UPDATE: Contact FY operating earnings up 12%

(Adds detail on cost savings, divisional earnings, from 5th paragraph.)

By Gavin Evans

Aug. 12 (BusinessDesk) - Contact Energy said full-year operating earnings from continuing operations rose 12 percent, boosted by a strong performance from the firm’s generation and wholesale business.

New Zealand's second-largest electricity and gas retailer said earnings before interest, tax, depreciation, amortisation and changes in financial instruments from continuing operations rose to $505 million in the year ended June 30, from $449 million a year earlier.

That excludes the RockGas LPG business and the Ahuroa gas storage facility, which the firm sold to First Gas in the first half for $390 million. Including those non-continuing operations, ebitdaf rose 8 percent to $518 million.

Including the gain on those sales, full-year net profit more than doubled to $345 million from $132 million. Excluding such one-time gains, underlying net profit was $176 million, up from $112 million a year earlier, the company said.

Chief executive Dennis Barnes noted the firm achieved a 6 percent reduction in cash operating costs and capital spending, with stay-in-business capex down $18 million and other operating costs down $11 million.

About $4 million of that was from savings on IT procurement, with another $6 million from leaner wholesale operations and bad-debt reduction.

Generation earnings rose by $67 million to $464 million, boosted by higher power prices and a 22 percent increase in hydro generation from its South Island dams, which helped offset a shortage of gas in late 2018 and earlier this year.

Despite a 21 percent reduction in its gas-fired generation volumes, thermal generation costs were $8 million higher than the year before. Risk management costs were $19 million higher and power purchases from other generators increased by 22 percent, Contact said.

Earnings from the customer business fell $9 million to $67 million, reflecting competition, lower volumes, and higher pass-through costs from lines and meters.

While retail margins remain “under pressure,” Contact said it has gained 4,200 customers during the six months ended June and its net promotor score in the June quarter climbed to plus-26 from plus-20 a year earlier.

Bad debt write-offs were more than halved to $2.3 million, while its broadband offer contributed an extra $1 million to earnings and attracted 10,000 new users.

Contact will pay a 23 cent final dividend on Sept. 17 to investors registered at Aug. 29. That is up from 19 cents a year earlier, and takes the full-year payout to Contact’s 39 cents a share target. It paid out 32 cents a year earlier.

The company’s shares last traded at $8.30 and have gained about 41 percent so far this year.

(BusinessDesk)

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