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APA Group share price rises on 27% interim profit increase

The APA Group  (ASX: APA) share price has risen 0.85% to $9.48 per share at the time of writing after a strong half-year result which saw net profit after tax (NPAT) increase by 27.0%.

The interim results wrap

APA’s total revenue excluding pass-through rose 6.1% to $1.01 billion in 1H19 while earnings before interest, tax, depreciation and amortization (EBITDA) rose 4.3% on prior corresponding period (pcp) to $787.7 million for the half. The biggest EBITDA segments were Queensland (+7.9% to $511.6 million) and Western Australia (+4.9% to $122.7 million) while Victoria & South Australia dragged slightly on the overall EBITDA figure (-3.8% to $68.8 million).

Statutory NPAT rose 27.0% to $157.4 million despite the group’s record capex program of $1.4 billion which management said is nearing completion. The biggest profit driver was the strong EBITDA figure and lower net interest expense which fell 8.8% after management undertook significant refinancing activities throughout 1H19.

The group’s operating cash flow profile remained strong and increased by 1.7% to $157.4 million for the half-year. APA’s low-risk business model continues to pay dividends for the group, with 79.3% of its revenue from capacity charge revenue and revenue diversified across Energy (49.3%), Utilities (23.4%) and Resources (21.3%).

The group’s payout ratio as a percentage of operating cash flow was 53.4% for the half which works out to be a 21.5 cents per share (cps) distribution consisting of the following:

  • APT franked profit distribution: 7.47 cps
  • APT unfranked profit distribution: 2.03 cps
  • APT capital distribution: 6.58 cps
  • APTIT profit distribution: 2.97 cps
  • APTIT capital distribution: 2.45 cps

Foolish takeaway

I thought today was a strong result for APA in meeting estimates, despite a tumultuous year it spent as a potential takeover target for Hong Kong-based CK Infrastructure Holdings. Ultimately, the deal didn’t receive Foreign Investment Review Board (FIRB) approval.

Management has affirmed FY19 EBITDA guidance at the upper end of the guidance range of $1,550-1,575 million. There is still plenty of uncertainty surrounding the business, however, so I wouldn’t be buying at the current share price of $9.48 per share.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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