Severn Trent Plc · LSE:SVT
Severn Trent — FY2021 Earnings Presentation
40 slides from Severn Trent's earnings presentation, May 2021
Slide 1: Wonderful on Tap
WONDERFUL ON TAP SEVERN TRENT
Slide 2: Disclaimers
DISCLAIMERS Cautionary statement regarding forward-looking statements This document contains statements that are, or may be deemed to be, These factors include but are not limited to: the Principal Risks disclosed in our ‘forward-looking statements’ with respect to Severn Trent’s financial condition
Slide 3: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive
Slide 4: 2020/21 Highlights
2020/21 HIGHLIGHTS Building momentum for a successful AMP Sector-leading Year one net ODI performance, Green Recovery outperformance investment of resulting in £79m delivering 5.8% reward across all £565m Fast start to the RoRE Resilient areas awarded AMP with £90m financial acceleration of performa
Slide 5: Green Recovery
GREEN RECOVERY Creating value for our shareholders through RCV growth and enhanced resilience £565 million awarded, Significant share of new sector investment £624 million in nominal prices £862m £565m 6.6% additional real RCV growth at Green Recovery - SVT Green Sector new Recovery attractive retur
Slide 6: Green Recovery £565m
£565m GREEN RECOVERY Leading the sector in supporting the UK’s green economic recovery and environmental sustainability Trialling innovative nature-based flood solutions for Mansfield Increasing water supplies by enough to supply a city the size of Derby Creating bathing quality stretches of the Riv
Slide 7: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer
Slide 8: 2020/21 Financial Highlights
2020/21 FINANCIAL HIGHLIGHTS Resilient financials help drive strong performance Adjusted Group Effective PBIT of £473 5.8% RoRE interest cost million in line outperformance of down 30 bps with 1.9% Strong liquidity to 3.4% expectations Fast start to new £1bn AMP7 with over sustainable RCF £590 milli
Slide 9: Regulated Water and Waste Water Revenue
REGULATED WATER AND WASTE WATER REVENUE Turnover remaining strong despite COVID effect on non-household volumes 32.4 (17.0) (50.2) 87.4 1,708.1 33.0 1,693.9 (12.4) 1,660.9 £m 1,620.7 Regulatory mechanism allows recovery later in the AMP FY 2019/20 Change to FY 2019/20 CPIH+K Impact of price Covid-19
Slide 10: Regulated Water and Waste Water PBIT
REGULATED WATER AND WASTE WATER PBIT COVID impacts but adjusted PBIT remains in line with expectations 28.9 540.4 (33.0) Increase in power and £m chemicals costs, as expected 511.5 (14.2) (17.1) (12.2) (18.7) 16.1 (11.2) 452.1 2.0 Investing for customer ODI performance Includes £6m for new OFWAT inn
Slide 11: Customer Collections
CUSTOMER COLLECTIONS Customer support doubled while improving collection performance Data-driven approach to targeting delivers 5% increase in Higher collections leading to lower bad debt collections 2020/21 2.3% 0.7% 3.0% £1,227m £1,166m 2019/20 3.0% 0.2% 3.2% 2019/20 2020/21 Base COVID-19 Multiple
Slide 12: Business Services
BUSINESS SERVICES Short-term COVID impact in 20/21, recovery already underway Turnover: £134.7m EBITDA: £39.3m Financial results -2.3% -17.6% Robust performance from stable long-term contracts, Operating Services providing resilience through the pandemic COVID-19 impact of commercial food waste shor
Slide 13: Financing Performance
FINANCING PERFORMANCE Effective interest cost continues to fall 3.4% Effective cash cost of 3.1% New debt outperforming Effective interest cost1 iBoxx rate3 down 30bps interest flat £188m £187m 5.4% Effective interest cost Inflation AMP7 embedded debt rate (nominal) roll-up 4.5% Net pension finance
Slide 14: Financing Strategy
FINANCING STRATEGY Strong liquidity and flexibility to support long-term growth Net debt1 £6,443.8m Regulated gearing2 64.5% Sustainable RCF agreed Balanced debt portfolio in good shape for future £1 billion through to at least 2026 outperformance 1. Includes cross currency swaps, before transaction
Slide 15: Pensions
PENSIONS Deficit reduction plan on track despite volatile market conditions Effective hedging strategy – protection against £712m lower gilt yields and higher inflation £575m £520m Asset performance – increased asset values in £453m volatile equity conditions £368m £234m Sustainable cash contributio
Slide 16: FY22 Technical Guidance
FY22 TECHNICAL GUIDANCE Regulated Water and Waste Water FY21 Year-on-Year Turnover1 £1.78 billion to £1.81 billion. Includes c.£50 million of diversions income related to HS2. £1.69bn Operating costs (incl. Higher year-on-year, driven by a planned step-up in our IRE programme and continued upward
Slide 17: Transaction Summary
TRANSACTION SUMMARY Raising capital to support our Green Recovery ambitions ▪ Equity placing of c.4% of existing market capital, raising c.£250m Equity placing ▪ Including retail offering through PrimaryBid ▪ Supporting investment and RCV growth: +6.6% ▪ Strong investment proposition ▪ Delivering su
Slide 18: Financial Summary
FINANCIAL SUMMARY Resilient financials providing strong foundation for future growth Sector-leading customer ODIs £79m Adjusted PBIT1 in line with expectations £473m Effective interest cost2 down 30bps 3.4% 6.6% additional RCV growth, revised AMP RCV real growth 10.4% Dividend in line with policy 10
Slide 19: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive
Slide 20: Record Year in Water
RECORD YEAR IN WATER Major advances in Water performance Ensuring our water is of Step change in CRI scores and improving water quality the highest quality complaints by more than 60% and 10% respectively Targeting those measures customers care about most Focusing on customer with reductions in pers
Slide 21: Leaders in Waste
LEADERS IN WASTE Integrated approach delivers targeted benefits Focus on hotspot areas has decreased blockages by 30% Targeted approach Installing up to 40,000 sensors by 2025 in our network giving us better data and insight Investing in technology Beating our pollutions target by 20% through target
Slide 22: Environment-led Approach
ENVIRONMENT-LED APPROACH Outperformance underpinned by exciting future partnerships Full AMP biodiversity Delivering AMP target with ambitions to improve 5,000ha by delivered in year 1 2027, enhancing the environment Catchment Educating and creating partnerships with over 7,000 management farmers, i
Slide 23: Customers First
CUSTOMERS FIRST Supporting our customers through a difficult year Supported more than 150,000 customers and Doubled number of launched COVID-specific Back on Track scheme customers supported Creating an intelligent customer system so we’re available whenever our customers need us Using digital initi
Slide 24: Our People, Our Communities
OUR PEOPLE, OUR COMMUNITIES Developing our people and caring for our communities Leaders in diversity: highest performing utility in Hampton Alexander Review, Tortoise Responsibility100, and Social Mobility Index More than 7,000 training days completed; purpose-built Academy opened to help support c
Slide 25: Summary
SUMMARY Creating foundations for a successful future, with Green Recovery driving increased growth Resilient financials delivering performance in line with expectations Strong operational performance and best-ever customer ODIs of £79m Helping our region bounce back and creating 2,500 jobs through G
Slide 26: Appendix
APPENDIX
Slide 27: Outcome Delivery Incentives
OUTCOME DELIVERY INCENTIVES Aggregated P10 – P90 outlook -£15 00.m £0 .0 m £1 50.0m Customer & Community >100% Environment >100% Water 37% Waste 91% -£150m £0m £150m Aggregated P10 Aggregated P90 2020/21 ODI Value
Slide 28: Adjusted EBITDA
ADJUSTED EBITDA¹ 2020 (restated)2 2021 Variance Variance £m £m £m % 893.7 Regulated Water and Waste Water 816.1 (77.1) (8.6) 47.7 Business Services 39.3 (8.9) (18.5) (5.5) Corporate and other (4.9) 0.6 10.9 (0.8) Eliminations – 0.8 100 935.1 Severn Trent Group 850.5 (84.6) (9.0) 1. Earnings before i
Slide 29: Business Services Adjusted EBITDA
BUSINESS SERVICES ADJUSTED EBITDA¹ Non Regulated Regulated Total £m £m £m Operating Services and Other 4.0 18.9 22.9 Green Power (0.8) 14.9 14.1 Property Development 3.2 (0.9) 2.3 Adjusted EBITDA 6.4 32.9 39.3 Depreciation (0.2) (12.7) (12.9) Amortisation2 – (0.6) (0.6) Adjusted PBIT 6.2 19.6 25.8 1
Slide 30: Segmental Adjusted PBIT
SEGMENTAL ADJUSTED PBIT¹ 2020 Bioresources Developer 2020 2021 Variance Variance (old basis) Services (new basis)2 £m £m £m £m £m £m % 511.5 29.3 (0.4) 540.4 Regulated Water and Waste Water 452.1 (88.3) (16.3) 64.9 (29.3) 0.4 36.0 Business Services 25.8 (10.2) (28.3) (5.6) – – (5.6) Corporate and ot
Slide 31: Depreciation
DEPRECIATION¹ 2020 (restated)2 2021 Variance Variance £m £m £m % 352.8 Regulated Water and Waste Water 364.0 11.2 3.2 12.2 Business Services 13.5 1.3 10.6 0.1 Corporate and other 0.2 0.1 100.0 (0.3) Eliminations – 0.3 100.0 364.8 Severn Trent Group 377.7 12.9 3.5 1. Including amortisation of intangi
Slide 32: Net Finance Costs
NET FINANCE COSTS 2020 2021 Income Gross Income Gross statement Capitalised interest statement Capitalised interest charge interest incurred charge interest incurred £m £m £m £m £m £m 143.3 44.2 187.5 Cash interest (including accruals) 162.5 30.4 192.9 11.1 – 11.1 Net pension finance cost 5.4 – 5.4
Slide 33: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE 2020 2021 Variance Variance £m £m £m % 570.3 Adjusted profit before interest and tax 472.8 (97.5) (17.1) (188.4) Net finance costs (187.1) 1.3 0.7 – Gain on impairment of loan receivable 3.6 3.6 (100.0) 381.9 Adjusted profit before tax 289.3 (92.6) (24.2) (39.7) Tax at th
Slide 34: Group Balance Sheet
GROUP BALANCE SHEET 31 March 2020 31 March 2021 Variance Variance £m £m £m % Property, plant and equipment, right-of-use assets, intangible assets and 9,954.8 10,261.4 306.6 3.1 goodwill 43.2 Working capital 15.2 (28.0) (64.8) (1,188.3) Deferred income (1,259.1) (70.8) (6.0) (234.0) Net retirement b
Slide 35: Net Debt
NET DEBT 31 March 2020 31 March 2021 Variance Variance £m £m £m % (1,251.9) Bank loans (1,011.1) 240.8 19.2 (5,058.5) Other loans (5,471.3) (412.8) (8.2) (122.7) Lease liabilities (121.3) 1.4 1.1 48.6 Net cash and cash equivalents 44.0 (4.6) (9.5) 60.4 Cross currency swaps 31.9 (28.5) (47.2) 92.6 Lo
Slide 36: Fair Value of Debt
FAIR VALUE OF DEBT 31 March 2020 31 March 2021 Variance Variance £m £m £m % (1,128.0) Floating rate debt (1,050.8) 77.2 6.8 (4,214.7) Fixed rate debt (4,366.1) (151.4) (3.6) (2,042.2) Index-linked debt (2,636.3) (594.1) (29.1) (7,384.9) (8,053.2) (668.3) (9.0) 48.6 Net cash and cash equivalents 44.0
Slide 37: Analysis of Borrowings & Net Debt
ANALYSIS OF BORROWINGS & NET DEBT 977.0 7,893.3 463.2 6,603.7 (84.0) (44.0) (31.9) 6,443.8 9.3 Bank loans, other Loans due from Net cash and cash Cross currency Net debt per Floating debt fair Fixed debt fair value Index-linked debt Fair value of net loans & lease joint venture equivalents swaps bal
Slide 38: Debt Maturity
DEBT MATURITY AMP7 AMP8 and beyond RCF1 600 CPIH Bond 500 Sustainable Bond 400 Existing Debt £m 300 200 100 0 2032 2050 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2051 2052 2053 2054 2055 2056 2057 2058 2059
Slide 39: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)1 2020 (restated)2 2021 Variance Variance £m £m £m % 790.1 Regulated Water and Waste Water 584.1 (206.0) (26.1) 9.3 Business Services 9.1 (0.2) (2.2) 0.1 Corporate and other – (0.1) (100.0) 799.5 Severn Trent Group 593.2 (206.3) (25.8) 1. Including purchases of property
Slide 40: Gearing and Credit Ratings
GEARING AND CREDIT RATINGS 31 March 2020 30 September 2020 Net debt/RCV1 31 March 2021 64.9% 66.1% Severn Trent Group2 67.5% 64.4% 63.9% Severn Trent Water Group3 (“Regulated Gearing”) 64.5% 31 March 2020 31 March 2021 Severn Trent Water Severn Trent Plc Severn Trent Water Severn Trent Plc Outlook B