Announcement

HALFYR: MCY: Mercury - HY2020 Results and Interim Report 08:31a.m. 
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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