Vector Limited · NZX:VCT
Vector — FY2014 Earnings Presentation
31 slides from Vector's earnings presentation, Aug 22, 2014
Slide 1: Financial and Operational Results
VECTOR LIMITED Financial and Operational Results Year ended 30 June 2014 22 August 2014
Slide 2: Disclaimer
VECTOR LIMITED Disclaimer This financial and operational results presentation dated 22 August 2014 provides additional comment on the market release of the same date. As such, it should be read in conjunction with, and subject to, the explanations and views of future outlook on market conditions, ea
Slide 3: Michael Stiassny, Chairman
VECTOR LIMITED Michael Stiassny CHAIRMAN 3
Slide 4: Agenda
VECTOR LIMITED Agenda • Dividend • Full Year (FY) 2014 summary • Financial results • Operating overview • Outlook 4
Slide 5: Vector's vision and goal
VECTOR LIMITED Vector’s vision and goal VISION: First choice for integrated infrastructure solutions GOAL: Deliver sustainable dividend increases Declared dividend 20 • 2014 fully-imputed full year dividend rises 0.25 cents per share to 15.25 16 cents per share Cents per share 12 7.75 7.75 • Record
Slide 6: Simon Mackenzie, Group Chief Executive
VECTOR LIMITED Simon Mackenzie GROUP CHIEF EXECUTIVE 6
Slide 7: Vector's portfolio of businesses
VECTOR LIMITED Vector’s portfolio of businesses 2014 adjusted EBITDA* 700 630.5 +23.7 600 580.7 -26.5 -37.0 -0.5 -9.5 500 $ Million 400 300 200 100 0 2013 Electricity Gas Gas Technology Shared 2014 Transportation Wholesale Services *In line with international best practice, Vector has replaced group
Slide 8: 2014 financial performance
VECTOR LIMITED 2014 financial performance 1,400 1,279.2 1,258.9 2013 1,200 2014 1,000 $ Million 800 630.5 580.7 600 426.2 366.6 400 339.2 298.6 206.2 171.3 146.9 151.9 200 0 Revenue Adjusted EBITDA Net Profit Operating Capital Expenditure Dividend Paid Cash Flow -1.6% -7.9% -16.9% -14.0% +13.6% +3.4
Slide 9: Dan Molloy, Chief Financial Officer
VECTOR LIMITED Dan Molloy CHIEF FINANCIAL OFFICER 9
Slide 10: Profit statement
VECTOR LIMITED Profit statement 2014 2013 CHANGE YEAR ENDED 30 JUNE $M $M % Revenue 1,258.9 1,279.2 -1.6 Operating expenses (678.2) (648.7) -4.5 Adjusted EBITDA 580.7 630.5 -7.9 Depreciation and amortisation (183.8) (174.1) -5.6 Net interest costs (168.9) (164.4) -2.7 Fair value change on financial
Slide 11: Electricity
VECTOR LIMITED Electricity 2014 2013 CHANGE YEAR ENDED 30 JUNE $M $M % Revenue 631.3 632.9 -0.3 Operating expenses (285.3) (260.4) -9.6 EBITDA 346.0 372.5 -7.1 Depreciation and amortisation (83.1) (80.8) -2.8 Segment profit 262.9 291.7 -9.9 EBITDA/Revenue 54.8% 58.9% Growth capital expenditure 80.2
Slide 12: Gas Transportation
VECTOR LIMITED Gas Transportation 2014 2013 CHANGE YEAR ENDED 30 JUNE $M $M % Revenue 187.0 219.6 -14.8 Operating expenses (53.6) (49.2) -8.9 EBITDA 133.4 170.4 -21.7 Depreciation and amortisation (22.8) (23.9) +4.6 Segment profit 110.6 146.5 -24.5 EBITDA/Revenue 71.3% 77.6% Growth capital expenditu
Slide 13: Gas Wholesale
VECTOR LIMITED Gas Wholesale 2014 2013 CHANGE YEAR ENDED 30 JUNE $M $M % Revenue 349.8 372.2 -6.0 Operating expenses (298.9) (311.8) +4.1 EBITDA 50.9 60.4 -15.7 Depreciation and amortisation (15.4) (16.2) +4.9 Segment profit 35.5 44.2 -19.7 EBITDA/Revenue 14.6% 16.2% Growth capital expenditure 3.8 3
Slide 14: Technology
VECTOR LIMITED Technology 2014 2013 CHANGE YEAR ENDED 30 JUNE $M $M % Revenue 137.0 109.1 +25.6 Operating expenses (37.0) (32.8) -12.8 EBITDA 100.0 76.3 +31.1 Depreciation and amortisation (46.5) (38.9) -19.5 Segment profit 53.5 37.4 +43.0 EBITDA/Revenue 73.0% 69.9% Growth capital expenditure 96.5 8
Slide 15: Shared Services
VECTOR LIMITED Shared Services 2014 2013 CHANGE YEAR ENDED 30 JUNE $M $M % Revenue 0.6 0.6 - Operating expenses (50.2) (49.7) -1.0 Adjusted EBITDA (49.6) (49.1) -1.0 15
Slide 16: Cash flow
VECTOR LIMITED Cash flow 2014 2013 YEAR ENDED 30 JUNE $M $M Operating cash flow 366.6 426.2 Replacement capex (135.1) (123.3) Dividends paid (156.7) (148.3) Cash available for growth and debt repayment 74.8 154.6 Growth capex (192.3) (160.1) Acquisitions (60.1) - Other investment activities 1.8 3.7
Slide 17: Asset backing and capital structure
VECTOR LIMITED Asset backing and capital structure 30 JUNE 31 DECEMBER 30 JUNE 2014 2013 2013 Net debt 2,461m 2,388m 2,364m Equity/total assets 39.5% 40.4% 39.3% Gearing (net debt/(net debt+equity)) 51.6% 50.7% 51.1% Interest cover (net) 2.3x 2.7x 2.8x • Vector’s balance sheet remains sound • Standa
Slide 18: Simon Mackenzie, Group Chief Executive
VECTOR LIMITED Simon Mackenzie GROUP CHIEF EXECUTIVE 18
Slide 19: Strategic focus
VECTOR LIMITED Strategic focus GOAL: Deliver sustainable dividend increases AREAS OF STRATEGIC DISCIPLINED CUSTOMER OPERATIONAL REGULATORY PEOPLE AND GROWTH FOCUS EXCELLENCE OUTCOMES SAFETY FOCUS INNOVATION 19
Slide 20: Well positioned to grow
VECTOR LIMITED Well positioned to grow Auckland households Smart meters 800,000 800,000 675,555 700,000 600,000 600,000 505,888 500,000 DISCIPLINED 400,000 400,000 369,394 GROWTH 300,000 245,477 200,000 200,000 114,272 100,000 - 0 1996 2001 2006 2013 2016 2021 2026 2010 2011 2012 2013 2014 Actual Au
Slide 21: Meeting the challenge
VECTOR LIMITED Meeting the challenge Customers want: • Value • Efficiency • Reliability CUSTOMER • Choice and flexibility FOCUS • Minimal disruption How we are delivering: • Encouraging customers to ensure they are on the appropriate tariffs • Driving efficiency by implementing a single contract acr
Slide 22: Vector delivers real value to customers
VECTOR LIMITED Vector delivers real value to customers • Vector’s electricity distribution prices have dropped two years in a CUSTOMER row FOCUS • After stripping out inflation our electricity charges have fallen over recent years • Over the same period other line charge costs have increased - Trans
Slide 23: Continuous improvement
VECTOR LIMITED Continuous improvement OPERATIONAL EXCELLENCE • Efficient operations means Vector remains among the lowest cost providers in the country • New products across the metering network: - Ability for consumers to export solar power back to the grid - Technology to control energy consumptio
Slide 24: Regulation – the quest for an equitable regime
VECTOR LIMITED Regulation – the quest for an equitable regime • Vector remains concerned the regulatory regime is not keeping pace with technological change and global trends REGULATORY - Regulated cash flow profiles do not recognise technological change OUTCOMES - Allowable rates of return not achi
Slide 25: People & safety: setting the standard
VECTOR LIMITED People & safety: setting the standard • We strive for a high performance culture that recognises health and safety as a core value PEOPLE & • We have developed a three year health, safety and environment SAFETY strategy which requires commitment and proactive leadership from our board
Slide 26: Outlook
VECTOR LIMITED Outlook • A challenging year ahead, with regulatory pricing adjustments relating to prior periods and declining demand for electricity per capita • We remain focused on customer solutions, the demands of our gas customers and delivering on the potential of our technology operations •
Slide 27: Q&A
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Slide 28: Appendix
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Slide 29: Operating statistics
VECTOR LIMITED Operating statistics % % 2014 2013 Change 2014 2013 Change ELECTRICITY GAS TRANSPORTATION Customers1,5 543,953 539,232 +0.9 Distribution customers1,5 159,738 156,952 +1.8 Net movement in customers 2 4,721 4,004 +17.9 Net movement in distribution customers 2 2,786 2,303 +21.0 Volume di
Slide 30: Non-GAAP reporting measures
VECTOR LIMITED Non-GAAP reporting measures Vector’s standard profit measure prepared under New GAAP TO Non-GAAP reconciliation Zealand GAAP is net profit. Vector has used non-GAAP profit measures when discussing financial performance in EBITDA and Adjusted EBITDA 2014 2013 this document. The directo
Slide 31: vector.co.nz
vector.co.nz 31