Slide 1: Financial & Operational Results
FINANCIAL & OPERATIONAL RESULTS FULL YEAR ENDED 30 JUNE 2018 Insert new artwork 24 August 2018
Slide 2: Disclaimer
DISCLAIMER This presentation contains forward-looking statements. Forward-looking statements often include words such as "anticipates", "estimates", "expects", "intends", "plans", "believes“ and similar words in connection with discussions of future operating or financial performance. The forward-lo
Slide 3: Agenda
AGENDA • Dividend • FY18 Snapshot • Financial Performance • Segment Performance • Outlook • Q&A 3
Slide 4: Dividend
DIVIDEND 4
Slide 5: 12 Consecutive Years of Dividend Growth
12 CONSECUTIVE YEARS OF DIVIDEND GROWTH • FY18 Adjusted EBITDA of $470.1m Dividend growth (cents per share) − FY18 Guidance “at or around last year’s result” of $474m − April storm & under-performance of E-Co’s heat pump division weighed on result 8.00 8.00 8.00 7.75 8.00 7.75 7.50 • Full year divid
Slide 6: FY2018 Snapshot
FY2018 SNAPSHOT 6
Slide 7: FY2018 Operational Snapshot
FY2018 OPERATIONAL SNAPSHOT Continuing to support Auckland Metering growth continues Solid performance from Gas growth • Deployed 85k advanced meters Trading • New electricity & gas connections in NZ to effectively complete NZ • Volumes up across all business up 13% to 14,300 mass market deployment
Slide 8: Continued Leadership in Sustainability
CONTINUED LEADERSHIP IN SUSTAINABILITY Total Lost Time Injury Frequency Rate (LTIFR) • Announced target to be Net Zero Carbon by Number of lost time injuries per million hours worked, including contractors 2030 2.90 2.96 2.76 2.80 • 1st accepted Safety Case in NZ for new 2.52 BottleSwap plant in Sou
Slide 9: Financial Performance
FINANCIAL PERFORMANCE vectorW
Slide 10: Overview of Financial Performance
OVERVIEW OF FINANCIAL PERFORMANCE 1,328.4 1,226.7 FY17 FY18 474.4 470.1 367.4 381.2 389.9 335.7 168.9 149.8 159.3 162.1 Revenue Adjusted EBITDA 3, 4 Capital Expenditure Net Profit Operating Cash Flow Full Year Dividend +8.3% -0.9% +3.8% -11.3% +16.1% +1.8% 10 Adjusted EBITDA is not a GAAP measure of
Slide 11: Earnings Growth in Technology Offset by Other Segments
EARNINGS GROWTH IN TECHNOLOGY OFFSET BY OTHER SEGMENTS April storm cost 2018 ADJUSTED EBITDA MOVEMENT ($M) $4.4m (see slide 19) +8.0 -2.6 -6.5 -2.5 -0.7 474.4 470.1 Driven by smart Prior year included meter growth insurance settlement of (see slide 22) $5.3m (see slide 23) Underlying cost increase o
Slide 12: Net Profit Down 11% Due Primarily to Higher Depreciation & Amortisation
NET PROFIT DOWN 11% DUE PRIMARILY TO HIGHER DEPRECIATION & AMORTISATION EXPENSE MOVEMENT IN NET PROFIT AFTER TAX ($M) 1 +4.8 +16.7 +6.6 168.9 -3.1 -15.0 -18.9 -10.1 149.8 Increase is driven by growth in asset base, Other includes amortisation of prior period tax intangible (E-Co), and washup, a revi
Slide 13: Net Capex Up 1.5%, Regulated Capex Offsetting Gas Trading Decline
NET CAPEX UP 1.5%, WITH GROWTH IN REGULATED CAPEX OFFSETTING A DECLINE IN GAS TRADING & METERING GROSS CAPITAL EXPENDITURE ($m) GROSS CAPEX BY SEGMENT FY2018 6% 350 71.5 62.3 6% Regulated Networks 300 25% FY2017 250 Gas Trading 28% 200 Technology 57% 150 305.2 309.7 64% 100 Corporate 9% 5% 50 0 FY20
Slide 14: $858 Million of Refinancing Completed in FY2018
$858 MILLION OF REFINANCING COMPLETED IN FY2018 NET ECONOMIC DEBT & GEARING ($m) GROUP DEBT MATURITY ($M) 52.5% 52.9% 53.6% 53.4% 47.1% 47.3% 48.8% 43.7% 43.9% 300 355 307 350 286 297 251 240 277 150 138 2,625 2,682 2,745 2,741 1,933 1,968 2,220 2,253 2,378 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16
Slide 15: Segment Performance
SEGMENT PERFORMANCE 15
Slide 16: Auckland Growth Continues with Record Connection Numbers & Capital Investment
AUCKLAND GROWTH CONTINUES WITH RECORD Regulated Networks CONNECTION NUMBERS & CAPITAL INVESTMENT Segment NEW CONNECTIONS • New electricity and gas connections up 13.0% to 14,300 82% 3,165 increase in 5 3,515 3,323 – 563,076 electricity connections (up 1.4%) years 2,821 3,107 2,464 11,135 – 109,229 g
Slide 17: Electricity Network Not Earning Expected Return Due to Regulatory Forecast Errors
ELECTRICITY NETWORK NOT EARNING EXPECTED RETURN Regulated Networks DUE TO FORECAST ERRORS IN REGULATORY PARAMETERS Segment RY18 Electricity ROI1 • Electricity operating expenditure expected to be 7.19% broadly in line with regulatory allowance over 5 years Gap of 5.49% 1.70% of DPP2 (1 April 2015 to
Slide 18: Quality Thresholds Are Challenging Given Industry and Environmental Factors
QUALITY THRESHOLDS ARE CHALLENGING GIVEN CURRENT Regulated Networks INDUSTRY AND ENVIRONMENTAL FACTORS Segment SAIFI • Quality targets in current DPP (DPP2) are 18% (SAIDI) and System Average Interruption Frequency Index 25% (SAIFI) lower than DPP1 • SAIDI breaches in 2015 & 2016 regulatory years. 1
Slide 19: Several Factors Weighing on Regulated Earnings
Regulated SEVERAL FACTORS WEIGHING ON REGULATED EARNINGS Networks Segment • Growth in electricity revenues (largely due to growth in connections) largely offset by gas reset in October 2017, which saw prices reduce by 14% • April storm resulted in additional operating cost of ADJUSTED EBITDA MOVEMEN
Slide 20: Aus Smart Meter Deployments to Exceed NZ in FY19
Technology AUS SMART METER DEPLOYMENTS TO EXCEED NZ IN FY19 Segment • Deployed 84,878 smart meters in NZ in FY18 – NZ mass market rollout now complete. Fleet now 1.34m MONTHLY SMART METER DEPLOYMENT – Weighted average contracted life remaining > 7 years 1 16,000 • Deployed 40,169 smart meters in Aus
Slide 21: E-Co Has Faced Challenges in FY18, But Underlying Business Well Positioned
E-CO HAS FACED CHALLENGES IN FY18, Technology Segment BUT UNDERLYING BUSINESS WELL POSITIONED • E-Co Products faced several challenges in FY18: – Margin pressure in EES (heat pumps) – Closure of retrofit windows business unit – Significant upfront investment in launching HRV Solar – Transition from
Slide 22: Technology Result Driven by Smart Meter Rollout
TECHNOLOGY RESULT DRIVEN BY SMART METER ROLLOUT Technology Segment • Technology segment result includes E-Co Products Group & PowerSmart from 1 April 2017 • FY18 Technology adjusted EBITDA up 6.5% ADJUSTED EBITDA MOVEMENT ($M) characterised by: +2.9 +8.4 +2.1 130.5 – Smart meter gains offset by redu
Slide 23: Gas Trading Volumes Up Across All Segments
GAS TRADING VOLUMES UP ACROSS ALL SEGMENTS Gas Trading Segment • Strong volumes across all areas underpinned by ADJUSTED EBITDA MOVEMENT ($M) 36.9 increased production at Kapuni +0.9 +0.4 34.4 +4.9 • Absent prior year one off (insurance proceeds), -5.3 underlying segment earnings up 8.9% -3.4 • Natu
Slide 24: Corporate Result Primarily Impacted by One Off Revenue in Prior Period
Corporate CORPORATE RESULT PRIMARILY IMPACTED BY ONE OFF Segment REVENUE IN PRIOR PERIOD • Corporate result impacted by: – One off revenue in prior period ADJUSTED EBITDA MOVEMENT ($M) Centralisation Group Digital – Centralisation of some costs previously accounted for in FY2017 One off revenue of c
Slide 25: Outlook
OUTLOOK 25
Slide 26: Outlook
OUTLOOK • Expect largely flat Network earnings through to 2020 – Auckland growth to continue. Expect circa 11,000 new electricity connections in FY19 – LUFC settlement, exceeding SAIDI/SAIFI targets & Commerce Commission forecast errors counteracting impact of growth and leading to under-recovery on
Slide 27: Q&A Any Questions?
Q&A ANY QUESTIONS? vector W
Slide 28: Appendices
APPENDICES 28
Slide 29: 5 Year Adjusted EBITDA Performance by Segment
5 YEAR ADJUSTED EBITDA PERFORMANCE BY SEGMENT Adjusted EBITDA (Continuing Operations Only) $million For the year ended 30 June 473.0 474.4 470.1 446.5 451.9 FY2014 FY2015 FY2016 FY2017 FY2018 Regulated Networks 351.1 349.7 368.5 361.2 358.6 Gas Trading 50.9 46.9 40.6 36.9 34.4 Technology 94.0 105.5
Slide 30: Group Profit Statement
GROUP PROFIT STATEMENT YEAR ENDED 30 JUNE ($M) 2018 2017 Change INCOME STATEMENT $m $m % Revenue (excluding capital contributions) 1,256.9 1,164.4 +7.9 Operating expenditure (786.8) (690.0) -14.0 Adjusted EBITDA 470.1 474.4 -0.9 Capital Contributions 71.5 62.3 +14.8 Depreciation and amortisation (22
Slide 31: Group Cash Flow
GROUP CASH FLOW YEAR ENDED 30 JUNE ($M) 2018 2017 CASH FLOW $m $m Operating cash flow 389.9 335.7 Replacement capex (152.7) (137.0) Dividends paid (163.9) (161.0) Cash available for growth and debt repayment 73.3 37.7 Growth capex (234.1) (217.3) Acquisitions (3.1) (91.0) Proceeds from sale of inves
Slide 32: Segment Results
SEGMENT RESULTS YEAR ENDED 30 JUNE ($M) REGULATED NETWORKS TECHNOLOGY GAS TRADING CORPORATE 2018 2017 Change % 2018 2017 Change % 2018 2017 Change % 2018 2017 Change % Revenue excluding 706.0 680.7 +3.7 272.3 212.9 +27.9 290.3 281.8 +3.0 0.9 4.9 -81.6 Capital Contributions Operating expenditure (347
Slide 33: GAAP to Non-GAAP Reconciliation
GAAP TO NON-GAAP RECONCILIATION Vector’s standard profit measure prepared under New Zealand GAAP is net profit. GAAP to Non-GAAP reconciliation Vector has used non-GAAP profit measures when discussing financial performance EBITDA and Adjusted EBITDA in this document. The directors and management bel
Slide 34: Segment Adjusted EBITDA
SEGMENT ADJUSTED EBITDA SEGMENT ADJUSTED EBITDA ($m) 2018 2017 Year ended 30 June Reported less capital Segment Reported less capital Segment segment EBITDA contributions adjusted EBITDA segment EBITDA contributions adjusted EBITDA Technology 131.8 (1.3) 130.5 123.6 (1.1) 122.5 Gas Trading 34.4 0.0
Slide 35: Vector
Vector 7