Q2 2019 PRESENTATION Rolf Barmen (CEO) Birte Strander (CFO) Oslo, 22 th August
Q2 2019 HIGHLIGHTS Rolf Barmen (CEO)
Highlights second quarter 2019 Another solid quarter driven by strong price management and favourable market dynamics Key Highlights 1 Δ in # of deliveries (QoQ) # of deliveries (end of period) • Strong YoY growth in net revenue adj. and EBIT adj. driven by strong price management and favourable market dynamics 607 563 911 • Mild weather and decrease in average consumption per Increase of 2 % YoY Of which org. growth: 911 delivery is offset by growth in # of deliveries 2 Volume sold Gross revenue • Strong growth in number of mobile subscribers - passing 80k and further strengthening our position as the largest mobile 2 696 GWh NOK 1 428.8m service provider without its own mobile network Decrease of 0 % YoY Increase of 10 % YoY • Successful acquisition of Vesterålskraft Strøm AS. Transaction completed 1 July 2019 3 3 2 Net revenue (adj.) K6 EBIT (adj.) NOK 273.8m NOK 98.4m 9 Increase of 13 % YoY K7 Increase of 26 % YoY Basic EPS (reported) K13 NIBD (cash) NOK 0.73 (NOK 292.2m) Increase of 40 % YoY K19 NIBD/LTM EBITDA: -0.51 Sources: Company information 1) Number of deliveries excl. Extended Alliance deliveries. Number of deliveries incl. Extended Alliance deliveries: 641,954 2) Not including Alliance volume. Volume turnover for alliance partners Q2 2019: 858 GWh 3) Adj. Net revenue and EBIT are reported figures adjusted for any estimate deviations on sales and distribution of electricity related to previous reporting periods, special items, unrealised gains and losses on financial derivatives and depreciations from acquisitions | Quarterly Presentation | Q2 2019 3
Agreement to acquire Vesterålskraft Strøm (“VKS”) Transaction highlights Customer portfolio (‘000) Clear strategic rationale for acquiring VKS 8.6 o Strong strategic fit – a regional office enabling increased 7.8 market share in the northern part of Norway 7.1 o Leveraging from long-lasting Alliance relationship VKS – a sales organisation with solid customer growth o 8,600 electricity deliveries split into 7,800 in the consumer market and 800 in the business market o 18 employees, primarily sales personnel and customer service Year-end 2017 Year-end 2018 June 2019 The transaction was completed at an EV of NOK 27.3m, split between the customer portfolio (NOK Key financials 2018 (NOKm) 24.8m) and workforce (NOK 2.5m) o The transaction was financed through available cash o Seller has purchased FKRAFT shares with the settlement NOK m. Underlying cost synergies 1 estimated to at least NOK 1.5m p.a. o However, the acquisition and the new regional office enables market share gains in the northern part of Norway, and we will use this momentum to further invest in sales 10.0 activities in this region >1.5 Cost synergies One-off integration costs expected to be in the area of 3.0 NOK 4m 1 1 The transaction was completed 1 July 2019 Net revenue EBIT Sources: Company information 1) Underlying net revenue and EBIT based on reported 2018 financials and adjusted for certain growth related costs and pension costs | Quarterly Presentation | Q2 2019 4
Solar panels now available to the Consumer segment • Consumer customers can now order solar panels for their homes through Fjordkraft • Three different panel offerings with different outputs and prices • The majority of consumers want to finance it on their own. Financing might be offered in the future • Professional and nation-wide partner in Solcellespesialisten • Check the suitability of your roof at www.fjordkraft.no/solceller • Supporting loyalty and strengthening the value added service offering | Quarterly Presentation | Q2 2019 5
BUSINESS REVIEW Rolf Barmen (CEO)
Market development Weekly elspot prices (NOK/kWh) 2 Key highlights in Q2 2019 • The decrease in elspot prices from Q1 continues – 0,6 beneficial for variable products 0,5 • Warmer than normal weather in two out of three 0,4 months, having a negative impact on average 0,3 consumption per delivery 1 0,2 - April: +3.3°C above normal 0,1 - May: -0.3°C below normal 0,0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 - June: +0.5°C above normal 2018 2019 Forward price Market churn (LTM) 3 25% • According to NVE, the market churn figures for Q1 21% 2019 are delayed due to Elhub 20% 15% 18% 10% 5% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 16 16 16 16 17 17 17 17 18 18 18 18 Sources: Consumer Business 1) Temperature figures from met.no’s monthly reports 2) Weekly system prices in NOK from Nordpool, forward prices from Montel 3) Figures from the Norwegian Water Resources and Energy directorate | Quarterly Presentation | Q2 2019 7
Segment development - Consumer # of electricity deliveries 1 (‘000) Key highlights in Q2 2019 • Positive organic development quarter over quarter 600 and a positive trend within the quarter 500 - Net additions in Q2 2019 were 1,471, all of which organic 400 • Stable volume development YoY. The decrease in 300 529 530 532 520 520 avg. volume per delivery is offset by increase in # of 200 deliveries 100 - Avg. volume per delivery decreasing -7% YoY 0 2,600 kWh in Q2 2019 vs. 2,785 kWh in Q2 2018 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Volume (GWh) 2 500 8 000 7 000 2 000 6 000 5 000 1 500 4 000 2 299 2 077 1 000 3 000 1 376 1 381 2 000 1 126 500 1 000 0 0 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Quarter LTM Sources: Company information 1) Number of electricity deliveries at the end of the period | Quarterly Presentation | Q2 2019 8
Segment development - Business # of electricity deliveries 1 (‘000) Key highlights in Q2 2019 • A slight decrease in number of deliveries, driven by 90 loss of tender customer. Limited financial impact 80 70 - Net additions in Q2 2019 were -560 60 50 • Volume decrease 1% YoY. Decrease in avg. volume 40 76 76 76 76 76 per delivery is partly offset by growth in # of 30 deliveries 20 10 - Avg. volume per delivery decreasing -9% YoY 0 17,279 kWh in Q2 2019 vs. 19,043 kWh in Q2 2018 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Volume (GWh) 2 500 7 000 6 000 2 000 5 000 1 500 4 000 3 000 2 103 1 000 1 884 2 000 1 328 1 316 1 118 500 1 000 0 0 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Quarter LTM Sources: Company information 1) Number of electricity deliveries at the end of the period | Quarterly Presentation | Q2 2019 9
New Growth Initiatives # of Mobile subscribers 1 (‘000) Key highlights in Q2 2019 • Strong development with an accelerating growth in 90 number of mobile subscribers. Highest quarterly 80 growth since Q1 2018 70 60 - Growth of 9,446 subscribers in Q2 2019 50 81 40 72 66 61 30 57 • -6% YoY Alliance volume growth driven by mild 20 10 weather 0 • New contract within Extended Alliance Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 • ~5,000 electricity deliveries and ~8,000 Volume Alliance (GWh) broadband customers with expected start-up in 2020 2 000 5 000 4 000 1 500 3 000 1 000 2 000 1 511 1 358 500 910 858 1 000 713 0 0 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Quarter LTM Sources: Company information 1) Number of mobile subscribers at the end of the period | Quarterly Presentation | Q2 2019 10
FINANCIAL REVIEW Birte Strander (CFO)
Net revenue improvement across all segments Change in adj. net revenue (NOKm) Adj. net revenue LTM (NOKm) +13% 1 400 300 +18% 5 1 200 10 250 16 1 000 200 800 150 274 600 1 184 1 152 242 1 088 1 048 1 005 100 400 50 200 0 0 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Consumer Business NGI Q2 19 • Successful margin improvement in a quarter with 0% YoY volume growth • Favourable elspot price development positively impacting variable product margins in both Consumer and Business segments Last twelve months adj. net revenue improvement ~ 70/30 split between improved margins and volume growth 1 YoY • Sources: Company information 1) New Growth Initiatives figures are excluded from the calculations, as high volumes with very low margins distorts the analysis | Quarterly Presentation | Q2 2019 12
Strong adj. EBIT performance Change in adj. EBIT (NOKm) Adj. EBIT LTM (NOKm) +23% 120 +26% 40% 500 100 3 37% 37% 36% 9 400 36% 36% 8 30% 80 300 60 20% 446 98 425 200 390 379 364 40 78 10% 100 20 Adj. EBIT Adj. EBIT margin: 32% margin: 36% 0 0 0% Q2 18 Consumer Business NGI Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 EBIT LTM (adj.) LTM adj. EBIT margin • Positive EBIT contribution from all segments – EBIT margin in the quarter up 4pp YoY • OPEX increasing by 7% YoY, primarily driven by sales and marketing • Solid growth in LTM EBIT – stable development in LTM EBIT margin Sources: Company information | Quarterly Presentation | Q2 2019 13
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