Severn Trent Plc · LSE:SVT
Severn Trent — H1 2011/12 Earnings Presentation
42 slides from Severn Trent's earnings presentation, Nov 25, 2011
Slide 1: Interim Results 6 months to 30 September 2011
I t i Results Interim R lt 6 months to 30 September 2011 25 November 2011 Exchange House, London 1
Slide 2: Mike McKeon, Finance Director
Mike McKeon Finance Director 2
Slide 3: Highlights
Highlights g g H1 H1 Change 2010/11 2011/12 % Group Turnover (£m) 867 9 867.9 886 0 886.0 21 2.1 Profit before interest and tax (PBIT1) (£m) 277.0 274.3 (1.0) Profit before tax (PBT2) (£m) 158.0 155.0 (1.9) Adjusted basic EPS3 (pence) 47.4 46.4 (2.1) B i EPS ((pence)) Basic 43 9 43.9 30 5 30.5 (30 5
Slide 4: Severn Trent Water turnover
Severn Trent Water turnover Severn Trent Water Turnover Turnover* H1 2011/12 £m £32.7m +4.7% 37.1 (5.1) 1 (1.1) 1.8 735.0 702.3 0.0 4 * Business segment turnover is stated gross (i.e. including inter segment trading),
Slide 5: Severn Trent Water PBIT
Severn Trent Water PBIT Severn Trent Water PBIT PBIT* 2011/12 £m 32.7 (1.6) (3.6) 1.2 (5.5) +0.1% (3.4) (13.8) (1 3) (1.3) (4.5) 272.7 272.9 5 * Numbers shown before exceptional items
Slide 6: Severn Trent Services performance
Severn Trent Services performance £m Investment cost 172.0 13.0 0.8 164.1 12.0 160.0 6.5 H1 2010/11 H2 2010/11 H1 2011/12 H1 2010/11 H2 2010/11 H1 2011/12 Revenue PBIT* ROIC (annualised) = 5.9% 5 9% 6 * PBIT before exceptional items
Slide 7: Exceptional items
Exceptional items H1 H1 £m 2010/11 2011/12 Restructuring costs Severn Trent Water 6.2 3.6 Other exceptional costs Severn Trent Services - 21.9 C Corporate t and d other th - (6 0) (6.0) Total exceptional operating costs 6.2 19.5 7
Slide 8: Cash flow
Cash flow Six months ended 30 September 2011 £m 475.6 (150.1) 325.5 (83.2) (35.5) ( (92.5) ) 2.1 (0.3) 116.1 (6.1) 110.0 8
Slide 9: Group net debt and finance charges
Group net debt and finance charges g Net debt* debt Finance charge £m £m 119.1 119.4 3,869 3,759 Index linked 1,104 1,135 89.4 91.2 Nominal 3 080 3,080 3,036 26.8 30.0 2.9 Cash 315 1.8 413 H1 2010/11 H1 2011/12 'Cash' interest 31 March 2011 30 Sept 2011 RPI rolled up Net pension (debit)/credit* • 73
Slide 10: Effective rate of current tax
Effective rate of current tax H1 2011/12 23.8% 14.3% 67 2% 67.2% 29 1% 29.1% H1 full tax rate IAS 39 Exceptionals Effective rate 2011/12 Full Year effective current tax rate 26%-27% 26% 27% * Current tax (excluding prior year adjustments) attributable to PBT before gains/losses on financial instrume
Slide 11: Outlook
Outlook FY 2011/12 Severn Trent Water • Opex below the level of final determination • Bad debt to remain at 2.2% • Capex £450m-£470m range; IRE £120m-£130m (ex. PD S) PDaS) Severn Trent Services • H2 weighted Group • Interest charge broadly in line with prior year • Tax rate 26%-27% 26% 27% 11
Slide 12: Summary
Summary y Delivering planned opex - good cost control Investment in efficiencies supports pp strength g of balance sheet P d Prudent investment i in i our networks k Delivering on dividend promise 12
Slide 13: Tony Wray, Chief Executive
SEVERN TRENT Tony Wray Chief Executive 13
Slide 14: Key Performance Indicators
Key y Performance Indicators Unplanned interruptions* Supply availability** Net Energy Use*** 23 85 23.85 22 94 22.94 94 4% 94.4% 98 5% 98.5% 706 702 Mar 11 Sept 11 Mar 11 Sept 11 Mar 11 Sept 11 * per 1,000 properties. Moving annual total ** % of designed capacity available. Moving annual total 14 *
Slide 15: Updated KPI benchmarks
Updated KPI benchmarks Upper Median Lower 1 Lost time incidents per 100,000 hours worked 2 Employee motivation 3 Water quality (test failure rate) - ppm 4 Customer written complaints per 1,000 properties 5 1st time call resolution for billing (%) 6 Unplanned interruptions per 1,000 properties 7 Prop
Slide 16: The Service Incentive Mechanism (SIM)
The Service Incentive Mechanism (SIM) ( ) SIM consists of 2 equally weighted measures: Quantitative JR11 WASC This measure looks at the number of complaints, unwanted contacts Ranking and engaged / abandoned calls calls. 4th Qualitative This measure looks at the end to end customer service by comple
Slide 17: Innovation
Innovation Mi Minworth th • Anammox (ANaerobic AMMonium OXidation) process - £14m opex savings vs. traditional solution over AMP5 Ashbourne • 1st in UK to adopt HYBACS, (Hybrid Activated Sludge) p process - reduces footprint area and power consumption - £84k pp.a. a opex saving compared to tradition
Slide 18: Severn Trent Services
Severn Trent Services Still presents a good opportunity in the long term - Drivers – scarcity, climate change, population, standards - Current challenging economic environment Operating Services • US market – lower bid activity • UK performed well • Italy – uncertainty post referendum Products • Fil
Slide 19: Private Drains and Sewers
Private Drains and Sewers • S Successful f lhhandover d on 1 1stt O October t b • To date in-bound call volumes lower than expectations - 4,000 jobs on transferred assets Cost YTD Guidance • Positive customer feedback* Exceptionals £2.5m £6m Opex £1m £12-15m £12 15m Capex £1.5m £8-12m 19 * Comments:
Slide 20: Sector developments
Sector developments Of t Ofwat • Involving customers in price setting – Ofwat’s Ofwat s customer engagement policy statement (August 2011) • Regulatory Compliance – a proportionate and targeted approach (October 2011). • Future price limits Defra • White Paper 20
Slide 21: Summary
Summary Plans in place to improve areas of operational performance Network investment Long term opportunity with Services – short term will remain challenging Encouraged by direction of regulatory reforms Delivering sustainable shareholder value 21
Slide 22: Q&A
SEVERN TRENT Q&A
Slide 23: Appendix
SEVERN TRENT Appendix 23
Slide 24: Group Earnings
Group Earnings Six months to 30 September 2011 2010/11 2011/12 £m £m 104.5 Profit for the period 72.3 103.8 Attributable to: - Equity holders of the company 72.3 0.7 - Non controlling interests 0.0 Variance Variance P Pence P Pence pence % Basic EPS from continuing operations 47.4 Adjusted basic EPS
Slide 25: Group balance sheet
Group balance sheet 30 September 2011 31 March 30 September Movement in 2011 2011 the period £m £m £m 6 427 0 6,427.0 Property plant and equipment 6 481 6 6,481.6 (54 6) (54.6) 203.2 Intangible assets 193.2 10.0 5.1 Other non current assets 5.0 0.1 (583.5) Working capital/provisions (818.9) 235.4 60
Slide 26: Movements on shareholders' equity
Movements on shareholders’ equity Six months to 30 September 2011 2011/12 At 1 April 1 106 1 1,106.1 Total recognised income for the period (51.8) Dividends (92.5) Dividends to minorities (0.3) Credit from share based payments charge 0.9 Tax on share based payments charge 0.3 Shares issued 3.9 At 30
Slide 27: Gearing
Gearing At 30 September 2011 31 March 30 September Net debt/RCV 2011 2011 57% Severn Trent Plc 54% 58% Severn Trent Water 55% 27
Slide 28: Segmental analysis of capital employed
Segmental analysis of capital employed 30 September 2011 N tO Net Operating ti Total Goodwill Total Assets 31 March 30 September 30 September 30 September 2011 2011 2011 2011 £m £m £m £m 5,905.2 Severn Trent Water 5,744.3 0.0 5,744.3 189.0 Severn Trent Services* 96.2 68.8 165.0 (42.4) Other (48.4) 0
Slide 29: PBITD analysis
PBITD* analysis Six months to 30 September 2011 2010/11 2011/12 £m £m 403.9 Severn Trent Water 405.4 16.6 Severn Trent Services 10.2 (8 1) (8.1) Oh Other (6 1) (6.1) 412.4 Group 409.5 29 * Profit before interest, tax, depreciation (see slide [35]) and exceptional items
Slide 30: Depreciation analysis
Depreciation* analysis Six months to 30 September 2011 2010/11 2011/12 £m £m 131.2 Severn Trent Water 132.5 3.6 Severn Trent Services 3.7 06 0.6 Oh Other (1 0) (1.0) 135.4 Group 135.2 30 * Including amortisation of intangibles, profit/loss on disposal of fixed assets and deferred income released.
Slide 31: Capital expenditure (net cash)
Capital expenditure (net cash)* Six months to 30 September 2011 2010/11 2011/12 £m £m (190.2) Water and sewerage (146.5) (3.8) Severn Trent Services (3.5) (4 5) (4.5) Oh Other (0 1) (0.1) (198.5) Group (150.1) 31 * Net of grants received and proceeds of sale
Slide 32: Severn Trent Water – operating costs
Severn Trent Water – operating costs Six months to September 2011 2010/11 2011/12 Variance Variance £m £m £m % 260.1 Direct operating costs 277.6 17.5 6.7 131.2 Depreciation 132.5 1.3 1.0 38.3 Infrastructure renewal 52.1 13.8 36.0 429.6 STW operating costs 462.2 32.6 7.6 32 * Net of other income £2.
Slide 33: Severn Trent Water – capex reconciliation
Severn Trent Water – capex reconciliation Six months to 30 September 2011 2010/11 2011/12 £m £m 164.5 UK GAAP gross capex 197.4 (8.9) Less grants and contributions (10.4) 155 6 155.6 UK GAAP net capex 187 0 187.0 (38.3) Treated as IFRS infrastructure operating expenditure (52.1) (2 1) (2.1) Other IF
Slide 34: Severn Trent Services performance
Severn Trent Services performance Six months ended 30 September 2011 Turnover Underlying PBIT* 2010/11 2011/12 Change 2010/11 2011/12 Change £m £m % £m £m % 172.0 160.0 (7.0) As reported 13.0 6.5 (50.0) 165.5 160.0 (3.3) At constant exchange rates** 12.5 6.5 (48.0) ROIC*** 11.5% 5.9% * Excluding for
Slide 35: Net finance costs
Net finance costs Six months ended 30 September 2011 Income statement Capitalised Gross interest charge interest incurred £m £m £m “Cash” interest 91.2 3.2 94.4 Pension debit/(credit) (1.8) - (1.8) RPI interest 30.0 1.1 31.1 119 4 119.4 43 4.3 123 7 123.7 35
Slide 36: Net debt
Net debt 30 September 31 March 30 September 2011 2011 2010 £m £m £m Cash and cash equivalents 412.6 315.2 443.9 Borrowings – current liabilities (85.5) (23.9) (58.8) B Borrowings i – non-currentt liabilities li biliti (4 271 6) (4,271.6) (4 320 5) (4,320.5) (4 268 8) (4,268.8) Cross currency swaps h
Slide 37: Fair value of net debt
Fair value of net debt At 30 September 2011 30 September 31 March 30 September 2011 2011 2010 £m £m £m Bank loans (852.3) (836.8) (847.0) Other loans (3,795.5) (3,597.6) (3,156.4) Obligations under finance leases (253.7) (237.4) (254.4) (4,901.5) (4,671.8) (4,257.8) C h Cash 412 6 412.6 315 2 315.2
Slide 38: Analysis of borrowings, net debt and swaps at 30 September 2011
Analysis of borrowings, net debt and swaps at 30 September 2011 (186) 97 (413) 3,778 (165) 1,068 3,538 3,171 Borrowings X-Currency C C Cash Net debt per Net debt at IR swaps swaps balance sheet fair value GBP debt Currency y debt @ historical rate Exchange g adjustment j 38
Slide 39: Debt maturity profile
Debt maturity y profile M t it profile Maturity fil off gross d debt bt (£ millions) illi ) 700 600 500 400 300 200 100 0 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 2062 2067 39
Slide 40: Credit ratings
Credit ratings 30 September 2011 L Long-Term T Se ern Trent Water Severn Se ern Trent Plc Severn 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 – longg term rating
Slide 41: 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** 6,638 6,979 7,259 7,557 7,857 Ofwat Actual / Projected Outturn*** 6,814 6,844 6,885 6,951 6,999 * Year end 2007/08 prices ** At year average actual/estima
Slide 42: 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 T: +44 (0) 2477 715000 M: +44 (0) 7775 226260 e:mail: john.crosse@severntrent.co.uk www.severntrent.com www.severntrentservices.com 42