Severn Trent Plc · LSE:SVT
Severn Trent — H1 2020/21 Earnings Presentation
36 slides from Severn Trent's earnings presentation, Nov 26, 2020
Slide 1: Wonderful on Tap - November 2020
26 November 2020 WONDERFUL ON TAP
Slide 2: Disclaimers
DISCLAIMERS Cautionary statement regarding forward-looking statements This document contains statements that are, or may be deemed to be, ‘forward-looking statements’ with respect to Severn Trent’s financial condition, results of operations and business and certain of Severn Trent’s plans and object
Slide 3: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive 3 3
Slide 4: 2020/21 Highlights
2020/21 HIGHLIGHTS ▪ Delivering at least £25m ODI reward this year and exceeding AMP6 year one performance Strong operational ▪ Balanced performance across Water, Waste & Environment with c. 80% of measures in performance positive territory ▪ Industry-leading environmental performance confirmed with
Slide 5: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer 5
Slide 6: H1 2020/21 Financial Highlights
H1 2020/21 FINANCIAL HIGHLIGHTS H1 results in line with expectations, on track for a successful AMP Fast start to AMP7 Underlying PBIT1 Effective interest cost2 investment £284m £226m 3.3% cash capex in H1 -21% down 40 bps in H1 Positive customer ODIs Underlying basic EPS3 Strong liquidity £25m+ 51p
Slide 7: Regulated Water and Waste Water
REGULATED WATER AND WASTE WATER Turnover down 2.4% reflecting impact of COVID-19 on NHH volumes 16.2 (12.7) (33.2) 42.4 849.9 7.8 829.9 1.9 822.1 £m 807.5 COVID-19 impact on metered revenue, as per guidance, recovered later in the AMP. H1 2019/20 Change to H1 2019/20 CPIH+K Impact of price Consumpti
Slide 8: Regulated Water and Waste Water
REGULATED WATER AND WASTE WATER PBIT down 19% after COVID-19 impact on revenue & bad debt and increased investment 12.3 272.4 (20.0) Reflecting £m commissioning of 260.1 AMP6 assets. (6.0) (7.6) 10.0 (9.7) (7.8) (11.7) 219.6 main impact of COVID-19 H1 2019/20 Change 1to H1 2019/20 Turnover Bad debts
Slide 9: Customer Collections
CUSTOMER COLLECTIONS Cash collections robust, prudent provision made for anticipated COVID-19 impact Strong base position on credit management Strengthening our approach with new initiatives ▪ Back on Track scheme launched to support customers impacted 3.2% 3.3% by COVID-19 with bill discounts of up
Slide 10: Financing Performance
FINANCING PERFORMANCE Strong performance continues into the new AMP Effective interest cost1 Effective cash cost of interest2 £93.8m £91.1m 3.3%, down 40 bps 3.1%, flat £5.3m £17.0m Inflation £2.6m roll-up £5.4m 5.4% Effective interest cost Net pension AMP7 embedded debt rate (nominal) finance cost
Slide 11: Financing Strategy
FINANCING STRATEGY Strong liquidity and financing flexibility to support our long-term strategy Floating Index-linked 7% ▪ £300m sterling bond issued in June under our 24% Sustainable Finance Framework ▪ Extension of RCF facilities through to March 2023 ▪ Further plans to increase CPI share of index
Slide 12: Pensions Strategy
PENSIONS STRATEGY Effective asset allocation mitigating impact of COVID-19 equity shocks & historically low discount rates Impact of temporary spike in credit spreads and low long- £712m term inflation forecast ▪ As anticipated, corporate bond spreads narrowed from March spike, combined with £575m h
Slide 13: Business Services
BUSINESS SERVICES H1 impacted by COVID-19; well-positioned for long-term growth Turnover EBITDA Operating Services ▪ Solid performance from stable, long-term contracts £34.6m £7.8m & Other ▪ H1 impact of COVID-19 expected to recover over full year ▪ COVID-19 impact - lower energy prices & less comme
Slide 14: 2020/21 Technical Guidance
2020/21 TECHNICAL GUIDANCE Guidance in bold italics has been revised since the last trading update. Please note that all technical guidance is presented in the new segmental basis for comparative purposes. FY20 Year-on- Regulated Water and Waste Water (restated)1 Year 1,2 Turnover £1.63 billion to £
Slide 15: Financial Summary
FINANCIAL SUMMARY On track for a successful AMP Underlying PBIT1 Impact of COVID-19 related decrease in consumption £226m recovered later in AMP7 Customer ODIs at least Improvements across a wide range of price controls £25m Effective interest cost2 40 bps reduction this half year, strong liquidity,
Slide 16: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive 16
Slide 17: Severn Trent Culture
SEVERN TRENT CULTURE Providing the platform to be our best… Aligned purpose driving increased Top 500 leaders collaborate and plan engagement score – Top 5% of Global for the future Utilities Looking after the physical, mental CEO sustainability roadshows and financial health of our people engaging
Slide 18: Momentum in Water
MOMENTUM IN WATER 75% Emerging strength benefiting from investment Positive territory Strong start on industry-wide measures Success on bespoke customer measures Leakage & speed of response Customer metering ▪ 35,000 leakage loggers helping to keep on track with ▪ On track to deliver almost 15% leak
Slide 19: Strong Start for Waste
75% STRONG START FOR WASTE Positive Embedding operational excellence across a broad set of measures territory ▪ Industry-leading environmental performance confirmed with 4* EPA status ▪ Ambitious waste network investment plans including 40,000 loggers across region by 2025 ▪ On track with 50% reduct
Slide 20: Enhancing Our Environment
89% ENHANCING OUR ENVIRONMENT Positive Utilising the power of nature as a long-term sustainable solution territory Leading ambition on biodiversity Embracing nature as a solution ▪ On track to deliver 60% of 2027 ambition and 1.5 ▪ Green Communities ODI encourages use of nature times our five-year O
Slide 21: Investing for Our Future
INVESTING FOR OUR FUTURE Utilising the benefits of fast-track status Investment ahead of plan maintaining momentum from AMP6 in AMP7 £80m accelerated to deliver key projects earlier - supporting operational outperformance Brought forward renewable energy investment to increase efficiency of process
Slide 22: Investing in People
INVESTING IN PEOPLE Securing the best skills and brightest talent to push Severn Trent further Academy launch Academy to open late 2020 to enhance skills of our people and our communities Welcoming new talent Diversity & inclusion ▪ Largest ever intake into New Talent ▪ 1st on EY’s Female FTSE repor
Slide 23: Summary
SUMMARY Delivering outperformance and investing for the future ▪ ODIs an embedded strength for the long-term Operationally ▪ Adapted to pandemic while maintaining focus on being a business fit for the future strong ▪ Industry-leading environmental performance with 4* EPA accreditation ▪ £500m+ capit
Slide 24: Appendix
APPENDIX 24
Slide 25: Underlying EBITDA, Six Months Ended 30 September 2020
UNDERLYING EBITDA¹ SIX MONTHS ENDED 30 SEPTEMBER 2020 2019 2020 Variance Variance (restated)2 £m £m £m % 449.3 Regulated Water and Waste Water 408.2 (41.1) (9.1) 23.5 Business Services 15.1 (8.4) (35.7) (3.6) Corporate and other (2.1) 1.5 41.7 (0.1) Eliminations – 0.1 100.0 469.1 Severn Trent Group
Slide 26: Segmental Underlying PBIT, Six Months Ended 30 September 2020
SEGMENTAL UNDERLYING PBIT¹ SIX MONTHS ENDED 30 SEPTEMBER 2020 2019 2020 Variance Variance (restated)2 £m £m £m % 272.4 Regulated Water and Waste Water 219.6 (52.8) (19.4) 17.6 Business Services 8.2 (9.4) (53.4) (3.7) Corporate and other (2.2) 1.5 40.5 286.3 Severn Trent Group 225.6 (60.7) (21.2) 1.
Slide 27: Depreciation, Six Months Ended 30 September 2020
DEPRECIATION¹ SIX MONTHS ENDED 30 SEPTEMBER 2020 2019 2020 Variance Variance (restated) 2 £m £m £m % 176.9 Regulated Water and Waste Water 188.6 11.7 6.6 5.9 Business Services 6.9 1.0 16.9 – Corporate and other 0.1 0.1 100.0 182.8 Severn Trent Group 195.6 12.8 7.0 1. 2. Including amortisation of int
Slide 28: Net Finance Costs
NET FINANCE COSTS SIX MONTHS ENDED 30 SEPTEMBER 2020 2019 2020 Income Capitalised Gross interest Income Capitalised Gross interest statement interest incurred statement interest incurred charge charge £m £m £m £m £m £m 71.4 21.1 92.5 Cash interest (including accruals) 83.2 14.9 98.1 5.4 – 5.4 Net pe
Slide 29: Underlying Earnings Per Share
UNDERLYING EARNINGS PER SHARE SIX MONTHS ENDED 30 SEPTEMBER 2020 2019 2020 Variance Variance £m £m £m % 286.3 Underlying profit before interest and tax 225.6 (60.7) (21.2) (93.8) Net finance costs (91.1) 2.7 2.9 192.5 Underlying profit before tax 134.5 (58.0) (30.1) (19.9) Tax at the underlying effe
Slide 30: Group Balance Sheet at 30 September 2020
GROUP BALANCE SHEET AT 30 SEPTEMBER 2020 31 March 2020 30 September 2020 Variance Variance £m £m £m % 9,954.8 Property, plant and equipment, right-of-use assets, intangible assets and goodwill 10,049.3 94.5 0.9 43.2 Working capital (32.0) (75.2) (174.1) (1,188.3) Deferred income (1,206.6) (18.3) (1.
Slide 31: Cash Capex, Six Months Ended 30 September 2020
CASH CAPEX¹ SIX MONTHS ENDED 30 SEPTEMBER 2020 2019 2020 Variance Variance £m £m £m % 369.2 Regulated Water and Waste Water 279.6 (89.6) (24.3) 4.7 Business Services 3.9 (0.8) (17.0) 0.2 Corporate and other – (0.2) (100.0) 374.1 Severn Trent Group 283.5 (90.6) (24.2) 1. Including purchases of proper
Slide 32: Net Debt at 30 September 2020
NET DEBT AT 30 SEPTEMBER 2020 31 March 2020 30 September 2020 Variance Variance £m £m £m % (1,251.9) Bank loans (966.3) 285.6 22.8 (5,058.5) Other loans (5,351.4) (292.9) (5.8) (122.7) Lease liabilities (123.6) (0.9) (0.7) 48.6 Net cash and cash equivalents 22.7 (25.9) (53.3) 60.4 Cross currency swa
Slide 33: Fair Value of Debt at 30 September 2020
FAIR VALUE OF DEBT AT 30 SEPTEMBER 2020 31 March 2020 30 September 2020 Variance Variance £m £m £m % (1,128.0) Floating rate debt (989.8) 138.2 12.3 (4,214.7) Fixed rate debt (4,589.8) (375.1) (8.9) (2,042.2) Index-linked debt (2,760.5) (718.3) (35.2) (7,384.9) (8,340.1) (955.2) (12.9) 48.6 Net cash
Slide 34: Analysis of Borrowings & Net Debt
ANALYSIS OF BORROWINGS & NET DEBT AT 30 SEPTEMBER 2020 1,236.2 8,142.0 653.5 6,441.3 (122.3) (22.7) (53.1) 6,243.2 9.1 Borrowings Loans due from Cash and cash Cross currency Net debt per Floating debt fair Fixed debt fair value Index-linked debt Fair value of net joint venture equivalents swaps bala
Slide 35: Debt Maturity at 30 September 2020
- 100 400 500 200 300 600 700 2021 2022 AMP 7 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 AMP 8 and beyond 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055 2056 2057 2058 2059 2060 2061 2062 2063 2064 2065 2066 2067 DEBT MATURIT
Slide 36: Gearing and Credit Ratings at 30 September 2020
GEARING AND CREDIT RATINGS AT 30 SEPTEMBER 2020 Gearing – Net debt/RCV 1 30 September 2019 31 March 2020 30 September 2020 63.1% 64.9% Severn Trent Group2 66.1% 61.1% 64.4% Severn Trent Water Group3 63.9% Credit ratings 31 March 2020 30 September 2020 Severn Trent Water Severn Trent Plc Severn Trent