Covid-19 won't stop Mercury shareholders getting bigger dividend
Tuesday, 18 August 2020
Demand for electricity dropped during lockdown, but that hasn’t stopped Mercury from announcing an increased dividend to shareholders for the 12th year running.
The renewable energy generator and retailer told investors on the NZX that it expected to lift the dividend again in the coming year.
Mercury, whose chief executive Vince Hawksworth took up the position during the lockdown in March, announced a normalised profit lift of $27 million in the 12 months to the end of June.
The company’s profit after tax was $207m, down from $357m the previous year, when it had booked a $177m from the sale of its smart metering business Metrix.
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The strong result came despite drought and disruption caused by Covid-19, which saw demand for electricity fall from industry, and to a lesser extent, households.
The pandemic had also set back the completion of its Turitea wind farm near Palmerston North.
Completion of the 33 northern turbines was now expected during the first half of next year.The 27 southern turbines were due to be finished by the end of next year. Project times were subject to contractor performance and further Covid-19 restrictions.
Mercury was planning for the closure of Tiwai, which would result in lower wholesale prices for electricity, and that would in time flow through to the price households pay for their power, the company said.
Minimal rainfall in the final quarter of the financial year continued a sequence of record low hydrological conditions, Mercury said.
Lake Taupō hydro storage ended the year almost 100GWh below its long-term mean at the end of June, but careful management of Lake Taupō’s storage levels, and prudent hedging, helped lessen the financial impact of the extremely low inflow, Mercury told shareholders.
Operating earnings before interest, tax depreciation, amortisation, and fair value adjustments of $494m were down $12m on the prior year, which the company said was pleasing, considering the loss of revenue after the sale of Matrix.
Mercury was forecasting comparable operating earnings to rise to $515m in the current 12-month period to the end of June, subject to any material events, significant one-off expenses or other unforeseeable circumstances including hydrological conditions.
Operating costs remained broadly flat for a seventh year in a row.
Mercury said its workers had managed working from home during lockdown well, with 85 per cent reporting either being as productive, or more productive than they were working from the office.
“Mercury managed a smooth transition to working from home for most of our people during the level 4 lockdown; faster payments were arranged for suppliers dependent on cashflow; communications were stepped up, and more choices offered to help customers; and essential workers were committed and diligent in their work to keep the lights on for New Zealanders by generating renewable electricity from our hydro and geothermal assets,” the company told shareholders.
Mercury chair Prue Flacks said the board had approved a fully imputed final dividend of 9.4 cents per share, taking total ordinary dividends to 15.8 cents per share, an increase of 2 per cent at a time when many other NZX sharemarket-listed companies had suspended dividends.
The company was forecasting a dividend of 17 cents per share in the current year.
Hawksworth said that the impacts of the Covid-19 pandemic on the economy and on customers would continue to be felt for some time.