|
Article Excerpt
PARTICIPANTS
. Mike McKeon, Severn Trent plc, FD . Neil Beddall, Barclays Capital, Analyst . Mark Freshney, Credit Suisse, Analyst . Rachel Graham, Bloomberg, Media . Richard Stuber, Cazenove, Analyst . Fraser McLaren, Merrill Lynch, Analyst . Lakis Athanasiou, Evolution, Analyst . Iain Turner, Deutsche Bank, Analyst
OVERVIEW
SVT.L reported its interim management statement.
PRESENTATION SUMMARY
S1. Interim Management Statement (M.M.) 1. Details: 1. Trading, in line with what Co. said before. 1. There is one exception to that, which is relatively minor, but nonetheless probably has a bigger trend impact going forward. 2. That is non-household measured consumption, where Co. was anticipating a normal decline of around about 3%, seen in last few months. 3. Notably since Nov. when some new data came out, but that decline has now increased to around about 6%. 4. Reasons for that Co. believes are around about the general decline in either industrial activity and/or elimination of industrial activity, whether it be retail or industrial. 2. Should have an impact of around about increasing YonY reduction in industrial non-household measured income from about GBP12-15m to about GBP20-25m. 1. Essentially everything else is pretty much in line. 3. OpEx & CapEx: 1. Expects to deliver the amounts that Co. mentioned before over AMP period. 2. On track in operating cost to deliver GBP30m savings over remaining two years (this year and next). 3. Seeing based on detailed planning that some GBP20m will move on CapEx from this current year to next year. 1. Overall CapEx in core will remain pretty much the same. 4. New guidance on level of infrastructure expenditure in this period up to March 2009 will be GBP120-130m. 1. Slightly different from where Co. was before. 4. Negative Inflation: 1. Impacts the baseline Final Determination (FD). 2. Would operate targets in terms of savings against FD, which Co. assumed was at a reasonable avg. level of inflation. 1. This now going to be lower. 3. When Co. mentioned 3% outperformance on FD, 6% on OpEx and 6% on CapEx, confident that it will deliver the previously mentioned absolute levels. 1. In percentage terms, these numbers are going to be slightly lower now. 5. In terms of what can be achieved in the last year, 2009/2010, Co.'s working very hard. 1. Can see what Co.'s trying to achieve in terms of reduced costs there. 2. Not entirely finished this work. 3. For this year with only two months to go, there's just more limit in what Co. can achieve. 4. Has got the next twelve months to figure out where Co. needs to go.
QUESTION AND ANSWER SUMMARY
OPERATOR: Thank you very much. (Operator Instructions). And the first question is from Neil Beddall of Barclays Capital. Please go ahead, sir.
NEIL BEDDALL, ANALYST, BARCLAYS CAPITAL: Thank you. Hi Mike. Just a quick couple of questions if I may, just on the decline on industrial sort of activity and water usage. Can you just give us a feel for what the likely impact on the EBIT is of that sort of level of decline?
And also let us know roughly just an approximation of how much commercial water supply or commercial water activities, I suppose waste as well as water supply, actually account for in the Severn Trent business please.
MIKE MCKEON, FD, SEVERN TRENT PLC: Well, first of all, the EBIT impact year-on-year, we've talked about the reduction in income and it basically falls through to the bottom line. Most of that was already factored in, but we're just saying it's slightly higher than it was before.
The reasons behind it we're finding is a combination of commercial businesses going out of business. So for example in our region we supply Woolworths, we supply MFI. If they're not in operation they don't take any water. We also have big car companies like Jaguar and Land Rover and if they're on a month's stop and they're clearly not -- as metered customers, they're clearly not using any water and they're big users of water. So there is a combination of basically businesses going out of business and businesses not performing the way they would normally do at the level of activity that they would.
And commercial customers are around about 20% overall of our water revenue although in terms of we have other activities which are non-domestic which is higher than that on top of it. But commercial/industrial people would be about 20%.
NEIL BEDDALL: Right. Okay, thank you.
MIKE MCKEON: Thanks Neil.
OPERATOR: We now go to over Mark Freshney of Credit Suisse. Please go ahead, sir.
MARK FRESHNEY, ANALYST, CREDIT SUISSE: Good morning Mike.
MIKE MCKEON: Morning, Mark.
MARK FRESHNEY: Just a further tech question on metering, I understand the Ofwat actually built in changes to metered customer revenues throughout the review. I guess the key thing is how does what you're seeing compare to the regulatory review rather than year-on-year.
My second question comes on the baseline. What do you think the likelihood of Ofwat actually making adjustments for expected lower inflation in the first year of the next review to the baseline would be?
And thirdly regarding the CapEx, I just wondered whether you'd be able to provide a bit more granularity on exactly what you're doing and how you're rejigging your CapEx program around compared to the FD and also compared to the prior year.
MIKE MCKEON: Okay, there's three questions there, Mark. I'll do my best and if I've missed one, then come back to me.
Measured versus the regulatory review, it's clearly we are lower in terms of consumption of what we originally thought. We did assume some decline. I think it was the order of 1% or 2% per annum. We were seeing about 3% per...
|
