Vector posts 26% drop in first-half net profit but reiterates full-year guidance

Vector Group chief executive Simon Mackenzie. Photo / File

Vector, the Auckland-based electricity and gas distributor, posted a 26 per cent drop in first-half profit but reiterated its full-year guidance despite slower-than-expected growth in its technology business.

Profit fell to $79 million in the six months ended December 31 from $107.1m a year earlier, Auckland-based Vector said in a statement.

The prior year was bolstered by a one-time $18.8m gain after a Court of Appeal ruling on a tax claim. Higher depreciation and amortisation costs also weighed on this year's result.

The company said adjusted earnings before interest, tax, depreciation and amortisation fell 2.7 per cent to $250m. Revenue lifted 8.1 per cent to $676.2m, driven largely by its 2017 acquisition of E-Co Products Group, better known as home ventilation firm HRV.

According to Vector, its regulated networks and gas trading business performed "as expected" but the technology result was below expectations.

Earnings in its regulated lines business fell $3m to $192.7m due to an increase in maintenance expenditure while its gas trading division posted a $5.3m decline in earnings to $18.4m because of a one-off $5.3m insurance settlement in the prior year.

Earnings in the technology segment grew $4.2m to $64.7m and helped offset some of those declines but "we were not satisfied with the slower than expected growth in our technology part of the business," said Vector chair Michael Stiassny.

He said it was attributable to disappointing results in the E-Co Products Group's heat pump business, as well as the cost of establishing the new HRV Solar business ahead of its recent launch in Auckland. In metering, installations in Australia were lower than hoped for as the market waited for the Power of Choice reforms to take effect in December 2017.

"In addition, there was increased planned and unplanned maintenance costs in our Regulated Networks business to accommodate Auckland's continued rapid growth as well as the increased need to manage the vegetation risks to energy infrastructure," he said.

Stiassny also announced a new dividend policy.

"As flagged last year, the board has been reviewing the company's dividend policy and has now approved a new progressive policy. Vector will increase dividends by at least 0.25 cents per share annually provided the company has the financial capacity to do so," he said.

In line with that, Vector said it would pay a dividend of 8.25 cents per share, up 0.25 cents on the prior year's interim dividend of 8 cents per share. The record date is March 28 and the payment date is April 11.

Looking ahead, Vector reiterated guidance it gave in August for adjusted ebitda for the full-year to June 30, 2018, to be "at or around last year's result." Ebitda from continuing operations increased to $474.4m in the 12 months ended June 30 last year.