Severn Trent PLC · LSE:SVT
Severn Trent — H1 2007/08 Earnings Presentation
51 slides from Severn Trent's earnings presentation, Nov 27, 2007
Slide 1: Disclaimers
Disclaimers For the purposes of the following disclaimers, references to this "document" shall be deemed to include references to the presenters' speeches, the question and answer session and any other related verbal or written communications. This document contains certain “forward-looking statemen
Slide 2: Interim Results: 6 Months to 30 September 2007
Interim Results 6 Months to 30 September 2007 Presentation – 27 November 2007 1
Slide 3: Sir John Egan, Chairman
SEVERN TRENT Po Sir John Egan Chairman
Slide 4: Mike McKeon, Finance Director
Mike McKeon Finance Director 3
Slide 5: Highlights
Highlights H1 2006/07 H1 2007/08 Change £m £m % Group Turnover 746 774 3.7% Profit Before Interest and Tax 219 250 14.2% (PBIT*) Profit Before Tax (PBT**) 142 162 13.5% Adjusted Basic EPS*** (pence) 42.1p 47.6p 13.1% Basic EPS (pence) 55.8p 64.7p 15.9% from continuing and discontinued operations Div
Slide 6: Water and Sewerage Turnover
Water and Sewerage Turnover Water and Sewerage Turnover £m +5.0% 36 (12) 2 641 3 2 610 C C N H A O H on us et 1 llo th 1 20 20 er t g s w om um ro 06 ed 07 w er /0 /0 pt Pr th 7 8 io re /m ic n b e et at (R er e PI ac op + cr ta K ua nt ) l s Business segment turnover is stated gross (i.e. including
Slide 7: Water and Sewerage PBIT
Water and Sewerage PBIT Water and Sewerage PBIT £m +9.5% 30.2 (6.8) 5.8 (4.2) (3.5) 247.1 225.6 Tu N D H En In H et ep 1 1 f rn er ra 20 20 C re ov s gy os 06 07 c tru e ia tI /0 /0 r c tio m 7 tu 8 n pa re ct Numbers shown before exceptional items 6
Slide 8: Financial impact of floods
Financial impact of floods ■ Net exceptional costs charged in H1 2007/08 are £18.2m − Gross costs incurred and provided for at 30 September 2007 £23.2m − Insurance recoveries received to date £5.0m ■ Work ongoing to fully assess the longer term impact of flood damage on all elements of the affected
Slide 9: Water Technologies and Services performance
Water Technologies and Services performance Change H1 2006/07 H1 2007/08 % Turnover* £137.7m £146.4m 6.3% PBIT** £9.0m £10.1m 12.2% ROIC*** 10.1% 11.8% • H1 2006/07 turnover adjusted for disposals and impact of exchange rates (See Appendix slide 49) ** PBIT before exceptional items *** Return On Inv
Slide 10: Corporate & Other
Corporate & Other Integration of Head Office functions now complete H1 2006/07 H1 2007/08 Change £m £m % Corporate Costs (13.5) (5.9) 56.3% Other (1.3) 0.6 146.2% PBIT* (14.8) (5.3) 64.2% * Excluding exceptional items 9
Slide 11: Cash Flow
W at er an d Se w £m er ag e 197.4 Se rv ic O e s th 6.3 er Cash Flow ( in c. C or p or O at pe e) ra (30.9) tin g C as h Fl H1 2007/08 operating cash flow ow 172.8 In t er e st (55.2) Ta x (37.0) D iv id en ds (90.8) Sh ar e is su es O 7.1 th er m ov e m en M ts ov e m (35.5) en ti n ne t de bt (38
Slide 12: Liquidity position
Liquidity position ■ Un-drawn committed bank facilities of £500m ■ Cash on deposit of £423m ■ No commercial paper outstanding ■ Committed facilities cover next 18 months maturities ■ Index linked debt increased from £0.6bn to £1.0bn ■ Average maturity > 20 years 11
Slide 13: Group finance charges and net debt
Group finance charges and net debt Interest Net debt £m £m 94.9 84.0 (6.3) (6.7) 88.6 77.3 3,128 3,166 2,867 H1 2006/07 H1 2007/08 30 Sept 2006 31 Mar 2007 30 Sept 2007 Net finance cost Net pension credit Net Debt* ■ Effective rate circa 5.6 % * ■ 69% at fixed interest rates ■ Interest cover*: ■ Ave
Slide 14: Effective rate of tax
Effective rate of tax H1 2006/07 Effective current tax rate% H1 2007/08 Effective current tax rate% (3.4%) 0.3% 30.8% 30.5% 30.8% 27.4% Effective rate* Exceptional items H1 2007/08 as reported Effective rate* Exceptional items H1 2007/08 as reported (incl prior year adjs.) (incl prior year adjs.) 20
Slide 15: Financial summary
Financial summary On track to deliver 2007/08 financial performance as expected Head office costs reduced Delivering on dividend growth commitment 14
Slide 16: Tony Wray, Chief Executive
SEVERN TRENT Po Tony Wray Chief Executive 15
Slide 17: Focus on water
Focus on water ■ The right team to deliver ■ Legacy issues ■ Focus on water 16
Slide 18: The right team to deliver
The right team to deliver Tony Wray Mike McKeon Chief Executive Finance Director Tony Ballance Martin Kane Andy Smith Richard Martin Director of Director of Director of Water Director of Waste Regulation & Customer Services Water Services Competition Relations Peter Gavan Alec Richmond Alec Luhaste
Slide 19: Legacy Issues
Legacy Issues mSFO mw Ofwat 18
Slide 20: Focus on water
Focus on water Dec 2006 Feb 2007 Jun 2007 Today Group restructuring – focus on water Diagnose, evaluate options and build plans New Deliver on KPIs Organisation Benchmark our performance Separate Clean Water and Wastewater operations Prioritise and validate options Detailed process reviews Focus on
Slide 21: We are now on a journey…
We are now on a journey… SLIDE FROM PRELIMINARY RESULTS PRESENTATION 6 JUNE 2007 Key Area Objective Measure Relative Performance Worst Best Provide a safe working environment Lost time incidents Employee Develop a confident & productive workforce Employee motivation Provide a world class product Wat
Slide 22: Focus on delivery
Focus on delivery ■ Good performance and improvement in some key areas: − Leakage − Customer complaints − Pollution incidents − Opex. vs. Final Determination − Capex. vs. Final Determination − Lost time incidents (safety) 21
Slide 23: KPI: Leakage
KPI: Leakage DMA Leakage profile 460 450 440 Ml/d 430 420 410 400 Apr May Jun Jul Aug Sep Oct Nov* Dec Jan Feb Mar 2006/07 2007/08 * Nov 2007/08 estimate based on first 3 weeks data & 1 week forecast ■ Proactive focus on 600 worst performing DMAs to bring them under control ■ Resource plans affected
Slide 24: KPI: Customer complaints
KPI: Customer complaints Customer written complaints per 1,000 properties 3 Half- 2 yearly billing effect 1 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2006/07 2007/08 ■ Billing System performance stabilised ■ Business Process Reviews identifying and delivering efficiency opportunities ■ Suffi
Slide 25: KPI: Pollution incidents
KPI: Pollution incidents Pollution incidents* per 1,000 properties 75 65 55 45 35 25 15 6 7 6 7 6 7 6 7 7 6 -0 -0 0 0 -0 -0 -0 -0 0 -0 n- n- b- ug ug pr pr ct ct ec Ju Ju Fe O O A A A D A Category 3 Category 1&2 Moving annual average Pollution reduction plan delivering improvements * Confirmed incid
Slide 26: KPI: Opex vs. Final Determination
KPI: Opex. vs. Final Determination ■ Actual FY 2006/07: − Overshot Ofwat’s Final Determination by £18.9m principally due to rising energy costs ■ Forecast FY 2007/08: − On track to meet Ofwat’s Final Determination 25
Slide 27: KPI: Capex vs. Final Determination
KPI: Capex. vs. Final Determination ■ H1 2007/08 gross capex.* is £258.1m ■ Delivery of Water and Waste AMP4 obligations on track ■ Forecast 6% efficiency over AMP4 * UK GAAP before taking account of grants and other income 26
Slide 28: KPI: Lost time incidents
KPI: Lost time incidents Lost time incidents (LTI) 10 8 Incidents 6 4 2 0 2006/07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Avg Lost days 20 15 Long term absence Days 10 Short term absence Moving annual total 5 0 2006/07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Avg 27
Slide 29: Water Technologies and Services
Water Technologies and Services ■ Focus on Water ■ Growth Opportunities − Existing technology to new markets − New technology to existing markets ■ Delivering revenue, margin and ROIC* growth * Return On Invested Capital (LTM PBIT before exceptionals/Net operating assets plus gross goodwill from acq
Slide 30: The longer term
The longer term ■ The summer 2007 flooding raised three broad questions for our business: − The adequacy of flood defences − The degree of system resilience such that the failure of a key asset can be substituted by other means without interruption of service − The adequacy of contingency planning s
Slide 31: Focus on Water
Focus on Water Focus on Water The right team Delivering our investment programme and sustainable investment returns 30
Slide 32: Q&A
SEVERN TRENT Po Q&A 31
Slide 33: SEVERN
SEVERN TRENT Po SEVERN TRENT
Slide 34: Appendix
SEVERN TRENT Po Appendix 33
Slide 35: Contact Details – Investor Relations
Contact Details – Investor Relations Venetia Cooper Investor Relations Manager Severn Trent Plc 2297 Coventry Road Birmingham B26 3PU United Kingdom Tel: +44 (0)121 722 4523 Fax: +44 (0)121 722 4294 e:mail venetia.cooper@stplc.com www.severntrent.com 34
Slide 36: Group income statement summary
Group income statement summary Six Months to 30 September 2007 30 Sep 30 Sep 2006 2007 Variance Variance £m £m £m % 746.2 Turnover 774.0 27.8 3.7 (527.2) Operating costs (524.0) 3.2 0.6 219.0 Profit before exceptional items, interest and tax 250.0 31.0 14.2 4.2 Exceptional items (21.4) (25.6) (609.5
Slide 37: Group Earnings
Group Earnings Six months to 30 September 2007 H1 2006/07 H1 2007/08 £m £m 130.4 Profit for the period 152.1 129.5 Attributable to - Equity holders of the company 150.9 0.9 - Minority Interests 1.2 Variance Variance Pence Pence pence % Basic earnings per share from continuing operations 42.1 Adjuste
Slide 38: Group balance sheet
Group balance sheet 30 September 2007 31 Mar 30 Sep Movement since 2007 2007 31 Mar 2007 £m £m £m 5,521.1 Property, plant and equipment 5,612.0 90.9 150.3 Intangible assets 148.8 (1.5) 4.1 Other non-current assets 4.2 0.1 (357.9) Working Capital/provisions (404.2) (46.3) 5,317.6 Capital employed 5,3
Slide 39: Movements on shareholders’ equity
Movements on shareholders’ equity Six months to 30 September 2007 H1 2007/08 £m At 31 March 1,137.3 Total recognised income for the financial period 152.7 Dividends (90.8) Credit from share based payments charge 1.6 Shares issued (net of shares purchased for ESOP) 7.1 Tax on share based payments pos
Slide 40: Credit ratings
Credit ratings 30 September 2007 Long-Term Severn Trent Water Severn Trent Plc Moody’s A2 A3 Standard & Poor’s A A- Short-Term Severn Trent Water Severn Trent Plc Moody’s P1 P2 Standard & Poor’s A1 A1 Confirmed by Rating Agencies. 39
Slide 41: Segmental analysis of capital employed
Segmental analysis of capital employed 30 September 2007 Total Net operating assets Goodwill Total 31 March 2007 30 Sep 2007 30 Sep 2007 30 Sep 2007 £m £m £m £m 5,267.5 Water and Sewerage 5,284.0 - 5,284.0 128.7 Water Technologies and Services 84.2 48.4 132.6 (78.6) Other (55.8) - (55.8) 5,317.6 Gro
Slide 42: PBITD analysis
PBITD* analysis Six months to 30 September 2007 Group Group H1 2006/07 H1 2007/08 £m £m 337.2 Water and Sewerage 362.3 16.1 Water Technologies and Services 13.2 (17.7) Other (8.2) 335.6 Group** 367.3 * Profit before interest, tax, depreciation and amortisation of intangible assets, excluding excepti
Slide 43: Depreciation analysis
Depreciation* analysis Six months to 30 September 2007 Group Group H1 2006/07 H1 2007/08 £m £m 111.6 Water and Sewerage 115.2 7.1 Water Technologies and Services 3.1 (2.1) Other (1.0) 116.6 Group 117.3 * Including amortisation of intangibles, excluding profit/loss on disposal of fixed assets and def
Slide 44: Capital expenditure (net cash)
Capital expenditure (net cash)* Six months to 30 September 2007 H1 2006/07 H1 2007/08 £m £m (159.5) Water and Sewerage (216.5) (2.8) Water Technologies and Services (3.9) 3.0 Other 2.9 (159.3) (217.5) (31.8) Waste Management - (1.6) US Laboratories - (192.7) Group (217.5) * Net of grants received an
Slide 45: Water and Sewerage – income statement highlights
Water and Sewerage – income statement highlights Six months to 30 September 2007 H1 2006/07 H1 2007/08 Change Change £m £m £m % Turnover 605.4 Severn Trent Water 634.2 28.8 4.8 6.8 Retail & Utility Services 6.9 0.1 1.5 (1.8) Intra segment trading (0.5) 1.3 72.2 610.4 640.6 30.2 4.9 Operating Costs (
Slide 46: Severn Trent Water – turnover
Severn Trent Water – turnover Six months to 30 September 2007 £m % Six months to 30 September 2006 605.4 RPI + K 35.7 5.9 641.1 5.9 Consumption Reduced consumption (12.0) (2.0) Net growth/meter optants New customers/Income protection 4.2 0.7 Meter optants (2.7) (0.4) 631.6 4.2 Other 0.4 0.1 631.0 4.
Slide 47: Severn Trent Water – operating costs
Severn Trent Water – operating costs Six months to 30 September 2007 H1 2006/07 H1 2007/08 Variance Variance £m £m £m % 230.9 Direct operating costs* 231.8 0.9 0.4 107.7 Depreciation** 111.2 3.5 3.2 42.5 Infrastructure renewals 46.7 4.2 9.9 381.1 Total 389.7 8.6 2.3 * Net of other income £2.0m (£1.5
Slide 48: Severn Trent Water – capex reconciliation
Severn Trent Water – capex reconciliation Six months to 30 September 2007 H1 2007/08 £m UK GAAP gross capex 258.1 Less grants and contributions (22.9) UK GAAP net capex* 235.2 Treated as IFRS infrastructure operating expenditure (46.7) 188.5 Movement on capital creditors 28.6 Proceeds on sale of fix
Slide 49: Severn Trent Water – RCV
Severn Trent Water – RCV 30 September 2007 £m 2005/06 2006/07 2007/08 2008/09 2009/10 Per Determination* 4,853 4,981 5,107 5,191 5,292 STW Actual/Estimated 5,209 5,546 5,903 6,154 6,430 Outturn** Ofwat Actual/Projected 5,209 5,546 5,803 5,898 6,013 Outturn*** * 2002/03 prices ** At year-average outt
Slide 50: Water Technologies and Services performance
Water Technologies and Services performance H1 2006/07 H1 2007/08 Change £m £m % 149.5 Turnover 146.4 (2.1)% (5.2) Pipeline Services (-) 144.3 146.4 (6.6) Exchange rate impact - 137.7 146.4 6.3% 49
Slide 51: SEVERN
SEVERN TRENT Po SEVERN TRENT