Trustpower well placed

Electricity retailer and generator Trustpower lifted its revenue and all of its profits in the year ended March but failed to increase its final dividend or declare a special dividend.

Its operating earnings from continuing activities came in at $243million for the period, up $57million, or 30%.

Its operating earnings from all activities of $267million was up 12%, its before-tax profit was up 46% to $182million and its reported profit was up 48% to $129million from $88million in the previous corresponding period.

Forsyth Barr broker Damian Foster said in a ``modest surprise'', given Trustpower's strong balance sheet and excellent result, the company left the final dividend at 17c per share and there was no special dividend.

``That has left Trustpower's balance sheet in a very strong position and, in our mind, raises questions as to what Trustpower wants to do with the cash.''

Retail earnings for Trustpower were up 33% to $60million, something chief executive Vince Hawksworth said was a good indication the company had a strong retail business.

The company was exploring opportunities such as providing mobile phone services.

Trustpower's three generation schemes in New South Wales had performed well. However, given their size and distance from New Zealand, the board considered selling the Australian subsidiary was the best option for improving shareholder value.

Chairman Paul Ridley-Smith said despite competition, Trustpower's multi-product retail business strategy of bundling essential utilities, including power, gas, internet and phone, continued to deliver results.

``We are no longer a telecommunications start-up but an established player with the scale to compete with high-quality internet service provision and network caching.''

More customers were migrating to higher-value internet plans and 52% of telecommunications customers were now on fibre, he said.

Total utility account holders reached 397,000 in the year, up 3% from 385,000 in March last year.

Gross margin increased to $151millon from $133million in the pervious period.

Mr Hawksworth said the rise was well in excess of the increase in utility accounts, validating the company's view the new category of bundled energy and telecommunications was more profitable than either energy or telecommunications alone.

``We continue to see customer retention levels in our bundled customers higher than established energy retailers and much greater than the levels reported by the major telco players.''

Guidance for the 2019 year was expected to be in the range of $205million to $225million, assuming average hydrology and climatic conditions, he said.

The guidance assumed a reduction in revenue of $27million following the sale of the Australian operations and a reduction from the current year of about $25million for a return to average hydrology and pricing.


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