Announcement
HALFYR: MCY: Mercury - HY2020 Results and Interim Report
08:31am
MCY
25/02/2020 08:31
HALFYR
PRICE SENSITIVE
REL: 0831 HRS Mercury NZ Limited (NS)
HALFYR: MCY: Mercury - HY2020 Results and Interim Report
[See table in News Release]
25 February 2020 - Below average generation and the divestment of smart
metering business Metrix impacted Mercury's earnings for the financial
half-year to 31 December 2019, Chief Executive Fraser Whineray says.
Mr Whineray said that while earnings (EBITDAF) of $258 million ($302 million
HY2019), and net profit after tax (NPAT) of $83 million ($104 million
HY2019), were down on the near-record prior corresponding period, when
adjusted for lower generation and the sale of Metrix the result reflected
strong execution across Mercury's business.
Highlights included:
o committing to complete the construction of NZ's largest windfarm at Turitea
by building the remaining 27 consented turbines, adding to the 33-turbine
project announced earlier in 2019
o effective portfolio management to capture opportunities in a dynamic
wholesale and retail market
o investment in data science and analytics capability to better inform our
customer strategy
o configuration of Rotorua and Maraetai workspaces to support a more
collaborative and high-performance team environment
o completion of an upgrade to our Maximo asset management system
o management of planned geothermal maintenance shuts
Generation during the period reduced by 377GWh to 3,428GWh due to drier
conditions in the Waikato and important scheduled maintenance on several
geothermal stations as part of Mercury's long-term asset management plan.
Hydro generation was down 306GWh to 2,142GWh (2,448GWh HY2019) while
geothermal generation was down 71GWh to 1,286GWh (1,357GWh HY2019).
"While hydro generation was below the mid-point forecast we had at the start
of the financial year, our portfolio strategy has captured opportunities in
this dynamic environment," Mr Whineray said.
"A deliberate portfolio strategy to maintain a longer net-generation
position, particularly from October, has been positive for earnings and risk
management.
"Applying our expanded analytics capability helped enhance integration of our
portfolio approach with our customer strategy. We have been able to better
apply insights to digital initiatives that reward loyalty and value.
Mercury's focus on customer value rather than growing customer numbers at all
costs saw mass market customer numbers down 16,000, however we achieved a
1.8% uplift in yield across our mass market segment through disciplined
portfolio management," Mr Whineray said.
Operating expenditure was $94 million ($99 million HY2019). Mercury's
stay-in-business capital expenditure (SIB capex) was $53 million, up $8
million on the prior corresponding period due to scheduled geothermal well
drilling costs.
Free cash flow at $127 million ($126 million HY2019) was slightly up due to
lower interest costs, tax paid and elevated working capital requirements in
the prior corresponding period.
INTERIM DIVIDEND
Mercury's Chair Prue Flacks said the Board had approved a fully-imputed
interim dividend of 6.4 cents per share, an increase of 3.2% on HY2019, to be
paid on 1 April 2020. This represents approximately 40% of the full-year
ordinary dividend guidance of 15.8 cents per share.
Total shareholder return (TSR) across the 12-month period to 31 December 2019
was 43%.
Ms Flacks noted that this interim report was Fraser's last as Chief
Executive, before he leaves in March for a role at Fonterra.
"Fraser has been an inspiring leader for Mercury, and a pleasure to work
with," Ms Flacks said.
Mercury has appointed former Trustpower Chief Executive Vince Hawksworth to
succeed Mr Whineray, with Mr Hawksworth joining in late April.
FULL YEAR OUTLOOK
Mr Whineray said Mercury expects to see ongoing challenging wholesale
conditions due to national thermal fuel and transmission constraints, however
the company's portfolio is well positioned.
"Intense competition in retail and strained retail margins will continue to
be a feature. I also anticipate further competitor decisions on new
generation development and retirement," Mr Whineray said.
"Mercury is well positioned for the full year as a result of our portfolio
and channel management, reinvestment activities in generation, digital and
our people, and new investment decisions."
GUIDANCE
Mercury's FY2020 EBITDAF guidance has been revised to $500 million, subject
to any material events, significant one-off expenses or other unforeseeable
circumstances including hydrological conditions. Guidance at the time of this
report assumes 3,900GWh of hydro production. FY2020 SIB capex guidance is
$120 million, up $15 million from initial guidance due to costs related to
bringing forward the drilling of a geothermal well at Rotokawa.
FY2020 ordinary dividend guidance remains at 15.8 cents per share, fully
imputed, representing a 2% increase on FY2019 and the 12th year of
progressive ordinary dividends.
ENDS
Howard Thomas
General Counsel and Company Secretary
Mercury NZ Limited
For investor relations queries, please contact:
Tim Thompson
Head of Treasury and Investor Relations
0275 173 470
For media queries, please contact:
Craig Dowling
Head of Communications
021 615 663
End CA:00348888 For:MCY Type:HALFYR Time:2020-02-25 08:31:27
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