1 1 index
play

1 1 INDEX Highlights Investment Fundamentals Financing ODIs and - PowerPoint PPT Presentation

1 1 INDEX Highlights Investment Fundamentals Financing ODIs and Totex Sustainability p.3-6 p.13-22 p.23-29 p.30-41 p.42-51 3. AMP6 Summary 14. Investment Fundamentals 24. Financing performance 31. Strong Water Performance 43. Our


  1. 1 1

  2. INDEX Highlights Investment Fundamentals Financing ODIs and Totex Sustainability p.3-6 p.13-22 p.23-29 p.30-41 p.42-51 3. AMP6 Summary 14. Investment Fundamentals 24. Financing performance 31. Strong Water Performance 43. Our Social Purpose journey 4. AMP6 Summary 15. AMP6 RCV Growth 25. Financial Resilience 32. Leakage 44. Sustainability Framework 5. 2019/20 Highlights 16. Multi-AMP RCV Growth 26. Effective Interest Rates: A 33. Strong AMP in Waste 45. Sustainable Development sector comparison Goals 6. ESG 17. Shareholder Return 34. The Environment 27. Debt Maturity 46. Reporting/Indices 18. Historic Dividends 35. Maintaining cost control COVID-19 28. Sustainable Finance 47. Making an Impact p.7-12 19. AMP7 Dividend Framework 36. Case Study: cost control 8. Managing the impact 48. Community Fund 20. Return on Regulated 29. Pensions 37. AMP6 Complete 9. Managing the impact Equity 49. Climate Change 38. AMP6 Capital Profile 10. COVID-19 impact on PBIT 21. Business Services 50. Biodiversity 39. AMP7 Programme 11. Water Plus 22. Our Senior Team 51. Awesome Place to Work 40. AMP7 Capital Delivery 12. Wholesaler Regulatory PR19 Framework 41. Innovation p.52-56 Appendix p.57-59 2 2

  3. AMP6 SUMMARY Balancing the needs of key stakeholders across AMP6  Engagement in the top 5% of utilities globally COLLEAGUES  75,000 days of training delivered  Recruited c. 400 graduates and apprentices  Sharing success with all-employee bonus scheme  Top 3 company in Hampton-Alexander review and Social Mobility Index  Cumulative RoRE of 8.5% , delivered across all 3 levers INVESTORS  £174m of customer ODIs delivered over 5 years  Invested for real RCV growth of around 9%  Effective finance cost reduced 170bps to 3.7%  Sharing success through RPI+4% dividend policy 3 3

  4. AMP6 SUMMARY Balancing the needs of key stakeholders across AMP6  Maintained lowest bills in England and Wales CUSTOMERS  £3bn invested in assets for future generations  Improved accessibility and digital experience  Annually supported 50,000 customers with bills  Improvements across range of service measures COMMUNITIES/ ENVIRONMENT  800,000 customers educated about water and waste  £17m donated to the Severn Trent Trust Fund  Anticipate 4* EPA status for third time in AMP  Improved quality of 1,600km of local rivers  100% renewable energy – 51% self-generated 4 4

  5. 2019/20 HIGHLIGHTS Net customer ODIs of £36m 1 taking AMP6 total to £174m A good end to Delivering consistent improvements in Water AMP6 operationally Anticipate 4* EPA status from the Environment Agency £800m of capital invested, taking AMP6 total to £3bn A substantial year of Birmingham Resilience completed on time and to budget investment Improved 1,600km of rivers with Water Framework Directive Expect to deliver positive customer ODIs from year one Entering AMP7 in a strong 80% of year one capital programme already contracted position Effective interest cost of 3.7% as we enter the AMP 5 5 5 1. Customer ODIs quoted pre-tax, in 2012/13 prices, unless otherwise stated.

  6. ESG In a year of important global, political, regulatory and company milestones, Severn Trent has maintained focus on supporting our customers and communities, demonstrating our commitment to our social purpose Our Values Our Framework Our Commitments We know that the resilience of We believe that if we are united by We’ll be reporting on our our business is intrinsically linked a clear social purpose we will commitments in our first to the resilience of our region, its deliver better outcomes for all our Sustainability Report in June 2020 communities and natural stakeholders- our customers, our environment. colleagues, our investors, the This year, we plan to review our society we live in and the contribution to the SDGs in detail, Over the next five years, we will environment we depend on. So at mapping to target level for those be investing £1.2 billion in our Severn Trent, we are first and Goals where we have the most sustainability ambitions , from foremost driven by our purpose – significant impact, and asking climate and biodiversity to to take care of one of life’s stakeholders for their input supporting the customers who essentials – and we’re guided by need us most. our values 6 6 6

  7. COVID19 7

  8. MANAGING THE IMPACT OF COVID-19 Supporting people through the COVID-19 crisis Colleagues Customers Communities Pic Pic    Committed to no redundancies or Helping customers struggling to pay with £1m emergency fund – £500k supporting furloughing from COVID-19 established WaterSure and Big c.200 organisations so far Difference schemes   Supporting financial wellbeing with full Supporting supply chain with immediate  sick pay , payment of 2019/20 bonus Supporting vulnerable customers through payment and secure future work in and three year pay deal Priority Services Register Midlands    Caring for our Colleagues campaign £3.5m donation to Severn Trent Trust Working with Business in the Community Fund and local forums 8 8

  9. MANAGING THE IMPACT OF COVID-19 Preparation, agility and culture enable delivery of essential services and AMP7 plans Continued focus on AMP7 Delivering essential services   Quickly enabled well-practised incident management Well prepared through fast-track status and substantial investment in final year of AMP6  Flexible working to keep frontline colleagues safe  Re-focusing customer ODI delivery plans to counteract  Almost half of colleagues working from home impact on some measures, e.g. Per Capita Consumption  Embracing technology with increased use of virtual  Teams with capacity working on new projects technicians and at-home network monitoring  Taking advantage of reduced traffic , pulling forward network  Quickly identified and trained reserve teams to ensure renewal in normally busy streets adequate skilled resource for essential tasks 9 9

  10. COVID-19 IMPACT ON PBIT Limited impact on 2019/20 PBIT; direct costs largely absorbed; bad debt provision increased No material step up in operating costs as a result of COVID-19 to date March/April cash receipts strong; low levels of direct debit cancellations Direct impact to bad debt of £2m; indirect impact of some activity restrictions on older debt recovery plan Potential impact in 2020/21: Lower non-household Reduced property revenue; recovered Increased household sales ; deferred to later later in AMP7 bad debt risk from in AMP7 economic recession £50m to £85m impact £1m to £5m for year 10 10

  11. WATER PLUS Improving performance in H2; overtaken by economic impact of COVID-19 Recovery plans drove Marked improvement in …but tail-off in receipts £14.3m improved performance cash collections after a seen post lockdown FY share of underlying trading loss challenging first half… in H2 (H1: £9.3m; H2: £5.0m) Additional bad debt Impairment of goodwill £37.4m Economic impact of provision at year end for and intangibles based on Share of write-downs COVID-19 on Water expected COVID-19 expected impact on (Equity: £32.5m; Debt: £4.9m) Plus recovery business failures Water Plus recovery plan £51.7m On 30 April Ofwat announced code changes to cap bad debt exposure Total losses reported and provide short-term liquidity for retailers as exceptional 11 11

  12. WHOLESALER REGULATORY FRAMEWORK Effective regulatory framework mitigates NHH COVID-19 consumption risk over AMP7 Impact of lower volumes COVID-19 lockdown will significantly decrease business consumption with some offset in higher household demand We are anticipating c. £50m-£85m impact on 2020/21 revenue, assuming government’s published path out of lockdown The Ofwat regulatory model allows us to recover this revenue in two years • Ofwat announced protection for wholesalers against retailer default from COVID-19 Ofwat Consultation • Capped exposure from providing retailers with liquidity April 2020 • Wholesalers can charge interest on deferred payments; amounts to be fully repaid by March 2021 12 12

  13. INVESTMENT FUNDAMENTALS 13 13

  14. INVESTMENT FUNDAMENTALS Slides Slides Stable earnings with strong cost control Attractive inflation-linked dividend 35,36 18,19   Five year certainty of revenues – set to 2025 Growth of at least CPIH for the next five years   Reduced opex by 7% in real terms since 2015 Total Shareholder Return of 34% over past five years   AMP6 efficiencies partly reinvested for AMP7 success Dividend yield of 4.4% at 31 March 2020 Slides Slides Long-term sustainable RCV growth Growing non-regulated business 15,16 21  Green Power – 255GWh and £17.6m EBITDA in FY20  Only listed water co with real growth in AMP7 - 3.8%  Property – on track for £100m PBIT over 10 years  Fundamental long term drivers include: climate change, population growth and asset replacement  Operating Services – long-term secure contracts Slides Slides Strong industry performers A socially purposeful company 20,53 43-51   Cumulative AMP6 RoRE of 8.5% - 2.9% above base Taking care of the environment   High quality AMP7 plan ‘fast tracked’ by Ofwat Helping people to thrive   Industry leaders on ODIs - £174m earned in AMP6 Being a company you can trust 14 14

Recommend


More recommend