Contact Energy's board is happy with the direction of the electricity generator-retailer, which it sees as supporting a new distribution policy set to deliver bigger returns to shareholders, says chairman Ralph Norris.
In his address to shareholders at today's annual meeting in Auckland, Norris stayed close to the script in the 2017 annual report in that the generation business doesn't need new builds in the immediate future, and that it's relying on innovation to cut costs and extend the life of its assets. In the meantime, the retail arm is relying on new technology and less bureaucratic administrative processes to improve the customer experience.
"Your board spent some time this year reviewing the strategic direction of Contact and ensuring that we were creating and growing value for shareholders," Norris said in speech notes published on the NZX. "The board engaged deeply with management and external experts and remain comfortable that our company is on the right path."
Wellington-based Contact announced a new dividend policy when unveiling the annual earnings result in August where it will pay 80-to-90 per cent of operating free cash flow once it reduces net debt to a ratio of 2.8 times earnings before interest, tax, depreciation, amortisation, and fair value movements in financial instruments.
Norris said the strategy review was "a hugely important exercise" and gave directors "confidence in revising the distribution policy". He reaffirmed the 2018 dividend target for 32 cents per share, a 23 per cent gain on 2017.
Chief executive Dennis Barnes said the new financial year has been positive across all operational measures, although "we didn't see a return to more normal hydrological conditions until mid-August". The focus on customer experience, cost-cutting and digital transformation will continue to underpin the distribution policy, he said.
Contact shares edged up 0.2 per cent to $5.52, having gained 18 per cent so far this year and outpacing the 17 per cent increase in the S&P/NZX 50 index over the same period.