Contact details - Investor Relations

Transcription

1 Disclaimers For the purposes of the following disclaimers, references to this "document" shall be deemed to include references to the presenters' speeches, the question and answer session and any other related verbal or written communications. The group s IFRS accounting policies as they are applied for the six months ended 30 September 2005 have been adopted on the basis of all IFRS issued by the International Accounting Standards Board ( IASB ) as at the date of this report and which have either been endorsed by the European Union ( EU ) or where there is a reasonable expectation of endorsement by the EU before the group prepares its first annual Accounts in accordance with IFRS for the year ending 31 March While most of the issues regarding the adoption of IFRS for use in the EU have been resolved, there are still some areas to be concluded upon. Any new standards or interpretations issued by the IASB will be assessed and considered by the group on an individual basis and might result in adjustments to the 2005/06 IFRS financial statements before they are considered final. IFRS is currently being applied simultaneously in the United Kingdom and a number of other countries for the first time. Furthermore, due to a number of new or revised IFRS having been issued in the past 18 months there is not yet significant established practice upon which to draw when forming decisions regarding interpretation and application. Accordingly, practice is continuing to evolve. At this preliminary stage therefore, the full financial effect of reporting under IFRS as it will be applied and reported on in the group s first IFRS financial statements for the year ended 31 March 2006 may be subject to change. This document contains certain forward-looking statements with respect to Severn Trent s financial condition, results of operations and business and certain of Severn Trent s plans and objectives with respect to these items. Forward-looking statements are sometimes but not always, identified by their use of a date in the future or such words as anticipates, aims, due, could, may, should, expects, believes, intends, plans, targets goal, or estimates. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies and markets in which the Group operates; changes in the regulatory and competition frameworks in which the Group operates; the impact of legal or other proceedings against or which affect the Group; and changes in interest and exchange rates. All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Severn Trent or any other member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Severn Trent does not intend to update these forward-looking statements. This document is not an offer to sell, exchange or transfer any securities of Severn Trent Plc or any of its subsidiaries and is not soliciting an offer to purchase, exchange or transfer such securities in any jurisdiction. Securities may not be offered, sold or transferred in the United States absent registration or an applicable exemption from the registration requirements of the US Securities Act of 1933 (as amended). Without prejudice to the above, whilst Severn Trent Plc accepts liability to the extent required by the Listing Rules of the UK Listing Authority for any information contained within this document which Severn Trent Plc makes publicly available as required by the Listing Rules; (a) (b) neither Severn Trent Plc nor any other member of the Group or persons acting on their behalf shall otherwise have any liability whatsoever for loss howsoever arising, directly or indirectly, from use of the information contained within this document; neither Severn Trent Plc nor any other member of the Group or persons acting on their behalf makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained within this document. Without prejudice to the above, no reliance may be placed upon the information contained within this document to the extent that such information is subsequently updated by or on behalf of Severn Trent Plc. Past performance of securities of Severn Trent Plc cannot be relied upon as a guide to the future performance of securities of Severn Trent Plc.

2 Contact details - Investor Relations Julian Wais Tel: +44 (0) Fax: +44 (0) julian.wais@stplc.com 2297 Coventry Road Birmingham B26 3PU United Kingdom

3 Interim Results Six months to 30 September 2005 Presentation - 6 December 2005

4 Sir John Egan Chairman

5 Mark Wilson Group Finance Director

6 Encouraging Group results 2005/ /05 Change m m % Profit before interest and tax % (PBIT*) Profit before tax (PBT*) % Adjusted basic EPS** 40.9p 32.8p +24.7% Basic EPS 33.1p 25.1p +31.9% * Excluding IAS39 fair value adjustments ** Excluding deferred tax and IAS39 fair value adjustments

7 Dividend increase, 2.5% above RPI inflation Pence per share 2005/ /05 % increase Interim % Interim dividend payment date advanced by over ten weeks to 25 January 2006

8 Group turnover up 13% to 1174m m / /06 Water and sewerage* 2004/ / / / / / / % +9.6% -1.2% +23.0% -15.6% /06 Biffa* Laboratories* Services* Other businesses* * Business segment turnover is stated gross i.e. including inter segment trading

9 Group PBIT up 26.5% to 281m m / / / /06 Water and sewerage* Non-regulated businesses* +36.2% -6.2% * Excluding corporate overheads and inter segment unrealised profit

10 Non-regulated businesses total PBIT m / / /052005/ /052005/ / /06 Biffa Laboratories Services Other businesses % -27.0% +61.8%

11 Group net debt and finance charges Net Debt Net Finance Costs m m IAS 39 Net Debt 84.3 IAS 39 Net Interest 31 March September / /06 70% at fixed interest rates* Effective rate circa 6%* Gearing 62.3%** (net debt/net debt & equity) Interest cover*: times PBITD # times PBIT * Exc. IAS39 fair value adjustments ** Inc. IAS39 fair value adjustments # Profit before interest, tax, depreciation and amortisation of intangible assets

12 Current taxation rate rising in 2005/ %* 18.4%* 2004/ /06 *Attributable to PBT before IAS 39 fair value adjustments and share of results of associates and joint ventures

13 Businesses generate 236m cash after 191m capex m Water & sewerage m Biffa Laboratories m + 0.5m Services + 0.8m Interest & tax Other m + 0.2m Acqns - 1.4m Dividends m Other financing Cash inflow m + 9.3m 0-50

14 Half-year on Half-year changes Water and sewerage PBIT Biffa PBIT Laboratories and Services turnover and PBIT Group PBIT and PBT

15 Water and sewerage PBIT Half-year on Half-year changes m Turnover m Opex inflation - 5.3m Real opex increases - 0.7m Depreciation - 2.4m Infrastructure renewals expenditure - 4.2m New business ventures + 0.3m Net increase m Water and sewerage PBIT - up 63.8m to 240.2m ( 176.4m)

16 Front-end loaded infrastructure renewals programme 2005/06 IFRS renewals charge Profile AMP4 renewals charge c.110 IFRS UK GAAP H2 c.74 m m / / / / /10

17 Biffa PBIT Half-year on Half-year changes 5 m 4 Special Waste + 1.3m Central costs - 0.2m Net increase Biffa UK + 3.5m Belgium - 3.9m 3 Landfill + 0.7m 2 Collection + 1.7m 1 0 Net decrease total Biffa - 0.4m -1 Biffa PBIT - down 0.4m to 43.5m ( 43.9m)

18 Laboratories and Services turnover and PBIT m Laboratories Services Total TURNOVER 2004/ Trading Movements (0.7) Foreign Exchange (0.3) (0.1) (0.4) 2005/ PBIT 2004/ Trading Movements (2.7) 2.1 (0.6) Foreign Exchange /

19 Group PBIT & PBT Half-year on Half-year changes m Water & sewerage m Biffa - 0.4m Laboratories - 2.7m Services + 2.1m Other businesses - 2.5m Corporate & unrealised profit - 1.4m Net increase in PBIT m Interest + 0.3m* Net increase in PBT* m Group PBT* - up 59.2m to 198.1m ( 138.9m) * Excluding IAS 39 fair value adjustments

20 Colin Matthews Group Chief Executive

21 Management priorities are as follows Severn Trent Water AMP4 performance Biffa growth and return on investment improvement Chart from June 2005 presentation

22 Severn Trent Water meeting Ofwat opex challenge sooner than planned Total Severn Trent Water opex* Ofwat assumption m Revised Severn Trent 2005/06 forecast Severn Trent forecast 2005/ / / / /10 Management focus on maintaining progress * On basis consistent with Final Determination i.e. UK GAAP

23 partly driven by lower manpower Manpower numbers* - September Plan Actual * Severn Trent Water permanent and temporary manpower including manpower from former Charles Haswell and Partners and Severn Trent Systems businesses

24 and while maintaining focus on operational performance. Reportable accident rate per thousand employees Category 1 & 2 pollution incidents * / / / / / /06 * Provisional - subject to Environment Agency revision

25 AMP4 obligations on track, capex spend slightly lower than Ofwat assumptions Quality regulatory obligations 2005/06 Capex* # 2005/ c.400 No. m H2 c Ofwat Obligations Forecast Ofwat assumed Actual/Forecast * Capex is at outturn prices after deduction of grants & contributions # On basis consistent with Final Determination i.e. UK GAAP

26 Too early to forecast AMP4 capex efficiencies but maintaining our ambition to outperform AMP4 capex * # m 2005/ / / / /10 * Capex is at outturn prices after deduction of grants & contributions # On a basis consistent with Final Determination i.e. UK GAAP

27 Biffa good UK performance in a flat market 90 m Collection +6% Landfill +3% 21.5m Special Waste Overheads +43% -2% 4.3m m Total Biffa UK PBIT Biffa Belgium +8% -300% - 2.6m Total Biffa PBIT -1% m 46.1m 43.5m 10 0

28 Industrial & Commercial Collection remains the largest and most attractive segment Segment customer revenues Segment customer revenues, excluding tax Municipal bn 3.3 Industrial & commercial* PFI/PPP Incineration Recycling bn 0.9 Landfill Collection Disposal Note: excludes transfer stations, haulage and certain forms of recycling e.g. scrap metal * Includes revenues in respect of disposal

29 Scale matters in Industrial & Commercial Collection and Biffa is the market leader Biffa cost per tonne by I&C Collection depot Biffa s market share* in I&C Collection Unit cost ( /tonne) 10% 6% 4% Route density (tonne/km) Biffa (#1) #2 #3 *Excluding construction waste market Source: Market research, Biffa competitor intelligence

30 Biffa is very well positioned in Landfill where average unit prices are increasing Biffa Landfill void*, million m 3 Biffa average unit prices** for Landfill, index Other controlled void Operational September / / / /06 * Including Arpley ** Excluding landfill tax

31 Now focused on organic growth, through a combination of immediate and mid term actions September 2005 Today March 2006 September 2006 Immediate actions Roll out recycling offers Reduce churn Void management Mid term actions Restructuring depots Process improvement Roll out

32 Laboratories US remains a challenging market but management taking action Return* on Total investment** 14% 9% 2004/ /06 * Before interest and tax ** Net operating assets plus gross goodwill from acquisitions

33 Services continues to improve Return* on Total investment** 5% 4% 3% 2003/ / /06 * Before interest and tax ** Net operating assets plus gross goodwill from acquisitions

34 Real dividend increase demonstrates confidence in the future Severn Trent Water made a good start to AMP4 Biffa focused on an organic growth strategy Laboratories expected to face a challenging market in US Services expected to continue to improve

35

36 Appendix

37 Group Income statement summary Six months to 30 September /06 m 2004/05 m % increase /(decrease) Turnover Profit before interest and tax (Operating profit) Net interest (84.3) (84.6) 0.4 Fair value movements in treasury instruments (33.7) - n/a Share of results of associates and joint ventures Profit before tax Current tax (56.2) (25.4) (121.3) Deferred Tax 6.6 (26.7) n/a Profit after tax Basic EPS (pence) Adjusted basic EPS before IAS39 fair value adjustments and deferred tax (pence)

38 Group balance sheet At 30 September 2005 Movement since 30/9/05 31/3/05 31/3/05 m m m Property, plant & equipment Intangible assets (7.5) Other non-current assets (0.1) Working Capital/provisions (499.0) (477.4) (21.6) Capital employed Tax creditor (105.3) (69.6) (35.7) Deferred tax provision (875.6) (902.6) 27.0 Dividends payable - (63.0) 63.0 Net debt (3016.6) (2894.6) (122.0) Net assets (61.9) Gearing* 62.3% 60.6% 1.7% (Points) * Net debt divided by net debt and equity

39 Group cashflow and movement in net debt Six months to 30 September / /05 m m Cash flow from operations # Capital expenditure (net) (190.7) (189.2) Interest and tax payments (97.8) (93.1) Acquisitions* (1.4) (1.0) Free cash flow Equity dividends (167.8) (61.1) Share issues/purchases Cash flow from debt finance 31.1 (58.9) Net cash inflow/(outflow) 9.3 (38.8) Cash flow from debt finance (31.1) 58.9 Non-cash movements** (100.2) (6.3) Net debt at 1 April (2894.6) (2753.6) Net debt at 30 September** (3016.6) (2739.8) # Inc. dividends from associates * Net of assumed cash/(debt) and loans to associates and joint ventures ** Including IAS 39 fair value adjustments of 105.1m

40 Movements on equity Six months to 30 September 2005 At 1 April as previously reported under UK GAAP 2005/ /05 m m Adjustments for IFRS conversion Profit for the period Dividends Net income recognised directly in equity Credit from share based payments charge Deferred tax on items recognised directly in equity Shares issued At 30 September (372.7) (104.8) (25.7) 2.2 (1.3) (358.1) 86.4 (100.9)

41 Credit ratings At 30 September 2005 Long-Term Severn Trent Water Severn Trent Plc Moodys A2 A3 Standard & Poors A A- Short-Term Severn Trent Water Severn Trent Plc Moodys P1 P2 Standard & Poors A1 A1

42 Taxation analysis Six months to 30 September / /05 m m Profit before tax and results of associates and joint ventures Current tax Credit relating to prior year Deferred tax Total tax Effective current tax rate Effective total tax rate (4.0) (2.7) (6.6)* # 28.5%** 18.4% 30.4% 37.8% * Includes tax credit of 10.1m on IAS 39 fair value adjustments at 30% ** Reflects expectations for the full year # Calculated on PBT of 197m before IAS 39 fair value adjustments & share of results of associates & joint ventures Note: Tax Bulletin 53 applies from 1 April 2005 and impacts the tax charge

43 Segmental analysis of capital employed Six months to 30 September 2005 Net operating Goodwill Total Total assets 30/09/05 30/09/05 30/09/05 30/09/04 m m m m Water Biffa Laboratories Services Other (50.1) - (50.1) 16.9 Total

44 PBITD* analysis Six months to 30 September 2005 m UK US/Europe Group 2005/ / / / / /05 Water & sewerage Waste management Laboratories Services Other (13.9) (8.6) (0.8) (1.6) (14.7) (10.2) * Profit before interest, tax, depreciation # and amortisation of intangible assets # Includes deferred income write back and profit on sale of property, plant and equipment

45 Depreciation* analysis Six months to 30 September 2005 m UK US/Europe Group 2005/ / / / / /05 Water & sewerage (100.4) (98.1) - - (100.4) (98.1) Waste management (29.1) (29.3) (2.8) (3.1) (31.9) (32.4) Laboratories (0.8) (0.7) (3.5) (3.5) (4.3) (4.2) Services (0.3) (0.3) (2.2) (2.1) (2.5) (2.4) Other (0.5) (0.1) (0.5) 1.1 (131.1) (127.2) (8.5) (8.8) (139.6) (136.0) * Including amortisation of intangibles, deferred income write back and profit on sale of property, plant and equipment

46 Capital expenditure (net cash) * Six months to 30 September / /05 m m Water & sewerage (150.2) (147.4) Biffa (36.5) (35.3) Laboratories (4.8) (4.0) Services (1.8) (4.2) Other (190.7) (189.2) * Net of grants received and proceeds of sale

47 Water & sewerage Income statement highlights Six months to 30 September /06 m 2004/05 m Change % Turnover Severn Trent Water Retail and Utility Services Intra segment trading (1.2) (1.1) (9.1) Operating Costs Severn Trent Water* (336.8) (322.6) (4.4) Retail and Utility Services (7.7) (7.8) 1.3 Intra segment trading (343.3) (329.3) (4.3) PBIT** * Operating costs include profit on disposal of non-current assets of 1.8m ( 4.7m) ** Net of other income but excluding management charges of 3.3m ( 2.4m)

48 Severn Trent Water - turnover Six months to 30 September 2005 m % Six months to 30 Sept RPI + K Growth New customers Income initiatives Conservation Metering impact (1.9) (0.4) Reduced consumption (1.7) (0.3) One off changes (0.4) (0.1) Power generation reclassification Six months to 30 Sept

49 Severn Trent Water - operating costs Six months to September /06 m 2004/05 m change % Direct operating costs* (200.5) (192.9) (3.9) Depreciation** (100.1) (97.7) (2.5) Infrastructure renewals (36.2) (32.0) (13.1) Total (336.8) (322.6) (4.4) * Net of other income but excluding management charges ** Net of amortisation of grants and contributions and profit on disposal of property, plant and equipment

50 Severn Trent Water - direct operating costs Six months to 30 September /06 m % Six months to 30 September 2004* (192.9) Power generation reclassification (1.6) (0.8) Six months to 30 September 2004 restated* (194.5) Inflation (5.3) (2.7) (199.8) (2.7) Real opex increases (0.7) (0.4) Six months to 30 September 2005* (200.5) (3.1) * Net of other income but excluding management charges

51 Severn Trent Water capex reconciliation Six months ended 30 September 2005 Forecast 2005/ /06 m m UK GAAP net capex* Treated as IFRS infrastructure operating expenditure IFRS net capex Movement on capital creditors Proceeds of sale of fixed assets IFRS capex (net cash) (36) (110) (3) 150 * Capex is at outturn prices after deduction of grants & contributions

52 Severn Trent Water RCV Six months ended 30 September 2005 At each price review, Ofwat sets price limits which it considers will enable companies to earn a reasonable return on capital. Ofwat bases that return on the regulatory capital value (RCV often referred to as RAV). The actual outcome for the RCV from the December 2004 determination through AMP 4 is as follows at each 31 March year end: m 2004/ / / / / /10 Per Determination* Actual/Estimated Outturn** * 2002/03 prices ** Including inflation assumption of 2.7% in 2005/06 and 2.5% from 2006/07 to 2009/10

53 Biffa - Turnover analysis Six months to 30 September /05 - UK GAAP 2004/05 - IFRS 2005/06 - IFRS UK landfill tax and Belgian environmental tax included in turnover: /05 UK GAAP 42.5m 2004/05 IFRS 42.5m 2005/06 IFRS 48.6m Collection UK Landfill UK Special UK Belgium

54 Biffa - PBIT analysis Six months to 30 September /05 UK GAAP 2004/05 IFRS 2005/06 IFRS Collection UK Landfill UK Special UK Belgium Central O heads

55 Laboratories & Services - turnover analysis Six months to 30 September /05 - UK GAAP 2004/05 - IFRS 2005/06 - IFRS Laboratories Water Purification Operating Services

56 Laboratories & Services - PBIT analysis Six months to 30 September /05 - UK GAAP 2004/05 - IFRS 2005/06 - IFRS Laboratories Services

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