Anglian Water Group Results Year ended 31 March 2016 Investor Presentation 30 June 2016 Peter Simpson Anglian Water Group Chief Executive Officer Scott Longhurst Anglian Water Group Managing Director, Finance and Non-Regulated Business
For the purposes of the following disclaimer, references to this “document” shall mean this presentation pack and shall be deemed to include references to the related speeches made by or to be made by the presenters, any questions and answers in relation thereto and any other related verbal or written communications. Any forward- looking statements made in this document represent management’s judgment as to what may occur in the future. However, the group’s actual results for the current and future fiscal periods and corporate developments will depend on a number of economic, competitive and other factors including some which will be outside the control of the group. Such factors could cause the group’s actual results for current and future periods to differ materially from those expressed in any forward-looking statements made in this document. Unless otherwise required by applicable law, accounting standard or regulation, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
• The year in context • Performance update • Financial performance • Summary
The year in context Performance update Peter Simpson Anglian Water Group Chief Executive Officer
2015/16 FULL YEAR HIGHLIGHTS A very strong start to AMP6 - a challenging but successful year A HIGH DEGREEE HOWEVER: OF CHALLENGE: • All ODIs have at least met base targets; • Biggest drop in customer bills three achieved max / close to max reward of all WASCs • Secured £11.2m of net reward against • Reduction in revenue and EBITDA break-even plan expectations • Challenging determination with • Best ever performance on leakage, new ODI challenges interruptions to supply and pollutions • Low levels of inflation to consider • Substantial buffer built against future • Additional Market Reform challenges helped by relatively mild cost pressures winter • Internal challenges from • Achieved planned Totex system changes (telemetry, efficiency outperformance readiness for market opening) INVESTOR PRESENTATION | 5
TOP 10 ODIs BY FINANCIAL IMPACT MARCH 2016 FINAL FIGURES INVESTOR PRESENTATION | 6
FINANCIAL ODIs - EXCEPTIONAL PERFORMANCE Service Incentive Mechanism Pollutions Excellent start to • • Lowest ever number of Cat 3 • Ended the year in second ODI delivery Pollutions: reward of position overall. Great recovery Rewards earned approx. £4.7m. from early performance. • on Interruptions to Supply, Serviceability Interruptions to Supply Leakage and • Best-ever performance: • Strong performance, with all bar Pollutions max reward of £6.0m one measure within control limits. No penalty incurred. Quality and safety • Leakage Other ODIs targets met • Lowest ever result: • Performance was at or ahead of across almost all net reward of £0.5m target, contributing to outturns areas in future years Great recovery of • SIM position following slow start INVESTOR REPORT | 7
STRONG REPUTATIONAL ODI PERFORMANCE Reputational quality measures • Significant improvements in Mean Zonal Compliance (MZC) and Distribution Maintenance indices • Notable drop in customer complaints following proactive, outbound communications campaign • Operational and embodied carbon reduction targets met • Baseline established for community impact perceptions • Big increase (to 99%) of SSSIs (by area) judged by Natural England to be in favourable condition INVESTOR REPORT | 8
IMPRESSIVE TOTEX OUTPERFORMANCE Delivered target Opex efficiency • savings in • Source, IRIS, 1Customer programmes all driving efficiency 2015/16, increased level for 2016/17 Spitfire Company-wide • • Spitfire programme establishes further efficiency confidence in delivery of AMP6 plan, going beyond base opex budget for 2016/17 initiative underway Totex approach • Capex efficiency resulting in lower • Efficiency driven by four Alliances and Totex Asset Solutions Team overall spend through revised needs evaluation process, delivering lower cost capital solutions and improved Totex decisions. NO BUILD LOW BUILD BUILD CHANGE OTHER MAINTENANCE / REPAIR / REFURBISH / REACTIVE RESPONSE FACTORS, EG ENHANCED MONITORING ENHANCED REPLACE BEFORE FAILURE TO FAILURE UPGRADE OPERATIONS, FLOWS / RISK MANAGEMENT MAINTENANCE INVESTOR REPORT | 9
WIDER BUSINESS SUCCESS IRIS Lowest ever AFR, • • Successful implementation of largest radio telemetry excellent safety system in Europe: more than 640,000 points, 12,000 performance outstations and 13 billion event and historic data records across Alliances converted and migrated. IRIS successfully • Alliances rolled out across • Unique approach to programme delivery all assets established and working well. Influencing • • All four Alliances successfully delivered year one programme. strategy making the case for water resilience. Continue to plan • and implement changes ready Non Regulated Business for NHH Market • Still leading the industry in preparation for Opening Market Opening in April 2017. • Excellent progress made establishing systems and processes for engagement with retailers. INVESTOR REPORT | 10
AT THE HEART OF THE EVOLUTION OF THE INDUSTRY Water 2020: taking a leading role in Ofwat’s future thinking • Significant contribution to Ofwat’s thinking. • Jointly launched the consultation at LSE. • Many of our ideas included in published approach. • Fully engaged with market reform agenda, and the evolution of the industry. Significant progress in making case for improving resilience • Participation in Ofwat’s Resilience Task and Finish Group report. • Initiating and leading critical national project to develop a water resources long term planning framework. • Establishing Water Resources East leadership forum. INVESTOR PRESENTATION | 11
BUSINESS FOCUS – INTO 2016/17 Market Reform, Regulatory Long term water resources Change • Leading National Resource • Non-household competition, Strategy shadow and full market opening • Influence National Infrastructure • Water2020 programme Commission on resilience • Preparations for PR19 • Water Resources East Responding to changing Quality and environmental risks customer influence • Catchment management • Reclaiming SIM top spot • Phase two of Renewables • Further developing digital and Strategy, targeting carbon proactive communications neutrality by 2050 Business efficiency Our organisation and culture: & ODI performance • Wellbeing and H&S focus • 2016/17: highest level of annual • Extending Senior leadership spend across the AMP development programme • Building resilience to guard • Cyber-risk management against adverse weather impact • Creating the ‘shop window’ - the on ODIs water company of the future INVESTOR REPORT | 12
Financial Performance Scott Longhurst Anglian Water Group Managing Director, Finance and Non-Regulated Business
ANGLIAN WATER FINANCIAL HIGHLIGHTS Year ended 31 March EBITDA Underlying operating profit Underlying profit before tax 1 £452.6m £340.4m £182.0m £89.1m £720.4m £624.8m 15 16 15 16 15 16 Dividends paid Operating cash flow 2 Net debt 3 £5,649.2m £5,833.6m £180.2m £152.2m £708.1m £644.4m 15 16 15 16 15 16 INVESTOR PRESENTATION | 14
ANGLIAN WATER INCOME STATEMENT 1 2016 2015 £m £m Revenue -4.7% 1,185.4 1,244.3 Underlying operating costs (560.6) (523.9) Underlying EBITDA -13.3% 624.8 720.4 Other operating income 4.7% 13.5 12.9 Depreciation and amortisation (297.9) (280.7) Underlying operating profit 340.4 452.6 Interest (excluding indexation) 2 (206.9) (198.8) Indexation charge (44.4) (71.8) Underlying net finance costs (251.3) (270.6) Underlying profit before tax 89.1 182.0 1 Shown on an underlying basis (i.e. excluding fair value losses on financial and energy derivatives of £89.7m (2015: £213.6m)). 2 Interest excludes the intra-group interest receivable of £192.8m (2015: £192.3m). A reconciliation to the statutory profit before tax is provided in appendix 3. INVESTOR PRESENTATION | 15
ANGLIAN WATER TOTEX IN 2015 / 2016 PRICES Our 2015-16 totex out-performance of £46.8m is as a result of a number of efficiency measures and initiatives, a number of which started during AMP5. Capital programme efficiencies continue to be driven through our Alliance delivery model and operating cost efficiency has been achieved through supply chain efficiencies and changes to some of our operational processes and structures. These will continue to be key areas of efficiency focus as we progress through the AMP. INVESTOR PRESENTATION | 16
ANGLIAN WATER OPERATING COSTS Year ended 31 March 1.9 1.2 12.8 2.8 3.0 £m 4.4 7.2 560.6 7.0 15.6 8.8 532.7 573.4 572.7 569.9 566.9 562.5 523.9 555.3 548.3 532.7 523.8 INVESTOR PRESENTATION | 17
ANGLIAN WATER INTEREST 1 Year ended 31 March £m 1 Includes movement in fair values of derivatives other than energy hedges INVESTOR PRESENTATION | 18
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