KEY POINTS:
Despite a rocky few months, Vector is headed for full-year net profit at the upper end of market expectations as it continues to exceed all its operating targets, says chairman Michael Stiassny.
The company, New Zealand's largest energy distributor, yesterday reported an 18.9 per cent increase in net profit of $45.7 million for the six months to December, a period marked by regulatory woes and a messy boardroom stoush.
But with revenue from ordinary activities up 27 per cent to $723 million, the result reflected "solid operational performance across Vector's core businesses and demonstrates the underlying strengths of the company", said Stiassny.
Much of the upside in yesterday's result was expected, as it had been revealed in the company's first quarter result, a period when, because of colder weather, the company makes much of its profit.
Accordingly, Stiassny attributed the improved half-year performance to increased energy consumption associated with "normal" cold weather conditions last winter following a warm winter the year before.
The company had also benefited from increased customer connections to its gas and electricity networks and significantly higher natural gas sales.
Total electricity network connections were up by 8879 to 669,524 and total gas network connections rose 3993 to 140,999. Natural gas sales volumes were up 72 per cent on last year's first half thanks to new sales contracts and the sale of more gas to electricity generators and petrochemical producers.
Stiassny confirmed the company expected to achieve full-year net earnings at the upper end of market estimates of $42 million to $65 million.
Vector's board declared a 6.5c per share dividend, up from 6c last year.
Analyst Matthew Henry of Goldman Sachs JBWere also described the result as "solid".
"You expected a decent result given their first quarter where they make the bulk of their money," he said.
"The electricity side of it was expected but they benefited from selling quite a bit more wholesale gas."
The result would not affect Goldman Sachs' full-year expectations for the company. "We were at that top end so we're quite comfortable with where we're sitting."
Stiassny yesterday hailed a preliminary agreement reached with the Commerce Commission after the regulator had threatened in August to take control over the company's prices as "a critical milestone".
"We are expecting a final resolution with the commission soon and are pleased to report a much strengthened relationship with the commission over the past few months."
Chief executive Mark Franklin said much of the company's investment programme, including gas pipeline and telecommunications infrastructure, had been deferred because of regulatory issues but would soon be back on track.
Stiassny said the board had initiated a search for new directors to replace Tony Gibbs, Greg Muir and John Goulter, who resigned over concerns about the influence of 75 per cent owner the Auckland Energy Consumer Trust and Stiassny's management style.
Franklin said the Auckland City Council-led bid to unwind the Trust would "absolutely not" affect the company's operations or investment plans.
Vector shares closed 2c higher at $2.79 yesterday.
