Vector Limited today announced its annual profit result for the twelve months to 30 June 2009, with Group Chief Executive Officer Simon Mackenzie describing the company’s performance as pleasing.

“We are in a strong financial position and remain focused on core business performance, productivity and growth.

“Not surprisingly, the recession has had an impact on our business. Growth in new connections has slowed and volumes are down on last year. However, our efficiency programmes, started nearly two years ago, delivered full year gross savings of $20 million and we have significantly improved our debt profile and maintained our ratings with international credit agencies.

“Consequently, we have been able to reduce the recession’s impact and are in a good position to take advantage of suitable growth opportunities as they arise.”

Net profit after tax (NPAT) from continuing operations* (adjusted to exclude Vector’s Wellington network sold in July 2008) was $164.9 million, $23.1 million or 16.3% ahead of last year.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) from continuing operations was $582.2 million, a $34.3 million or 6.3% improvement on 2008. Revenue from continuing operations was down from $1,182.0 million to $1,174.2 million.

Shareholders will be paid a fully imputed dividend of 13.75 cents per share for the year, compared to 13.25 cents for the prior period.

Vector continues to invest in its assets – electricity, gas and fibre networks, gas processing, and smart meters - spending $319 million on growth capital, replacement capital, and maintenance works during the year.

Despite Vector’s pleasing full year result, its board and management team are realistic about the issues facing the company, said Mr Mackenzie.

“The way forward will be challenging given the regulatory reset, gas market dynamics and legacy contract roll-offs, coupled with the soft economic conditions. We will however, continue to pursue growth options such as fibre and smart meters.

“Over the past two years our efficiency programmes have made significant savings, but the opportunity to replicate those savings in the years ahead is limited. Productivity and working smarter are the keys to further efficiencies.”

Electricity consumption decreased by 0.3%, and growth in connections fell by 18.3%. The gas market over the past year has been volatile, with wholesale and retail gas volumes contracting. Growth in retail gas connections was down 44%.

Vector’s fibre optic infrastructure business achieved a number of milestones during the year including nearing completion of the build of the network constructed for major customer Vodafone, ahead of time and on budget, said Mr Mackenzie.

“High speed fibre is coming, and we are ready to be part of it. Vector fully supports the Government’s vision of a high speed open access fibre network to deliver the infrastructure that New Zealand so badly needs.
 
“We are strongly placed to be part of the country’s fibre initiative. As experts in infrastructure, and unencumbered by legacy assets, we have a highly credible solution, and are ready to deliver in Auckland, and potentially beyond.

“We have actively engaged with Government. And to support the vision of local fibre companies, Vector has been instrumental in setting up the New Zealand Regional Fibre Group working collaboratively with other fibre and lines companies to help realise regional investment, connected communities and national coordination.

“If we get the opportunity and if it makes commercial sense, we’ll be part of New Zealand’s fibre solution. In the future, fibre will be the means for many retailers – not just the telcos, to deliver services to customers and drive New Zealand’s economic development and productivity.”

The changes to the Commerce Amendment Act governing the electricity and gas sector have delivered a more robust regulatory framework Mr Mackenzie said, but there are still critical and complex issues to work through.

“The outcomes will have a long term and far reaching effect on our industry, and we will continue to be an active participant in the submission and consultation process. Regulatory certainty is vital to support investment and funding of critical infrastructure.”

Vector welcomes the ministerial review of the electricity market, and will be contributing to the submissions process.

“As noted in the discussion paper, network charges for electricity lines businesses have not risen significantly, if at all, in contrast with the significant increase in energy prices. The changes proposed regarding governance around transmission investment we see as positive. While the possibility of lines companies being able to retail only goes part of the way to address retail competition and price issues.”

Vector is in good shape, said Mr Mackenzie.

“We are focused on productivity, participating in the Government’s fibre initiative, the electricity review, regulation, and navigating the continuing difficult economic conditions.”