Debt fall to lift Contact dividend

Contact Energy shareholders can expect an increase in annual dividend policy later this financial year as the electricity producer and retailer’s debt levels fall to within its target ratio against operating earnings.

Contact yesterday announced an interim dividend of 11c per share for the six months to December 31, the same as it has paid every year since 2008, although final dividends, special dividends and share buybacks have put total annual distributions on a steadily increasing trend.

Interim and final dividends have totalled 26c per share for the last three financial years, but a 50 cps special dividend in the year to June 2015 reflected the departure of Origin Energy as the company’s cornerstone shareholder.

That distribution also exhausted imputation credits, which are only slowly rebuilding, so the interim dividend announced is only imputed for 8 of the 11 cents per share.

Contact yesterday posted a 12 per cent rise in first-half underlying profit.

Underlying profit rose to $82 million in the six months to December 31, from $73m a year earlier, said the Wellington-based company. Sales fell to $1.04 billion from $1.12b. Net income was $96m compared with a loss of $116m a year earlier, which reflected impairments.

Expenses fell to $778m from $866m, while capital expenditure dropped 11 per cent to $63m.

Contact shares closed yesterday up 8c at $4.87.

“Contact’s strategy remains centred on optimising the customer and generation businesses to deliver strong cash flows which are ultimately for distribution to shareholders,” Contact said.