United Utilities Group PLC · LSE:UU.
United Utilities — FY2009 Earnings Presentation
39 slides from United Utilities's earnings presentation, May 2009
Slide 1: United Utilities Group PLC Final results
United Utilities Group PLC Final results Year ended 31 March 2009 www.unitedutilities.com 1 1
Slide 2: Philip Green, Chief Executive
Philip Green Chief Executive 2 Good morning ladies and gentlemen. With me today is Tim Weller, our Chief Financial Officer, and we also have other members of our executive team in the audience. 2
Slide 3: Agenda
Agenda • Overview Philip Green • Financial review Tim Weller • Business update Philip Green • Questions 3 This slide sets out the agenda for this morning’s presentation. I will begin with a brief overview of the business before handing over to Tim, who will talk about our financial performance. I’ll
Slide 4: Highlights
Highlights • Strong financial results despite difficult economic climate • Operational improvements delivered – achieved regulatory leakage target for third consecutive year – increasing customer satisfaction: highest level for many years • Capital investment programme on track • Financing position
Slide 5: Key areas of focus
Key areas of focus • Operational performance • Delivery of 2005-10 regulatory contract • 2009 water price review • Non-regulated activities 5 The key areas of focus for us remain unchanged: to continue to improve operational performance, successful delivery of the current regulatory contract, the 20
Slide 6: Tim Weller, Chief Financial Officer
Tim Weller Chief Financial Officer 6 Thank you Philip. Good morning. 6
Slide 7: Financial highlights
Financial highlights • Underlying profit before taxation1 up 12% to £532m • Underlying operating profit1 up 10% to £742m • Regulated activities – underlying operating profit2 up 11% to £679m • Non-regulated activities – underlying operating profit3 up 9% at £68m • Final ordinary dividend of 22.03p p
Slide 8: Regulated activities
Regulated activities Continuing operations £m 2009 2008 Revenue 1,499.5 1,416.3 +6% Operating profit 678.4 611.6 +11% Adjustments: One-off costs 1.0 2.6 Underlying operating profit 679.4 614.2 +11% • Good growth in regulated business • Underpinned by allowed price increase of 7.8% and tight cost con
Slide 9: Regulated activities: Operating expenses
Regulated activities Operating expenses £m 2009 2008 Depreciation and amortisation 236.3 222.9 Infrastructure renewals expenditure 117.8 120.1 Power 55.3 42.5 Property rates 54.8 59.6 Bad debts 50.7 51.4 Other expenses 305.2 305.6 Operating expenses 820.1 802.1 +2% • Higher depreciation in line with
Slide 10: Non-regulated activities
Non-regulated activities Continuing operations £m 2009 2008 Revenue 919.3 949.2 -3% 1 +37% Operating profit 69.1 50.6 Adjustments: One-off items2 (1.0) 11.6 Underlying operating profit 68.1 62.2 +9% • Revenue marginally down reflecting lower contribution from connections business • Rise in operating
Slide 11: Finance expense
Finance expense Continuing operations £m 2009 2008 Published finance expense 270.9 331.6 Net fair value losses on debt and derivative instruments (24.3) (42.7) Add back interest on swaps and debt under fair value option 8.3 41.7 Underlying interest payable 254.9 330.6 Investment income (65.5) (146.7
Slide 12: Finance expense: index-linked debt
Finance expense: index-linked debt Continuing operations £m 2009 2008 Interest on index-linked debt 30.9 26.2 RPI adjustment to index-linked debt principal - 3 month lag (12.5) 24.9 RPI adjustment to index-linked debt principal - 8 month lag 40.9 29.9 Interest charge on index-linked debt 59.3 81.0 I
Slide 13: Profit before tax
Profit before tax Continuing operations £m 2009 2008 Operating profit 735.2 663.2 +11% Investment income and finance expense (205.4) (184.9) Profit before tax 529.8 478.3 +11% Adjustments: 1,2 One-off items 6.6 14.0 Net fair value losses on debt and derivative instruments 24.3 42.7 Interest on swaps
Slide 14: Earnings per share (EPS)
Earnings per share (EPS) Impact of one-off deferred tax items Continuing operations Year ended 31 March 2009 2008 Basic earnings per share (pence) 26.5 61.2 2008/09 • £206m deferred tax charge - abolition of industrial buildings allowances • 08/09 EPS lower by 30.3 pence 2007/08 • £82m deferred tax
Slide 15: Movement in net debt
Movement in net debt 7,000 6,000 163.9 22.1 911.4 349.9 174.7 710.3 4,895.2 5,000 1,482.3 £m 4,000 2,903.4 3,000 RCV RCV 2,000 gearing1 gearing1 39% 66% 1,000 0 Net debt at Return to Net capex Dividends Interest & tax Structured Other Operating Net debt at 1/4/08 shareholders financing cash flow 31/
Slide 16: Robust financing position
Robust financing position • Headroom through to mid-2011 in line with Board’s treasury policy • Over £1bn of debt raised during 2008/09: – £400m European Investment Bank loan with 12-year maturity – £375m 6.125% bond issue with 7-year maturity – £275m 5.75% bond issue with 13-year maturity • All com
Slide 17: Debt portfolio
Debt portfolio Average term to maturity over 25 years Term debt1 maturing per regulatory period 3,000 2,000 £m 1,000 0 2009-10 2010-15 2015-20 2020-25 2025-30 2030-35 2035-40 2040-45 2045-50 2050-55 2055-60 Years 17 1 future repayments of index-linked debt include inflation based on an average annua
Slide 18: Financial summary
Financial summary • Strong underlying profit growth • Raised over £1bn of debt finance • Financing headroom through to mid-2011 • Maturity of term debt portfolio over 25 years • Index-linked debt provides a natural RPI hedge 18 In summary, we have delivered strong underlying profit growth. We have r
Slide 19: Philip Green, Chief Executive
Philip Green Chief Executive 19 Thank you Tim. 19
Slide 20: Business update
Business update • Operational performance • Delivery of 2005-10 regulatory contract • 2009 water price review • Non-regulated activities • Summary and outlook 20 I will now update you on our four key priorities I mentioned earlier. 20
Slide 21: Key operational and service measures
Key operational and service measures Start point Current Target Relative Below average Narrowed operating efficiency gap to most efficient Upper quartile in the efficiency water companies since 20051 and improved opex medium term position to band B for water and band C for wastewater as assessed by
Slide 22: Pollution: Upper quartile performance
Pollution Upper quartile performance • Proactive approach with Environment Agency – quicker response to help mitigate impact of incidents • Pumping station maintenance insourced – better visibility and control • Focused on key risk areas • Action planning – high risk register highlights key areas •
Slide 23: Business update
Business update • Operational performance • Delivery of 2005-10 regulatory contract • 2009 water price review • Non-regulated activities • Summary and outlook 23 Now, looking at our current regulatory contract. 23
Slide 24: Efficiency initiatives progressing well
Efficiency initiatives progressing well Workforce management project to deliver further benefits • Workforce management project now successfully implemented – on time and below budget • Customer contact and work scheduling system • Real time data for more effective job scheduling • Early progress en
Slide 25: Regulatory capital programme
Regulatory capital programme Expenditure and outputs on track • Continue to make good progress on regulatory capital programme • Completed peak phase of 2005-10 capital investment programme – £740 million invested in the year • Spend and outputs broadly in line with regulatory assumptions • Well set
Slide 26: Business update
Business update • Operational performance • Delivery of 2005-10 regulatory contract • 2009 water price review • Non-regulated activities • Summary and outlook 26 That brings us to the 2009 water price review. 26
Slide 27: 2009 water price review
2009 water price review Final business plan submitted April 2009 • £3.7bn capital investment programme (2007/08 prices) • 1.5% p.a. improvement in underlying operating efficiency • 4% to 8% efficiency improvement in capital programme • 4.85% cost of capital (post-tax, real) – targeting an A3 credit
Slide 28: 2009 water price review: Movement in capex
2009 water price review Movement in capex between draft and final plans 6,000 5,000 351 (433) 4,035 (119) 4,000 (130) 3,704 £m (07/08 prices) 3,000 2,000 1,000 0 Draft business Work on sewer Deferral & removal Impact of Greater efficiency Final business plan overflows of outputs recession on plan gr
Slide 29: 2009 water price review: Quality spend
2009 water price review UU has a greater proportion of quality spend UU capex Water sector capex Quality 22% Quality 43% Maintenance Maintenance 51% 52% Supply/ demand 17% Enhanced Supply/ Enhanced service demand service 9% 5% 1% • UIDs1 are statutory obligations - funding included in quality catego
Slide 30: 2009 water price review: Affordability of customer bills
2009 water price review Maintaining the affordability of customer bills 450 8 4 (17) 400 389 (7) 377 £ (07/08 prices) 350 300 250 Draft plan average Impact of Higher cost of Cost of Greater efficiency Final plan average household bill in recession on capital maintaining and household bill in 2014-15
Slide 31: Business update
Business update • Operational performance • Delivery of 2005-10 regulatory contract • 2009 water price review • Non-regulated activities • Summary and outlook 31 I’ll now give you an update on our non-regulated activities. 31
Slide 32: Non-regulated activities
Non-regulated activities UK market leader and further progress achieved • Good profit growth - international operations performing well • UU the leading utility infrastructure outsourcing company in the UK – order book worth over £6 billion • Two new contract awards: – Derbyshire municipal solid was
Slide 33: Business update
Business update • Operational performance • Delivery of 2005-10 regulatory contract • 2009 water price review • Non-regulated activities • Summary and outlook 33 So, to sum up. 33
Slide 34: Summary and outlook
Summary and outlook Strong results and a robust financing position Operational performance 2005-10 regulatory contract • Met leakage target for third year • Good progress on capital • Customer satisfaction at highest investment programme level for many years • Efficiency initiatives progressing well
Slide 35: Questions
Questions 35 That concludes our results presentation. Thank you for listening and we will now take questions. 35
Slide 36: Supporting information
Supporting information Financing and liquidity Debt structure 36 36
Slide 37: Financing & liquidity as at 31 March 2009
Financing & liquidity as at 31 March 2009 Continuing operations Gross debt = £5,680m Headroom / prefunding = £935m Other Joint venture £m borrow ings, debt, £230.2m Yankee bonds £533.0m (USD), £743.2m Cash and short-term deposits 299 EIB loans, 1 1,076 Medium-term committed bank facilities £200.0m E
Slide 38: Debt structure at 31 March 2009
Debt structure at 31 March 2009 United Utilities Group PLC United Utilities PLC BBB+ stable; Baa1 stable Yankees: Euro MTN: Other debt: • $250m in 18’s • USD10m in 09’s2 • Short-term loans £99m • $350m in 19’s • GBP 6.5m in 13’s • Commercial paper £18m • $400m in 28’s United Utilities Water PLC A3 s
Slide 39: Cautionary statement
CAUTIONARY STATEMENT This final results presentation contains certain forward-looking statements with respect to the operations, performance and financial condition of the group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and develop
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