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Record generation and earnings for Mercury

27 February 2018

Record generation and earnings for Mercury in half year result

Summary

>> Record total generation of 4,107 GWh, up 9% on same period last year

>> Record operating earnings (EBITDAF) $301 million, up 11.4%

>> Fully-imputed interim dividend 6.0 cents per share to be paid on 3 April 2018

Mercury has gained momentum in the half-year to 31 December with earnings (EBITDAF) rising to record levels.

Mercury’s interim financial result was driven by favourable North Island rainfall supporting record hydro generation of 2,694GWh up 14% from 2,367GWh in the prior corresponding period.

Chair Joan Withers said that the conditions coincided with lower than average output from South Island hydro generators playing to Mercury’s strategic locational advantage.

Financial Results

HY2018HY2017
EBITDAF ($M)301270
NET PROFIT AFTER TAX ($M)132113
UNDERLYING EARNINGS AFTER TAX ($M)11494
INTERIM DIVIDEND (CENTS PER SHARE)6.05.8

Stay-in-business capital expenditure increased to $59 million in HY2018 from $54 million in HY2017 due to completion of technology upgrade projects and execution of hydro and geothermal maintenance plans.

Operating costs were up $4 million due to phasing of activity in the prior year. Full year operating costs are expected to be in line with FY2017, consistent with the prior four years.

Our customers

Customer growth continued through the period, up 1,000, attributable to Mercury’s loyalty-focused customer strategy. In a highly competitive market, relative churn was maintained at a materially lower rate than the market average through attention to inspiring, rewarding and making things easy for customers.

Participation in the Airpoints™ rewards programme grew with around 150,000 of Mercury customers now enjoying rewards through membership of the programme as at 31 December 2017, up from nearly 100,000 at the same time a year ago.

Our people

Mercury recently received a number of accolades, including two premier marketing awards, and in January was named Best Enterprise Workplace (750+ employees) in the IBM Best Workplaces Awards.

“These things don’t happen by accident. Instead it reflects the great work of Mercury’s people, which I acknowledge on behalf of the Board,” says Ms Withers.

Mercury is developing the capability of its people through a high performance teams programme.

Programme of work

Chief Executive, Fraser Whineray, said that a strong focus on execution in the half year was particularly pleasing.

As an example, Mercury’s core SAP IT platform, which supports many customer interactions as well as behind-the-scenes processing, was upgraded in November with disruption kept to an absolute minimum, Mr Whineray said.

Mercury also launched a refreshed e-bike marketing campaign during the half year to inspire New Zealanders to enjoy energy in more wonderful ways.

Investing in growth

Mercury continues to pursue growth. It has selected Tesla as the supplier for a grid-connected battery storage trial. Mercury’s Research & Development Centre in Auckland was winner of the Most Innovative New Initiative Award by the Sustainable Electricity Association of New Zealand.

During the half year Mercury investigated the prospect of expanding its metering capabilities through an acquisition opportunity in Australia.

“While ultimately unsuccessful with the bid, the process helped refine our view of relevant businesses that could support growth. We will continue to explore other opportunities with a strong commercial lens,” Mr Whineray said.

Outlook

Mr Whineray said Mercury was well positioned to build on the strong momentum.

“Electricity demand has been higher across all sectors except the industrial sector. Drier weather conditions in many areas of the country contributed to increased demand from both dairy processing and irrigation relative to the prior period. This demand growth is supported by population growth in key regions offsetting per-household consumption decreases.

“Mercury continues to invest in solar, battery storage and other customer-led home and transport technologies to ensure we continue to be at the forefront of offering choice to consumers,” Mr Whineray said.

“The momentum established though our rebrand in FY2017, and the leadership and high performance work we are undertaking with our people, has been enhanced in this half year. This signals to me that we are in good shape to continue to deliver value.”

FY2018 Guidance

Mercury’s FY2018 EBITDAF guidance is $530m subject to any material events, significant one-off expenses or other unforeseeable circumstances including hydrological conditions. FY2018 stay-in-business capital expenditure guidance remains at $115 million.

The full year ordinary dividend guidance remains at 15.0 cents per share, a 2.7% increase on FY2017.

Dividend

Ms Withers said Mercury’s 85,000 owners, including the Crown, would receive an interim fully-imputed dividend of 6.0 cents per share, an increase of 3.4%. This represents 40% of the full-year ordinary dividend guidance of 15.0 cents per share. The interim dividend will be paid on 3 April 2018.

ENDS


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