United Utilities Group Plc · LSE:UU.
United Utilities — FY2019 Earnings Presentation
47 slides from United Utilities's earnings presentation, May 2019
Slide 1: Full year results
United Utilities Group PLC Full year results Year ended 31 March 2019 Thirlmere
Slide 2: 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 3: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities Group PLC Capital Markets Event 15 March 2018 Crummock Water
Slide 4: Going from strength to strength
Going from strength to strength Delivering against our targets year on year Consistently improving customer Expect to be eligible for AMP6 SIM reward satisfaction of around £16m Early investment delivering £19m wholesale ODI reward for 2018/19, performance against tough targets £30m cumulative AMP6
Slide 5: Sector beating SIM improvement
Sector beating SIM improvement One of the leading companies 4 year qualitative SIM scores 2015-2019 4.55 4.50 4.45 4.40 4.35 4.30 4.25 4.20 2015/16 2016/17 2017/18 2018/19 Industry Ave UU United Utilities • 2018/19 full year results 5
Slide 6: Reward for good SIM performance
Reward for good SIM performance Expect to be eligible for a SIM reward of around £16m for AMP6 performance 4 year average SIM performance1 90.00 Reward potential Industry average Penalty potential 88.00 Listed water and 86.00 wastewater company 84.00 82.00 Unlisted water and 80.00 wastewater company
Slide 7: Good service costs less
Good service costs less Driving down bad debt and cost to serve whilst improving customer service Household bad debt as a % of revenue 4.0% Average cost to serve 60 3.6% 3.5% 50 £ per household 40 3.0% 3.0% 30 20 2.5% 10 2.5% 2.3% 0 2.1% 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2.0% UU actual
Slide 8: Sector's most embedded innovation culture
Sector’s most embedded innovation culture Use of technology delivering efficiencies and improved service Machine “Out of all the water Advanced Improved company business plans we learning & technology service AI have assessed, United Utilities’ plan has the best evidence of an embedded Systems Innov
Slide 9: Outcome Delivery Incentives (ODIs)
Outcome Delivery Incentives (ODIs) A good year earning a £19m reward Reward / (Penalty) (£m) 1 year 4 years 2018-19 2015-19 Good all round performance Private sewers service index 7.4 29.5 at the top of our Wastewater category 3 pollution incidents 3.3 13.1 estimates Thirlmere transfer to West Cumbr
Slide 10: Alternative supply vehicles
Alternative supply vehicles Restoring water to 95% of customers within 3 hours 1 million litres of water on wheels Restoring water to 95% of customers, within 3 hours, Centrally planned, co- 24/7 ordinated and controlled Vital for customer service, The largest fleet of “water on Better response to b
Slide 11: A fast-track company
A fast-track company Leading on a forward looking basis A = High quality, ambitious and innovative plan with evidence that overall is sufficient and convincing. B = High quality plan, not sufficiently ambitious and innovative to be exceptional with evidence that overall is sufficient and convincing.
Slide 12: A flying start to AMP7
A flying start to AMP7 £100m additional investment; total for AMP6 now £350m Fast-track status gives greater clarity of areas to target investment £350m total outperformance sharing Targeted investment Impacting ODIs Leak sensors Leakage £250m delivering enhanced Strategic mains Supply interruptions
Slide 13: Base totex run rate on target
Base totex run rate on target AMP6 investment delivering efficiencies to be sustained in AMP7 Base totex1 AMP6 glide slope into 1,000 AMP7 run rate 800 600 £m 400 200 0 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Source: Company PR19 business plan submission, Sept
Slide 14: Trust and confidence in reporting
Trust and confidence in reporting Awarded top self-assurance status for third consecutive year Financial Risk & Water Long term PR19 IAP Mvt Charges Assurance Financial Cost PR19 IAP monitoring Outcomes compliance resources Case work viability data Category from engagement plan flows assessment data
Slide 15: Russ Houlden, Chief Financial Officer
Russ Houlden Chief Financial Officer 15 Haweswater Reservoir
Slide 16: Reported income statement
Reported income statement Year ended 31 March 2019 2018 £m Revenue 1,818.5 1,735.8 Operating expenses (790.4) (722.6) EBITDA 1,028.1 1,013.2 Depreciation and amortisation (393.2) (376.8) Operating profit 634.9 636.4 Investment income and finance expense (205.4) (206.6) Share of profits of joint vent
Slide 17: Underlying income statement
Underlying income statement Year ended 31 March 2019 2018 Movement £m Revenue 1,818.5 1,735.8 82.7 Operating expenses (575.9) (566.8) Infrastructure renewals expenditure (164.6) (147.1) EBITDA 1,078.0 1,021.9 Depreciation and amortisation (393.2) (376.8) Operating profit 684.8 645.1 39.7 Net finance
Slide 18: Underlying operating costs
Underlying operating costs Year ended 31 March 2019 2018 Movement £m Revenue 1,818.5 1,735.8 82.7 Employee costs (154.4) (147.0) (7.4) Hired and contracted services (96.2) (95.4) (0.8) Property rates (94.7) (90.5) (4.2) Materials (72.9) (66.7) (6.2) Power (70.0) (70.4) 0.4 Regulatory fees (32.5) (29
Slide 19: Financial position
Financial position At 31 March 2019 2018 Movement £m Property, plant and equipment 11,153.4 10,790.5 362.9 Retirement benefit surplus 483.9 344.2 Other non-current assets 441.3 421.1 Cash 339.3 510.0 (170.7) Other current assets 280.8 302.2 Total derivative assets 489.1 635.5 (146.4) Total assets 13
Slide 20: Pensions – the importance of self-sufficiency
Pensions – the importance of self-sufficiency United Utilities’ pensions are fully funded on a self-sufficiency basis Basis of Typical discount rate Objective applied to liabilities United Utilities surplus / deficit Intercompany comparison IFRS (full disclosure of Gilts +70/+110 £484m surplus assum
Slide 21: RCV gearing
RCV gearing RCV gearing supports robust capital structure RCV gearing 75% 70% 65% RCV gearing within our 60% target range, supporting a solid A3 credit rating 55% 50% 45% Mar-15 Mar-11 Mar-12 Mar-13 Mar-14 Mar-16 Mar-17 Mar-18 Sep-18 Mar-19 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 United Uti
Slide 22: Cash flow statement
Cash flow statement Year ended 31 March 2019 2018 £m Net cash generated from operating activities 832.3 815.6 Net cash used in investing activities (627.7) (723.2) Net cash (used in) / generated from financing activities (377.4) 184.7 Net movement in cash (172.8) 277.1 United Utilities • 2018/19 ful
Slide 23: Net regulatory capital spend profile
Net regulatory capital spend profile A further £821m invested this year 900 800 700 600 500 £m 400 TCQi TCQi TCQi TCQi 300 90% 93% 93% 95% 200 100 0 2015/16 2016/17 2017/18 2018/19 2019/20 FD scope capex Dry weather Outperformance sharing FD assumed capex The UU AMP6 investment programme on this cha
Slide 24: Financing
Financing AMP6 financing requirement fully funded with headroom out to the end of 2020 Index-linked Nominal Committed bank facilities £711m RPI-linked raised previously £1,483m raised previously New £50m committed bank facilities signed for 5-year term £165m CPI-linked raised previously HKD320m priv
Slide 25: Cost of debt and hedging
Cost of debt and hedging Delivering significant financing outperformance Inflation hedging Index-linked debt c50% of net debt c£3.8bn maintained in index-linked index-linked Average cost of form 1.3% real Interest rate hedging Nominal debt Maintain a c£3.3bn fixed rate, 10 year nominal debt reducing
Slide 26: Financial summary
Financial summary Delivering in AMP6 and prepared for AMP7 Good results Fully funded pension on self- Good set of results, maintaining tight sufficiency basis cost control Responsible stewardship of pension scheme mitigating risk for all stakeholders Financial resilience Financing outperformance Sec
Slide 27: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities Group PLC Capital Markets Event 15 March 2018 Crummock Water
Slide 28: External recognition for best practice
External recognition for best practice Awards and accreditations reflecting leading performance A good corporate citizen 4* Industry Leading Company United Utilities • 2018/19 full year results 28
Slide 29: Summary
Summary Going from strength to strength Innovation and Systems Thinking delivering PR19 business plan awarded fast-track status operational improvements £100m additional investment for AMP7 flying Anticipate a £16m SIM reward start; total AMP6 reinvestment £350m £100m totex saving against AMP6 final
Slide 30: Any questions?
Any questions?
Slide 31: Supporting information
Supporting information 1. Revenue analysis 2. Profit before tax reconciliation 3. Profit after tax reconciliation 4. Dry weather event costs 5. Finance expense 6. Finance expense: index-linked debt 7. Derivative analysis 8. IFRS pension surplus (normalised) 9. Impact of IFRS16 10. Regulatory capital
Slide 32: Revenue analysis
Revenue analysis Year ended 31 March 2019 2018 £m Wholesale water charges 767 719 Wholesale wastewater charges 906 876 Household retail charges 105 111 Other appointed revenue 6 6 UU Water appointed 1,784 1,712 UU Water non-appointed 14 5 Non-UU Water 21 19 Revenue 1,819 1,736 United Utilities • 201
Slide 33: Profit before tax reconciliation
Profit before tax reconciliation Year ended 31 March 2019 2018 £m Operating profit 634.9 636.4 Investment income and finance expense (205.4) (206.6) Share of profits of joint ventures 6.7 2.3 Reported profit before tax 436.2 432.1 Adjustments: Flooding incidents in Dec 15 (net of insurance proceeds
Slide 34: Profit after tax reconciliation
Profit after tax reconciliation Year ended 31 March 2019 2018 £m Reported profit after tax 363.4 354.6 Adjustments: Flooding incidents in Dec 15 (net of insurance proceeds recognised) - 1.7 Non-household retail market reform1 - 1.0 Dry weather event 36.1 - GMP equalisation 6.6 - Restructuring costs
Slide 35: Dry weather event costs
Dry weather event costs Year ended 31 March 2019 2020 £m Capex 29.6 13.0 IRE 10.5 - Opex 25.6 - Totex 65.7 13.0 £36m of costs recognised as an adjusting item for the year to 31 March 2019 United Utilities • 2018/19 full year results 35
Slide 36: Finance expense
Finance expense Year ended 31 March 2019 2018 £m Investment income 17.1 12.0 Finance expense (222.5) (218.6) (205.4) (206.6) Less net fair value gains on debt and derivative instruments (9.5) (47.3) Adjustments for interest on derivatives and debt under fair value option 30.6 23.5 Adjustment for net
Slide 37: Finance expense: index-linked debt
Finance expense: index-linked debt Year ended 31 March 2019 2018 £m Cash interest on index-linked debt (48.8) (47.8) RPI adjustment to index-linked debt principal – 3 month lag1 (71.1) (107.8) CPI adjustment to index-linked debt principal – 3 month lag2 (3.1) (3.7) RPI adjustment to index-linked deb
Slide 38: Derivative analysis
Derivative analysis At 31 March 2019 2018 £m Derivatives hedging debt 479.6 585.5 Derivatives hedging interest rates (69.9) (50.1) Derivatives hedging commodity prices (0.5) (0.9) Total derivative assets and liabilities (slide 19) 409.2 534.5 • Derivatives hedging debt; hedge our non index-linked de
Slide 39: IFRS pension surplus normalised
IFRS pension surplus normalised UU IFRS pension surplus (normalised1) 700 600 500 400 300 200 100 0 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 UU - IFRS position UU normalised to SVT UU normalised to PNN Source: Companies’ annual report and accounts 1 Normalised for inflation, discount rate and mortality as
Slide 40: Impact of IFRS 16
Impact of IFRS 16 • IFRS 16 effective from 1 April 2019 • £55m lease liability brought onto the statement of financial position as at 1 April 2019 • Corresponding £55m lease asset also brought onto the statement of financial position as at 1 April 2019 • In 2019/20, expect the lease asset to be depr
Slide 41: Regulatory capital value (RCV)
Regulatory capital value (RCV) Regulatory Capital Value (RCV) 12,000 11,500 11,000 10,500 10,000 £m 9,500 9,000 8,500 8,000 7,500 7,000 United Utilities Water’s regulatory capital value (based on shadow RCV for AMP6, adjusted for actual spend) and presented in outturn prices. Shadow RCV at 31 March
Slide 42: Movement in net debt
Movement in net debt 7,500 27.3 6.0 0.9 7,067.3 98.3 7,000 6,867.8 163.2 995.5 274.4 £m 624.9 6,500 6,000 5,500 Net debt at Operating Net capex Dividends Interest and Inflation uplift Fair value Loans to joint Other Net debt at 31/03/2018 cash flow taxation on index- movements ventures 31/03/2019 li
Slide 43: Financing and liquidity
Financing and liquidity Gross debt = £7,815.8m Headroom / prefunding = £357.4m £639.0m, Other borrowings £373.9m, Yankee bonds (USD) £m £619.8m, Euro bonds (EUR) £606.2m, Other EIB loans Cash and short-term deposits 339.3 Medium-term committed bank facilities 1 700.0 Short-term debt (166.7) £1,801.1
Slide 44: Term debt maturity profile
Term debt maturity profile Average term to maturity of just under 20 years 1 Future repayments of index-linked debt include inflation based on an average annual RPI rate of 3% and an average annual CPI rate of 2% United Utilities • 2018/19 full year results 44
Slide 45: Debt structure
Debt structure United Utilities Group PLC United Utilities PLC Baa1 stable; BBB stable; A- stable4 Yankees: • $400m in 28s United Utilities Water Limited A3 stable; A- stable; A- stable4 Ring-fenced and regulated by Ofwat Euro MTNs: Other debt: • €500m in 20s • £35m in 37s1 • £50m in 46s1 • EIB inde
Slide 46: EIB funding maturity profile
EIB funding maturity profile Notes Future repayments of EIB RPI linked debt include inflation based on an average annual RPI rate of 3%. Dark blue areas represent EIB loans currently drawn and outstanding. Light blue areas represent a further £250m AMP6 loan assuming this will be signed and drawn in
Slide 47: PR19 timetable
PR19 timetable Fast-track company representations on draft determinations 24 May 2019 Fast-track status Fast-track draft Slow-track draft achieved determinations determinations Final determinations Start of AMP7 31 Jan 2019 11 Apr 2019 18 Jul 2019 11 Dec 2019 1 Apr 2020 AMP6 Delivery AMP7 Preparatio
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