Announcement
ANNREP: CEN: Contact Energy - FY19 Results and Annual Report
08:30am
CEN
12/08/2019 08:30
ANNREP
PRICE SENSITIVE
REL: 0830 HRS Contact Energy Limited
ANNREP: CEN: Contact Energy - FY19 Results and Annual Report
Monday, 12 August 2019
Investments in customer-centric processes, products and propositions benefit
customers
Key financial metrics
[see table in attached media release]
Highlights for the year
o Introduction of new, differentiated products and digital service
investments improve customer advocacy by 6 points. Smart payment solutions
help customers avoid entering the credit cycle; outstanding debt at record
low levels
o Flexible generation portfolio with favourable hydrology, access to stored
gas and strong risk management delivers a $56 million improvement to
operating earnings over FY18
o Cost efficiency programme continues to deliver capital efficiency, with
cash spent on stay-in-business (SIB) capital projects down by $18 million
(30%) and other operating costs down $11 million (5%)
o Completed the sale of Ahuroa gas storage (AGS) and the sale of the Rockgas
LPG business in the year, receiving net cash proceeds of $390m. These
transactions simplify and focus the organisation and have strengthened our
balance sheet
o Committed to drilling four geothermal appraisal wells at Tauhara in
anticipation of a final investment decision to develop a new renewable power
station
o Investment made in Simply Energy to add the capability required to deliver
innovative solutions that will help our Commercial and Industrial customers
transition to the low carbon solutions that Tauhara will deliver
o Rewarding shareholders with increasing dividends. FY19 ordinary dividend of
39 cents per share (FY18 32 cents per share)
Putting our energy where it matters
"It is pleasing to report a strong financial result for FY19 following the
transformation programme we have successfully executed in recent years which
included sector leading reductions to operating and capital expenditure, a
deepening of the relationship with our customers and the simplification of
our portfolio of assets", Chief Executive Dennis Barnes said.
Contact reported a statutory profit for the twelve months ended 30 June 2019
of $345 million, $213 million higher than the prior corresponding period
after realising a gain on the sale of Rockgas and AGS of $170m. EBITDAF from
continuing operations increased by $56 million, or 12%, to $505 million led
by strong operational performance in the Wholesale business. Operational
improvements resulted in a further reduction in other operating costs of $11
million, 5% down on the prior comparative period. Operating free cash flow
increased to $341 million, up 13% on FY18 on a combination of higher
operating earnings, lower stay in business capital expenditure and interest
costs that were partially offset by higher cash tax.
Contact's portfolio of long-life renewable generation assets continues to
provide the Board confidence to distribute ordinary dividends which target a
pay-out ratio of 100% of expected operating free cash flow. For FY19 this
equated to 39 cents per share, compared to the 32 cents per share declared
for FY18.
Connecting with our customers
Contact's Customer business continues to reduce the cost to serve while
improving the customer experience.
Customer experience improvements saw a final quarter Net Promoter Score of
+26, up +6 on the prior comparative period as operational efficiencies led to
a 1% reduction in the cost to serve customers. Contact also invested in a
refreshed brand, new products and digital capability to drive improved
customer experience. These factors have contributed to customer churn being
1.7 percentage points below the market. Despite strong operational
performance, Customer EBITDAF was down $9 million to $67 million for the
twelve months ended 30 June 2019, as continuing competitive pressures limited
Contact's ability to recover rising costs for electricity and distribution
networks, with the result also impacted by lower sales volumes to electricity
customers.
"Even with volatile wholesale prices, the retail electricity market remains
highly competitive, with heavy discounting and large sign on credits the
predominant tools for acquiring customers. In order to differentiate our
products and services from our competitors we have delivered several smart
customer solutions in the period, including our new payment methods - PrePay
and weekly/fortnightly billing - that help customers manage their bills, and
we launched new products to deliver customer choice and innovative rewards
such as 'free-bill', 'promise plan' and our broadband and electricity bundle.
To assist those who struggle to pay their bills we are removing prompt
payment discounts and replacing them with simple plans such as our
pre-existing 'basic plan' or guaranteed discounts.
The significant improvement in customer advocacy and take-up of our new
products gives me confidence that our transformation into a customer-centric
digital energy company is progressing well" said Mr Barnes.
Generating for the future
Contact's Wholesale business is working with business customers, partners and
suppliers to decarbonise New Zealand's energy sector.
"Volatile wholesale market conditions driven by a shortage of gas have shown
the value of our flexible and diverse generation assets, strong risk
management, our continuous improvement programme and our access to stored
gas", Mr Barnes said.
Generation EBITDAF increased by $67 million to $464 million in the twelve
months to 30 June 2019 compared to the same period a year ago, as production
from hydro generation increased by 22%, or 752GWh after a dry FY18 in
Contact's Clutha catchment. In addition, Contact supported the market by
accessing gas stored in AGS and offering additional thermal generation above
our contracted sales to meet wholesale spot demand.
"New Zealand is undergoing a transformation from reliance on fossil fuels to
renewable electricity. Contact is well placed to meet the expected growth in
electricity demand which will result in meaningful reductions to the nation's
carbon emissions by developing our large-scale consented geothermal
development options backed by our world-class geothermal capability and
strong balance sheet", Mr Barnes said.
Outlook
"After successfully lowering the cost of geothermal since our last build, we
are taking the next step towards developing the geothermal power station
project we have consented at Tauhara by committing to drill a series of four
appraisal wells.
Our commitment to reducing carbon emissions is not limited to the supply-side
and we are actively partnering with our Commercial and Industrial customers
through our investment in Simply Energy - an innovative energy solutions
company that uses demand-side management tools to assist customers switch to
electricity from their current energy sources, help them be more energy
efficient, reduce their costs and cut their carbon emissions.
We remain focussed on delivering on our transformation programme to reduce
controllable costs, and seek opportunities to capture value from scale
efficiencies through brownfield geothermal development and by leveraging our
customer systems and lean operating model to improve returns", Mr Barnes
said.
ENDS
Investor enquiries: Matthew Forbes +64 21 072 8578
Media enquiries: Andrew Austin +64 21 644 167
End CA:00338910 For:CEN Type:ANNREP Time:2019-08-12 08:30:13
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