Severn Trent Plc · LSE:SVT
Severn Trent — H1 2023/24 Earnings Presentation
35 slides from Severn Trent's earnings presentation, Nov 22, 2023
Slide 1: Interim Results 23/24
ST Classification: OFFICIAL PERSONAL INTERIM RESULTS 23/24 22 November 2023
Slide 2: Disclaimers
DISCLAIMERS Cautionary statement regarding forward-looking statements This document contains statements that are, or may be deemed to be, 'forward-looking All written or verbal forward-looking statements, made in this document or made statements' with respect to Severn Trent's financial condition, r
Slide 3: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive
Slide 4: Half Year Highlights
HALF YEAR HIGHLIGHTS Accelerating 80% of measures £400m of expected to be transition spend green this year for a fast start to PR24 On track for AMP8 submission our 4* EPA At least £50m in most status ODI rewards this ambitious for fifth year in a financial year business plan to row date 4
Slide 5: Helen Miles, Chief Financial Officer
HELEN MILES Chief Financial Officer
Slide 6: Half Year Financial Highlights
HALF YEAR FINANCIAL HIGHLIGHTS Financial performance 60.6% on track; shadow RCV Interim dividend expect FY gearing at 30 of 46.74p adjusted EPS September growth £477m capital £1bn equity investment; on raise supporting track for £1bn long term this year growth 6
Slide 7: Regulated Water and Waste Water PBIT
REGULATED WATER AND WASTE WATER PBIT Revenue growth offset by guided cost pressures and planned investment Inflationary costs Revenue growth Opex impacted by higher power and Revenue increase £1.8m chemical costs, together with 7.5% due to inflationary employee pay deal uplift, ODI reward and Green
Slide 8: Business Services
BUSINESS SERVICES Focused on sustainable long-term growth EBITDA, £m UK’s largest producer of renewable energy from food 30.7 waste, well-positioned to maximise growth opportunities Green 23.9 24.7 Fast-growing business – annualised run rate Power demonstrates 30% growth in generation capacity 17.2
Slide 9: HY 2023/24 Financing Performance
HY 2023/24 FINANCING PERFORMANCE Financing costs reducing through lower inflation and benefits of equity raise Cost of debt 3% below sector average in FY23 Strong metrics carrying forward into this half year 3.4% 5.6% 60.6% Severn Trent 6.8% up 60 bps up 30 bps down 80 bps Effective cash cost Effect
Slide 10: Financing Strategy
FINANCING STRATEGY Well positioned to maintain strong financing performance as we head towards AMP8 Our Financing Platform Sustainable Finance • £3bn raised under Sustainable Finance Framework to date £1.2bn undrawn Sector Liquidity committed facilities, leaders liquidity until 2026 • EU Taxonomy al
Slide 11: Creating Long-Term Growth
CREATING LONG-TERM GROWTH Successful £1 billion equity raise to fund unprecedented long-term growth opportunity Nominal RCV doubling between 2020 and 20301 Equity raise supporting sustainable growth AMP6 CAGR AMP7 CAGR AMP8 CAGR Supporting Uniquely positioned to maximise growth Real: 2% Real: 3% Rea
Slide 12: FY24 Technical Guidance
FY24 TECHNICAL GUIDANCE No changes to guidance Earnings: We anticipate adjusted earnings per share growth in 2023/24, after adjusting for the new share issue, as a result of a reduction in interest charge. We expect a further step up in 2024/25, as lower energy costs and inflation-linked tariff incr
Slide 13: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive
Slide 14: Maintaining Operational Excellence
MAINTAINING OPERATIONAL EXCELLENCE Continue to deliver strong AMP7 performance while building for further success in AMP8 On track to hit 80% of measures this year, delivering at Forecasting around UQ on 72% of measures for AMP8 least £50 million in ODI rewards Storm Overflows Per Capita Consumption
Slide 15: Caring for Our Environment
CARING FOR OUR ENVIRONMENT Sector-leading record on environmental measures, but ambitious to go further Dedicated programmes with executive oversight to Case Study: Farming for Water EPA 4 Star maintain EPA’s top rating • Unique catchment management approach, engaging with farmers to adopt more sust
Slide 16: Investing in Our Network
INVESTING IN OUR NETWORK Managing our programme efficiently and effectively to deliver true enhancement Delivering our highest year of investment ever Smooth capex profile into AMP8 Capex step-up: FY25 to AMP8 average • Closing out AMP7 strongly Severn Trent and HD have the • Scaling up to deliver o
Slide 17: Planning for AMP8
PLANNING FOR AMP8 Unprecedented growth underpinned by robust delivery plan £12.9bn totex, stepping up investment 31% real RCV growth1 Sector-leading ambitions on CSOs and sewer flooding Net Zero by 2030 76% customer acceptability of plan Deliverable Financeable Affordable Already operating on AMP8 c
Slide 18: Setting Up for Success
SETTING UP FOR SUCCESS Fostering a culture that can deliver the opportunities ahead Right People Right Skills Right Approach • Insourced model is a source of • Our Severn Trent Academy, which • Motivated workforce with highest ever differentiation, providing agility and opened in 2021, has delivered
Slide 19: Summary
SUMMARY 80% of measures on track; setting up for Operational Excellence success on AMP8 measures Investing c. £1 billion this year; right run- Capital Investment rate for AMP8, supporting deliverability Capital structure optimised for long-term Strong Balance Sheet growth Delivering improvements in
Slide 20: Appendix
APPENDIX 20
Slide 21: Regulated Water and Waste Water Revenue
REGULATED WATER AND WASTE WATER REVENUE Annual CPIH + K £45.8m increase in tariffs £65.5m £3.6m Relating to the Due to higher green movement from the prior energy incentive year in the adjustment for income and IRE £72.1m Driven by in-AMP fast the RFI mechanism diversions income, money for Green par
Slide 22: Regulatory Capital Value
REGULATORY CAPITAL VALUE AMP7 RCV expected to grow by 43% to £13.4bn by 2025 £2.9bn £2.8bn £0.4bn £0.2bn £0.4bn £0.6bn £13.8bn £2.7bn £13.4bn £9.4bn 43% Nominal Growth 7% CAGR 2020/21 Opening RPI/CPIH Growth 1 Capex growth2 RCV run-off 2 Green Recovery 2 Real options 2 AMP7 midnight 3 Expected 2024-
Slide 23: EBITDA
EBITDA¹ H1 2022 H1 2023 Variance Variance £m £m £m % 442.3 Regulated Water and Waste Water 450.2 7.9 1.8 30.7 Business Services 24.7 (6.0) (19.5) (3.3) Corporate and other (3.9) (0.6) (18.2) 469.7 Severn Trent Group 471.0 1.3 0.3 1. Earnings before interest, tax, depreciation and amortisation.
Slide 24: Business Services EBITDA
BUSINESS SERVICES EBITDA¹ Non- Regulated Regulated Total £m £m £m Operating Services and Other 1.7 10.9 12.6 Green Power 0.1 10.6 10.7 Property Development 1.4 – 1.4 EBITDA 3.2 21.5 24.7 Depreciation and amortisation (0.1) (8.0) (8.1) PBIT 3.1 13.5 16.6 1. Earnings before interest, tax, depreciation
Slide 25: Segmental PBIT
SEGMENTAL PBIT H1 2022 H1 2023 Variance Variance £m £m £m % 242.9 Regulated Water and Waste Water 242.6 (0.3) (0.1) 22.7 Business Services 16.6 (6.1) (26.9) (3.9) Corporate and other (4.0) (0.1) (2.6) – Consolidation adjustments (0.1) (0.1) (100) 261.7 Severn Trent Group 255.1 (6.6) (2.5)
Slide 26: Depreciation
DEPRECIATION¹ H1 2022 H1 2023 Variance Variance £m £m £m % 199.4 Regulated Water and Waste Water 207.6 8.2 4.1 8.0 Business Services 8.1 0.1 1.3 0.6 Corporate and other 0.2 (0.4) (66.7) 208.0 Severn Trent Group 215.9 7.9 3.8 1. Including amortisation of intangible assets and depreciation of right-of
Slide 27: Net Finance Costs
NET FINANCE COSTS H1 2022 H1 2023 Income Gross Income Gross statement Capitalise interest statement Capitalised interest charge d interest incurred charge interest incurred £m £m £m £m £m £m 77.9 23.5 101.4 Cash interest (including accruals) 90.3 31.1 121.4 1.6 – 1.6 Net pension finance cost 6.6 – 6
Slide 28: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE H1 2022 H1 2023 Variance Variance £m £m £m % 261.7 Profit before interest and tax 255.1 (6.6) (2.5) (186.9) Net finance costs (179.2) 7.7 (4.1) 0.2 Share of current year profit/loss of joint venture (1.1) (1.3) (650.0) 75.0 Adjusted profit before tax 74.8 (0.2) (0.3) – Ta
Slide 29: Group Balance Sheet
GROUP BALANCE SHEET 31 March 2023 30 September 2023 Variance Variance £m £m £m % 11,124.8 Property, plant and equipment, right-of-use assets, intangible assets and goodwill 11,542.5 417.7 3.8 16.5 Investment in joint venture 15.4 (1.1) (6.7) 81.6 Working capital (110.1) (191.7) (234.9) (1,482.2) Def
Slide 30: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)1 H1 2022 H1 2023 Variance Variance £m £m £m % 274.2 Regulated Water and Waste Water 469.6 195.4 71.3 6.1 Business Services 7.4 1.3 21.3 280.3 Severn Trent Group 477.0 196.7 70.2 1. Including purchases of property, plant and equipment, intangible assets, proceeds on dis
Slide 31: Net Debt
NET DEBT 31 March 2023 30 September 2023 Variance Variance £m £m £m % (713.0) Bank loans (649.0) 64.0 9.0 (6,474.2) Other loans (7,067.1) (592.2) (9.2) (110.9) Lease liabilities (114.4) (3.5) (3.2) 28.7 Net cash and cash equivalents 216.7 188.0 655.1 33.6 Cross currency swaps 19.3 (14.3) (42.6) 75.3
Slide 32: Fair Value of Debt
FAIR VALUE OF DEBT 1 31 March 2023 30 September 2023 Variance Variance £m £m £m % (708.9) Floating rate debt (711.0) (2.1) (0.3) (4,287.9) Fixed rate debt (4,554.3) (266.4) (6.2) (1,935.1) Index-linked debt (1,794.0) 141.1 7.3 (6,931.9) (7,059.3) (127.4) (1.8) 28.7 Net cash and cash equivalents 216.
Slide 33: Analysis of Borrowings & Net Debt
ANALYSIS OF BORROWINGS & NET DEBT £m 7,830.5 (74.1) (216.7) (19.3) 7,520.4 10.0 (467.1) (314.1) 6,749.2 Bank loans, other Loans due from Net cash and cash Cross currency Net debt per Floating debt fair Fixed debt fair Index-linked debt Fair value of net loans & lease joint venture equivalents swaps
Slide 34: Debt Maturity
£m 100 200 300 400 500 600 700 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 Debt 2040 2041 2042 2043 GBP Bond 2044 2045 PPs 2046 2047 2048 2049 Bank loans 2050 2051 2052 2053 2054 2055 2056 2057 2058 2059 2060 2061 2062 2063 2064 2065 2066 DEBT MATURITY 2067
Slide 35: Gearing and Credit Ratings
GEARING AND CREDIT RATINGS 30 September 2022 31 March 2023 Net debt/RCV¹ 30 September 2023 61.2% 62.1% Severn Trent Plc Group² 62.9% 58.1% 60.0% Regulatory Gearing³ 60.6% 31 March 2023 30 September 2023 Severn Trent Water Severn Trent Plc Severn Trent Water Severn Trent Plc Outlook Baa1 Baa2 Moody's