Ann: FLLYR: VCT: Vector FY 2012 Annual Results Ma

• Release Date: 23/08/12 11:13
• Summary: FLLYR: VCT: Vector FY 2012 Annual Results Market Release
• Price Sensitive: No
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VCT
23/08/2012 09:13
FLLYR

REL: 0913 HRS Vector Limited

FLLYR: VCT: Vector FY 2012 Annual Results Market Release

Smart growth initiatives sustain Vector FY 2012 growth

Vector Group
12 Months to June 30 FY 2012
$M FY 2011
$M Change
(%)
Revenue 1,252.6 1,244.6 0.6%
Operating expenditure (625.2) (608.0) (2.8)%
EBITDA 627.4 636.6 (1.4)%
Underlying EBITDA  627.4 594.2 5.6%
Depreciation and amortisation (173.5) (170.2) (1.9)%
EBIT 453.9 466.4 (2.7)%
Net profit before tax 283.3 286.8 (1.2)%
Net profit after tax 198.8 201.4 (1.3)%
Underlying net profit after tax 198.8 171.3 16.1%
Earnings per share 20.0 20.2 (1.0)%
Full-year dividend (cents per share) 14.50 14.25 1.8%

All Vector operating segments generated increases in earnings before
interest, tax, depreciation and amortisation (EBITDA). Group EBITDA fell 1.4
percent to $627.4 million from $636.6 million. However, adjusting for the
2011 non-operating $42.4 million contribution from the sale to Transpower of
rights to use Vector's Penrose-to-Hobson Street tunnel, Vector's underlying
group EBITDA rose 5.6 percent to $627.4 million from $594.2 million.

Depreciation and amortisation increased 1.9 percent to $173.5 million from
$170.2 million due to
ongoing growth in Vector's asset base and accelerated depreciation on certain
asset classes.

Net interest costs fell to $166.2 million from $178.2 million primarily
reflecting lower interest rates on
the floating portion of the debt portfolio, increased interest earned on
deposits and the replacement of expiring debt with a lower cost $250 million
US private placement in December 2010.

Net profit after tax fell 1.3 percent to $198.8 million from $201.4 million.
However, if the impact of the 2011 one-off sale to Transpower is stripped
out, then underlying net profit after tax rose 16.1 percent to $198.8 million
from $171.3 million.

Operating cash flow increased 4.7 percent to $392.3 million from $374.6
million. We invested
$261.8 million in our assets to preserve the cash flow and drive growth from
the existing operations. This is a 1.8 percent increase on the prior year's
$257.1 million and more than half of this sum was invested in growth
initiatives that will underpin Vector's performance into the future.

We expect to increase the level of investment over the next two or three
years reflecting large customer projects, network upgrades and continued
investment in our metering business.

The Board has declared a final dividend of 7.50 cents per share for the year,
unchanged from last year's final dividend. The final dividend is to be paid
on 17 September 2012. Total dividends for the year are 14.50 cents per share
up a quarter of a cent or 1.8 percent from the 14.25 cents declared in 2011.
This represents a pay-out ratio of 53 percent of free cash flow in line with
our dividend policy.

SEGMENT PERFORMANCE

Electricity

12 Months to June 30 FY 2012
$M FY 2011
$M Change
(%)
Revenue 609.1 574.0 6.1
EBITDA 384.1 364.6 5.3

Revenue in the electricity segment rose 6.1 percent to $609.1 million from
$574.0 million. EBITDA rose 5.3 percent to $384.1 million from $364.6
million. The division benefited from regulated inflation-linked price
increases and a 1.3 percent increase in consumption across the network to
8,424 GWh from 8,319 GWh in 2011. Increased Transpower charges, which are
passed directly through to customers, also lifted revenue.

These volume increases and generally higher usage per customer were due to a
return to more normal and cooler weather. Average temperatures in the
financial year fell by 1 degree to 15.2 degrees from the unusually high 16.2
degrees last year. Residential consumption grew by 3.3 percent, while small
and medium sized business customers consumed around 2.0 percent more.
Industrial and commercial consumption was up 0.8 percent.

These revenue gains were partly offset by an increase in transmission costs
and lower capital contributions due to the delay of several large projects.

Customer numbers grew 0.5 percent to 535,228 in the 12 months from 532,607 in
2011, with the strongest growth occurring in the industrial and commercial
segment, up 2.3 percent. Residential and small and medium sized business
connections grew by 0.4 percent and 0.8 percent respectively.  Net new
connections were lower than prior years. However, this reflects industry
trends to disconnect non-revenue generating connections.

Gas Wholesale

12 Months to June 30 FY 2012
$M FY 2011
$M Change
(%)
Revenue 381.0 372.3 2.3
EBITDA 65.8 59.6 10.4

Gas Wholesale revenue rose 2.3 percent to $381.0 million from $372.3 in 2011.
EBITDA rose 10.4 percent to $65.8 million from $59.6 million. The Natural
Gas, Kapuni Gas Treatment Plant and Liquigas operations all posted revenue
gains and benefited from high international natural gasoline and LPG prices,
and higher gas sales to industrial and commercial users. The LPG business
suffered a slight fall in volumes and sales, but this was a strong
performance as the prior year included a large one-off opportunistic sale.

As previously signalled, access to Kapuni gas and legacy pricing is drawing
to a close. This is expected to result in a decline in the gas wholesale
business' EBITDA, with timing of that decline dependent on the outcome of
negotiations with signatories to the Kapuni Gas Contract.

Emission trading scheme costs and recoveries are less than prior year due to
lower emission unit prices.

Gas Transportation

12 Months to June 30 FY 2012
$M FY 2011
$M Change
(%)
Revenue 214.6 205.1 4.6
EBITDA 160.5 157.3 2.0

Our gas transportation segment benefited from a 4.4 percent or 5.3 PJ
increase in transmission volumes to 125.4 PJ from 120.1 PJ in 2011.
Meanwhile, consumption on the distribution network increased
4.8 percent or 1 PJ to 21.8 PJ from 20.8 PJ. Revenue rose 4.6 percent or $9.5
million to $214.6 million
from $205.1 million. It also benefited from regulated price increases in line
with the CPI.

EBITDA rose 2.0 percent to $160.5 million from $157.3 million. Offsetting the
revenue gains were the higher cost of sales due to volume and price increases
and increases in gas maintenance costs due to the timing of specific
maintenance initiatives. This expenditure included increased amounts of
pigging . We also faced an increase in regulatory costs as we prepare for the
introduction of the new Gas Regulatory regime at the end of this year.

Gas distribution customers rose 1.4 percent to 154,649 from 152,508 in 2011,
but net additions fell reflecting the energy retailers' policies to
disconnect inactive connections.

 Technology

12 Months to June 30 FY 2012
$M FY 2011
$M Change
(%)
Revenue 97.1 87.1 11.5
EBITDA 67.5 57.8 16.8

The technology segment continued to grow strongly. Revenue rose 11.5 percent
to $97.1 million from $87.1 million and EBITDA grew 16.8 percent to $67.5
million from $57.8 million, assisted by the fast growing metering business,
as well as a solid contribution from our communications business.

Over the period the number of installed smart meters rose 50.5 percent to
369,394 from 245,477 and we continue to add more than 8,000 meters a month.
This rate of addition is slightly slower than prior years but this is due to
Vector now installing in harder-to-reach areas where installations take
longer to complete. Vector is just over halfway through the installation of
the 670,000 meters we have been contracted to install by electricity
retailers.

Shared services

12 Months to June 30 FY 2012
$M FY 2011
$M Change
(%)
Revenue 1.2 50.6 N/A
EBITDA (50.6) (2.7) N/A

Revenue fell to $1.2 million from $50.6 million and EBITDA fell to a loss of
$50.6 million from a loss in
the prior year of $2.7 million due to the inclusion in the 2011 year of the
impact from the sale to Transpower of the right to use the Penrose to Hobson
street tunnel and gains from property sales. We faced personnel cost
increases in line with inflation and the expense of meeting the growing
regulatory demands.

Capital Structure
Vector's capital structure remains strong with gearing (net debt to net debt
plus equity) of 52.5 percent and net interest cover of 2.7 times.  We
refinanced and expanded our senior credit facilities and rolled over the $307
million Capital Bonds. Standard & Poor's reaffirmed our BBB+ credit rating in
August 2012.

Outlook
Vector expects continued revenue growth from our technology business and our
gas wholesale business and growth in the volume of electricity and gas
transported across our regulated energy networks.

However, as we have previously articulated, Vector faces a number of
challenges that make it difficult to predict with certainty the outcome for
the 2013 financial year including the Commerce Commission's decision on the
starting prices for our regulated electricity network for the current
regulatory period; the outcome of the Merits Review court action on the
regulatory regime and negotiations over our rights to gas at the Kapuni field
and the price we pay for that gas.

Our objective is to maintain EBITDA broadly in line with this year and market
consensus, recognising these uncertainties.

ENDS
End CA:00226331 For:VCT    Type:FLLYR      Time:2012-08-23 09:13:55