VCT
22/08/2013 08:30
FLLYR
REL: 0830 HRS Vector Limited
FLLYR: VCT: Vector FY2013 Annual Results
FINANCIAL RESULTS FOR THE YEAR TO 30 JUNE 2013
Vector lifts annual earnings and dividend
HIGHLIGHTS:
- Revenue rises 2.2% from $1,252.2 million to $1,279.2 million
- Net profit rises 2.2% from $201.7 million to $206.2 million
- EBITDA rises 0.5% from $627.4 million to $630.5 million
- Final dividend rises to 7.75 cents per share taking the total dividend for
the year to 15.0 cents per share.
New Zealand's leading integrated energy infrastructure company, Vector
Limited (NZX: VCT) today reported improved financial results for the 12
months to 30 June 2013.
Vector Chairman Michael Stiassny said: "Vector, a critical provider of New
Zealand's strategic energy infrastructure, has once again delivered on its
commitment to the Auckland region, the national economy as well as our
shareholders.
"We seek to deliver a sustainable and growing dividend to shareholders, grow
our portfolio of businesses, drive operational excellence and deliver
services attuned to our customers. In the 2013 financial year we met those
objectives.
"The Board has resolved to pay a fully-imputed final dividend of 7.75 cents
per share up from last year's 7.5 cents per share final dividend.
"Our balance sheet remains strong, with gearing as measured by net debt to
net debt plus equity at 51.1%. And, we have continued to invest in the
business. Notably, we were pleased to complete the $60 million acquisition of
Contact Energy's gas metering operation. This business gives us another
opportunity to leverage our internationally-recognised expertise in managing
energy infrastructure."
Vector Group Chief Executive Simon Mackenzie said: "The results were lifted
by growth in our smart metering business, the continuation of legacy pricing
on our Kapuni gas entitlements and continued tight cost control.
"The convergence of information technology and infrastructure management
technology has opened up new growth opportunities for Vector. These are now
buoying our financial performance in the face of a new economic norm of
patchy growth, reduced energy consumption and a challenging environment for
value-enhancing acquisitions.
"Innovations such as photovoltaic cells combined with battery storage are
offering a unique investment opportunity. They offer consumers real
opportunities to reduce energy consumption and help us to more efficiently
manage the network.
"We have made significant productivity gains through on-going operational and
process changes across our business. We are one of the lowest cost providers
of electricity distribution services on measures such as the cost of
delivering power lines services to our customers and the average operating
cost per customer.
"Unfortunately customers' wallets are yet to benefit from these initiatives
as regulation intended. From April of this year we reduced prices on our
residential electricity network by 9% or the equivalent of $60 per
residential customer per year. However, only in the case of a small minority
of energy retailers have we seen these savings passed on to customers.
"The goal of regulation is to incentivise efficiencies in our business and we
expect the gains we make to flow through to customers as regulation
intended."
FINANCIAL AND OPERATIONAL RESULTS:
Year ended 30 June 2013
$M 2012
$M Change
(%)
Revenue 1,279.2 1,252.2 +2.2%
EBITDA 630.5 627.4 +0.5%
EBIT 456.4 453.9 +0.6%
Net profit 206.2 201.7 +2.2%
Operating cash flow 426.2 392.3 +8.6%
Dividend per share 15.0 14.5 +3.4%
Capital expenditure
Growth 167.6 138.9 +20.7
Replacement 131.0 122.9 +6.6
Revenue for the 12 months to June increased 2.2% from $1,252.2 million to
$1,279.2 million. Our unregulated technology operation has provided
considerable support to the business demonstrating the strengths of Vector's
diversified portfolio of businesses.
However revenue fell after stripping out price increases on our electricity
network, price increases on our gas networks and increases in Transpower
charges.
This reduction in revenue followed reduced Kapuni production, warmer weather
and a trend by homes and businesses towards reduced energy consumption.
Energy volumes transported across our electricity network fell 1.1% to 8,332
GWh, while gas distribution volumes fell 1.8% to 21.4 PJ. Gas transmission
volumes fell 5.7% to 118.2 PJ due to reduced demand from power generators.
Electricity volumes will have less effect on our revenues going forward
following changes to the electricity regulatory regime effective 1 April
2013. Vector, in response, is making changes to ensure tariffs reflect costs,
which are predominantly fixed.
EBITDA rose 0.5% from $627.4 million to $630.5 million. Net profit rose 2.2%
from $201.7 million to $206.2 million as we benefited from continued access
to Kapuni gas at legacy prices and successfully controlled costs. But reduced
gas production and a highly competitive LPG market partially offset these
gains.
Mr Mackenzie said: "We are pleased with the progress we have made with our
technology business, particularly our internationally-recognised smart
metering business, which continues to provide a rich source of revenue and
earnings growth.
"We are contracted to install over 764,000 meters across New Zealand,
allowing for customers moving between retailers, up from 670,000 a year
earlier. We are continuing discussions with retailers to expand the fleet.
"New Zealand's conversion to smart metering has proceeded smoothly. Overseas
jurisdictions, which have not had the same experience, are increasingly
looking at the New Zealand model and Vector is investigating the
opportunities that this may create."
Regulation:
The decisions on the Merit Appeals of the Commerce Commission's Input
Methodology decisions, brought by Vector along with six other large
infrastructure companies, are due in the next month.
From April this year, Vector reduced its electricity lines charges in line
with the Commerce Commission's price-quality determination. The Commission
also mandated price reductions for our gas transmission and distribution
networks of 29% and 18% respectively. We will implement these with our normal
price change from 1 October 2013 this year and will adjust the price
reductions in order to align with the regulatory periods.
Outlook:
For the 2014 financial year we expect earnings and revenue to meet market
consensus estimates. Tight cost control and continued growth in our
technology businesses will underpin group revenue and earnings in the coming
year.
We remain focused on growing our technology portfolio, especially in the
metering business. We operate a highly-valued portfolio of assets that is
coveted by international investors and we are very aware of the long-term
value it can create for shareholders as well as Auckland and the national
economy.
SEGMENT PERFORMANCE
Electricity
Year ended 30 June 2013
$M 2012
$M Change (%)
Revenue 632.9 609.0 3.9%
EBITDA 372.5 384.1 -3.0%
Electricity revenue rose 3.9% from $609.0 million to $632.9 million, while
EBITDA fell 3.0% from $384.1 million to $372.5 million.
Revenue increased due to higher Transpower charges and regulated price
increases in the first three quarters of the year. Stripping out the
Transpower charges and the price increases, revenue fell.
Electricity customer numbers increased 0.7% from 535,228 to 539,232. Net
movement in customers increased 52.8% from 2,621 to 4,004. The significant
increase reflects the disconnection of inactive accounts in the prior
financial year.
SAIDI, our measure of network reliability, rose over the fourth quarter from
15.9 minutes to 37.2 minutes over the same period last year, due to a higher
number of storms and high wind events. The audited SAIDI value for the
regulatory period to 31 March 2013 is unchanged at 95.8 minutes.
The revenue gains due to Transpower charges and price increases were offset
by a 1.1% fall in power distributed from 8,424 GWh to 8,332 GWh across
Vector's networks and the regulatory reset to our prices on 1 April 2013. The
lower consumption was due mainly to warmer than average temperatures over the
prior year, with heating degree days falling from 1,262 to 1,150 in 2013.
Maintenance costs were steady, but inter-segment and external costs such as
council rates increased.
Going forward we expect to see connection growth. But on a per user basis we
expect to see flat to reducing volumes consistent with international trends.
Gas Transportation
Year ended 30 June 2013
$M 2012
$M Change (%)
Revenue 219.6 214.6 2.3%
EBITDA 170.4 160.5 6.2%
Revenue rose 2.3% from $214.6 million to $219.6 million, due to regulated
price increases. EBITDA rose 6.2% from $160.5 million to $170.4 million.
Distribution customers rose 1.5% from 154,649 to 156,952.
Net movement in customers rose 7.6% from 2,141, to 2,303, due to the increase
in subdivision activity as well as strong growth in the number of new
small-to-medium sized business customers compared to the prior year.
However these gains were offset by a 1.8% fall in the volume of gas
transported through the distribution network from 21.8 PJ to 21.4 PJ.
Volumes on our gas transmission network fell from 125.4 PJ to 118.2 PJ,
primarily due to reduced demand from gas-fired power stations. But the fall
had little impact on revenue as this is largely contracted capacity.
Costs fell due to lower fuel-gas costs reflecting the reduced volumes through
the Vector network and lower maintenance expenditure. Legal fees mostly
linked to the outage of the Maui pipeline also lifted expenses in the prior
year, but are not repeated in the current year. However, the savings were
partially offset by increases in rates.
Gas Wholesale
Year ended 30 June 2013
$M 2012
$M Change (%)
Revenue 372.2 380.9 -2.3%
EBITDA 60.4 65.8 -8.2%
Revenue fell 2.3% from $380.9 million to $372.2 million, while EBITDA fell
8.2% from $65.8 million to $60.4 million.
The results were underpinned by the continuation of supply of Kapuni gas at
legacy prices following success in an arbitration to determine our
entitlements. The matter is still subject to appeal but we are confident of
our entitlements.
Gas Wholesale also benefited from higher LPG sales due to continued growth in
our bottle swap business and an increase in LPG tolling volumes, which rose
15.8% from 130,820 tonnes to 151,544 tonnes due to the economic recovery in
the South Island, with increased exports also assisting.
Nevertheless, these gains were diluted by lower production from the Kapuni
field, lower natural gas sales volumes, which fell 4.3% from 27.7 PJ to 26.5
PJ, higher LPG purchase prices and higher maintenance and administration
costs.
Gas liquid sales fell 6.7% from 76,876 tonnes to 71,757 tonnes reflecting
lower raw gas production at Kapuni field production at an average 38.8 TJ/day
compared to 45.0 TJ /day last year.
Technology
Year ended 30 June 2013
$M 2012
$M Change (%)
Revenue 109.1 97.0 12.5%
EBITDA 76.3 67.5 13.0%
Revenue rose 12.5% from $97.0 million to $109.1 million, while EBITDA rose
13.0% from $67.5 million to $76.3 million.
Revenue benefited from the 37.0% increase in the installed base of smart
meters, which rose from 369,394 to 505,888 meters. Vector Communications
continues to make an important contribution to the group.
Costs also increased, largely reflecting increased communication and platform
charges due to the continued roll out of smart meters and success in
contracting new customers.
We have extended our contract with Contact Energy to install a further 90,000
meters, and have a new contract to install 38,000 meters for Mighty River
Power. Allowing for switching between retailers, this increases our total
contracted installations to over 764,000, up from 670,000 at June 2012.
We expect to install 13,000 meters to 15,000 meters a month over the next
twelve months.
Shared Services
Year ended 30 June 2013
$M 2012
$M Change (%)
Revenue 0.6 1.2 -50.0%
EBITDA (49.1) (50.6) +3.0%
Shared services demonstrated continued progress on controlling costs.
Cash flow and capital expenditure
Vector continues to invest in its network to maintain our high levels of
service and performance. This investment is the foundation of future earnings
growth.
Operating cash flow rose 8.6% from $392.3 million to $426.2 million, although
this figure was lifted by the timing of payments to certain creditors and we
would expect this to reverse in the upcoming year.
Capital expenditure increased 14.1% from $261.8 million to $298.6 million. Of
this $167.6 million has been directed at growth initiatives and a further
$131.0 million to maintain the quality of our assets.
The increase was driven by investment in our smart meter programme and the
timing of capital expenditure on projects including the nearly-completed $45
million development of our substation at Hobson Street in Auckland and the
now-completed $10.2 million Wairau Road substation on the North Shore. The
step up also reflected the increase in subdivision activity in the North and
South of Auckland.
Capital Structure
Our balance sheet remains strong. Net debt fell from $2,373.8 million at 30
June 2012 to $2,364.3 million. Gearing, as measured by net debt to net debt
plus equity, fell from 52.5% to 51.1%. Net finance costs are covered by EBIT
2.8 times compared with 2.7 times for the year ended 30 June 2012.
-Ends-
For further information contact:
Financial Analysts:
Daniel Kieser
Group Manager Corporate Development
Tel: +64 978 7780
Mob: +64 21 775 028
Media:
Sandy Hodge
External Communications Manager
Tel: +64 9 978 7638
Mob: +64 21 579 522
Appendix
NON-GAAP PROFIT REPORTING MEASURES
Vector's standard profit measure prepared under New Zealand GAAP is net
profit. Vector has used non-GAAP profit measures when discussing financial
performance in this document. The directors and management believe that these
measures provide useful information as they are used internally to evaluate
performance of business units, to establish operational goals and to allocate
resources. For a more comprehensive discussion on the use of non-GAAP profit
measures, please refer to the policy 'Reporting non-GAAP profit measures'
available on our website (vector.co.nz)
Non-GAAP profit measures are not prepared in accordance with NZ IFRS (New
Zealand International Financial Reporting Standards) and are not uniformly
defined, therefore the non-GAAP profit measures reported in this document may
not be comparable with those that other companies report and should not be
viewed in isolation or considered as a substitute for measures reported by
Vector in accordance with NZ IFRS.
Vector's definition of non-GAAP profit measures used in this document
EBITDA: Earnings before net finance costs, income tax, depreciation,
amortisation, share of net profit/(loss) from
associates and impairments.
EBIT: Earnings before net finance costs, income tax, share of net
profit/(loss) from associates and impairments.
GAAP to non-GAAP reconciliation
Year ended 30 June
2013
$M 2012
$M
Net profit for the period (GAAP) 206.2 201.7
Add back: income tax expense1 83.6 81.6
Add back: impairment of investment in associates1 3.6 4.1
Deduct: share of net profit from associates1 (1.3) 0.3
Add back: net finance costs1 164.3 166.2
EBIT 456.4 453.9
Add back: depreciation and amortisation1 174.1 173.5
EBITDA 630.5 627.4
1 Extracted from audited financial statements.
End CA:00240003 For:VCT Type:FLLYR Time:2013-08-22 08:30:04
