Vector subdued after posting healthy annual profit

Vector says business has been subdued in the early part of this financial year and warns the regulatory threat and the fragile economy will continue to bear on the company.

The country's biggest electricity and gas distributor reported a 16.3 per cent rise in net profit from continuing operations to $164.9 million for the year to June 30.

This excludes the sale of its Wellington network to Cheung Kong Infrastructure Holdings in July last year, which if taken into account boosted net profit to $370 million.

Revenue from continuing operations dropped to $1.17 billion from $1.18 billion, while earnings before interest, tax, depreciation and amortisation (ebitda) from continuing operations rose 6.3 per cent to $582.2 million.

Chief executive Simon Mackenzie said the first two months of the current year had been weak.

"I think it would be fair to say that we haven't seen anything that gives any signs of a recovery. That however, could be masked by volumes that are masked by climatic conditions."

The Commerce Commission is reviewing the formula for the charging regimes of lines companies.

Vector did not provide guidance given uncertainty about the regulatory environment, the economy and climate-dependent energy use. While an efficiency programme had delivered $20 million in gross savings during the past year, cost cutting would not result in such a figure this year.

The company's debt profile had improved - with funds from the Wellington lines sale used to pay back debt - but ratings agencies still attached importance to how the company could be affected by further regulation.

The recession had badly affected new business.

During the past year electricity consumption fell 0.3 per cent as growth in connections fell by 18.3 per cent, the wholesale gas market had been volatile and growth in retail gas connections had fallen by 44 per cent.

In spite of flat electricity volumes, revenue had been boosted by increased charging in Auckland as a result of geographic rebalancing in April last year and a consumer price index-linked rise.

Vector's fibre optic infrastructure business achieved a number of milestones during the year, Mackenzie said.

Vector is positioning itself to be part of the Government's $1.5 billion ultra-fast broadband plan aimed at 75 per cent of New Zealanders within 10 years.

Already the company had almost finished an Auckland network for Vodafone, ahead of time and on budget, he said

The company was ready to deliver a full network in Auckland, and potentially beyond, he said.

Vector had been instrumental in setting up the New Zealand Regional Fibre Group working collaboratively with other fibre and lines companies.

"If we get the opportunity and if it makes commercial sense, we'll be part of New Zealand's fibre solution," Mackenzie said.

Forsyth Barr analyst Andrew Harvey Greene said the company had had such a good year during 2008-9 but the gas wholesale business would remain challenging

Vector shares closed up 1c at $2.06.