United Utilities Group Plc · LSE:UU.
United Utilities — H1 2021/22 Earnings Presentation
45 slides from United Utilities's earnings presentation, November 2021
Slide 1: Half year results
Half year results Six months ended 30 September 2021 United Utilities Group PLC United Utilities • 2021/22 half year results
Slide 2: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2021/22 half year results
Slide 3: Highlights
Highlights On track to deliver net zero Strong financial performance; Investing for sustainable and enhancing biodiversity actively managing the performance impact of rising inflation A digital utility – delivering Delivering regulatory operational excellence outperformance United United Utilities U
Slide 4: Strong operational performance
Strong operational performance Remain on track for c£20m ODI reward in 2021/22 and c£150m in total for AMP7 Water Waste Customer service 70,000 sensors helping Industry leading 4* Achieved the Institute of reduce leakage to lowest environmental performance Customer Service – Service ever level confi
Slide 5: Mitigating the impact of climate change
Mitigating the impact of climate change 1 2 3 Commitment 100% 100% Green to meet our renewable Fleet by 2028 science-based electricity by targets (scope 2021 1&2) 4 1,000 5 Planting 1 million trees to 6 Commitment hectares of peat to set science- restoration by create 550 based scope 3 2030 hectar
Slide 6: Adaptation – Securing climate resilience
Adaptation – Securing climate resilience Investment in digital utility delivering greater 1 resilience to extremes of weather Better visibility of performance, acting earlier to Better placed to deal 2 deal with issues with extremes of weather through 3 Integrating climate change into long-term plan
Slide 7: Enhancing biodiversity
Enhancing biodiversity 56,000 Ha UK’s largest corporate landowner Leading the way on catchment approach Leveraging partnership funding Carbon pledges enhance biodiversity Haweswater Catchment Swindale Beck case study: https://www.youtube.com/watch?v=116HjMEXgWM United United Utilities Utilities • 20
Slide 8: Phil Aspin, Chief Financial Officer
Phil Aspin Chief Financial Officer United Utilities • 2021/22 half year results
Slide 9: Financial highlights
Financial highlights Household Underlying Underlying Interim Revenue dividend bad debt operating profit1,2 EPS1,2 per share £932m 1.8% £333m 28.4p of revenue 14.50p H1 2020/21: H1 2020/21: H1 2020/21: H1 2020/21: H1 2020/21: £894m 1.8% £319m 29.2p 14.41p Raising Effective Strong finance efficiently
Slide 10: Revenue
Revenue £m Consumption returning to pre-pandemic levels Overall consumption higher as business 1,859 activity returns to pre-Covid levels -1.5% k factor, 0.6% (20) (4) 932 CPIH increase Reduction in consumption from peak levels in 894 spring/summer 2020 Full year 2021/22 (6) 68 revenue expected to b
Slide 11: Strong collections performance
Strong collections performance Low balance sheet risk; only £12m of household 1 debtors aged >1year at Mar-21 Strong current year household cash collection 2 Wide range of affordability schemes Household bad debt Over 80% on direct debit or other returning to pre- 3 payment plan pandemic levels at 1
Slide 12: Underlying operating profit
Underlying operating profit £m Recharge of revenue collected on behalf of the Innovation Fund1 (9) (5) Inflationary cost (4) increases on operating (3) cost base of c£390m Includes costs directly (3) 333 compensated via ODI incentive payments 319 38 H1 2020/21 UOP Revenue Inflationary cost Depreciat
Slide 13: Interest, joint ventures, tax and earnings
Interest, joint ventures, tax and earnings Underlying net Joint Underlying Underlying profit finance expense1 Ventures tax charge1 after tax1 £134.2m £1.8m 1.5% £193.9m £51m higher Share of At H1 2020/21: than H1 2020/21 underlying losses £3m £199.1m Higher inflation on £5.9m share of losses in Maxi
Slide 14: Financing performance
Financing performance Existing debt locked in at rates favourable to 1 the AMP7 allowed cost of embedded debt £2.4bn RPI-linked CPI-linked Fixed Floating financing to raise in AMP7 8,000 2 7,000 c£1.1bn raised so far in 6,000 AMP7 at 5,000 2.5% 2.4% 2.2% 2.3% 2.4% 3 attractive rates Liquidity 4,000
Slide 15: Inflation hedging for long-term sustainable performance
Inflation hedging for long-term sustainable performance Consistent approach to hedging debt and pensions delivering sustainable value Hedging policies Inflation hedging targets Inflation exposure minimise volatility to deliver to maintain c50% net debt impacted by pension position long-term sustaina
Slide 16: Inflation position delivering shareholder value
Inflation position delivering shareholder value Debut sustainable bond case study £300m sustainable bond issued Jan-21 Locked-in c£40m of total shareholder value through Long 8+ year term, maturing Oct-29 1 financing outperformance 0.875% coupon regardless of inflation outturn Swapped to CPI minus 1
Slide 17: Accelerating capex with 80% already contracted
Accelerating capex with 80% already contracted Net regulatory capex (£m) Super deductibility of capital allowances 700 600 500 400 300 200 100 - 2020/21 2021/22 2022/23 2023/24 2024/25 Contracted Not yet contracted Original business plan profile 1. AMP7 net regulatory capex excludes IRE 2. The AMP7
Slide 18: Strong balance sheet – net debt to RCV gearing
Strong balance sheet – net debt to RCV gearing RCV gearing of 62% supports stable A3 credit rating with Moody’s Net debt £m 7 6 7,401 58 7,306 93 197 (18) (536) 288 Mar-21 net debt Operating cash Fair value Net capex Dividends Indexation Interest Tax Other Sep-21 net debt flow movements RCV gearing
Slide 19: 2021/22 full year outlook
2021/22 full year outlook Revenue guidance has been revised from that given in May-21 with all other guidance unchanged Consumption remains high Revenue c2% y-o-y 0.6% CPIH offset by –1.5% k factor Underlying operating Higher IRE reflecting additional investment in DNM costs Inflationary increas
Slide 20: Financial summary
Financial summary Strong financial performance Raising new debt efficiently and have locked-in debt at low rates compared with price review assumptions Hedging policies mitigate risk and deliver shareholder value Strong balance sheet with appropriate gearing and low household debtor risk United Unit
Slide 21: Steve Mogford, Chief Executive
Steve Mogford Chief Executive United Utilities • 2021/22 half year results
Slide 22: Investing additional £365m for long-term sustainable improvement
Investing additional £365m for long-term sustainable improvement Expected AMP7 regulatory performance remains unchanged from guidance provided in May 2021 1 Confident in meeting the FD scope within the allowance £150m additional approved totex – WINEP scheme at Bolton Delivering 2 and re-lining of V
Slide 23: Systems Thinking application – a world first Dynamic Network Management
Systems Thinking application – a world first Improved 4,500 state of the art sensors flooding 1 installed across the region performance across all live Dynamic Artificial intelligence areas 2 learning system pattern 20,000 Network sensors in total to be installed by Management 3 Automated dashboards
Slide 24: Summary
Summary Built on great start to AMP7 benefitting from our accelerated investment Systems Thinking delivering operational excellence – benefitting customers and the environment Regulatory outperformance delivering shareholder value Leading the way on climate change and biodiversity United United Util
Slide 25: Any questions?
Any questions? United Utilities • 2021/22 half year results
Slide 26: 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 27: 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. Inflation volatility 4. Profit after tax reconciliation 18. Mitigating the impact of climate change 5. Finance expens
Slide 28: Underlying income statement
Underlying income statement Six months ended 30 September 2021 2020 Change (%) £m Revenue 932.3 894.4 +4% Operating expenses (309.3) (289.8) Infrastructure renewals expenditure (82.6) (83.3) EBITDA 540.4 521.3 +4% Depreciation and amortisation (207.6) (202.8) Operating profit 332.8 318.5 +4% Net fin
Slide 29: Underlying operating costs
Underlying operating costs Six months ended 30 September 2021 2020 Change (%) £m Revenue 932.3 894.4 +4% Employee costs (82.4) (78.6) +5% Hired and contracted services (50.1) (45.9) +9% Property rates (46.5) (45.2) +3% Materials (40.7) (39.5) +3% Power (38.2) (38.5) -1% Regulatory fees (14.5) (14.5)
Slide 30: Profit before tax reconciliation
Profit before tax reconciliation 30 Sep 2021 30 Sep 2020 31 Mar 2021 £m Operating profit 332.8 318.5 602.1 Investment income and finance expense (118.3) (119.9) (78.5) Share of (losses)/profits of joint ventures (1.8) 2.5 (9.3) Profit on disposal of joint ventures - - 36.7 Reported profit before tax
Slide 31: Profit after tax reconciliation
Profit after tax reconciliation 30 Sep 2021 30 Sep 2020 31 Mar 2021 £m Reported (loss)/profit after tax (216.2) 162.0 453.4 Adjustments: Fair value (gains)/losses on debt and derivative instruments, excluding interest on derivatives (15.9) 37.1 (54.3) and debt under fair value option Profit on dispo
Slide 32: Finance expense
Finance expense Six months ended 30 September 2021 2020 £m Investment income 9.2 12.1 Finance expense (127.5) (132.0) (118.3) (119.9) Fair value (gains)/losses on debt and derivative instruments, excluding interest on derivatives and debt under (15.9) 37.1 fair value option Underlying net finance ex
Slide 33: Finance expense: index-linked debt
Finance expense: index-linked debt Six months ended 30 September 2021 2020 £m Interest on index-linked debt (17.1) (25.0) RPI adjustment to index-linked debt principal – 3 month lag1 (79..5) (32.8) CPI adjustment to index-linked debt principal – 3 month lag2 (22.8) (5.5) RPI adjustment to index-link
Slide 34: Derivative analysis
Derivative analysis At 30 September 2021 2020 £m Derivatives hedging debt 417.3 652.4 Derivatives hedging interest rates (93.6) (180.8) Derivatives hedging commodity prices 48.1 2.2 Total derivative assets and liabilities 371.8 473.8 • Derivatives hedging debt; hedge our non index-linked debt into s
Slide 35: Statement of financial position
Statement of financial position At 30 Sep 2021 31 Mar 2021 Change (%) £m Property, plant and equipment 11,956.3 11,799.0 +1% Retirement benefit surplus 821.1 689.0 +19% Other non-current assets 255.7 267.9 -5% Cash 655.9 744.1 -12% Other current assets 271.8 254.4 +7% Total derivative assets 481.3 4
Slide 36: Reconciliation of net debt
Reconciliation of net debt At 30 Sep 2021 31 Mar 2021 £m Cash 655.9 744.1 Total derivative assets 481.3 424.7 Gross borrowings (8,462.8) (8,451.8) Total derivative liabilities (109.5) (114.7) Balance sheet position (7,435.1) (7,397.7) Exclude the fair value impact of: Interest rate derivatives fixin
Slide 37: 2021 household debtors reconciliation
2021 household debtors reconciliation As at 31 March 31 March £m 2021 2020 Household net debtors 77.6 77.5 Household accrued income 69.4 54.6 Non household net debtors 28.6 37.9 Other sundry net debtors 48.1 31.3 Total net debtors (including related parties) 223.7 201.3 Less related party debtors (4
Slide 38: Pensions
Pensions The ESG journey to remove the “pensions iceberg” at UU Discount rate of 2.05% IFRS = Gilts +75bps deficit Position today IFRS £821m IFRS IFRS Pension scheme fully funded £689m £654m on a low dependency basis Extra funding deficit with no further pension deficit contributions due Strong posi
Slide 39: Financing and liquidity at 30 September 2021
Financing and liquidity at 30 September 2021 Gross debt = £8,462.8m Headroom / prefunding = £655.3m £350.7m, Other £388.0m, Yankee borrowings including bonds (USD) lease obligations and £508.6m, Other EIB short-term debt £m £348.0m, HKD, JPY loans and USD bonds £687.5m, GBP Fixed £183.3m, Euro Cash
Slide 40: Debt structure at 30 September 2021
Debt structure at 30 September 2021 United Utilities Group PLC United Utilities Group PLC United Utilities PLC Yankees: • $400m in 28s Baa1 stable; BBB- stable; A- stable7 Euro MTNs: Other debt: United Utilities Water Limited • £375m in 22s • £300m in 27s • £70m in 39s1 • £100m in 40s1 • £50m in 49s
Slide 41: Term debt maturity profile as at 30 September
Term debt maturity profile as at 30 September 20211 Average term to maturity of approximately 18 years 1 Future repayments of index-linked debt include RPI/CPI/CPIH market derived forecasts out to 2025, subsequently transitioning to an average annual RPI rate of 3% and an average annual CPI/CPIH rat
Slide 42: AMP7 maturity profile
AMP7 maturity profile Notes Future repayments of RPI linked debt include market derived forecasts out to 2025 Light green areas represent EIB debt maturing whereas dark green areas represent other debt maturing. United United Utilities Utilities • 2020/21 • 2021/22 half year half year results result
Slide 43: EIB funding maturity profile
EIB funding maturity profile Notes Future repayments of EIB RPI linked debt include market derived forecasts out to 2025, subsequently transitioning to an average annual RPI rate of 3% United United Utilities Utilities • 2020/21 • 2021/22 half year half year results results • 43
Slide 44: Inflation volatility
Inflation volatility United United Utilities Utilities • 2020/21 • 2021/22 half year half year results results • 44
Slide 45: Mitigating the impact of climate change
Mitigating the impact of climate change On track for Net Zero from 2030 Pledge 1: 42% reduction in scope 1 & 2 by 2030 First in sector to secure SBTi approval for targets (pledge 6) United United Utilities Utilities • 2020/21 • 2021/22 half year half year results results • 45
United Utilities Group — H1 2021/22 Earnings Presentation on 6ix