Vector posts a 25% first-half profit drop as technology earnings disappoint

Vector [NZX:VCT] has posted a 25% drop in first-half net profit, which it says reflects its long-term investment in new energy initiatives and the impact of Auckland’s growth on connections and capital spending.

The electricity lines company’s net profit for the six months ended December fell to $78.3 million from $104.4 million in the same six months a year earlier.

The year-earlier result included $18.8 million in one-off items while the current first half includes a significant increase in depreciation and amortisation.

Revenue rose 8.1% to $676.2 million, primarily due to the acquisition of E-Co Products Group in March last year.

Vector’s earnings before interest, tax, depreciation and amortisation (ebitda) from its technology business rose $4.2 million to $64.7 million but the company says growth was lower than it had expected.

“The gains from acquisitions and the New Zealand smart meter rollout were diluted by slow Australian meter deployment in advance of the Power of Choice reforms, by a lower-than-expected performance of E-Co Product Group’s head-pump business, by the cost of establishing HRV Solar and by changes to the way we account for internal communications services,” the company says.

Its capital spending rose 5.7% to $182.7 million in the latest six months because of Auckland’s growth and higher network replacement capital spending.

Some offsets
That was partly offset by lower metering capital spending in line with the slowdown in New Zealand meter deployment rates.

The ebitda result from Vector’s regulated businesses fell to $192.7 million from $195.7 million.

Nevertheless, chairman Michael Stiassny says the company made continued progress “toward Vector’s ambition of creating a new and more sustainable energy future.

“We believe the business is well-positioned for the future. However, we were not satisfied with the slower-than-expected growth in our technology part of the business.”

The spending to cater for Auckland’s growth included both planned and unplanned maintenance costs as well as the increased need to manage the vegetation risks to energy infrastructure.

“All these areas will be a key focus for the second half of the financial year. In a world being rapidly disrupted, we must maintain our focus on creating lasting and sustainable value for our customers, for shareholders and for New Zealand.”

Vector will pay a first-half dividend of 8.25c per share, up from 8c last year.