Genesis generates improved profit in first six months

Damian Foster.
Damian Foster.
Genesis Energy produced a first-half profit slightly better than forecast, mainly from the generation portion of the business.

The operating profit of $200million for the six months ended December was 28% higher than the $156million reported in the previous corresponding period.

Despite paying less than than the pcp, Genesis' reported profit fell 24% to $28million.

In keeping with the new way many companies now report, the adjusted normalised profit was up 38% to $102million from $74million.

Forsyth Barr broker Damian Foster said on the surface, it looked like a good result.

However $26million of the $200million operating profit was acquired - $19million from Kupe and $7million from the ex-Nova business. Favourable generation conditions added a further $25million.

The retail business had disappointed, although Genesis was pointing to $7million of one-off costs associated with investing for the future as the main reason for the retail result being weak.

Nevertheless, falling customer numbers and a push into lower margin business had not helped, he said.

Genesis narrowed its operating profit guidance range to between $350millon and $360million from $345million to $365million.

Given the favourable operating conditions in the first half and the favourable conditions at the start of the second half of the financial year, the implied second-half guidance of between $150million and $160million seemed soft, Mr Foster said.

Genesis was silent on Tekapo issues, despite indicating it would update the market, other than to note there would be a $12million ''headwind'' and most of the impact would be in the second half.

Given Lake Tekapo was close to full, there would be some timing benefit into the 2019 financial year, he said.

Genesis announced an interim dividend of 8.3c per share, just 0.1cps higher than the pcp and 0.1cps lower than the final 2017 dividend. It also decided to start a dividend reinvestment plan.

Mr Foster said while the dividend miss was only 0.1cps, that and the dividend reinvestment plan signalled the board and management had some concern about future cash flows and the need to reduce debt.

The operating cash flow increased to $34millon to $129millon, enabling debt repayment of $52million.

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