Announcement

FLLYR: VCT: Financial Results for the year to 30 June 2019 08:30a.m. 
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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