Severn Trent PLC · LSE:SVT
Severn Trent — H1 2000/01 Earnings Presentation
40 slides from Severn Trent's earnings presentation, Nov 28, 2000
Slide 1: Interim Results Announcement
Interim Results Announcement 28 November 2000
Slide 2: Alan Costin, Group Finance Director
Alan Costin Group Finance Director
Slide 3: Group financial highlights - turnover
Group financial highlights - turnover Six months to 30 September 2000 1,000 791 748 800 Total turnover up 5.7% 600 to £791m 400 200 STW down 9.4% 0 2000 1999 Biffa up 5.8% (up 3.5% Water Systems excl landfill tax) Waste Property & other Services Inter segment Services up 60% Note: No trading results
Slide 4: Group financial highlights - profit before interest and tax
Group financial highlights - profit before interest and tax Six months to 30 September 2000 250 226.0 Total PBIT down 17.7% 200 186.0 STW down 19.8% 150 100 Biffa unchanged 50 Services up 35.6% 0 2000 1999 No exceptional costs in Water Systems first half 2000/01 Waste Property & other (£3.1m 1999/20
Slide 5: Group financial highlights
Group financial highlights Six months to 30 September 2000 PBIT includes goodwill amortisation £4.5m Interest charge £73.2m, up 28.6% Profit before tax £112.8 million, down 33.3% Taxation £7.9 million, down 48.0%, effective rate 7% EPS 30.6 pence, down 33.5% (pre 99/00 exceptional) DPS 17.0 pence, u
Slide 6: Goodwill
Goodwill Six months to 30 September 2000 Amortisation charge £m Biffa 0.4 Services 4.0 Systems 0.1 Property & other – 4.5 Estimated goodwill arising on acquisition of UK Waste circa £280 million Amortised over 20 years = circa £14 million p.a.
Slide 7: Interest costs
Interest costs Six months to 30 September 2000 Net Cost £73.2 million Average effective interest rate 6.73% Includes £1.9 million associated with UK Waste acquisition Cover: PBIT 2.54 times PBITDA 4.35 times
Slide 8: Net Debt
Net Debt Six months to 30 September 2000 Consolidated net debt £2332 million Increased £393 million since 31/03/00 Free cashflow before acquisitions £58 million Gearing Net Debt: Shareholders Funds 89.2% Net Debt: Shareholders Funds plus Debt 47.2% Credit ratings obtained from : S&P : A1 STW; A2 STP
Slide 9: Cashflow
Cashflow Six months to 30 September 2000 Total cashflow from operations £304 Total capital expenditure £195 Net cash from operations Water £107 Waste £7 Services £3 Others (£8) Total £109m Cash outflow on acquisitions (incl acquired cash/debt) Waste £363m Services £28m £391m
Slide 10: Severn Trent Environmental Leadership
SEVERN TRENT ENVIRONMENTAL LEADERSHIP
Slide 11: Robert Walker, Group Chief Executive
Robert Walker Group Chief Executive
Slide 12: Highlights
Highlights Six months to 30 September 2000 STW AMP3 out-performance on track Biffa UK up 19% on PBIT Services PBIT up 36%, led by US
Slide 13: Severn Trent Water - profit and loss account
Severn Trent Water - profit and loss account Six months to 30 September 2000 2000/01 1999/00 change £m £m % Turnover 440.8 497.1 (11.3) New business ventures 1.5 – – Customer rebates – (9.0) 100.0 442.3 488.1 (9.4) Operating costs* (276.5) (279.9) 1.2 New business ventures (1.1) – – Other income 1.2
Slide 14: AMP 3 outperformance on track
AMP 3 outperformance on track OPEX reductions Manpower change programme Office/depot disposals CAPEX output delivery New financing All with no impact on quality and customer service
Slide 15: Rapid progress on OPEX cuts
Rapid progress on OPEX cuts….. 60 Target 1st half £m 2004/5* 2000/01 50 40 Water supply 8 0.7 30 20 Sewage treatment 13 3.1 10 Networks 18 4.2 0 2000 2000/01 2001/02 2002/03 2003/04 2004/05 Customer relations 9 0.5 STW actual Support areas 12 2.5 OFWAT assumed Total 60 11.0 STW programmed * As shown
Slide 16: Driven by fast start on manpower reductions
….driven by fast start on manpower reductions 5700 Overall reduction since Nov 99 650 5500 Sewerage agency add back 350 5300 Net reduction 300 5100 4900 4700 Mar Mar Mar Mar Sep 97 98 99 00 00 Pre sewerage agencies transfer Post agencies transfer Reduction ahead of 2 year plan
Slide 17: Continued progress on Capital efficiencies
Continued progress on Capital efficiencies CAPEX 2000-2005 2000/01 likely outturn at £335m 400 5% out-performance on track 300 Savings coming from Standardisation 200 2001 2002 2003 2004 2005 Strategic procurement (Outturn prices) Significant reduction in contractors Further stretch anticipated
Slide 18: New STW focus on growth agenda
New STW focus on growth agenda New national account - Center Parcs Competitive IT-based operations capability Promising start on New Business Ventures
Slide 19: Integrated model works for STW
Integrated model works for STW…… Financial restructuring under active evaluation Outsourcing at the right time and the right price Enhanced operations capabilities in water/waste IT capability ….leading contender for supply side contracts ….industry leader, positioned for growth
Slide 20: Biffa – Financial Highlights
Biffa – Financial Highlights Six months to 30 September 2000 Turnover £153.1m, up 5.8% Divisional PBIT (up 3.5% excl landfill tax) Profit £m Change % Collection up 1.2 +12 PBIT £15.8m Special Waste up 0.1 +11 Strong growth in the UK Landfill up 1.1 +23 offset by Belgium Central overheads (0.1) Total
Slide 21: Continued strong growth in Biffa UK
Continued strong growth in Biffa UK Collection revenues and volumes both up 5%; profits up 12% SCA recycling contract 4 new municipal contracts (2 re-won for 12 years) Largest UK salesforce Tight cost control Landfill revenues (net of tax) up 9%; profit up 23%, aided by 1999 cost reductions Special
Slide 22: UK Waste acquisition completed end-September
UK Waste acquisition completed end-September…. No major customer attrition “Best in Class” Integration plan: Biffa divisional structure adopted Merging of depot routes commencing after 90 day consultation period with employees & unions Good progress in transferring to Biffa’s IT system …on track for
Slide 23: Biffa Belgium impacted by lower landfill volumes
Biffa Belgium Impacted by lower landfill volumes Profit down from £3.8m to £1.5m – Volumes diverted to German incinerators – Slower growth going forward Belgian collection activity 4% ahead New IT system successfully integrated Treatment volumes up 15% on the year
Slide 24: Analytical Services growth ahead of targets
Analytical Services growth ahead of targets Revenue ahead 139%, margins on target US pricing pressures lifting Industry growth forecast more optimistic Organic growth driven by new account wins, expanded services Completed acquisitions expand services, geographical reach and STL leading UK labs comp
Slide 25: Good progress in Contract Operations
Good progress in Contract Operations Cost reduction programme, margin improvement Important new contract renewals/new business progress Revenue growth up 66% 2 new Pipeline Service acquisitions, consolidating leading position
Slide 26: Purification impacted by phasing of AMP3
Purification impacted by phasing of AMP3 Revenue slightly below last year; ahead in US AMP3 phasing, order backlog to improve second half Businesses now fully integrated, focusing on two Sales Divisions (Disinfection/Filtration)
Slide 27: Businesses in transition
Businesses in transition Paperflow Services Strong interest in Stoner and WMS businesses CIS/Open Vision product stable, though loss-making
Slide 28: Environmental Services Industry
Environmental Services Industry Strong regulatory/stakeholder drivers Growing environmental leadership reputation Severn Trent has broadest coverage, strongest credentials Leading position in key sectors Growing customer interest in single environmental solutions provider
Slide 29: Environmental Services Industry: an £8 billion opportunity
Environmental Services Industry…. …..an £8 billion opportunity Competable water services* Testing Waste & recycling Consultancy Legal & other Energy services Industrial water treatment *Non infrastructure Source: kae consultants
Slide 30: Severn Trent is uniquely positioned
Severn Trent is uniquely positioned …... Second largest WaSC UK’s leading integrated waste services company UK’s leading environmental testing laboratories Major supplier of water purification equipment and services
Slide 31: Strong platform for future growth
Strong platform for future growth: STW’s focus on AMP3 outperformance Biffa’s competitive business model Analytical Labs growth/consolidation Further Services customer growth …..increasing Group-wide environmental services focus
Slide 32: Severn Trent Environmental Leadership
SEVERN TRENT ENVIRONMENTAL LEADERSHIP
Slide 33: Appendix
Appendix
Slide 34: Group Profit & Loss Summary
Group Profit & Loss Summary Six months to 30 September 2000 2000 1999 % increase £m /(decrease) Turnover 790.8 748.3 5.7 Profit before interest and exceptional costs 186.0 229.1 (18.8) Year 2000 costs - (3.1) - Profit before interest 186.0 226.0 (17.7) Net interest (73.2) (56.9) (28.6) Profit before
Slide 35: Group Balance Sheet
Group Balance Sheet Six months to 30 September 2000 Movement since £m 30/09/2000 31/03/2000 Fixed Assets 4,798 168 Goodwill 436 298 Investments 24 (2) Working Capital/Provisions (120) 8 Capital employed 5,138 472 Tax creditor (39) (13) Dividends payable (154) - Net debt (2,332) (393) Net assets 2,61
Slide 36: Group Cash Flow
Group Cash Flow Six months to 30 September 2000 £m 2000 1999 Cash flow from operations 304 346 (inc. dividend from associates) Capital expenditure (net) (195) (300) Interest paid (50) (38) Tax payments (1) (1) Total before acquisitions 58 7 Acquisitions (including assumed debt) (391) (100) Free cash
Slide 37: Severn Trent Water
Severn Trent Water Profit before interest, tax & exceptional costs Six months to 30 September 2000 500 411 416.4 423.9 423.5 400.8 400 362.6 324.6 293 300 £m 200 206 210.6 207.8 216.9 212.7 167 183.1 168.1 100 149 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 H1 H2
Slide 38: Severn Trent Water - turnover
Severn Trent Water - turnover Six months to 30 September 2000 £m % Half year to 30 September 1999 488.1 K(P0) less discontinued customer rebate (57.6) (11.8) RPI 6.8 1.4 Headroom etc 4.1 0.8 441.4 (9.6) Growth New customers 2.1 0.4 Income initiatives 1.0 0.2 Conservation Metering impact (1.6) (0.3)
Slide 39: Severn Trent Water - operating costs
Severn Trent Water - operating costs Six months to 30 September 2000 Sept 2000 Sept 1999 change £m £m % Direct operating costs 175.8 176.2 (0.2) - Includes £2.2m (£2.5m) management charge Depreciation 73.5 70.5 4.3 Infrastructure renewals 27.2 33.2 (18.1) Total 276.5 279.9 (1.2)
Slide 40: Severn Trent Water direct operating costs
Severn Trent Water direct operating costs Six months to 30 September 2000 Sept 2000 £m % Half year to 30 September 1999 176.2 Inflation - pay & price increases 5.0 2.8 181.2 Impact of capital schemes/upward pressures 5.2 3.0 Efficiencies (10.6) (6.0) Half year to 30 September 2000 175.8 (0.2)