Elmera Group Asa · OSL:ELMRA
Elmera Group Asa — Fjordkraft — Investor Day (February 2019)
71 slides from Elmera Group Asa's investor day presentation, Feb 14, 2019
Slide 1: Today’s agenda
Today’s agenda Start - finish Time (min) Subject Presenter 09:00 - 09:15 15 1. Financial update Rolf Barmen/Birte Strander 09:15 - 09:40 25 2. CEO state of the union Rolf Barmen 09:40 - 09:50 10 Q&A 09:50 - 10:10 20 3. Regulations and M&A Arnstein Flaskerud 10:10 - 10:25 15 4. The Power market and t
Slide 2: Today’s presenters and Fjordkraft management team
Today’s presenters and Fjordkraft management team Today’s presenters Broader management Rolf Barmen Alf Kåre Hjartnes Chief Executive Officer EVP - Head of Technology Birte Strander Jeanne Tjomsland Chief Financial Officer EVP - Head of Group Marketing, Communications & HR Arnstein Flaskerud Solfrid
Slide 3: Q4 2018 Highlights
Q4 2018 HIGHLIGHTS Rolf Barmen (CEO) 3
Slide 4: Highlights fourth quarter 2018
Highlights fourth quarter 2018 Strong performance in a competitive quarter Key Highlights 2 • Adjusted net revenue was NOK 304.6m, +15% YoY # of deliveries (end of period) Net change in # of deliveries • Adjusted EBIT increased +12% YoY and was NOK 107.1m 604 973 8 687 • +14% YoY growth in deliverie
Slide 5: Financial Review
FINANCIAL REVIEW Birte Strander (CFO) 5
Slide 6: Adj. net revenue and adj. EBIT by segment – quarterly
Adj. net revenue and adj. EBIT by segment – quarterly Consumer segment Business segment New Growth Initiatives Adj. net revenue (NOKm) Adj. net revenue (NOKm) Adj. net revenue (NOKm) 250 +15% 250 250 200 200 200 150 150 +18% 150 223 +3% 100 185 213 100 100 174 156 50 50 82 83 50 70 62 65 9,0 9,1 5,6
Slide 7: Full Year 2018
FULL YEAR 2018 Birte Strander (CFO) 7
Slide 8: Group performance stronger than expected
Group performance stronger than expected Adj. net revenue1 (NOKm) Adj. EBIT1 (NOKm) +10% +18% 1 200 400 60% 1 000 350 50% 300 38% 800 Target: 36% 40% Mid-single digit 250 600 revenue growth on 200 30% 1 088 an organic basis 390 356 924 150 400 20% 100 200 10% 50 0 0 0% FY 2017 FY 2018 FY 2017 FY 201
Slide 9: Adj. net revenue and adj. EBIT by segment – Full Year
Adj. net revenue and adj. EBIT by segment – Full Year Consumer segment Business segment New Growth Initiatives Adj. net revenue1 (NOKm) Adj. net revenue1 (NOKm) Adj. net revenue1 (NOKm) 1 000 +16% 1 000 1 000 800 800 800 Target2: Target2: 600 Slightly positive net 600 Above double digits 600 revenue
Slide 10: Performance vs financial targets
Performance vs financial targets1 Targets Status Group Ambition to act as a consolidator in a fragmented market Three acquisitions in 2018 # of Purchase Expected annual Expected annual Acquisition deliveries price synergies 2018 synergies 2019 Status TrønderEnergi ~61,200 278 NOKm >5 NOKm >15 NO
Slide 11: CEO State of the Union
CEO STATE OF THE UNION Rolf Barmen (CEO) Oslo, 14th February 11
Slide 12: Fjordkraft at a glance – a leading Norwegian electricity retailer
Fjordkraft at a glance – a leading Norwegian electricity retailer for both consumer and business customers Deregulated: Transmission system Distribution system Energy production operator (TSO) operators (DSO) Electricity retailers End-customers 2018 financials 3% Gross revenue New Growth Con
Slide 13: Strategy execution resulting in profitability shift and net revenue growth
A highly successful strategy execution has resulted in an impressive profitability shift and net revenue growth Impressive net revenue and EBIT development… …enabled through optimisation & focused investment 2002-2012 2013-2018 Net revenue adj.1 in NOKm 1 088 1200 Today New management and strategy i
Slide 14: Observations and fundamental beliefs
Observations and fundamental beliefs We observe that We believe that • Our industry is fragmented • We are in a pole position to act as the consolidator • Our business environment is becoming increasingly more complex • Our products still need to be actively sold • All retail business across all ind
Slide 15: A highly fragmented industry – Fjordkraft ready to be the consolidator
A highly fragmented industry – Fjordkraft ready to be the consolidator We observe that We believe that The industry is very fragmented Fjordkraft is positioned to take lead in the consolidation >100 retailers 11 with national presence Management and organisation with ambition to consolidate Local
Slide 16: Fjordkraft well positioned in an increasingly complex market
Fjordkraft well positioned in an increasingly complex market We observe that We believe that • Complexity fuels consolidation • GAAFA companies likely to search for partners like us • Complexity increases • Small disruptive players likely to search • Electricity needs to be sold for partners like us
Slide 17: Key focus areas to handle deflation
Key focus areas to handle deflation We observe that We believe that • Digitalisation needs to be accompanied by a focused growth strategy • We must take advantage of competing • All retail business across all industries, tech solutions sooner or later suffers from deflation • We must take advantage
Slide 18: Competitive advantages supporting Fjordkraft’s business plan
Competitive advantages supporting Fjordkraft’s business plan We observe that We believe that • We have well defined competitive advantages: • Brand • Winning players across all industries possess competitive advantages • Sales distribution system • Large customer base • “The Fjordkraft factory” Our
Slide 19: Securing profitability through the three defensive lines
Securing profitability through the three «defensive lines» Securing profitability Customer Sales Product Service & «First line of activities development Loyalty defence» = programs Net revenue growth Distribution, Top of Product management Attraction, it’s all Mind, Regulatory about managing price (
Slide 20: Updated roadmap to growth – increased focus on M&A
Updated roadmap to growth – increased focus on M&A Roadmap to growth 2019-2020 2 million (+0.8 million) people supplied with electricity from Fjordkraft Vision / Target 875k deliveries (+235k) through growing the customer base Continue leverage market leading brand and distribution Organic capabil
Slide 21: Financial targets for the next two years
Financial targets for the next two years1 Targeting high-single digit net revenue growth on an organic basis Group Targeting a stable EBIT margin on an organic basis Ambition to act as a consolidator in a fragmented market Growth Targeting mid-single digit net revenue growth on an organic ba
Slide 22: Fjordkraft
C) Fjordkraft Mer for pengene
Slide 23: Regulatory drivers and consolidation
REGULATORY DRIVERS AND CONSOLIDATION Arnstein Flaskerud (EVP Head of Strategy and M&A) Oslo, 14th February 23
Slide 24: Electricity – Regulations
ELECTRICITY – REGULATIONS 24
Slide 25: The energy sector becomes more horizontal
The energy sector becomes more horizontal Production Today Grid (Vertically integrated) Electricity retail Regulatory changes – ongoing and planned Large investment – in grid and production Market enablers Fragmented market – large number of subscale players Production Future Grid (Horizontally inte
Slide 26: Regulatory developments providing opportunities for large independent electricity retailers
Regulatory developments providing significant opportunities for large independent electricity retailers Regulatory milestones in Norway Smart meter (AMS) Elhub Unbundling Mandatory One Invoice 2017-2018 2019 2020 - 2021 2021 - 2022 • Roll-out of smart meters • 18 February 2019 • Requirement for corp
Slide 27: Mobile – Regulations
MOBILE — REGULATIONS © Fjordkraft
Slide 28: Market shares and the mobile regulation
Market shares and the mobile regulation Market 15 ≈3 % ≈7 % • The market is regulated • Telenor is obliged to provide access and call origination to other mobile operators ≈50 % • No discrimination regarding price or ≈40 % technology • Margin squeeze tests bi-annually to evaluate Telenor’s pricing s
Slide 29: Mergers & Acquisitions
MERGERS & ACQUISITIONS © Fjordkraft
Slide 30: Ambitions & opportunities
Ambitions & opportunities Roadmap to growth 2019-2020 Drivers for consolidation Regulatory changes 2 million (+0.8 million) people supplied with electricity from Fjordkraft Merging of grid companies Merging of counties and municipalities Intensified competition 875k deliveries (+235k) throug
Slide 31: Market and competition driving costs for local players
Market and competition are driving costs required for local players to compete Building up a strong Incumbents are rigged for Higher churn erodes their defense and adding more local competition – lack of local markets shares and sales and customer national brand and forces them out of their service
Slide 32: Substantial potential for consolidation within electricity retailing in Norway
Substantial potential for consolidation within electricity retailing in Norway Typically have strong regional positions National and national presence – facing players National Typically have strong regional positions and national increased competition from larger (50- players national players prese
Slide 33: M&A methodology
M&A methodology Prospecting Strategic considerations Company triggers Competition Brand Transaction structure Cost synergies Portfolio acquisition Company acquisition Valuation methods Administration DCF Multiples Benchmark Churn out Cost synergies Invoicing, customer service and back-office Due dil
Slide 34: Key highlights from regulations and M&A
Key highlights from regulations and M&A We expect that our M&A activities will fulfill a major part of our 1 Roadmap to Growth Regulations both in the electricity market and the mobile market 2 are supporting Fjordkraft’s growth strategy The electricity market is highly fragmented and provides a 3 s
Slide 35: The Power Market and the Fjordkraft Factory
THE POWER MARKET AND THE FJORDKRAFT FACTORY Ingeborg Morken (EVP Head of Operations) Oslo, 14th February
Slide 36: The Power Market
THE POWER MARKET C) Fjordkraft Mer for pengene
Slide 37: Managing the volatile power market and power trading
Managing the volatile power market and power trading right is important Price to end-customers ILLUSTRATIVE 20% • Fjordkraft operates in a low margin business 7% 100% • Aggregating consumption from both consumer, business and alliance partners brings opportunities for diversification and economies o
Slide 38: The Nordic electricity wholesale market
The Nordic electricity wholesale market The wholesale market consists of several markets where bids are submitted and where prices are determined: • the day-ahead market • the intraday market • the balancing market In addition to the system price, Nord Pool sets area prices, which take into account
Slide 39: System price in the day-ahead market
System price in the day-ahead market ILLUSTRATIVE Drivers for the electricity price level: Marginal production cost Example demand Cost of: curve Gas • coal turbines • gas The system reference • carbon price serves as a basis Clearing point Long for financial trading and between supply Oil And renew
Slide 40: The Nordic financial electricity trading market
The Nordic financial electricity trading market Financial electricity trading can take place either bilaterally or on Nasdaq OMX Commodities AS (Nasdaq OMX) exchange All contracts are settled financially without any physical electricity deliveries At Nasdaq OMX, players can hedge prices for purchase
Slide 41: Power trading through partner
Power trading through partner Consumer Power Business Fjordkraft trading partner (Statkraft Energy AS) Alliance OTC Our size and partner model give us unique advantages | Capital Markets Day | 2019 41
Slide 42: Scalable and robust business model
Scalable and robust business model Risk exposure Consumer Business Volume risk – the exposure to the uncertainty of actual volume Low N/A Electricity prices risk – the exposure to fluctuations in electricity area price Low Low Foreign exchange risk – the exposure to currency fluctuations N/A N/A Ele
Slide 43: The Fjordkraft Factory
THE FJORDKRAFT FACTORY C) Fjordkraft Mer for pengene 43
Slide 44: A highly flexible and scalable Fjordkraft factory
A highly flexible and scalable “Fjordkraft factory” Fjordkraft Factory overview A well-integrated service architecture • Flexible platform for sale of intangible services Interfaces Framework Applications Grid owners Elhub Financial Message Metering systems • Handling of new market and regulator
Slide 45: Proven cost efficient platform supporting growth ambitions
Proven cost efficient platform supporting growth ambitions and competitiveness Operational efficiency – selected processes Daily operation for eight different brands Cost per invoice # of invoices per month Cost per relocation # of relocations per year Cost per new sale # of new sales per year Rol
Slide 46: Key takeaways
Key takeaways 1 Fjordkraft has a thorough governance to monitor risk 2 In the Power market - our size and partner model give us unique advantages Overall Fjordkraft seeks to reduce market risk to a low level, but exposure to price 3 volatility supports margin upside A scalable and cost-effective Fjo
Slide 47: Fjordkraft
C) Fjordkraft Mer for pengene
Slide 48: Consumer
CONSUMER Christian Kalvenes (EVP Head of Consumer) Oslo, 14th February 48
Slide 49: The No.1 brand for electricity retailing in the Norwegian consumer market
The No.1 brand for electricity retailing in the Norwegian consumer market Consumer segment in brief A leading market position The No. 1 electricity retail brand in the Nationwide #1 consumer segment2 The Consumer presence segment comprises The most recognised brand in the consumer #1 energy sales an
Slide 50: How we categorize our competitors in electricity retail
How we categorize our competitors in the electricity retail market Local • Located all over Norway, but operates in small geographical areas • Located all over Norway and operates in relatively large Regional geographical areas • Located and operates all over Norway. Our toughest competitors Nationa
Slide 51: Industry leading distribution platform with national omnichannel strategy
An industry leading distribution platform, addressing customers through a national omnichannel strategy Telemarketing Targeting a balanced split between internal and external distribution Internal Web / Online – Support diversification and reduce risk – Optimise profitability per channel – also Cu
Slide 52: Consumer segment business model with limited risk
Consumer segment business model with limited risk Price to end-customers Spot price contracts Variable price contracts ILLUSTRATIVE Product characteristics Product characteristics 20% • The customers price follows the • Fixed price for up to 14 days Nord pool spot price • More steady and predictable
Slide 53: A differentiated, market leading offering with attractive prices
A differentiated, market leading offering with attractive prices and popular value added-services addressing consumer demands Well-tailored service offering Wide range of customer benefits Menu of alternative pricing models to match varying consumer preferences Electricity supply agreements with add
Slide 54: Solid marketing muscle and distribution reach supporting growth
Fjordkraft’s solid marketing muscle and distribution reach supporting growth in a dynamic consumer market High churn rates… …supporting growth and optimizing customer mix ILLUSTRATIVE D • Customer switching driven by sales and A marketing activities by suppliers, and from B consumers moving homes C
Slide 55: | Capital Markets Day | 2019
| Capital Markets Day | 2019 55
Slide 56: Mobile
MOBILE © Fjordkraft
Slide 57: Expanding service offering to leverage the Fjordkraft brand
Expanding service offering to leverage the Fjordkraft brand and strengthen customer relations Mobile service launched April ‘17 Strategic rationale • Introduced as a value enhancing service to electricity customers Capitalise on the Fjordkraft brand • Focus on offering attractive price plans for e
Slide 58: Mobile offering impact on churn, satisfaction and loyalty
Mobile offerings has a massive impact on churn, customer satisfaction and loyalty Customer satisfaction1 Loyalty effect 78 Still too early to conclude, but preliminary analyses 76 show more than 50% reduced electricity churn for 74 customers with both electricity and mobile subscription 72 from Fjor
Slide 59: Key takeaways
Key takeaways 1 The no 1 electricity retail brand in the consumer segment 2 Industry leading nationwide distribution platform and omnichannel strategy 3 Market leading value proposition addressing differentiated consumer needs Large retention toolkit spearheaded by market leading mobile offering tha
Slide 60: Business
BUSINESS Roger Finnanger (EVP Head of Business) Oslo, 14th February 60
Slide 61: A brief look at the Business segment
A brief look at the Business segment Business segment in brief A leading market position Selected customers #2 A leading market position with > 75,000 deliveries and >30,000 business customers4 #2 A leading brand position with 95% brand awareness The Business segment comprises and high top-of-mind s
Slide 62: Main competitors in the electricity retail market
Our main competitors are divided between local, regional and national players in the electricity retail market Selected local/regional players National players Public entities / SMEs Large Customers tender market X X X X X X X X X X X X X X X X X X X X X X X X | Capital Markets Day | 2019 62
Slide 63: Industry leading distribution platform with hands on advisory capabilities
An industry leading distribution platform, addressing customers with hands on advisory capabilities 2 teams in telemarketing cover the smaller segment (<1 GWH) Sales force localised across the 4 teams cover the mid-sized country (Oslo, Bergen, Stavanger, segment (1-10 GWh) Sandefjord and Trondheim
Slide 64: Distribution muscle and sales force
OEOOOCO QOCOOOCO OLOOGHOCOCO ©OCO More than COCO OLOO 8 0 people dedicated to sales and customer services. 2 Ly O00 OOO people in external sales departments. Our large in-house telemarketing department keeps us agile and lets us sell in our desired areas. Distributio D having en Ke Being Norway's mo
Slide 65: Attractive offering to all sorts of businesses
Attractive offering to all sorts of businesses Electricity supplier selection criteria Fjordkraft’s offering to address criteria • Competitive terms • Flexible and tailored solutions for large customers • Predictable and correct invoicing • Products for all risk profiles for SMEs • Consumption repor
Slide 66: A balanced product mix through varied product offering
A balanced product mix through varied product offering Product mix 20171 Product mix 20181 2% 3% 42% 45% 53% 56% Spot incl. risk management Spot Variable Spot incl. risk management Spot Variable Source: Company information 1) Based on number of deliveries at the end of the year | Capital Markets Day
Slide 67: A professional and attractive partner through value added services
A professional and attractive partner through value added services From supplier to energy partner From a traditional electricity retailer • Standardized power contracts • Including professional advisory To an attractive electricity partner services • Risk management Enabled through value added serv
Slide 68: Marketing muscle and distribution reach in business market
Fjordkraft’s solid marketing muscle and distribution reach supporting growth in a dynamic business market Increasing churn rates1 20% Switching in % of total deliveries 15% Frequent supplier changes allow Fjordkraft to capitalise 16% on its strong brand awareness and distribution capacity to gain
Slide 69: Key takeaways
Key takeaways A strong distribution muscle – Managing portfolios enabling market share gains and lock in Blog Easy invoicing Reorganizing – smarter and better use of sales resources Market updates Additional services Growth drivers New value added services – increasing Our most important customer lo
Slide 70: Fjordkraft
C) Fjordkraft Mer for pengene
Slide 71: Fjordkraft – Summary investment highlights
Fjordkraft – Summary investment highlights Operating in the attractive Norwegian electricity retailing market with an unparalleled demand 1 profile and a level playing field favouring strong national brands such as Fjordkraft A proven business model providing ‘need to have’ electricity combined with