Severn Trent Plc · LSE:SVT
Severn Trent — H1 2010/11 Earnings Presentation
43 slides from Severn Trent's earnings presentation, Nov 23, 2010
Slide 1: Interim Results
Interim Results 6 months to 30 September 2010 23 November 2010 The Lincoln Centre, London
Slide 2: Disclaimers
Disclaimers For the purposes of the following disclaimers, references to this "document" shall be deemed to include references to the presenters' speeches, the question and answer session and any other related verbal or written communications. This document contains certain “forward-looking statemen
Slide 3: Mike McKeon, Finance Director
Mike McKeon Finance Director 3
Slide 4: Highlights
Highlights H1 2009/10 H1 2010/11 Change £m £m % Group Turnover 852.1 867.9 1.9% Profit Before Interest and Tax (PBIT1) 287.1 277.0 (3.5)% Profit Before Tax (PBT2) 188.0 158.0 (16.0)% Adjusted Basic EPS3 (pence) 60.8p 47.4p (22.0)% Basic EPS (pence) 63.4p 43.9p (30.8)% Interim declared Dividend 26.71
Slide 5: Severn Trent Water turnover
Severn Trent Water turnover Severn Trent Water Turnover* H1 2010/11 £m £ 7m +1.0% 9.1 (1.2) 1.1 702.3 695.3 (2.0) C Ne on Ot tg Al 20 20 su lo he ro 09 10 m we wt r / /1 pt 11 h d io 0 /m Pr n et ice e ro (R pt PI an +K t s 5 ) * Business segment turnover is stated gross (i.e. including inter segmen
Slide 6: Severn Trent Water PBIT
Severn Trent Water PBIT Severn Trent Water PBIT* H1 2010/11 £m +x.x% (2.4)% 8.9 (15.8) 7.0 5.8 (9.6) 279.3 (2.9) 272.7 O In O Em D 20 20 Tu wn fra ep th 10 09 rn pl er re st / wo /1 11 ov oy ru ci 0 e er rk at ct e io ur ca co n e pi st ta lis 6 e d * Numbers shown before exceptional items
Slide 7: Severn Trent Services performance
Severn Trent Services performance Six months ended 30 September Turnover Underlying PBIT** 09/10 10/11 Var. 09/10 10/11 Var. £m £m £m £m 165.5 172.0 3.9% As reported 12.2 13.0 6.6% 163.9 168.6 2.9% Like for like in constant currency* 12.1 12.9 6.6% ROIC*** 11.5% * Excluding foreign exchange, disposa
Slide 8: Exceptional items
Exceptional items £m 2009/10 2010/11 H1 H1 Restructuring costs Severn Trent Water (7.2) (6.2) Severn Trent Services (2.8) - Total exceptional operating costs (10.0) (6.2) Exceptional loss on disposal of business (1.5) - Total exceptional items (11.5) (6.2) 8
Slide 9: Improvement programmes – back office
Improvement programmes – back office 14 12 10 8 £m Spend 6 Benefits 4 2 0 1 2 3 4 Year 9
Slide 10: Cash flow
Cash flow H1 2010/11 operating cash flow £m 478.2 (198.5) 279.7 (80.7) (24.7) (107.8) 2.0 (1.3) 67.2 (29.1) 38.1 s ns re w es t x ds es ts w ts eb t it o itu fl o r Ta n su en lf o en d a nd sh te de is m m t er ca In iv i e ve sh ve ne o p x pe D ar o ca o n le g sh rm m ti om ta ati n t e r om sh
Slide 11: Group net debt and finance charges
Group net debt and finance charges Net debt* Interest £m £m 119.1 99.1 3,761 3,723 3,551 97.2 93.5 116.2*** 91.4*** 28.0 (5.8) 30 Sept 2009 31 March 2010 30 Sept 2010 H1 2009/10 H1 2010/11 1 'Cash' interest RPI rolled up Net pension (debit)/credit* • 77% at fixed interest rates • Regulated entity (S
Slide 12: Effective rate of current tax
Effective rate of current tax H1 2009/10 Effective current tax rate% H1 2010/11 Effective current tax rate% 15.7% (3.7)% 43.5% 27.8% 24.3% 20.6% Effective rate* Adjustments H1full tax rate** Effective rate* Adjustments H1 full tax rate** 20010/11 Full Year effective current tax rate 25%-28% * Curren
Slide 13: Summary
Summary Better than anticipated turnover in the regulated business Return to growth at Severn Trent Services Improvement plans on track and delivering benefits 13
Slide 14: Tony Wray, Chief Executive
Tony Wray Chief Executive SEVERN TRENT 14
Slide 15: Continuous improvement
Continuous improvement • Progress on a range of KPI scores – Customer service – Sewer flooding incidents – Leakage • Bad debt • OPA – Moved up again, from 7th to 6th • Renewables – Stoke Bardolph energy crop 15
Slide 16: Ongoing improvements
Ongoing improvements Customer service - Billing* Sewer flooding** Leakage*** .131 90% 497 491 GOOD 89% .117 GOOD GOOD Mar 10 Sep 10 Mar 10 Sep 10 Mar 10 Sep 10 * First time call resolution for billing % ** Sewer flooding incidents – other causes, per 1,000 properties 16 *** Leakage, Ml/d
Slide 17: Capex / Opex efficiencies
Capex / Opex efficiencies • SAP – Realising benefits of phase 1 deployment – Phase 2 – asset management and fieldforce – going well • New approach to capital programme – Progressing well, delivering planned efficiencies & required outputs – Spend more H2 weighted • Opex – In line with expectations (
Slide 18: Severn Trent Services
Severn Trent Services Return to growth • Operating Services performed well – Mix of contract wins and renewals – High levels of interest – Italy, Ireland, MENA, US • Water Purification bounced back strongly – Converted a record order book into good revenue and PBIT growth – Benefitting from cost red
Slide 19: Outlook 2010/11
Outlook 2010/11 • Severn Trent Water – Continue to deliver higher standards and efficiencies – Consumption expected to be flat in H2 period on period – Net capex £415-£425 million range – Exceptional charges of approx. £20 million • Severn Trent Services – Strong Water Purification order book – cont
Slide 20: AMP5 Outlook
AMP5 Outlook • Remain confident we can meet or exceed objectives – Continuing to drive performance improvements • Final Business Plan included 1.7% efficiency on opex and 7% on capex – Now think we can deliver around 2% opex and around 10% on capex • Cost of significant proportion of existing and an
Slide 21: Dividend
Dividend • FY 2010/11 dividend 65.09p New Policy • Annual growth of RPI+3% for remainder of AMP5 – Using November RPI of prior year – Aligned with business performance and price setting mechanism – Clear, sustainable, progressive – Interim/final split of 40% / 60% 21
Slide 22: Summary
Summary Made further progress on KPI and OPA Good start to investment program; realising benefits of efficiency programmes Well placed to succeed in AMP5 New dividend policy reflects confidence in future 22
Slide 23: Investor Day December 2010
Investor Day 16 December 2010 Severn Trent Centre “Winning i 2, St. John’s Street na Coventry changing w orld” CV1 2LZ 10:00am to 4:30pm Email: john.crosse@severntrent.co.uk 23
Slide 24: Severn Trent
SEVERN TRENT 24
Slide 25: Contact details – Investor Relations
Contact details – Investor Relations John Crosse Head of Investor Relations Severn Trent Plc PO Box 5309 Coventry. CV3 9FH United Kingdom Tel: +44 (0) 2477 715000 Mobile: +44 (0) 7775 226260 e:mail: john.crosse@severntrent.co.uk www.severntrent.com 25
Slide 26: Appendix
Appendix SEVERN TRENT 26
Slide 27: Group Earnings Six months to 30 September 2010
Group Earnings Six months to 30 September 2010 2009/10 2010/11 £m £m 150.0 Profit for the period 104.5 149.7 Attributable to: - Equity holders of the company 103.8 0.7 0.3 - Minority Interests Pence Pence Variance Variance pence % Basic EPS from continuing operations 60.8 Adjusted basic EPS (before
Slide 28: Group balance sheet 30 September 2010
Group balance sheet 30 September 2010 31 Mar 30 Sep Movement since 2010 2010 31 Mar 2010 £m £m £m 6,302.0 Property, plant and equipment 6,281.0 21 209.1 Intangible assets 208.4 0.7 191.6 Other non-current assets 191.6 0.0 (664.8) Working Capital/provisions (664.8) 0.0 6,037.9 Capital employed 6,016.
Slide 29: Movements on shareholders’ equity
Movements on shareholders’ equity Six months to 30 September 2010 2010/11 £m At 1 April 947.0 Total recognised income for the financial period 79.7 (1.3) Dividends (107.8) Dividends to non controlling interests Credit from share based payments charge 0.2 Tax on share based payments posted directly t
Slide 30: Credit ratings 30 September 2010
Credit ratings 30 September 2010 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 A3 A3 Moody’s – long term rating is stable Standard & Poor’s – long term rating is stable 30
Slide 31: Debt maturity profile
Debt maturity profile Debt maturity 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 2011 2016 2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 Debt maturity Average maturity of around 16 years 31
Slide 32: Gearing
Gearing Actual at Proforma at Net debt/RCV 30 Mar 2010 30 Sep 2010 Severn Trent Plc 59.3% 56.3% Severn Trent Water 61.0% 57.5% 32 * To be confirmed
Slide 33: Segmental analysis of capital employed
Segmental analysis of capital employed 30 September 2010 Net operating Total assets Goodwill Total 31 Mar 2010 30 Sep 2010 30 Sep 2010 30 Sep 2010 £m £m £m £m 5,704.8 Severn Trent Water 5,684.4 0.0 5,684.4 198.6 Severn Trent Services* 125.8 68.7 194.5 (46.1) Other (49.4) 0.0 (49.4) 5857.3 Group 5760
Slide 34: PBITD analysis
PBITD* analysis Six months to 30 September 2010 Group Group 2009/10 2010/11 £m £m 401.9 Water & Sewerage 411.2 15.9 Severn Trent Services 17.0 (5.6) Other (9.9) 412.2 Group 418.3 * Profit before interest, tax, depreciation and amortisation of intangible assets, excluding exceptional items 34
Slide 35: Depreciation analysis
Depreciation* analysis Six months to 30 September 2010 Group Group 2009/10 2010/110 £m £m 122.5 Water and Sewerage 138.5 3.7 Severn Trent Services 4.0 (1.2) Other (1.2) 125.1 Group 141.3 35 * Including amortisation of intangibles, excluding profit/loss on disposal of fixed assets and deferred income
Slide 36: Capital expenditure (net cash)
Capital expenditure (net cash)* Six months to 30 September 2010 Group Group 2009/10 2010/11 £m £m (234.1) Water and Sewerage (190.2) 4.9 Severn Trent Services (3.8) 0.7 Other (4.5) (238.3) Group (198.5) 36 * Net of grants received and proceeds of sale
Slide 37: Severn Trent Water – operating costs
Severn Trent Water – operating costs Six months to September 2010 2009/10 2010/11 Variance Variance £m £m £m % 249.5 Direct Operating Costs* 260.1 10.6 4.2% 119.3 Depreciation** 10.0% 131.2 11.9 47.2 Infrastructure Renewals 38.3 (8.9) (18.9)% 416.0 STW operating costs** 429.6 13.6 3.3% * Net of othe
Slide 38: Severn Trent Water – capex reconciliation
Severn Trent Water – capex reconciliation Six months to 30 September 2010 2010/11 £m UK GAAP gross capex 164.5 Less grants and contributions (8.9) UK GAAP net capex* 155.6 Treated as IFRS infrastructure operating expenditure (38.3) Other IFRS adjustment (2.1) 115.2 Movement on capital creditors 78.9
Slide 39: Net debt
Net debt 30 September 31 March 30 September 2010 2010 2009 Cash and cash equivalents 443.9 227.8 589.1 Borrowings - current liabilities (58.8) (260.9) (490.6) Borrowings - non-current liabilities (4,268.8) (3,915.6) (3,875.9) Cross currency swaps hedging debt 160.4 187.3 226.6 Net debt (3,723.3) (3,
Slide 40: Fair value of net debt
Fair value of net debt 30 September 31 March 30 September 2010 2010 2009 Bank loans (847.0) (679.1) (767.7) Other loans (3,156.4) (3,328.5) (3,345.6) Finance leases (254.4) (260.3) (317.7) Fair value of borrowings (4,257.8) (4,267.9) (4,431.0) Cash and cash equivalents 443.9 227.8 589.1 Cross curren
Slide 41: Analysis of borrowings, net debt and swaps
Analysis of borrowings, net debt and swaps at 30 September 2010 £’m 4,327 (160) (444) 3,723 3,653 157 41
Slide 42: 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 Outturn** 6,617 6,844 7,063 7,360 7,658 * 2007/08 prices ** Year end at year average out turn prices 42
Slide 43: Severn Trent
SEVERN TRENT