United Utilities Group Plc · LSE:UU.
United Utilities — FY2020/21 Earnings Presentation
47 slides from United Utilities's earnings presentation, Mar 31, 2021
Slide 1: Full year results
Full year results Year ended 31 March 2021 United Utilities Group PLC United Utilities • 2020/21 full year results
Slide 2: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2020/21 full year results
Slide 3: Highlights
Highlights A digital utility – delivering ESG is at our heart Investing incremental £300m excellent performance for sustainable performance – fully remunerated Robust financial performance Targeting around £150m of backed by a strong AMP7 customer balance sheet ODI rewards United United Utilities Ut
Slide 4: Digital transformation delivering excellent performance
Digital transformation delivering excellent performance Zero 31% 53% Lowest serious pollution reduction in environmental reduction in water ever level of incidents for two pollution consecutive years; supply interruptions leakage best in sector incidents performance 100% 4 star 13% 93% wastewater tr
Slide 5: Excellent customer service delivery
Excellent customer service delivery Supporting the Significant AMP7 most vulnerable Digital transformation customer ODIs Open Banking Upper quartile 200,000 - innovating to help customers better for customer service measures helped with affordability On track for rewards for both 1 million 133,000 e
Slide 6: £300m additional totex investment in sustainable performance
£300m additional totex investment in sustainable performance Net regulatory capex (£m) 700 600 500 400 300 200 100 - 2020/21 2021/22 2022/23 2023/24 2024/25 Base capex Additional capex FD capex profile 1. The light blue blocks on the chart amount to c£220m representing the capex elements of the £300
Slide 7: Ground breaking applications of Systems Thinking
Ground breaking applications of Systems Thinking State of the art sensors Investing for 1 sustainable Near real-time performance Dynamic 2 performance information Network 3 Predictive machine intelligence £100m incremental Management totex1 Proactive optimisation (DNM) 4 of system performance Recove
Slide 8: Delivering net customer ODI rewards
Delivering net customer ODI rewards Met or exceeded over Key ODIs contributing to 2020/21 performance 2020/21 forecast performance range (P10/P90) 80% Penalties Rewards of our performance -20 -15 -10 -5 0 5 10 15 20 commitments Reducing interruptions to water supply Mains repair Sewer blockages Inte
Slide 9: Commitment to net zero by 2030
Commitment to net zero by 2030 73% reduction in emissions – ahead of 2020 target; AMP7 plans build on enhanced resilience delivered in AMP6 Commitment to meet our science- Net zero by 2030 consistent with science-based targets of 1 based targets (scope 1&2) 42% reduction by 2030 and 100% by 2050 100
Slide 10: Recycling capital
Recycling capital Tallinn JV Renewable Energy Sold for cash Maximised consideration of €100m opportunities to date to achieve carbon targets Continued support of Profit on disposal of £37m decarbonisation with power agreements through to 2045 Proceeds reduce net debt Looking to recycle investment by
Slide 11: Embracing diversity and inclusion
Embracing diversity and inclusion 89% 92% 4.5/5 employee employees would rating from former engagement – recommend UU to and current better than UK high friends as a great employees on performance place to work Glassdoor Growing Hosted the membership of sector’s first employee Social Mobility divers
Slide 12: Phil Aspin, Chief Financial Officer
Phil Aspin Chief Financial Officer United Utilities • 2020/21 full year results
Slide 13: Financial highlights
Financial highlights Household Underlying Underlying Dividend Revenue bad debt operating profit1,2 EPS1,2 per share £1,808m 2.2% £602m 56.2p 43.24p of revenue 2019/20: 2019/20: 2019/20: 2019/20: 2019/20: £1,859m 1.8% £732m 71.3p 42.60p Raising Strong Return on finance efficiently balance sheet regul
Slide 14: Revenue
Revenue Revenue £m Includes strong performance in identifying void properties 13 Consumption up due to 1,859 Covid and dry weather Lower consumption 9 from businesses as a 6 47 1,808 result of Covid broadly (80) offset by higher consumption from 5.5% real reduction in (47) households typical HH bill
Slide 15: Strong cash performance
Strong cash performance 1 Marginal 2 Household statutory bad debt charge (% of household revenue) Data led increase in approach 4.00% underlying bad 3.7% 3.1% reported bad debt charge debt charge of included £17m exceptional charge Low balance just £5m as a 3.50% as a result of Covid sheet risk resu
Slide 16: Underlying operating profit
Underlying operating profit Underlying1 operating profit £m 732 £8m rates refund in 2019/20 (51) (22) (22) (14) (6) Network optimisation (15) 602 Including £13m of COVID related costs 2019/20 UOP Revenue IRE Depreciation Property rates Innovation Fund Other 2020/21 UOP 1 Underlying measures reflect
Slide 17: Interest, joint ventures, tax and earnings
Interest, joint ventures, tax and earnings Underlying net Joint Underlying Underlying profit finance expense1 Ventures tax charge1 after tax1 £132.8m £9.3m 17% £383.0m £58m lower Share of At 2019/20: than 2019/20 underlying losses £77m £486.3m Change to alternative 2019/20 £6.1m share of Total tax c
Slide 18: Financing performance
Financing performance 1 £2.4bn Existing debt locked in at rates favourable to financing to raise the AMP7 allowed cost of embedded debt 2 in AMP7 RPI-linked CPI-linked Fixed Floating £900m 8,000 raised in 7,000 2020/21 at 3 attractive rates 6,000 Liquidity extended out to 5,000 2.5% 2.4% 2.2% 2.3% 2
Slide 19: Sustainable financing based on strong ESG credentials
Sustainable financing based on strong ESG credentials £300m More than notional 3x over- amount subscribed 2 days’ Long-8yr engagement term, maturing Sustainable with c50 October 2029 Finance Framework institutional investors launched in November 2020 replacing green EIB funding no 0.875% longer avai
Slide 20: Raising finance efficiently – outperforming the index
Raising finance efficiently – outperforming the index by 50 -100bps UK Water sector GBP bonds (excl. fees) vs iBoxx yield less 15bps £65m CPI linked (1 April 2020 to 31 March 2021) amortising 20yr £450m 17yr bond 3.10 bond £40m 30yr bond 2.60 £375m 8yr bond £300m 20yr bond 2.10 £350m 20yr bond Yield
Slide 21: Strong balance sheet – low household debtor risk
Strong balance sheet – low household debtor risk Household customer receivables position on the balance sheet 2021 household debtors £17m one-off extra £115m COVID provision £m £101m £93m £93m Trade debtors <1 year 65.6 £78m £78m Trade debtors 1-2 years 12.0 Trade debtors >2 years 0.0 Total 77.6 Rec
Slide 22: Strong balance sheet – net debt to RCV gearing
Strong balance sheet – net debt to RCV gearing RCV gearing of 62% supports stable A3 credit rating with Moody’s Net debt £m 53 49 12 129 7,361 292 7,398 (92) 7,306 639 (1,037) (85) (8) (6) RCV gearing calculated as group net debt / UUW’s shadow RCV (outturn) of £11,729m Full detail of the adjustment
Slide 23: Strong balance sheet – pension surplus is a key differentiator
Strong balance sheet – pension surplus is a key differentiator 1 2 3 £689m Focus on We are not IFRS pension RoRE as a measure making deficit surplus at March-21 – of relative value – repair contributions and fully funded pensions not not eroding cash on a low dependency captured by RoRE value basis
Slide 24: Return on regulated equity (RoRE) for 2020/21
Return on regulated equity (RoRE ) for 2020/21 Reported RoRE of 4.3%; underlying1 RoRE of 4.8% Reported 2020/21 RoRE is 4.3% 1.2% financing performance; 2.5% effective interest rate 0.3% customer ODI performance representing net £21m reward 3.9% base return including 0.11% fast track reward -0.3% to
Slide 25: 2021/22 full year outlook
2021/22 full year outlook Revenue 0.6% CPIH offset by -2.0% k factor Underlying operating Higher IRE reflecting additional investment in DNM costs Inflationary increases net of efficiencies to core costs Underlying finance Higher inflation impacting index-linked debt expense £625-675m Accelera
Slide 26: Financial summary
Financial summary Robust financial performance Resilient cash collection and bad debt position Locked in debt at low rates compared with price review assumptions Raising new debt efficiently and leveraging strong ESG credentials Strong balance sheet with leading pensions position and low household d
Slide 27: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2020/21 full year results
Slide 28: Summary
Summary Customers and the environment benefitting from best ever operational performance Supporting customers; upper quartile customer satisfaction Industry leading environmental performance £21m customer ODI rewards in 2020/21; targeting £20m in 2021/22 and £150m for AMP7 Highest levels of employee
Slide 29: Any questions?
Any questions? United Utilities • 2020/21 full year results
Slide 30: Cautionary statement
Cautionary statement This presentation contains certain forward-looking statements with respect to the operations, performance and financial condition of the group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to diffe
Slide 31: Supporting information
Supporting information 1. Underlying income statement 15. AMP7 maturity profile 2. Underlying operating costs 16. EIB funding maturity profile 3. Profit before tax reconciliation 4. Profit after tax reconciliation 5. Finance expense 6. Finance expense: index-linked debt 7. Derivative analysis 8. Sta
Slide 32: Underlying income statement
Underlying income statement Year ended 31 March 2021 2020 Change (%) £m Revenue 1,808.0 1,859.3 -3% Operating expenses (618.8) (584.0) Infrastructure renewals expenditure (164.8) (143.0) EBITDA 1,024.4 1,132.3 -10% Depreciation and amortisation (422.3) (400.2) Operating profit 602.1 732.1 -18% Net f
Slide 33: Underlying operating costs
Underlying operating costs Year ended 31 March 2021 2020 Change (%) £m Revenue 1,808.0 1,859.3 -3% Employee costs (161.8) (161.4) 0% Hired and contracted services (96.3) (96.5) 0% Property rates (89.4) (75.9) +18% Power (83.6) (78.9) +6% Materials (82.2) (73.9) +11% Bad debts (28.7) (23.7) +21% Regu
Slide 34: Profit before tax reconciliation
Profit before tax reconciliation Year ended 31 March Re-presented As reported 2021 £m 2020 2020 Operating profit 602.1 630.3 630.3 Investment income and finance expense (78.5) (289.0) (289.0) Share of losses of joint ventures (9.3) (38.1) (38.1) Profit on disposal of joint ventures 36.7 - - Reported
Slide 35: Profit after tax reconciliation
Profit after tax reconciliation Year ended 31 March Re-presented As reported 2021 £m 2020 2020 Reported profit after tax 453.4 106.8 106.8 Adjustments: Bioresources asset write down - 82.6 82.6 COVID-19 - 56.2 56.2 Restructuring costs - - 11.8 Fair value (gains)/losses on debt and derivative instrum
Slide 36: Finance expense
Finance expense Year ended 31 March 2021 2020 £m Investment income 25.0 24.0 Finance expense (103.5) (313.0) (78.5) (289.0) Less net fair value losses on debt and derivative instruments (74.5) 76.3 Adjustments for interest on swaps and debt under fair value option 20.2 16.5 Adjustment for the allowa
Slide 37: Finance expense: index-linked debt
Finance expense: index-linked debt Year ended 2021 2020 £m Interest on index-linked debt (44.2) (50.4) RPI adjustment to index-linked debt principal – 3 month lag1 (35.9) (72.7) CPI adjustment to index-linked debt principal – 3 month lag2 (5.1) (6.1) RPI adjustment to index-linked debt principal – 8
Slide 38: Derivative analysis
Derivative analysis At 31 March 2021 2020 £m Derivatives hedging debt 402.7 596.4 Derivatives hedging interest rates (99.2) (120.6) Derivatives hedging commodity prices 6.5 (2.2) Total derivative assets and liabilities 310.0 473.6 • Derivatives hedging debt; hedge our non index -linked debt into ste
Slide 39: Statement of financial position
Statement of financial position At 31 Mar 2021 31 Mar 2020 Change (%) £m Property, plant and equipment 11,799.0 11,510.9 +3% Retirement benefit surplus 689.0 754.1 -9% Other non-current assets 267.9 332.9 -20% Cash 744.1 528.1 +41% Other current assets 254.4 300.2 -15% Total derivative assets 424.7
Slide 40: Reconciliation of net debt
Reconciliation of net debt At 31 Mar 2021 31 Mar 2020 £m Cash 744.1 528.1 Total derivative assets 424.7 617.9 Gross borrowings (8,451.8) (8,363.1) Total derivative liabilities (114.7) (144.3) Net debt on previous definition (7,397.7) (7,361.4) Exclude the fair value impact of: Interest rate derivati
Slide 41: Household debtors reconciliation
Household debtors reconciliation As at 31 March 31 March £m 2021 2020 Household net debtors 77.6 77.5 Household accrued income 69.4 54.6 Non household net debtors 28.6 37.9 Other sundry net debtors 48.1 31.3 Total net debtors (including related parties) 223.7 201.3 Less related party debtors (40.4)
Slide 42: Strong balance sheet – pensions
Strong balance sheet – pensions The ESG journey to remove the “pensions iceberg” at UU IFRS Discount rate of 2.05% deficit = Gilts +75bps Position today IFRS £754m IFRS £689m Pension scheme fully funded Extra funding on a low dependency basis deficit with no further pension deficit contributions due
Slide 43: Financing and liquidity
Financing and liquidity Gross debt = £8,451.8m £161.2m, Short term Headroom / prefunding = £806.2m debt £373.6m, Yankee bonds £239.1m, Other £60.0m, Lease (USD) borrowings Obligations £183.3m, Euro £m £529.7m, Other EIB loans bonds (EUR) Cash and short-term deposits 744.1 £689.5m, GBP Fixed £244.4m,
Slide 44: Debt structure
Debt structure United Utilities Group PLC United Utilities PLC Yankees: • $400m in 28s Other debt: • Short-term loans £100m Baa1 stable; BBB- stable; A- stable7 Euro MTNs: Other debt: United Utilities Water Limited • £375m in 22s • £300m in 27s • £70m in 39s1 • £100m in 40s1 • £50m in 49s1 • £510m i
Slide 45: Term debt maturity profile
Term debt maturity profile Average term to maturity of approximately 18 years 1 Future repayments of index-linked debt include RPI/CPI/CPIH market derived forecasts out to 2025, subsequently transitioning to an average United Utilities • 2020/21 fullhalf year results annual RPI rate of 3% and an ave
Slide 46: AMP7 maturity profile
AMP7 maturity profile Notes Future repayments of RPI linked debt include market derived forecasts out to 2025 Light green areas represent EIB debt maturing whereas dark green areas represent other debt maturing. United United Utilities Utilities • 2020/21 • 2020/21 fullhalf yearyear results results
Slide 47: EIB funding maturity profile
EIB funding maturity profile Notes Future repayments of EIB RPI linked debt include market derived forecasts out to 2025, subsequently transitioning to an average annual RPI rate of 3% United United Utilities Utilities • 2020/21 • 2020/21 fullhalf yearyear results results • 47
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