Announcement
FLLYR: VCT: Financial Results for the year to 30 June 2019
08:30am
VCT
23/08/2019 08:30
FLLYR
PRICE SENSITIVE
REL: 0830 HRS Vector Limited
FLLYR: VCT: Financial Results for the year to 30 June 2019
FY19 ADJUSTED EBITDA RESULT IN LINE WITH GUIDANCE.
NOVEMBER REGULATORY RESET KEY FOR FIVE YEAR OUTLOOK
Vector's financial results for the 12 months to 30 June 2019 were steady,
with adjusted earnings before interest, tax, depreciation and amortisation
(Adjusted EBITDA) of $485.8 million - ahead of FY18 and in the mid-point of
the guidance range provided over the year.
Shareholders will receive a fully imputed final dividend of 8.25 cents per
share, taking the full year dividend to 16.50 cents per share, up from 16.25
cents per share in 2018.
Dame Alison Paterson said, "While our revenues continued to benefit from
strong connection growth across our networks and the further expansion of the
metering business in New Zealand and Australia, gains were partially offset
by increased maintenance expenditure to improve electricity network
reliability and the underperformance of E-Co Products Group, trading as HRV.
"Group net profit after tax was $84.0 million and includes a non-cash
impairment of $46.6 million in respect of E-Co Products Group. The prior
year's net profit of $149.8 million included a one-off tax gain of $16.7
million. If we exclude these, Group net profit after tax of $130.6 million
was down slightly on the prior year.
"As a result of the disappointing performance of E-Co Products Group leading
to impairment, we have new leadership in place and have repositioned the
business with our other technology solutions, through Vector PowerSmart.
"For the past decade, we have worked hard to build a strategic asset
portfolio which provides more options for sustainable returns. Alongside our
regulated electricity and gas businesses, we have continued to grow our wider
businesses, particularly Vector PowerSmart, Vector Advanced Metering Services
(AMS) and Vector Communications, which, along with our Gas Trading business,
define our company as an energy group with a growing domestic and
international footprint."
Vector Group Chief Executive, Simon Mackenzie said, "The 12 months saw many
operational highlights, including continued network and smart meter
connection growth, ongoing leadership in health and safety, and the
successful integration of network management software co-developed with
technology firm, mPrest.
"Vector has continued to engage with the Commerce Commission in relation to
electricity network service performance in the context of an increasingly
challenging environment. As part of this process, earlier this year Vector
and the Commission agreed to recommend to the Court a penalty of $3.6 million
in recognition of Vector's breaches of the electricity network quality
standards in 2015 and 2016. This year we have strengthened our focus on
improving network reliability and we remain committed to meeting our
regulatory compliance requirements."
"Vector is facing a significant, ongoing requirement to invest in our
networks not just to support growing consumer demand, but also local and
central policy objectives of enabling Auckland growth, keeping energy
affordable and enabling the transition to a low carbon world through the
accelerated electrification of transport.
"April 2020 marks the start of the next five-year regulatory period where the
Commerce Commission will reset limits for our electricity network revenues
and network quality standards.
"In terms of network revenues, a key focus of our ongoing engagement with the
Commission calls into question the sustainability of two critical regulatory
settings. The first is the indexation of asset values, which are heavily
reliant on inflation forecasts and have been significantly over-forecasted
for a decade - resulting in major revenue impacts to electricity
distributors, without correction.
"Secondly, the current ultra-low interest rate environment underscores the
urgent need for the Commerce Commission to amend the way it derives the cost
of debt in its Weighted Average Cost of Capital (WACC) determinations.
Currently this is determined from a narrow window around the time of reset.
"Within the broader regulatory regime, there are avenues for Vector and the
Commerce Commission to work together to correct these anomalies, and better
align cashflows with investment needs.
"We remain committed to working openly and collaboratively with the Commerce
Commission - both within the current reset process and beyond - to explore
all options to address these two challenges."
Looking ahead
Dame Alison Paterson said, "While acknowledging the key challenges ahead of
us, we remain committed to Vector's vision to create a new energy future for
New Zealanders.
"We remain confident in our plan to rise to the challenges of Auckland's
growth and increasing electrification of transport. We will continue target
investment as efficiently as we can by supporting traditional network assets
with digital and new energy solutions for the long-term benefit of energy
consumers. However, changes to regulatory settings which enable this
investment will be critical.
"We are pleased by our ongoing success in the Australian metering market and
look forward to continued growth in the coming year. Our revised approach for
Vector Communications and the newly consolidated Vector PowerSmart business
are already gaining traction, and we look forward to reporting on progress
and improved profitability. Our Gas Trading business will continue to adapt
and seek new opportunities in the challenging market conditions.
"As has been signalled previously, we will be reviewing our dividend policy
and providing guidance on FY20 earnings once we have the Commission's final
reset decision, which is expected in late November of this year."
ENDS
Investor contact
Jason Hollingworth, Chief Financial Officer, Vector
Jason.hollingworth@vector.co.nz, 021 312 928
Media contact
Elissa Downey, Acting Senior Manager Corporate Communications, Vector
Elissa.downey@vector.co.nz, 021 866 146
About Vector
Vector is New Zealand's leading network infrastructure company which runs a
portfolio of businesses delivering energy and communication services to more
than one million homes and commercial customers across the country. Vector is
leading the country in creating a new energy future for customers and
continues to grow and invest in the growth of Auckland, and in a wide range
of activities and locations. Vector is listed on the New Zealand Stock
Exchange with ticker symbol VCT. Our majority shareholder, with voting rights
of 75.1%, is Entrust. For further information, visit www.vector.co.nz
End CA:00339638 For:VCT Type:FLLYR Time:2019-08-23 08:30:21
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