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Vector interim result

23 February 06

Vector interim result - six months ended 31 December 2005

Vector today announced an unaudited net profit after-tax and before amortisation (NPATA) of $86 million for the six-month period to 31 December 2005 - 33% ahead of the same period last year.

The interim period includes, for the first time, a full-period of contribution from NGC and reflects Vector's move from majority to full ownership in August 2005.

The company has declared a fully imputed interim dividend of 6 cents per share, its first dividend to shareholders since listing as a share issuer on 15 August 2005, and is forecasting higher than expected full year net earnings of $38 to $43 million.

Overview of Group results:

Half year (NZ$m)
31 Dec 05 31 Dec 04 % change
Revenue 568.7 345.8 +64
EBITDA * 303.1 206.5 +47
NPAT 38.4 43.3 -11
NPATA 86.0 64.8 +33

* Earnings before interest, tax, depreciation & amortisation

Vector Chairman Michael Stiassny says the company's interim result was very satisfactory as it exceeded expectations, despite relatively tough trading conditions.

"We have achieved all of our operating targets despite an unseasonably warm winter which resulted in lower energy consumption and, therefore, reduced revenues from our electricity and gas businesses.

However, this was partially offset by operating cost containment which has allowed us to achieve our targets for EBITDA and EBIT."

Mr Stiassny says while the company also exceeded its projections for both NPAT and NPATA, the result is difficult to compare to the previous corresponding period.

"Our net earnings have already exceeded our IPO prospectus NPAT forecast of $36.5 million for the full year, and reflect a $5 million benefit from Vector's earlier than expected move to 100% ownership of NGC."

The latest half year period included increased borrowing costs of $39.3 million and an additional $26.2 million of amortisation of goodwill, both as a result of the full acquisition of NGC.

Therefore, the results are not directly comparable to the previous period due to the full inclusion of NGC's revenues and earnings contributions, its costs and the increased debt associated with the full acquisition.

Vector Group CEO Mark Franklin says the full acquisition of NGC, is already providing the company with significant benefits.

"It has considerably strengthened our cash flows, with operating cash flows for the period amounting to $218.9 million compared with $151.9 million in the previous half year.

We also now have a broader business platform and therefore more scope to identify and pursue new business opportunities. We look forward to capitalising on this further."

The Vector board has declared a fully imputed interim dividend of 6 cents per share, which represents a 5% increase over the prospectus forecast of 5.7 cents per share and 70% of NPATA.

The record date for the dividend is 31 March 2006, with the payment to be made on 7 April 2006.

On prospects for the second half of the year, Mr Franklin says earnings in the second half of the year are traditionally flat compared with the first half of the year given it is normally warmer and energy consumption is lower.

"We are confident that we remain on track to achieve EBITDA and EBIT in line with our prospectus forecasts for the full year. We also expect our full-year net profit to be in the range of $38 to $43 million, due primarily to the better than expected result for the first half."

Mr Franklin says the company is also on track with the integration of Vector and NGC.

"The integration of the two companies is progressing well, with all executive and senior management roles now in place. We have already integrated all gas activities into a single gas business, have completed all necessary refinancing, and are making good progress in metering and information systems consolidation, project governance and procurement arrangements. We expect to complete the final stages of integration by year-end.

We now effectively have the operational and management structure in place to pursue a revised strategy that now reflects the aspirations of the newly merged company."


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