Annual General Meeting.ppt by lovemacromastia

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									Six months ended 30 September 2000

            Interim
            results
John Roberts
Chief Executive
Agenda


         • Introduction
         • Financials
         • Business reorganisation
         • Looking forward
         • Questions and answers
Introduction


     • Delivering £400m of cost reductions
     • Putting our reorganisation into place
        – delivering additional cost savings through
          our multi-utility strategy
        – preparing for competitive opportunities
          using our core skills


         “Putting our strategy into practice…”
Simon Batey
Finance Director
Highlights

    • Regulated businesses - on track to deliver at least £40m
      cost reductions in year
    • Business now reorganised to deliver further multi-
      utility cost reductions and to pursue competitive
      opportunities
    • Vertex - external order book increased to £850m
    • Norweb Telecom - turnover increased by 43% to £53m
    • Interim dividend of 15.0 pence per share, an increase
      of 2.0%
Turnover
£m                                            2000         1999

Continuing operations                        719.0         770.9
Discontinued operations                      201.5         335.5
Total                                        920.5        1,106.4


• Sale of energy supply business
• Regulatory price reductions in water & wastewater and
  electricity distribution
• Growth in BPO and telecommunications
Operating profit
£m                                                  2000    1999

Continuing activities*                              256.6   318.7
Discontinued activities*                             21.6    17.4
Total operating profit*                             278.2   336.1


• Anticipated reduction following regulatory price reductions
• Operating costs reduced by £15m
• Investment for growth in BPO and telecommunications

                            * Excluding exceptional items
Exceptional items
£m                                                                     2000              1999

Profit on disposal of businesses                                       292.2               -
Goodwill written off                                                 (101.0)              -
Year 2000 costs                                                         -                (7.0)
                                                                      191.2              (7.0)


Exceptional tax charge                                                 (45.0)              -

nb c£15m restructuring costs to be incurred in second half year following group reorganisation
Interest
£m                                              2000           1999

Interest charge                                109.7       102.9


Average interest rates                         7.4%        7.1%


• Increased borrowings to fund capital expenditure
• Partly offset by sales proceeds from sale of energy supply
• Higher average interest rates
Taxation
£m                                               2000       1999

Taxation charge                                   5.8        0.6


• Based on estimated effective rate for the full year
• Mainly UK tax
• Benefit of tax allowances on continuing high level of capital
  expenditure
Earnings and dividends
pence per share                                 2000       1999

Earnings per share                             26.4        40.5
Dividend per share                             15.0        14.7
Dividend cover                                  1.8x        2.8x


• Impact on EPS of regulatory price reductions on operating profit
• Interim dividend increased by 2.0%
Movement in net debt
£m                                              2000       1999

Operating cash flow                            420.4       426.4
Acquisitions and disposals                     309.1        (3.1)
Dividends                                       (0.3)     (205.3)
Other (capex and financing)                   (404.9)     (407.8)
Decrease/(increase) in net debt                324.3      (189.8)

           • Operating cash flows steady in spite of impact of
             regulatory reviews
           • Proceeds from disposal of energy supply mitigates
             borrowing to fund regulatory capital programme
           • Gearing fell from 105% to 88%
Water and wastewater
£m                                               2000        1999

Turnover                                        471.2       515.3
Operating profit                                201.0       244.6
Capital expenditure                             164.7       240.1


• Turnover reduced by £39m following regulatory price reductions
• Cost reductions delivered ahead of plan
• On track to deliver at least £28m cost reductions targeted in year
• Capex reduction is result of timing effect in AMP3 programme
Electricity distribution
£m                                               2000       1999

Turnover                                        130.5      174.6
Operating profit                                 53.1        68.6
Capital expenditure                              54.4        51.2


• Turnover reduced by £55m in full year following regulatory
  price reductions and effects of licence separation
• Cost reductions delivered ahead of plan
• On track to deliver at least £12m cost reductions targeted in year
Telecommunications
£m                                              2000      1999

Turnover                                        52.9      37.0
Operating profit                               (12.4)     (8.4)


• Turnover increased by 20% year on year excluding acquisitions
• Business sales up 62% to £29m
• Continued investment to drive future sales and profit
• National network increased to 2,800km
Business process outsourcing
£m                                               2000        1999

Turnover                                         96.7        86.0
Operating profit                                   4.0           5.7


• Contribution to turnover from Cable & Wireless contract
• Fall in operating profit reflects further investment to grow
  business and renegotiated internal contracts
• 50% of annualised turnover is external to group
International operations
£m                                             2000      1999

International operations                       5.6       5.3
Development costs                             (2.5)      (3.7)
Operating profit                               3.1       1.6


• Increased operating profit before development costs
• US$55m, 20-year wastewater treatment contract won in
  Queensland, Australia
• US$1bn, 25-year concession agreement signed for Sofia, Bulgaria
Segmental analysis of profits
£m                                                       2000     1999
 Water and wastewater                                    201.0    244.6
 Electricity distribution                                 53.1     68.6
 Telecommunications                                      (12.4)    (8.4)
 Business process outsourcing                              4.0      5.7
 International operations                                  3.1      1.6
 Other activities                                          7.8      6.6
 Operating profit on continuing activities*              256.6    318.7
 Discontinued activities                                   21.6    17.4
                                                         278.2    336.1
                                 * Excluding exceptional items
Highlights

    • Regulated businesses - on track to deliver at least £40m
      cost reductions in year
    • Business now reorganised to deliver further multi-
      utility cost reductions and to pursue competitive
      opportunities
    • Vertex - external order book increased to £850m
    • Norweb Telecom - turnover increased by 43% to £53m
    • Interim dividend of 15.0 pence per share, an increase
      of 2.0%
John Roberts
Chief Executive
Strategy

       • Improve the efficiency of our regulated
         businesses
       • Maximise multi-utility synergies
       • Develop our non-regulated businesses
         using our core skills of
           – asset management
           – customer relationship management
New business structure


                             United Utilities PLC


United Utilities   United Utilities   United Utilities
   Service           Contract           Customer                         Norweb
                                                          Vertex
   Delivery          Solutions             Sales                         Telecom



       Asset Management               Customer relationship management
New business structure
       • United Utilities Service Delivery
          – restructuring regulated asset management businesses
            within a single unit
       • United Utilities Contract Solutions
          – building on asset management skills and developing
            non-regulated income
       • United Utilities Customer Sales
          – establishing a separate water supply business
            out of North West Water
       • Vertex
          – BPO services with a primary focus on CRM
       • Norweb Telecom
          – telecomms solutions for small and medium
            sized enterprises
United Utilities Service Delivery

        • Programme of £400m cost reductions fully
          identified and underway
        • Bring together the management and operation of
          North West Water and Norweb Distribution
          assets to achieve further multi-utility synergies
United Utilities Service Delivery

        • Operating water and electricity networks requires
          similar skills
        • Management and operation of network assets
          brought together into a single business
        • Focus on efficiency and multi-utility synergies
          for out-performance
        • Appointment of Les Dawson as MD (ex Transco)
          broadens asset management experience
United Utilities Contract Solutions

        • Building on existing profitable international
          operations
        • Combines core skill of asset management with
          commercial skills of international operations
        • Managing third party assets throughout the UK
          and selected areas overseas
        • Wider restructuring of utilities in the UK
        • WPD bid for Hyder
          – Option for Hyder Industrial Services for £75m
United Utilities Customer Sales

       • Separating water supply from asset management
         activities
       • Preparing proactively for the future competitive
         water market in the UK
       • Sharper focus for customer-facing activities

       • Establish and develop the value in our customer
         base
Vertex external order book

    1000




(£m) 500




       0
           1998     1999      2000      Now
                  Year ended 31 March
Vertex

         • Order book of £1.3bn, £850m external to group
         • Managing over 8.5 million customer accounts
         • Leading provider of outsourced services to
           utilities in the UK
         • Scale and breadth of activity to be a major player
           in the BPO market
Telecommunications

                                    Total Sales
                 140
                 120      Interim   Final
 Turnover (£m)




                 100
                 80
                 60
                 40
                 20
                  0
                       96/97    97/98       98/99   99/00   00/01

                         Strong growth in business sales...
Norweb Telecom

      Network
      • Development of 2,800km national network
      • 5 System X exchanges

      Products
      • Successful integration of Intercell
         – fixed and mobile telephony seller
      • Netforce acquisition
         – internet services consultancy
Broadband wireless access licences

        • Licences acquired in four regions
           – North West
           – West and East Midlands
           – Yorkshire
           – Northern England
        • Cost £9m
        • Exploits Norweb’s radio expertise
        • Technology well-proven
        • Not contingent on local loop unbundling
           – capable of immediate deployment
Norweb Telecom

      Realising shareholder value
      • Development of business on track
         – transaction timing subject to market conditions
         – overriding objective to maximise value

      Strengthened management
      • Appointment of Hugh Logan as MD (ex BT)
Sale of energy supply
        • Sold to avoid increased risk from commodity
          trading - a non-core skill
        • £310m cash sale to TXU Europe who took
          responsibility for power purchase contracts with
          a fair value of £241m at 31 March 2000
        • Good price - implied value of c£240 per
          customer
        …but also
       • Seven year £650m contract for Vertex
       • Marketing alliance between TXU Europe and
         North West Water
Looking forward
 • Debate over alternative capital structures for utilities
 • United Utilities is committed to being an industry leader in
   operational and financial efficiency, through multi-utility
   strategy and existing structure
 • Debate is response to concerns of capital markets to risk
   perceived in the regulatory process
 • Major long-term capital investment programme to be funded
 … but
 • Capital markets need more confidence in regulatory process
   to fund this long-term investment
Progress so far

       • Business reorganisation now completed
       • Cost reduction programme
          – delivering ahead of plan
          – on track to achieve at least £40m targeted for
            full year
       • Growth in order book in Vertex
          – £1.3bn total order book
          – £850m external to group
          – leading provider of outsourced services to UK
            utilities
       • Norweb Telecom
          – strong growth in sales
          – acquisitions enhance product range
          – success in broadband wireless access licences
Going forward


      • Focusing on core skills
      • Reshaping the group
      • Delivering cost reductions
      • Ready for competition




      “Putting our strategy into practice…”
Supporting Information
Water and Wastewater Turnover
 £m                6 months      Price     Volume     6 months
                     ended       Effect     Effect      ended
                  30 Sept 1999                       30 Sept 2000

 Unmeasured           309.6      (25.6)      (5.2)       278.8

 Measured             170.6      (10.9)       2.4        162.1

 Trade effluent        23.8        (2.7)      0.3         21.4

 Other                 11.3        0.2       (2.6)          8.9

                      515.3      (39.0)      (5.1)       471.2
Water and Wastewater Gross Investment
  £m                       2000    1999

  Water supply              17.7    19.6

  Water distribution        46.9    60.4

  Wastewater                87.6   143.0

  Quality and efficiency    12.5    17.1

                           164.7   240.1
Water and Wastewater Expenses
  £m                        1999/2000   1998/1999

  Depreciation                59.8        53.6

  Infrastructure renewals     49.9        38.1

  Customer initiatives         3.5        12.7

  Other costs                157.0       166.3

  Total costs                270.2       270.7

								
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