Severn Trent Plc · LSE:SVT
Severn Trent — H1 2018/19 Earnings Presentation
40 slides from Severn Trent's earnings presentation, Nov 22, 2018
Slide 1: H1 18/19 Results
H1 18/19 RESULTS 22 November 2018
Slide 2: Disclaimers
DISCLAIMERS Cautionary statement regarding forward-looking statements 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 object
Slide 3: Liv Garfield, Chief Executive
LIV GARFIELD CHIEF EXECUTIVE 3
Slide 4: H1 2018/19 in Summary
H1 2018/19 IN SUMMARY PR19 Investment Financing On track for our 76.2p Submitted a high Improved position biggest capex Underlying EPS quality plan we are through diverse spend of the + 16.3% proud of sources decade Resilience Green Power Pathfinder Managed increased 37.35p Enhancing our A company w
Slide 5: James Bowling, Chief Financial Officer
JAMES BOWLING CHIEF FINANCIAL OFFICER
Slide 6: H1 2018/19 Financial Highlights
H1 2018/19 FINANCIAL HIGHLIGHTS Good results – on track to deliver in line with expectations Turnover1 Underlying PBIT1,2 Effective interest rate £881.5m £299.1m 3.8% +3.6% +4.3% down 70 basis points Property Development Underlying basic EPS1,3 Interim dividend £18.4m 76.2 pence 37.35 pence profit f
Slide 7: Regulated Water and Waste Water: Turnover
REGULATED WATER AND WASTE WATER Up 4% driven by RPI-linked price increases in Severn Trent Water and Hafren Dyfrdwy (£27.9m) Turnover Revenue uplift from 2016/17 customer ODI rewards (£8.2m) partially offset by WRFIM¹ £823m adjustment for the same period (-£5.4m); other items have a net increase
Slide 8: Regulated Water and Waste Water: Underlying PBIT
REGULATED WATER AND WASTE WATER Underlying PBIT Broadly flat, with turnover up 4%, offset by an increase in net operating costs Largely driven by the costs of hot weather experienced over summer (£10.1m), higher £279m depreciation (£8.4m), and anticipated cost pressures £m 32.6 (10.5) (5.3) (5.0)
Slide 9: Business Services
BUSINESS SERVICES An exciting year in our non-regulated business £18 million1 profit from sale of land near Nottingham; enabling 830 homes to be built Acquisition of Agrivert for £120 million near completion, adding 106 GWh of generation Results on old segmental basis2 Lower MOD activity reduc
Slide 10: Group Cash Flow and Net Debt
GROUP CASH FLOW AND NET DEBT Net debt Increase in net debt of £62m following an increase in net capital expenditure to £340m – on £5,419m track to deliver our biggest annual capital spend in a decade £m 5,356.6 (489.2) 75.9 21.3 5,418.5 122.9 (9.1) 340.1 Opening net debt Cash generated from Net capi
Slide 11: Financing Performance
FINANCING PERFORMANCE Financing strategy drives further reduction in interest cost Finance costs1 3.8% Effective interest rate2 Down 70 basis points from 2017/18 16% £110.5m Effective cash interest cost3 £93.1m 3.1% Down 50 basis points from 2017/18 RPI rolled up £23.6m 24% £18.0m Net pension £7.5m
Slide 12: A Balanced Debt Portfolio
A BALANCED DEBT PORTFOLIO Preparing for AMP7 with a strong balance sheet and a diversified, low cost debt portfolio Index-linked Sourcing low Raised £323m1 in USPP at low cost fixed rates 26% cost debt Liquidity to early 2021 £1,465m Fixed Gross Debt 47% Managing Balanced portfolio, taking adv
Slide 13: FY18/19 Technical Guidance
FY18/19 TECHNICAL GUIDANCE Guidance in bold has been revised since the last trading update. Please note that all technical guidance is presented under the old segmental basis for comparative purposes. FY17/18 Regulated Water and Waste Water Year-on-Year (restated) Turnover £1.62 billion to £1.65 bil
Slide 14: Liv Garfield, Chief Executive
LIV GARFIELD CHIEF EXECUTIVE 14
Slide 15: Our Strategy
OUR STRATEGY Our vision is to be the most trusted water company by 2020: delivering an outstanding customer experience, the best value service and environmental leadership Upper Derwent Valley Reservoir Lowest bills in 4* EPA Most trusted in Upper Quartile England & performance England1 UKCSI positi
Slide 16: Our Purpose
OUR PURPOSE To serve our communities and build a lasting water legacy Creating value through purpose… ….in a sustainable way Customers Customer Employee Investor Colleagues Investors A PR19 plan packed with initiatives to engage and inspire the Communities we serve
Slide 17: Our AMP7 Business Plan
OUR AMP7 BUSINESS PLAN 31 Jan Ofwat initial assessment
Slide 18: Embed Customers at the Heart of All We Do
EMBED CUSTOMERS AT THE HEART OF ALL WE DO PR19: A plan Set to have the lowest bills in England and Wales until at least 2025 built on our customers Ongoing engagement through Tap Chat – an online community needs of 15,000 of our customers In a strong Upper quartile among utilities in the position fo
Slide 19: Progressing in Water
PROGRESSING IN WATER Catchment Management ODI Further reductions in water quality complaints -12% On track to deliver 6% reduction this year -6% On track to hit target by the end of AMP6 Measured by CRI in AMP7 – ambition to halve our score by end of AMP6 2016 Actual 2017 Actual 2018 Forecast Impr
Slide 20: Weather Resilience
WEATHER RESILIENCE Preparation enabled us to deliver more for our customers We saw a 22% increase Remain on track to in demand for water – halve supply the equivalent of an interruptions additional 400ML/d at year-on-year its peak Hot weather cost We entered the £10m in first half, summer well prepa
Slide 21: Excelling in Waste
EXCELLING IN WASTE Our catchment approach to waste water …And waste performance will be even has set us apart in AMP6… more important in AMP7 Invest React Largest RoRE Enhanced ODIs: New and range on internal sewer Bespoke ODIs for customer ODIs flooding & pollutions AMP7 Frontier cost efficiency in
Slide 22: Awesome Place to Work
AWESOME PLACE TO WORK Supporting our colleagues how and when they need it most Top 20 employer and Trained over 70% of only water company in people managers in the Social Mobility mental health Index awareness ‘Blazing a trail’ on Top utility and 4th menopause awareness overall in Hampton- and shari
Slide 23: AMP6 Performance
AMP6 PERFORMANCE Sector leading performance in AMP6 providing a strong platform for AMP7 160 bps Lowest bills Driving efficiency £870m to keep bills low reduction in finance in England and Wales – totex efficiencies costs now and for the future Delivering for UQ customer service2 4* EPA status £150m
Slide 24: Q&A
Q&A
Slide 25: Appendix
APPENDIX
Slide 26: U.N. Sustainable Development Goals
U.N. SUSTAINABLE DEVELOPMENT GOALS
Slide 27: PR19 Timetable
PR19 TIMETABLE Key dates Late January 2019 Ofwat publish initial assessment of business plans March/April 2019 Draft determinations published for exceptional and fast track plans July 2019 Draft determinations published for slow track and significant scrutiny plans December 2019 Final Determinations
Slide 28: Underlying EBITDA, Period Ended 30 September 2018
UNDERLYING EBITDA¹ PERIOD ENDED 30 SEPTEMBER 2018 2017² 2018 2018 Variance Variance (restated) old basis new basis old basis £m £m £m £m % 439.8 Regulated Water and Waste Water 428.0 449.1 9.3 2.1 19.2 Business Services 51.5 18.2 (1.0) (5.2) (6.6) Corporate and Other (6.8) 3.9 10.5 159.0 (0.3) Elimi
Slide 29: Depreciation, Period Ended 30 September 2018
DEPRECIATION1 PERIOD ENDED 30 SEPTEMBER 2018 2017 2018 2018 Variance Variance (restated) old basis new basis old basis £m £m £m £m % 162.5 Regulated Water and Waste Water 159.8 170.1 7.6 4.7 3.9 Business Services 14.2 3.9 ‒ ‒ ‒ Corporate and Other ‒ ‒ ‒ ‒ ‒ Eliminations (0.1) (0.1) (0.1) N/A 166.4 S
Slide 30: Power, Period Ended 30 September 2018
POWER PERIOD ENDED 30 SEPTEMBER 2018 2017 2018 Segmental Self Segmental Self Group Group analysis generation analysis generation £m £m £m £m £m £m Turnover 29.7 (9.5) 20.2 Business Services 31.0 (8.6) 22.4 Costs (45.2) 9.3 (35.9) Regulated Water and Waste Water 1 (49.2) 8.2 (41.0) (1.1) 0.2 (0.9) Bu
Slide 31: Net Finance Costs
NET FINANCE COSTS PERIOD ENDED 30 SEPTEMBER 2018 Income Income statement Capitalised Gross interest statement Capitalised Gross interest charge interest incurred charge interest incurred 2017 2017 2017 2018 2018 2018 £m £m £m £m £m £m 79.4 11.3 90.7 "Cash" interest (including accruals) 68.2 15.7 83.
Slide 32: Underlying Earnings per Share
UNDERLYING EARNINGS PER SHARE PERIOD ENDED 30 SEPTEMBER 2018 2017 2018 Variance Pence (restated)¹ per share £m £m £m 286.7 Underlying profit before interest and tax 299.1 12.4 5.2 (110.5) Net finance costs (93.1) 17.4 7.4 176.2 Underlying profit before tax 206.0 29.8 12.6 (23.3) Tax at the underlyin
Slide 33: Group Balance Sheet at 30 September 2018
GROUP BALANCE SHEET AT 30 SEPTEMBER 2018 31 March 2018 30 September 2018 Variance Variance (restated)¹ £m £m £m % 8,622.5 Property, plant and equipment; intangible assets and goodwill 8,835.7 213.2 2.5 37.6 Joint ventures, associates and other investments 36.5 (1.1) (2.9) 76.5 Working capital 52.5 (
Slide 34: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)¹ PERIOD ENDED 30 SEPTEMBER 2018 2017 2018 Variance Variance £m £m £m % 260.0 Regulated Water and Waste Water 333.1 73.1 28.1 10.8 Business Services 4.2 (6.6) (61.1) ‒ Corporate and Other 2.8 2.8 ‒ (0.4) Eliminations ‒ 0.4 100.0 270.4 Severn Trent Group 340.1 69.7 25.8
Slide 35: Net Debt at 30 September 2018
NET DEBT AT 30 SEPTEMBER 2018 31 March 2018 30 September 2018 Variance Variance £m £m £m % 38.5 Net cash and cash equivalents 79.9 41.4 107.5 (1,217.4) Bank loans (1,309.6) (92.2) (7.6) (4,223.9) Other loans (4,245.5) (21.6) (0.5) (113.9) Finance leases (115.4) (1.5) (1.3) 135.6 Loans receivable fro
Slide 36: Fair Value of Net Debt
FAIR VALUE OF NET DEBT AT 30 SEPTEMBER 2018 2017 2018 Variance Variance £m £m £m % (978.5) Floating rate debt (1,198.9) (220.4) (22.5) (3,467.4) Fixed rate debt (3,304.5) 162.9 4.7 (2,277.1) Index-linked debt (2,213.3) 63.8 2.8 (6,723.0) (6,716.7) 6.3 0.1 44.6 Net cash and cash equivalents 79.9 35.3
Slide 37: Analysis of Borrowings & Net Debt
ANALYSIS OF BORROWINGS & NET DEBT AT 30 SEPTEMBER 2018 748.9 6,464.7 291.7 5.6 5,670.5 (141.8) (79.9) (30.3) 5,418.5 Borrowings Loans receivable from Net cash and cash Cross currency swaps Net debt per balance Fixed debt fair value Floating debt fair value Index-linked debt fair Fair value of net de
Slide 38: Debt Maturity at 30 September 2018
200 300 500 600 100 400 700 0 2019 AMP6 2020 2021 2022 2023 AMP7 2024 2025 2026 2027 Based on carrying value of debt at 30 September 2018 2028 2029 2030 2031 2032 AMP8 and beyond 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 USPP 2018 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2
Slide 39: Gearing & Credit Ratings
GEARING & CREDIT RATINGS AT 30 SEPTEMBER 2018 30 September 2017 31 March 2018 Net Debt/RCV⁽¹⁾ 30 September 2018 59.2% 60.6% Severn Trent Group (2) 59.6% 59.8% 60.8% Severn Trent Water Group(3) 59.0% 31 March 2018 30 September 2018 Severn Trent Water Severn Trent Plc Severn Trent Water Severn Trent P
Slide 40: Wonderful on Tap
WONDERFUL ON TAP TRENT