Severn Trent PLC · LSE:SVT
Severn Trent — H1 2022 Earnings Presentation
34 slides from Severn Trent's earnings presentation, 2021
Slide 1: ST Classification: UNMARKED
ST Classification: UNMARKED
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 Continuing momentum in year two of AMP7 Strong financials Balanced Leading the and robust performance sector with balance across all areas – ambitious sheet supporting over 90% of STW Strong operational environmental AMP7 RCV ODIs on track performance plans On track with growth
Slide 5: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer
Slide 6: Half Year Financial Highlights
HALF YEAR FINANCIAL HIGHLIGHTS Strong financials in line with expectations Strong balance sheet, pension Interim Group revenue up deficit down to dividend of 8%, returning to £292 million, 40.86 pence, in pre-COVID levels supporting line with policy Group Adjusted long-term Adjusted EPS up PBIT up 1
Slide 7: Regulated Water and Waste Water Revenue
REGULATED WATER AND WASTE WATER REVENUE Consumption pattern returns to pre-COVID levels £m Revenue returning to normal levels as businesses reopen £m 1 1. Following a change in accounting presentation, which has resulted in a reclassification of £12.9 million of diversions income to turnover, previo
Slide 8: Regulated Water and Waste Water PBIT
REGULATED WATER AND WASTE WATER PBIT PBIT up 10% following recovery of revenue and increased investment Includes £3 million for In line with Ofwat Innovation Fund programme 51.1 51.1 (8.1) (12.9)1 £m Year 2 of three- year pay deal £m Improved collection 12.91 performance and COVID-19 provision in pr
Slide 9: Financing Performance
FINANCING PERFORMANCE Effective interest cost1 below embedded debt rate Effective interest cost1 4.2% Inflation up 90bps rolled up Net pension Effective cash cost of 3.1% finance cost interest flat Cash interest Outperforming iBoxx on all new debt Embedded debt well below PR19 allowance HY21 HY22 £9
Slide 10: Financing Strategy
FINANCING STRATEGY Well balanced financing position, strongly placed for future RCV growth Net debt1 £6,232m Regulated 60.8% gearing2 AMP7 debt Over £100 issues million raised A balanced debt portfolio: low fixed interest rates locked in, low levels of index-linked debt limiting inflation impact, lo
Slide 11: Pensions Performance
PENSIONS PERFORMANCE Pension deficit reducing in line with plan Effective hedging strategy – protecting against higher £712m inflation and interest rate volatility £575m £520m £453m Asset performance – Strong asset performance helping the deficit reduce more than £400 million over the last £368m fiv
Slide 12: Business Services
BUSINESS SERVICES Robust performance sees revenue and EBITDA exceed pre-pandemic levels Turnover EBITDA Adjusted PBIT Financial results £66.1m £23.9m £17.4m +12% +58% +112% Improved performance from sales growth on Operating Services existing long-term contracts Underlying operational efficiencies a
Slide 13: FY22 Technical Guidance
FY22 TECHNICAL GUIDANCE Movement in Regulated Water and Waste Water FY21 Year-on-Year guidance from May 2021 Turnover1 £1.78 billion to £1.81 billion. Includes c.£50 million of diversions income related to HS2. £1.69bn ▲ - Operating costs (incl. IRE) Higher year-on-year, driven by a planned step-up
Slide 14: Financial Summary
FINANCIAL SUMMARY Strong financial performance supporting large-scale investment programme Group PBIT up 14% driven by recovery in regulated revenues and strong performance in Business Services Customer ODI guidance increased to at least £75 million for the full year Robust financing position and ne
Slide 15: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive
Slide 16: Momentum in Water
MOMENTUM IN WATER Focus drives continued performance Strong operational Over 85% of ODI water measures on target or performance better Fifth successive year-on-year improvement in water Water quality quality complaints, forecasting 18% reduction since improvements the start of the AMP Improving cust
Slide 17: Leading in Waste
LEADING IN WASTE Delivering in areas that matter most to customers Investment on blockages benefits other areas, with blockages and floodings to reduce by Holistic approach over 30% since the start of the AMP Big improvement in Hafren Dyfrdwy with blockbuster rollout delivering over 15% Waste focus
Slide 18: Protecting Our Environment
PROTECTING OUR ENVIRONMENT Leading with our environmental ambitions 100% of environmental Customer ODIs at or Delivering in all areas above target Continuation of 2,900 of 5,000 hectares of biodiversity of our programme commitment already delivered Clear plans outlined to reduce baseline Net Zero by
Slide 19: Delivering for Our Customers
DELIVERING FOR OUR CUSTOMERS Supporting our customers and improving their experience Industry-leading ODI reward on combined experience measures Improving service More than 160,000 of our most vulnerable customers supported Making a difference Intelligent customer systems providing more Focusing on
Slide 20: Our People, Our Communities
OUR PEOPLE, OUR COMMUNITIES Delivering benefits for our region Supporting the Over £8 million awarded since start of AMP7 region we operate in to support those in our region most in need Responsibility Top company on Tortoise Responsibility100 recognition index Top 3 employer on Government Kickstart
Slide 21: Summary
SUMMARY Strong start for year two, alongside resilient financials Operational performance ahead of plan Customer ODI guidance increased to at least £75 million for the full year Strong balance sheet supporting scale RCV growth Leading the sector with environmental ambitions
Slide 22: Appendix
ST Classification: UNMARKED APPENDIX 22
Slide 23: EBITDA
ST Classification: UNMARKED EBITDA¹ H1 2020 H1 2021 Variance Variance £m £m £m % 408.2 Regulated Water and Waste Water 435.3 27.1 6.6 15.1 Business Services 23.9 8.8 58.3 (2.1) Corporate and other (3.0) (0.9) (42.9) 421.2 Severn Trent Group 456.2 35.0 8.3 1. Earnings before interest, tax, depreciati
Slide 24: H1 Business Services EBITDA
ST Classification: UNMARKED H1 BUSINESS SERVICES EBITDA¹ Non- Regulated Regulated Total £m £m £m Operating Services and Other 2.0 6.8 8.8 Green Power (0.1) 6.3 6.2 Property Development 5.2 3.7 8.9 EBITDA 7.1 16.8 23.9 Depreciation and amortisation (excluding amortisation of acquired intangible – (6.
Slide 25: Segmental Adjusted PBIT
ST Classification: UNMARKED SEGMENTAL ADJUSTED PBIT¹ H1 2020 H1 2021 Variance Variance £m £m £m % 219.6 Regulated Water and Waste Water 242.4 22.8 10.4 8.2 Business Services 17.4 9.2 112.2 (2.2) Corporate and other (3.2) (1.0) (45.5) 225.6 Severn Trent Group 256.6 31.0 13.7 1. Profit before interest
Slide 26: Depreciation
ST Classification: UNMARKED DEPRECIATION¹ H1 2020 H1 2021 Variance Variance £m £m £m % 188.6 Regulated Water and Waste Water 192.9 4.3 2.3 6.9 Business Services 6.5 (0.4) (5.8) 0.1 Corporate and other 0.2 0.1 100.0 195.6 Severn Trent Group 199.6 4.0 2.0 1. Including amortisation of intangible assets
Slide 27: Net Finance Costs
ST Classification: UNMARKED NET FINANCE COSTS H1 2020 H1 2021 Income Capitalised Gross interest Income Capitalised Gross interest statement interest incurred statement interest incurred charge charge £m £m £m £m £m £m 83.2 14.9 98.1 Cash interest (including accruals) 81.0 15.2 96.2 2.6 – 2.6 Net pen
Slide 28: Adjusted Earnings Per Share
ST Classification: UNMARKED ADJUSTED EARNINGS PER SHARE H1 2020 H1 2021 Variance Pence/share £m £m £m 225.6 Adjusted profit before interest and tax 256.6 31.0 13.0 (91.1) Net finance costs (120.8) (29.7) (12.5) – Share of net loss of joint venture (1.8) (1.8) (0.7) 134.5 Adjusted profit before tax 1
Slide 29: Group Balance Sheet
ST Classification: UNMARKED GROUP BALANCE SHEET 31 March 30 September 2021 2021 Variance Variance £m £m £m % 10,261.4 Property, plant and equipment, right-of-use assets, intangible assets and goodwill 10,355.6 94.2 0.9 – Investment in joint venture 16.9 16.9 N/A 15.2 Working capital (43.6) (58.8) (3
Slide 30: Capital Expenditure (Net Cash)
ST Classification: UNMARKED CAPITAL EXPENDITURE (NET CASH)1 H1 2020 H1 2021 Variance Variance £m £m £m % 279.6 Regulated Water and Waste Water 233.6 (46.0) (16.5) 3.9 Business Services 4.4 0.5 12.8 283.5 Severn Trent Group 238.0 (45.5) (16.0) 1. Including purchases of property, plant and equipment,
Slide 31: Net Debt
ST Classification: UNMARKED NET DEBT 31 March 30 September 2021 2021 Variance Variance £m £m £m % (1,011.1) Bank loans (928.0) 83.1 8.2 (5,471.3) Other loans (5,316.0) 155.3 2.8 (121.3) Lease liabilities (122.4) (1.1) (0.9) 44.0 Net cash and cash equivalents 32.2 (11.8) (26.8) 31.9 Cross currency sw
Slide 32: Fair Value of Debt
ST Classification: UNMARKED FAIR VALUE OF DEBT 1 31 March 30 September 2021² 2021 Variance Variance £m £m £m % (1,045.9) Floating rate debt (965.0) 80.9 7.7 (4,376.4) Fixed rate debt (4,126.4) 250.0 5.7 (2,636.3) Index-linked debt (2,872.5) (236.2) (9.0) (8,058.6) (7,963.9) 94.7 1.2 44.0 Net cash an
Slide 33: Debt Maturity
33 2067 DEBT MATURITY £300m sustainable bond 2066 2065 2064 Maturing debt 2063 CPIH Debt 2062 £50m PP 2061 2060 2059 2058 2057 2056 2055 2054 2053 2052 2051 2050 2049 2048 2047 2046 2045 2044 2043 2042 2041 2040 2039 2038 2037 2036 2035 2034 AMP8 and beyond 2033 2032 2031 2030 2029 2028 2027 2026 20
Slide 34: Gearing and Credit Ratings
ST Classification: UNMARKED GEARING AND CREDIT RATINGS 30 September 2020 31 March 2021 Net debt/RCV¹ 30 September 2021 66.1% 67.5% Severn Trent Plc Group² 63.8% 63.9% 64.5% Severn Trent Water Group³ 60.8% 31 March 2021 30 September 2021 Severn Trent Water Severn Trent Plc Severn Trent Water Severn T