VCT
28/08/2015 08:47
FLLYR
PRICE SENSITIVE
REL: 0847 HRS Vector Limited
FLLYR: VCT: Annual Results 2015
Creating a new energy future
Earnings ahead of guidance as new technology and a focus on customers drives
innovation at New Zealand's largest integrated infrastructure company
HIGHLIGHTS:
- Revenue rises 2.8% to $1,294.0 million and adjusted EBITDA is $596.9
million, ahead of the prior period's $580.7 million and ahead of market
expectations
- Strong growth in Auckland, higher energy volumes and continued growth in
the technology operations lift Vector's financial performance, offsetting
well-signaled price cuts to the regulated energy networks and falling demand
and weaker prices in the gas wholesale business
- Net profit falls 12.8% to $149.4 million from $171.3 million primarily due
to non-cash mark-to-market derivative losses and higher borrowing costs
- Embarked upon a new, ground-breaking, relationship with Silicon Valley
pioneer Tesla Energy through which Vector expects to bring commercial and
residential battery solutions to New Zealand
- Commenced a strategic review of the gas transmission and gas distribution
assets outside Auckland
- Acquired the Arc Innovations metering business and entered into a long-term
metering services contract with Meridian Energy
- Full year dividend increases for the ninth consecutive year to 15.5 cents
per share, following the declaration of a fully imputed final dividend of 8.0
cents per share. The record date for dividend entitlements is 14 September
2015 and payment date is 21 September 2015
- Confident of meeting analysts' expectations of adjusted EBITDA for the 2016
financial year, which range from $605 million to $620 million
- Continued strong health and safety focus across the group reduces Vector's
Total Recordable Injury Frequency Rate (TRIFR), by 42.5% to 7.45 in the 2015
financial year from 12.9 in 2014
New Zealand's leading integrated energy infrastructure company, Vector today
reports earnings for the year to 30 June 2015 ahead of guidance given in
February and an acceleration in the transformation of its energy
infrastructure networks.
Despite significant price cuts to its regulated energy networks, falling
natural gas volumes and weaker prices at the gas wholesale business, the
company has delivered an improved adjusted EBITDA result. It has benefited
from strong growth in Auckland, a return to cooler temperatures in line with
historic averages and ongoing growth in its technology operations.
Annual revenue rose 2.8% to $1,294.0 million from $1,258.9 million. Increases
in Transpower charges, rates and levies that are passed through to customers
directly, lifted revenue by around $28 million, diluting the significant cost
savings Vector has passed on to customers in recent years.
Adjusted EBITDA rose 2.8% to $596.9 million from the prior year's $580.7
million, ahead of the $588 million guidance given in February. Capital
contributions were up $12.8 million to $56.5 million as a result of
development activity in Auckland and significant relocation activity in the
Gas Transportation business. Excluding capital contributions, adjusted EBITDA
was up $3.4 million to $540.4 million.
Net profit fell 12.8% to $149.4 million from $171.3 million. This result
included higher borrowing costs and $11.0 million of non-cash mark-to-market
losses on derivatives, principally reflecting a weakening of the New Zealand
dollar against the US dollar.
Vector Chairman Michael Stiassny said: "Vector has today delivered a strong
result ahead of market expectations and over the last year we have continued
to prepare the company for a future that is significantly different from the
past.
"Vector's vision is to create a new energy future for our customers by
leading the adoption of technology that will transform the electricity
industry worldwide and by creating new opportunities for the company.
"In particular, reinforcing our status as an energy industry leader, this
year we have embarked upon a new ground-breaking relationship with Silicon
Valley pioneer Tesla Energy through which we expect to bring residential and
commercial battery solutions to New Zealand.
"Our metering business continues to grow and we are well positioned to
leverage our New Zealand credentials to support a smart meter roll-out that
is beginning to gain momentum across the Tasman.
"Our metering business has also been bolstered by the $20 million acquisition
of Arc Innovations. We also commenced a strategic review of our gas
transmission assets and our gas distribution assets outside Auckland."
The Board has today declared a fully imputed final dividend of 8.0 cents per
share, taking total dividends for the year to 15.5 cents per share, up 0.25
cents per share on the prior year's 15.25 cents per share.
"It is the ninth year running that Vector has delivered an increase in
dividends to shareholders. The dividend represents a pay-out of 69% of free
cash flow . This is ahead of our policy to target a pay-out of 60% and
compensates for below target pay-outs in the four years prior to the last
financial year," Mr Stiassny said.
"Our balance sheet is strong with gearing at 53.6% compared to 52.5% in the
prior year and we retain an investment-grade credit rating.
"Vector continues to benefit from its position as a provider of essential
infrastructure to Auckland, the country's economic powerhouse.
"We expect capital expenditure in Auckland to increase in the coming year, in
line with the significant increase we are seeing in new electricity
connections. We are also investing to open new markets and creating new
options for growth with investments in new technologies such as solar panels,
batteries, electric vehicle charging infrastructure and home energy
monitoring services.
"Looking ahead to the remainder of the 2016 financial year, Auckland
continues to grow and this will underpin growth in our Auckland energy
distribution networks as well as the company's new areas of growth. We are
also confident of continued growth in our metering business and our bottle
swap operation.
"Our wholesale gas business still enjoys a strong position in the market, but
faces increased competition, uncertainty over the quantity of gas reserves
remaining in the Kapuni field and the price we pay for the gas. The business
also faces tighter margins due to weaker global oil and gas prices and weaker
demand from the major electricity generators.
"Nevertheless, we are confident of meeting analysts' expectations of adjusted
EBITDA for the 2016 financial year, which range from $605 million to $620
million. Excluding capital contributions, which are volatile and driven by
developer and relocation activity, we expect adjusted EBITDA to be in the
range of $550 million to $565 million."
Year ended 30 June 2015
$M 2014
$M Change
(%)
Revenue 1,294.0 1,258.9 +2.8
Adjusted EBITDA 596.9 580.7 +2.8
Net profit 149.4 171.3 -12.8
Operating cash flow 369.2 366.6 +0.7
Dividend per share (cents) 15.5 15.25 +1.6
Vector Group Chief Executive Simon Mackenzie said: "Vector's vision to create
a new energy future reflects the new reality we face.
"Customers are seeking and gaining greater choice over the source of energy
they use. They expect energy services to be delivered like any other service.
They want them to be at their fingertips; they want to be in control.
"And, given the rise in electricity prices over the last few years,
customers, increasingly, are becoming incentivised to make use of all of
these developments to manage their energy costs.
"In addition to seeking sustainable growth, Vector is meeting these
challenges by continuing to place customers at the centre of our thinking, by
engaging and collaborating with new partners to develop innovative options,
by excelling operationally and doing all of this while setting standards for
health and safety."
NEW PARTNERSHIPS
Vector's relationship with Tesla Energy illustrates the approach. Tesla
Energy batteries, which can offer energy storage at a price that is
significantly lower than other systems, represent a game changer for the
country's energy industry. Also they are expected to open an array of new
markets for Vector, including the provision of back-up power supply systems
and new network services.
Tesla Energy's Powerwall Home Battery system is within the reach of a large
section of the population. Combined with Vector's solar solutions, it will
allow customers to store energy generated by solar panels during the day for
use in the evening, when daily electricity prices are highest. This is but
one of many applications for the Tesla Energy system.
Tesla Energy's larger Powerpack Commercial Battery systems are meanwhile
creating new options for network investment. Later this year, Vector intends
to deploy a cohort of the larger batteries to the network. Depending on the
circumstances, these systems can be more cost effective than a traditional
upgrade would be.
Vector is not a mere distributor of the battery systems. It has developed the
engineering that adapts batteries to local conditions including the control
systems, the interface with local networks as well as the appropriate health
and safety protocols and systems.
"By playing a key role in the commercialisation of solar panels and batteries
in New Zealand, we are better positioned to manage the challenges the
technologies pose to our core electricity networks, including reduced demand
for electricity network services," Mr Mackenzie said.
"The technology also allows us to build a deeper and more enduring
relationship with the more than 544,000 electricity customers we serve across
the Auckland region with complementary technologies such as solar panels and
home energy management systems.
"At the same time, we expect to gain new customers. Already, we have fielded
inquiries from businesses across New Zealand as to whether Vector could
install Tesla Energy Powerpack systems and we see plenty of other
opportunities further afield.
Such transformations are taking place across Vector's portfolio of
operations. Vector is working with a number of other leading edge technology
providers globally to deliver innovative solutions for customers.
The acquisition of Arc Innovations added almost 140,000 smart meters to the
Vector fleet and led to a new long-term metering services contract with the
vendor Meridian Energy. These agreements, combined with others the company
has struck over the last few years, have lifted the installed base of Vector
smart meters to 958,146 as at 30 June 2015 from 675,555 a year earlier.
Vector has added Meridian and the SmartCo consortium of power companies to
its deployment programme and it is now contracted to install over 1.2 million
smart meters across the country, up from 0.9 million a year earlier.
Following a great deal of work over the past two years, Vector's metering
business is now well-positioned to leverage its New Zealand expertise to
support the smart meter roll-out in Australia.
Vector is well advanced towards achieving accreditation in Australia to
operate as a metering services provider. Meanwhile, the unbundling of meters
from distribution networks this year and Australian Energy Market Commission
rule changes, which come into effect in 2017, are providing a catalyst for
change.
Retailers now must move towards assuming responsibility for mass-market
metering in a model that closely follows the development of the
highly-successful New Zealand market. Ahead of the shift, electricity
retailers and distribution companies are considering whether to set up their
own smart metering subsidiaries or whether to contract services from
experienced operators such as Vector.
In recognition of customers' preference for the convenience of swapping empty
9kg gas bottles and the resulting burgeoning demand for pre-filled gas
bottles, Vector this year gave the green light to the construction of a $22
million state-of-the-art LPG bottling plant.
The company is working with Auckland City BMW to provide charging solutions
for those customers that have bought the company's new eye-catching electric
vehicles (EVs). In addition to this we are working to deploy the public
infrastructure to support EVs.
In July Vector launched a charging station outside its headquarters in
Newmarket. Also, Vector is targeting the development of another that can
charge an EV in under an hour at its Hobson Street substation and more across
the city over the next year.
The company has established the role of Chief Networks Officer to oversee the
customer, commercial, engineering and regulatory aspects of its regulated gas
and electricity networks businesses. This follows on the creation of a new
role of Group General Manager Development to explore ways to enhance the
company's growth and development, through innovative customer solutions and
technology.
The company is also working to streamline the business to ensure it is
responsive to customer demand. For example, this year it launched its online
gas connection portal, which cuts the time it takes to get a quote for a
residential connection to the gas network from five days to just a few
seconds. The company plans to deploy similar tools on the electricity
network.
Vector's outage app for smartphones, which provides the details of power
outages and the likely time to restoration, continues to provide customers
with the information they need to manage their lives in the event of energy
supply disruptions. The more than 8.8 million total visits to the app and the
website over the last two years and the popularity of our Twitter feed
demonstrate Vector is delivering the information customers are seeking.
ENABLING AUCKLAND'S GROWTH
Vector's Auckland energy networks have seen a strong step up in connections
and are laying the foundations for further growth. New connections to the
electricity network rose 26.0% to 7,813 from 6,202 in 2014.
Vector expects this growth to continue. In the coming ten years, Vector
forecasts around $1.8 billion of capital investment will be required for its
Auckland energy networks. Were this investment ring-fenced into a stand-alone
company, it would create the country's second largest energy distribution
company after Vector.
This level of investment is critical given Auckland's significance to the
national economy and stands in sharp contrast to those regions that have
little or no growth.
"As we have previously indicated, we believe the current regulatory regime
does not adequately recognise the rising risks - due to advances in
technology - that new investments could be made redundant before they have
delivered a return to investors," Mr Mackenzie said.
"Furthermore, most distribution companies do not earn the returns allowed by
the regulator, since actual energy volume growth and the rate of inflation
have been consistently and significantly below the forecasts used by the
Commission to set our revenue. In the last three years alone, these
forecasting differences have cost Vector $175 million in lost electricity
revenue.
"These factors, combined with the continued concern over the potential for
further significant change to the regime, create disincentives to new
investment. To invest in our energy networks, Vector needs confidence that
the regulatory environment will enable us to recover our capital and earn a
fair return.
"The Commerce Commission is reviewing the key inputs that determine the
prices Vector can charge for use of its network and the company welcomes the
Commission's focus on customer adoption of new technologies and the impact of
this on network infrastructure investment.
"We are also firmly of the view that the regulatory environment needs to
recognise that Auckland is a special case. The region is growing strongly, it
has the highest demands for capital and it drives the growth of the national
economy. Vector, with its investment requirements, is at the sharp end of
this issue.
"We believe infrastructure providers should be able to reach binding,
long-term 'special undertakings' that enable investment in the face of these
challenges."
Such arrangements, which are already working with some success in the UK and
Australia, could allow Vector, and others, to seek credible long-term
tailored regulatory commitments, which aim to match the asset life and
expected recovery times of either existing or new infrastructure investment.
Such arrangements could allow infrastructure providers to bring forward cost
recovery to reward efficient investment and minimise the risks associated
with new technologies by matching allowable cash flows with real cash flows.
The electricity network endured a particularly difficult year, weathering
four major events over the regulatory year to 31 March 2015 that challenged
Vector's strong record for providing a reliable electricity supply. This
number of major events is well ahead of the average of less than one over the
prior ten-year period.
Three of the events were the major storms in April, June and July, when the
company recorded the highest ever sustained wind speeds and high winds
lasting considerably longer periods than it has seen in any other year. The
fourth was the fire at Transpower's Penrose substation last October.
As a result SAIDI, Vector's key measure of network reliability, was 155
minutes, exceeding the Commerce Commission's quality threshold of 127
minutes. As foreshadowed in February we have informed the Commission that we
have breached the service quality requirement that we do not exceed the
threshold two out of every three years.
We continue to work with the Electricity Authority (EA) and Transpower on the
investigation into the Penrose outage. Vector and Transpower have delivered
their draft technical report into the outage to the EA, which is now
completing its report for the Minister of Energy and Resources.
The investigation and reporting process being undertaken by all parties will
ensure contributing factors to the outage are accurately identified and any
necessary risk management improvements are being actioned quickly.
Vector is meanwhile advocating on behalf of Auckland consumers against the
EA's recently announced proposed transmission pricing options, which could
result in Auckland households and businesses bearing a greater share of
Transpower's electricity transmission costs.
"The EA's base option would result in a 59% increase in transmission costs in
Auckland. This increase is the equivalent of $192 per year for the average
customer in the region and is nearly 60% of the annual dividend payments our
major shareholder the Auckland Energy Consumer Trust distributes to its
beneficiaries. These costs would dilute the significant price cuts we have
made for the benefit of the Auckland region in recent years," Mr Mackenzie
said.
"It is unfathomable that a generator located at the bottom of the South
Island can supply energy into Auckland and not have to pay for transport. The
price customers pay for their energy may in fact reduce if generators had to
pay Transpower for transporting their energy to their customers.
HEALTH AND SAFETY
Vector's headline Health and Safety measure, the Total Recordable Injury
Frequency Rate (TRIFR) has fallen 42.5% to 7.45 in the 2015 financial year,
from 12.95 in 2014 due to a continued focus on workplace health and safety.
"We have an active and broad ranging programme of safety leadership and
training throughout the business. We have this year ceased live-line work
except in special circumstances where health and safety risk could be
exacerbated by conducting the work with the lines de-energised.
"We have also reviewed and enhanced our Health Safety and Environment
Management system, policies, procedures and reporting in preparation for the
enactment of the Health and Safety Reform Bill," Mr Mackenzie said.
"We have implemented initiatives such as pre-winter health checks, on-site
occupational health providers and access to physiotherapy services.
"We continue to engage positively with all our key stakeholders: our
employees, our contractors, our business partners and regulators to ensure
continued improvement in all aspects of our business."
SEGMENT PERFORMANCE
Year ended 30 June 2015 2014 Change
$M $M (%)
Electricity
Revenue 670.8 631.3 +6.3
EBITDA 348.8 346.0 +0.8
Gas Transportation
Revenue 193.4 187.0 +3.4
EBITDA 143.2 133.4 +7.3
Gas Wholesale
Revenue 314.2 349.8 -10.2
EBITDA 46.9 50.9 -7.9
Technology
Revenue 158.4 137.0 +15.6
EBITDA 108.2 100.0 +8.2
Shared Services
Revenue 0.4 0.6 -33.3
Adjusted EBITDA (50.2) (49.6) -1.2
UNREGULATED BUSINESSES:
Vector's unregulated businesses generated EBITDA of $155.1 million, 2.8%
ahead of the $150.9 million achieved in the same period last year. The
Technology business continued to benefit from strong growth in metering and
the acquisition of Arc Innovations.
TECHNOLOGY: Smart meter roll-out continues to drive growth
Technology revenue increased $21.4 million or 15.6% to $158.4 million from
$137.0 million in the prior year reflecting the increase in smart meters to
958,146 from 675,555 in the prior year. The increase in meters includes the
contribution from the December 2014 acquisition of Arc Innovations and the
deployment of meters for the SmartCo consortium of electricity distribution
companies.
Vector Communications grew its revenue by 8.5%; a good result given the
competitive pressures in the sector. These gains in segment revenue were
partially offset by a decrease in revenue due to a decline in installed
legacy meters.
Vector deployed 130,000 meters in the 2015 financial year down from 170,000
in the prior year. This figure excludes the nearly 140,000 meters acquired
with Arc and the 13,609 deployed for the SmartCo consortium.
Vector is now contracted to install more than 1.2 million smart meters up
from 889,000 in the prior year.
EBITDA increased 8.2% to $108.2 million. Growth in EBITDA lagged revenue
growth due to investment in the Australian metering business, Arc acquisition
and integration costs and investment into new energy technologies.
Depreciation and amortisation rose to $57.0 million from $46.5 million, again
due to the increase in the size of the smart meter fleet, the contribution to
depreciation from Arc and higher software amortisation expenses.
GAS WHOLESALE: Entitlement proceedings dominate
Gas Wholesale revenue fell to $314.2 million from $349.8 million due to
falling demand from the major power generators and lower oil and gas prices.
Natural gas volumes fell 20.4% from 24.5 PJ to 19.5 PJ.
Lower revenues flowed through to EBITDA, which fell to $46.9 million from
$50.9 million. The result was also lower due to higher maintenance costs and
costs relating to arbitration over the price Vector must pay for the next
tranche of Kapuni gas. These costs offset gains from higher gas liquid sales
and margin improvements in the natural gas portfolio.
Our gas bottle swap business continues to grow, with the numbers of bottles
swapped rising 17.9% to 505,927 bottles from 428,951. Liquigas performed
strongly, increasing its tolling volumes by 4.5% to 186,626 tonnes.
Production at Kapuni was up marginally, while sales of gas liquids were in
line with the prior year at 71,092 tonnes.
Vector is awaiting an award from a recent arbitration hearing over the price
it is required to pay for the next tranche of Kapuni gas, which it has been
taking since July 2013. Vector has rights to take 50% of the gas remaining in
the field from 1 April 1997.
In late 2014, the Kapuni Mining Companies (KMCs) issued a redetermination
notice for the Kapuni field, proposing a reserves figure that would reduce
the quantity of Kapuni gas Vector considers it is currently entitled to.
Vector's international expert, considers the remaining reserves are currently
some 103 PJ more than the KMCs propose. The parties are currently trying to
agree on a reserves figure.
In addition to the arbitration and redetermination issues, the KMCs have also
issued legal proceedings in relation to the ongoing application of a 1999
arbitral award setting terms for gas processing of the KMC's share of Kapuni
gas at the Kapuni Gas Treatment Plant.
Legal proceedings notwithstanding, the gas wholesale business is facing
headwinds due to changes to the pricing of gas processing at Kapuni, lower
prices for oil and gas globally and lower LPG exports.
REGULATED BUSINESSES
Regulated EBITDA was up 2.6% on the same time last year with growth in
connections, higher capital contributions and higher volumes offsetting
regulated price cuts.
ELECTRICITY: Volume and connection growth offset price cuts
Electricity revenue increased $39.5 million or 6.3% to $670.8 million from
$631.3 million. EBITDA increased by $2.8 million to $348.8 million.
Around 70% or $28 million of the increase in revenue was due to an increase
in costs passed directly through to customers, including Transpower charges,
rates and regulatory levies. The remainder of the revenue growth was due to
connection and volume growth on the network. New connections and volume
growth added $20 million of revenue.
Volume gains were offset by lower prices and the regulatory clawback
implemented from 1 April 2014 . The segment also saw a $5.3 million increase
in capital contributions, due largely to an increase in housing activity.
From 1 April 2015 a new price-quality determination for the electricity
network was put in place, giving Vector a positive 0.8% starting price
adjustment, setting the maximum allowable revenue the network can generate
for the year ended 31 March 2016 at $395 million.
Thereafter, for the remainder of the current regulatory period, which ends on
31 March 2020, Vector's average prices can increase annually at the rate of
inflation, so that revenue will increase at the rate of volume growth plus
inflation.
Reflecting growth in the Auckland region, Vector added 7,813 new connections
to the network, up 26.0% on the prior year's 6,202. Volumes transported
through the network rose 2.0% to 8,414 GWh from 8,252 GWh in the prior year,
reflecting an increase in connections and cooler winter temperatures in a
reversion to historic norms.
Network expenditure was up by $36.7 million. This increase was largely due to
an increase in pass through costs, including a one off non-recoverable $3.3
million charge following clarification from the courts on the use of
Transpower's Auckland transmission network. Storms and the Penrose outage
contributed additional repair and investigation costs of $5.2 million.
Depreciation and amortisation rose $1.5 million to $84.6 million as
depreciation rates were accelerated on some assets following relocation
projects.
GAS TRANSPORTATION: Increased distribution network volumes and higher capital
contributions flow through to EBITDA
Gas Transportation revenue rose by $6.4 million to $193.4 million. EBITDA,
meanwhile, rose $9.8 million to $143.2 million as costs were controlled.
Gas transmission volumes were up 2.8% to 114.4 PJ from 111.3 PJ, primarily
due to increased customer transport in the Taranaki region and higher
industrial and commercial deliveries. The dairy sector has been a source of
considerable demand and we this year made several new connections to meet
that demand.
Gas transmission revenues were up by $6 million, largely due to capital
contributions which were up $10.5 million, offset by lower third-party
contracting revenues. The increase in contributions primarily related to the
relocation of the transmission pipeline for the Waikanae expressway near
Wellington.
Gas distribution revenues were up 1% on the prior year, with higher volumes
offsetting the impact of slightly lower net pricing. Price increases
implemented from 1 October 2014 on the gas networks largely counteracted the
price reductions implemented from 1 October 2013.
New gas connections were down 3.1% on the prior period to 3,915. Total
customers at 30 June 2015 were 163,243 up 2.2% on the prior year's 159,738.
Auckland showed lower growth than the rest of the North Island, with new
connections down 7.6% at 2,410, while the rest of the North Island was up
5.0% at 1,505. Gas distribution volumes were up by 2.3% to 22.4 PJ from 21.9
PJ, largely driven by increased non-residential consumption.
Depreciation and amortisation rose $1.6 million, largely due to an
acceleration of depreciation and amortisation on the gas transmission
network.
CAPITAL EXPENDITURE
Year ended 30 June 2015 2014 Change
$M $M (%)
Electricity
Growth 71.2 80.2 -11.2
Replacement 83.2 82.1 +1.3
154.4 162.3 -4.9
Gas Transportation
Growth 22.3 21.1 +5.7
Replacement 29.5 26.5 +11.3
51.8 47.6 +8.8
Gas Wholesale
Growth 6.1 3.8 +60.5
Replacement 8.8 6.3 +39.7
14.9 10.1 +47.5
Technology
Growth 73.4 96.5 -23.9
Replacement 13.3 8.5 +56.5
86.7 105.0 -17.4
Shared Services
Growth 0.4 1.0 -60.0
Replacement 15.1 13.2 +14.4
15.5 14.2 +9.2
Total Group
Growth 173.4 202.6 -14.4
Replacement 149.9 136.6 +9.7
323.3 339.2 -4.7
Capital contributions
Electricity 36.9 31.6 +16.8
Gas Transportation 17.0 6.2 +174.2
Technology 2.6 5.9 -55.9
56.5 43.7 +29.3
Total group (net of capital contributions) 266.8 295.5 -9.7
Total capital expenditure decreased 4.7% to $323.3 million from $339.2
million. Net of capital contributions, capital expenditure was down 9.7%.
Capital expenditure directed at growth initiatives was $173.4 million down
14.4% on the prior year, with around 54% of this spent on the regulated
networks. Capital expenditure focused on maintaining the quality of our
assets was $149.9 million with $112.7 million of this spend focused on the
regulated networks.
On the electricity network, capital expenditure was down $7.9 million at
$154.4 million as we concluded major reinforcement projects. The prior year's
figures, for example, included the Hobson Street Auckland grid exit point and
a substation at the Flat Bush development. This was partially offset by
increased customer connection and subdivision development growth in Auckland.
Capital expenditure in the Gas Transportation business was up 8.8% to $51.8
million largely as a result of relocation activity in gas transmission and
growth in the dairy sector with new and upgraded delivery points in Pahiatua,
Tuakau and Tatuanui. Capital expenditure in the competitive markets business
was 11.7% lower largely due to a reduced level of smart meter deployment
relating to owned meters in the 2015 financial year.
Capital Structure
Operating cash flow was broadly in line with the prior year at $369.2 million
compared to $366.6 million in 2014. Vector's balance sheet remains strong. We
remain an 'investment-grade' credit risk and are rated by Standard & Poor's
and Moody's at BBB and Baa1 respectively, both with stable outlook.
Our gearing as at 30 June 2015 was 53.6% compared to 52.5% at 30 June 2014.
Our interest cover for the year to 30 June 2015 was 2.2 times compared to 2.3
times for the prior corresponding period.
For further information contact:
Investors: Media:
Dan Molloy Sandy Hodge
Chief Financial Officer External Communications Manager
Tel: +64 9 213 5179 Tel: +64 9 978 7638
Mob: +64 21 441 311 Mob: +64 21 579 522
About Vector: (www.vector.co.nz)
Vector is New Zealand's leading multi-network infrastructure company which
delivers energy and communication services to more than one million homes and
businesses across the country. The company owns and manages a unique
portfolio of businesses, which consists of electricity distribution, gas
transmission and distribution, electricity and gas metering installations and
data management services, natural gas and LPG, fibre optic networks and
solar solutions. Vector is listed on the New Zealand Stock Exchange with
ticker symbol VCT. Our majority shareholder, with a 75.1% stake, is the
Auckland Energy Consumer Trust (AECT).
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.
DEFINITIONS:
EBITDA: Earnings before interest, taxation, depreciation and
amortisation.
Adjusted EBITDA EBITDA adjusted for fair value changes, associates,
impairments and significant one-off gains, losses, revenues and/or expenses.
GAAP TO NON-GAAP RECONCILIATION:
EBITDA and Adjusted EBITDA
Year ended 30 June 2015 2014
$M $M
Reported net profit for the period (GAAP) 149.4 171.3
Add back: net interest costs1 180.8 168.9
Add back: tax (benefit)/expense1 61.3 63.2
Add back: depreciation and amortisation1 195.2 183.8
EBITDA 586.7 587.2
Adjusted for:
Impairment of investment in associate1 0 1.2
Associates (share of net (profit)/loss)1 (0.8) (1.7)
Fair value change on financial instruments1 11.0 (6.0)
Adjusted EBITDA 596.9 580.7
1 Extracted from audited financial statements
End CA:00269239 For:VCT Type:FLLYR Time:2015-08-28 08:47:42
