Meridian pays special dividend
Meridian Energy is paying a special dividend of 2 cents a share after posting solid profits of $229.8 million for the June year, even as household power bills went down slightly in the past year.
And depending on what happens in next month’s election and if the Tiwai Point aluminium smelter stays open, shareholders could be in line for another windfall later next year, with Meridian dangling the possibility of an extra dividend or a share buy-back.
An analyst said a share buyback was a good way of keeping a firm’s share price high, but it also indicated ‘‘they can’t think of anything else to do with the money’’.
With the market ‘‘awash’’ with generation and strong cash flows, there was little else but to give the money back to shareholders.
Meridian’s shares last traded at $1.275, down 1c yesterday, compared with the initial issue price of $1 for the instalment receipt. The company listed in late 2013.
The latest June year’s profit was down from $295.1m in the previous financial year, which was boosted by a couple of large one-off factors. But the June year profit was 22 per cent ahead of the prospectus forecast and in line with its guidance earlier this year.
Meridian announced a higher than forecast final ordinary dividend of 6.82 cents a share, taking the full year dividends to a total of 11.01c, better than the prospectus forecast of 10.5c.
As well, the company will pay a special dividend of 2c a share from the sale of excess land and other assets, including aluminium hedge contract proceeds. Both dividends will be paid on October 15. Sales of surplus land in the South Island and assets in the United States realised $62.2m.
But the Green Party says the ‘‘folly’’ of the National Government’s asset sales was exposed by Meridian’s windfall dividend, of which the Government would only now get half.
‘‘Meridian’s windfall dividend underlines that selling good assets to cut debt is plain bad economics,’’ Green co-leader Russel Norman said.
‘‘The Cown would get a $26.2m windfall from Meridian, but it would have been more than $50m had the Government not sold this superb asset,’’ Norman said.
Meridian chief executive Mark Binns said the company expected to make an announcement on its capital structure in February, but the final detail of that would depend on the future of Tiwai Point and the general election result.
‘‘I’m still hopeful that (the smelter) will stay, but that is their decision and that hope is not based on anything I’ve been told by them,’’ Binns said yesterday.
Meridian expected the smelter company to take a longer-term view of aluminium prices when the criticial decision is made on July 1 next year about the future of the smelter.
‘‘My personal view, and I wouldn’t bet my first-born son on it, I think they would probably stay, but that’s a personal assessment that we are at the bottom of the cycle.
‘‘We have seen aluminium prices improve . . . (and) you’d suspect the New Zealand dollar will decline,’’ Binns said.
The options for Meridian’s capital structure included a share buyback programme or enhanced special dividends, but Binns rejected that was from ‘‘excessive profits’’.
Meridian’s household power prices had actually gone down in the past year as it tried to win new customers ‘‘and save ones that have been pinched’’.
Meridian noted a ‘‘competitive retail landscape’’, with latest government agency MBIE’s showing a 0.3 per cent annual fall in residential sales electricity charges.
‘‘This was despite a 1.7 per cent increase in lines charges, which was more than offset by decreases in Meridian’s energy charges,’’ the company said.
Analyst Andrew Harvey-Green, of Forsyth Barr, said Meridian’s operating profits were in line with expectations, with the dividend a little better than expected, reflecting asset sales.
Meridian was the lowest geared of any of the big power companies, so they were looking at possible share buy-back or an extra dividend.
‘‘It would be a reasonable uplift – it won’t be miniscule,’’ HarveyGreen said.
Farm sales are up 25 per cent over the last year, although winter has seen dairy farm sales virtually grind to a halt. Figures from the Real Estate Institute (REINZ) show 1923 farms changed hands over the year to July. Sales were up nearly 17 per cent rise in the three months to July on the same period a year ago, totalling 512. Ten regions reported an uptick in sales volumes, led by Canterbury, then Nelson, Northland and Auckland and Bay of Plenty. Sales of lifestyle properties fell 13.5 per cent in the three months to July compared to a year ago, and 1.5 per cent on the three months to June.
Big pay rise
Commonwealth Bank boss Ian Narev’s pay packet has grown to $8.1 million despite a cut to his bonus because of the company’s financial planning scandal. Narev’s 19 per cent pay rise from the previous year’s $6.8m comes amid revelations of misconduct by some of its financial advisers that caused millions of dollars in losses for some clients. The bank has already paid around $52m in compensation and is reviewing a decade of activities within its financial planning businesses, from 2003 to 2012. Mr Narev took home $4.06 million in cash salary and bonuses in the 2013/14 financial year, plus $4.05 million in cash and shares from bonuses earned in previous years. His 2013/14 short term bonuses were cut by $515,000 because of the financial planning scandal, CBA’s annual report shows.
Landmark sold