Supplier costs a turn-off for Vector

Electricity lines company Vector has posted a 29.5 per cent fall in annual profit, but met its prospectus forecast.

It logged a net surplus of $40.77 million for the year to June, down from $57.8 million but slightly ahead of its predicted $40.73 million.

Total operating revenue grew 52 per cent to $833 million from $578 million.

Chief executive Mark Franklin said revenue growth across the group was due to a buoyant economy, higher selling prices and infrastructure changes.

But increased supplier costs meant the company was experiencing margin pressure across many businesses. Electricity transmission costs had risen 15 per cent during the year and electricity maintenance cost 33 per cent more.

The company said it was hard to make direct year-on-year comparisons because the results included six months' operations from its investment in gas distribution and metering company NGC Holdings.

Vector, which listed on the stock exchange this week and issued a quarter of its shares, took a majority stake in NGC in December and is now completing a total takeover.

Looking ahead, Franklin said Vector's immediate task was to integrate the operations of NGC. "There is a lot to do, and we expect that it will take a few months.

"We are aiming to keep the transition as smooth as possible with particular focus on continuing to deliver customer service and shareholder value."

UBS NZ research sales director Richard Leggat said the result was not unexpected.

"The reason the price has gone up is it's seen as a good company and there was no public or institutional pool so there's been a shortage of stock," he said.

Chairman Michael Stiassny said the NGC buy would take Vector to the next level, "considerably broadening our energy infrastructure portfolio".

"Our key indicators of ebitda [earnings before interest, tax, depreciation and amortisation] and npata [net surplus before intangible asset amortisation] are showing solid growth."

Ebitda, at $466.1 million, was 36.7 per cent up on the same period last year, and npata was on target, up 7.9 per cent to $104.3 million, despite increased tax and interest.

Operating net cashflows of $239.5 million were up $59.4 million on the previous year.

Vector's total assets increased over the period from $3.07 billion to $4.85 billion largely due to the acquisition of NGC.

- NZPA