NGC keeps the heat up

By PAUL PANCKHURST

Gas company NGC surprised analysts with a bigger than expected dividend yesterday, and kept merger speculation simmering.

Chief executive Phil James told journalists and analysts that talks with publicly-owned power giant Vector were alive, confirming a Business Herald report of 13 days ago.

NGC pushes gas through pipelines in the North Island, processes and trades gas and LPG and owns energy meters.

It has a market capitalisation of $1.3 billion.

The company announced a fully imputed full-year dividend of 19c a share, or 100 per cent of the net profit of $84.5 million.

That compares with last year's unimputed dividend of 9c a share.

The company's share price reached a new peak of $3.02 after yesterday's annual result - the price is hovering at seven-year highs - and closed down 1c for the day at $2.94.

Sharebrokers said the price moves showed investors reacting to the headline news before looking closer to see features including a one-off $7 million tax gain.

The stock is seen as fully priced - sharebroker UBS, for example, estimates that it has a value of $2.70 a share. Analyst Greg Main, of Forsyth Barr, said the dividend was higher than expected.

But stripped of the tax gain, the result was broadly in line with analysts' forecasts.

The share price is bubbling along because of speculation about merger and acquisition possibilities.

On that topic, James said the company was "evaluating a number of opportunities for the growth of the business".

He said NGC's talks with Powerco had ceased as the listed New Plymouth lines company went through an ownership change.

But the opportunity could arise for the companies to talk again.

Discussions with Vector about "a range of possibilities" continued.

James would not comment on speculation that NGC's 66 per cent owner, Australian company AGL, was likely to sell out.

"I have no knowledge of what our shareholders' intentions are on a daily basis."

The company pitched the result as very good for a tough trading year.

Net profit was down from last year's $148 million.

But the previous period included a one-off gain from the sale of $78.9 million of generation assets.

Excluding the sale, like-for-like earnings were up by 22 per cent at $81.8 million.

A strategic repositioning over the past two years has taken the company out of electricity generation and mass-market gas retailing.

That slashed revenue and operating earnings, but earnings-per-share are up -14.5c versus 9c before last year's one-offs - and the new capital structure has slashed financing costs.

Those costs for the year were $14.8 million, compared with the previous $41.6 million.

Natural gas sales were down by nearly 19 per cent at $226.3 million because of reduced supply from the Maui field and the maturing of Kapuni gas supply contracts, the company said.