Severn Trent PLC · LSE:SVT
Severn Trent — FY2022/23 Earnings Presentation
45 slides from Severn Trent's earnings presentation, May 24, 2023
Slide 1: Full Year 2022/23 Results
FULL YEAR 2022/23 RESULTS 24 May 2023
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: 2022/23 Highlights
2022/23 HIGHLIGHTS Invested Around 80% of £737m; measures green; delivered 100% £53m in ODIs of regulatory commitments Highly to date Doubling confident of Strong RoRE biodiversity 4* EPA status performance of contribution to for fourth year 12.2% 10,000Ha by in a row 2025 4
Slide 5: Sector Issues Under Scrutiny
SECTOR ISSUES UNDER SCRUTINY Delivering on key issues through increased focus and investment Sector Issues Our Performance Leakage Hit our leakage target for eleven of the last twelve years ✓ Hosepipe bans No bans in our region for nearly three decades ✓ Pollutions Reduced total pollutions by 22% so
Slide 6: James Bowling, Chief Financial Officer
JAMES BOWLING Chief Financial Officer
Slide 7: 2022/23 Financial Highlights
2022/23 FINANCIAL HIGHLIGHTS Regulatory Proposed final Group PBIT up Gearing at 60%, dividend of 1%, in line with below sector 64.09 pence, in expectations average line with policy Business RCV growth of Services EBITDA £2.2bn AMP to up 24% date 7
Slide 8: Group PBIT
GROUP PBIT Group PBIT up: increased turnover; strong cost control; Business Services growth £18.7m HS2 costs offset in turnover and IRE £18.7m £18.7m £21.5m Operating costs (excl. power) held flat in real terms £90.5m £172.3m £20.1m £20.5m Details on Group PBIT impact slide 9 reduced to £43m £13.4m
Slide 9: Business Services
BUSINESS SERVICES Strong earnings growth driven by operational excellence and higher energy prices Turnover £177.1m EBITDA £65.8m PBIT £49.2m +23.3% +23.7% +35.2% EBITDA doubled through improved generation and higher energy prices £5.6m £18.2m £11.2m 25% higher year-on- Asset utilisation of 96% driv
Slide 10: Effective Energy Strategy
EFFECTIVE ENERGY STRATEGY Benefitting from strategic renewable investments helping us navigate a volatile market Return on Equity protection We announced our strategy to invest in low Investment in energy generation means a broadly neutral impact¹ on 2015 carbon energy Group RoE across AMP7 from rec
Slide 11: Financing Strategy
FINANCING STRATEGY Continuing to raise debt at competitive rates, supporting future growth Experienced Treasury team ✓ Strong ESG credentials ✓ ✓ Access to diverse global markets Strong liquidity: £1.3bn facilities ✓ Stable credit ratings Baa1/BBB+/BBB+ ✓ Strong track record Well-positioned for futu
Slide 12: 2022/23 Financing Performance
2022/23 FINANCING PERFORMANCE Strategic debt mix boosts financing performance and protects earnings in high inflation 7.7% 3.0% 6.2% Strong in-year performance up 470 bps flat year-on-year up 150bps RoRE financing Effective cash Effective cost of Cash interest cost flat despite rising rates outperfo
Slide 13: Return on Regulatory Equity
RETURN ON REGULATORY EQUITY Continued strong RoRE: 8.3% above the base return in year, 5.0% cumulative outperformance 2022/23 RoRE 12.2% Cumulative RoRE: £53m Customer ODIs, meeting or exceeding c.80% of 0.7% Years 1-3 of AMP7 ODIs¹ targets despite weather extremes; guiding to a further £50m in 2023
Slide 14: Helen Miles, Chief Financial Officer Designate
HELEN MILES Chief Financial Officer Designate
Slide 15: Outlook and Guidance
OUTLOOK AND GUIDANCE Earnings: We anticipate strong earnings per share growth in 2023/24 as a result of a 15-20% reduction in interest charge. We expect a further step up in 2024/25 as lower energy costs and inflation-linked tariff increases flow through to operational earnings. Returns: We expect t
Slide 16: Substantial RCV Growth
SUBSTANTIAL RCV GROWTH Large investment programme and higher inflation; expected AMP7 RCV1 of £12.8bn Water Industry National Environment Programme FY25 expected AMP8 expected FY23 RCV RCV £12.8 to be the £11.6 billion, billion, sector’s most Water Resources AMP to date Management Plan reflecting AM
Slide 17: An Exciting Future
AN EXCITING FUTURE Building on solid financial foundations… Totex Energy Balance Sheet Well-controlled totex with sharp Investment in self-generation Strong balance sheet focus on costs and innovative provides protection and strong management provides resilience approach to capital returns and capac
Slide 18: Liv Garfield, Chief Executive
LIV GARFIELD Chief Executive
Slide 19: Investing in Our Future
INVESTING IN OUR FUTURE Delivering our programme on time for best value, setting up for future success £737 million of investment delivered this year, helping Delivering our AMP7 programme enables our capability drive nominal RCV growth of 36% for future investment In-house capability enables value
Slide 20: World's First Net Zero Waste Water Treatment Hub
TO FIND OUT MORE ABOUT THE WORLD’S FIRST NET ZERO WASTE WATER TREATMENT HUB CLICK HERE 1 2 3 4 On track to deliver Working with Integrating new Providing a the world’s first Net international technologies and blueprint for water Zero waste water partners and backed innovations at scale companies glo
Slide 21: Working Smarter in Waste
WORKING SMARTER IN WASTE Taking a multi-pronged approach to improving waste operations Installing tens of thousands of sewer sensors and Expect to remain Upper Quartile on Data utilising new AI technology to model and control flow external sewer floodings despite a disappointing year Enhanced asset
Slide 22: Increasing Water Resilience
INCREASING WATER RESILIENCE Keeping customers’ water flowing despite extreme weather events Benefitting from multi-year capital spend, from large- Performance dramatically improved during Investment scale schemes to smaller targeted interventions extreme cold-weather events Insourced key teams to ma
Slide 23: Hand-in-Hand with Nature
HAND-IN-HAND WITH NATURE Our catchment management strategy helps support water and waste performance Biodiversity Tree Planting Farming for WaterNew target Supported thousands of farmers to Delivered over 7,700 hectares this AMP Planted over 694,000 trees this AMP deliver environmental solutions Dou
Slide 24: Get River Positive Pledges One Year On
TO FIND OUT MORE ABOUT OUR GET RIVER POSITIVE PLEDGES ONE YEAR ON CLICK HERE 1 2 3 4 Reduced our share Reduced average Making great Trialling new of our regions annual CSO progress on our technology for our RNAGS from 24% to activations from 25 nature-based Bathing Rivers 16% to 18 Mansfield project
Slide 25: Caring for Our Customers
CARING FOR OUR CUSTOMERS Supporting our customers through challenging times Financially supporting 237,000 customers, including up to 90% Affordability off their water bill; firmly on track to support 315,000 customers by the end of the AMP Using smart meters to spot usage trends, creating targeted
Slide 26: Communities and Colleagues
COMMUNITIES AND COLLEAGUES Providing long-term benefits for people in our region Donated £7.6m of our AMP7 £10m commitment, supporting 682 organisations with enhanced spaces, nature projects and Community Fund core funding support Helping support 100,000 people out of poverty over the next 10 years,
Slide 27: Delivering Across Multiple Pillars
DELIVERING ACROSS MULTIPLE PILLARS Environment Investment Operations Customers Financials Delivered Firmly on track Highly Strong RoRE £737m of capital Delivered £53m with our confident of performance of investment, in ODI reward, extensive 4* EPA status 12.2% and stepping up to with around support
Slide 28: Capital Markets Day October 2023
CAPITAL MARKETS DAY 12 OCTOBER 2023 WE HOPE YOU CAN JOIN US
Slide 29: Appendix
STST Classification: Classification: OFFICIAL OFFICIAL PERSONAL PERSONAL APPENDIX
Slide 30: EU Taxonomy
EU TAXONOMY Over 95% of our key financial metrics are eligible under EU taxonomy We are voluntarily disclosing our eligibility under EU taxonomy guidance, recognising 5% the need for robust disclosure around sustainability commitments 5% These disclosures relate to the two published objectives: clim
Slide 31: Regulatory Capital Value
REGULATORY CAPITAL VALUE +£3.4 billion £2.9bn £2.7bn £0.2bn £0.5bn £2.5bn £12.8bn Equity holders benefiting from inflation with just 28% index-linked debt; 1% additional inflation creates c.2% equity return £9.4bn 1 2 2 2 2 2020/21 Opening RCV RPI/CPIH Growth Totex growth RCV run-off Green Recovery
Slide 32: Regulated Water and Waste Water Revenue
REGULATED WATER AND WASTE WATER REVENUE Relating to the under- £18.7m £4.7m £12.2m recovery of revenue in 2020-21 as the pandemic £24.4m impacted non-household consumption Offset by an £35.0m increase in infrastructure Driven by renewals higher £66.9m expenditure wholesale energy prices £1,995.4m £6
Slide 33: EBITDA
EBITDA¹ 2022 2023 Variance Variance £m £m £m % 861.3 Regulated Water and Waste Water 868.1 6.8 0.8 53.2 Business Services 65.8 12.6 23.7 (6.7) Corporate and other (7.8) (1.1) 17.9 907.8 Severn Trent Group 926.1 18.3 2.0 1. Earnings before interest, tax, depreciation and amortisation. 33
Slide 34: Business Services EBITDA
BUSINESS SERVICES EBITDA¹ Non Regulated Regulated Total £m £m £m Operating Services and Other – 21.0 21.0 Green Power 0.9 34.8 35.7 Property Development 2.0 – 2.0 Other 3.9 3.2 7.1 EBITDA 6.8 59.0 65.8 Depreciation (0.2) (16.4) (16.6) PBIT 6.6 42.6 49.2 1. Earnings before interest, tax, depreciation
Slide 35: Segmental PBIT
SEGMENTAL PBIT¹ 2022 2023 Variance Variance £m £m £m % 476.3 Regulated Water and Waste Water 467.5 (8.8) (1.8) 36.4 Business Services 49.2 12.8 35.2 (6.9) Corporate and other (8.0) (1.1) 15.9 0.4 Consolidation adjustments 0.1 (0.3) (75.0) 506.2 Severn Trent Group 508.8 2.6 0.5 1. Profit before inter
Slide 36: Depreciation
DEPRECIATION¹ 2022 2023 Variance Variance £m £m £m % 385.0 Regulated Water and Waste Water 400.6 15.6 4.0 16.8 Business Services 16.6 (0.2) (1.2) 0.2 Corporate and other 0.1 (0.1) 0.0 – (0.4) Eliminations 0.4 (100.0) 401.6 Severn Trent Group 417.3 15.7 3.9 1. Including amortisation of intangible ass
Slide 37: Net Finance Costs
NET FINANCE COSTS 2022 2023 Income Gross Income statement Capitalised interest statement Capitalised Gross interest charge interest incurred charge interest incurred £m £m £m £m £m £m 156.2 34.5 190.7 Cash interest (including accruals) 143.3 56.6 199.9 6.7 – 6.7 Net pension finance cost 3.6 – 3.6 10
Slide 38: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE 2022 2023 Variance Variance £m £m £m % 506.2 Profit before interest and tax 508.8 2.6 0.5 (269.4) Net finance costs (362.6) (93.2) 34.6 – 0.2 Reduction in expected credit loss on loan receivable (0.2) (100.0) 237.0 Profit before tax 146.2 (90.8) (38.3) (1.4) Tax at the ad
Slide 39: Group Balance Sheet
GROUP BALANCE SHEET 31 March 2022 31 March 2023 Variance Variance £m £m £m % 10,609.3 Property, plant and equipment, right-of-use assets, intangible assets and goodwill 11,124.8 515.5 4.9 16.5 Investment in joint venture 16.5 0.0 14.8 Working capital 81.6 66.8 451.4 (1,353.4) Deferred income (1,482.
Slide 40: Capital Expenditure (Net Cash)
CAPITAL EXPENDITURE (NET CASH)1 2022 2023 Variance Variance £m £m £m % 588.7 Regulated Water and Waste Water 689.7 101.0 17.2 5.6 Business Services (3.1) (8.7) (155.4) 594.3 Severn Trent Group 686.6 92.3 15.5 1. Including purchases of property, plant and equipment, intangible assets, proceeds on dis
Slide 41: Net Debt
NET DEBT 31 March 2022 31 March 2023 Variance Variance £m £m £m % (782.5) Bank loans (713.0) (69.5) (8.9) (5,823.5) Other loans (6,474.2) 650.7 11.2 (117.4) Lease liabilities (110.9) (6.5) (5.5) 107.7 Net cash and cash equivalents 28.7 (79.0) (73.4) 28.3 Cross currency swaps 33.6 5.3 18.7 79.6 Loans
Slide 42: Fair Value of Debt
FAIR VALUE OF DEBT 1 31 March 2022 31 March 2023 Variance Variance £m £m £m % (814.0) Floating rate debt 2 (708.9) (105.1) (12.9) (4,379.6) Fixed rate debt (4,287.9) (91.7) (2.1) (2,605.6) Index-linked debt (1,935.1) (670.5) (25.7) (7,799.2) (6,931.9) (867.3) (11.1) 107.7 Net cash and cash equivalen
Slide 43: Analysis of Borrowings & Net Debt
ANALYSIS OF BORROWINGS & NET DEBT 7,298.1 (75.3) (28.7) (33.6) 7,160.5 (6.9) (264.3) (95.0) 6,794.3 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 swap
Slide 44: Debt Maturity
Currency (£m) 100.0 200.0 300.0 400.0 500.0 600.0 700.0 0.0 2023 AMP7 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 AMP8 and beyond 2035 Other Public Bonds 2036 2037 2038 2039 2040 2041 2042 2043 2044 GBP Sustainable Bonds 2045 2046 2047 2048 USPP 2049 2050 2051 2052 2053 Bank Loan 2054 205
Slide 45: Gearing and Credit Ratings
GEARING AND CREDIT RATINGS 30 September 2022 31 March 2022 Net debt/RCV¹ 31 March 2023 61.2% 63.3% Severn Trent Plc Group² 62.1% 58.0% 59.2% Regulatory Gearing³ 60.0% 31 March 2022 31 March 2023 Severn Trent Water Severn Trent Plc Severn Trent Water Severn Trent Plc Outlook Baa1 Baa2 Moody's Baa1 Ba