Severn Trent Plc · LSE:SVT
Severn Trent — FY2018/19 Earnings Presentation
38 slides from Severn Trent's earnings presentation, May 21, 2019
Slide 1: Full Year 2018/19 Results
FULL YEAR 2018/19 RESULTS 21 May 2019 1
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: Highlights
HIGHLIGHTS Continued momentum and fast-track status building a strong platform for AMP7 H2 Strong water performance gives FY20 confidence £769m Largest year of capital investment in a decade At least £177m(1) AMP7 revenue from AMP6 customer ODIs c£1.5bn Partners appointed for AMP7 capital programme
Slide 5: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer 5
Slide 6: 2018/19 Financial Highlights
2018/19 FINANCIAL HIGHLIGHTS Delivering a strong set of results in a pivotal year Turnover(1) Underlying PBIT(1,2) Effective interest rate £1,767.4m £573.6m 3.9% +4.2% +6.3% down 60 basis points Underlying basic EPS(1,3) Full-year dividend AMP6 cumulative RoRE(4) 145.8 pence 93.37p 9.1% +21.0% in li
Slide 7: Regulated Water and Waste Water: Turnover
REGULATED WATER AND WASTE WATER Turnover Up 4% driven by RPI-linked price increases in Severn Trent Water and Hafren Dyfrdwy Revenue uplift from 2016/17 WRFIM(1) adjustment partially offset by decision to take lower £1,638m customer ODI reward into 2018/19 revenue £m 13.9 3.0 1,637.6 (54.5) 55.7
Slide 8: Regulated Water and Waste Water: Underlying PBIT
REGULATED WATER AND WASTE WATER Underlying PBIT Up 5.7% driven by higher turnover and disciplined cost control PBIT margin up despite absorbing around £22m of hot weather costs, higher depreciation £544m (£14.3m) and other anticipated cost pressures in power and licence fees £m 7.4 (17.9) 63.0 (9
Slide 9: Business Services
BUSINESS SERVICES An exciting period of potential opportunity Property Development 2018/19 performance(1) Delivered £20m in 2018/19 On track for a further £5m - £10m in 2019/20 Turnover £146m up £5.4m Pipeline of land sales ready for AMP7 delivery PBIT £36m up £0.7m Renewable Energy In line wi
Slide 10: Group Cash Flow and Net Debt
GROUP CASH FLOW AND NET DEBT Net debt Increase in net debt of £478m following an increase in net capital expenditure to £769m, £5,834m our biggest annual capital spend in a decade £m 182.9 35.8 5,834.1 113.9 211.9 5,356.6 (826.3) 769.3 (10.0) Opening net debt Cash generated Net issue of shares Net c
Slide 11: Financing Performance
FINANCING PERFORMANCE Delivered 150bps reduction in cost of debt… Down 60 bps from 17/18 Effective interest cost(1) 5.4% Effective cash interest Effective 3.9% cost down 30 bps to interest 3.1% rate(1) 4.5% 4.4% 4.5% 3.9% 14/15 15/16 16/17 17/18 18/19 Net finance costs down £25.3m year-on-year
Slide 12: A Resilient Financing Strategy
A RESILIENT FINANCING STRATEGY AMP7 preparation under way with a diverse, low cost debt portfolio Index-linked 25% Floating 22%, (now 15%3) New debt at Raised £523m at competitive fixed rates competitive Further opportunity from £3bn of debt £1,352m £1,486m rates to raise in AMP7 Gross debt Re
Slide 13: Return on Regulated Equity (RoRE)
RETURN ON REGULATED EQUITY (RoRE)(1) Strong RoRE, despite customer ODI capping and totex reinvestment RoRE 8.1% 9.1% • CUSTOMER ODIs Sustained strong performance 2018/19(2) AMP6 Cumulative constrained by customer ODI cap, impacting year 4 RoRE 1.0% • Benefit of uncapping to be realised in year 5 Out
Slide 14: FY20 Technical Guidance
FY20 TECHNICAL GUIDANCE The following technical guidance is presented under the new segmental basis. Please refer to note 2 to the accounts in the Full Year Results RNS for more information regarding segmental changes. Regulated Water and Waste Water FY18/19 Year-on-Year Turnover 1 £1.61 billion to
Slide 15: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive 15
Slide 16: Delivering for Customers
DELIVERING FOR CUSTOMERS We’ve delivered a lot for our customers over AMP6… Delivered against performance commitments, including: On track to invest £1,300 Helped over 50,000 for every household we customers a year who reduction in external serve struggle to pay 62% sewer flooding reduction in water
Slide 17: Leading the Way in Waste
LEADING THE WAY IN WASTE Leaders on customer ODIs and costs in AMP6 – set to continue into AMP7 Hit the ODI1 cap this year – earned £7m in Waste, Severn Trent and Hafren Dyfrdwy lead the equivalent to £103m on an uncapped basis sector on base cost efficiency, more than 7% Cap increased to 2.6% o
Slide 18: Building Momentum in Water
BUILDING MOMENTUM IN WATER Second half performance gives confidence for FY19/20 and beyond Refreshed strategies and increased focus following the Leakage Back on track, hitting our leakage target with 4% summer delivered promising results. In particular: improvement on last year. Supply interruption
Slide 19: Improving Our Environment
IMPROVING OUR ENVIRONMENT Delivering ambitious environmental programmes and making long term commitments Catchment management Our triple carbon pledge Working with farmers to improve water quality, generate efficiency and deliver environmental benefits Earned ODI reward of £11 million, recognisi
Slide 20: Preparing for AMP7 Customer ODIs
PREPARING FOR AMP7 CUSTOMER ODIS Confident we can continue delivering for customers, communities and investors Executive-led reviews of all Using our experience to ensure better, performance commitments more efficient and effective outcomes Driver trees Taking key learnings to drive benefits acr
Slide 21: Investment Programme
INVESTMENT PROGRAMME Biggest year of capital investment in a decade, while preparing for our AMP7 programme £300m Birmingham Resilience Project to deliver Certainty over AMP7 investment more benefits than planned for the same cost programme supports: Early contracting of supply chain c£1.5 billion
Slide 22: Awesome Place to Work
AWESOME PLACE TO WORK Creating an inclusive culture that recognises people as our most valuable asset Glassdoor Social Mobility Company bonus Top 50 Company Index Aligned from top April 19 score: 3.9 Top 20 company to bottom Engagement Gender diversity Gender pay gap 5% above UK&I Top 4 in Hampton M
Slide 23: Our AMP7 Platform
OUR AMP7 PLATFORM Customer Revenue of at least £177m(1) in AMP7 from ODIs AMP6 ODIs; confident in further delivery Proud to be working as a pathfinder On the right run-rate following AMP6 efficiencies; Totex suppliers appointed for fast start to AMP7 purposeful company Financing Entering AMP7 with a
Slide 24: Q&A
Q&A 24
Slide 25: Appendix
APPENDIX 25
Slide 26: Underlying EBITDA, Year Ended 31 March 2019
UNDERLYING EBITDA¹ YEAR ENDED 31 MARCH 2019 2018 2019 2019 Variance Variance (restated)⁽²⁾ old basis new basis old basis £m £m £m £m % 835.4 Regulated Water and Waste Water 841.9 879.0 43.6 5.2 43.2 Business Services 94.7 46.3 3.1 7.2 (9.6) Corporate and Other (8.1) 3.2 12.8 133.3 (0.5) Eliminations
Slide 27: Business Services Underlying EBITDA
BUSINESS SERVICES UNDERLYING EBITDA¹,2 YEAR ENDED 31 MARCH 2019 Regulated Non-Regulated Total £m £m £m Operating Services - 7.9 7.9 Energy 0.1 7.4 7.5 Bioresources 52.5 - 52.5 Property Development 8.6 10.9 19.5 Other 3.9 3.4 7.3 Underlying EBITDA 65.1 29.6 94.7 Depreciation (23.1) (6.5) (29.6) Amort
Slide 28: Depreciation, Year Ended 31 March 2019
DEPRECIATION¹ YEAR ENDED 31 MARCH 2019 2018 2019 2019 Variance Variance old basis new basis old basis £m £m £m £m % 320.5 Regulated Water and Waste Water 315.0 334.8 14.3 4.5 8.4 Business Services 30.6 10.8 2.4 28.6 0.1 Corporate and other 0.1 0.1 ‒ ‒ (0.3) Eliminations (0.5) (0.5) (0.2) (66.7) 328.
Slide 29: Power, Year Ended 31 March 2019
POWER YEAR ENDED 31 MARCH 2019 2018(1) 2019 Segmental Self Self Group Group analysis generation Segmental analysis generation £m £m £m £m £m £m Turnover 60.4 (19.0) 41.4 Business Services 72.6 (26.4) 46.2 Costs (95.9) 18.5 (77.4) Regulated Water and Waste Water (2) (105.8) 17.2 (88.6) (2.3) 0.5 (1.8
Slide 30: Net Finance Costs
NET FINANCE COSTS YEAR ENDED 31 MARCH 2019 Income Income statement Capitalised Gross interest statement Capitalised Gross interest charge interest incurred charge interest incurred 2018 2018 2018 2019 2019 2019 £m £m £m £m £m £m 149.9 26.2 176.1 "Cash" interest (including accruals) 140.7 33.2 173.9
Slide 31: Underlying Earnings Per Share
UNDERLYING EARNINGS PER SHARE YEAR ENDED 31 MARCH 2019 2018 2019 Variance Variance (restated)⁽¹⁾ £m £m £m % 539.8 Underlying profit before interest and tax 573.6 33.8 6.3 (219.5) Net finance costs (194.2) 25.3 11.5 320.3 Underlying profit before tax 379.4 59.1 18.5 (40.8) Tax at the underlying effec
Slide 32: Group Balance Sheet at 31 March 2019
GROUP BALANCE SHEET AT 31 MARCH 2019 31 March 2018 31 March 2019 Variance Variance (restated)⁽¹⁾ £m £m £m % 8,622.5 Property, plant and equipment; intangible assets and goodwill 9,300.7 678.2 7.9 37.6 Joint ventures, associates and other investments 37.0 (0.6) (1.6) 76.5 Working capital 109.7 33.2 4
Slide 33: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)¹ YEAR ENDED 31 MARCH 2019 2018 2019⁽¹⁾ Variance Variance £m £m £m % 582.4 Regulated Water and Waste Water 757.7 175.3 30.1 11.0 Business Services 12.6 1.6 14.5 (0.1) Corporate and Other 0.9 1.0 1000.0 (2.3) Eliminations (1.9) 0.4 17.4 591.0 Severn Trent Group 769.3 178
Slide 34: Net Debt at 31 March 2019
NET DEBT AT 31 MARCH 2019 31 March 2018 31 March 2019 Variance Variance £m £m £m % 38.5 Net cash and cash equivalents 39.6 1.1 2.9 (1,217.4) Bank loans (1,120.1) 97.3 8.0 (4,223.9) Other loans (4,820.5) (596.6) (14.1) (113.9) Finance leases (112.2) 1.7 1.5 135.6 Loans receivable from joint ventures
Slide 35: Fair Value of Debt at 31 March 2019
FAIR VALUE OF DEBT AT 31 MARCH 2019 2018 2019 Variance Variance £m £m £m % (1,109.8) Floating rate debt (1,004.2) 105.6 9.5 (3,360.6) Fixed rate debt (3,969.9) (609.3) (18.1) (2,269.1) Index-linked debt (2,298.3) (29.2) (1.3) (6,739.5) (7,272.4) (532.9) (7.9) 38.5 Net cash and cash equivalents 39.6
Slide 36: Analysis of Borrowings & Net Debt
ANALYSIS OF BORROWINGS & NET DEBT AS AT 31 MARCH 2019 36
Slide 37: Debt Maturity as at 31 March 2019
0 100 200 300 500 600 700 400 AMP6 2019 2020 2021 2022 AMP7 2023 2024 2025 2026 2027 2028 2029 2030 2031 AMP8 and beyond 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055 2056 2057 2058 2059 2060 2061 2062 2063 2064 2065 2066 2067
Slide 38: Gearing and Credit Ratings
GEARING AND CREDIT RATINGS AS AT 31 MARCH 2019 31 March 2018 Net Debt/RCV⁽¹⁾ 31 March 2019 60.6% Severn Trent Group (2) 63.0% 60.8% Severn Trent Water Group(3) 62.3% 31 March 2018 31 March 2019 Severn Trent Water Severn Trent Plc Severn Trent Water Severn Trent Plc Outlook A3 Baa1 Moody's A3 Baa1 Ne