Vector Limited · NZX:VCT
Vector — FY2008 Earnings Presentation
34 slides from Vector's earnings presentation, Aug 27, 2008
Slide 1: 2008 annual result
2008 annual result Michael Stiassny, Chairman Simon Mackenzie, Group Chief Executive Officer Alex Ball, Chief Financial Officer 27 August 2008
Slide 2: Michael Stiassny, Chairman
] \Y K\ Vector Michael Stiassny Chairman
Slide 3: Vector 2008 result
Vector 2008 result NPAT $164.4 million Dividend 13.25cps (fully imputed)
Slide 4: Group Summary
Group Summary Simon Mackenzie Group Chief Executive Officer
Slide 5: Agenda
Agenda Results Summary Electricity, Gas & Technology performance Progress to date CFO financial summary Looking ahead Questions
Slide 6: Results Summary
Results Summary Year ended 30 June 2008 ($m) 1,400 1,307.1 1,329.3 2007 1,200 2008 1,000 800 640.0 605.3 600 400 228.5 231.5 233.3 164.4 200 0 Revenue EBITDA NPBT NPAT 1.7% 5.7% 1.3%
Slide 7: Electricity
Electricity ($M) Revenue and 700 611.5 637.5 EBITDA increases 600 2007 500 2008 Strong volume 403 400 376 growth in Auckland 300 Wellington network 200 divestment 100 completed in July 0 2008 Revenue EBITDA 4.3% 7.2% (GWh) Electricity distributed 1.1% 12,000 10,595 10,708 10,000 2,435 2,441 Wellingt
Slide 8: Gas
Gas ($M) 626.8 619.5 Contract position in 600 2007 Commercial and 2008 Industrial market 400 remains strong 244 252 200 Competition 0 increased due to gas Revenue EBITDA supply 1.2% 3.4% Gas distributed 12.2% PJ’s 140 120 21.6 Distribution 1.8% 100 22.0 80 60 109.3 94.6 40 20 Transmission 15.5% 0 20
Slide 9: Technology
Technology Vodafone contract announced ($M) 2007 66.3 63.2 2008 300 km network 60 extension underway 46.8 43.0 41 Telecom 40 exchanges to be connected 20 Wholesale telecommunications 0 channel growth Revenue EBITDA 4.9% 8.1% Wellington fibre optic network not included in CKI sale
Slide 10: Progress
Progress Economic conditions and refinancing EMTN successful Wellington network divested Vector rated BBB+ and Baa1 stable Senior debt retired Regulation Commerce Amendment Bill – key features retained Electricity threshold reset 2010 or later Acceptance of electricity administrative settlement Disc
Slide 11: Progress
Progress Capital and Operational expenditure efficiency Total group overheads down $15m ($20m annualised) Streamlining field contracting Continued internal efficiency focus Operational excellence Kapuni uptime increases to 99.87% SAIDI regulatory target 85.5 mins Vector normal interruptions 84.7 min
Slide 12: Progress
Progress Storm response Improved liaison Improved communication Re-organised executive team Four new appointments Allan Carvell – GGM Regulation and Pricing David Worsnop – GGM Service Delivery David Tompkins – GGM Asset Investment Alex Ball - CFO
Slide 13: Financial Results
Financial Results Alex Ball Chief Financial Officer
Slide 14: Positioning the Financials
Positioning the Financials First year of reporting under IFRS − 2007 comparatives adjusted Results include Wellington Electricity Network − Classified as “discontinuing operation held for sale” Higher cost of credit increased financing costs (+$24m) − Maintained BBB+ rating Cost containment programm
Slide 15: Financial Result Summary
Financial Result Summary Contributors to Group EBITDA growth 8.4 3.1 640 -3.8 620 27.0 600 NZ$ million 580 640.0 560 605.3 540 520 500 FY07 EBITDA Elect r icit y Gas Technology Corpor at e FY08 EBITDA Core businesses in Electricity and Gas remain key underlying drivers of EBITDA growth
Slide 16: Financial results (2)
Financial results (2) Year ended 30 June 2008 2007 2008 $ Millions 1,329.3 1,400.00 1,307.1 1,200.00 1,000.00 800.00 640.0 605.3 600.00 458.6 485.1 400.00 228.5 231.5 233.3 200.00 164.4 0.00 Total Revenue EBITDA EBIT NPBT NPAT
Slide 17: Operating margins
Operating margins Year ended 30 June 2008 2007 2008 % 60 48.1 50 46.3 40 35.1 36.5 30 20 17.5 17.4 10 0 EBITDA/Total Revenue EBIT/Total Revenue NPBT/Total Revenue
Slide 18: Divisional results
Divisional results Year ended 30 June 2008 2008 Electricity Gas Technology Corporate/ Inter- Total Other segment $ Millions Total Revenue 637.5 665.9 69.2 5.9 (49.2) 1,329.3 Operating Expenditure (234.5) (413.9) (26.2) (63.9) 49.2 (689.3) EBITDA 403.0 251.9 43.0 (57.9) - 640.0 % Revenue 63.2 37.8 62
Slide 19: Impact of the Wellington network sale
Impact of the Wellington network sale Income Statement 2008 2007 $millions Continuing Discontinuing Total Continuing Discontinuing Total Revenue 1,182.0 147.3 1,329.3 1,145.8 161.3 1,307.1 EBITDA 547.9 92.1 640.0 501.2 104.1 605.3 EBIT 407.6 77.5 485.1 372.1 86.5 458.6 NPBT 200.1 31.4 231.5 184.9 43
Slide 20: Dividend
Dividend Cents per share 14 13.0 13.25 12.0 12 10 6.75 Final 6.0 6.5 8 6 6.0 6.5 6.5 Interim 4 2 0 2006 2007 2008 All dividends fully imputed at 30c Shareholders record date 11 September 2008 Payable 18 September 2008
Slide 21: Capital expenditure
Capital expenditure $ Millions Electricity Gas Technology Corporate Total Replacement/ 82.4 17.8 4.7 0.6 105.5 Compliance Growth 72.3 20.2 23.7 8.5 124.7 Total 154.7 38.0 28.4 9.1 230.2 % of Total Spend 67.2% 16.5% 12.3% 4.0% 100.0% 2007 total 166.0 43.4 35.8 14.9 260.1 Capital expenditure lower acr
Slide 22: Cash flow
Cash flow $ Millions 2008 2007 Change EBITDA 640.0 605.3 34.7 Net interest paid (244.5) (221.8) 22.7 Tax paid (67.9) (59.2) 7.7 Non cash items 12.5 (7.8) 20.3 Change in operating working (9.1) 41.5 50.6 capital Operating cash flow (OCF) 331.0 358.0 27.0 Replacement Capex (106.1) (127.6) 21.5 Dividen
Slide 23: Asset backing & capital structure
Asset backing & capital structure as at 30 June 2008 2008 2007 2006 $m 3,110.0 2,947.7 3,081.1 Net Debt Equity/Total assets % 31.8 33.0 33.7 Debt (1)/Debt (1)+Equity % 62.0 60.4 61.5 Interest (net) cover X times 1.9 2.0 1.6 (1) Net Debt
Slide 24: Debt Facilities Maturity Profile (30 June 2008)
Debt Facilities Maturity Profile (30 June 2008) Consolidated Group Debt Maturity Profile Sterling 7.625% Bonds 1,100.0 Credit Wrapped 1,000.0 Floating Rate Notes 900.0 USPP 800.0 700.0 6.81% Fixed Rate Debt ($m) 600.0 Notes 500.0 Credit Wrapped AUD Medium Term Notes 400.0 Credit Wrapped 300.0 Floati
Slide 25: Debt Facilities Maturity Profile – After Sale Wellington Network
Debt Facilities Maturity Profile – After Sale Wellington Network 1,100.0 Sterling 7.625% Bonds 1,000.0 Credit Wrapped 900.0 Floating Rate Notes USPP 800.0 6.81% Fixed Rate 700.0 Notes Debt ($m) 600.0 Credit Wrapped AUD Medium Term Notes 500.0 Credit Wrapped Floating Rate Notes 400.0 8.00% Capital Bo
Slide 26: Looking ahead
Looking ahead Simon Mackenzie Group Chief Executive Officer
Slide 27: Options for disciplined growth: Telecommunications
Options for disciplined growth Telecommunications •Proven credentials in working with local and central government •Vector committed to open access networks •$1 billion cost to deploy fibre to wider Auckland •Commercially acceptable agreement via infrastructure fund
Slide 28: Options for disciplined growth: Smart Metering
Options for disciplined growth Smart Metering •Future proofed legacy asset •Positioned for growth in other markets
Slide 29: Options for disciplined growth: Renewables
Options for disciplined growth Renewables Thin film PV panels Hills evacuated tube solar hot water heater Swift micro-wind turbine
Slide 30: Looking ahead
Looking ahead •Security of supply remains an issue •Vector spends $200m per annum in Capex and Opex combined •Concerned by thermal moratorium •Range of energy solutions needed
Slide 31: Looking ahead
Looking ahead •Gas being developed globally •NZ has healthy gas supplies – new fields being developed •Base case demand will outstrip supply by 2011
Slide 32: Summary
Summary Multi utility infrastructure owner or manager Operational Excellence Capital and Operational Expenditure Efficiency Regulatory and customer outcomes Disciplined growth Growth Organic Leveraging existing positions and expertise
Slide 33: Summary: Value drivers
Summary Value drivers Organic growth Options for future growth Network overlap Population density Capital expenditure requirements Network age Regulation Acquisitions considered if they arise
Slide 34: Summary
Summary Refinanced Regulation, work in progress Improved Capital, Operational Efficiency Improved Operational Excellence Improved Customer outcomes Strengthened Executive team New options for disciplined growth Ongoing continuous improvement