Pennon Group Plc · LSE:PNN
Pennon — FY2003/04 Earnings Presentation
19 slides from Pennon's earnings presentation, May 27, 2004
Slide 1: Preliminary Results 2003/04
Preliminary Results 2003/04 27 May 2004 1 Pennon Group Plc 2003/04 Financial Highlights • Operating profit up 7.3% to £136.3m (1) – South West Water up 6.6% to £118.9m – Viridor up 18.8% to £22.7m (before goodwill) • Profit before tax up 6.2% to £78.8m (1) • Earnings per share (before deferred tax)
Slide 2: Operational Highlights; Shanks
Pennon Group Plc Operational Highlights • South West Water – On track to outperform the current regulatory contract – Final 2005 - 2010 Business Plan submitted to Ofwat • Viridor Waste – Strong growth in profits from landfill and power generation – Acquisitions performing in line with expectations 3
Slide 3: Terra Firma
Pennon Group Plc Terra Firma • Pennon recently received an unsolicited, indicative, non-binding approach from a consortium of financial investors led by Terra Firma, at an effective value of 822 pence per share for each issued ordinary share of the Company (t he “Approach”) – Pennon shareholders wou
Slide 4: Summary Financial Results; Cash Flow
Pennon Group Plc Summary Financial Results 2003/04 2002/03 Change £m £m Group turnover 471.3 417.2 13.0% (1) Group operating profit after goodwill 136.3 127.0 7.3% (1) Group profit before tax 78.8 74.2 6.2% • c£2.0m interest received from Viridor Instrumentation sale proceeds in 2002/03 ____________
Slide 5: Net Debt; Net Interest Payable
Pennon Group Plc Net Debt As at 31 March 2004 2003 £m £m Loans and finance leases - over one year 1,234.8 1,083.2 - under one year 107.0 96.4 1,341.8 1,179.6 Less: investments and cash (267.7) (191.0) Net debt 1,074.1 988.6 Net gearing 119% 111% • Significant drawdowns from EIB and other loans of £1
Slide 6: Financing Initiatives; Depreciation
Pennon Group Plc Financing Initiatives • Funding requirements for the K3 period fully sourced • Funding strategy uses mix of fixed and floating rate borrowings • Interest rate swaps on majority of debt up to 2005 • Locks-in benefit of current low interest rates compared to Ofwat assumptions 11 Penno
Slide 7: Taxation; Pensions
Pennon Group Plc Taxation 2003/04 2002/03 £m £m UK corporation tax 7.5 3.4 Deferred tax 3.3 13.7 10.8 17.1 • Deferred tax charge very sensitive to long term interest rates used for discounting 13 Pennon Group Plc Pensions • Indicative net deficit of c£55m at 31 March 2004, similar to 31 March 2003 •
Slide 8: Key Financial Ratios; Dividends
Pennon Group Plc Key Financial Ratios 2003/04 2002/03 Dividend cover (1) 1.4 times 1.5 times Net interest cover (1) 2.4 times 2.4 times Net gearing 119% 111% ____________________________________ (1) Before exceptional item, special dividend and deferred tax 15 Pennon Group Plc Dividends • Progressiv
Slide 9: South West Water Financial Performance Summary
17 South West Water Financial Performance Summary 2003/04 2002/03 Change £m £m Turnover 291.8 270.2 8.0% Operating profit 118.9 111.5 6.6% 18 9
Slide 10: Turnover; Operating Costs
South West Water Turnover • Increase of £21.6m (8.0%) in year • Reflects impact of £m - tariff increase 19.5 - meter option switchers (6.0) - new connections 2.1 - measured demand (Summer 2003) 3.0 - other – commercial and service sales 3.0 21.6 • Number of meter switchers 30,900 • Number of new cus
Slide 11: Efficiency Savings; Operational Performance Summary
South West Water Analysis of Efficiency Savings £m • Manpower/overheads 1.2 • Supply chain/contracted services 1.9 • Power costs 0.5 • Other 0.5 4.1 • Cumulative K3 savings of £18.4m (£46.0m since 1995) 21 South West Water Operational Performance Summary • Highest ever drinking water quality • Origi
Slide 12: Capital Programme; Regulatory Asset Value
South West Water Capital Programme • Regulatory Contract K3: - Ofwat provision £725m (May 1999 prices) - targeting outperformance of 10% - on track to achieve • Reduced capex2003/04 - £139m (2002/03 - £182m) • Over 400km water mains laid, replaced or refurbished • Investment to improve waste water c
Slide 13: PR04 Final Business Plan; Debt to RAV
South West Water PR04 Final Business Plan • Overall 17% higher capex than AMP3 • A reduced waste water environmental improvement programme • A bigger water mains rehabilitation programme to meet DWI requirements by 2010 • Increased levels of capital maintenance expenditure • Asset investment to meet
Slide 14: Looking Towards PR04
South West Water Looking Towards PR04 • October 2002 Ofwat framework document • January 2003 Initial ministerial guidance • August 2003 Draft Business Plan • October 2003 Ofwat response to Draft Business Plans • March 2004 Final ministerial guidance • April 2004 Final Business Plan • 5 August 2004 D
Slide 15: Viridor: Delivering Strong Financial Performance
Viridor Delivering Strong Financial Performance Year Ended 31 March 2001 2002 2003 2004 (1) £m £m £m £m Turnover2 106.1 125.3 152.3 183.1 EBITDA 28.8 32.1 38.2 43.2 Operating profit - before goodwill 13.1 15.2 19.1 22.7 - after goodwill 13.1 14.9 17.6 20.2 Operating margin (before goodwill and 17.7%
Slide 16: Viridor Operational Highlights: Landfill and Power Generation
Viridor Operational and Business Highlights - Landfill • Landfill volumes increased by 6.3% (primarily full year effect of Parkwood) to 3.7m tonnes • Gate fees increased by 3.5% – ahead of cost increases • Increased landfill asset base (83m cubic metres consented capacity, up 3m from last year end)
Slide 17: Viridor Profit Contribution by Segment; Acquisitions
Viridor Profit Contribution by Segment (1) Year Ended 31 March 2004 Year Ended 31 March 2003 Recycling 2% (2) Other 2% Recycling (2) 3% Other Collection 6% 10% Collection 11% Power Generation Power Landfill 25% Generation 60% Landfill 20% 61% ____________________ (1) Contribution before goodwill and
Slide 18: Viridor: Delivering Value in the Waste Sector
Viridor Delivering Value in the Waste Sector • A leading waste management company in the UK • Strategy – capitalise on leading position in landfill disposal – exploit opportunities in renewable energy generation – pursue profitable opportunities arising from Government’s developing waste strategy •
Slide 19: Summary
Pennon Group Plc Summary • Strategy clearly focused on water, sewerage and waste management • South West Water remains confident of outperforming the Regulatory Contract to 2005 – strong growth in RAV up to 2005, outstripping anticipated growth in net debt – planning for the K4 period • Viridor deli