Z Energy paints rosy picture for float
SARAH THOMPSON, ANTHONY MACDONALD AND GRETCHEN FRIEMANN
New Zealand listing candidate Z Energy is presenting a confident assessment of its brand and growth as it works towards a $600 million float slated for August.
In a management presentation issued to potential investors, the fuels refiner and retailer, owner of the former Shell retail network, says it holds the No 1 or No 2 position in all seven of its refined products.
Z can also point to positive statistics in terms of brand preference and customer loyalty, with figures on repeated use of its sites that beat those of BP and Caltex. It also wins over its rivals on the availability of its petrol stations, although it lags BP in spontaneous mentions of its brand.
The figures are pleasing in light of several dire warnings when it cast off the Shell moniker after taking over the business for $695 million in 2010. Z's sites boast the highest average sales per station in the industry, hosting 60 million transactions a year, the third largest in the country.
Perhaps slightly worrying to some is its gradually sliding market share, down to 30 per cent in the 2013 financial year from 32 per cent two years ago.
But it makes up for that in profitability, with its gross margin on sales firmly heading north, reaching 18.8c a litre in 2013, up from 16.4c last year. That supported a 14.6 per cent growth in operating earnings in 2013 to $196m.
Gearing is stable at about 40 per cent, with debt running just about $400m. Its next bond maturity is in 2016, then in 2018 and 2019.
Z, which has compared itself to market outperformer Caltex Australia, is not shy about growth prospects either. It refers to the possible acquisition of one of its rivals should any determine that New Zealand is no longer strategic, and Z says it will "sensibly outspend" on infrastructure and services stations given its competitors' "capital limitations".
In a bid to avoid IPO fatigue, the float is timed to slip between the first two energy privatisations, Mighty River Power, which listed last month, and Meridian Energy, due later in the year.
No decision has yet been made whether Z Energy's 17.1 per cent stake in Refining NZ would be included in the float, a spokesman said last week.
Similarly it was still undecided whether current chairman, Infratil's Marko Bogoievski, would continue in that role, though the spokesman said that would be "uncommon".
The company's somewhat complex structure was a product of its ownership structure and is expected to be streamlined after any listing, the spokesman said. Both 50 per cent owners, NZ Super Fund and Infratil, will reduce their stakes through the float, which is being arranged by First NZ Capital and Goldman Sachs. Deutsche Bank/Craigs Investment Partners and Forsyth Barr are joint lead managers.
Meanwhile, the contenders for a 42 per cent slice in New Zealand's second largest electricity and gas distribution company, Powerco, have been handed an offer deadline of June 21.
AMP, Deutsche Asset Management (the former RREEF Infrastructure) as well as China's State Grid Corporation are all vying for Brookfield Infrastructure's stake. The process will be concluded by mid July at the latest.
Yet unlike some recent high-profile infrastructure sales, this one features few investment bankers - AMP has its own in-house team led by the former Powerco chief executive Richard Krogh, who resigned in 2011 to pursue consultancy work and Michael Robinson, head of infrastructure acquisitions for Deutsche Asset Management, is spearheading its negotiations.
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