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Vector ekes out 2.3% gain in FY profit as technology unit bolsters earnings

Thursday 22nd August 2013

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Vector, the Auckland-based electricity, gas and telecommunications network operator, lifted net profit 2.3 percent, missing estimates, as its technology unit bolstered sagging earnings from traditional energy revenue streams. 

Net profit rose to $203.3 million, or 20.4 cents per share, in the 12 months ended June 30, from $198.8 million, or 20 cents, a year earlier, the company said in a statement. That was just short of First NZ Capital estimates of $207.9 million. Revenue rose 2.2 percent to $1.25 billion and earnings before interest, tax, depreciation and amortisation edged up 0.5 percent to $627.4 million. 

“The convergence of information technology and infrastructure management technology has opened up new growth opportunities for Vector,” chief executive Simon Mackenzie said. “These are now buoying our financial performance in the face of a new economic norm of patchy growth, reduced energy consumption and a challenging environment for value-enhancing acquisitions.” 

The board declared a final dividend of 7.75 cents per share, with a Sept. 6 record date, payable on Sept. 13. That takes the annual return to 15 cents. 

The shares fell 0.4 percent to $2.64 yesterday, and have shed 2.9 percent this year, lagging the benchmark NZX 50 index’s 12 percent gain. The stock is rated an average ‘hold’ based on six analyst recommendations compiled by Reuters, with a median target price of $2.80. 

The company expects 2014 earnings and revenue to meet market estimates. Reuters data shows Vector is expected to report revenue of $1.25 billion and EBITDA of $575.3 million. 

Vector’s regulated electricity distribution unit, which accounts for about half the company’s sales, lifted revenue 3.9 percent to $632.9 million, though EBITDA fell 3 percent to $372.5 million as electricity volumes fell on lower consumption. 

The gas transportation unit increased sales 2.3 percent to $219.6 million and earnings 6.2 percent to $170.4 million as it attracted more customers, though its gas wholesale unit reported a 2.3 percent fall in revenue to $372.2 million and an 8.2 percent decline in EBITDA to $60.4 million. 

Vector’s retail gas prices are set to come down in October after the Commerce Commission ordered reductions in the transmission and distribution charges. 

The technology unit was the company’s best segment, reporting a 13 percent gain in sales to $109.1 million and a 13 percent lift in earnings to $76.3 million as Vector installed more smart meters. Vector completed its $60 million acquisition of Contact Energy’s gas metering operation earlier this year. 

Mackenzie said the company expects the decisions on the merit appeals of the Commerce Commission’s input methodology review in the next month. 

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