Trustpower Limited has delivered a substantial lift in profit for the six months ended 30 September 2017, reporting a net profit after tax for the half year of $82 million, an increase of $37 million or 82 per cent.
Trustpower's diverse and flexible fleet of generation assets, together with sound operating decisions, has allowed it to take advantage of above average prices and record a strong result, says Chair Paul Ridley‐Smith. Trustpower's total shareholder return over the six months has been 24 per cent.
“It is pleasing to see this improved performance reflected in our share price,” says Paul. “We also remain committed to delivering long‐term sustainable value for investors.”
Trustpower's retail earnings of $29 million are a positive sign its investment in growth is paying off, says chief executive Vince Hawksworth.
“Our multi‐product retail business strategy bundling life's essential utilities including power, gas, internet and phone, is gaining momentum,” says Vince.
The strategy is backed by a robust innovation and technology programme to ensure the company delivers a great customer experience and remains one step ahead in an evolving customer world, says Vince.
“When you place your customer at the heart of your business, results follow. We have continued to invest in developing a strong service and technology platform, providing new options for our consumer queries including virtual agents and web bots. It's great to see more customers are choosing to engage with us digitally. Forty three per cent of our customer interactions are now handled by our virtual workforce.
“While the energy and telecommunications markets remain highly competitive, Trustpower's bundled proposition resonates well with customers who can see its value,” says Vince.
“About 80 per cent of new customers who join Trustpower now purchase more than one product.”
Trustpower is seeing its retail revenue grow by focusing on service and value rather than just price.
“Our overall revenues of $520 million were up by $18 million or four per cent on the same period last year, with growth in all product groups,” says Vince.
“It is fantastic to see the high number of customers who have remained with Trustpower once their initial contract period has ended.”
Direct cost of sales increased in line with revenue, resulting in a retail gross margin increase of $11 million or 18 per cent. Other retail operating costs were $3 million or six per cent lower than the prior year.
“Our continued focus on technology improvements is expected to both enhance customer experience and drive a reduction in cost‐to‐serve and cost‐to‐acquire,” says Vince.
New Zealand Generation
New Zealand generation production lifted 20 per cent due to the impact of strong hydrological inflows, resulting in operating earnings of $127 million, up 24 per cent on last year. This reflects Trustpower's geographically diverse fleet of generation stations that allow it to take advantage of record high inflows in some parts of New Zealand while other parts are facing extremely low inflows.
The three generation schemes in New South Wales are all associated with irrigation schemes and as such they generate predominately in summer. Early indications are that generation volumes this summer will be consistent with Trustpower's forecast predictions.
“We are continuing to work through our strategic review of the New South Wales assets and expect to have this completed by early 2018,” saysPaul. “These assets are performing well, but due to their size and distance from New Zealand are a less strategic part of our portfolio.”
Growth in customer numbers has been modest, with retail acquisition campaigning put on hold during the period while the company leveraged high wholesale electricity prices. Trustpower's current marketing campaign for new bundle customers is proving very successful and the company is on track for a 20 per cent increase in telecommunication customers this year, says Vince.
An interim dividend of 17 cents per share, fully imputed, has been declared and is payable on December 8, 2017. The company expects to be able to increase the dividend payable at the year end.
Trustpower is actively managing its debt level and composition and will be repaying the retail bond maturing on December 15 2017 and replacing it with bank debt.
Trustpower's retail business continues to make solid progress. Total utility account holders reached 390,000, a one per cent increase from 385,000 at March 31 2017. Customers with two or more products reached 94,000, a four per cent increase from 90,000 at March 31 2017.
Half year results 2018 compared to half year 2017.
Net profit after tax of $82 million, up $37 million or 82%
Operating earnings (EBITDAF) of $159 million, up 44%
Retail earnings (EBITDAF) of $29 million, up 109%
Generation earnings (NZ and Australia) of $134 million, up 21%
Underlying earnings after tax of $84 million, up $28 million or 48%
Interim dividend of 17 cents
Earnings per share of 25.8 cents, up 79%