Severn Trent Plc · LSE:SVT
Severn Trent — FY2014 Earnings Presentation
44 slides from Severn Trent's earnings presentation, May 29, 2014
Slide 1: Preliminary Results
Preliminary Results Year ended 31 March 2014 29 May 2014 BAFTA, London
Slide 2: Disclaimers
Disclaimers This presentation contains certain “forward-looking statements” with respect to Severn Trent's financial condition, results of operations and business, and certain of Severn Trent’s plans and objectives with respect to these items. Forward-looking statements are sometimes, but not always
Slide 3: Liv Garfield, Chief Executive
Liv Garfield Chief Executive
Slide 4: Focus areas
Focus areas • Customers at the heart of what we do • Drive operational improvement • People / Talent development • Regulatory relationship • Ready to deliver in AMP6 Create long term value for shareholders 4
Slide 5: Operational performance: Waste
Operational performance Waste Internal sewer flooding Serious pollution Sewer blockages (‘000) Serviceability indicator incidents * incidents** -20% Ofwat KPIS Good Good -41% 19.7 Ofwat upper level 255 204 2.17 1.27 28.1 29.5 25.6 Mar 13 Mar 14 Mar 13 Mar 14 Mar 12 Mar 13 Mar 14 Serviceability 2011/
Slide 6: Operational performance: Water
Operational performance Water Water supply Leakage ** Supply interruptions > Serviceability indicator interruptions* 12 hrs (‘000 properties) Ofwat target 13/14 (456) Ofwat KPIS Good -45% 2.7 Ofwat upper level 29 16 497 441 441 5.2 2.6 2.7 Mar 13 Mar 14 Mar 10 Mar 13 Mar 14 Mar 12 Mar 13 Mar 14 Serv
Slide 7: Operational performance: SIM
Operational performance SIM Qualitative Quantitative Combined 4.5 4.48 260 82 81.6 4.36 80 78.1 225 78 4.3 220 205 76 Good 74 Good Good 72 69.9 4.1 180 167 3.98 70 68 3.96 143 68 3.9 140 66 64 62 3.7 100 60 2010/11 2011/12 2012/13 2013/14 2010/11 2011/12 2012/13 2013/14 2010/11 2011/12 2012/13 2013/
Slide 8: RCV investment for our customers
RCV investment for our customers We have invested £120m of the additional £150m Water Network • Invested £44m in reducing the amount of leaks • Since March 2012, leakage fallen from 464Ml/d to 441Ml/d (-5%) • Found over 36,000 leaks and carried out over 124,000 repairs on our network • Trunk mains r
Slide 9: Value creation and distribution
Value creation and distribution RCV growth & dividends RCV Dividend growth Pence AMP5 total £4.39 £7,883 140 per share £7,618 8,000 £6,418 £7,089 £7,364 £6,814 £7,364 £6,814 £7,089 120 7,000 £6,418 £6,418 100 63.0 6,000 +25.0%* 5,000 80 4,000 60 3,000 40 75.9 80.4 84.9 +18.3% 65.1 70.1 2,000 20 1,00
Slide 10: Mike McKeon, Finance Director
Mike McKeon Finance Director
Slide 11: Highlights FY 2013/14
Highlights FY 2013/14 Underlying Turnover PBIT1 £1,856.7m +1.4% £516.8m +4.3% Total Adjusted ordinary basic EPS2 dividend 88.4 pence (4.5%) 80.4 pence +6.0% 1. before exceptional items 11 2. before exceptional items, gains/losses on financial instruments and deferred tax 2012/13 restated due to adop
Slide 12: Regulated – Severn Trent Water turnover
Regulated – Severn Trent Water turnover* 2013/14 £m 33.8 +2.2% 1.3 (4.4) 1,544.8 44.8 1,511.0 (15.0) 2012/13 Allowed Price Allowed Price Consumption New growth/ Other (K) (RPI) meter optants * Business segment turnover is stated gross (i.e. including inter segment trading) 12
Slide 13: Regulated – Severn Trent Water PBIT
Regulated – Severn Trent Water PBIT* 2013/14 £m +4.0% 33.8 (12.0) (6.6) 0.9 0.7 0.5 (4.7) 7.4 (3.3) 518.6 5.5 (2.2) 498.5 3.0% 3.2% Indirectly managed Directly managed costs costs * Before exceptional items 13 1. restated due to adoption of IAS19 Revised
Slide 14: Non-regulated Severn Trent Services performance
Non-regulated Severn Trent Services performance £m Revenue PBIT* 307.5 311.4 13.8 7.1 2012/13 2013/14 2012/13 2013/14 Like for like** Like for like** Like for like** Like for like** * PBIT before exceptional items 14 ** On constant currency excluding acquisitions and disposals
Slide 15: Group cash flow
Group cash flow £m 730.2 (463.9) 266.3 (204.5) (48.5) 75.7 (11.4) (185.3) (106.0) (150.2) 2.3 (0.6) (44.2) 15
Slide 16: Group net debt and finance charges
Group net debt and finance charges Net debt* Finance charge £m £m 247.9 4,297 4,448 244.3 Index linked 1,371 1,240 188.5 197.3 Cash interest Nominal 3,330 3,331 39.4 34.9 RPI rolled up Net pension 123 finance cost Cash 16.4 15.7 404 31 March 2013 31 March 2014 2012/13 2013/14 Restated**** • 77% at f
Slide 17: Effective rate of current tax
Effective rate of current tax £(0.8)m ETR £49.9m £47.2m £46.5m 17.3% £(2.7)m Current tax on Recoveries due Current tax on Exceptional items IAS 39 Effective rate** PBT* from PBT overpayments in (ex. Prior year prior years adjustments) * Total current tax attributable to PBT. See note 6 of RNS 17 **
Slide 18: Outlook FY 2014/15
Outlook FY 2014/15 Regulated - Severn Trent Water • Prices at Severn Trent Water rose by 1.5% in April 2014 • Lower measured consumption • Opex – higher due to inflation, quasi taxes and power but in line with final determination (like for like) • Capex £510m-£530m range; IRE £125m-£135m Non regulat
Slide 19: Summary
Summary Good financial performance Continuing investment in networks driving growth and service improvements Continuing to deliver on AMP5 dividend policy: up 6% to 80.40p 19
Slide 20: Liv Garfield, Chief Executive
Liv Garfield Chief Executive
Slide 21: PR14 Next steps
PR14 Next steps • Constructive dialogue with Ofwat • Ofwat requires more evidence on our submission • Legacy adjustments, ODIs and Birmingham strategic resilience project • Birmingham resilience accounts for £255 million of totex (total expenditure) over the 5 years • 27 June - Plan re-submission •
Slide 22: Summary
Summary Delivering on commitments for stakeholders Improve customer service Preparing for AMP6 Create and deliver long term value for shareholders 22
Slide 23: Severn Trent
SEVERN TRENT
Slide 24: Appendix
SEVERN TRENT Appendix
Slide 25: Operational performance: Ofwat KPIs
Operational performance Ofwat KPIs 2013/14 performance 2012/13 8 Upper 4 Median 2 Lower Benchmark 2013/14 Movement Improved performance year on year Declining performance year on year Stable performance year on year Progress since last year: • 7 have improved (5 out of the 6 KPIs in median • Stable
Slide 26: Private drains and sewers
Private drains and sewers • To end of March 2014, customer contacts in line with previous forecast • The AMP5 investment range remains in line with previous guidance. • We have commenced a phased adoption programme for eligible private pumping stations prior to the mandatory transfer on 1st October
Slide 27: Group earnings
Group earnings Year ended 31 March 2014 2012/13 restated 2013/14 Variance Variance £m £m £m % 218.9 Profit for the year 434.9 216.0 98.7% 216 Attributable to: - Equity holders of the company 433.8 217.8 100.8% 2.9 - Non controlling interests 1.1 (1.8) (62.1)% Variance Variance Pence Pence Pence % Ba
Slide 28: Group balance sheet
Group balance sheet 31 March 2014 Movement in 2013 2014 the period £m £m £m 6,760.0 Property, plant and equipment 7,023.5 263.5 141.0 Intangible assets 95.0 (46.0) 5.1 Other non-current assets 5.3 0.2 (739.7) Working capital / provisions (751.4) (11.7) 6,166.4 Capital employed 6,372.4 206.0 40.5 Tax
Slide 29: Movements on shareholders’ equity
Movements on shareholders’ equity Year ended 31 March 2014 £m At 1 April 2013 844.0 Total comprehensive income for the period 434.4 Dividends paid to shareholders of Severn Trent Plc (185.3) Dividends paid to non-controlling interests (0.6) Share based payments charge (after tax) 4.0 Shares issued 5
Slide 30: Gearing
Gearing At 31 March 2014 2012/13 Net debt/RCV* 2013/14 58% Severn Trent Group 58% 58% Severn Trent Water 59% 30
Slide 31: Segmental analysis of capital employed
Segmental analysis of capital employed 31 March 2014 2013 2014 Net operating Total Total assets Goodwill £m £m £m £m 6,082.7 Severn Trent Water 6,286.6 1.3 6,287.9 125.7 Severn Trent Services* 85.6 14.6 100.2 (42.0) Other (14.6) (1.1) (15.7) 6,166.4 Group 6,357.7 14.8 6,372.4 * Excludes goodwill of
Slide 32: PBITD analysis
PBITD* analysis Year ended 31 March 2014 2012/13 Restated** 2013/14 £m £m 780.9 Severn Trent Water 804.3 18.0 Severn Trent Services 12.8 (14.8) Other (10.9) 784.1 Group 806.2 *Profit before interest, tax, depreciation (see depreciation slide) and exceptional items **Restated due to adoption if IAS19
Slide 33: Depreciation analysis
Depreciation* analysis Year ended 31 March 2014 2012/13 2013/14 £m £m 282.4 Severn Trent Water 285.7 5.4 Severn Trent Services 5.7 0.9 Other (2.0) 288.7 Group 289.4 *Including amortisation of intangibles, profit/loss on disposal of fixed assets and deferred income released 33
Slide 34: Capital expenditure (net cash)
Capital expenditure (net cash)* Year ended 31 March 2014 2012/13 2013/14 £m £m 392.5 Severn Trent Water 441.3 7.5 Severn Trent Services 12.3 1.8 Other 10.4 401.8 Group 464.0 *Including amortisation of intangibles, profit/loss on disposal of fixed assets and deferred income released 34
Slide 35: Severn Trent Water – operating costs
Severn Trent Water – operating costs Year ended 31 March 2014 2012/13 2013/14 Variance Variance £m £m £m % 582.4 Direct operating costs* 600.3 17.9 3.1 282.4 Depreciation** 285.7 3.3 1.2 147.7 Infrastructure renewals 140.3 (7.4) (5.0) 1,012.4 STW operating costs 1,026.3 13.9 1.4 * Restated due to th
Slide 36: Severn Trent Water – Capex reconciliation
Severn Trent Water – Capex reconciliation Year ended 31 March 2014 2012/13 2013/14 £m £m 451.6 Additions to Property, plant and equipment 519.4 13.6 Additions to intangible fixed assets 8.2 465.2 IFRS capex 527.6 (10.4) Interest capitalised under IFRS (13.8) (23.0) Adopted assets capitalised under I
Slide 37: Severn Trent Services performance
Severn Trent Services performance Year ended 31 March 2014 Turnover Underlying PBIT* 2012/13 2013/14 Change 2012/13 2013/14 Change £m £m % £m £m % 328.5 311.4 (5.2) As reported 12.6 7.1 (43.7) (21.1) - Changes in group 1.2 0.0 0.1 - Exchange rate impacts - - 307.5 311.4 1.3 Like for like** 13.8 7.1
Slide 38: Net finance costs
Net finance costs Period ended 31 March 2014 Income statement Capitalised interest Gross interest incurred charge 2013/14 (2013/14) 2013/14 £m £m £m “Cash” interest (including accruals) 197.3 11.8 209.1 Pension debit 15.8 - 15.8 RPI interest 34.8 2.1 36.9 247.9 13.9 261.8 38
Slide 39: Net debt
Net debt At 31 March 2014 2013 2014 Movement in the year £m £m £m Cash and cash equivalents (403.6) (123.2) 280.4 Bank overdrafts 0.4 0 (0.4) Bank loans 758.7 594.9 (163.8) Other loans 3,840.9 3,826.0 (14.9) Finance leases 201.6 201.2 (0.4) Cross currency swaps (100.7) (51.4) 49.3 Net debt 4,297.3 4
Slide 40: Fair value of net debt
Fair value of net debt At 31 March 2014 As reported Restated As reported Movement in 31 March 2013 31 March 2013 31 March 2014 the period £m £m £m £m Bank loans 782 782 609 (173) Other loans 4,585 4,395 4,168 (227) Finance leases 208 208 198 (11) 5,575 5,385 4,974 (411) Net cash and cash equivalents
Slide 41: Analysis of borrowings, net debt and swaps
Analysis of borrowings, net debt and swaps At 31 March 2014 147* 4,800 4,622 (51) (123) 46 4,448 743 3,833 Borrowings X-Currency swaps Cash Net debt per Net debt at IR swaps balance sheet fair value GBP Debt Currency debt @ historical rate Exchange adjustment * Excludes forward starting cash flow he
Slide 42: Debt Maturity Profile
Debt Maturity Profile At 31 March 2014 42
Slide 43: Credit ratings
Credit ratings 31 March 2014 Long-Term Severn Trent Water Severn Trent Plc Moody’s A3 Baa1 Standard & Poor’s BBB+ BBB- Short-Term Severn Trent Water Severn Trent Plc Moody’s P2 P2 Standard & Poor’s A2 A3 Moody’s – long term rating is stable Standard & Poor’s – long term rating is stable 43
Slide 44: Severn Trent Water – RCV
Severn Trent Water – RCV £m 2010/11 2011/12 2012/13 2013/14 2014/15 Per Determination* 6,216 6,244 6,280 6,341 6,385 Actual / Estimated Outturn** 6,814 7,089 7,364 7,618 7,883 Ofwat Actual/Projected Outturn*** 6,814 7,089 7,364 7,618 7,670 * 2007/08 prices ** At year end actual/estimated prices ***