Infratil first-half earnings fall as Perth Energy unit struggles

Infratil reported a 2.8% fall in earnings as the listed infrastructure investor's Perth Energy division faced difficult retail conditions in Western Australia, and the company now sees its annual result tracking at the bottom end of its forecast.

Underlying earnings before interest, tax, depreciation, amortisation and fair value of financial instruments (ebitdaf) fell to $246 million in the six months ended September 30 from $253.1 million a year earlier, the Wellington-based company said in a statement. Net profit sank 93% to $28.9 million, though the year-earlier period included $407.1 million of gains from the sale of Infratil's stakes in Z Energy and iSite Holdings. It raised its interim dividend to 5.75 cents per share, payable on December 15 with a November 28 record date, from 5.25 cents a year earlier.

Perth Energy was the biggest drag on earnings, posting an ebitdaf loss of $9.7 million due to expensive product purchase arrangements and a lack of wholesale hedging products, which led to "poor performance in the retail business," Infratil said. The company has installed a "substantially new management team" which is expected to show an improvement in the second half of the financial year.

Infratil warned annual ebitdaf was tracking at the bottom end of the projected $485-525 million range because of the flat performance from electricity generator and retailer Trustpower, Perth Energy's troubles, the cost of demerging Tilt Renewables from Trustpower, and the loss of NZ Bus' South Auckland contracts. Offsetting that will be growth at Wellington International Airport and contributions from newer investments King Country Energy, Canberra Data Centres, Australia National University student accommodation and its US renewable business, Longroad.

The company has been on the hunt for new investments after selling out of Z, Lumo and iSite, and recycled some of that capital into CDC, ANU and Longroad through the six-month period. It still has more than $500 million in cash and undrawn bank facilities and has said it favours renewable energy, the retirement sector, social infrastructure such as housing, telecommunications infrastructure, and waste management.

Capital expenditure was $103.5 million and Infratil spent $496.3 million in new investments in the half, up from $62.4 million a year earlier. It's projecting capital expenditure and investment of between $700-750 million for the full year, up from $599.8 million in 2016.

The shares last traded at $2.945, having declined 10% so far this year, and Infratil said the discount to historic highs and its net asset value suggested conservative valuations of Trustpower and Wellington Airport and that CDC and ANU were held at a discount to cost. It's operating a $50 million share buyback "designed to repurchase shares at attractive returns and deliver strong accretion in the near term."

Earnings at Trustpower were largely flat at $118.7 million due to weak generation and a higher cost of acquiring customers while Tilt Renewables earnings edged up to $66.1 million on higher Australian wind generation. Wellington airport lifted earnings 4.5% to $43.7 million on rising passenger numbers, and NZ Bus earnings rose 10% to $25 million on cheaper petrol costs and greater productivity.

The Metlifecare stake contributed $7.4 million while new investments CDC and ANU contributed $600,000 and $1.5 million respectively. RetireAustralia earnings fell 32% to $7.1 million on weak sales with new developments slated for the second half

(BusinessDesk)