Severn Trent Plc · LSE:SVT
Severn Trent — H1 2014/15 Earnings Presentation
43 slides from Severn Trent's earnings presentation, Nov 25, 2014
Slide 1: Interim Results
Interim Results 6 months ended 30 September 2014 25 November 2014
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 alway
Slide 3: Liv Garfield, Chief Executive
Liv Garfield Chief Executive
Slide 4: Highlights
Highlights Financial results in line with expectations • Capital investment on track • Good performance for customers • Improving performance on many operational metrics • Progressing well with AMP6 efficiency plans • Constructive dialogue with Ofwat continues 4
Slide 5: Focus areas revisited
Focus areas revisited • 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 5
Slide 6: Customers at the heart of what we do
Customers at the heart of what we do • Lowest combined average bills for 2014/15 • Confident of maintaining lowest combined bills for next 5 years • New social tariff launching April 2015 • “Value for money” score improving • 100 new front line roles • 88% customer approval rating for our AMP6 plan
Slide 7: Drive operational improvement
Drive operational improvement Internal sewer Pollution Incidents** Leakage*** flooding incidents * -4.4% -3.2% -19.6% Good Good Good 204 164 77.97 74.53 441 427 Mar 14 Sep 14 Mar 14 Sep 14 Mar 14 Sep 14 * Number of incidents of internal sewer flooding where flooding has previously occurred in the la
Slide 8: People / Talent development
People / Talent development • New performance appraisal framework launched - “Inspiring Great Performance” • Refreshed apprentice and graduate programmes • Focus on empowering our people • The right talent for AMP6 • Making sure we recognise and reward exceptional contributions 8
Slide 9: Regulatory relationship
Regulatory relationship • Constructive dialogue with Ofwat continues • Approach to representations outlined in letter of 19 September • Focus on material issues to help ensure an effective process • Submitted representations on 3 October • Believe we have addressed evidence requests • Awaiting final
Slide 10: Ready to deliver in AMP6
Ready to deliver in AMP6 • New executive team • New organisational structure • Reducing management layers to be more responsive • 500 roles • Minimum 45 day consultation started 23 October • AMP6 Employee Roadshows • Key messages on totex, ODI’s, efficiency and customers 10
Slide 11: Mike McKeon, Finance Director
Mike McKeon Finance Director
Slide 12: Highlights H1 2014/15
Highlights H1 2014/15 Turnover Underlying PBIT1 £947.6m +2.7% £274.9m +3.0% Adjusted Interim basic EPS2 dividend 52.6 pence 33.96 pence +12.6% +5.6% 1. before exceptional items 12 2. before exceptional items, net losses/gains on financial instruments, current tax on exceptional items and on financia
Slide 13: Regulated - Severn Trent Water turnover
Regulated - Severn Trent Water turnover* H1 2014/15 £m 18.4 2.4% 5.9 793.0 20.0 0.8 774.6 (8.5) 2013/14 Allowed Price Allowed Price Consumption New growth/ Other / 2014/15 (K) (RPI) meter optants tariff mix 13 * Business segment turnover is stated gross (i.e. including inter-segment trading)
Slide 14: Regulated - Severn Trent Water PBIT
Regulated - Severn Trent Water PBIT* H1 2014/15 £m +2.1% 2.1% 18.4 (6.2) (1.5) 1.5 (1.2) (0.8) 0.4 0.7 (2.0) (1.8) (1.9) 275.1 269.5 14 * Before exceptional items
Slide 15: Non-regulated: Severn Trent Services performance
Non – regulated Severn Trent Services performance £m Revenue PBIT* +10.9% 139.7 154.9 6.4 1.8 H1 2013/14 H1 2014/15 H1 2013/14 H1 2014/15 Like for like** Like for like** Like for like** Like for like** 15 * Before exceptional items ** On constant currency excluding acquisitions and disposals
Slide 16: Group cash flow
Group cash flow H1 2014/15 £m 486.3 (212.8) 273.5 (79.0) (33.4) 18.1 (115.5) 3.7 (1.6) 65.8 (1.1) 64.7 * Impact of refunds of overpayments in prior years 16
Slide 17: Group net debt and finance charges
Group net debt and finance charges Net debt* Finance charge £m £m 4,448 4,383 125.6 119.1 Index 1,240 1,254 linked 99.4 98.1 Cash interest Nominal 3,331 3,283 17.9 13.4 RPI rolled up 8.3 7.6 Net pension Cash 123 154 finance cost 31 March 30 September H1 2013/14 H1 2014/15 2014 2014 • 77% at fixed in
Slide 18: Outlook – in line with expectations
Outlook – in line with expectations FY 2014/15 Regulated - Severn Trent Water • Slightly higher measured consumption • Opex – in line with final determination (like for like) • Capex (UK GAAP, net) £530m to £545m; IRE £130m to £140m (acceleration of AMP6 spend) Non-regulated - Severn Trent Services
Slide 19: Liv Garfield, Chief Executive
Liv Garfield Chief Executive
Slide 20: Next steps – key events
Next steps – 3 key events 12 Receive final determination from Ofwat Dec Early Announce our future dividend policy 2015 17 Mar Capital Markets Day 20
Slide 21: Summary
Summary Good financial & operational performance Continuing investment in networks driving growth and improvements for customers Preparing for AMP6 Continuing to deliver on commitments for stakeholders Create and deliver long term value for shareholders 21
Slide 22: Severn Trent
SEVERN TRENT
Slide 23: Appendix
SEVERN Appendix
Slide 24: Private drains and sewers
Private drains and sewers • To end of September 2014, activity levels in line with previous forecast – We continue the phased adoption of eligible private pumping stations prior to the mandatory transfer on 1st October 2016 to enable controlled and safe transfer of ownership from customers. – The AM
Slide 25: Group Earnings
Group Earnings Six months ended 30 September 2014 2013/14 2014/15 Variance Variance £m £m £m % 344.8 Profit for the period 108.3 (236.5) (68.6)% 344.9 Attributable to: - Owners of the company 107.5 (237.4) (68.8)% (0.1) - Non controlling interests 0.8 0.9 (900.0%) Variance Variance Pence Pence Pence
Slide 26: Group balance sheet
Group balance sheet 30 September 2014 31 March 2014 30 September Movement in 2014 the period £m £m £m 7,023.5 Property, plant and equipment 7,111.6 88.1 95.0 Intangible assets 86.7 (8.3) 5.3 Other non-current assets 5.0 (0.3) (751.6) Working capital, provisions and pensions (887.2) (135.6) 6,372.2 C
Slide 27: Movements on shareholders' equity
Movements on shareholders’ equity Six months ended 30 September 2014 £m At 1 April 2014 1,090.1 Total comprehensive income for the period 80.3 Dividends paid to shareholders of Severn Trent Plc (115.5) Dividends paid to non-controlling interests (1.6) Share based payments 1.7 Shares issued 6.2 At 30
Slide 28: Gearing
Gearing At 30 September 2014 31 March 2014 Net debt/RCV* 30 September 2014 58% Severn Trent Group 57% 59% Severn Trent Water 56% *March 2014 RCV is at year end actual prices. September RCV has been estimated based on March 2014 actual RCV and 28 March 2015 forecast RCV at estimated prices
Slide 29: Segmental analysis of capital employed
Segmental analysis of capital employed 30 September 2014 31 March 2014 30 September 2014 Total Net operating assets Goodwill Total £m £m £m £m 6,287.9 Severn Trent Water 6,214.4 1.3 6,215.7 100.4 Severn Trent Services* 98.6 15.1 113.7 (16.1) Other (12.0) (1.3) (13.3) 6,372.2 Group 6,301.0 15.1 6,316
Slide 30: PBITD analysis
PBITD* analysis Six months ended 30 September 2014 2013/14 2014/15 £m £m 415.2 Severn Trent Water 422.7 4.0 Severn Trent Services 9.5 (5.1) Other (6.2) 414.1 Group 426.0 *Profit before interest, tax, depreciation (see depreciation slide) and exceptional items 30
Slide 31: Depreciation analysis
Depreciation* analysis Six months ended 30 September 2014 2013/14 2014/15 £m £m 145.7 Severn Trent Water 147.6 2.4 Severn Trent Services 3.1 (0.9) Other 0.4 147.2 Group 151.1 *Including amortisation of intangibles, profit/loss on disposal of fixed assets and deferred income released 31
Slide 32: Capital expenditure (net cash)
Capital expenditure (net cash)* Six months ended 30 September 2014 2013/14 2014/15 £m £m 195.1 Severn Trent Water 194.2 5.7 Severn Trent Services 2.7 2.8 Other 15.9 203.6 Group 212.8 *Including purchases of property, plant and equipment, intangible assets, proceeds on disposal of property, plant and
Slide 33: Severn Trent Water – total operating costs
Severn Trent Water – total operating costs* Six months ended 30 September 2014 2013/14 2014/15 Variance Variance £m £m £m % 296.6 Direct operating costs 305.7 9.1 3.1 145.7 Depreciation** 147.6 1.9 1.3 62.8 Infrastructure renewals 64.6 1.8 2.9 505.1 STW total operating costs* 517.9 12.8 2.5 *Before
Slide 34: Severn Trent Water – Capex reconciliation
Severn Trent Water – Capex reconciliation Six months ended 30 September 2014 2013/14 2014/15 £m £m 235.0 Additions to property plant and equipment 213.2 4.0 Additions to intangible fixed assets 4.2 239.0 IFRS capex 217.4 (5.9) Interest capitalised under IFRS (9.2) (15.7) Adopted assets capitalised u
Slide 35: Severn Trent Services performance
Severn Trent Services performance Six months ended 30 September 2014 Turnover Underlying PBIT* 2013/14 2014/15 Change 2013/14 2014/15 Change £m £m % £m £m % 148.0 154.9 4.7 As reported 1.6 6.4 300.0 (8.3) - Exchange rate impacts 0.2 - 139.7 154.9 10.9 Like for like** 1.8 6.4 255.6 Like for like** RO
Slide 36: Net finance costs
Net finance costs Six months ended 30 September 2014 Income statement Capitalised Gross interest charge interest incurred 2014/15 2014/15 2014/15 £m £m £m “Cash” interest (including accruals) 98.1 8.1 106.2 Net pension finance cost 7.6 - 7.6 RPI interest 13.4 1.1 14.5 119.1 9.2 128.3 36
Slide 37: Net debt
Net debt At 30 September 2014 30 September 31 March 30 September 2013 2014 2014 £m £m £m Cash and cash equivalents (278.3) (123.2) (154.1) Bank overdrafts 0.1 - 0.6 Bank loans 594.3 594.9 595.8 Other loans 3,830.3 3,826.0 3,786.1 Finance leases 203.7 201.2 180.7 Cross currency swaps (90.9) (51.4) (2
Slide 38: Fair value of net debt
Fair value of net debt At 30 September 2014 30 September 31 March 30 September 2013 2014 2014 £m £m £m Bank loans 597 609 613 Other loans 4,220 4,168 4,289 Finance leases 202 197 175 5,019 4,974 5,077 Net cash and cash equivalents (278) (123) (154) Cross currency swaps (91) (51) (26) Fair value of n
Slide 39: Analysis of borrowings, net debt and swaps
Analysis of borrowings, net debt and swaps At 30 September 2014 4,897 167* 4,563 (26) (154) 4,383 6 729 3,828 Borrowings Cross currency Cash Net debt per Net debt at IR swaps swaps balance sheet fair value GBP Debt Currency debt at historical rate Exchange adjustment * Excludes forward starting cash
Slide 40: Debt maturity profile
Debt maturity profile At 30 September 2014 700 600 500 400 300 200 100 0 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 Average maturity of around 15 years 40
Slide 41: Credit ratings
Credit ratings At 30 September 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 41
Slide 42: Severn Trent Water – RCV
Severn Trent Water – RCV £m 2010/11 2011/12 2012/13 2013/14 2014/15 April 154 Per Determination1 6,216 6,244 6,280 6,341 6,385 Actual 6,814 7,089 7,364 7,618 Estimated Outturn2 7,863 7,783 Ofwat Projected Outturn3 7,670 September 2014 RCV5 £7,741m 1 2007/08 prices 2 At year end estimated prices 3 Ye
Slide 43: Severn Trent
SEVERN TRENT