, amounting to £25,800,000 for the group financial statements and £41,700,000 for the parent company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk
and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £1,720,000 (group audit)
and £2,780,000 (parent company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of accounting included:
• Testing the mathematical integrity of the cash flow forecasts and the models supporting these forecasts and reconciling them to Board approved budgets;
• Assessing the key assumptions the directors have applied in developing their base case and severe but plausible downside scenarios;
• Assessing the accuracy of the cash flow forecast prepared in the prior years so as to obtain evidence over the ability of the directors to prepare
accurate forecasts;
• Obtaining and understanding the terms of the Group’s financing and available credit facilities including the related financial covenants;
• Reviewing the directors’ analysis of both liquidity and covenant compliance to ensure there is sufficient liquidity and no forecast covenant breaches
during the going concern period;
• Assessing the extent of mitigating actions that could be taken by the directors, if necessary, to increase liquidity or to avoid a covenant default; and
• Assessing the appropriateness of the disclosures within the financial statements relating to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
Severn Trent Plc Annual Report and Accounts 2026 159
Strategic report Governance Financial statements
Independent auditors’ report
to the members of Severn Trent Plc continued
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the parent company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention
toin relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
Thedirectors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly,
we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
reportbased on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have
been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the year
ended 31 March 2026 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review.Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting
onotherinformation section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement,
included within the Strategic Report and Governance section is materially consistent with the financial statements and our knowledge obtained
duringthe audit, and we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation
of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in
preparing them, and their identification of any material uncertainties to the group’s and parent company’s ability to continue to do so over a period
ofat least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the group’s and parent company’s prospects, the period this assessment covers and why the
period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the parent company will be able to continue in operation and meet
itsliabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications
orassumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and parent company was substantially less in scope than
anaudit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in
alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the group and parent company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information
necessary for the members to assess the group’s and parent company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the parent company’s compliance with
theCode does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 160
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibility Statement, the directors are responsible for the preparation of the financial statements
inaccordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whetherdue to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
notaguarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related
toenvironmental regulations, Ofwat regulations and the FCA Listing Rules, and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such
as corporate tax legislation and the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls), and determined that the principal risks were related to posting of inappropriate journal
entries that improve financial performance and management bias in significant accounting estimates and judgements. Audit procedures performed
bythe engagement team included:
• Discussions among the engagement team covering the potential for material misstatements due to error or fraud, the risks associated with related
parties and emphasis on the need to maintain professional scepticism throughout the engagement;
• Inquiries of the directors and others within the entity, including those outside of finance, as to their knowledge, awareness and concerns regarding
fraud, or breaches in laws and regulations;
• Identification and testing of journal entries that met our risk criteria and incorporating an element of unpredictability in the nature, timing and extent
of audit procedures performed;
• Testing significant accounting estimates and judgements made by the directors and assessing whether these included any bias;
• Reading the minutes of the Board meetings to identify any inconsistencies with other information provided by management;
• Reviewing internal audit reports insofar as they related to the financial statements;
• Reviewing legal expense accounts to identify items which may indicate the existence of material legal claims;
• Reviewing the Material Litigation Report; and
• Reviewing correspondence with regulatory authorities.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws
and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However,
ittypically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the
population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with Chapter 3 of
Part16of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
orto any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Severn Trent Plc Annual Report and Accounts 2026 161
Strategic report Governance Financial statements
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
notvisited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting
records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
We were first appointed by the parent company for the financial year ended 31 March 2026. Our uninterrupted engagement covers one financial year.
Other matter
The company is required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules to include these financial statements in an
annual financial report prepared under the structured digital format required by DTR 4.1.15R – 4.1.18R and filed on the National Storage Mechanism
ofthe Financial Conduct Authority. This auditors’ report provides no assurance over whether the structured digital format annual financial report
hasbeen prepared in accordance with those requirements.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
19 May 2026
Independent auditors’ report
to the members of Severn Trent Plc continued
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 162
Consolidated income statement
For the year ended 31 March 2026
2026 2025
Note£m £m
Turnover
5,6
2,831
2,427
Operating costs before charge for bad and doubtful debts
7
(1,924)
(1,802)
Charge for bad and doubtful debts
7
(46)
(35)
Total operating costs
(1,970)
(1,837)
Profit before interest and tax
861
590
Finance income
9
150
143
Finance costs
10
(452)
(387)
Net finance costs
(302)
(244)
Net losses on financial instruments
11
(33)
(15)
Share of net loss of joint venture accounted for using the equity method
20
(2)
(11)
Profit on ordinary activities before taxation
524
320
Current tax
12
(3)
–
Deferred tax
12
(150)
(91)
Taxation on profit on ordinary activities
12
(153)
(91)
Profit for the year
371
229
Earnings per share (pence)
Note
2026
2025
Basic
14
123.5
76.6
Diluted
14
123.1
76.4
Consolidated statement of comprehensive income
For the year ended 31 March 2026
2026 2025
Note£m£m
Profit for the year
371
229
Other comprehensive income
Items that will not be reclassified to the income statement:
Net actuarial gains
30
40
38
Deferred tax on net actuarial gains
12
(10)
(9)
30
29
Items that may be reclassified to the income statement:
Gains on cash flow hedges
17
9
Deferred tax on gains on cash flow hedges
12
(4)
1
Net gains on cash flow hedges transferred to the income statement
(9)
(13)
Net losses on terminated hedges transferred to losses on financial instruments
7
13
Deferred tax on transfer to the income statement
12
–
(3)
11
7
Other comprehensive income for the year
41
36
Total comprehensive income for the year
412
265
Severn Trent Plc Annual Report and Accounts 2026 163
Strategic report Governance Financial statements
Consolidated statement of changes in equity
For the year ended 31 March 2026
Equity attributable to owners of the Company
Share Share OtherRetained
capital premium reserves earningsTotal
Note£m£m£m £m£m
At 1 April 2024
295
1,363
168
8
1,834
Profit for the year
–
–
–
229
229
Net actuarial gains
30
–
–
–
38
38
Deferred tax on net actuarial gains
12
–
–
–
(9)
(9)
Gains on cash flow hedges
–
–
9
–
9
Deferred tax on gains on cash flow hedges
12
–
–
1
–
1
Net gains on cash flow hedges transferred to
the income statement
–
–
(13)
–
(13)
Net losses on terminated hedges transferred to losses
on financial instruments
11
–
–
13
–
13
Deferred tax on transfers to the income statement
12
–
–
(3)
–
(3)
Total comprehensive income for the year
–
–
7
258
265
Share options and LTIPs
– proceeds from shares issued
32, 33
1
15
–
–
16
– value of employees' services
39
–
–
–
11
11
Issue from treasury shares
–
–
–
2
2
Deferred tax on share based payments
12
–
–
–
(1)
(1)
Dividends paid
13
–
–
–
(356)
(356)
Transactions with owners, recognised directly in equity
1
15
–
(344)
(328)
At 1 April 2025
296
1,378
175
(78)
1,771
Profit for the year
–
–
–
371
371
Net actuarial gains
30
–
–
–
40
40
Deferred tax on net actuarial gains
12
–
–
–
(10)
(10)
Gain on cash flow hedges
–
–
17
–
17
Deferred tax on gain on cash flow hedges
12
–
–
(4)
–
(4)
Net gains on cash flow hedges transferred to
the income statement
–
–
(9)
–
(9)
Net losses on terminated hedges transferred to losses
on financial instruments
11
–
–
7
–
7
Total comprehensive income for the year
–
–
11
401
412
Share options and LTIPs
– proceeds from shares issued
32, 33
1
14
–
–
15
– value of employees' services
39
–
–
–
13
13
Deferred tax on share based payments
12
–
–
–
1
1
Dividends paid
13
–
–
–
(371)
(371)
Transactions with owners, recognised directly in equity
1
14
–
(357)
(342)
At 31 March 2026
297
1,392
186
(34)
1,841
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 164
Company statement of changes in equity
For the year ended 31 March 2026
Note
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Total
£m
At 1 April 2024 295 1,363 157 2,920 4,735
Profit for the year – – – 755 755
Total comprehensive income for the year – – – 755 755
Share options and LTIPs
– proceeds from shares issued 32, 33 1 15 – – 16
– value of employees' services 39 – – – 11 11
Issue from treasury shares – – – 1 1
Dividends paid 13 – – – (356) (356)
Transactions with owners, recognised directly in equity 1 15 – (344) (328)
At 1 April 2025 296 1,378 157 3,331 5,162
Profit for the year – – – 204 204
Total comprehensive income for the year – – – 204 204
Share options and LTIPs
– proceeds from shares issued 32, 33 1 14 – – 15
– value of employees' services 39 – – – 13 13
Deferred tax on share based payments – – – (1) (1)
Dividends paid 13 – – – (371) (371)
Transactions with owners, recognised directly in equity 1 14 – (359) (344)
At 31 March 2026 297 1,392 157 3,176 5,022
Included in retained earnings are profits of £1,221 million that arose from group restructuring arrangements in previous years and are therefore
not distributable.
Severn Trent Plc Annual Report and Accounts 2026 165
Strategic report Governance Financial statements
Consolidated and Company balance sheet
As at 31 March 2026
Group
Company
31 March31 March 31 March31 March
20262025 2026 2025
Note £m £m£m£m
Non-current assets
Goodwill
15
152
117
–
–
Other intangible assets
16
224
207
–
–
Property, plant and equipment
17
15,079
13,307
–
–
Biological assets
18
4
5
–
–
Right-of-use assets
19
142
141
–
1
Investment in joint venture
20
–
2
–
–
Investments in subsidiaries
21
–
–
3,610
3,600
Derivative financial instruments
22
99
60
–
–
Deferred tax asset
29
–
–
5
1
Trade and other receivables
23
67
91
1,901
1,723
Retirement benefit surplus
30
5
5
–
–
15,772
13,935
5,516
5,325
Current assets
Inventory
24
48
43
–
–
Trade and other receivables
23
933
878
45
50
Derivative financial instruments
22
22
6
–
–
Cash and cash equivalents
25
796
1,048
14
314
1,799
1,975
59
364
Current liabilities
Borrowings
(366)
(533)
(8)
(3)
Derivative financial instruments
26
(1)
(3)
–
–
Trade and other payables
27
(872)
(862)
(12)
(19)
Provisions for liabilities
28
(52)
(47)
(1)
–
Current tax payable
31
(4)
–
(27)
(18)
(1,295)
(1,445)
(48)
(40)
Net current assets
504
530
11
324
Total assets less current liabilities
16,276
14,465
5,527
5,649
Non-current liabilities
Borrowings
26
(10,618)
(9,164)
(495)
(480)
Derivative financial instruments
27
(50)
(45)
–
–
Trade and other payables
28
(2,064)
(1,839)
(4)
–
Deferred tax
29
(1,634)
(1,472)
–
–
Retirement benefit obligations
30
(26)
(125)
(6)
(6)
Provisions for liabilities
31
(43)
(49)
–
(1)
(14,435)
(12,694)
(505)
(487)
Net assets
1,841
1,771
5,022
5,162
Equity
Called up share capital
32
297
296
297
296
Share premium account
33
1,392
1,378
1,392
1,378
Other reserves
34
186
175
157
157
Retained earnings
(34)
(78)
3,176
3,331
Total equity
1,841
1,771
5,022
5,162
The Company’s profit for the year is £2 0 4 million (2025: £75 5 million).
Signed on behalf of the Board who approved the accounts on 19 May 2026.
Christine Hodgson
Chair
Company Number 02366619
Helen Miles
Chief Financial Officer
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 166
Consolidated cash flow statement
For the year ended 31 March 2026
2026 2025
Note£m£m
Cash generated from operations
41
1,265
913
Tax paid
41
–
–
Net cash generated from operating activities
1,265
913
Cash flows from investing activities
Purchase of subsidiaries net of cash acquired
(35)
(14)
Purchases of property, plant and equipment
(1,896)
(1,553)
Purchases of intangible assets
(46)
(40)
Proceeds on disposal of property, plant and equipment
5
11
Net loans repaid by joint venture
20
1
Interest received
58
58
Net cash outflow from investing activities
(1,894)
(1,537)
Cash flows from financing activities
Interest paid
(399)
(312)
Dividends paid to shareholders of the parent
(371)
(356)
Repayments of borrowings
(517)
(55)
Principal elements of lease payments
(15)
(14)
New loans raised
1,657
1,440
Issues of shares
15
16
Proceeds/(payments) for swaps
2
(1)
Net cash inflow from financing activities
372
718
Net movement in cash and cash equivalents
(257)
94
Net cash and cash equivalents at the beginning of the year
1,045
951
Net cash and cash equivalents at the end of the year
788
1,045
Cash at bank and in hand
33
59
Bank overdrafts
(8)
(3)
Short term deposits
763
989
788
1,045
Severn Trent Plc Annual Report and Accounts 2026 167
Strategic report Governance Financial statements
Notes to the Financial Statements
1 General information
The Severn Trent Group’s 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 74 which sets out the Group’s 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 note v), accounting for the transfer of assets from
customers (refer to accounting policy note i), biological assets (refer to
accounting policy note j) and retirement benefit surplus and obligations
(refer to accounting policy note r).
(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 Accounting 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 ‘Application of Financial Reporting
Requirements’, accordingly the Company has elected to apply FRS 101
‘Reduced Disclosure Framework’.
Therefore the recognition and measurement requirements of United
Kingdom adopted International Accounting 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 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 (‘the partnerships’), 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’s equity. Non-controlling interests consist of
the amount of those interests at the date of the original business
combination and the non-controlling interests’ 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.
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 wastewater revenue is recognised when the service is provided
and includes an estimate of the amount of water and wastewater 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.
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.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 168
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 m) 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 note 2 m) below).
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:
• it is technically feasible to create and make the asset available for use
or sale;
• there are adequate resources available to complete the development
and to use or sell the asset;
• there is the intention and ability to use or sell the asset;
• it is probable that the asset created will generate future economic
benefits; and
• 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 an asset 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 property, plant and
equipment relating to research and 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
Severn Trent Plc Annual Report and Accounts 2026 169
Strategic report Governance Financial statements
Notes to the Financial Statements continued
2 Accounting policies continued
j) Biological assets
Biological assets consist of trees held by the Group for the purpose of
commercial felling. Agricultural produce consists of felled trees and
timber.
Biological assets are recognised by the Group as they are intended to be
used for commercial activity and meet the following criteria as set out in
IAS 41 - Forestry Assets:
• the assets are controlled by the Group;
• where required, the appropriate regulatory authority has approved the
commercial felling of the asset; and
• the fair value or cost of the asset can be measured reliably.
Biological assets are measured at fair value less costs to sell on initial
recognition. At the end of subsequent periods, biological assets are
remeasured to fair value less costs to sell and the gain or loss on
remeasurement is included in other income or costs in the income
statement.
Biological assets are valued by independent qualified valuers on a
quinquennial basis. Between independent valuations, fair values are
estimated by management based on the previous quinquennial valuation
and movements in market indices.
Agricultural produce is measured at fair value less costs to sell at the
point of harvest.
k) 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’s
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.
l) 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
revenue 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 revenue in the
period that they become receivable.
m) 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’s 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’s cost of capital adjusted for
the risk profiles of individual businesses. For regulated businesses we
use the weighted average cost of capital (‘WACC’) from Ofwat’s 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.
n) Parent company investments
The parent company recognises investments in subsidiary undertakings
at historical cost. Impairment losses are recognised in line with policy set
out in m) above.
o) 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.
p) 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.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 170
p) 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.
q) 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’s historical
experience of trade receivable write-offs and reasonable, supportable
forward-looking information which is available without undue cost or
effort.
r) 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:
• differences between the return on scheme assets and interest income
included in the income statement;
• actuarial gains and losses from experience adjustments; and
• 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.
s) Provisions
Provisions are recognised where:
• there is a present obligation as a result of a past event;
• it is probable that there will be an outflow of economic benefits to settle
this obligation; and
• 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’s 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.
t) 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 equity until such time as they vest.
u) Borrowings
The accounting policy for borrowings that are the hedged item in a fair
value hedge is set out in note 2 v) and the accounting policy for lease
liabilities is set out in note 2 k).
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 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.
Severn Trent Plc Annual Report and Accounts 2026 171
Strategic report Governance Financial statements
Notes to the Financial Statements continued
2 Accounting policies continued
v) Derivative financial instruments
Derivative financial instruments are stated at fair value, including accrued
interest. Fair value is determined using the methodology described in
note 36 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:
• the economic relationship between the hedging instrument and the
hedged item;
• its risk management objectives and strategy for undertaking the hedge
transaction; and
• 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 the
income statement on the same line as the hedged item.
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:
• the risks and characteristics of the embedded derivative are not closely
related to those of the contract;
• a separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative; and
• 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.
w) Share based payments
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.
x) 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’s 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.
y) 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:
• 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 r) above; and
• 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.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 172
y) Business combinations continued
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
‘measurement period’).
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
On 9 April 2024, the IASB issued IFRS 18 ‘Presentation and Disclosure in
Financial Statements’. The key new concepts introduced in IFRS 18 relate
to:
• the structure of the statement of profit or loss;
• required disclosures in the financial statements for certain profit or
loss performance measures that are reported outside an entity’s
financial statements (that is, management-defined performance
measures); and
• enhanced principles on aggregation and disaggregation which apply to
the primary financial statements and notes in general.
IFRS 18 does not impact the recognition or measurement of items in the
financial statements.
The new standard is effective for accounting periods commencing on or
after 1 January 2027. We will consider the requirements of the new
standard in the period up to its implementation but our initial assessment
has not identified any material impacts on the Group’s financial reporting.
At the balance sheet date, no other Standards or Interpretations were in
issue but not yet effective that are expected to have a material impact on
the Group’s financial position.
4 Significant accounting judgments and key sources of
estimation uncertainty
In the process of applying the Group’s 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’s best knowledge of the
amount, event or actions, actual results may ultimately differ from
those estimates.
a) Significant accounting judgments
(i) Classification of costs between operating expenditure and
capital expenditure
Severn Trent Water’s 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 £136 million
(2025: £149 million). Expenditure which results in quality or capacity
enhancements to the operating capability of the infrastructure networks
is capitalised and amounted to £365 million (2025: £316 million).
(ii) Income from connections to the water and wastewater networks
The Group receives income from developers and domestic customers for
new connections to the water and wastewater networks either in the form
of infrastructure assets or cash. The more significant examples of these
transactions are:
• 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.
• 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.
• When developers require properties to be connected to the Group’s
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’s infrastructure networks or is to facilitate
the ongoing provision of water and wastewater 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 £124 million
(2025: £188 million), infrastructure charges amounting to £28 million
(2025: £26 million) and other charges relating to the provision of
infrastructure amounting to £5 million (2025: £15 million).
The Group considers that the purpose of these transactions is to facilitate
the ongoing provision of water and wastewater 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 wastewater
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 wastewater 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 has performed 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 ‘Our approach to climate change’ section of the
Strategic Report on page 30.
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.
Severn Trent Plc Annual Report and Accounts 2026 173
Strategic report Governance Financial statements
Notes to the Financial Statements continued
4 Significant accounting judgments and key sources of
estimation uncertainty continued
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’s 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
Infrastructure assets
141
Fixed plant and equipment
27
Moveable plant
12
The impact on the annual depreciation expense of a 15 per cent increase
and decrease in useful economic life (‘UEL’) of property, plant and
equipment by asset category is detailed as follows:
15 per cent 15 per cent
increase in UEL decrease in UEL
Impact on annual depreciation (£m) £m £m
Land and buildings
(16)
22
Infrastructure assets
(7)
9
Fixed plant and equipment
(33)
44
Moveable plant
(2)
2
(ii) Retirement benefit obligations
Determining the amount of the Group’s 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 key assumptions made and associated sensitivities are set out in note
30 to the financial statements.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 174
5 Segmental analysis – Group
a) Background
The Group is organised into two main business segments:
Regulated Water and Wastewater includes the activities of Severn Trent Water Limited, except affinity products, hydro-electric generation and property
sales, and Hafren Dyfrdwy Cyfyngedig.
Infrastructure Services (formerly Business Services) includes the Group’s Operating Services businesses, the Green Power business including Severn
Trent Water’s hydro-electric generation, Network Services, the Property Development business and our other non-regulated businesses including
affinity products and searches.
The Severn Trent Executive Committee (‘STEC’) is the Group’s 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 profit before interest and tax (‘PBIT’). A segmental analysis of turnover and
PBIT is presented below.
b) Segmental results
The following table shows the segmental turnover and PBIT:
2026
2025
Regulated Water Infrastructure Regulated Water Infrastructure
and Wastewater Services and Wastewater Services
£m £m £m £m
External turnover
2,629
202
2,249
178
Inter-segment turnover
–
28
–
5
Total turnover
2,629
230
2,249
183
Profit before interest and tax
850
29
586
25
Profit before interest and tax is stated after:
2026
2025
Regulated Water Infrastructure Regulated Water Infrastructure
and Wastewater Services and Wastewater Services
£m £m £m £m
Depreciation of property, plant and equipment
425
18
394
16
Depreciation of right–of–use assets
7
–
6
1
Amortisation of intangible assets
47
3
34
3
Profit on disposal of fixed assets
–
(5)
–
(5)
Impairment
5
5
12
2
The reportable segments’ turnover is reconciled to Group turnover as follows:
2026 2025
£m £m
Regulated Water and Wastewater
2,629
2,249
Infrastructure Services
230
183
Corporate and other
2
2
Consolidation adjustments
(30)
(7)
2,831
2,427
Included in the revenues of Regulated Water and Wastewater of £2,629 million (2025: £2,249 million) is £238 million (2025: £233 million) which arose
from sales to Water Plus Group. No single customer contributed 10% or more to the Group’s revenue for 2026.
Severn Trent Plc Annual Report and Accounts 2026 175
Strategic report Governance Financial statements
Notes to the Financial Statements continued
5 Segmental analysis – Group continued
b) Segmental results continued
Segmental PBIT is reconciled to the Group’s profit before tax as follows:
2026 2025
£m £m
Regulated Water and Wastewater
850
586
Infrastructure Services
29
25
Corporate and other
(15)
(20)
Consolidation adjustments
(3)
(1)
Profit before interest and tax
861
590
Net finance costs
(302)
(244)
Net losses on financial instruments
(33)
(15)
Share of net loss of joint ventures accounted for using the equity method
(2)
(11)
Profit on ordinary activities before taxation
524
320
The Group’s 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.
2026
2025
Regulated Water Infrastructure Regulated Water Infrastructure
and Wastewater Services and Wastewater Services
£m £m £m £m
Operating assets
16,055
421
14,241
389
Goodwill
63
89
63
55
Segment assets
16,118
510
14,304
444
Segment operating liabilities
(3,014)
(41)
(2,866)
(42)
Capital employed
13,104
469
11,438
402
Operating assets comprise other intangible assets, biological 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’ assets are reconciled to the Group’s total assets as follows:
2026 2025
Segment assets £m £m
Regulated Water and Wastewater
16,118
14,304
Infrastructure Services
510
444
Corporate and other
9
6
Other financial assets
918
1,114
Investment in joint venture
–
2
Loan receivable from joint venture
51
71
Consolidation adjustments
(35)
(31)
Total assets
17,571
15,910
The consolidation adjustments comprise elimination of intra–group debtors and unrealised profits on fixed assets.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 176
5 Segmental analysis – Group continued
The reportable segments’ liabilities are reconciled to the Group’s total liabilities as follows:
2026 2025
Segment liabilities £m £m
Regulated Water and Wastewater
(3,014)
(2,866)
Infrastructure Services
(41)
(43)
Corporate and other
(35)
(36)
Other financial liabilities
(11,035)
(9,745)
Deferred tax liabilities
(1,634)
(1,472)
Current tax payable
(4)
–
Consolidation adjustments
33
23
Total liabilities
(15,730)
(14,139)
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:
2026
2025
Regulated Water Infrastructure Regulated Water Infrastructure
and Wastewater Services and Wastewater Services
£m £m £m £m
Other intangible assets
45
1
39
1
Property, plant and equipment
2,186
49
1,953
13
Right–of–use assets
6
2
4
1
d) Geographical areas
All of the Group’s sales were derived from the UK in 2026 and 2025.
6 Revenue from contracts with customers – Group
Revenue recognised from contracts with customers is analysed by type of revenue and by business segment below:
Regulated Water Infrastructure Corporate Consolidation
and Wastewater Services and other adjustments Group
Year ended 31 March 2026 £m £m £m £m £m
Water and wastewater services
2,581
–
–
–
2,581
Operating services
–
107
–
(4)
103
Network services
–
23
–
(18)
5
Renewable energy
42
83
–
(6)
119
Other sales
6
17
2
(2)
23
2,629
230
2
(30)
2,831
Regulated Water Infrastructure Corporate Consolidation
and Wastewater Services and other adjustments Group
Year ended 31 March 2025 £m £m £m £m £m
Water and wastewater services
2,204
–
–
–
2,204
Operating services
–
85
–
–
85
Renewable energy
40
83
–
(5)
118
Other sales
5
15
2
(2)
20
2,249
183
2
(7)
2,427
a) Water and wastewater services
Revenue from water and wastewater 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 wastewater 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.
Severn Trent Plc Annual Report and Accounts 2026 177
Strategic report Governance Financial statements
Notes to the Financial Statements continued
6 Revenue from contracts with customers – Group continued
Deferred income arising from connections to the Group’s water and wastewater networks represents a contract liability and is recognised in line with
the Group’s accounting policy set out in note 2 and the judgment described in note 4. Changes in the Group’s contract liabilities from deferred income in
relation to connections were as follows:
2026 2025
£m £m
At 1 April
1,869
1,655
Contributions and grants received
53
44
Assets transferred at no cost
124
188
Amounts released to income statement
(18)
(18)
At 31 March
2,028
1,869
Revenue amounting to £18 million (2025: £18 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’s water and
wastewater networks that were satisfied or partially satisfied in previous years (2025: 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 wastewater service, are provided over the life of the relevant property.
Revenue from the remaining performance obligations is expected to be recognised as follows::
2026 2025
£m £m
In the next year
18
30
Between one and five years
74
121
After more than five years
1,936
1,718
2,028
1,869
Payments received from customers in advance of the service period represents a contract liability. Changes in the Group’s contract liabilities from
payments received in advance were as follows:
2026 2025
£m £m
Contract liability at 1 April
174
149
Revenue recognised
(1,970)
(1,669)
Cash received
1,869
1,694
Contract liability at 31 March
73
174
b) Operating services
The Operating Services business includes a material 25-year contract with multiple performance obligations. Under this contract with the Ministry of
Defence (‘MoD’), 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:
• operating and maintaining the customer’s infrastructure assets;
• upgrading the customer’s infrastructure assets;
• administrating the services received from statutory water and sewerage undertakers; and
• administrating billing services of the customer’s 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 wastewater 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’s 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 2025 as a result of higher inflation and consumption. At 31 March 2026 the aggregate amount of the estimated transaction price allocated to
performance obligations that were not satisfied was £249 million (2025: £306 million). This amount is expected to be recognised as revenue as follows:
2026 2025
£m £m
In the next year
60
59
Between one and five years
189
247
249
306
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).
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 178
6 Revenue from contracts with customers – Group continued
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:
2026 2025
£m £m
Contract asset at 1 April
31
47
Amounts billed
(64)
(64)
Revenue recognised
62
48
Contract asset at 31 March
29
31
No contract liabilities arose from the Group’s Operating Services contract with the MoD.
7 Net operating costs – Group
2026 2025
£m £m
Wages and salaries
538
452
Social security costs
68
47
Pension costs
53
43
Share based payments
13
11
Total employee costs
672
553
Power
177
187
Raw materials and consumables
140
125
Rates
100
97
Charge for bad and doubtful debts
46
35
Services charges
61
52
Depreciation of tangible fixed assets
441
410
Depreciation of right-of-use assets
7
7
Impairment
10
14
Amortisation of intangible fixed assets
50
38
Hired and contracted services
385
341
Hire of plant and machinery
21
12
Profit on disposal of tangible fixed assets
(5)
(5)
Infrastructure maintenance expenditure
136
149
Ofwat licence fees
13
8
Other operating costs
87
83
Other operating income
(3)
(3)
2,338
2,103
Own work capitalised
(368)
(266)
1,970
1,837
During the year the following fees were charged by the auditor:
2026 2025
£’000 £’000
Fees payable to the Company's auditor for:
- the audit of the Company's annual accounts
545
300
- the audit of the Company's subsidiary accounts
1,068
900
Total audit fees
1,613
1,200
Fees payable to the Company's auditor and its associates for other services to the Group:
- audit related assurance services
230
100
- other assurance services
168
100
Total non-audit fees
398
200
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 Committee report on pages 108 and 113. No services were provided pursuant to contingent fee arrangements.
Details of directors’ remuneration are set out in the Directors’ Remuneration Report on pages 118 to 145.
Severn Trent Plc Annual Report and Accounts 2026 179
Strategic report Governance Financial statements
Notes to the Financial Statements continued
8 Employee numbers – Group and Company
Average number of employees (including Executive Directors) during the year:
Group
Company
2026 2025 2026 2025
Number Number Number Number
By business segment
Regulated Water and Wastewater
10,047
8,989
–
–
Infrastructure Services
793
535
–
–
Corporate and other
20
15
20
15
10,860
9,539
20
15
9 Finance income – Group
2026 2025
£m £m
Interest income earned on bank deposits
51
53
Other financial income
6
5
Total interest receivable
57
58
Interest income on defined benefit scheme assets
93
85
150
143
10 Finance costs – Group
2026 2025
£m £m
Interest expense charged on:
Bank loans and overdrafts
39
41
Other loans
309
242
Lease liabilities
4
4
Total borrowing costs
352
287
Other financial expenses
–
4
Interest cost on defined benefit scheme liabilities
100
96
452
387
Borrowing costs of £150 million (2025: £103 million) incurred funding eligible capital projects have been capitalised at an interest rate of 4.9%
(2025: 4.4%). Tax relief of £38 million (2025: £26 million) was claimed on these costs which has created tax losses carried forward, and a related
deferred tax asset of £38 million (2025: £26 million).
11 Net losses on financial instruments – Group
2026 2025
£m £m
Loss on swaps used as hedging instruments in fair value hedges
(12)
(1)
Gain arising on debt in fair value hedges
13
5
Exchange (loss)/gain on other loans
(69)
11
Net loss on terminated hedges transferred from equity
(7)
(13)
Gain/(loss) arising on swaps where hedge accounting is not applied
41
(18)
Amortisation of fair value adjustment on debt
1
1
(33)
(15)
The gains from financial assets and liabilities mandatorily measured at fair value through profit or loss was £29 million (2025: loss of £19 million). There
were no financial assets or liabilities designated as at fair value through the profit or loss (2025: nil).
The Group’s hedge accounting arrangements are described in note 38.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 180
12 Taxation – Group
a) Analysis of tax charge in the year
2026 2025
£m £m
Current tax
Current year at 25% (2025: 25%)
–
1
Prior years
3
(1)
Total current tax charge
3
–
Deferred tax
Origination and reversal of temporary differences:
Current year
139
85
Prior years
11
6
Total deferred tax charge
150
91
Total tax charge
153
91
b) Factors affecting the tax charge in the year
The tax expense for the year is higher (2025: higher) than the standard rate of corporation tax in the UK of 25% (2025: 25%). The differences are
explained below:
Total Tax
2026 2025
£m £m
Profit before taxation
524
320
Tax at standard rate of corporation tax in the UK 25% (2025: 25%)
131
80
Tax effect of depreciation on non-qualifying assets
4
6
Other permanent differences
4
–
Adjustments in respect of prior years
14
5
Total tax charge
153
91
Current Tax
2026 2025
£m £m
Profit before taxation
524
320
Tax at standard rate of corporation tax in the UK 25% (2025: 25%)
131
80
Tax effect of depreciation on non-qualifying assets
4
5
Other permanent difference
4
–
Tax effect of accelerated capital allowances
(327)
(274)
Other temporary differences
14
(16)
Tax losses carried forward
174
206
Adjustments in respect of prior years
3
(1)
Total current tax charge
3
–
The most significant factor impacting the Group’s 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.
Full expensing was made permanent in the Autumn Statement on 22 November 2023 and provides first year allowances for main rate assets and 50%
first year allowance for special rate (including long life) assets. The impact of full expensing meant that the Group was eligible to claim significant
capital allowances to the extent that the Group was not liable to pay corporation tax for the year.
Certain of the Group’s 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.
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 29.
Severn Trent Plc Annual Report and Accounts 2026 181
Strategic report Governance Financial statements
12 Taxation – Group
b) Factors affecting the tax charge in the year continued
As part of the Organisation for Economic Co-operation and Development (‘OECD’)/G20 Base Erosion and Profit Shifting (‘BEPS’) project, the OECD has
introduced the Pillar Two Model Rules. The Group is within the scope of these OECD Pillar Two model rules. Pillar Two legislation was enacted in the
United Kingdom, the jurisdiction in which Severn Trent Plc is incorporated, and was effective for the Group from financial year beginning 1 April 2024.
The Group has performed an assessment of its potential exposure to Pillar Two income taxes. This assessment is based on a combination of the most
recent tax filings, country-by-country reporting and financial statements for constituent entities in the Group. Other than the Group’s captive insurance
subsidiary, which is tax resident in Guernsey, all of the Group’s subsidiaries are tax resident in the UK. Based on the assessment performed, the Pillar
Two simplified effective tax rate for the Group in the UK is above the transitional safe harbour rate of 16%. Accordingly, the Group expects to rely on the
UK transitional safe harbour provisions and, as a result, is not required to perform a full GloBE calculation. If a full GloBE calculation were required, the
Group does not expect any UK Pillar Two top-up tax to arise based on the Group’s current tax profile. No current tax expense in respect of Pillar Two
top-up tax has therefore been recognised in these financial statement.
Therefore, in the UK, the Group will apply the transitional safe harbour rules which will exempt it from applying the full Pillar Two rules in the UK. For
Guernsey where the transitional safe harbour relief does not apply, the effective tax rate is above 15% under the full GloBE calculation. Therefore, the
Group does not expect a potential exposure to Pillar Two top-up taxes. The Group continues to monitor ongoing OECD developments including future
safe harbour frameworks, to assess their potential impact on subsequent reporting periods.
The Group has applied the temporary exception under IAS 12 to recognising and disclosing information about deferred tax assets and liabilities related
to Pillar Two rules.
c) Tax charged directly to other comprehensive income or equity
The following amounts of deferred tax have been (credited)/charged to other comprehensive income or equity:
2026 2025
£m £m
Deferred tax on:
Actuarial gains
10
9
Cash flow hedges
4
(1)
Share based payments
(2)
1
Transfers to the income statement
–
3
Total deferred tax charged to other comprehensive income or equity
12
12
13 Dividends – Group and Company
Amounts recognised as distributions to owners of the Company in the year:
2026
2025
Pence Pence
per share
£m
per share
£m
Final dividend for the year ended 31 March 2025 (2024)
73.03
220
70.10
210
Interim dividend for the year ended 31 March 2026 (2025)
50.40
151
48.68
146
Total dividends paid
123.43
371
118.78
356
Proposed final dividend for the year ended 31 March 2026
75.62
228
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 per share – Group
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’s
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.
Notes to the Financial Statements continued
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 182
14 Earnings per share – Group continued
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
2026 2025
£m £m
Profit for the year
371
229
(ii) Number of shares
2026 2025
m m
Weighted average number of ordinary shares for the purpose of basic earnings per share
300.4
299.5
Effect of dilutive potential ordinary shares:
- share options and LTIPs
1.1
0.7
Weighted average number of ordinary shares for the purpose of diluted earnings per share
301.5
300.2
b) Adjusted earnings per share
2026 2025
pence pence
Adjusted basic earnings per share
184.4
112.1
Adjusted diluted earnings per share
183.7
111.8
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 2026 and 2025. 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.
The adjustments to earnings that are made in calculating adjusted earnings per share are as follows:
2026 2025
£m £m
Earnings for the purpose of basic and diluted earnings per share
371
229
Adjustments for:
- net losses on financial instruments
33
15
- deferred tax
150
91
Earnings for the purpose of adjusted basic and diluted earnings per share
554
335
Current tax on net losses on financial instruments was nil in both years.
15 Goodwill – Group
2026 2025
£m £m
Cost
At 1 April
117
113
Acquisition of subsidiary – Severn Trent Green Power Lodge Farm Limited
–
1
Acquisition of subsidiary – Severn Trent Green Power Atherstone Limited
–
1
Acquisition of subsidiary – Severn Trent Green Power Cayton Limited
–
1
Acquisition of subsidiary – Severn Trent Green Power Church Farm Limited
–
1
Acquisition of trade and assets – Industrial Water Jetting Systems Limited
7
–
Acquisition of subsidiaries – Watertight Management Limited and Synergen Holdings Limited
21
–
Acquisition of subsidiary – Reigate Environmental Services Limited
6
–
Acquisition of subsidiary – Howlett Associates Water Treatment Limited
1
–
At 31 March
152
117
On 1 May 2025, Severn Trent Services Operations UK Limited acquired 100% of the issued shares in Reigate Environmental Services Limited for a total
consideration of £7 million.
On 31 July 2025, Severn Trent Holdings Limited acquired the trade and assets of Industrial Water Jetting Systems Limited for a total consideration of
£13 million.
On 1 August 2025, Severn Trent Holdings Limited acquired 100% of the issued shares in Watertight Management Limited and Synergen Holdings
Limited as part of a strategic supply chain integration, for a total consideration of £26 million.
On 10 December 2025 Severn Trent Services Operations UK Limited acquired 100% of the issued shares in Howlett Associates Water Treatment
Limited, for a total consideration of £2 million.
Severn Trent Plc Annual Report and Accounts 2026 183
Strategic report Governance Financial statements
Notes to the Financial Statements continued
15 Goodwill – Group continued
The acquisitions have been accounted for using the acquisition method. Goodwill of £35 million was recognised, attributable to the anticipated future
opportunities and increase in the Group’s infrastructure services market share. The goodwill valuation was based on management’s best estimates of
the fair values of the assets and liabilities acquired, which was estimated at £13 million.
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.
2026 2025
£m £m
Regulated Water and Wastewater
62
62
Green Power
46
46
Operating Services
11
4
Severn Trent Green Power Lodge Farm Limited
1
1
Severn Trent Green Power Atherstone Limited
1
1
Severn Trent Green Power Cayton Limited
2
2
Severn Trent Green Power Church Farm Limited
1
1
Industrial Water Jetting Systems Limited
7
–
Watertight Management Limited and Synergen Holdings Limited
21
–
152
117
Regulated Water and Wastewater also has an intangible asset with indefinite useful life amounting to £4 million (2025: £4 million). This is reviewed for
impairment as part of the Regulated Water and Wastewater impairment review, set out below.
a) Regulated Water and Wastewater
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 in Hafren Dyfrdwy, consequently this goodwill is allocated to the Regulated Water and
Wastewater 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 Wastewater CGU was determined on the basis of fair value, through a level 3 valuation, less costs of disposal.
The fair value, determined using a discounted cash flow calculation for the Regulated Water and Wastewater segment is based on the most recent
financial projections available for the business, which cover the five year period to 31 March 2031.
The key assumptions underlying these projections are the cash flows in the projections and the following:
%
Discount rate
6.4
CPIH long-term inflation
2.1
Growth rate in the period beyond the detailed projections
2.0
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 PR24
final determination, which is a real rate (i.e. excluding inflation), adjusted to reflect current market conditions.
The rate disclosed above is the equivalent pre-tax nominal rate (2025: 5.8%).
Inflation has been included in the detailed projections at 2.1% CPIH, informed through external market trends and measures of inflation used by Ofwat.
Cash flows beyond the end of the five-year period are extrapolated using an assumed real growth rate of 2.0% in the Group’s 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 of disposal for the CGU exceeded its carrying value by £5,669 million. An increase in the discount rate to 7.2% or a reduction in
the growth rate in the period beyond the detailed projections to 1.3% would reduce the recoverable amount to the carrying amount of the CGU.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 184
b) Green Power
On 30 November 2018, the Group acquired Agrivert Holdings and its subsidiary undertakings resulting in goodwill of £29 million. Subsequent to this, on
1 September 2023 the Group also acquired Andigestion Limited, resulting in goodwill of £17 million.
This goodwill has been allocated to the Green Power South CGU 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 Infrastructure 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 31 March 2031.
The key assumptions underlying these projections are the cash flows in the projections and:
Key assumption
%
Discount rate
7.6
Growth rate in the period beyond the detailed projections
2.7
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 (2025: 7.0%).
Cash flows beyond the end of the five-year period are extrapolated using assumed growth of 2.7% in the Group’s free cash flows, informed through
external market trends.
The value in use for the CGU exceeded its carrying value by £28 million. An increase in the discount rate to 8.1% or reduction in the growth rate in the
period beyond the detailed projections to 1.9% would reduce the recoverable amount to the carrying amount of the CGU.
16 Other intangible assets – Group
Computer software Internally
generated Other
Internally assets under intangible
generated Purchased development assets Total
£m £m £m £m £m
Cost
At 1 April 2024
383
198
–
48
629
Additions
35
5
–
–
40
Disposals
(22)
(2)
–
–
(24)
Reclassification
25
(25)
–
–
–
Acquisition of subsidiaries
–
–
–
18
18
At 1 April 2025
421
176
–
66
663
Additions
13
–
33
–
46
Transfers on commissioning
46
–
(46)
–
–
Transfers from property, plant and equipment
21
–
–
–
21
Reclassifications
(75)
–
75
–
–
At 31 March 2026
426
176
62
66
730
Amortisation
At 1 April 2024
(283)
(148)
–
(11)
(442)
Amortisation for the year
(25)
(10)
–
(3)
(38)
Disposals
22
2
–
–
24
Reclassification
(5)
5
–
–
–
At 1 April 2025
(291)
(151)
–
(14)
(456)
Amortisation for the year
(37)
(10)
–
(3)
(50)
At 31 March 2026
(328)
(161)
–
(17)
(506)
Net book value
At 31 March 2026
98
15
62
49
224
At 31 March 2025
130
25
–
52
207
Other intangible assets include the instrument of appointment acquired with Dee Valley Water, customer contracts and energy subsidy contracts both
acquired with Agrivert and contracts for delivery of biodiversity improvements. 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 Wastewater CGU described in note 15. As
at 31 March 2026 no impairment was recorded (2025: nil).
Additionally, Severn Trent Green Power Atherstone Limited, Severn Trent Green Power Lodge Farm Limited, Severn Trent Green Power Cayton
Limited, and Severn Trent Green Power Church Farm Limited include licences to connect and provide electricity to the UK grid network. These licences
have a useful life of up to 42 years.
Severn Trent Plc Annual Report and Accounts 2026 185
Strategic report Governance Financial statements
Notes to the Financial Statements continued
17 Property, plant and equipment – Group
Land and Infrastructure Fixed plant Moveable Assets under
buildings assets and equipment plant construction Total
£m £m £m £m £m £m
Cost
At 1 April 2024
4,455
6,375
5,753
98
2,020
18,701
Additions
117
259
178
5
1,410
1,969
Transfers on commissioning
150
57
112
5
(324)
–
Disposals
(13)
–
(195)
(5)
–
(213)
Reclassifications
–
–
–
1
–
1
Acquisition of subsidiary undertaking
–
–
1
–
–
1
At 1 April 2025
4,709
6,691
5,849
104
3,106
20,459
Additions
138
221
197
52
1,627
2,235
Transfers on commissioning
414
144
642
12
(1,212)
–
Transfers to other intangible assets
–
–
–
–
(21)
(21)
Disposals
(2)
–
(11)
(5)
–
(18)
Acquisition of subsidiary undertaking
–
–
9
–
–
9
Reclassifications
(5)
–
4
1
–
–
At 31 March 2026
5,254
7,056
6,690
164
3,500
22,664
Depreciation
At 1 April 2024
(1,838)
(1,565)
(3,483)
(48)
–
(6,934)
Charge for the year
(120)
(47)
(233)
(10)
–
(410)
Disposals
12
–
191
4
–
207
Reclassifications
(8)
–
8
–
–
–
Reclassifications from right-of-use
–
–
–
(1)
–
(1)
Impairment
–
–
–
–
(14)
(14)
At 1 April 2025
(1,954)
(1,612)
(3,517)
(55)
(14)
(7,152)
Charge for the year
(126)
(50)
(252)
(13)
–
(441)
Disposals
2
–
11
5
–
18
Impairment
–
–
–
–
(10)
(10)
At 31 March 2026
(2,078)
(1,662)
(3,758)
(63)
(24)
(7,585)
Net book value
At 31 March 2026
3,176
5,394
2,932
101
3,476
15,079
At 31 March 2025
2,755
5,079
2,332
49
3,092
13,307
Additions include assets transferred from developers at no cost, which have been recognised at their fair value of £124 million (2025: £189 million) and
provisions for works in response to legally enforceable undertakings to regulators amounting to £42 million (2025: £42 million).
The net book value of land and buildings is analysed as follows:
2026 2025
£m £m
Freehold
3,176
2,755
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 186
18 Biological assets – Group
Biological assets comprise forestry assets situated at Lake Vyrnwy in Wales and the Upper Derwent Valley in England. The forests were valued by RICS
Registered Valuers, Knight Frank LLP in December 2022. These valuations were updated to the recognition date using the Standing Timber Index
published by Forest Research according to arrangements approved by the UK Statistics Authority. Forest Research is the research agency of the
Forestry Commission and is Great Britain’s principal organisation for forestry and tree-related research.
2026 2025
£m £m
Value at 1 April
5
6
Biological assets felled
(1)
(1)
Value 31 March
4
5
The Group holds 293 hectares (2025: 354) of forestry assets.
19 Leases – Group
a) The Group’s 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 k).
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:
2026 2025
£m £m
Depreciation charge of right-of-use assets:
Land and buildings
1
1
Infrastructure assets
1
1
Fixed plant and equipment
–
1
Moveable plant
5
4
Total depreciation of right-of-use assets
7
7
Interest expense included in finance cost
4
4
Severn Trent Plc Annual Report and Accounts 2026 187
Strategic report Governance Financial statements
Notes to the Financial Statements continued
19 Leases – Group continued
c) Balance sheet
The balance sheet includes the following amounts relating to leases:
2026 2025
£m £m
Right-of-use assets:
Land and buildings
15
16
Infrastructure assets
109
110
Fixed plant and equipment
3
3
Moveable plant
15
12
142
141
Additions to right-of-use assets were £8 million (2025: £5 million). Disposals were £1 million (2025: nil). There were no right-of-use assets acquired as
part of business combinations (2025: nil).
2026 2025
£m £m
Lease liabilities:
Current
17
13
Non-current
87
98
104
111
Obl gat ons under lease l ab l t es were as follows
2026 2025
£m £m
Within 1 year
19
18
1 - 2 years
19
17
2 - 5 years
53
49
After more than 5 years
39
52
Gross obligations under leases
130
136
Less future finance charges
(26)
(25)
Present value of lease obligations
104
111
Net obligations under leases were as follows:
2026 2025
£m £m
Within 1 year
17
13
1 - 2 years
15
14
2 - 5 years
46
42
After more than 5 years
26
42
Included in non-current liabilities
87
98
104
111
d) Cash flow
The total cash outflow for leases in the year was £19 million (2025: £17 million) which consists of £4 million (2025: £4 million) payments of interest and
£15 million (2025: £14 million) repayment of principal elements. This is included in financing cash flows.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 188
20 Investment in joint venture – Group
Particulars of the Group’s principal joint venture undertaking at 31 March 2026 were:
Proportion of
Country of Class of share ownership
Name
Type
incorporation capital held 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:
2026 2025
£m £m
Carrying value of joint venture investment at 1 April
2
13
Group's share of loss after tax and comprehensive loss
(2)
(11)
Carrying value of joint venture investment at 31 March
–
2
During the current year, the Group has recognised its share of Water Plus’s losses of £2 million (2025: £11 million) against the value of the investment.
As at 31 March 2026, the Group’s unrecognised share of joint venture losses amounts to £3 million (2025: nil). These losses have not been recognised in
the consolidated financial statements.
As at 31 March 2026 and 2025 the joint venture did not have any significant contingent liabilities to which the Group was exposed and 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 2026 or 2025.
The Company has given guarantees in favour of Water Plus Limited in respect of the joint venture’s liabilities to wholesalers in the Open Water market.
The guarantees are capped at £51 million (2025: £51 million).
The registered office of Water Plus Group Limited is Prospect House, Gordon Banks Drive, Trentham Lakes, Stoke-on-Trent, United Kingdom, ST4 4TW.
Balance sheet and income statement extracts can be found below for Water Plus:
2026 2025
At 31 March £m £m
Non-current assets
36
39
Current assets
1
219
235
Current liabilities
2
(94)
(91)
Non-current liabilities
3
(163)
(199)
Net liabilities
(2)
(16)
1 Includes cash of £1 million (2025: £2 million)
2 Includes current financial liabilities (excluding trade and other payables and provisions) of nil (2025: nil)
3 Includes non-current financial liabilities of £163 million (2025: £199 million)
2026 2025
For the year ended 31 March £m £m
Revenue
912
780
Depreciation and amortisation
(5)
(5)
Finance income
1
–
Finance costs
(12)
(15)
Tax charge
(2)
(2)
Comprehensive loss for the year
(11)
(22)
The below shows a reconciliation from the net liabilities of Water Plus to the carrying value as above:
2026 2025
£m £m
Net liabilities of Water Plus at 31 March
(2)
(16)
Severn Trent’s share of net liabilities
(1)
(8)
Water Plus financial liabilities classified as part of net investment in joint venture
–
10
Share of Water Plus losses not recognised
3
–
Other
(2)
–
Carrying value of joint venture investment at 31 March
–
2
The net liabilities 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
2027.
Severn Trent Plc Annual Report and Accounts 2026 189
Strategic report Governance Financial statements
Notes to the Financial Statements continued
21 Investments in subsidiaries – Company
£m
At 1 April 2025
3,600
Additions arising from share based payment arrangements
10
At 31 March 2026
3,610
22 Categories of financial assets – Group
2026 2025
Note £m £m
Fair value through profit and loss
Cross currency swaps - not hedge accounted
70
14
Inflation swaps – not hedge accounted
5
6
Energy swaps - not hedge accounted
1
–
76
20
Derivatives designated as hedging instruments
Cross currency swaps - fair value hedges
2
9
Interest rate swaps - cash flow hedges
30
36
Energy swaps - cash flow hedges
13
1
45
46
Total derivative financial assets
121
66
Financial assets at amortised cost
Trade receivables
23
433
370
Accrued income
23
342
358
Other amounts receivable
23
87
91
Loan receivable from joint venture
23
51
71
Short term deposits
25
763
989
Cash at bank and in hand
25
33
59
Total financial assets at amortised cost
1,709
1,938
Total financial assets
1,830
2,004
Disclosed in the balance sheet as:
Non-current assets
Derivative financial assets
99
60
Trade and other receivables
2
6
Loan receivable from joint venture
51
71
152
137
Current assets
Derivative financial assets
22
6
Trade and other receivables
860
813
Cash and cash equivalents
796
1,048
1,678
1,867
1,830
2,004
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 190
23 Trade and other receivables – Group and Company
Group
Company
2026 2025 2026 2025
£m £m £m £m
Current assets
Net trade receivables
431
364
–
–
Other amounts receivable
87
90
–
1
Contract assets
29
31
–
–
Prepayments
44
35
1
–
Net accrued income
342
358
–
–
Amounts owed by group undertakings
–
–
44
49
933
878
45
50
Non-current assets
Net trade receivables
2
6
–
–
Prepayments
14
14
–
–
Loan receivable from joint venture
51
71
51
71
Amounts owed by group undertakings under loan agreements
–
–
1,850
1,652
67
91
1,901
1,723
1,000
969
1,946
1,773
Prepayments include unamortised success fees paid as a result of winning the MoD contract (see note 6) amounting to £2 million (2025: £3 million).
The costs are being amortised on a straight-line basis over the life of the contract.
The Company offers loan facilities to several of its subsidiaries, using the Bank of England base rate. The details of these facilities are detailed below:
Amount Facility
drawn amount Margin
2026 £m £m
%
Maturity date
Etwall Land Limited
10
12
1.375
29 March 2028
Hafren Dyfrdwy Cyfyngedig
30
35
1.700
8 March 2028
Midlands Land Portfolio Limited
15
31
1.375
29 March 2028
Severn Trent Draycote Limited
799
1,000
1.375
16 July 2027
Severn Trent Green Power Limited
45
50
1.375
28 August 2027
Severn Trent Holdings Limited
83
100
1.375
17 March 2029
Severn Trent Investment Holdings Limited
816
875
1.375
15 December 2027
Severn Trent (W&S) Limited
52
60
1.375
10 March 2028
Amount Facility
drawn amount Margin
2025 £m £m
%
Maturity date
Etwall Land Limited
10
12
1.375
29 March 2028
Hafren Dyfrdwy Cyfyngedig
14
30
1.375
8 March 2028
Midlands Land Portfolio Limited
15
31
1.375
29 March 2028
Severn Trent Draycote Limited
745
1,000
1.375
16 July 2027
Severn Trent Green Power Limited
21
25
4.750
31 August 2028
Severn Trent Holdings Limited
42
50
1.375
17 March 2027
Severn Trent Investment Holdings Limited
805
875
1.375
15 December 2027
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 92% of net trade receivables. Severn Trent Water has a statutory obligation to
provide water and wastewater 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’s 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 45, 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’s collection of trade receivables.
Severn Trent Plc Annual Report and Accounts 2026 191
Strategic report Governance Financial statements
Notes to the Financial Statements continued
23 Trade and other receivables – Group and Company continued
a) Credit risk continued
(i) Trade receivables and accrued income continued
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 (2025: nil).
(ii) Contract assets
The contract assets represent the Group’s 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 (2025: 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
three stage impairment model in IFRS 9.
b) Expected credit loss allowance
(i) Trade receivables and accrued income
The expected credit loss at 31 March 2026 and 2025 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.
Expected Gross carrying Loss Net carrying
loss rate amount allowance amount
2026 % £m £m £m
Unbilled amounts
1
347
(5)
342
Billed amounts, up to 1 year past due
17
303
(53)
250
1 – 2 years past due
24
90
(22)
68
2 – 3 years past due
25
59
(15)
44
3 – 4 years past due
29
38
(11)
27
4 – 5 years past due
33
27
(9)
18
5 – 6 years past due
33
18
(6)
12
6 – 7 years past due
56
16
(9)
7
7 – 8 years past due
58
12
(7)
5
8 – 9 years past due
71
7
(5)
2
More than 9 years past due
100
9
(9)
–
926
(151)
775
Expected Gross carrying Loss Net carrying
loss rate amount allowance amount
2025 % £m £m £m
Not past due
3
491
(17)
474
Up to 1 year past due
14
89
(12)
77
1 – 2 years past due
25
86
(22)
64
2 – 3 years past due
30
60
(18)
42
3 – 4 years past due
40
40
(16)
24
4 – 5 years past due
45
30
(14)
16
5 – 6 years past due
44
20
(9)
11
6 – 7 years past due
49
21
(10)
11
7 – 8 years past due
59
13
(7)
6
8 – 9 years past due
61
8
(5)
3
More than 9 years past due
99
9
(9)
–
867
(139)
728
Movements on the expected credit loss allowance were as follows:
2026 2025
£m £m
At 1 April
139
137
Charge for bad and doubtful debts
46
35
Amounts written off during the year
(34)
(33)
At 31 March
151
139
(ii) Loan receivable from joint venture
The Company has a facility of £95 million available to Water Plus Limited. The loan is unsecured and attracts interest at the Bank of England base rate +
3.25% and matures on 15 December 2029.
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
£55 million (2025: £75 million) from Water Plus, in the light of significant losses incurred by Water Plus. Following the loss incurred by 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 2026 based on Water Plus’s financial projections. The Group
has maintained the expected credit loss provision at £4 million (2025: £4 million) resulting in a net loan receivable of £51 million (2025: £71 million).
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 192
24 Inventory – Group
2026 2025
£m £m
Consumables
28
23
Land held for sale
20
20
48
43
25 Cash and cash equivalents – Group and Company
Group
2026 2025
£m £m
Cash at bank and in hand
33
59
Short term deposits
763
989
796
1,048
£22 million (2025: £33 million) of cash at bank and in hand is restricted for use on the MoD contract and £1 million (2025: £1 million) is held as security
for insurance obligations. Neither are available for use by the rest of the Group.
Company
2026 2025
£m £m
Cash at bank and in hand
6
6
Short term deposits
8
308
14
314
26 Borrowings – Group and Company
Group
Company
2026 2025 2026 2025
£m £m £m £m
Current liabilities
Bank overdraft
8
3
8
3
Other loans
341
517
–
–
Lease liabilities
17
13
–
–
366
533
8
3
Non-current liabilities
Bank loans
785
785
232
232
Amounts due to group undertakings under loan agreements
–
–
63
49
Other loans
9,746
8,281
200
199
Lease liabilities
87
98
–
–
10,618
9,164
495
480
10,984
9,697
503
483
See note 35 for details of interest rates payable and maturity of borrowings.
Company
Amounts due to group undertakings under loan agreements are as follows:
Amount Facility
drawn amount Margin Maturity
2026 £m £m % date
Lyra Insurance Guernsey Limited
16
16
1.375
30 March 2028
Severn Trent Property Solutions Limited
7
10
1.375
11 December 2028
Severn Trent Services Operations UK Limited
35
45
1.375
18 January 2029
Severn Trent Services (Water and Sewerage) Limited
3
5
1.375
8 December 2027
Severn Trent Data Portal Limited
1
2
1.375
15 July 2027
Industrial Water Jetting Systems Holdings Limited
2
5
1.375
29 September 2027
Amount Facility
drawn amount Margin
2025 £m £m
%
Maturity date
Lyra Insurance Guernsey Limited
14
15
1.375
30 March 2028
Severn Trent Property Solutions Limited
4
4
1.375
11 December 2026
Severn Trent Services Operations UK Limited
30
35
1.375
18 January 2027
Severn Trent Services (Water and Sewerage) Limited
1
5
1.375
8 December 2027
Severn Trent Plc Annual Report and Accounts 2026 193
Strategic report Governance Financial statements
Notes to the Financial Statements continued
27 Categories of financial liabilities - Group
2026 2025
Note £m £m
Fair value through profit and loss
Cross currency swaps - not hedge accounted
27
25
Interest rate swaps - not hedge accounted
3
5
Energy hedges - not hedge accounted
–
2
30
32
Derivatives designated as hedging instruments
Cross currency swaps - fair value hedges
20
15
Energy hedges - cash flow hedges
1
1
21
16
Total derivative financial liabilities
51
48
Other financial liabilities
Borrowings
26
10,984
9,697
Trade payables
28
183
174
Other payables
28
31
15
Accruals
28
604
457
Total other financial liabilities
11,802
10,343
Total financial liabilities
11,853
10,391
Disclosed in the balance sheet as:
Non-current liabilities
Derivative financial liabilities
50
45
Borrowings
10,618
9,164
Accruals
54
–
10,722
9,209
Current liabilities
Derivative financial liabilities
1
3
Borrowings
366
533
Trade payables
183
174
Other payables
31
15
Accruals
550
457
1,131
1,182
11,853
10,391
28 Trade and other payables – Group and Company
Group
Company
2026 2025 2026 2025
£m £m £m £m
Current liabilities
Trade payables
183
174
–
–
Social security and other taxes
17
12
–
–
Other payables
31
15
–
4
Accruals and receipts in advance
550
457
8
9
Amounts due to group undertakings
–
–
4
6
Contract liabilities
73
174
–
–
Deferred income
18
30
–
–
872
862
12
19
Non–current liabilities
Other payables
–
–
4
–
Accruals and receipts in advance
54
–
–
–
Deferred income
2,010
1,839
–
–
2,064
1,839
4
–
2,936
2,701
16
19
Movements in the contract liabilities and deferred income balances are set out in note 6 to the financial statements.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 194
29 Deferred tax – Group and Company
Group – Deferred tax liabilities
An analysis of the movements in the major deferred tax liabilities and assets recognised by the Group is set out below:
Retirement Fair value of
Accelerated tax benefit Tax financial
depreciation obligations losses instruments Other Total
£m £m £m £m £m £m
At 1 April 2024
1,602
(10)
(218)
(11)
2
1,365
Charge/(credit) to income statement
314
3
(224)
(1)
(1)
91
Acquisition of subsidiary
–
–
–
–
4
4
Charge to equity
–
9
–
2
1
12
At 1 April 2025
1,916
2
(442)
(10)
6
1,472
Charge/(credit) to income statement
317
–
(154)
(9)
(4)
150
Charge/(credit) to equity
–
10
–
4
(2)
12
At 31 March 2026
2,233
12
(596)
(15)
–
1,634
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:
2026 2025
£m £m
Deferred tax asset
(611)
(452)
Deferred tax liability
2,245
1,924
1,634
1,472
Company – Deferred tax asset
Retirement
benefit
obligations Other Total
£m £m £m
At 1 April 2024
1
–
1
Charge to income statement
–
–
–
At 1 April 2025
1
–
1
Credit to income statement
–
3
3
Credit to equity
–
1
1
At 31 March 2026
1
4
5
30 Retirement benefit schemes – Group and Company
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, closed to future accrual on 31 March 2024.
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’ 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 2025
Severn Trent Mirror Image Pension Scheme (‘STMIPS’)
31 March 2022
Water Companies Pension Scheme – Dee Valley Water Limited Section (‘DVWS’)
31 March 2023
* The STPS is by far the largest of the Group’s UK defined benefit schemes, comprising around 94% of the Group’s overall defined benefit obligations.
The defined benefit scheme assets have been updated to reflect their market value at 31 March 2026. 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.
Severn Trent Plc Annual Report and Accounts 2026 195
Strategic report Governance Financial statements
Notes to the Financial Statements continued
30 Retirement benefit schemes – Group continued
a) Defined benefit pension schemes continued
(ii) Amount included in the balance sheet arising from the Group’s obligations under the defined benefit pension schemes
2026 2025
£m £m
Fair value of assets
1,733
1,677
Present value of the defined benefit obligations
(1,754)
(1,797)
(21)
(120)
Presented on the balance sheet as:
Retirement benefit obligation – funded schemes in surplus
5
5
Retirement benefit obligation – funded schemes in deficit
(19)
(119)
Retirement benefit obligation – unfunded schemes
(7)
(6)
Retirement benefit obligation – total
(26)
(125)
Net retirement benefit obligation
(21)
(120)
2026 2025
STPS, STMIPS, and DVWS £m £m
Fair value of scheme assets
Equities
9
21
Annuity policies*
99
104
Corporate bonds
588
491
Liability-driven investment funds (‘LDI’s)
696
728
Property
129
209
Cash
212
123
Other
–
1
1,733
1,677
* On 29 July 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 MIPS. 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.
Some of the invested assets have quoted prices in active markets, including equity (£8 million), corporate bonds (£196 million) and cash (£212 million).
Within LDIs are government bonds (£244 million), index linked bonds (£735 million) and fixed income futures (£3 million) which are quoted and
unquoted liabilities which are repurchase agreements (£269 million) and swap contracts (£17 million).
The remaining investment assets, with the exception of annuities, are held in pooled investment vehicles which are unquoted, although some of the
assets held by those funds may be within actively traded markets.
Movements in the fair value of the scheme assets were as follows:
2026 2025
£m £m
Fair value at 1 April
1,677
1,805
Interest income on scheme assets
93
85
Contributions from the sponsoring companies
72
70
Return on plan assets (excluding amounts included in finance income)
14
(162)
Scheme administration costs
(4)
(4)
Benefits paid
(119)
(117)
Fair value at 31 March
1,733
1,677
Movements in the present value of the defined benefit obligations were as follows:
2026 2025
£m £m
Present value at 1 April
(1,797)
(2,018)
Past service cost
(2)
–
Interest cost
(100)
(96)
Actuarial gains/(losses) arising from changes in demographic assumptions
19
(1)
Actuarial gains arising from changes in financial assumptions
18
201
Actuarial losses arising from experience adjustments
(11)
(1)
Benefits paid
119
118
Present value at 31 March
(1,754)
(1,797)
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 £7 million (2025: £6 million) is included as an unfunded scheme within the retirement
benefit obligation.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 196
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
2026 2025
£m £m
Amounts charged to operating costs:
Past service cost
(2)
–
Scheme administration costs
(4)
(4)
(6)
(4)
Amounts charged to finance costs:
Interest cost
(100)
(95)
Amounts credited to finance income:
Interest income on scheme assets
93
85
Total amount charged to the income statement
(13)
(14)
The actual return on scheme assets was £108 million (2025: loss of £76 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’s contributions to the schemes are based on actuarial calculations which make assumptions about the returns expected from the schemes’
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’s 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, but has reduced this allocation over the year. 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 and floors. The Group’s
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’s 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.
Benefit risk
The Company is aware of the case involving Virgin Media and NTL Pension Trustee, and has completed a legal review of all relevant historical deeds and
has received confirmation that past amendments made are compliant.
Severn Trent Plc Annual Report and Accounts 2026 197
Strategic report Governance Financial statements
Notes to the Financial Statements continued
30 Retirement benefit schemes – Group continued
a) Defined benefit pension schemes continued
(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:
2026 2025
% pa % pa
Price inflation – RPI
3.4
3.1
Price inflation – CPI
Pre 2030:
2.4
2.1
Post 2030:
3.3
3.0
Discount rate
6.1
5.8
Pension increases
3.4
3.1
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 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:
2026
2025
Men
Women
Men
Women
Remaining life expectancy for members currently aged 60 (years)
26.0
27.9
25.8
28.7
Remaining life expectancy at age 60 for members currently aged 40 (years)
27.2
29.2
27.1
29.9
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’s 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% p.a.
Decrease/increase by £18 million
Price inflation
2
Increase/decrease by 0.1% p.a.
Increase/decrease by £15 million
Mortality
3
Increase in life expectancy by 1 year
Increase by £58 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 30 iv).
3 The change in 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 – 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.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 198
(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 11 years for STPS, 8 years for STMIPS and 10 years for DVWS.
The most recently completed formal triennial actuarial valuations and funding agreements were carried out as at 31 March 2025 for the STPS,
31 March 2022 for the STMIPS and 31 March 2023 for DVWS. As a result of the STPS actuarial valuation, annual deficit reduction contributions of
£40 million were agreed, with the March 2026 payment having been increased in line with the annual increase in CPI to November 2025. Thereafter,
future contributions for the STPS also increase in line with CPI inflation until March 2027. The contributions are paid into a limited liability partnership
that the Group and Trustee have set up. It is expected that all future deficit reduction contributions will continue to be paid into this limited liability
partnership, which is recognised as an asset of the Scheme.
Payments of £8 million per annum through an asset backed funding arrangement will continue to 31 March 2032 for the STPS. Further inflation-linked
payments of £15 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 asset backed funding contributions will cease earlier should a subsequent
valuation of the STPS show that these contributions 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 £51 million (2025: £43 million) represents contributions payable to these schemes by the Group at rates
specified in the rules of the scheme. As at 31 March 2026, no contributions (2025: 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.
31 Provisions – Group and Company
Group
Insurance Regulatory Other Total
£m £m £m £m
At 1 April 2025
18
56
21
95
Charged to income statement
12
–
9
21
Other net additions
–
42
–
42
Utilisation of provision
(8)
(50)
(5)
(63)
At 31 March 2026
22
48
25
95
2026 2025
£m £m
Included in:
Current liabilities
52
47
Non-current liabilities
43
49
95
96
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. The associated outflows are estimated to
arise over a period of up to five years from the balance sheet date. The other net additions predominantly comprises of £31 million of new projects and
projects which have moved to the relevant stage for provision recognition.
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.
Company
2026 2025
£m £m
At 1 April 2025 and 31 March 2026
1
1
2026 2025
£m £m
Included in:
Current liabilities
1
–
Non-current liabilities
–
1
1
1
Severn Trent Plc Annual Report and Accounts 2026 199
Strategic report Governance Financial statements
Notes to the Financial Statements continued
32 Share capital – Group and Company
2026 2025
£m £m
Total issued and fully paid share capital
303,308,247 ordinary shares of 97 17/19p (2025: 302,650,803)
297
296
At 31 March 2026, 2,218,618 treasury shares (2025: 2,438,224) were held at a nominal value of £2,171,910 (2025: £2,386,893).
Changes in share capital were as follows:
Number
£m
Ordinary shares of 97 17/19p
At 1 April 2024
301,742,969
295
Shares issued under the Employee Sharesave Scheme
907,834
1
At 1 April 2025
302,650,803
296
Shares issued under the Employee Sharesave Scheme
657,444
1
At 31 March 2026
303,308,247
297
33 Share premium – Group and Company
2026 2025
£m £m
At 1 April
1,378
1,363
Share premium arising on issue of shares for Employee Sharesave Scheme
14
15
At 31 March
1,392
1,378
34 Other reserves – Group and Company
Group
Capital
redemption Hedging
reserve reserve Total
£m £m £m
At 1 April 2024
157
11
168
Total comprehensive income for the year
–
7
7
At 1 April 2025
157
18
175
Total comprehensive income for the year
–
11
11
At 31 March 2026
157
29
186
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 other comprehensive income under the
hedge accounting provisions of IFRS 9.
Company
Capital
redemption
reserve
£m
At 1 April 2024, 1 April 2025 and 31 March 2026
157
The capital redemption reserve arose on the redemption of B shares.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 200
35 Capital management – Group
The Group’s principal objectives in managing capital are:
• to maintain a flexible and sustainable balance sheet structure;
• to maintain an investment grade credit rating;
• 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;
• to manage exposure to movements in interest rates to provide an appropriate degree of certainty as to its cost of funds;
• to minimise exposure to counterparty credit risk; and
• 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 14% (2025: 10%) of our
gross debt portfolio at the balance sheet date, with a further 22% (2025: 24%) of index-linked debt and 64% (2025: 66%) of fixed rate debt.
Exposure to credit risk (excluding credit risk relating to amounts receivable from contracts with customers) is set out in note 37 b).
Foreign exchange risk is set out in note 37 a) (ii).
At 31 March 2026 the Group had the following credit ratings:
Fitch
Moody’s
Severn Trent Plc
BBB
Baa2
Severn Trent Water
BBB+
Baa1
The ratings were stable.
A key metric in measuring financial sustainability and capital efficiency for companies in the water sector is regulated gearing. This is measured as
Severn Trent Water Group’s adjusted net debt plus Hafren Dyfrdwy Cyfyngedig’s adjusted net debt divided by the RCV published by Ofwat in its annual
update. At 31 March 2026 the regulated gearing was 63.6% (2025: 62.7%). See note 46 for the definition of adjusted net debt.
The Group’s dividend policy is a key tool in achieving its capital management objectives. This policy is reviewed and updated in line with Severn Trent
Water’s five-year price control cycle and takes into account, inter alia, the planned investment programme, the appropriate gearing levels 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 2025/26 dividend at 126.02 pence, an increase of 3.5% compared to the total dividend for 2024/25 of
121.71 pence. Our policy for AMP 8 is to grow the dividend annually at CPIH.
The Group’s capital at 31 March was:
2026 2025
£m £m
Cash and cash equivalents
796
1,048
Loans receivable from joint venture
51
71
Borrowings (note 26)
(10,984)
(9,697)
Valuation adjustments*
83
33
Adjusted net debt
(10,054)
(8,545)
Equity attributable to owners of the Company
(1,841)
(1,771)
Total capital
(11,895)
(10,317)
* The valuation adjustments which comprise exchange gains/losses on amounts borrowed in foreign currencies, adjustments on foreign currency debt in fair value hedges and accounting
adjustments on debt acquired with subsidiaries, are included in the carrying values of debt instruments, included in borrowings. However, as the foreign currency debt instruments are
economically hedged, the sterling value of the matching hedge reflects the Group’s sterling obligations. The accounting adjustments on acquisition will be amortised over the life of the debt
and do not represent a liability that will be settled in cash. The valuation adjustments above result in adjusted net debt reflecting the Group’s sterling obligations.
Severn Trent Plc Annual Report and Accounts 2026 201
Strategic report Governance Financial statements
Notes to the Financial Statements continued
36 Fair values of financial instruments – Group
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 - 3 based on the degree to which
the fair value is observable. The Group’s valuation techniques are all Level 2:
2026 2025
£m
£m
Valuation techniques and key inputs
Cross currency swaps Discounted cash flow
Assets 72 23 Future cash flows are estimated based on forward interest rates from
Liabilities (47) (39) 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.
Interest rate swaps Discounted cash flow
Assets 30 36 Future cash flows are estimated based on forward interest rates from
Liabilities (3) (5) observable yield curves at the period end and contract interest rates
discounted at a rate that reflects the credit risk of counterparties.
Energy swaps Discounted cash flow
Assets 14 1 Future cash flows are estimated based on forward electricity prices from
Liabilities (1) (3) observable indices at the period end and contract prices discounted at a rate
that reflects the credit risk of counterparties.
Inflation swaps Discounted cash flow
Assets 5 6 Future cash flows on the RPI leg of the instrument are estimated based on
Liabilities – – 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 (‘the CPI wedge’).
Both legs are discounted using observable swap rates at the period end, at a
rate that reflects the credit risk of counterparties.
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:
2026
2025
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Floating-rate debt
Bank loans
624
624
629
629
Other loans
148
154
148
155
Overdraft
8
8
3
3
780
786
780
787
Fixed-rate debt
Other loans
7,679
7,148
6,472
5,986
Lease liabilities
104
104
111
111
7,783
7,252
6,583
6,097
Index-linked debt
Bank loans
161
156
156
146
Other loans
2,260
1,564
2,178
1,557
2,421
1,720
2,334
1,703
10,984
9,758
9,697
8,587
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.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 202
37 Risks arising from financial instruments – Group
The Group’s activities expose it to a variety of financial risks:
• market risk (including interest rate risk, exchange rate risk and other price risk);
• credit risk;
• liquidity risk; and
• inflation risk.
The Group’s overall risk management programme addresses the unpredictability of financial markets and seeks to reduce potential adverse effects on
the Group’s financial performance or position.
Financial risks are managed by a central treasury department (‘Group Treasury’) 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’s Treasury Procedures Manual and Policy Statement and identifies, evaluates and hedges financial risks in
close co-operation with the Group’s 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’s policy is that derivative financial instruments are not held for trading but may be used to mitigate the Group’s 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’s exposure to changes in market interest rates. Further details are set out in section a) (i) of this note
and note 38 b) (i).
Cross currency swaps are held to mitigate the Group’s exposure to exchange rate movements on amounts borrowed in foreign currencies. Further
details are set out in section a) (ii) of this note and note 38 a).
Energy swaps are held to mitigate the Group’s exposure to changes in wholesale energy prices. Further details are provided in note 38 b) (ii).
Severn Trent Water, the Group’s 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’s annual income and its operating cash flows are substantially independent of changes in market interest rates. The Group’s 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’s policy is to maintain 40% to 70% of its interest-bearing liabilities in fixed rate instruments during AMP 8. In measuring this metric,
management uses adjusted net debt excluding financial assets.
2026 2025
£m £m
Adjusted net debt (note 35)
10,054
8,545
Cash and cash equivalents
796
1,048
Loans receivable from joint venture
51
71
Interest bearing financial liabilities
10,901
9,664
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’s 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.
Severn Trent Plc Annual Report and Accounts 2026 203
Strategic report Governance Financial statements
Notes to the Financial Statements continued
37 Risks arising from financial instruments continued
a) Market risk continued
(i) Interest rate risk continued
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.
Floating Fixed Index-
rate rate linked Total
2026 £m £m £m £m
Overdraft
(8)
–
–
(8)
Bank loans
(614)
(10)
(161)
(785)
Other loans
(1,133)
(6,633)
(2,238)
(10,004)
Lease liabilities
–
(104)
–
(104)
(1,755)
(6,747)
(2,399)
(10,901)
Impact of swaps not matched against specific debt instruments
275
(275)
–
–
Interest bearing financial liabilities
(1,480)
(7,022)
(2,399)
(10,901)
Proportion of interest bearing financial liabilities that are fixed
64%
Weighted average interest rate of fixed debt
3.98%
Weighted average period for which interest is fixed (years)
8.8
Floating Fixed Index-
rate rate linked Total
2025 £m £m £m £m
Overdraft
(3)
–
–
(3)
Bank loans
(614)
(15)
(156)
(785)
Other loans
(634)
(5,980)
(2,152)
(8,766)
Lease liabilities
–
(111)
–
(111)
(1,251)
(6,106)
(2,308)
(9,665)
Impact of swaps not matched against specific debt instruments
275
(275)
–
–
Interest bearing financial liabilities
(976)
(6,381)
(2,308)
(9,665)
Proportion of interest bearing financial liabilities that are fixed
66%
Weighted average interest rate of fixed debt
3.99%
Weighted average period for which interest is fixed (years)
8.7
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 £1 million
(2025: £2 million) in the income statement.
Average contract fixed
interest rate
Notional principal amount
Fair value
2026 2025 2026 2025 2026 2025
% % £m £m £m £m
Pay fixed rate interest
2 - 5 years
5.52
–
(35)
–
(2)
–
5 - 10 years
5.41
5.46
(40)
(75)
(1)
(5)
5.46
5.46
(75)
(75)
(3)
(5)
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’s profits, cash flow and equity, including the impact on derivative financial instruments, to changes in interest rates
at 31 March is as follows:
2026
2025
+1.0% -1.0% +1.0% -1.0%
£m £m £m £m
Profit or loss
(8)
8
(3)
3
Cash flow
(11)
11
(7)
7
Equity
(8)
8
(3)
3
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 204
(ii) Exchange rate risk
Except for debt raised in foreign currency, which is hedged, the Group’s business does not involve significant exposure to foreign exchange
transactions. Substantially all of the Group’s 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’s results to changes in exchange rates is not material.
Certain of the Group’s 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 (2025: 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 may be accounted for as fair value hedges. The notional value and fair value of these swaps is shown in note 38 a)(i).
The Group also has cross currency swaps with a sterling notional value of £2,997 million (2025: £1,323 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 £39 million (2025: charge of
£15 million) in the income statement, as well as an exchange loss of £69 million (2025: gain of £11 million) on the underlying debt.
The Group’s 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’s exposure to
exchange rate risk in relation to its currency borrowings.
EUR USD YEN AUD NOK CHF
2026 €m $m ¥bn $m Krm Frm
Borrowings by currency
(3,000)
(220)
(20)
(40)
(1,350)
(200)
Cross currency swaps - hedge accounted
–
70
10
40
–
–
Cross currency swaps - not hedge accounted
3,000
150
10
–
1,350
200
Net currency exposure
–
–
–
–
–
–
EUR USD YEN AUD
2025 €m $m ¥bn $m
Borrowings by currency
(1,470)
(220)
(10)
(40)
Cross currency swaps - hedge accounted
20
70
10
40
Cross currency swaps - not hedge accounted
1,450
150
–
–
Net currency exposure
–
–
–
–
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 23.
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
Number of counterparties
2026 2025 2026 2025 2026 2025
£m £m £m £m £m £m
Triple A range
750
600
283
394
5
4
Double A range
1,125
125
186
60
13
1
Single A range
1,145
1,570
294
535
13
22
3,020
2,295
763
989
31
27
The fair values of derivative assets analysed by credit ratings of counterparties were as follows:
Derivative assets
2026 2025
£m £m
Single A range
121
66
Severn Trent Plc Annual Report and Accounts 2026 205
Strategic report Governance Financial statements
Notes to the Financial Statements continued
37 Risks arising from financial instruments continued
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:
2026 2025
£m £m
2 – 5 years
1,617
1,100
(ii) Cash flows from non-derivative financial instruments
The following tables show the estimated cash flows that will arise from the Group’s 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.
Payments on
Trade and other financial
2026 Floating rate Fixed rate Index-linked payables liabilities
Undiscounted amounts payable: £m £m £m £m £m
Within 1 year
(97)
(522)
(43)
(792)
(1,454)
1 – 2 years
(95)
(515)
(45)
(28)
(683)
2 – 5 years
(550)
(1,550)
(558)
–
(2,658)
5 – 10 years
(266)
(4,181)
(294)
–
(4,741)
10 – 15 years
–
(3,359)
(263)
–
(3,622)
15 – 20 years
–
(785)
(514)
–
(1,299)
20 – 25 years
–
–
(366)
–
(366)
25 – 30 years
–
–
(830)
–
(830)
30 – 35 years
–
–
(3,315)
–
(3,315)
35 – 40 years
–
–
(28)
–
(28)
40 – 45 years
–
–
(395)
–
(395)
Total
(1,008)
(10,912)
(6,651)
(820)
(19,391)
Loans due from Trade and other Cash and short Receipts from
joint ventures receivables term deposits financial assets
Undiscounted amounts receivable: £m £m £m £m
Within 1 year
–
2
796
798
1 – 2 years
51
846
–
897
Total
51
848
796
1,695
Payments on
Trade and other financial
2025 Floating rate Fixed rate Index-linked payables liabilities
Undiscounted amounts payable: £m £m £m £m £m
Within 1 year
(54)
(791)
(36)
(647)
(1,528)
1 – 2 years
(328)
(1,933)
(321)
–
(2,582)
2 – 5 years
(440)
(1,427)
(387)
–
(2,254)
5 – 10 years
(287)
(2,598)
(258)
–
(3,143)
10 – 15 years
–
(1,473)
(168)
–
(1,641)
15 – 20 years
–
(889)
(296)
–
(1,185)
20 – 25 years
–
–
(385)
–
(385)
25 – 30 years
–
–
(716)
–
(716)
30 – 35 years
–
–
(3,473)
–
(3,473)
35 – 40 years
–
–
(23)
–
(23)
40 – 45 years
–
–
(412)
–
(412)
Total
(1,109)
(9,111)
(6,475)
(647)
(17,342)
Loans due from Trade and other Cash and short Receipts from
joint ventures receivables term deposits financial assets
Undiscounted amounts receivable: £m £m £m £m
Within 1 year
71
813
1,048
1,932
1 – 2 years
–
6
–
6
Total
71
819
1,048
1,938
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.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 206
(iii) Cash flows from derivative financial instruments
The following tables show the estimated cash flows that will arise from the Group’s 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
Interest Inflation Energy Cash Cash
rate swaps swaps swaps receipts payments Total
2026 £m £m £m £m £m £m
Within 1 year
7
(1)
8
238
(271)
(19)
1 – 2 years
6
(1)
4
122
(167)
(36)
2 – 5 years
12
(7)
1
408
(531)
(117)
5 – 10 years
–
(4)
–
2,532
(2,347)
181
10 – 15 years
–
1
–
1,778
(1,565)
214
25
(12)
13
5,078
(4,881)
223
Cross currency swaps
Interest rate Inflation Energy Cash Cash
swaps swaps swaps receipts payments Total
2025 £m £m £m £m £m £m
Within 1 year
16
1
(3)
60
(95)
(21)
1 – 2 years
5
1
–
172
(181)
(3)
2 – 5 years
8
6
–
188
(262)
(60)
5 – 10 years
–
4
–
784
(912)
(124)
10 – 15 years
–
(1)
–
784
(788)
(5)
29
11
(3)
1,988
(2,238)
(213)
The Group has the right to settle on a net basis, derivative cash (outflows)/inflows under ISDA master settlement arrangements with all derivative
counter parties, in certain circumstances, for example insolvency of either party. The amounts do not meet the criteria for offsetting and so are not
presented on a net basis in the balance sheet.
Amounts
Amounts subject to
presented in the master netting Net
balance sheet arrangements amounts
2026 £m £m £m
Derivative financial assets
121
(27)
94
Derivative financial liabilities
(51)
27
(24)
Amounts
Amounts subject to
presented in the master netting Net
balance sheet arrangements amounts
2025 £m £m £m
Derivative financial assets
66
(23)
43
Derivative financial liabilities
(48)
23
(25)
d) Inflation risk
The Group’s 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 (‘index-linked debt’). 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 has moved the measure of inflation used in the economic regulatory model from RPI to CPIH over a period. In anticipation of this the Group
has entered into CPI/RPI swaps with a notional value of £350 million (2025: £350 million) in order to mitigate the risk of divergence between inflation
measured by CPIH and that measured by RPI.
Severn Trent Plc Annual Report and Accounts 2026 207
Strategic report Governance Financial statements
Notes to the Financial Statements continued
37 Risks arising from financial instruments continued
d) Inflation risk continued
Inflation rate sensitivity analysis
The finance cost of the Group’s index-linked debt instruments varies with changes in CPI/CPIH/RPI rather than interest rates. The sensitivity at
31 March of the Group’s 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’s revenues and Regulatory Capital Value, or accounting for defined benefit pension
schemes.
2026
2025
+1.0% -1.0% +1.0% -1.0%
£m £m £m £m
Profit or loss
(18)
18
(17)
17
Equity
(18)
18
(17)
17
38 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 mainly 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 to mitigate the Group’s 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
2026 2025 2026 2025
£m £m £m £m
Euro
–
12
–
6
USD
55
55
(3)
(1)
Yen
60
60
(13)
(7)
AUD
21
21
(2)
(3)
136
148
(18)
(5)
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
2026 2025 2026 2025 2026 2025
Period to maturity % % £m £m £m £m
Less than one year
1.70
–
50
–
1
–
1 - 2 years
2.33
–
60
–
2
–
2 - 5 years
1.83
2.19
248
116
27
5
5 - 10 years
–
1.83
–
248
–
30
1.90
1.95
358
364
30
35
The Group recognised no gain or loss on hedge ineffectiveness (2025: nil) in losses on financial instruments in the income statement in relation to
interest rate swaps.
(ii) Energy swaps
The Group has entered into a series of energy swaps under which it has agreed to exchange the difference between fixed and market prices of
electricity at six-monthly intervals up until 31 March 2030.
Details of energy swaps that have been accounted for as cash flow hedges are summarised below:
Average contract price
Notional contracted amount
Fair value
2026 2025 2026 2025 2026 2025
Period to maturity £/MWh £/MWh MWh MWh £m £m
Less than 1 year
74.90
75.10
309,058
39,420
7
–
1 – 2 years
67.22
73.04
338,184
139,553
4
–
2 – 5 years
67.68
69.78
519,559
193,827
1
–
69.46
71.14
1,166,801
372,800
12
–
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 208
c) Cumulative fair value adjustments
At the year end the cumulative fair value adjustments arising from the corresponding continuing hedge relationships were as follows:
Cumulative amount of fair value
Carrying amount of hedged items adjustments on the hedged items
Assets Liabilities Assets Liabilities
2026 £m £m £m £m
Cross currency swaps
–
(117)
–
20
Cumulative amount of fair value
Carrying amount of hedged items adjustments on the hedged items
Assets Liabilities Assets Liabilities
2025 £m £m £m £m
Cross currency swaps
–
(142)
–
7
39 Share based payment – Group
The Group operates a number of share based remuneration schemes for employees. During the year, the Group recognised total expenses of
£13 million (2025: £11 million) related to equity settled share based payments transactions.
The weighted average share price during the year was £27.72 (2025: £25.27).
At 31 March 2026, there were no options exercisable (2025: 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 2022, 2023, 2024 and 2025 LTIP awards are subject to Severn Trent Water’s achievement of Return on Regulatory Equity in excess of the base
return included within the Final Determinations over a three-year vesting period, as well as performance across a range of non-financial metrics.
The 2022 LTIP vested at 100% in July 2025. It has been assumed that overall performance against the 2023 LTIP metrics will be 90%, while for the
2024 and 2025 LTIPs, 100% has been assumed (2025: 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 2024
632,418
Granted during the year
324,281
Vested during the year
(185,056)
Lapsed during the year
(19,855)
Outstanding at 1 April 2025
751,788
Granted during the year
328,408
Vested during the year
(194,051)
Lapsed during the year
(26,316)
Outstanding at 31 March 2026
859,829
Details of LTIP awards outstanding at 31 March were as follows:
Number of awards
Date of grant
Normal Date of Vesting
2026
2025
July 2022
2025
–
205,961
July 2023
2026
220,724
225,204
July 2024
2027
314,562
320,623
July 2025
2028
324,543
–
859,829
751,788
The awards outstanding at 31 March 2026 had a weighted average remaining contractual life of 1.6 years (2025: 1.7 years).
Details of the basis of the LTIP scheme are set out in the Directors’ Remuneration Report on pages 118 and 145.
Severn Trent Plc Annual Report and Accounts 2026 209
Strategic report Governance Financial statements
Notes to the Financial Statements continued
39 Share based payment – Group continued
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 2024
4,205,017
2,068p
Granted during the year
1,401,938
2,053p
Forfeited during the year
(50,821)
2,152p
Cancelled during the year
(328,231)
2,147p
Exercised during the year
(907,834)
1,773p
Lapsed during the year
(5,459)
2,111p
Outstanding at 1 April 2025
4,314,610
2,119p
Granted during the year
1,360,092
2,276p
Forfeited during the year
(64,245)
2,102p
Cancelled during the year
(274,070)
2,094p
Exercised during the year
(657,444)
2,199p
Lapsed during the year
(8,908)
2,169p
Outstanding at 31 March 2026
4,670,035
2,155p
Sharesave options outstanding at 31 March were as follows:
Number of awards
Normal date of
Date of grant
exercise
Option price
2026
2025
January 2020
2025
1,787p
100
131,801
January 2021
2026
1,860p
119,648
125,190
January 2022
2025 or 2027
2,307p
71,393
591,776
January 2023
2026 or 2028
2,183p
783,241
832,156
January 2024
2027 or 2029
2,120p
1,136,336
1,252,419
January 2025
2028 or 2030
2,053p
1,205,670
1,381,268
January 2026
2029 or 2031
2,276p
1,353,647
–
4,670,035
4,314,610
The options outstanding at 31 March 2026 had a weighted average remaining contractual life of 2.0 years (2025: 2.1 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:
2026
2025
LTIP
SAYE
LTIP
SAYE
3 year scheme
5 year scheme
3 year scheme
5 year scheme
Share price at grant date (pence)
2,774
2,943
2,943
2,351
2,496
2,496
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 (%)
4.5
4.3
4.3
5.2
4.9
4.9
Risk-free rate (%)
n/a
3.8
4.0
n/a
5.2
4.4
Fair value per share (pence)
2,751
647
652
2,327
499
470
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.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 210
40 Acquisitions – Group
Details of the more significant acquisitions are set out below.
Goodwill recognised on business combinations is not deductible for tax purposes.
a) Industrial Water Jetting Systems Limited
On 31 July 2025, the Company acquired the trade and assets of Industrial Water Jetting Systems Limited for a total consideration of £13 million. Details
of the purchase consideration, the net assets acquired and goodwill are as follows:
£m
Purchase consideration
Cash paid
12
Deferred consideration
1
Total consideration
13
The assets and liabilities recognised as a result of the acquisition are as follows:
£m
Property, plant and equipment
6
Net identifiable assets acquired
6
Add: goodwill
7
13
The fair value of the acquired net assets of £6 million is provisional, as management evaluation of the fair value of net assets remains ongoing.
b) Watertight Management Limited and Synergen Holdings Limited
On 1 August 2025, the Company acquired 100% of the issued shares in Watertight Management Limited and Synergen Holdings Limited as part of a
strategic supply chain integration, for a total consideration of £26 million. Details of the purchase consideration, the net assets acquired and goodwill
are as follows:
£m
Purchase consideration
Cash paid
20
Deferred consideration
4
Contingent consideration
2
Total consideration
26
The assets and liabilities recognised as a result of the acquisition are as follows:
£m
Property, plant and equipment
1
Trade and other receivables
4
Cash and cash equivalents
4
Inventory
1
Trade and other payables
(5)
Net identifiable assets acquired
5
Add: goodwill
21
26
The fair value of the acquired net assets of £5 million is provisional, as management evaluation of the fair value of net assets remains ongoing.
The Group also paid £9 million consideration relating to the acquisition of Reigate Environmental Services Limited and Howlett Associates Water
Treatment Limited resulting in the recognition of £8 million goodwill.
Total acquisition related costs of £1 million were recognised as an expense in the income statement.
Severn Trent Plc Annual Report and Accounts 2026 211
Strategic report Governance Financial statements
Notes to the Financial Statements continued
41 Cash flow statement – Group
a) Reconciliation of operating profit to operating cash flows
2026 2025
£m £m
Profit before interest and tax
861
590
Depreciation of property, plant and equipment
441
410
Depreciation of right-of-use assets
7
7
Amortisation of intangible assets
50
38
Impairment of property, plant and equipment
10
14
Pension service cost
2
–
Defined benefit pension scheme administration costs
4
4
Defined benefit pension scheme contributions
(72)
(70)
Share based payment charge
13
11
Profit on sale of property, plant and equipment and intangible assets
(5)
(5)
Release from deferred credits
(18)
(18)
Contributions and grants received
53
44
Provisions charged to the income statement
21
26
Utilisation of provisions for liabilities
(63)
(56)
Operating cash flows before movements in working capital
1,304
995
Increase in inventory
(5)
(2)
Increase in amounts receivable
(45)
(64)
Increase/(decrease) in amounts payable
11
(16)
Cash generated from operations
1,265
913
b) Non-cash transactions
Non cash investing and financing cash flows disclosed in other notes were:
• Acquisition of right-of-use assets (note 19).
• Acquisition of infrastructure assets from developers at no cost (note 17).
• Shares issued to employees for no cash consideration under the LTIP (note 39).
c) Reconciliation of movement in cash and cash equivalents to movement in adjusted net debt
Exchange on
currency
Net cash Fair value debt not Loans due
and cash Bank Other Lease accounting hedge from joint Adjusted
equivalents loans loans liabilities adjustments accounted venture net debt
£m £m £m £m £m £m £m £m
At 1 April 2025
1,045
(785)
(8,798)
(111)
23
10
71
(8,545)
Cash flow
(257)
6
(1,146)
15
–
–
(20)
(1,402)
Fair value adjustments
–
–
19
–
(19)
–
–
–
Inflation uplift on index-linked debt
–
(5)
(88)
–
–
–
–
(93)
Foreign exchange
–
–
(69)
–
–
69
–
–
Other non-cash movements
–
(1)
(5)
(8)
–
–
–
(14)
At 31 March 2026
788
(785)
(10,087)
(104)
4
79
51
(10,054)
d) Liabilities from financing activities
Bank Other Lease Interest
loans loans liabilities Derivatives accrual Total
£m £m £m £m £m £m
At 1 April 2024
(784)
(7,358)
(120)
45
(90)
(8,307)
Cash flow
5
(1,390)
14
2
308
(1,061)
Fair value adjustments
–
6
–
–
–
6
Inflation uplift on index-linked debt
(5)
(65)
–
–
–
(70)
Foreign exchange
–
10
–
–
–
10
Other non-cash movements
(1)
(1)
(5)
(29)
(317)
(353)
At 1 April 2025
(785)
(8,798)
(111)
18
(99)
(9,775)
Cash flow
6
(1,151)
15
2
406
(722)
Fair value adjustments
–
19
–
–
–
19
Inflation uplift on index-linked debt
(5)
(88)
–
–
–
(93)
Foreign exchange
–
(69)
–
–
–
(69)
Other non-cash movements
(1)
–
(8)
50
(394)
(353)
At 31 March 2026
(785)
(10,087)
(104)
70
(87)
(10,993)
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 212
42 Contingent liabilities – Group and Company
Group
a) Bonds and guarantees
Group undertakings have entered into bonds and guarantees in the normal course of business. No liability (2025: nil) is expected to arise in respect of
either bonds or guarantees.
b) Ongoing combined sewer overflow investigations
Ofwat and the Environment Agency are each conducting their own investigations into the wastewater industry. The Environment Agency is investigating
all English wastewater companies in respect to compliance with conditions of permits (therefore excluding Hafren Dyfrdwy Cyfyngedig). Ofwat has
been investigating all English and Welsh wastewater companies’ compliance with licence conditions, section 94 of the Water Industry Act 1991 and
the Urban Wastewater Treatment Regulations.
In summer 2024, Ofwat served notices upon Severn Trent Water Limited and Hafren Dyfrdwy Cyfyngedig, along with the other companies that had
previously been excluded from the original list of enforcement cases, to enable Ofwat to request information to ascertain whether or not there has
in-fact been any non-compliance in relation to their wastewater treatment processes as part of Ofwat’s sector wide investigation. Both the Ofwat
and EA investigations are ongoing and we await the decision. We have responded comprehensively to all questions from the regulators and continue
to engage positively with them on the issues under investigation.
c) Collective Action Claim
In December 2023, Severn Trent Water Limited and Severn Trent Plc were served with the collective proceedings order (‘CPO’) application, alongside
five other water and sewerage companies for separate (but equivalent) claims, in respect of potential collective proceedings to be brought before
the Competition Appeal Tribunal (‘CAT’) (formerly referred to as the ‘Leigh Day Claim’). The Group have received a claim for £239 million (excluding
interest) on behalf of a class comprising certain consumers of STW (on an opt-out basis) who alleged to have been overcharged for sewerage services
as a result of an alleged abuse of a dominant position.
The preliminary Certification Hearing to determine if the claim is capable of being heard by the CAT and should proceed to trial was held on
23 September 2024 and on 7 March 2025 the CAT handed down judgment. The CAT held that the alleged failure of the potential defendants to supply
accurate information for the statutory regime of price control under the Water Industry Act 1991 was an “essential ingredient” of the claimant’s claims
for breach of statutory duty under the Competition Act 1998. As a result, the CAT concluded that the claims for abuse of dominance were excluded by
s18(8) of the Water Industry Act 1991 and dismissed. On 28 March 2025 the claimant sought permission to appeal the dismissal by the CAT with the
Court of Appeal. On 5 March 2026, the Court of Appeal dismissed the appeal. On 9 April 2026, Professor Roberts applied for permission to appeal
to the Supreme Court. It is unknown if the Supreme Court will grant permission to hear the appeal as it does not raise any legal principles of general
public interest and the Supreme Court recently considered the leading authority for this claim (i.e. Manchester Ship Canal). A decision from the
Supreme Court is not expected until Autumn 2026.
Company
Bank offset agreements
The banking arrangements of the Company operate on a pooled basis with certain of its subsidiary undertakings. Under these arrangements
participating companies guarantee each other’s overdrawn balances to the extent of their credit balances, which can be offset against balances
of participating companies. As at 31 March 2026, the Company had no contingent liabilities (2025: nil).
43 Financial and other commitments – Group
Investment expenditure commitments
2026 2025
£m £m
Property, plant and equipment contracted for but not provided for in the financial statements
857
759
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
wastewater services.
44 Post balance sheet events – Group and Company
Following the year end the Board of Directors has proposed a final dividend of 75.62 pence per share.
Severn Trent Plc Annual Report and Accounts 2026 213
Strategic report Governance Financial statements
Notes to the Financial Statements continued
45 Related party transactions – Group and Company
Group
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.
2026 2025
£m £m
Sale of services
238
234
Net interest income
4
5
242
239
Outstanding balances between the Group and the joint venture as at 31 March were as follows:
2026 2025
£m £m
Amounts due to related parties
–
(1)
Loans receivable from joint venture
51
71
51
70
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 30.
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’ Remuneration Report on pages 118 to 145.
Fixed pay Bonus (deferred Service
and benefits Bonus into shares) LTIPs Contracts Total
2026 £’000 £’000 £’000 £’000 £’000 £’000
Non-Executive Directors
–
–
–
–
783
783
Executive Directors
1,625
112
112
1,304
–
3,153
Other members of the Executive Committee
2,621
1,319
1,301
1,616
–
6,857
4,246
1,431
1,413
2,290
783
10,793
Fixed pay Bonus (deferred Service
and benefits Bonus into shares) LTIPs Contracts Total
2025 £’000 £’000 £’000 £’000 £’000 £’000
Non-Executive Directors
–
–
–
–
754
754
Executive Directors
1,562
665
665
1,884
–
4,776
Other members of the Executive Committee
2,422
1,124
1,124
1,197
–
5,867
3,984
1,789
1,789
3,081
754
11,397
The remuneration amounts disclosed above for executives are equivalent to those disclosed in the ‘total single figure of remuneration (audited)’
in the annual report on remuneration with the exception of members who have not been in office for the full financial year. The remuneration for
these individuals is pro-rated in the Directors’ Remuneration Report whereas the table above presents their remuneration for the full financial year.
Company
The Company has applied the exemption in FRS 101 from disclosing transactions with its wholly owned subsidiaries.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 214
46 Alternative Performance Measures (‘APMs’) – Group
Financial measures or metrics used in this report that are not defined by IFRS are alternative performance measures (‘APMs’). 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’ APMs. These measures are not intended to be a substitute for, or
superior to, IFRS measurements.
a) 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.
b) Adjusted net debt
Adjusted net debt comprises borrowings excluding fair value accounting adjustments on debt, net cash and cash equivalents, and loans to joint
ventures. Foreign currency borrowings that are hedged by cross currency swaps are included at the notional principal of the sterling payable leg of the
swap. See note 41.
c) 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 adjusted net debt during the year.
2026 2025
£m £m
Net finance costs
302
244
Net finance costs from pensions
(7)
(10)
Capitalised finance costs
150
103
445
337
Average adjusted net debt
9,237
7,755
Effective interest cost
4.8%
4.3%
This APM is used as it shows the average finance cost for the adjusted net debt of the business.
d) 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).
2026 2025
£m £m
Net finance costs
302
244
Net finance costs from pensions
(7)
(10)
Indexation adjustments
(93)
(70)
Capitalised finance costs
150
103
352
267
Average adjusted net debt
9,237
7,755
Effective cash cost of interest
3.8%
3.4%
This is used as it shows the average finance cost that is paid in cash.
e) PBIT interest cover
The ratio of PBIT to net finance costs excluding net finance costs from pensions.
2026 2025
£m £m
PBIT
861
590
Net finance costs
302
244
Net finance costs from pensions
(7)
(10)
Net finance costs excluding net finance costs from pensions
295
234
ratio
ratio
PBIT interest cover ratio
2.9
2.5
This is used to show how the PBIT of the business covers the financing costs associated only with adjusted net debt on a consistent basis.
Severn Trent Plc Annual Report and Accounts 2026 215
Strategic report Governance Financial statements
Notes to the Financial Statements continued
46 Alternative Performance Measures (‘APMs’) – Group continued
f) EBITDA and EBITDA interest cover
The ratio of profit before interest, tax, depreciation and amortisation to net finance costs excluding net finance costs from pensions.
2026 2025
£m £m
PBIT
861
590
Depreciation (including right-of-use assets)
448
416
Amortisation
50
38
Impairment
10
14
EBITDA
1,369
1,058
Net finance costs
302
244
Net finance costs from pensions
(7)
(10)
Net finance costs excluding finance costs from pensions
295
234
EBITDA interest cover ratio
4.6
4.5
This is used to show how the EBITDA of the business covers the financing costs associated only with adjusted net debt on a consistent basis.
g) 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 and share of net loss of joint ventures accounted for using the equity method.
£m
2026 2025
Current tax Current tax
thereon thereon
£m
£m
£m
Profit before tax
524
–
320
–
Adjustments
Share of net loss of joint venture
2
–
11
–
Net losses on financial instruments
33
–
15
–
559
–
346
–
Adjusted effective current tax rate
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 loss of joint ventures is excluded from the calculation because the loss is included after tax and so the tax on joint venture profits is not
included in the current tax charge.
h) Operational cashflow
Cash generated from operations less contributions and grants received.
2026 2025
£m £m
Cash generated from operations
1,265
913
Contributions and grants received
(53)
(44)
Operational cashflow
1,212
869
This APM is used to show operational cash excluding the effect of contributions and grants received as part of capital programmes.
i) 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.
2026 2025
£m £m
Purchases of property, plant and equipment
1,896
1,553
Purchases of intangible assets
46
40
Contributions and grants received
(53)
(44)
Proceeds on disposal of property, plant and equipment
(5)
(11)
Cash capex
1,884
1,538
This APM is used to show the cash impact of the Group’s capital programmes.
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 216
j) 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.
2026 2025
£m £m
Additions to property, plant and equipment
2,235
1,969
Additions to intangible assets
46
40
Contributions and grants received
(53)
(44)
Assets contributed at no cost
(124)
(189)
Capitalised finance costs
(150)
(103)
Capital investment
1,954
1,673
Includes £42 million (2025: £42 million) of provisions for future capital expenditure arising from regulatory obligations (See notes 17 and 31).
47 Subsidiary undertakings – Group and Company
Details of all subsidiary undertakings as at 31 March 2026 are given below. Details of the joint venture are set out in note 20. 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
Chester Water Limited
Severn Trent Green Power Limited
Dee Valley Group Limited
Severn Trent Green Power Lodge Farm Limited
Dee Valley Limited
Severn Trent Holdings Limited
East Worcester Water Limited
Severn Trent Investment Holdings Limited
Etwall Land Limited
Severn Trent LCP Limited
Hafren Dyfrdwy Cyfyngedig
Severn Trent Leasing Limited
Howlett Associates Water Treatment Limited
Severn Trent Metering Services Limited
Industrial Water Jetting Systems Holdings Limited
Severn Trent MIS Trustees Limited
Lakeside Water and Building Services Limited
Severn Trent Overseas Holdings Limited
M A Solutions (LINDUM) Ltd
Severn Trent Pension Scheme Trustees Limited
Mains Infrastructure Construction Limited
Severn Trent PIF Trustees Limited
Midlands Land Portfolio Limited
Severn Trent Property Solutions Limited
Reigate Environmental Services Limited
Severn Trent Reservoirs Limited
Severn Trent (W&S) Limited
Severn Trent Retail and Utility Services Limited
Severn Trent Bower Limited
Severn Trent Services (Water and Sewerage) Limited
Severn Trent Data Portal Limited
Severn Trent Services Defence Holdings Limited
Severn Trent Draycote Limited
Severn Trent Services Defence Limited
Severn Trent General Partnership Limited
Severn Trent Services Holdings Limited
Severn Trent Green Power (Andigestion) 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 Finance Limited
Severn Trent Green Power (CW) Limited
Severn Trent Solar Holdings Limited
Severn Trent Green Power (Hertfordshire) Limited
Severn Trent SSPS Trustees Limited
Severn Trent Green Power (North London) Limited
Severn Trent Trimpley Limited
Severn Trent Green Power (RBWM) Limited
Severn Trent Utilities Finance Plc
Severn Trent Green Power (Wallingford) Limited
Severn Trent Water Limited
Severn Trent Green Power (West London) Limited
Severn Trent Wind Power Limited
Severn Trent Green Power Atherstone Limited
Synergen Holdings Limited
Severn Trent Green Power Biogas Limited
Synergen Utilities Limited
Severn Trent Green Power Cayton Limited
Watertight Holdings Limited
Severn Trent Green Power Church Farm Limited
Watertight Management Limited
Severn Trent Green Power Composting Limited
Watertight Management Holdings Limited
Severn Trent Green Power Group Limited
Wrexham Water Limited
Severn Trent Green Power Holdings Limited
Severn Trent Plc Annual Report and Accounts 2026 217
Strategic report Governance Financial statements
Notes to the Financial Statements continued
47 Subsidiary undertakings – Group and Company continued
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
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’s 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
Lakeside Water and Building Services Limited
Unit 6, Enterprise Court, Eagle Business Park, Falcon Way, Peterborough,
Cambridgeshire, PE7 3GR
Lyra Insurance Guernsey Limited
St Martin's 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 (Andigestion) Limited
The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
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 Atherstone 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 Cayton Limited
The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power Church Farm 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
Severn Trent Green Power Limited
The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Severn Trent Green Power Lodge Farm Limited
The Stables, Radford, Chipping Norton, Oxfordshire, OX7 4EB
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 218
Subsidiary audit exemptions
Severn Trent Plc has issued guarantees over the liabilities of the following companies at 31 March 2026 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
East Worcester Water Limited
2757948
Etwall Land Limited
7559793
Industrial Water Jetting Systems Holdings Limited
6044159
Lakeside Water and Building Services Limited
03631827
MA Solutions (LINDUM) Ltd
5107976
Midlands Land Portfolio Limited
07559692
Severn Trent (W&S) Limited
3995023
Severn Trent Bower Limited
14513739
Severn Trent Carsington Limited
7570384
Severn Trent Data Portal Limited
8181048
Severn Trent Draycote Limited
7681784
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 Atherstone Limited
12559241
Severn Trent Green Power Cayton Limited
11780059
Severn Trent Green Power Church Farm Limited
13207815
Severn Trent Green Power Composting Limited
4927756
Severn Trent Green Power Lodge Farm Limited
12558704
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 Reservoirs Limited
3115315
Severn Trent Retail and Utility Services Limited
2562471
Severn Trent Services International (Overseas Holdings) Limited
3125131
Severn Trent Services International Limited
2387816
Severn Trent Solar Finance Limited
16018635
Severn Trent Solar Holdings Limited
16015007
Severn Trent Trimpley Limited
10690056
Synergen Holdings Limited
15009862
Synergen Utilities Limited
12717978
Watertight Holdings Limited
10060805
Watertight Management Limited
07245349
Watertight Management Holdings Limited
15009731
Severn Trent Plc Annual Report and Accounts 2026 219
Strategic report Governance Financial statements
Continuing operations
2026
£m
2025
£m
2024
£m
2023
£m
2022
£m
Turnover 2,831 2,427 2,338 2,165 1,943
Profit before interest and tax 861 590 512 509 506
Increase in expected credit loss on loan receivable – – (3) – –
Net interest payable before losses on financial instruments (302) (244) (282) (363) (269)
(Losses)/gains on financial instruments (33) (15) (22) 22 39
Results of associates and joint ventures (2) (11) (4) – (2)
Profit on ordinary activities before taxation 524 320 201 168 274
Current taxation on profit on ordinary activities (3) – (6) – 5
Deferred taxation (150) (91) (56) (36) (72)
Exceptional tax – – – – (294)
Profit/(loss) for the year 371 229 139 132 (87)
Net assets employed
Property, plant and equipment 15,079 13,307 11,767 10,717 10,609
Other net liabilities excluding adjusted net debt, retirement benefit
obligation, provisions and deferred tax (1,504) (1,322) (1,129) (1,037) (1,381)
Derivative financial instruments 70 18 45 72 15
Net retirement benefit obligation (21) (120) (213) (279) (128)
Provisions for liabilities and deferred tax (1,729) (1,567) (1,448) (1,378) (1,381)
11,895 10,316 9,022 8,095 7,734
Financed by
Called up share capital 297 296 295 249 248
Reserves 1,544 1,475 1,539 722 1,016
Total shareholders' funds 1,841 1,771 1,834 971 1,264
Adjusted net debt 10,054 8,545 7,188 7,124 6,471
11,895 10,316 9,022 8,095 7,735
Statistics
Earnings per share (continuing) - pence 124 77 51 53 (35)
Adjusted earnings per share - pence 184 112 79 58 97
Adjusted dividends per share - pence 126 122 117 107 102
Dividend cover
1
1.5 0.9 0.7 0.5 1.0
Ordinary share price at 31 March - pence 3,090 2,531 2,470 2,879 3,078
Average number of employees
- Regulated Water and Wastewater 10,047 8,989 8,150 7,176 6,612
- Other 550 550 541 475 506
1 Dividend cover has been calculated as adjusted earnings per share divided by adjusted dividends per share.
Five Year Summary
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 220
A&M
Alvarez & Marsal
ABS
Annual Bonus Scheme
AD
Anaerobic Digestion
ADRs
American Depositary Receipts
AGM
Annual General Meeting
AI
Artificial Intelligence
AMP
Asset Management Plan
APD
Acid Phase Digestion
ARA
Annual Report and Accounts
ASP
Activated Sludge Processes
ATC
Advanced Thermal Conversion
BABE
Burst and Background Estimate
BAP
Biodiversity Action Plan
BIO
Protection and Restoration of
BiodiversityandEcosystems
BNG
Biodiversity Net Gain
BOD
Biochemical Oxygen Demand
CAW
Carbon Accounting Workbook
CAPEX
Capital Expenditure
CCA
Climate Change Adaptation
CCM
Climate Change Mitigation
CCW
Consumer Council for Water
CDP
Carbon Disclosure Project
CE
Circular Economy
CEO
Chief Executive Officer
CFD
Climate-related Financial Disclosures
CFO
Chief Financial Officer
CHP
Combined Heat and Power
C-MeX
Customer Measure of Experience
CPIH
Consumer Prices Index including
owneroccupiers’ housing costs
CRI
Compliance Risk Index
CSO
Combined Sewer Overflow
CSRD
Corporate Sustainability Reporting Directive
D&I
Diversity and Inclusion
Defra
Department for Environment,
FoodandRuralAffairs
DMA
Double Materiality Assessment
D-MeX
Developer Measure of Experience
DNOs
Distribution Network Operators
DNSH
Do No Significant Harm
DNV
DNV Business Assurance Services UKLimited
DRIP
Dividend Reinvestment Plan
DWI
Drinking Water Inspectorate
DWMP
Drainage and Wastewater Management Plan
DWSP
Drinking Water Safety Plan
EA
Environment Agency
EBITDA
Earnings Before Interest, Tax, Depreciation and
Amortisation
EBT
Employee Benefit Trust
EDMs
Event Duration Monitoring
eDNA
Environmental DNA
EPA
Environmental Performance Assessment
EPS
Earnings Per Share
EQ
Equiniti
ERM
Enterprise Risk Management
ESG
Environmental, Social and Governance
EV
Electric Vehicle
FBU
Fair, balanced and understandable
FCA
Financial Conduct Authority
FOC
Flooding Other Causes
FRC
Financial Reporting Council
FRIEDA
Field Response Investigation
EvidenceandDataApp
FRS
Financial Reporting Standards
FTSE
Financial Times Stock Exchange Index
GAC
Granular and Powdered ActivatedCarbon
GFI
Green Finance Institute
GHG
Greenhouse Gas
GWh
Gigawatt hour
H&S
Health and Safety
Ha
Hectares
HGV
Heavy Goods Vehicle
HR
Human Resources
HSW
Health, Safety & Wellbeing
HVO
Hydrotreated Vegetable Oil
IED
Industrial Emissions Directive
IFRS
International Financial Reporting Standards
INNS
Invasive Non-Native Species
IPPC
International Plant Protection Convention
ISSB
International Sustainability Standards Board
KPM
Key Performance Measure
LEAP
Learning, Employability and Preparation
LCV
Light Commercial Vehicle
LTDS
Long-Term Delivery Strategy
Glossary
Severn Trent Plc Annual Report and Accounts 2026 221
Strategic report Governance Financial statements
LTIP
Long-Term Incentive Plan
LTI
Lost Time Incident
LTP
Liquor Treatment Plant
MABR
Membrane Aerated Biofilm Reactor
MoD
Ministry of Defence
MPs
Members of Parliament
MRA
Mining Remediation Authority
MST
Microbial Source Tracking
NEET
Not in Education, Employment or Training
NGO
Non-Governmental Organisation
NRW
Natural Resources Wales
NZTP
Net Zero Transition Plan
ODI
Outcome Delivery Incentive
ONS
Office for National Statistics
OPEX
Operating Expenditure
OWC
Other water company
PBIT
Profit before Interest and Tax
PCC
Per Capita Consumption
PCD
Price Control Deliverable
PESTLE
Political, Economic, Sociological,
Technological,Legal and Environment
PESR
Post-Employment Shareholding Requirement
PFAS
Per and Polyfluoroalkyl Substances
PIRP
Pollution Incident Reduction Plan
PPC
Pollution Prevention and Control
PR24
Price Review 2024
PRP
Performance Related Pay
PSR
Priority Services Register
R2IC
Resource, Recovery and Innovation Centre
RAG
Red/Amber/Green status
RCP
Representative Concentration Pathway
RCV
Regulatory Capital Value
REGO
Renewable Energy Guaranteees
RGGO
Renewable Gas Guarantees of Origin
RNAGS
Reasons for Not Achieving Good Status
RoRE
Return on Regulated Equity
RPI
Retail Price Index
RS
Renewable Sources
s.172
Section 172 Statement
SAC
Special Areas of Conservation
SBT
Science-Based Targets
SBTi
Science-Based Targets initiative
SDS
Strategic Direction Statement
SEND
Special Educational Needs and Disabilities
Sharesave
Severn Trent Sharesave Scheme
SID
Senior Independent Non-Executive Director
SOAF
Storm Overflow Assessment Framework
SPS
Sewage Pumping Station
SRF
Strategic Risk Forum
SROs
Strategic Resource Options
SRS
UK Sustainability Reporting Standards
SSSIs
Sites of Special Scientific Interest
STEC
Severn Trent Executive Committee
STEPS
Severn Trent Environmental Protection Scheme
SuDS
Sustainable urban Drainage Systems
TCFD
Task Force on Climate-related
FinancialDisclosures
tCO
2
e
Tonnes of carbon dioxide equivalent
THP
Thermal Hydrolysis Plant
TNFD
Taskforce on Nature-related
FinancialDisclosures
TOMs
Themes, Outcomes and Measures
TSR
Total Shareholder Return
UKCSI
UK Customer Satisfaction Index
UKWIR
UK Water Industry Research
UQ
Upper Quartile
UV
Ultraviolet
UWWT
Urban Wastewater Treatment
WaSCs
Water and Sewerage Company
WFD
Water Framework Directive
WINEP
Water Industry National
EnvironmentProgramme
WIRI
Water Industry Regulation Incidents
WMCA
West Midlands Combined Authority
WRMP
Water Resources Management Plan
WTR
Sustainable Use and Protection
ofWaterandMarine Resources
WWF-UK
World Wide Fund for Nature
ZTA
Zero Trust Architecture
Glossary continued
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 222
Equiniti
The Company’s registrar is Equiniti (‘EQ’). If you have any queries relating
to your Severn Trent Plc shareholding, contact EQ. on:
Telephone: +44 (0) 371 384 2967¹
Online: www.shareview.co.uk
Accessibility: For deaf and speech impaired customers, EQ welcome
calls via Relay UK. Please see www.relayuk.bt.com formore information.
By post: Equiniti, Highdown House, Yeoman Way, Worthing, West Sussex,
BN99 6DA, UK. Please include your shareholder reference and details of
your query.
Corporate Website
Shareholders are encouraged to visit our website severntrent.com for
more information on:
• who we are, our businesses and plans;
• our governance arrangements;
• our approach to sustainability and innovation; and
• how to join the Severn Trent Team.
We operate a dedicated investors section on the website that provides
up-to-date information on our investment proposition. In the Shareholder
centre you will find:
• share price information;
• dividend history; and
• access to current and historical shareholder information.
Digital Communications
EQ’s Shareview Portfolio service is an online, secure service that is free to
shareholders and easy to use and allows shareholdings to be managed in
one place. It allows shareholders to access arange of information about
their shareholdings via the internet. Thisincludes holding details (such as
name and address), indicative share prices, recent balance changes and
dividend information. By registering for Shareview, notifications are set to
digital by default and the following benefits are enabled for shareholders:
• manage your personal details;
• buy and sell shares;
• vote at company meetings; and
• view tax vouchers and statement online.
This enables us to reduce our impact on the environment and benefit from
savings associated with reduced printing and mailing costs. Ifyou need to,
you can amend your notification preferences through the My Details page
once you have logged in.
For further information and to register for electronic shareholder
communications visit www.shareview.co.uk and register for an online
portfolio account or scan the QR code.
Scan the QR code to sign up for the
ShareviewPortfolio service
Financial Calendar
Ex dividend date – final dividend 28 May 2026
Record date to be eligible for the final dividend 29 May 2026
DRIP election date – final dividend 24 June 2026
AGM 9 July 2026
Final dividend payment date 15 July 2026
Dividends
The Directors are recommending a final divided of 75.62 per ordinary
share to be paid on 15 July 2026 to shareholders on theregister as at
29 May 2026.
Dividend Payments
Dividends are now paid by direct transfer, and cheque payments have
ceased. This change demonstrates our commitment to reducing our
environmental impact, while also providing a faster, more efficient
payment method. Benefits of direct payment include:
• receive cleared funds into your bank account on the payment date;
• avoid postal delays and reduce the risk of lost cheques in the post; and
• reduce the volume of paper in dividend mailing.
To provide or update your bank mandate details, contact EQ or register/
log in to www.shareview.co.uk and select ‘Arrange direct dividend payments’.
Dividend Reinvestment Plan (‘DRIP’)
The DRIP gives shareholders the option of using their dividend payments
to buy more Severn Trent Plc shares instead of receiving cash. If you would
like to participate in the DRIP, please request adividend reinvestment
planmandate from Equiniti Financial Services Limited via the Customer
Experience number below orarrange online via www.shareview.co.uk by
registering for/logginginto your portfolio account (via Help, the Dividend
FAQ and Re-investment options). Information on the DRIP can be accessed
directly via www.shareview.info/products/drip/.
Other Information
Buying and selling shares in the UK
If you wish to buy or sell certificated Severn Trent Plc shares, you
mayneed to use a stockbroker or high street bank which trades on
theLondon Stock Exchange. There are also many telephone and online
services available to you.
If you are selling, you will need to present your share certificate at the
time of sale. Details of dealing services offered by Equiniti Financial
Services Limited may be obtained from www.shareview.co.uk or by
contacting 03456 037 037² for assistance, or for general enquiries
youcanemail enquiries@equinitishareviewdealing.com.
Arranging asalevia telephone will incur additional fees.
Share price information
Shareholders can find share price information and interactive tools on
our website. For a real-time buying or selling price, you should contact
astockbroker of your choice, or this service is available via Shareview.
American Depositary Receipts (‘ADRs’)
TheBank of New York Mellon (‘BNY Mellon’) acts as Depositary a
sponsored Level 1 ADR programme which trades under the symbol
STRNY on the OTC Market. EachADR represents one Severn Trent
ordinary share. If you have anyenquiries regarding Severn Trent ADRs,
please contact BNY Mellon.
Post: BNY Shareowners Services, PO Box 43006, Providence,
RI02940-3078, US
Telephone: If calling from within the US: (888) 269 2377 (toll-free),
orifcalling from outside the US: +1 201 680 6825
Email: shrrelations@cpushareownerservices.com
Website: www.computershare.com/investor
Donate to Charity
It is possible to donate your shares, or proceeds to charity.
Ifyou’dliketouse your investment to help others, please visit
https://www.severntrent.com/shareholder-centre/manage-your-shares/.
1 Please use the country code when calling from outside the UK. Lines are open from 8.30am to 5.30pm (UK time), Monday to Friday (excluding public holidays inEngland and Wales). Calls
from a landline are charged at national rates. Calls from a mobile device may incur network extras.
2 Lines are open Monday to Friday, 8.00am to 4.30pm for dealing, and until 6.00pm for enquiries (excluding public holidays in England and Wales). Calls from alandline are charged at national
rates. Calls from a mobile device may incur network extras.
Information for Shareholders
Severn Trent Plc Annual Report and Accounts 2026 223
Strategic report Governance Financial statements
Fraud Awareness
Fraudsters use persuasive and high-pressure tactics to entice investors
into scams. Shareholders are advised to be wary of any unsolicited advice
or offers whether over the phone through the post or by email.
If you receive any unsolicited communication, please check that the
company or person is authorised by the Financial Conduct Authority
(‘FCA’) before engaging in communication. The FCA maintains a Warning
List of unauthorised companies to avoid, please visit www.fca.org.uk/
consumers/warning-list-unauthorised-firms.
To find out how to spot the warning signs of investment, pension and
otherfinancial scams, visit fca.org.uk/scamsmart.
If you buy or sell shares from an unauthorised company or person you
willnot have access to the Financial Ombudsman Service or Financial
Services Compensation Scheme.
Report any suspicious activity to the FCAviawww.fca.org.uk/consumers/
report-scam, or contact themon08001116768 (freephone), 0300 500
8082 (from the UK), +442070661000 (from abroad) or (18001) 0207 066
1000 (next generation text relay). If you have already paid money to
fraudsters contact Report Fraud on 0300 123 2040 or onlinevia
www.reportfraud.police.uk.
Always consider obtaining independent financial and professional advice
before you hand over any personal data, documents or money.
Unsolicited Mail
The Company is legally obliged to make its share register available tothe
general public. Consequently, some shareholders may receive unsolicited
mail. If you wish to limit the amount of unsolicited mail youreceive, please
contact: Mailing Preference Service, DMA House, 70 Margaret Street,
London, W1W 8SS. Alternatively, register online at www.mpsonline.org.uk
or call the MPS Team on 0207 291 3310.
Cautionary statement
This document contains statements that are, or may be deemed tobe,
‘forward-looking statements’ with respect to Severn Trent’s financial
condition, results of operations and business and certain of Severn
Trent’s plans and objectives with respect to these items.
Forward-looking statements are sometimes, but not always, identified
by their use of a date in the future or such words as ‘anticipates’, ‘aims’,
‘due’, ‘could’, ‘may’, ‘will’, ‘would’, ‘should’, ‘expects’, ‘believes’, ‘intends’,
‘plans’, ‘projects’, ‘potential’, ‘reasonably possible’, ‘targets’, ‘goal’,
‘estimates’ or words with asimilar meaning, and, in each case, their
negative or other variations or comparable terminology. Any forward-
looking statements in this document are based on Severn Trent’s
current expectations and, by their very nature, forward-looking
statements are inherently unpredictable, speculative and involve
riskand uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future performance
and no assurances can be given that the forward-looking statements
inthis document will be realised. There are a number of factors, many
of which are beyond Severn Trent’s control, that could cause actual
results, performance and developments to differ materially from
those expressed or implied by these forward-looking statements.
These factors include, but are not limited to: the Principal Risks
disclosed in our latest Annual Report and Accounts (which have
notbeen updated since the date of its publication); changes in the
economies and markets in which the Group operates; changes in
theregulatory and competition frameworks in which the Group
operates; the impact of legal or other proceedings against or which
affect the Group; and changes in interest and exchange rates.
All written or verbal forward-looking statements, made in this
document or made subsequently, which are attributable to Severn
Trent or any other member of the Group or persons acting on their
behalf are expressly qualified in their entirety by the factors referred
to above. This document speaks as at the date of publication. Save
asrequired by applicable laws and regulations, Severn Trent does
notintend to update any forward-looking statements and does not
undertake any obligation to do so. Past performance of securities
ofSevern Trent Plc cannot be relied upon as a guide to the future
performance of securities of Severn Trent Plc.
Nothing in this document should be regarded as a profits forecast.
Certain information contained herein is based on management
estimates and Severn Trent’s own internal research. Management
estimates have been made in good faith and represent the current
beliefs of applicable members of Severn Trent’s management.
Whilethose management members believe that such estimates
andresearch are reasonable and reliable, they, and their underlying
methodology and assumptions, have not been verified by any
independent source for accuracy or completeness and are subject
tochange without notice, and, by their nature, estimates may not be
correct or complete. Accordingly, no representation orwarranty
(express or implied) is given to any recipient of this document that
suchestimates are correct or complete.
This document is not an offer to sell, exchange or transfer any securities
of Severn Trent Plc or any of its subsidiaries and is notsoliciting an offer
to purchase, exchange or transfer such securities in any jurisdiction.
Securities may not be offered, soldortransferred in the United States
absent registration oranapplicable exemption from the registration
requirements ofthe US Securities Act of 1933 (as amended).
Information for Shareholders continued
Strategic report Governance Financial statements
Severn Trent Plc Annual Report and Accounts 2026 224
This report has been printed on Printspeed
Offset,a paper which is certified by the Forest
Stewardship Council
®
. The paper is made ata
millwith ISO 14001 Environmental Management
System accreditation.
Printed by Pureprint Group usingvegetable oil
based inks, Pureprint Group is a CarbonNeutral
®
printer, certified to ISO 14001 Environmental
Management System.
Consultancy, design and production
www.luminous.co.uk
Registered in England and Wales
Registration number: 2366619
Severn Trent Plc
Registered office:
Severn Trent Centre
2 St John’s Street
Coventry
CV1 2LZ
severntrent.com