LEADERSHIP Chair and Group Chief Executive report
who have been repositioning the business to meet the growing demand for heating, ventilation and air-conditioning solutions. Group net profit was up 5.4% to $83.3 million from $79.0 million in the prior period. This was largely due to higher earnings and an increase in capital contributions, partially offset by an increase in depreciation and amortisation as well as non-cash movements within costs of finance. Capital expenditure increased 10.1% to $201.1 million from $182.7 million in the prior period. This was driven by an increase in Australian smart meter deployment and network capital expenditure to support the ongoing growth in Auckland. As mentioned at the annual shareholder meeting in November 2018, since the major storm in April 2018, Vector has been upgrading the foundations of its outage management systems, processes and tools to improve the customer experience. In addition, we have been working closely with retailers and other key stakeholders, such as Civil Defence, to improve essential information access and data coordination. We have also increased our vegetation management efforts, and have continued to upgrade and maintain our existing network assets. While this programme of work has (thankfully) yet to be tested with a weather event of similar magnitude to the one experienced in April last year, the painful lessons we have learnt have also seen a comprehensive overhaul of the underlying systems and processes that feed into customer tools. A new and improved Outage Centre customer tool is now in operation, supported by a new Cyber Security Operations Centre, and we expect to see continuous improvements to the way in which our customers can access information during outages. That said, as an organisation that is increasingly focused on customer experience across our entire Group, we know we still have a great
deal of work to do. Further, we see customer experience as an increasingly critical part of our investment thinking, and have developed deeper insights into what customers prefer and expect, and how they want to be able to engage with us across our products and services. We welcome the focus from the Electricity Pricing Review panel on ensuring wider access to network metering data on reasonable terms. We have also invested in our people and our culture, to ensure we deliver on service expectations, and try to put ourselves in the shoes of our customers at all times. Our customer and staff research reveals that we are continuing to head in the right direction. In governance matters, long-serving Chairman Michael Stiassny stepped down at November’s annual shareholder meeting, David Bartholomew and Sibylle Krieger stepped down as independent directors in the same month, and Entrust trustee Mike Buczkowski joined the Board as a non- independent director, replacing outgoing Trustee James Carmichael. The Board remains committed to the long-term strategic direction of Vector, and has initiated an independent skills-based review and a new director search to ensure the right skills and composition of the Board are in place for Vector’s future. The six months has also seen the commencement of the signalled Government review of the electricity sector which, along with the pending Interim Climate Change Commission report, will help guide New Zealand’s transition to 100% renewable energy. Given the macro trends at play, it is timely the Government has this once-in-a- decade opportunity to incentivise investment in the new energy technologies that will help empower customer choice, help solve big market challenges, and help promote more innovation and competition.
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