Severn Trent PLC · LSE:SVT
Severn Trent — FY2014/15 Earnings Presentation
46 slides from Severn Trent's earnings presentation, Mar 31, 2015
Slide 1: Preliminary Results
PRELIMINARY RESULTS Year ended 31 March 2015
Slide 2: Cautionary statement regarding Forward Looking Statements
Cautionary statement regarding Forward Looking Statements DISCLAIMERS 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: FY 14/15 Highlights
FY 14/15 HIGHLIGHTS Good financial performance AMP5 £2.6bn investment programme complete AMP6 opening RCV of £7.7bn1 Driving operational improvement (12 out of 14 Ofwat KPIs stable or improving) New organisational structure and team in place Successful transition to AMP6 Severn Trent Services refocu
Slide 5: Closing out AMP5 - Operational Improvement
CLOSING OUT AMP5 - OPERATIONAL Ofwat KPIs IMPROVEMENT Improved or stable on 12 out of 14 No. of repeat incidents Discharge permit compliance -3%* Good Internal sewer flooding SIM Improved Water supply interruptions > 3 hours 204 198 Per 10,000km network Greenhouse gas emissions Mar 14 Mar 15 -18% Se
Slide 6: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer 6
Slide 7: Highlights
HIGHLIGHTS 14/15 delivered as promised: FY 2014/15 Capital investment Turnover Underlying PBIT1 £547m £1,801m £540m Completes £2.6bn +2.5% +3.2% AMP5 programme RCV3 Adjusted basic EPS2 Full year dividend £7.7bn 107.2 pence 84.9 pence +1.6% +15.9% +5.6% 1. Before exceptional items 2. Before exception
Slide 8: Regulated - Severn Trent Water: Turnover
REGULATED - SEVERN TRENT WATER REGULATED TURNOVER1 Overall growth of £36.4m, 2.4% Prices up 1.5% (RPI net of K) £1.58bn Tariff mix effects £m 10.5 1,581.2 39.9 1.0 1,544.8 (16.9) 2013/14 Allowed Price Allowed Price Consumption New growth/ Other / 2014/15 (K) (RPI) meter optants tariff mix 1. B
Slide 9: Regulated - Severn Trent Water: PBIT
REGULATED - SEVERN TRENT WATER Overall growth of £20.4m, 3.9% REGULATED PBIT1 Credit collections improved – bad debt charge 2.0% of turnover (13/14 2.2%) £539m Labour costs – £7m pre spend for AMP6 £m 36.4 (9.6) (6.7) 1.4 5.5 (2.7) (6.8) 2.9 539.0 518.6 Turnover AMP6 pre-spend Power Depreciati
Slide 10: Water Purification Transaction
WATER PURIFICATION TRANSACTION Enterprise value of US$99 million Represents EBITDA multiple of around 8x Water Purification turned around from £7m PBIT loss in 2013/14 to £4.9m profit in 2014/15, as promised Best placed to fulfil its future potential under a new owner DeNora specialist in
Slide 11: Non Regulated - Severn Trent Services
£m NON REGULATED - SEVERN TRENT SERVICES Continuing ops - good top line growth; investment in growth, NON REGULATED re-organisation and one-offs impacted PBIT PERFORMANCE New management team focused on core skills – water, waste, retail and renewables Continuing operations +4.6% TURNOVER From 15
Slide 12: Group Net Debt
Net Debt1 GROUP NET DEBT £m 4,7533 4,448 Rebalancing Actions: 27% Index linked 26% 1,262 1,240 £900m - new RCF Floating 10% 505 £530m - new EIB loan 3,331 73% 64% 3,163 £140m - buy back 2016 Eurobond Fixed £275m – notional value of swaps cancelled 123 Cash 177 31 Mar 2014 31 Mar 2015 Funding sou
Slide 13: Finance Charges
FINANCE CHARGES Finance Cost £m 247.9 240.02 Effective rate4 5.4% (13/14: 5.8%) Effective cash interest cost4 4.9% (13/14: 4.9%) EBITDA cover 1 3.5x 197.3 Cash 205.5 interest 2014/15 activity: Buyback/cancellations: Replaced with: 34.9 Eurobond @ 6.325% New floating rate RPI rolled up 20.1
Slide 14: Group Cash Flow
GROUP CASH FLOW MOVEMENT IN NET DEBT Strong cash from operations up 4.1% £139m swap cancellation (£305m) £17.5m share buyback to 31 Mar 2015 (£39m to date) 2014/15 £m 760.1 (416.1) 344.0 (218.2) (139.2) (28.6) (196.9) (257) (305.1) (17.5) (0.6) (48.1 ) Cash from Operating Swap Dividends Other
Slide 15: Regulatory Capital Value
Nominal prices £m REGULATORY CAPITAL VALUE c.1,9002 c. 9,6002 3rd fastest growth rate of WaSCs for AMP 6 1,322 7,7401 (57) 7,6831 Expected RCV 2019/20 6,418 Growth in AMP6 Opening RCV adjustments Closing RCV Growth in AMP5 Midnight 2014/15 2015/16 Opening RCV 2010/11 1. Based on year end RPI 0.9% fo
Slide 16: Assessing Our Future Performance
ASSESSING OUR FUTURE PERFORMANCE PBIT Totex ODIs RORE RCV growth Shareholder distributions 16
Slide 17: FY 2015/16 Technical Guidance
FY 2015/16 TECHNICAL GUIDANCE Y-on-Y Regulated Prices ▼ Decrease of 1.8% in April 2015 Wholesale totex ↔ £1,030 million to £1,060 million RCV ▲ 34.7% of 15/16 totex will be capitalised onto the RCV Opex (IFRS) ▼ Benefits of reorganisation Capex (IFRS, net cash) ▲ £410 million to £430 million IRE ▼ £
Slide 18: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive 18
Slide 19: Key Messages
KEY MESSAGES Ready for AMP6 – Focused on operational confident of performance outperforming Locking in cost Customers at the heart efficiencies of what we do Engaged in the Opportunity through regulatory debate renewables 19
Slide 20: Ready for AMP6
READY FOR AMP6 New MD of wholesale operations – Emma FitzGerald Starting 1 July Progress on Birmingham Resilience project Land purchases on track Contractors appointed Planning permissions ongoing Culture New team New organisational structure New company-wide incentive scheme lau
Slide 21: ODIs – Transition to Year 1
ODIs – TRANSITION TO YEAR 1 Embedding ODIs in to the culture of Out of 27 ODIs, 10 “game changers” Severn Trent For some of our top 10 ODIs – year 1 ODI reporting step change required - Swingometer Smaller improvements required in - Weekly performance report years 2 – 5 YTD Performance Per
Slide 22: Totex in a Regulatory World
TOTEX IN A REGULATORY WORLD New opportunities to optimise spend over AMP6 Totex assesses whole life cost of investment Totex thinking: Coalport sludge treatment facility Planned expenditure £14.4m Revised plan £9.5m, totex saving £4.9m Coalport sludge treatment facility 22
Slide 23: Locking in Further Cost Efficiencies
LOCKING IN FURTHER COST 80% now EFFICIENCIES locked-in £372m1 of efficiencies in our final determination, of which: £200m £100m £72m Outperformance Announced at our Announced Remaining capital markets day today £60m new supplier contracts £40m capital efficiencies 1. 2012/13 prices 23
Slide 24: Customers at the Heart of What We Do
CUSTOMERS AT THE HEART OF WHAT WE DO The lowest bills in Britain 100 more front line roles Big Difference Scheme launched SIM score improved Complaints down 1,600 240 1,500 205 200 1,400 167 1,300 160 143 1,200 Good 120 105 1,100 1,000 80 900 40 800 Mar-14 Jun-14 Oct-14 Jan-15 Mar-15 May-14 Aug-14 A
Slide 25: Engaged in the Debate
ENGAGED IN THE DEBATE Water 2020 Seconded our people to support the Open Water and DWI programmes Actively involved in helping to define detail of how the non-household retail market will work from 2017 Engaging constructively with the Welsh government on Silk Commission proposals for devolv
Slide 26: Opportunity Through Renewables
OPPORTUNITY THROUGH RENEWABLES £190M RENEWABLES INVESTMENT IN AMP6 Solar Sewage AD Wind Food Waste and £70m £70m £5m Crop AD 65 GWh 30 GWh 5 GWh 75 GWh, £50m Income from ROCs, self supply Income from ROCs, self supply, Income from feed-in tariff, self Income from feed-in tariff, gate and export expo
Slide 27: In Summary
IN SUMMARY 14/15 delivered as promised Driving operational improvement – transition to ODIs Further £100m of efficiencies Well positioned for AMP6 Business Services refocused Customer focus Creating and delivering long term value for shareholders 27
Slide 28: Appendix
APPENDIX 28
Slide 29: Group Earnings
GROUP EARNINGS YEAR ENDED 31 MARCH 2015 2013/14 2014/15 Variance Variance £m £m £m % 433.8 Profit for the period attributable to owners of the company 119.1 (314.7) (72.5%) 39.1 Adjusted for discontinued operations (3.7) (42.8) 109.5% 472.9 Profit for the period from continuing operations attributab
Slide 30: Group Balance Sheet
GROUP BALANCE SHEET AT 31 MARCH 2015 Movement in 2014 2015 the period £m £m £m 7,023.5 Property, plant and equipment 7,239.8 216.3 95.0 Intangible assets 81.0 (14.0) 5.3 Other non-current assets 4.7 (0.6) (751.6) Working capital, provisions and pensions (1,030.6) (279.0) 6,372.2 Capital employed 6,2
Slide 31: Movements on Shareholders' Equity
MOVEMENTS ON SHAREHOLDERS’ EQUITY YEAR ENDED 31 MARCH 2015 £m At 1 April 2014 1,090.1 Total comprehensive income for the period 22.4 Dividends paid to shareholders of Severn Trent Plc (196.9) Dividends paid to non-controlling interests (1.4) Share based payments charge (after tax) 2.4 Shares issued
Slide 32: Gearing
GEARING AT 31 MARCH 2015 2014 Net debt/RCV 1 2015 58% Severn Trent Group 61% 59% Severn Trent Water 61% 1. March 2015 RCV is at year end actual prices. 32
Slide 33: Segmental Analysis of Capital Employed
SEGMENTAL ANALYSIS OF CAPITAL EMPLOYED AT 31 MARCH 2015 2014 2015 Net operating assets Goodwill Total £m £m £m £m 6,287.9 Severn Trent Water 6,329.9 1.3 6,331.2 100.4 Severn Trent Services 46.6 14.3 60.9 (16.1) Corporate and other (95.9) (1.3) (97.2) 6,372.2 Group 6,280.6 14.3 6,294.9 33
Slide 34: PBITD Analysis
PBITD1 ANALYSIS YEAR ENDED 31 MARCH 2015 2013/14 2014/15 £m £m 804.3 Severn Trent Water 827.4 17.5 Severn Trent Services 14.1 (10.1) Corporate and other (8.6) 811.7 Group 832.9 1. Profit from continuing operations before interest, tax, depreciation (see depreciation slide) and exceptional items 34
Slide 35: Depreciation Analysis
DEPRECIATION1 ANALYSIS YEAR ENDED 31 MARCH 2015 2013/14 2014/15 £m £m 285.7 Severn Trent Water 288.4 4.2 Severn Trent Services 4.4 (2.0) Other (0.2) 287.9 Group 292.6 1. Including amortisation of intangibles, profit/loss on disposal of fixed assets and deferred income released 35
Slide 36: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)1 YEAR ENDED 31 MARCH 2015 2013/14 2014/15 £m £m 441.3 Severn Trent Water 392.5 12.3 Severn Trent Services 5.0 10.3 Other 18.6 463.9 Group 416.1 1.Including purchases of property, plant and equipment, intangible assets, proceeds on disposal of property, plant and equipm
Slide 37: Severn Trent Water Operating Costs
SEVERN TRENT WATER1 OPERATING COSTS YEAR ENDED 31 MARCH 2015 2013/14 2014/15 Variance Variance £m £m £m % 600.3 Direct operating costs 619.1 18.8 3.1 285.7 Depreciation 2 288.4 2.7 0.9 140.3 Infrastructure renewals 134.8 (5.5) (3.9) 1,026.3 STW operating costs 1,042.3 16.0 1.6 1. Before exceptional
Slide 38: Severn Trent Water Capex Reconciliation
SEVERN TRENT WATER CAPEX RECONCILIATION YEAR ENDED 31 MARCH 2015 2013/14 2014/15 £m £m 519.6 Additions to property, plant and equipment 481.3 8.2 Additions to intangible fixed assets 15.4 527.8 IFRS capex 496.7 (13.8) Interest capitalised under IFRS (19.1) (24.7) Adopted assets capitalised under IFR
Slide 39: Severn Trent Services Performance
SEVERN TRENT SERVICES PERFORMANCE YEAR ENDED 31 MARCH 2015 Turnover Underlying PBIT 1 2013/14 2014/15 Change 2013/14 2014/15 Change £m £m % £m £m % 210.2 216.3 2.9 As reported 13.3 9.7 (27.1) (3.5) - Exchange rate impacts - - 206.7 216.3 4.6 Like for like 2 13.3 9.7 (27.1%) 1. Before exceptional ite
Slide 40: Net Finance Costs
NET FINANCE COSTS YEAR ENDED 31 MARCH 2015 Income Gross statement Capitalised interest charge interest incurred 2014/15 2014/15 2014/15 £m £m £m “Cash” interest (including accruals) 205.5 18.0 223.5 Net pension finance cost 14.4 - 14.4 RPI interest 20.1 1.8 21.9 240.0 19.8 259.8 40
Slide 41: Net Debt
NET DEBT AT 31 MARCH 2015 Movement 2014 2015 in the year £m £m £m Cash and cash equivalents (123.2) (176.7) (53.5) Bank overdrafts - - - Bank loans 594.9 1,279.2 684.3 Other loans 3,826.0 3,467.5 (358.5) Finance leases 201.2 180.0 (21.2) Cross currency swaps (51.4) 2.6 54.0 Net debt 4,447.5 4,752.6
Slide 42: Fair Value of Net Debt
FAIR VALUE OF NET DEBT AT 31 MARCH 2015 Movement in 2014 2015 the period £m £m £m Bank loans 608.8 1,297.7 688.9 Other loans 4,167.8 4,331.1 163.3 Finance leases 197.7 190.7 (7.0) 4,974.3 5,819.5 845.2 Net cash and cash equivalents (123.2) (176.7) (53.5) Cross currency swaps (51.4) 2.6 54.0 Fair val
Slide 43: Analysis of Borrowings, Net Debt and Swaps
ANALYSIS OF BORROWINGS, NET DEBT AND SWAPS At 31 March 2015 5,645 166 1 4,931 (4) 3 (177) 4,753 461 4,470 Borrowings Exchange Cross currency Cash Net debt per Net debt at IR swaps adjustment swaps balance sheet fair value GBP Debt Currency debt at historical rate 1. Excludes forward starting cash fl
Slide 44: Debt Maturity Profile
DEBT MATURITY PROFILE 600 500 400 300 RCF Long term debt 200 100 0 Average maturity of around 15 years 44
Slide 45: Credit Ratings
CREDIT RATINGS Severn Trent Water Severn Trent Plc Moody’s A3 Baa1 Standard & Poor’s BBB+ BBB- Moody’s – outlook is negative Standard & Poor’s – outlook is stable 45
Slide 46: Severn Trent Water – RCV
SEVERN TRENT WATER – RCV 2014/15 Closing RCV (nominal) £7,740m 2015/16 Opening RCV (nominal) £7,683m £m 2015/16 2016/17 2017/18 2018/19 2019/20 Per Determination1 7,336 7,490 7,684 7,866 7,948 Projected Outturn (OBR RPI assumptions)2 7,840 8,212 8,686 9,168 9,550 1. 2012/13 prices 2. Based on Office