Severn Trent Plc · LSE:SVT
Severn Trent — H1 2016/17 Earnings Presentation
43 slides from Severn Trent's earnings presentation, Nov 24, 2016
Slide 1: Half Year 2016/17 Results
HALF YEAR 2016/17 RESULTS 24 November 2016 Upper Derwent Valley, Peak District National Park
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: Strategy to Drive Results
STRATEGY TO DRIVE RESULTS Our vision By 2020 to be the most trusted water company: delivering an outstanding customer experience, the best value service and environmental leadership Our strategy Severn Trent are transforming service today, driving growth and shaping our industry for tomorrow: for th
Slide 5: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer 5
Slide 6: H1 2016/17 Highlights
H1 2016/17 HIGHLIGHTS Group turnover Underlying PBIT(1) Effective finance cost £906.8m £278.4m 4.2% +3.2% +3.1% down from 4.6% Forecast customer Underlying basic EPS(3) Half-year dividend ODI reward(2) 62.3 pence 32.6 pence £15m +13.5% +1.1% 1. Underlying PBIT = Profit Before Interest, Tax and excep
Slide 7: Regulated Water & Waste Water: Turnover
REGULATED WATER & WASTE WATER Turnover 1.4% higher due primarily to £11.6m TURNOVER RPI-linked price increases £765.2m Partially offset by other net revenue decreases £m 11.6 0.8 1.5 (3.1) 765.2 754.4 (31.0) H1 2015/16 Net price impact Consumption New growth/ Changes in the H1 2016/17 meter opta
Slide 8: Regulated Water & Waste Water: Underlying PBIT
REGULATED WATER & WASTE WATER Increased turnover and labour cost efficiencies Underlying PBIT Partly offset by acceleration of our IRE(1) programme, as £268.9m expected, and costs of preparing for market opening(2) £m 2.5 (14.0) 6.0 (2.1) 1.7 10.8 (1.1) (0.3) 268.9 265.4 H1 2015/16 Turnover Net
Slide 9: Business Services
BUSINESS SERVICES Turnover up £16.9m driven by good growth in both Operating Services and Turnover: £151.0m Renewable Energy and favourable exchange movements of £9.2m £m 4.9 2.8 151.0 9.2 134.1 H1 2015/16 restated(1) Exchange rate movement Operating Services Renewable Energy growth H1 2016/17 under
Slide 10: Group Cash Flow
GROUP CASH FLOW MOVEMENT IN NET DEBT Strong cash from operations: up £36.5m (7.4%) y-on-y £82.1m Closing net debt £4,741.3m £m 532.0 (234.8) 297.2 (63.9) (15.4) (114.0) (60.6) 29.6 82.1 4.9 4.3 52.5 Cash from Net capital Operating Interest Net tax Dividends Impact Net share Proceeds on Change in
Slide 11: Debt: Securing Liquidity, Delivering Outperformance
DEBT: SECURING LIQUIDITY DELIVERING OUTPERFORMANCE Finance Cost Gross Debt Profile at 30th September 2016 106.3 £m Total: £4.9bn 8% 98.1 Indexed Linked £1,287m 93.6 (31 March 2016: 26% Cash interest £1,276m) 82.8 Fixed £2,704m 56% (31 March 2016: Floating £2,690m) 18% £887m 5.1 RPI rolled up 9.8 (31
Slide 12: Pensions
PENSIONS Triennial pension valuation – funding certainty for rest of AMP(1) 31st March 2016 triennial valuation – new funding plan agreed with Trustees Revised contribution plan(2) – base contributions increased by £3m pa to £15m(2) pa, extended to 2031 Efficient new ABF structure(3) enabling
Slide 13: Continued Progress on Energy
CONTINUED PROGRESS ON ENERGY Generation equivalent to 35% of our energy needs On track for 50% by 2020 +16 GWh delivered in H1 2016/17 £70m of the £190m investment programme spent to date Minworth gas to grid plant EBITDA(1) of £10.6m in H1 2016/17 Double-digit post-tax IRR on all renewabl
Slide 14: AMP6 RCV Growth
In real terms, per final determinations AMP6 RCV(1) GROWTH Yorkshire 9.2% Wessex 8.7% Severn Trent (2) 8.6% Thames 7.8% Anglian 7.0% Welsh 7.0% Southern 5.5% Key: South West Severn Trent 2.3% Other listed United Utilities 1.8% Non-listed Northumbrian 0.8% RCV growing around 3x times faster than othe
Slide 15: FY2016/17 Technical Guidance
FY2016/17 TECHNICAL GUIDANCE Regulated Water Includes regulated wholesale and Business Includes the old “Severn Trent Services” segment & Waste Water the household retail business Services and all of our renewable energy businesses Purple = change to guidance since FY 2015/16 Regulated Water and Was
Slide 16: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive 16
Slide 17: Our Winning Formula
OUR WINNING FORMULA Our vision By 2020 to be the most trusted water company: delivering an outstanding customer experience, the best value service and environmental leadership • Customers at the heart of our business • Operational excellence • Winners in a world of incentivisation • At the frontier
Slide 18: Embedding Customers at the Heart of Our Business
EMBEDDING CUSTOMERS AT THE HEART OF OUR BUSINESS Encouraging progress in many areas, but more to be done Service Incentive Mechanism (SIM) Joint 3rd of the WASCs(1) in 2015/16 Strong billing score at 4.6–4.7 Second best of WASCs(1) for low complaints Focus on variability & issue resolution i
Slide 19: Operational Excellence: Customer ODI Performance
OPERATIONAL EXCELLENCE Strong customer ODI(1) comparative performance 25 2015/16 customer ODI performance(2) 20 Net ODI post-tax reward/(penalty) 15 10 £m 5 0 Anglian Wessex South West Dwr Cymru Northumbrian Thames Southern Yorkshire Severn Trent United Utilities -5 -10 -15 1. ODI = Outcome Delivery
Slide 20: Winners in a World of Incentivisation
WINNERS IN A WORLD OF INCENTIVISATION On track for £15m FY16/17 customer ODI(1) reward, but winter ahead of us Category 3 pollutions Water quality complaints Internal sewer flooding Supply interruptions Leakage External sewer flooding Coliform detections(2) SIM(2) 1. Customer ODI = Customer Outcome
Slide 21: Locking in Further Totex Efficiencies
LOCKING IN FURTHER TOTEX EFFICIENCIES £130m £670m £120m +£50m £550m £490m £140m £80m(1) totex out- performance versus £410m(2) FD Locked in by Locked in during Further forecast AMP6 total Planned Net 31 March 2016 H1 16/17 efficiencies efficiencies reinvestment efficiencies • £40m capital programme
Slide 22: Asset Delivery Progress Update
ASSET DELIVERY PROGRESS UPDATE RCV growth relies on delivering the planned schemes on time and budget Good AMP6 progress to date Birmingham Resilience Programme Draycote Water: a change of approach Revised course of action: Original plan: Purchased River Severn Increase capacity of abstraction r
Slide 23: Delivering Outperformance Through Innovation
DELIVERING OUTPERFORMANCE THROUGH INNOVATION Phosphorus removal Pressure transient waves Key stage in sewage treatment process Pressure surges can cause bursts on our water pipes Commenced implementation of new technology Previous technology logged pressure every 15 minutes Reduces phospho
Slide 24: Responsible Business
RESPONSIBLE BUSINESS We invest responsibly for the future of our business… Future talent Corporate responsibility commitments We have an important role to play in protecting water We have almost trebled our apprentice intake this as a precious resource and the wider environment: year and our gradu
Slide 25: The Regulatory Environment: Increased Visibility to 2025
THE REGULATORY ENVIRONMENT INCREASED VISIBILITY TO 2025 We now have far greater clarity of the regulatory environment for AMP7… Cost of debt CPI indexation Water resources/bio-resource competition Risk and reward …enabling us to commence our planning and prepare the business for upcoming cha
Slide 26: Progress and Momentum
PROGRESS AND MOMENTUM Consistent progress in the first six months of this year… £50m £15m 40bps(1) More efficiencies Customer ODI Financing cost locked-in reward on track improvement …but more we can do 1. Finance cost improvement H1 2016/17 versus H1 2015/16 26
Slide 27: Q&A
Q&A Liv Garfield Sarah Bentley Martin Kane Evelyn Dickey Helen Miles Chief Executive Chief Customer Officer Chief Engineer Director of Human Resources Group Commercial Director James Bowling Emma FitzGerald Andy Smith Bronagh Kennedy Tony Ballance Chief Financial Officer Managing Director, Managing
Slide 28: Appendix
APPENDIX 28
Slide 29: Group Earnings
GROUP th EARNINGS Six months ended 30 September 2016 2015 2016 Variance Variance (restated) £m £m £m % 143.7 Profit for the period attributable to owners of the company 210.2 66.5 46.3% (8.1) Adjusted for discontinued operations (22.5) (14.4) 177.8% 135.6 Profit for the period from continuing operat
Slide 30: Group Balance Sheet
GROUP BALANCE th SHEET At 30 September 2016 31st March 2016 30th September 2016 Variance £m £m £m 7,805.6 Property, plant and equipment and intangible fixed assets 7,912.3 106.7 5.2 Joint ventures, associates and other investments 39.4 34.2 91.0 Working capital (16.2) (107.2) (878.3) Deferred income
Slide 31: Movement on Shareholders' Equity
MOVEMENT ON SHAREHOLDERS’ th EQUITY Six months ended 30 September 2016 At 1st April 2016 1,018.5 Total comprehensive income for the period (150.3) Dividends paid to shareholders of Severn Trent Plc (114.0) Share based payments charge (after tax) 3.9 Shares issued 4.9 At 30th September 2016 763.0 31
Slide 32: Gearing
GEARING At 30th September 2016 31st March 2016 Net debt/RCV¹ 30th September 2016 62% Severn Trent Group 59% 62% Severn Trent Water 57% 1. Estimated RCV at 30th September 2016 32
Slide 33: PBITD Analysis
PBITD¹ th ANALYSIS Six months ended 30 September 2016 2015 2016 (restated) £m £m 417.5 Regulated Water and Waste Water 422.1 15.4 Business Services 21.6 (6.8) Corporate and Other (6.6) 426.1 Severn Trent Group 437.1 1. Profit from continuing operations before interest, tax, depreciation (see depreci
Slide 34: Depreciation
DEPRECIATION¹ th Six months ended 30 September 2016 2015 2016 £m £m 152.1 Regulated Water and Waste Water 153.2 4.2 Business Services 5.5 (0.3) Corporate and Other ‒ 156.0 Severn Trent Group 158.7 1. Including amortisation of intangibles 34
Slide 35: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE th (NET CASH)¹ Six months ended 30 September 2016 2015 2016 £m £m 180.8 Regulated Water and Waste Water 193.3 7.2 Business Services 39.8 2.2 Corporate and Other 1.7 190.2 Severn Trent Group 234.8 1. Including purchases of property, plant and equipment, intangible assets, proceeds
Slide 36: Business Services Performance
BUSINESS SERVICES PERFORMANCE th Six months ended 30 September 2016 Turnover Underlying PBIT¹ 2015 2016 Variance 2015 2016 Variance (restated) (restated) £m £m % £m £m % 134.1 151.0 12.6 As reported 11.2 16.1 43.8 9.2 ‒ Exchange rate impacts (0.2) ‒ 143.3 151.0 5.4 Like for like² 11.0 16.1 46.4 1. B
Slide 37: Net Finance Costs
NET FINANCE th COSTS Six months ended 30 September 2016 Income Gross interest statement Capitalised incurred charge interest 2016 2016 2016 £m £m £m “Cash” interest (including accruals) 82.8 7.1 89.9 Net pension finance cost 5.5 - 5.5 RPI interest 9.8 0.9 10.7 98.1 8.0 106.1 37
Slide 38: Net Debt
NET DEBT At 30th September 2016 30th September 31st March 2016 2016 Variance £m £m £m 55.2 Net cash and cash equivalents 38.9 (16.3) (1,249.8) Bank loans (1,178.8) 71.0 (3,539.7) Other loans (3,582.2) (42.5) (117.2) Finance leases (117.2) ‒ ‒ Loans receivable from joint ventures 45.7 45.7 28.1 Cross
Slide 39: Fair Value of Debt
FAIR VALUE th OF DEBT At 30 September 2016 30th September 31st March 2016 2016 Variance £m £m £m (1,257.2) Bank loans (1,197.0) 60.2 (4,387.1) Other loans (5,025.9) (638.8) (125.4) Finance leases (139.6) (14.2) (5,769.7) (6,362.5) (592.8) 55.2 Net cash and cash equivalents 38.9 (16.3) ‒ Loans receiv
Slide 40: Analysis of Borrowings, Net Debt and Swaps
ANALYSIS OF BORROWINGS, NET DEBT th AND SWAPS At 30 September 2016 (200) (1,445) (22) (6,226) (4,878) 52 46 39 (4,741) (18) Borrowings Cross currency Loans Net cash and Net debt per Bank loans fair Other loans fair Finance leases Fair value of Interest rate swaps receivable from cash balance sheet v
Slide 41: Improving Debt Maturity Profile
IMPROVING DEBT MATURITY PROFILE 600 500 400 300 200 100 0 Debt maturing USPP 41
Slide 42: Credit Ratings
CREDIT RATINGS Severn Trent Water Severn Trent Plc Moody’s A3 Baa1 Standard & Poor’s BBB+ BBB- • Moody’s – outlook is stable • Standard & Poor’s – outlook is stable 42
Slide 43: Half Year 2016/17 Results
HALF YEAR 2016/17 RESULTS 24 November 2016 Upper Derwent Valley, Peak District National Park