Severn Trent PLC · LSE:SVT
Severn Trent — FY2022 Earnings Presentation
44 slides from Severn Trent's earnings presentation, May 25, 2022
Slide 1: Full Year 2022 Results
ST Classification: UNMARKED ST Classification: OFFICIAL PERSONAL FULL YEAR 2022 RESULTS 25th May
Slide 2: Disclaimers
DISCLAIMERS Cautionary statement regarding forward-looking statements This document contains statements that are, or may be deemed to be, These factors include but are not limited to: the Principal Risks disclosed in our ‘forward-looking statements’ with respect to Severn Trent’s financial condition
Slide 3: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive 3
Slide 4: 2021/22 Highlights
2021/22 HIGHLIGHTS Continuing to deliver for all stakeholders Financially Progressing well supporting an with £566m Strong financial additional 100,000 Green Recovery performance customers programme Best-ever Launched Get River operational Positive pledges performance with £79m ODIs1 4 1. Customer O
Slide 5: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer 5
Slide 6: Full Year Financial Highlights
FULL YEAR FINANCIAL HIGHLIGHTS Strong financial performance, robust balance sheet, resilient business model RoRE performance Confirmed final Gearing at 59.5%, of 8.7% and ODI dividend of supporting RCV performance of 61.3 pence, in growth £79m line with policy Group adjusted Pension deficit PBIT up
Slide 7: Regulated Water and Waste Water PBIT
REGULATED WATER AND WASTE WATER PBIT PBIT up 5% driven by recovery of revenue and improved customer collections Planned step up in IRE programme Includes £2m increase in chemicals 110.5 (11.8) (14.1) 15.7 (47.2) (7.9) Net impact of rising wholesale energy prices Continued strong (21.0) collections t
Slide 8: Business Services
BUSINESS SERVICES Strong performance in Business Services with earnings growth across the portfolio Turnover £143.6m EBITDA £53.2m Adjusted PBIT £38.5m +6.6% +35.4% +49.2% Increased project work and improved performance on MoD Operating Services and Coal Authority contracts Property £13m profit in t
Slide 9: Renewable Energy
RENEWABLE ENERGY A decade of investment delivering financial returns, Net Zero benefits and energy price hedging £370m of investment in renewable energy generation, mitigating the impact of rising market energy prices today and supporting our Benefitting from our natural hedge today journey to Net Z
Slide 10: Inflation
INFLATION Protecting our stakeholders in an inflationary world Inflation-linked returns for our shareholders Supporting our customers Inflation-linked dividend growth for our investors Offering support to an additional 100,000 customers who are struggling to pay, through an enhanced affordability sc
Slide 11: Click below for more about our affordability scheme
PLEASE CLICK BELOW FOR MORE ABOUT OUR AFFORDABILITY SCHEME HTTPS://YOUTU.BE/VBAHML3E5EE 11
Slide 12: Financing Strategy
FINANCING STRATEGY Active treasury management providing resilience and returns in today’s inflation environment Net debt1 £6,508m Average debt 13 years maturity Index-linked debt 27% Majority of our debt is now fixed at low interest rates; a low level of index- linked debt relative to the sector red
Slide 13: Financing Performance
FINANCING PERFORMANCE Cash cost of interest down, continuing to raise new finance below the iBoxx Track record of outperforming the Effective cash cost of interest1 3.0% nominal debt allowance down 10bps 7.00% 6.00% Effective interest cost2 4.7% 5.00% up 130bps 4.00% 3.00% Continuing to outperform t
Slide 14: Pensions Performance
PENSIONS PERFORMANCE Strong asset performance, effective hedging, significantly reduced pension deficit 10.7 £m Deficit reduced by £400m since 2016/17– ahead of triennial plan 367.7 (188.5) 10% of (61.9) market cap 128.0 £575m £520m Net deficit at FY21 Net services cost Actuarial gains Company Net d
Slide 15: Return on Regulatory Equity
RETURN ON REGULATORY EQUITY Strong RoRE: solid cost control, best-ever ODIs and financing outperformance Consistently outperforming the FY22 RoRE sector average 8.7% Best-ever performance with £79m on AMP6 FY21 Customer ODIs 1.6% 8.5% Financing returns3 boosted by active 6.1% 3.0% treasury managemen
Slide 16: FY23 Technical Guidance
FY23 TECHNICAL GUIDANCE FY22 Year-on- Regulated Water and Waste Water Outturn year Turnover1 £1.97 billion to £2.02 billion. Includes c.£60 million2 for diversions income related to HS2, which is broadly offset in IRE. £1.80bn ▲ The Group has a natural economic hedge against higher energy prices, wi
Slide 17: Financial Summary
FINANCIAL SUMMARY Strong financial performance, well positioned in a higher inflation environment Customer ODIs expected to be at least £50m for FY23, in addition to over £150m earned in the AMP so far Robust balance sheet, pension deficit down, gearing at 59.5% to support RCV growth FY23 dividend e
Slide 18: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive 18
Slide 19: Strong Year in Water
STRONG YEAR IN WATER AMP6 investment and continued focus driving improvements £15m reward1 10 out of 12 ODIs green Water Quality Complaints vs Network Flushing 16,000 16,000 Kilometres of network flushed 14,000 14,000 Water quality Water quality complaints down 14% this Water Quality Complaints 12,0
Slide 20: Leading in Waste
LEADING IN WASTE Multi-pronged approach driving frontier performance £34m reward 6 out of 8 ODIs green 5,000 Blockages 6 month rolling average 4,000 Down 4% this year, 33% down in AMP7 Continued reduction through investment in network repairs 3,000 in blockages and cleansing 2,000 AMP61 AMP7 Mixed r
Slide 21: More information about the EPA measure-set
MORE INFORMATION ABOUT THE EPA MEASURE-SET HTTPS://YOUTU.BE/FN7NDNYCXSQ 21
Slide 22: Enhancing Our Environment
ENHANCING OUR ENVIRONMENT Building an environment for the future £21m reward All 4 ODIs green Biodiversity - net improvement (Hectares) 5,000 4,696 Confident in achieving for a third 4* EPA status consecutive year TARGET 2,632 Great Big Nature Achieved over 90% of our biodiversity Boost success impr
Slide 23: Get River Positive
GET RIVER POSITIVE Our five pledges to help transform the rivers in our region by 2030 Our pledges We have reduced phosphate and ammonia from our operations since 1990s by 80% and 72% 2. Bathing quality 3. New deal for respectively rivers farmers 1. No harm to rivers from our operations 24% of RNAGs
Slide 24: Click below to hear more about our wetlands investment at Cinderford
CLICK BELOW TO HEAR MORE ABOUT OUR WETLANDS INVESTMENT AT CINDERFORD HTTPS://YOUTU.BE/52AAKVSRYYC 24
Slide 25: Investing in Our Future
INVESTING IN OUR FUTURE Making good progress with AMP7 capital programme and Green Recovery £604m capital invested this year £566m Green Recovery programme underway On core programme, All schemes mobilised delivering solutions to our 10% increased Delivered 100% of live working on over biggest chall
Slide 26: Delivering for Our Customers
DELIVERING FOR OUR CUSTOMERS Driving improvements in areas that matter for our customers £9m reward All 9 ODIs green Number of customers financially supported 350,000 every year 315,000 300,000 Making a Today announcing financial support for a difference further 100,000 customers 250,000 200,000 TAR
Slide 27: Our People, Our Communities
OUR PEOPLE, OUR COMMUNITIES Delivering benefits for our region Community Fund c.£2m awarded to 73 projects New talent 47% from social mobility cold spots programmes A Stonewall Top 50 Employer and 5th in Embracing D&I the Social Mobility Index Consistent ‘Best employee experience’ by CIPD and retent
Slide 28: Summary
SUMMARY Strong RoRE of 8.7% 88% of STW ODI measures in positive territory Forecast AMP7 10.8% real RCV1 growth Additional 100,000 customers supported 1. Nominal RCV growth for the Group of 28.6% based on the Office of Budget Responsibility March 2022 forecast of inflation; includes Green Recovery an
Slide 29: Appendix
APPENDIX 29 29
Slide 30: Get River Positive – Our Pledges
GET RIVER POSITIVE – OUR PLEDGES 1. Ensure storm overflows and sewage treatment works do not harm rivers 2. Create more opportunities for everyone to enjoy our region’s • Based on Environment Agency measures (RNAGS), our operations will not be the reason for rivers unhealthy rivers by 2030. • We wil
Slide 31: Regulated Water and Waste Water Revenue
REGULATED WATER AND WASTE WATER REVENUE Increased Regulated Water and Waste Water revenue as consumption returns to a normal level Recovery of 2020/21 shortfall through the Driven by increased regulatory mechanism biomethane power 25.9 1804.4 11.1 12.1 62.0 4.7 84.6 Income from £m diversions activit
Slide 32: Regulatory Capital Value
REGULATORY CAPITAL VALUE Green Recovery and inflation driving RCV growth of 29% Nominal growth of 28.6% Nominal RCV Growth CAGR 5.2% Real growth of 10.8% 28.6% 27.0% 20.9% 17.8% 17.6% 16.8% 10.8% 9.4% 4.1% Final Determination Final Determination + Final Determination + Green Recovery Green Recovery
Slide 33: Adjusted EBITDA
ADJUSTED EBITDA¹ 2021 2022 Variance Variance £m £m £m % 816.1 Regulated Water and Waste Water 861.3 45.2 5.5 39.3 Business Services 53.2 13.9 35.4 (4.9) Corporate and other (6.7) (1.8) (36.7) 850.5 Severn Trent Group 907.8 57.3 6.7 1. Earnings before interest, tax, depreciation, amortisation and amo
Slide 34: Business Services Adjusted EBITDA
BUSINESS SERVICES ADJUSTED EBITDA¹ Non Regulated Regulated Total £m £m £m Operating Services and Other 4.0 18.5 22.5 Green Power 0.2 17.3 17.5 Property Development 10.1 3.1 13.2 Adjusted EBITDA 14.3 38.9 53.2 Depreciation² – (14.7) (14.7) Adjusted PBIT 14.3 24.2 38.5 1. 2. Earnings before interest,
Slide 35: Segmental Adjusted PBIT
SEGMENTAL ADJUSTED PBIT¹ 2021 2022 Variance Variance £m £m £m % 452.1 Regulated Water and Waste Water 476.3 24.2 5.4 25.8 Business Services 38.5 12.7 49.2 (5.1) Corporate and other (6.9) (1.8) (35.3) – Consolidation adjustments 0.4 0.4 100.0 472.8 Severn Trent Group 508.3 35.5 7.5 1. Profit before i
Slide 36: Depreciation
DEPRECIATION¹ 2021 2022 Variance Variance £m £m £m % 364.0 Regulated Water and Waste Water 385.0 21.0 5.8 13.5 Business Services 14.7 1.2 8.9 0.2 Corporate and other 0.2 – – – Eliminations (0.4) (0.4) (100.0) 377.7 Severn Trent Group 399.5 21.8 5.8 1. Including amortisation of intangible assets and
Slide 37: Net Finance Costs
NET FINANCE COSTS 2021 2022 Income Income statement Capitalised Gross interest statement Capitalised Gross interest charge interest incurred charge interest incurred £m £m £m £m £m £m 162.5 30.4 192.9 Cash interest (including accruals) 156.2 34.5 190.7 5.4 – 5.4 Net pension finance cost 6.7 – 6.7 In
Slide 38: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE 2021 2022 Variance Variance £m £m £m % 472.8 Adjusted profit before interest and tax 508.3 35.5 7.5 (187.1) Net finance costs (269.4) (82.3) (44.0) 3.6 Reduction in expected credit loss on loan receivable 0.2 (3.4) (94.4) 289.3 Adjusted profit before tax 239.1 (50.2) (17.
Slide 39: Group Balance Sheet
GROUP BALANCE SHEET 31 March 2021 31 March 2022 Variance Variance £m £m £m % 10,261.4 Property, plant and equipment, right-of-use assets, intangible assets and goodwill 10,609.3 347.9 3.4 – Investment in joint venture 16.5 16.5 100.0 15.2 Working capital 14.8 (0.4) (2.6) (1,259.1) Deferred income (1
Slide 40: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)1 2021 2022 Variance Variance £m £m £m % 584.1 Regulated Water and Waste Water 588.7 4.6 0.8 9.1 Business Services 5.6 (3.5) (38.5) 593.2 Severn Trent Group 594.3 1.1 0.2 1. Including purchases of property, plant and equipment, intangible assets, proceeds on disposal of
Slide 41: Net Debt
NET DEBT 31 March 2021 31 March 2022 Variance Variance £m £m £m % (1,011.1) Bank loans (782.5) 228.6 22.6 (5,471.3) Other loans (5,823.5) (352.2) (6.4) (121.3) Lease liabilities (117.4) 3.9 3.2 44.0 Net cash and cash equivalents 107.7 63.7 144.8 31.9 Cross currency swaps 28.3 (3.6) (11.3) 84.0 Loan
Slide 42: Fair Value of Debt
FAIR VALUE OF DEBT 1 31 March 2021² 31 March 2022 Variance Variance £m £m £m % (1,045.9) Floating rate debt (814.0) 231.9 22.2 (4,376.4) Fixed rate debt (4,379.6) (3.2) (0.1) (2,636.3) Index-linked debt (2,605.6) 30.7 1.2 (8,058.6) (7,799.2) 259.4 3.2 44.0 Net cash and cash equivalents 107.7 63.7 14
Slide 43: Debt Maturity
DEBT MATURITY 700.0 AMP7 AMP8 and beyond Maturing debt 600.0 £50m PP 500.0 CPIH £50m £400m Sustainable Bond 400.0 300.0 200.0 100.0 0.0 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055
Slide 44: Gearing and Credit Ratings
GEARING AND CREDIT RATINGS 30 September 2021 31 March 2021 Net debt/RCV¹ 31 March 2022 63.8% 67.5% Severn Trent Plc Group² 63.7% 60.8% 64.5% Regulated Gearing³ 59.5% 31 March 2021 31 March 2022 Severn Trent Water Severn Trent Plc Severn Trent Water Severn Trent Plc Outlook Baa1 Baa2 Moody's Baa1 Baa