Vector first-half profit up 15%, gas trading challenging

Auckland electricity and telecommunications infrastructure provider Vector [NZX: VCT] reported a 16% lift in first-half profit to $100.1 million.

The result reflected gains across its portfolio, with the exception of its gas trading division, which faces the prospect of a writedown in the second half unless performance improves. The profit was achieved on total revenue for the half of $663 million, a 3.5% fall from the same period last year, driven by lower volumes of traded gas.

Adjusted earnings before interest, tax, depreciation and amortisation, a measure of underlying performance, rose to $305.9 million from $287.9 million.

"Adjusted ebitda across our regulated businesses rose 6.2% to $248.8 million supported by growth in connections and energy volumes in Auckland, regulated price increases in the gas transportation business and a strong focus on cost control," chairman Michael Stiassny said in a statement.

Adjusted ebitda in the company's unregulated businesses, including telecommunications services, metering and gas trading, rose 3.9% to $82.2 million and included costs of establishing in the Australian metering market.

"These gains have been diluted by the continuing challenges for the gas trading business. "Should the trading outlook for this business continue to weaken, we will carefully review the carrying value of the gas trading assets and goodwill at year-end," Mr Stiassny said.

Sale of the company's gas transmission and non-Auckland gas distribution businesses was approved by shareholders before Christmas.

"Absent the sale, the business is performing in line with August guidance for the year to 30 June 2016 of adjusted ebitda, excluding capital contributions, of $550 million to $565 million," Mr Stiassny said.

The Vector gas sale remains subject to regulatory approvals and may have a bearing on the full year result. The $952 million proceeds will be used for debt repayment and investment in higher value opportunities.

Vector will pay an increased interim dividend of 7.75c  per share on April 14, fully imputed, up from 7.5c  at the first half last year.

Technology division revenue rose 16% to $88.5 million for adjusted ebitda of $57 million, up 15%, benefiting from a larger smart meter fleet following the acquisition of Arc Innovations from Meridian Energy and an increased rate of deployment.

The shares rose 0.3% to $3.26, having increased 2.5% so far this year.

(BusinessDesk)