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Contact earnings little changed at $523m

NZN 14/08/2016

Electricity and gas provider Contact Energy has posted little-changed full-year operating earnings amid signs that electricity demand is starting to grow after a long period of decline.

Earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments (ebitdaf) were $523 million, down 0.4 per cent on the previous year's result, on revenue of $1.51 billion, a 5 per cent reduction on the previous year.

Chief executive Dennis Barnes says that ongoing improvements in operational performance in the current financial year "will be largely offset by increased carbon costs and the commencement of our 80 megawatt Tiwai (aluminium smelter) supply contract".

"With new products in market and retail price changes we expect to see increasing value in our retail offering but ultimately our performance will be influenced by our need to be competitive," he said.

A final dividend of 15 cents per share is unchanged from the previous year.

The underlying profit figure excludes a net $204m of impairments related to the closure of the company's Otahuhu-B gas-fired power station, abandonment of its interest in the undeveloped Taheke geothermal steam field and losses on gas inventories.

Those writedowns, all announced at the half-year earnings result, saw Contact turn in a statutory loss for the year of $66m for the year.

Reflecting the fact that several years of major capital expenditure have now ended, free cashflow improved 17 per cent to $403m. Some $100m of Contact shares were bought back during the year at an average price of $4.83. The shares closed last Friday at $5.26.

The result coincided with the implementation of new customer service technology that Contact says is starting to yield gains in a retail market.

The company is claiming "lowest cost-to-serve" in the industry at $106 per customer, down from $124 a year earlier.

Contact had gained a net 5380 customers in the second half of the financial year, compared to a net loss of 9800 in the first-half.

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