Severn Trent PLC · LSE:SVT
Severn Trent — FY2013 Earnings Presentation
47 slides from Severn Trent's earnings presentation, May 30, 2013
Slide 1: Preliminary Results
Preliminary Results Year ended 31 March 2013 30 May 2013 The Lincoln Centre, London 1
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: Andrew Duff, Chairman
SEVERN Andrew Duff Chairman
Slide 4: Mike McKeon, Finance Director
Mike McKeon Finance Director 4
Slide 5: Highlights
Highlights Change Group 2011/12 2012/13 % Turnover (£m) 1,770.6 1,831.6 3.4 Underlying profit before interest and tax1 (£m) 504.2 498.0 (1.2) Underlying profit before tax2 (£m) 275.3 266.3 (3.3) Adjusted basic EPS3 (pence) 88.9 98.9 11.2 Basic EPS (pence) 72.5 95.7 32.0 Total ordinary dividend per s
Slide 6: Regulated - Severn Trent Water turnover
Regulated - Severn Trent Water turnover Regulated - Severn Trent Water Turnover* 2012/13 £m 3.7% 76.2 1.1 (4.5) 1,511.0 1,457.5 0.0 * Business segment turnover is stated gross (i.e. including inter segment trading) 6
Slide 7: Regulated - Severn Trent Water PBIT
Regulated - Severn Trent Water PBIT Regulated - Severn Trent Water PBIT* 2012/13 £m 0.2% 53.5 (24.3) 13.6 3.4 (3.8) (5.7) (1.5) (6.1) 9.9 (4.9) (18.8) (14.4) 500.0 0.3% 6.6% 500.9 Controllable costs Non-controllable costs * Before exceptional items 7
Slide 8: Non-regulated
Non – regulated Severn Trent Services performance £m Revenue 5.3% Reported (3.5)% PBIT* PBIT excluding Investments in: Investment 6.7% • Operating services cost* • BALPURE® Investment 2.0 3.6 cost 307.4 Reported 291.9 PBIT* 14.4 13.9 2011/12 2012/13 2011/12 2012/13 Like for like** Like for like** Li
Slide 9: Group cash flow
Group cash flow £m 731.2 (401.8) 329.4 (233.4) (72.5) 11.1 (172.1) (282.6) (329.5) (149.9) 5.3 (0.5) (46.9) 9
Slide 10: Group net debt
Group net debt Net debt* • Net debt at 31 March 2013 £4,297m after £150m £m special dividend 4,297 • 77% at fixed interest rates 3,968 • Regulated Entity (Severn Trent Water) net debt £4,264.0m Index linked 1,158 Index linked 1,371 • RCV** £7,364m • Group net debt/RCV** 58% • Fair value of debt £5,0
Slide 11: Group finance charges
Group finance charges Finance charge £m 229.0* 231.9 RPI rolled up 1,371 53.6 RPI rolled up 39.4 • Effective rate circa 5.9% • Effective cash interest cost 4.9% 3,105 Cash interest 178.4 3,330 Cash interest 188.5 • EBITDA cover 3.4x • PBIT cover** 2.1x Net pension Net pension (credit)/debit (credit)
Slide 12: Group current tax
Group current tax £(10.6)m 0.6% 0.5% £(40.5)m £67.7m 25.4% (18.8%) Prior year £16.6m exceptional tax 7.7% Current tax on PBT Effective rate* IAS 39 Exceptional Adoption of Current tax (13.5%) (5.8%) items FRS101 on PBT** £(29.2)m £(12.6)m * Current tax (excluding prior year adjustments and tax on ex
Slide 13: Outlook
Outlook FY 2013/14 Regulated - Severn Trent Water • Prices at Severn Trent Water rose by 2.0% in April 2013 • Opex – inflation and investment costs partially offset by efficiencies • Capex £600m-£620m range; IRE £135m-£145m Non regulated - Severn Trent Services • Expect to see benefits of prior year
Slide 14: Summary
Summary Good financial performance, effective cost management Continuing growth from investments in our networks and service delivery Strong dividend growth: up 8.2% in 2012/13 and up 6% in 2013/14 to 80.40p 14
Slide 15: Tony Wray, Chief Executive
SEVERN Tony Wray Chief Executive 15
Slide 16: Creating value through continuous improvement
Creating value through continuous improvement • Delivering dividend policy with 8.2% growth • TSR AMP5 to date of 72%1 • Growth in RCV from £7,089 million to £7,364 million • Delivered significant operational improvements and higher levels of customer service • Severn Trent Water PBIT (excluding PDa
Slide 17: Operational improvements
Operational improvements Efficiency and higher customer service levels Supply interruptions* Leakage** Ofwat target 468 Good Good 5,223 2,557 464 441 Mar 12 Mar 13 Mar 12 Mar 13 Serviceability 2011/12 2012/13 Water below ground Marginal Stable Water above ground Stable Stable Waste below ground Stab
Slide 18: Improved customer service
Improved customer service 12% improvement in overall SIM score Qualitative 4.36 4.4 4.3 4.2 • 10% improvement year on year Good 4.1 4.0 3.98 3.96 • Severn Trent Water most improved 3.9 3.8 • Industry range -5% to 10% 3.7 2010/11 2011/12 2012/13 Quantitative 250 225 205 Good 200 167 • 19% improvement
Slide 19: Delivering regulatory performance
Delivering regulatory performance Ofwat KPI 2012/13 performance 2011/12 8 Upper 4 Median 2 Lower Benchmark 2012/13 Movement Progress since last year: • 10 have improved • Stable in 3 • 1 has deteriorated 19
Slide 20: RCV investment for our customers
RCV investment for our customers We have invested £54m of the additional £150m Water Network Investment • We have invested an additional £17m in reducing the amount of leaks • We found over 17,000 leaks and carried out over 60,000 repairs on our network • This delivered our lowest level of leakage i
Slide 21: Innovation
Innovation Lontra Blowers - £1.8m / year energy saving • Trial at Worcester waste water treatment works • 20% energy saving compared to current blowers • Replacement of all our blowers (280) would yield £1.8m / year energy saving at current energy prices 21
Slide 22: Non regulated
Non regulated Positioned for growth Operating services Products Momentum in US Growth in Asia and LatAm MoD contract performing well First BALPURE sales Revenue Exploiting new markets – and PBIT growth First Milk Opportunities Non-household retail and industrial sector in UK Renewables growth 30% ->
Slide 23: Well prepared for PR14
Well prepared for PR14 Good stakeholder engagement 2011 2012 2013 2014 2015 JAS OND JFM AMJ JAS OND JFM A M J J A S O N D J F M A M J J A S O N D J F M SVT Plan 1. Shaping 2. Shaping 3. Balancing 4. Assessment and 5. Final (5 Phases) the the plan the plan Challenge Decision consultation BP Represent
Slide 24: Outlook: RCV growth
Outlook RCV growth RCV growth £7,997 8,000 £7,687 £7,346 £7,364 £7,089 £7,089 7,000 £6,814 £6,814 £6,418 £6,418 6,000 +20.3% 5,000 Equity Debt 4,000 3,000 2,000 1,000 0 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Equity RCV growth vs. RCV growth • AMP to date RCV grew 14.7%, equity RCV grew 20.3
Slide 25: Outlook
Outlook Remainder of AMP5 • Continue to improve customer service levels • Re-invest efficiencies in the capital programme • AMP6 capital programme to reflect ongoing investment demands • Strong, flexible and sustainable balance sheet - kept under regular review • Clear and focused strategy • Committ
Slide 26: Highlights
Highlights Creating long term value through efficient investment and RCV growth Delivered significant operational improvements and higher levels of customer service Non-regulated underlying performance improved Well prepared for PR14 Delivering on 72% TSR since dividend policy start of AMP5 26
Slide 27: Severn Trent
SEVERN TRENT
Slide 28: Appendix
SEVERN Appendix 28
Slide 29: Private drains and sewers
Private drains and sewers • To end of March 2013, customer contacts, in line with previous forecast − Customer awareness showing steady growth − Our proactive CCTV investigations into the condition of our assets have led us to reforecast our AMP5 forecast spend Total to date Updated AMP5 Total Previ
Slide 30: Group Earnings
Group Earnings Year ended 31 March 2013 2011/12 2012/13 Variance Variance £m £m £m % 174.4 Profit for the period 230.4 56.0 32.1% 171.8 Attributable to: - Equity holders of the company 227.5 55.7 32.4% 2.6 - Non controlling interests 2.9 0.3 11.5% Variance Variance Pence Pence Pence % Basic EPS from
Slide 31: Group balance sheet
Group balance sheet 31 March 2013 2012 2013 Movement in £m £m the period £m 6,577.8 Property, plant and equipment 6,760.0 182.2 160.9 Intangible assets 141.0 (19.9) 4.9 Other non-current assets 5.1 0.2 (684.6) Working capital/provisions (739.7) (55.1) 6,059.0 Capital employed 6,166.4 107.4 (46.5) Ta
Slide 32: Movements on shareholders' equity
Movements on shareholders’ equity Year ended 31 March 2013 £m At 1 April 2012 981.4 Total comprehensive income for the period 172.2 Dividends paid to shareholders of Severn Trent Plc (322.0) Dividends paid to non-controlling interests (0.5) Credit from share-based payments charge 6.9 Tax on share-ba
Slide 33: Gearing
Gearing At 31 March 2013 2011/12 Net debt/RCV* 2012/13 56% Severn Trent Group 58% 59% Severn Trent Water 58% *At year end actual prices. 33
Slide 34: Segmental analysis of capital employed
Segmental analysis of capital employed 31 March 2013 2012 2013 Total Net operating assets Goodwill Total £m £m £m £m 5,958.7 Severn Trent Water 6,081.4 1.3 6,082.7 139.7 Severn Trent Services* 84.0 41.7 125.7 (39.4) Other (40.7) (1.3) (42.0) 6,059.0 Group 6,124.7 41.7 6,166.4 * Excludes goodwill of
Slide 35: PBITD analysis
PBITD* analysis Year ended 31 March 2013 2011/12 2012/13 £m £m 768.0 Severn Trent Water 783.3 25.6 Severn Trent Services 18.1 (15.7) Other (14.7) 777.9 Group 786.7 *Profit before interest, tax, depreciation (see depreciation slide) and exceptional items 35
Slide 36: Depreciation analysis
Depreciation* analysis Year ended 31 March 2013 2011/12 2012/13 £m £m 268.0 Severn Trent Water 282.4 7.6 Severn Trent Services 5.4 (1.8) Other 0.9 273.7 Group 288.7 *Including amortisation of intangibles, profit/loss on disposal of fixed assets and deferred income released 36
Slide 37: Capital expenditure (net cash)
Capital expenditure (net cash)* Year ended 31 March 2013 2011/12 2012/13 £m £m 342.9 Severn Trent Water 392.5 7.4 Severn Trent Services 7.5 0.9 Other 1.8 351.2 Group 401.8 *Net of grants and contributions received and proceeds of sale 37
Slide 38: Severn Trent Water – operating costs
Severn Trent Water – operating costs Year ended 31 March 2013 2011/12 2012/13 Variance Variance £m £m £m % 561.6 Direct operating costs 580.0 18.4 3.3 268.0 Depreciation* 282.4 14.4 5.4 128.9 Infrastructure renewals 147.7 18.8 14.6 958.5 STW operating costs 1,010.1 51.6 5.4 *Including amortisation o
Slide 39: Severn Trent Water – Capex reconciliation
Severn Trent Water – Capex reconciliation Year ended 31 March 2013 2011/12 2012/13 £m £m 405.3 Additions to Property, plant and equipment 451.6 9.8 Additions to Intangible fixed assets 13.6 415.1 IFRS capex 465.2 (10.5) Interest capitalised under IFRS (10.4) (37.0) Adopted assets capitalised under I
Slide 40: Severn Trent Services performance
Severn Trent Services performance Year ended 31 March 2013 Turnover Underlying PBIT* 2011/12 2012/13 Change 2011/12 2012/13 Change £m £m % £m £m % 332.3 328.5 (1.1) As reported 18.0 12.7 (29.4) (40.7) (21.1) Changes in group (3.5) 1.2 0.3 - Exchange rate impacts (0.1) - 291.9 307.4 5.3 Like for like
Slide 41: Net finance costs
Net finance costs Period ended 31 March 2013 Income statement Capitalised Gross interest charge interest incurred 2012/13 2012/13 2012/13 £m £m £m “Cash” interest (including accruals) 188.5 8.6 197.1 Pension debit 4.0 - 4.0 RPI interest 39.4 1.8 41.2 231.9 10.4 242.3 41
Slide 42: Net debt
Net debt At 31 March 2013 Movement 2012 2013 in the year £m £m £m Cash and cash equivalents (295.1) (403.6) (108.5) Bank overdrafts 0.4 0.4 - Bank loans 852.5 758.7 (93.8) Other loans 3,326.9 3,840.9 514.0 Finance leases 219.0 201.6 (17.4) Cross currency swaps (135.9) (100.7) 35.2 Net debt 3,967.8 4
Slide 43: Fair value of net debt
Fair value of net debt At 31 March 2013 Movement in 2012 2013 the period £m £m £m Bank loans 858 782 (77) Other loans 3,936 4,585 649 Finance leases 215 208 (7) 5,010 5,575 565 Net cash and cash equivalents (295) (403) (109) Cross currency swaps (136) (101) 35 Fair value of net debt 4,579 5,071 492
Slide 44: Analysis of borrowings, net debt and swaps
Analysis of borrowings, net debt and swaps At 31 March 2013 151* 5,071 4,801 (101) (404) 91 4,297 742 3,968 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 h
Slide 45: Credit ratings
Credit ratings 31 March 2013 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 45
Slide 46: 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 7,687 7,997 Ofwat Actual/Projected 6,814 7,089 7,364 7,435 7,487 Outturn*** * 2007/08 prices ** At year end actual/estimated prices. Exp
Slide 47: Severn Trent
SEVERN TRENT