Genisis Energy, the last of the government-controlled
electricity companies to report its June results, faced a
challenge to meet its forecasts, Forsyth Barr broker Andrew
Rooney said yesterday.
The company declared an increased final dividend of 6.6c per
share, taking the total dividend for the year to 13cps.
Mr Rooney said the higher-than-promised dividend had a ''me
too'' feel about it.
''Given the operating result was barely above forecast, we
are a little surprised by Genesis' decision.''
Genesis reported operating earnings of $307.8 million for the
year ended June, 1% ahead of its listing forecast of $305.2
million but down 9% on the $336.6 million reported in the
previous corresponding period.
The reported profit of $49.2 million was 18% ahead of
forecast but well down on the $104.5 million from the
Mr Rooney said Genesis reaffirmed its operating profit
forecast of $363.4 million.
''We believe this will be a challenging target for Genesis
given the start to the year and the generally wet conditions,
combined with lower mass market volumes than forecast.''
Forsyth Barr had a forecast of $341.5 million. While there
was upside to that number, Mr Rooney said he would struggle
to get to $363.4 million.
Unlike the other recently listed generation retailers,
Genesis did not appear to have reduced costs materially.
Overheads for Genesis were $328 million versus Forsyth Barr's
forecast of $329 and the listing forecast of $332 million.
An analysis of the balance sheet showed the operating profit
provided a margin of 15.3% on revenue of $2 billion, down
from a 16.3% in the previous period.
The 2014 profit was an 8% return on total assets of $3.63
Forsyth Barr had a target share price of $1.80 for the
company and a neutral recommendation on the shares.
''While Genesis has a great dividend, it has the highest
payout ratio in the sector and the highest gearing. In our
view, it has some challenges to hit its 2015 forecast,'' Mr
Chairwoman Dame Jenny Shipley said it was pleasing to achieve
the forecasts in a highly competitive energy environment.
Chief executive Albert Brantley said the Tekapo canal
remediation programme was a highlight for the year.
''This was a project of national significance and the company
completed it successfully, with the project finishing under
budget at $136 million and 18 days ahead of schedule.''
In the past year, the company had taken advantage of its
diverse portfolio to meet the challenging energy retail
environment as well as lower demand on the back of
above-average temperatures, a fall in wholesale electricity
prices and reduced generation volumes, he said.
Labour Party energy spokesman David Shearer said the profit
showed the power company was sold cheaply to the detriment of
the country's power consumers.
''A net profit of $49.2 million follows hard on the heels of
huge profits by Mighty River Power and Meridian.''
The Genesis profit was down on last year, but it was well
above forecasts at the time of sale, showing the company was
a ''golden goose'' with an increase in the final dividend for
investors, he said.