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Vector posts 26% drop in 1H net profit but reiterates full-year guidance

Wednesday 28th February 2018

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Vector, the Auckland-based electricity and gas distributor, posted a 26 percent drop in first-half profit but reiterated its full-year guidance despite slower-than-expected growth in its technology business. 

Profit fell to $79 million in the six months ended Dec. 31 from $107.1 million a year earlier, Auckland-based Vector said in a statement. The prior year was bolstered by a one-time $18.8 million gain after a Court of Appeal ruling on a tax claim. Higher depreciation and amortisation costs also weighed on this year's result. The company said adjusted earnings before interest, tax, depreciation and amortisation fell 2.7 percent to $250 million. Revenue lifted 8.1 percent to $676.2 million, driven largely by its 2017 acquisition of E-Co Products Group, better known as home ventilation firm HRV. 

According to Vector, its regulated networks and gas trading business performed "as expected" but the technology result was below expectations. 

Earnings in its regulated lines business fell $3 million $192.7 million due to an increase in maintenance expenditure while its gas trading division posted a $5.3 million decline in earnings to $18.4 million because of a one-off $5.3 million insurance settlement in the prior year.  

Earnings in the technology segment grew $4.2 million to $64.7 million and helped offset some of those declines but "we were not satisfied with the slower than expected growth in our technology part of the business," said Vector chair Michael Stiassny.

He said it was attributable to disappointing results in the E-Co Products Group’s heat pump business, as well as the cost of establishing the new HRV Solar business ahead of its recent launch in Auckland. In metering, installations in Australia were lower than hoped for as the market waited for the Power of Choice reforms to take effect in December 2017.

"In addition, there was increased planned and unplanned maintenance costs in our Regulated Networks business to accommodate Auckland’s continued rapid growth as well as the increased need to manage the vegetation risks to energy infrastructure," he said.  

Stiassny also announced a new dividend policy. 

“As flagged last year, the board has been reviewing the company’s dividend policy and has now approved a new progressive policy. Vector will increase dividends by at least 0.25 cents per share annually provided the company has the financial capacity to do so," he said. 

In line with that, Vector said it would pay a dividend of 8.25 cents per share, up 0.25 cents on the prior year’s interim dividend of 8 cents per share. The record date is March 28 and the payment date is April 11. 

Looking ahead, Vector reiterated guidance it gave in August for adjusted ebitda for the full-year to June 30, 2018, to be "at or around last year’s result." Ebitda from continuing operations increased to $474.4 million in the 12 months ended June 30 last year. 


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