Severn Trent Plc · LSE:SVT
Severn Trent — H1 2022/23 Earnings Presentation
37 slides from Severn Trent's earnings presentation, Nov 22, 2022
Slide 1: Interim Results 22/23
ST Classification: OFFICIAL PERSONAL INTERIM RESULTS 22/23 22 November 2022
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
Slide 4: Half Year Highlights
HALF YEAR HIGHLIGHTS c.85% of measures Green; Fast start to Get River at least £50m in Positive pledges ODIs Investment On track for Guiding to on track; now double-digit 4* EPA status expecting 36% for fourth year in a RoRE for FY23 nominal RCV row growth 4
Slide 5: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer
Slide 6: Half Year Financial Highlights
HALF YEAR FINANCIAL HIGHLIGHTS Robust Strong balance cost control sheet: £50 million contributing to 58% upgrade Group PBIT regulatory to property gearing profit guidance up 2% Financing 2022 pension valuation agreed outperformance supporting double - unchanged digit RoRE guidance contributions 6
Slide 7: Regulated Water and Waste Water
REGULATED WATER AND WASTE WATER Strong cost control and revenue recovery supporting PBIT Opex (excl. power) in line with £91.0m (£41.1m) inflation, as guided Above inflation increases in chemicals (+61%) offset by tight control of other costs, up just 4% Benefiting from (£9.5m) FY21 revenue recovery
Slide 8: Business Services
BUSINESS SERVICES Providing energy protection and additional Group dividend capacity through growth Business Business Services £81.4m Services £30.7m £50 million upgrade to property profits by + 23.1% + 28.5% Property 2032; averaging £10m PBIT each year Turnover EBITDA Assets operating at 96% effici
Slide 9: Impact of Power Costs
IMPACT OF POWER COSTS Group equity returns protected from market volatility through our hedging strategy Energy self-generation Natural economic hedge protecting the Group We have invested £370m in increasing our energy generation Net Group power costs have increased by £19m, in line with guidance.
Slide 10: Financing Strategy
FINANCING STRATEGY Active treasury management driving financing outperformance and financial resilience Well-positioned for continued AMP7 outperformance New debt allowance linked to iBoxx, providing regulatory protection in a rising rate environment Severn 68% 25% 7% Trent1 £400m New debt raised th
Slide 11: Strong Returns
STRONG RETURNS Guiding to double-digit RoRE for FY23, consistently outperforming sector Delivering across all three levers of outperformance ODIs: Continued operational excellence delivering an expected year 3 Customer ODI reward of at least £50 million Double digit Double 8.8% Digit Financing: Acti
Slide 12: Substantial RCV Growth
SUBSTANTIAL RCV GROWTH Large investment programme and higher inflation increasing RCV by £3.4bn over AMP7 +£3.4 billion AMP7 set to be highest nominal growth period to date Real RCV growth3 11% £2.4bn Nominal RCV growth3 36% £2.9bn (£2.7bn) £0.6bn £0.2bn £12.8bn Mid-AMP gearing4 58% £9.4bn Equity ho
Slide 13: FY23 Technical Guidance
FY23 TECHNICAL GUIDANCE Changes to guidance presented in May 2022 shown in bold Regulated Water and Waste Water FY22 Year-on-year 1 2 Turnover £1.97 billion to £2.02 billion. Includes c.£45 million for diversions income related to HS2, which is broadly offset in IRE. £1.80bn ▲ Higher year-on-year, i
Slide 14: Summary
SUMMARY Increasing visibility providing confidence in future delivery Expecting double-digit RoRE in FY23, consistently outperforming sector Strong cost control and effective energy hedge supporting robust financial performance and protecting customer bills Strategically positioned to continue outpe
Slide 15: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive
Slide 16: Capital Programme on Track
CAPITAL PROGRAMME ON TRACK Managing our programme effectively and efficiently to deliver the best outcomes On track to deliver large capital programme, including Over 70% of £2.9bn core AMP7 capital programme either Green Recovery, delivering 10.8% real RCV growth delivered or prices locked in Impro
Slide 17: To Find Out More About Water Resilience Click Here
TO FIND OUT MORE ABOUT WATER RESILIENCE CLICK HERE
Slide 18: Delivering for Our Customers
DELIVERING FOR OUR CUSTOMERS At least £50m net ODI reward this year; on track to meet or exceed c.85% of targets Water Resilience Consistently delivering operational excellence, earning Minimal disruption for our customers in one of the driest over £200m1 in AMP7 ODIs by the end of year 3 summers si
Slide 19: Taking Care of the Environment
TAKING CARE OF THE ENVIRONMENT Making great progress on our environmental commitments RIVER PLEDGES EPA 4 STAR TRIPLE CARBON PLEDGE Reducing our share of regional On track to achieve the EA’s highest 100% of energy from renewable RNAGS1 to Zero by 2030 environmental rating for the 4th 1 resources by
Slide 20: Supporting Our Communities
SUPPORTING OUR COMMUNITIES Here to support people in our region now and for the long term Supporting customers with their bills Making a lasting difference in our communities Helping support 100,000 people out of poverty by 2032 Bills among An average of around £1 a day and flat 300 work experience
Slide 21: To Learn More About Our New 10-Year Societal Strategy Click Here
TO LEARN MORE ABOUT OUR NEW 10-YEAR SOCIETAL STRATEGY CLICK HERE
Slide 22: Summary
SUMMARY Expecting 36% nominal RCV growth this AMP, well-positioned to deliver long-term investment requirements Continuing to deliver for customers, hitting c.85% of measures, supporting double-digit RoRE guidance for FY23 Great progress on environmental commitments, with fast start on Get River Pos
Slide 23: Appendix
APPENDIX
Slide 24: Regulated Water and Waste Water Revenue
REGULATED WATER AND WASTE WATER REVENUE £m £m 984.9 0.1 6.3 17.1 17.0 6.1 11.5 7.0 33.5 84.6 31.2 893.9 25.91 HY 2021/22 CPIH+K COVID-19 Green Recovery Voids into charge Changes in non- Billed by Other Renewable IRE income Other HY 2022/23 consumption 'fast money' household Water energy increase eff
Slide 25: EBITDA
EBITDA¹ H1 2021/22 H1 2022/23 Variance Variance £m £m £m % 435.3 Regulated Water and Waste Water 442.3 7.0 1.6 23.9 Business Services 30.7 6.8 28.5 (3.0) Corporate and other (3.3) (0.3) (10.0) 456.2 Severn Trent Group 469.7 13.5 3.0 1. Earnings before interest, tax, depreciation and amortisation. 25
Slide 26: Business Services EBITDA and PBIT
BUSINESS SERVICES EBITDA¹ AND PBIT2 Non Regulated Regulated Total £m £m £m Operating Services and Other 1.9 10.3 12.2 Green Power 0.3 16.9 17.2 Property Development 1.4 (0.1) 1.3 EBITDA 3.6 27.1 30.7 Depreciation and amortisation – (8.0) (8.0) PBIT 3.6 19.1 22.7 1. Earnings before interest, tax, dep
Slide 27: Segmental PBIT
SEGMENTAL PBIT¹ H1 2021/22 H1 2022/23 Variance Variance £m £m £m % 242.4 Regulated Water and Waste Water 242.9 0.5 0.2 16.4 Business Services 22.7 6.3 38.4 (3.2) Corporate and other (3.9) (0.7) (21.9) 255.6 Severn Trent Group 261.7 6.1 2.4 1. Profit before interest and tax. 27
Slide 28: Depreciation
DEPRECIATION¹ H1 2021/22 H1 2022/23 Variance Variance £m £m £m % 192.9 Regulated Water and Waste Water 199.4 6.5 3.4 7.5 Business Services 8.0 0.5 6.7 0.2 Corporate and other 0.6 0.4 200.0 200.6 Severn Trent Group 208.0 7.4 3.7 1. Including amortisation of intangible assets and depreciation of right
Slide 29: Net Finance Costs
NET FINANCE COSTS H1 2021/22 H1 2022/23 Income Gross Income statement Capitalised interest statement Capitalised Gross interest charge interest incurred charge interest incurred £m £m £m £m £m £m 81.0 15.2 96.2 Cash interest (including accruals) 77.9 23.5 101.4 3.4 – 3.4 Net pension finance cost 1.6
Slide 30: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE H1 2021/22 H1 2022/23 Variance Variance £m £m £m % 255.6 Profit before interest and tax 261.7 6.1 2.4 (120.8) Net finance costs (186.9) (66.1) (54.7) (1.8) Share of current year profit/(loss) of joint venture 0.2 2.0 111.1 133.0 Adjusted profit before tax 75.0 (58.0) (43.
Slide 31: Group Balance Sheet
GROUP BALANCE SHEET 31 March 2022 30 September 2022 Variance Variance £m £m £m % 10,609.3 Property, plant and equipment, right-of-use assets, intangible assets and goodwill 10,766.5 157.2 1.5 16.5 Investment in joint venture 16.7 0.2 1.2 14.8 Working capital (61.4) (76.2) (514.9) (1,353.4) Deferred
Slide 32: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)1 H1 2021/22 H1 2022/23 Variance Variance £m £m £m % 233.6 Regulated Water and Waste Water 274.2 40.6 17.4 4.4 Business Services 6.1 1.7 38.6 238.0 Severn Trent Group 280.3 42.3 17.8 1. Including purchases of property, plant and equipment, intangible assets, proceeds on
Slide 33: Net Debt
NET DEBT 31 March 2022 30 September 2022 Variance Variance £m £m £m % (782.5) Bank loans (989.6) (207.1) (26.5) (5,823.5) Other loans (6,006.4) (182.9) (3.1) (117.4) Lease liabilities (119.2) (1.8) (1.5) 107.7 Net cash and cash equivalents 366.0 258.3 239.8 28.3 Cross currency swaps 49.1 20.8 73.5 7
Slide 34: Fair Value of Debt
FAIR VALUE OF DEBT 1 31 March 2022 30 September 2022 Variance Variance £m £m £m % (814.0) Floating rate debt (992.5) (178.5) (21.9) (4,379.6) Fixed rate debt (3,802.2) 577.4 13.2 (2,605.6) Index-linked debt (1,710.4) 895.2 34.4 (7,799.2) (6,505.1) 1,294.1 16.6 107.7 Net cash and cash equivalents 366
Slide 35: Analysis of Borrowings & Net Debt
ANALYSIS OF BORROWINGS & NET DEBT 7,115.2 (72.5) (366.0) (49.1) 6,627.6 (5.8) (486.1) (118.2) 6,017.5 Bank loans, other Loans due from Net cash and cash Cross currency Net debt per Floating debt fair Fixed debt fair Index-linked debt Fair value of net loans & lease joint venture equivalents swaps ba
Slide 36: Debt Maturity
DEBT MATURITY [ AMP7 500.0 | ‘ es idle es PEE Ss es 36 AMP8 and beyond £40 vable Bond = = Bank Lo’ mDebt m £40 oP Oo oan mUSPP om
Slide 37: Gearing and Credit Ratings
GEARING AND CREDIT RATINGS 30 September 2021 31 March 2022 Net debt/RCV¹ 30 September 2022 63.8% 63.7% Severn Trent Plc Group² 61.2% 60.8% 59.5% Regulatory Gearing³ 58.1% 31 March 2022 30 September 2022 Severn Trent Water Severn Trent Plc Severn Trent Water Severn Trent Plc Outlook Baa1 Baa2 Moody's