Genesis Energy Limited · NZX:GNE
Genesis Energy — HY2017 Earnings Presentation
41 slides from Genesis Energy's earnings presentation, February 2017
Slide 1: HY17 Results Presentation
GENESIS ENERGY HY17 Results Presentation
Slide 2: Agenda
Agenda 1 HY17 Highlights and Strategy Update 2 Financial Performance __ __ Marc England Chris Jewell Chief Executive Chief Financial Officer 3 Operational Performance 4 Outlook and Guidance Update __ __ Marc England Marc England Chief Executive Chief Executive HY17 Results Presentation 2
Slide 3: HY17 Highlights and Strategy Update
1 HY17 Highlights and Strategy Update ____ ____ Marc England Chief Executive
Slide 4: HY17 Highlights
HY17 Highlights A reinvigorated strategy in place Announced Reset Vision and Transformation Acquisition of an Strategy Journey Underway Additional 15% Interest in Kupe Strong 22% Growth in Cost Optimisation Health & Safety LPG Sector Delivers $6 Million Performance with Customers in Savings TRIFR do
Slide 5: Strategy Update: Our plan on a page
Strategy Update Our plan on a page REIMAGINING ENERGY Vision to be customers’ first choice for energy management Strategic Themes OPTIMISE INVEST INNOVATE To improve short term return For medium term growth In long-term value creation Priorities Strategic Maximise Leverage data, Create enduring Depl
Slide 6: Strategy Update: Transformation journey underway
Strategy Update Transformation journey underway HY17 Achievements Optimise Driving efficiency Total cost savings Cost to acquire 6% reduction in To improve short term throughout the of $6 million, $4.5 return business down 15% employee costs million annualised Segment growth SME field force in Innov
Slide 7: Strategy Update: Next steps – example strategic initiatives
Strategy Update Next steps – example strategic initiatives Operational Build Sales & Customer Operational Strategic Initiative Excellence Retention Insights & Excellence and Best in Class CTS Capability Analysis and Value Optimisation • Reducing cost to serve • Single customer view • Deliver value f
Slide 8: Financial Performance
2 Financial Performance ____ ____ Chris Jewell Chief Financial Officer
Slide 9: HY17 Financial Highlights
HY17 Financial Highlights Performance in line with expectations and guidance EBITDAF NPAT FREE CASH FLOW $155.7m $37.4m $94.7m 11% lower year on year but 4% higher driven by fair value Consistent with lower EBITDAF excluding market impacts and changes in financial instruments growth performance stab
Slide 10: Financial Summary
Financial Summary Stable performance excluding market impacts • EBITDAF down 11% but taking account of market impacts and one off transformation activities performance was Key Financial Performance HY17 HY16 Variance stable (and in line with previous guidance) ($m) ($m) EBITDAF $ 155.7 175.5 (11.3%)
Slide 11: EBITDAF HY17 vs HY16
EBITDAF HY17 vs HY16 Focusing on controllable activities to offset market factors HY17 vs HY16 EBITDAF Transformation $ MILLIONS Market Adverse Conditions Controllable Activities Activities $9 $3 $6 $1 $7 $176 $2 $6 $3 $3 $4 $2 $156 HY16 EBITDAF Lower Oil Price Lower Reduced One-off Revenue Reduced
Slide 12: Customer Performance Summary
Customer Performance Summary Price growth and reduced cost to acquire sets a strong foundation for future growth • EBITDAF increased $5.7 million relative to HY16 up 10% Key Information HY17 HY16 Variance EBITDAF ($ millions) 62.7 57.0 10.0% • Key drivers: Electricity Customers 514,155 522,586 (1.6%
Slide 13: Wholesale Performance Summary
Wholesale Performance Summary Cost saving benefits offset by wet weather and global fuel conditions • EBITDAF impacted by lower spot electricity prices and lower wholesale fuel prices declining 10.3% on a like Key Information HY17 HY16 Variance for like basis EBITDAF ($ millions) 82.8 98.0 (15.5%) T
Slide 14: Kupe Performance Summary
Kupe Performance Summary Increased production is offset by continuing low oil prices • Gas production up on prior year despite unplanned Key Information HY17 HY16 Variance 12 day outage in HY17 EBITDAF ($ millions) 31.9 39.4 (19.0%) • EBITDAF continues to be impacted by external Gas Sales (PJ) 3.8 3
Slide 15: Operating Expenses
Operating Expenses Significant cost savings delivered in first half COST SAVINGS DELIVERED • $6 million of cost savings were delivered in HY17, predominantly due to reduced HY17 headcount, lower plant operating expenses and lower coal burn reducing handling and Annualised emission costs − Annualised
Slide 16: Cashflow and Capital Expenditure
Cashflow and Capital Expenditure Free cash flow in line with EBITDAF movement • Operating cash flow reduced by $36 million due to Cash Information HY17 HY16 Variance ($m) ($m) reduced EBITDAF, a one off tax credit paid in FY16, a Net Operating Cashflow $ 126.5 162.5 lower reduction in the coal stock
Slide 17: Funding Profile
Funding Profile Increased gearing from Kupe investment but headroom remains for growth • Adjusted gearing has increased to 34.9% due to additional bank facilities required for Kupe acquisition • Average tenor of 7.9 years with an average cost of debt of 5.5% GENESIS ENERGY DEBT PROFILE1 Debt Informa
Slide 18: Dividends
Dividends Consistent with prior year as capital prioritised towards growth opportunities • Interim dividend of 8.2cps declared same as HY16 with 80% imputation • Dividends have increased in real terms over past two years by 2.5% relative to inflation of 1.3% DIVIDENDS DECLARED AND FREE CASH FLOW $ M
Slide 19: Operational Highlights
3 Operational Highlights ____ ____ Marc England Chief Executive
Slide 20: Customer Key Highlights
Customer Key Highlights First half performance sets a strong foundation for further value creation • EBITDAF growth excluding one-offs1 of 16% EBITDAF • Increase in price for both Mass Market and TOU offset volume related declines Up 10% • Cost optimisation delivering $1 million of savings • LPG sal
Slide 21: HY17 Customer Market Conditions
HY17 Customer Market Conditions Reduced consumption and high level of switching ROLLING 12 MONTH INDUSTRY SWITCHING • Weather conditions were warmer than normal, 25% Home Move Retailer Switch Total Market Switch reducing consumption 20% 15% − 2016 was New Zealand’s warmest year on record 10% with av
Slide 22: Reducing cost to acquire
Reducing cost to acquire Cheaper and more targeted acquisition and retention channels • Tactical sales initiatives are improving margins COST TO ACQUIRE PER CUSTOMER $ Total CTA Variable CTA • Lower and less frequent discounts reducing cost HY17 to acquire down 15%, variable cost to acquire down 5%
Slide 23: Optimising cost to serve
Optimising cost to serve Driving efficiency with a customer centric approach • 11% reduction in FTE over past 18 months as business streamlined • Significant movement towards lower cost self service and digital interactions improving customer service with call volumes down 9% over the 12 months and
Slide 24: Growing Our Customer Base
Growing Our Customer Base ESTIMATED RESIDENTIAL LPG 45KG MARKET SHARE BY VOLUMES Continued strong growth in LPG and EOL channels Kilotonnes Market Share % • Rapid growth in LPG segment 4.3 4.2 Rolling 12m Sales 9.4% 9.2% 4.1 Rolling 12m Market Share (RHS) − 9% residential customer growth in 6 months
Slide 25: Driving Energy Insights
Driving Energy Insights Making energy relevant and relatable for customers • Genesis Energy has recently extended is exclusive partnership with energy insights company Ecotagious • An ‘energy disaggregation’ pilot program with 10,000 customers ran in 2016 to be expanded in 2017 − Energy itemisation
Slide 26: The ‘Local Energy Project’
The ‘Local Energy Project’ Bringing the seven flows of electrons to life • Genesis has launched a community project in Martinborough and surrounds to accelerate the journey to energy management supplier • Key benefits for the community: − Increased visibility of energy usage − Access to distributed
Slide 27: Wholesale Key Highlights
Wholesale Key Highlights Significant focus on business optimisation • In line with expectations as macro factors impacted wholesale fuel prices EBITDAF $82.8 million • Weather conditions reduced consumption and favoured renewable generation • Increased hydro and lower fuel burn reduced costs • 8% re
Slide 28: HY17 Wholesale Market Conditions
HY17 Wholesale Market Conditions Wet conditions favoured renewable generation NEW ZEALAND DAILY STORAGE 91 year average 2016 • Above average rain in 2016 led to low spot 4,000 prices, high storage levels resulting in renewable being favoured over thermal 3,000 generation in HY17 2,000 − Storage leve
Slide 29: Generation Flexibility Advantage
Generation Flexibility Advantage Reduces downside risk from macro conditions COAL vs GAS USE • Genesis Energy has a unique position to GWh 700 Coal Gas flex its thermal and hydro generation or 600 500 conserve its higher cost units and buy 400 on market to match market conditions 300 200 100 0 • Les
Slide 30: Optimising wholesale cost base
Optimising wholesale cost base Fuel cost down and delivered significant savings • $5.1 million of EBITDAF savings delivered in HY17, mainly due to lower operating expenses, of which $2.3 million is ongoing on an annualised basis • Campaign approach to maintenance focused on effective planning and sc
Slide 31: Health & Safety
Health & Safety Zero harm is our commitment • Our rigorous focus on health and safety is translating into tangible outcomes with our TRIFR down 70% over the past 12 months • No serious incidents and only one lost time injury down from 3 in previous year • Staylive remains an important forum for indu
Slide 32: Kupe Key Highlights
Kupe Key Highlights Increased Kupe ownership further integrates fuel position • Gas production up 11% on the prior year EBITDAF • Offset by macro oil price impacts $31.9 million • LPG production issues resolved for the second half • Increased exposure to a high performing field in a declining gas re
Slide 33: Kupe Outage Update
Kupe Outage Update 12 day unplanned outage in HY17 • Kupe was offline for 14 days in HY17, 12 of which were unplanned − Propane compressor failure which occurred after a planned outage − Net impact to HY17 performance of $2.6 million • LPG production down 18% for HY17 due to an LPG plant outage caus
Slide 34: Outlook
4 Outlook ____ Marc England Chief Executive
Slide 35: Outlook: FY guidance range updated
Outlook FY guidance range updated • FY17 EBITDAF updated guidance range of $320 to $330 million including increased share of Kupe1 • Target earnings profile remains to deliver $400+ million of EBITDAF in FY21 (with a range of $375 - $425 million) 1. Subject to any material events, significant one-of
Slide 36: Why Genesis Energy?
Why Genesis Energy? Yield plus growth strategy in motion as Genesis Energy transforms • Brand strength and largest customer base provides strong platform for growth Customer • Obsession with customer experience will drive increased loyalty and lower costs Centric • Leveraging technology to improve t
Slide 37: Supplementary Information
Supplementary Information Ww j ENERGY
Slide 38: Financial Statements
Financial Statements Income Statement HY17 HY16 Variance Balance Sheet HY17 HY16 Variance ($m) ($m) ($m) ($m) Revenue $965.3 $1,041.6 (7.3%) Cash and Cash Equivalents 209.7 37.5 Total Operating Expenses (809.6) (866.1) Other Current Assets 273.1 298.2 EBITDAF 155.7 175.5 (11.3%) Non-Current Assets 3
Slide 39: Reconciliation of EBITDAF to NPAT
Reconciliation of EBITDAF to NPAT Income Statement HY17 HY16 Variance • EBITDAF is a non-GAAP item but is used as a key ($m) ($m) metric by management to monitor performance at a EBITDAF 155.7 175.5 (11.3%) business segment and group level Depreciation, Depletion & Amortisation (73.6) (73.1) Impairm
Slide 40: Thank You
Thank You Ww j ENERGY
Slide 41: Disclaimer
Disclaimer This presentation has been prepared by Genesis Energy Limited (‘Genesis Energy’) for information purposes only. The information in this presentation is of a general nature and does not purport to be complete nor does it contain all the information required for an investor to evaluate an i