United Utilities Group Plc · LSE:UU.
United Utilities — H1 2020/21 Earnings Presentation
48 slides from United Utilities's earnings presentation, Nov 25, 2020
Slide 1: Half year results
Half year results Six months ended 30 September 2020 United Utilities Group PLC United Utilities • 2020/21 half year results
Slide 2: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2020/21 half year results
Slide 3: Highlights
Highlights Robust support for customers, Strong and confident Good financial performance Reaffirming AMP7 colleagues and communities start to AMP7 backed by strong dividend policy throughout the COVID-19 balance sheet pandemic United United Utilities Utilities • 2020/21 • 2020/21 halfhalf yearyear r
Slide 4: Strong operational performance during COVID-19
Strong operational performance during COVID-19 Domestic Business customers customers Service levels maintained Retailer billing and debt against higher domestic demand management activity recommenced - Peak demand up 22% Robust cash collection UUW average business demand down Confident in adequacy o
Slide 5: Supporting customers and communities
Supporting customers and communities Home 5% learning hub households helped 7,300 receiving support pupils during with their bill school closures Extended Hosted the industry’s first eligibility for social tariff Social Mobility Summit Continuing to Leading recruit graduates the way and apprentices;
Slide 6: Supporting our colleagues
Supporting our colleagues 80% key workers; 319 apprentices 60% working from home Accelerated digital strategy 97% retention COVID secure working environment rate Technical training college established in 2014; 2,500 people trained 187 graduates SOS scheme supporting colleagues’ struggling families 9
Slide 7: Strong and confident start to AMP7
Strong and confident start to AMP7 Customer On track Fast track Accelerating satisfaction for 4* industry provided early £500m remains high – on leading visibility of AMP7 capex track for C-MeX environmental reward performance £130m £150m Industry Completed investment in additional leading first rep
Slide 8: Delivering improved performance within the totex allowance
Delivering improved performance within the totex allowance Upper quartile efficiency Starting AMP7 at the required totex run rate Driving sustainable performance Confident in ability to deliver AMP7 scope within the final determination totex allowance Living within the AMP7 totex envelope to drive e
Slide 9: Delivering value for customers and shareholders
Delivering value for customers and shareholders Key ODIs driving current year performance Driving performance to Year 1 forecast performance range (P10/P90) unlock ODI opportunities denotes current forecast performance against the range of possible outcomes Penalties Rewards -15 -10 -5 0 5 10 15 1 £
Slide 10: Reaffirming AMP7 dividend policy
Reaffirming AMP7 dividend policy Robust business Stability in medium Dividend growth in supported by strong term inflation line with CPIH balance sheet forecasts inflation United United Utilities Utilities • 2020/21 • 2020/21 half year half year results results • 10
Slide 11: Phil Aspin, Chief Financial Officer
Phil Aspin Chief Financial Officer United Utilities • 2020/21 half year results
Slide 12: Financial highlights
Financial highlights Household Underlying Revenue bad debt operating profit Underlying EPS1,2 £894m 1.8% £319m 25.5p 4.4% of revenue 18.5% 16.1% H1 2019/20: H1 2019/20: H1 2019/20: H1 2019/20: £936m 1.8% £392m 30.4p Strong Strong Strong balance sheet balance sheet balance sheet Low customer 63
Slide 13: Revenue
Revenue Revenue £m FY 2020/21 revenue guidance 6 936 Consumption up due to Revenue down £60-110m on Covid and dry weather prior year 6 (40) 26 894 Volume impact £10-60m 6.6% real reduction in average HH bills, 1.5% CPIH increase (40) Revenue cap recovers volume Consumption down due to Covid impact i
Slide 14: Household cash collection and bad debt
Household cash collection and bad debt Current year Confident in Household bad debt household adequacy of £17m for H1 2020/21 Revenue remains guidance cash collection Mar-20 provision resilient at 1.8% for the full year of in line with last year regulated revenue Government intervention to Widest ra
Slide 15: Underlying operating profit
Underlying operating profit Underlying operating profit £m Marginal reduction in £8m rates refund in H1 capitalised costs to 45% 2019/20 392 (41) (15) (4) (6) (5) (2) 319 Network optimisation, including adverse weather costs of £3m Including £3m of COVID related costs H1 2019/20 UOP Revenue IRE Depr
Slide 16: Interest, joint ventures, tax and earnings
Interest, joint ventures, tax and earnings Underlying net Joint Underlying Underlying profit finance expense Ventures tax charge1 after tax1 £108.5m £2.5m 18% £174.0m £34m lower Share of At H1 2019/20: than H1 2019/20 underlying profits £39m £207.2m Lower inflation on H1 2019/20 £5.7m share Excludes
Slide 17: Financing performance
Financing performance Existing debt locked in at rates favourable to the AMP7 allowed cost of embedded debt £2.4bn financing to raise in AMP7 RPI-linked CPI/CPIH-linked Fixed Floating 9,000 £600m raised in H1 at attractive rates 8,000 7,000 Liquidity extended out to September 2022 6,000 £million 5,0
Slide 18: Strong balance sheet – low household debtor risk
Strong balance sheet – low household debtor risk Household customer receivables position on the balance sheet 2020 household debtors £115m £m Impact of one-off £17m extra COVID provision Trade debtors <1 year 60.2 £101m Trade debtors 1-2 years 16.4 £93m £93m Trade debtors >2 years 0.9 £78m Total 77.
Slide 19: Strong balance sheet – net debt to RCV gearing
Strong balance sheet – net debt to RCV gearing RCV gearing of 63% supports stable A3 credit rating with Moody’s Net debt £m 38 3 40 31 30 66 7,573 194 7,361 (178) 7,396 312 (496) (6) Full detail of the adjustments to derive net debt under the new definition are included in the appendices United Unit
Slide 20: Strong balance sheet – the pensions journey
Strong balance sheet – the pensions journey IFRS The ESG journey to remove the “pensions iceberg” at UU deficit Position today Discount rate of 1.6% = Gilts +95bps IFRS Pension scheme fully funded IFRS £754m on a low dependency basis Extra funding £699m IFRS deficit £654m with no further pension def
Slide 21: Reaffirming AMP7 dividend policy
Reaffirming AMP7 dividend policy Medium term Excellent Strong inflation forecasts operational balance Revenue sheet guidance have stabilised performance for the full year HMT and BoE forecast firm recovery Confident start to AMP7 Low residual household debtor risk in inflation over next 2 years RCV
Slide 22: 2020/21 full year outlook
2020/21 full year outlook Revenue £1.75-1.80bn c5% average household bill reduction year 1 of AMP7 COVID-19 impact reducing non-household consumption partly offset by increased household consumption Underlying operating Higher IRE costs Small inflationary increases to core costs Underlying finance
Slide 23: Financial summary
Financial summary Strong financial performance Robust cash collection and bad debt position Locked in debt at low rates compared with price review assumptions Strong balance sheet with leading pensions position and low household debtor risk Stable inflation forecasts, monetary and fiscal policy are
Slide 24: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2020/21 half year results
Slide 25: Playing our part in the green economic recovery
Playing our part in the green economic recovery 1 2 3 4 AMP7 Enhancement AMP8 On track acceleration projects acceleration Confident in delivering our Already accelerating £500m Around £150m remunerated Schemes to support earlier existing AMP7 requirements – a of AMP7 capex through ODI or totex deliv
Slide 26: Strong performance across a broad range of ESG indices
Strong performance across a broad range of ESG indices Established a sustainable financing framework to replace green EIB funding no longer available Read more about our approach to ESG at: https://www.unitedutilities.com/globalassets/documents/pdf/united-utilities-esg-booklet-2020.pdf United United
Slide 27: Summary
Summary Managing the impact of COVID-19 Focused on delivering our AMP7 plans Responsible value creation for all stakeholders Reaffirming AMP7 dividend policy United United Utilities Utilities • 2020/21 • 2020/21 half year half year results results • 27
Slide 28: Any questions?
Any questions? United Utilities • 2020/21 half year results
Slide 29: 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 30: Supporting information
Supporting information 1. Underlying income statement 15. AMP7 maturity profile 2. Underlying operating costs 16. EIB funding maturity profile 3. Profit before tax reconciliation 17. Net regulatory capital spend profile 4. Profit after tax reconciliation 18. HMT survey of inflation forecasts 5. Fina
Slide 31: Underlying income statement
Underlying income statement Six months ended 30 September 2020 2019 Change (%) £m Revenue 894.4 935.5 -4% Operating expenses (289.2) (276.5) Infrastructure renewals expenditure (83.3) (68.0) EBITDA 521.9 591.0 -12% Depreciation and amortisation (202.8) (199.3) Operating profit 319.1 391.7 -19% Net f
Slide 32: Underlying operating costs
Underlying operating costs Six months ended 30 September 2020 2019 Change (%) £m Revenue 894.4 935.5 -4% Employee costs (78.0) (73.3) +6% Hired and contracted services (45.9) (47.2) -3% Property rates (45.2) (39.3) +15% Materials (39.5) (36.9) +7% Power (38.5) (36.6) +5% Regulatory fees (14.5) (14.1
Slide 33: Profit before tax reconciliation
Profit before tax reconciliation 30 Sep 2020 30 Sep 2019 31 Mar 2020 £m Operating profit 318.5 383.0 630.3 Investment income and finance expense (119.9) (182.2) (289.0) Share of profits/(losses) of joint ventures 2.5 (5.7) (38.1) Reported profit before tax 201.1 195.1 303.2 Adjustments: Bioresources
Slide 34: Profit after tax reconciliation
Profit after tax reconciliation 30 Sep 2020 30 Sep 2019 31 Mar 2020 £m Reported profit after tax 162.0 158.6 106.8 Adjustments: Bioresources asset write down - - 82.6 COVID-19 - - 56.2 Restructuring costs 0.6 8.7 11.8 Net fair value losses on debt and derivative instruments 27.1 62.6 76.3 Interest o
Slide 35: Finance expense
Finance expense Six months ended 30 September 2020 2019 £m Investment income 12.1 11.7 Finance expense (132.0) (193.9) (119.9) (182.2) Less net fair value losses on debt and derivative instruments 27.1 62.6 Adjustments for interest on swaps and debt under fair value option 10.0 10.1 Adjustment for n
Slide 36: Finance expense: index-linked debt
Finance expense: index-linked debt Six months ended 30 September 2020 2019 £m Interest on index-linked debt (25.0) (25.5) RPI adjustment to index-linked debt principal – 3 month lag1 (32.8) (61.8) CPI adjustment to index-linked debt principal – 3 month lag2 (5.5) (4.9) RPI adjustment to index-linked
Slide 37: Derivative analysis
Derivative analysis At 30 September 2020 2019 £m Derivatives hedging debt 652.4 687.8 Derivatives hedging interest rates (180.8) (144.3) Derivatives hedging commodity prices 2.2 1.1 Total derivative assets and liabilities 473.8 544.6 • Derivatives hedging debt; hedge our non index-linked debt into s
Slide 38: Statement of financial position
Statement of financial position At 30 Sep 2020 31 Mar 2020 Change (%) £m Property, plant and equipment 11,648.9 11,510.9 +1% Retirement benefit surplus 654.3 754.1 -13% Other non-current assets 346.8 332.9 +4% Cash 899.0 528.1 +70% Other current assets 300.3 300.2 +0% Total derivative assets 661.9 6
Slide 39: Reconciliation of net debt
Reconciliation of net debt At 30 Sep 2020 31 Mar 2020 £m Cash 899.0 528.1 Total derivative assets 661.9 617.9 Gross borrowings (8,946.2) (8,363.1) Total derivative liabilities (188.1) (144.3) Net debt on previous definition (7,573.4) (7,361.4) Exclude the fair value impact of: Interest rate derivati
Slide 40: 2020 household debtors reconciliation
2020 household debtors reconciliation As at 31 March 2020 £m Household net debtors 77.5 Household accrued income 54.6 Non household net debtors 37.9 Other sundry net debtors 31.3 Total net debtors (including related parties) 201.3 Less related party debtors (52.7) Less total accrued income (72.1) Ne
Slide 41: IFRS pension surplus (normalised)
IFRS pension surplus (normalised) UU IFRS pension surplus (normalised1) 1,000 900 800 700 600 500 400 300 200 100 - Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 UU - IFRS position UU normalised to SVT UU normalised to PNN Source: Companies’ annual reports and accounts 1 Normalised for inflation, discou
Slide 42: Financing and liquidity at 30 September 2020
Financing and liquidity at 30 September 2020 Gross debt = £8,946.2m £256.4m, Other borrowings £208.5m, Short term debt Headroom / prefunding = £848.3m £58.0m, Lease Obligations £411.2m, Yankee bonds (USD) £550.9m, Other EIB loans £201.6m, Euro bonds… £m £413.2m, GBP Fixed rate & RPI £274.2m, HKD bon
Slide 43: Debt structure at 30 September 2020
Debt structure at 30 September 2020 United Utilities Group PLC United Utilities PLC Baa1 stable; BBB- stable; A- stable7 Yankees: Other debt: • $400m in 28s • Short-term loans £120m United Utilities Water Limited A3 stable; BBB+ stable; A- stable7 Ring-fenced and regulated by Ofwat Euro MTNs: Other
Slide 44: Term debt maturity profile as at 30 September
Term debt maturity profile as at 30 September 20201 3,000 Average term to maturity of approximately 18 years 2,000 £m 1,000 0 To 31 Mar 2025-30 2030-35 2035-40 2040-45 2045-50 2050-55 2055-60 2025 Years 1 Future repayments of index-linked debt include inflation based on an average annual RPI rate of
Slide 45: AMP7 maturity profile
AMP7 maturity profile 800 700 600 500 £m 400 300 200 100 0 2021 2022 2023 2024 2025 Notes EIB Other Future repayments of RPI linked debt include inflation based on an average annual RPI rate of 3%. Light green areas represent EIB debt maturing whereas dark green areas represent other debt maturing.
Slide 46: EIB funding maturity profile
EIB funding maturity profile EIB funding maturity profile 1,200.00 1,000.00 800.00 £m 600.00 400.00 200.00 - To 31 Mar 2025 2025-30 2030-35 2035-40 Notes Future repayments of EIB RPI linked debt include inflation based on an average annual RPI rate of 3%. United United Utilities Utilities • 2020/21
Slide 47: Net regulatory capital spend profile
Net regulatory capital spend profile Net regulatory capex 2020/21 2021/22 2022/23 2023/24 2024/25 Proposed capex profile FD capex profile AMP7 net regulatory capex excludes IRE The AMP7 net regulatory capex profile shown on the chart does not constitute a forecast and is subject to change United Uni
Slide 48: HMT survey of inflation forecasts
HMT survey of inflation forecasts 2.50 Inflation: Jan to May 2.50 Inflation: May to Nov 2.00 2.00 Inflation Inflation risk on risk off 1.50 1.50 1.00 1.00 0.50 0.50 0.00 FY21 FY22 FY23 FY24 FY25 0.00 FY21 FY22 FY23 FY24 FY25 May 20: Average (4 years to FY25) = 1.7% Nov 20: Average (4 years to FY25)
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