Trustpower trims dividend, forecast for Covid impacts

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Trustpower is picking a modest lift in operating earnings for the current financial year, reflecting dry conditions in the North Island and an expected increase in bad debts from the Covid-19 crisis.

New Zealand's fifth-largest retailer today reported a 16 per cent drop in earnings before interest, tax, depreciation, amortisation and changes in financial instruments to $186.5 million for the March year. Retail earnings were slashed by high wholesale prices for much of 2019, while maintenance outages also reduced generation earnings.

Now the firm is picking current year ebitdaf of $190m to $215m. While it expects ongoing growth in its broadband business, the forecast assumes there will be no price increases and a near tripling of bad debts due to Covid-19.

Commercial power volumes are expected to be down 35 per cent – largely due to the April lockdown – while generation volumes are assumed to be down 3 per cent on long-term averages due to low storage in the firm's North Island dams.

The company also trimmed its final dividend by 1.5 cents a share, holding back about $4.7m for extra flexibility "should trading conditions become more adverse as the economy contracts later in the year," it said in a statement on NZX.

"Developing this forecast in the early stages of the Covid-19 pandemic has proven challenging. There is material uncertainty surrounding the impact on the New Zealand economy and its impact on Trustpower's profitability."

Trustpower shares fell 1.4 per cent to $7.20, taking the stock's loss so far this year to 3 per cent.

Bundled services

Tauranga-based Trustpower is benefiting from a strategy to bundle power, gas and broadband services in order to target higher-value consumers. At the same time it is investing in greater digitisation of its operations to lower costs and improve the speed with which it responds to customers.

In the past year it started offering wireless broadband services and developed mobile phone capability. Total telecommunication connections rose by 8,000, or 8 per cent, to 104,000 at the end of March, with almost three-quarters of those on fibre. More than three-quarters of new customers are taking two or more services.

Trustpower is picking telco growth of 5,000 accounts this year.

The company today reported a 5 per cent increase in net profit to $97.6m, boosted by a $16.4m gain on the November sale of the firm's metering assets. That was partially offset by a $7.5m reduction in the value of its generation assets, including almost $2.4m written off an abandoned generation project.

The firm will pay a 15.5 cent final dividend on June 26 to investors registered at June 19.