Group Chief executive’s REPORT
A CLIMATEOF CHANGE. OPERATING IN
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SIMON MACKENZIE GROUP CHIEF EXECUTIVE
RESULTS REFLECT THE CHANGING WORLD AROUND US.
Despite challenging circumstances, our FY18 financial results were broadly on-target, with adjusted EBITDA of $470.1 million slightly below last year’s result of $474.4 million. While revenue was up across all business areas, group net profit was down 11.3% to $149.8 million, primarily due to a significant increase in depreciation and amortisation in the period. Adjusted EBITDA (excluding capital contributions) in our Regulated Networks segment of Vector fell 0.7% to $358.6 million, with higher maintenance costs of $7.5 million required to address additional vegetation and tree management needs in Auckland and costs associated with the April 2018 storm. The ferocious wind-storm in April caused widespread damage across Auckland and caused significant inconvenience for many customers, as well as drove an additional $4 million in unexpected network repair costs. Climate change modelling indicates extreme weather will likely become more common. The impact on physical infrastructure may be felt in many ways, including increased erosion, flooding, and, as we saw in April, increased wind damage to trees. As well as the massive impact, the storm saw our outage app fail, resulting in a poor customer experience and causing other customer channels to be impacted. Following the storm, the Vector outage app was hacked, resulting in some users of the app having their contact details accessed by a third party. Vector took this matter extremely seriously and took immediate steps to contain the breach and protect the customers information to the full extent possible. Since the storm, Vector has reviewed its storm procedures and response, has undertaken extensive engagement with a wide range of industry and Government stakeholders, and a number of corrective actions based on lessons from the storm are well underway. These include an overhaul of outage management systems, processes and tools to improve the customer experience. The storm review also highlighted shortfalls in tree management regulation. The thousands of trees that damaged lines in April were not owned by Vector and under current regulations we have restricted abilities to manage them.
Vector’s financial and operational results for FY18 reflect the relentless and continual changes to our operating environment. These include ongoing changes to the sector, consumer preferences, technology, and even to New Zealand’s climate. The Vector team, across our entire group, continue to embrace change and lead responses to these forces on behalf of our customers and Auckland.
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