Trustpower reports reduced net profit

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Trustpower has reported a net profit after tax of $93 million for full year 2019, down 19 percent on the previous 12 months. EBITDAF* operating earnings were down nine percent at $222 million, and New Zealand generation earnings of $172 million were down 13 percent, but retail earnings of $64 million (EBITDAF) were up eight percent.

The company has declared a fully imputed dividend of 17 cents, bringing it to 34 cents for the year, plus an unimputed special dividend of 15 cents, for a total of 40 cents for the year.

However, Trustpower has reaffirmed that its EBITDAF guidance for FY2020 is expected to be in the range of $205 million to $225 million, assuming average hydrology and climatic conditions.  Capex was expected to be in the range of $28 to $34 million.

Trustpower said its competitive retail offerings and the consistency of generation strategies had contributed to a solid result for Trustpower for the year ended 31 March 2019, off the back of a previously exceptional year in FY2018.

The highly favourable generation conditions from FY2018 did not repeat in FY2019, but this was not a surprise said Trustpower chair Paul Ridley-Smith. Reduced hydrological inflows and pre-selling its expected surplus generation to achieve stable sustainable earnings for shareholders, meant Trustpower had not been able to fully capitalise on high spot prices from an unexpected gas outage in spring.

The electricity industry is poised for growth, particularly in renewable energy and our national network of power stations generates more than 99 percent of its electricity from renewable resources.”

– Vince Hawksworth

“We have seen the continuation of the strong retail result which validates Trustpower’s now well-established bundling strategy,” said Ridley-Smith.

Bundling strategy 

Trustpower chief executive Vince Hawksworth said the company’s multi-product retail business strategy to bundle essential utilities including power, gas, internet and phone contributed to the positive retail results.

“Everything we do is centred around value creation for our customers,” he said.

“We place emphasis on technology and customer services aligned to Trustpower’s core business and are continually looking for new ways to expand in a competitive market.”

Trustpower now had 107,000 customers using two or more products. Customer retention levels in the bundled customers continued to remain higher than established energy retailers and were  greater than levels reported by major telcos, he said.

Later this year, Trustpower will introduce both mobile phone and wireless broadband services, further building on its position as a leading provider of bundled services, he added.

“A particular focus in recent years has been on laying robust foundations and investing in the capacity to offer our customers high quality internet service levels they require for downloading and streaming content, including major events and sport. We’ve developed a dedicated network throughout New Zealand and connectivity to Australia and the US.”

During the 12-month period, a large focus was on the enhancement of Trustpower’s generation assets, with innovation and development strategies implemented to ensure the company is constantly evolving in a constantly-changing industry.

“The electricity industry is poised for growth, particularly in renewable energy and our national network of power stations generates more than 99 percent of its electricity from renewable resources,” said Hawksworth.

Total utility account holders reached 402,000, a one per cent increase from 397,000 at 31 March 2018. Gross margin increased to $156 million from $148 million in the previous year.

“This rise is well in excess of the increase in utility accounts, validating Trustpower’s view that the new category of bundled energy/telco is more profitable than either energy or telco alone,” said Hawksworth.

Generation production was down 11 percent at 1994 GWh.

“While this is a good outcome and above the long run average of 1917 GWh there was not the good fortune in having the strong hydrological inflows we experienced last year.”

Key results 

(FY2019 compared with FY2018)

• Net profit after tax from continuing operations of $93 million, down $21 million or 19%

• Operating earnings (EBITDAF) from continuing activities of $222 million, down $21 million or 9%

• Retail earnings (EBITDAF) of $64 million, up 8%

• NZ generation earnings (EBITDAF) of $172 million, down 13%

• Underlying earnings after tax of $103 million, down $32 million or 24%

• Fully imputed final dividend of 17 cents bringing total ordinary dividends to 34 cents

• Unimputed special dividend of 15 cents bringing total special dividends to 40 cents

• Earnings per share from continuing operations of 29.0 cents down 19%

*(EBITDAF) Earnings before interest, depreciation, amortization and fair value adjustme

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