VCT
23/08/2012 09:15
FLLYR
REL: 0915 HRS Vector Limited
FLLYR: VCT: Vector FY 2012 Results Media Release
Vector 2012 earnings robust: sustained by smart growth initiatives
Highlights
o Underlying net profit after tax rose 16.1 percent to $198.8 million from
$171.3 million after adjusting for the 2011 sale to Transpower of rights to
use Vector's Penrose to Hobson Street tunnel. Net profit after tax fell 1.3
percent to $198.8 million from $201.4 million.
o Achieved robust earnings growth across our portfolio of businesses despite
muted economic conditions and rising regulatory costs.
o Technology and gas wholesale segments growing strongly, underscoring
success of
growth initiatives.
o Capital investment of $261.8 million provides for continued growth and
maintenance of safe, secure and efficient energy networks to Auckland and the
broader economy;
o Balance sheet remains strong; gearing stands at 52.5 percent. Standard &
Poor's BBB+/stable investment-grade credit rating reaffirmed.
o A final dividend of 7.50 cents per share taking 2012 total dividends to
14.50 cents per share, extending Vector's strong record of delivering returns
to shareholders and putting more than $100 million into the pockets of
Auckland Energy Consumer Trust (AECT) beneficiaries.
Financial Highlights
o Group revenue increased 0.6 percent to $1,252.6 million in the 12 months to
June 30 from $1,244.6 million in 2011.
o Group earnings before interest, tax, depreciation and amortisation (EBITDA)
fell 1.4 percent to $627.4 million from $636.6 million.
o Underlying EBITDA, adjusted for the 2011 sale to Transpower of rights to
use Vector's Penrose to Hobson Street tunnel, rose 5.6 percent to $627.4
million from $594.2 million.
o Net profit after tax fell 1.3 percent to $198.8 million from $201.4
million, but underlying net
profit after tax rose 16.1 percent to $198.8 million from $171.3 million.
New Zealand's largest multi-network infrastructure company Vector today
reported a robust result for the 12 months to 30 June 2012, achieving growth
across its portfolio of businesses despite rising regulatory costs and
adverse economic conditions.
Vector Chairman Michael Stiassny, said the Board had declared a final
dividend of 7.50 cents per share, bringing total dividends for the year to
14.50 cents per share (2011:14.25) representing a payout ratio of 53
percent (2011: 56 percent) relative to the dividend policy of 60 percent
average over time. The final dividend is payable on 17 September 2012 to
shareholders registered on 10 September 2012.
Vector Group Chief Executive Officer Simon Mackenzie said the results were a
testament to the deep resources of expertise and innovation upon which the
company draws.
"They also show a mixed ownership company, being jointly owned by the public
through the Auckland Energy Consumer Trust and private investors successfully
delivering on the expectations of shareholders, Auckland and the national
economy.
Business performance
"Vector operates a portfolio of infrastructure businesses that operate in
un-regulated and regulated markets. Our metering, telecommunications and gas
wholesale businesses are in the former category and delivered strong growth
despite robust competition and the adverse economic environment. Our
electricity and gas distribution and transmission networks are in the latter
category and still delivered improved returns even though our prices are set
by the Commerce Commission.
"The standout performance came from our growing technology business, which
generates revenue from the provision of metering and related information
services and telecommunications. It grew revenue and EBITDA by 11.5 percent
and 16.8 percent respectively.
"Vector is recognised internationally for being at the forefront of
developing smart metering technology and we are only halfway through our
contracted deployment of 670,000 meters. And even after these installations
are completed, it offers great promise.
"The gas wholesale business, another unregulated business grew revenue by 2.3
percent and EBITDA by 10.4 percent. This is due to large gas users turning to
Vector as they recognise our willingness to configure gas supply to meet
their specific needs and our ability to offer greater price certainty and
supply security thanks to our multiple long-term contracts with diverse gas
suppliers," he said.
Mr Mackenzie said Vector's regulated business - the gas distribution and
national transmission networks and the core Auckland electricity network -
grew revenue and earnings, benefiting from weather returning to more
normalised patterns.
"Volume through our electricity network increased by 1.3 percent to 8,424 GWh
from 8,319 GWh, due to more normal weather patterns. Average temperatures in
the financial year fell by 1 degree to 15.2 degrees, closer to the long run
average, from the unusually high 16.2 degrees last year.
"Growth in our electricity customer base, to 535,228 from 532,607 was muted.
However, we grew the number of industrial and commercial customers and the
number of small and medium sized business customers by 2.3 percent and 0.8
percent respectively. This is a strong result given the tough economic
conditions and they show the core Vector business can continue to grow even
while the broader economy struggles. Our gas customer base grew 1.4 percent
to 154,649 from 152,508.
"Meanwhile, Vector has delivered on our commitments to customers to provide a
reliable critical national infrastructure to customers. The Rugby World Cup
matches were played in Auckland without a noteworthy network incident and in
the period after the tournament we deftly managed the outage of the Maui
Pipeline.
"Although Vector does not own the pipeline, as the critical contingency
operator and Maui Pipeline operator, our gas transmission team performed an
exemplary job, speedily managing the repair; optimising capacity on the
smaller Vector-owned gas transmission network that runs parallel to the Maui
Pipeline and working with customers to manage their demand," he said.
Mr Mackenzie said Vector has continued to focus on safety throughout the
year, ensuring that staff, customers and the public were safe around our
networks.
"Our focus on safety is reflected in the fact that we are one of the first
companies in New Zealand to have our safety management system certified
against the new NZS7901 Safety Management System for Public Safety standard
across our electricity networks. This is an achievement we are very proud of.
Capital investment
"Vector is New Zealand's fifth largest listed company by market
capitalisation and one of the economy's largest contributors. Capital
investment directed at growth and maintaining the existing critical energy
infrastructure rose 1.8 percent to $261.8 million, from $257.1 million in the
prior year. Of this sum more than half was directed at growth investments.
"This investment, of which the majority is spent locally, underpins the
livelihood of many thousands of people, and ensures Auckland, the engine of
the national economy, is supplied with energy and is given the capacity to
thrive and grow.
"Key projects include the investment in substations in Hobson Street in the
Auckland CBD and Wairau Road on the North Shore. Transpower is locating its
new 'grid exit points' at these substations and when completed in 2014, these
substations will provide additional security of electricity supply to
Auckland and the North Shore and will provide additional capacity for
economic growth in both localities.
"Vector continues to invest in innovation and research to ensure we are at
the forefront of developing energy technologies. We understand energy will be
provided to the nation in a myriad of different ways into the future.
"It is for this reason we have invested so much in our metering business. But
we are also excited about a number of other technologies including solar
power, which we believe could play an important role in
New Zealand's energy future.
"Over the last year we have further developed our capabilities in this area
working with the Department of Conservation to install arrays of batteries
and solar panels on islands in the Hauraki Gulf and
Raoul Island in the Kermadec Group. These installations will supply up to 80
percent of DOC's needs on the islands and deliver substantial cost savings.
Soon New Zealand homes and business may enjoy similar benefits."
Regulation
"New Zealand's lack of regulatory certainty on critical infrastructure is of
concern to international investors. This leads to higher borrowing costs and
it is therefore impinging on our international competitiveness.
"The country urgently needs a regime that recognises the national need to
incentivise international
capital markets to make the long-term commitment to fund safe, secure and
cost-effective ports,
airports and telecommunications and energy networks, while striking the
appropriate balance with the consumer's short- term desire for cheaper
services.
"The current regulatory regime, as framed is some way from achieving that
balance. It also fails to recognise Vector's unique mixed-ownership structure
where our 75.1 percent shareholder, the Auckland Energy Consumer Trust, faces
strong disciplines to deliver outcomes that benefit the broader community.
"We are at half-time in the regulatory process. The second-half will resume
later this year when we along with others take our Merits Review of the
regulatory regime to the High Court. We continue to believe the Commerce
Commission has not determined the fundamental inputs nor provided the
complete regulatory package and the certainty needed for sound long-term
investments.
"Its determination of key regulatory inputs - from its asset valuation and
allowable return methodologies through to its lack of incentives for cost
savings and energy efficiency is fundamentally flawed.
"We do not take legal action lightly, but only through testing this still
immature regulatory regime through the courts will we arrive at the balance
and stability the country needs," said Mr Mackenzie
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 on 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:00226332 For:VCT Type:FLLYR Time:2012-08-23 09:15:17
