Mercury share price rises on FY20 results

The Mercury share price is lifting in early trade, despite a difficult FY20 for the company due to drought and the impact of the coronavirus.

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The Mercury NZ Ltd (ASX: MCY) share price is up in early morning trade following the release of the company's FY20 results.

At the time of writing, the Mercury share price is up by 3.39% to $4.58 per share.

FY20 results

Mercury is a New Zealand-based company that produces electricity from 100% renewable sources. Its FY20 results were impacted by the drought across the Waikato catchment, which impacted hydro generation from September, as well as the impacts of the coronavirus pandemic.

Mercury reported revenue from continuing operations was down 11.6% to NZ$1,768 million compared to the prior corresponding period. 

Net profit after tax (NPAT) was NZ$207 million, down compared to NZ$357 million in FY19. The results were Mercury's first full-year without the Metrix smart metering business, which was sold in FY19. On a normalised basis, NPAT was up $27 million. Lower interest and tax charges more than offset lower hydrology. 

Electricity generation was down 6% to 6,327GWh compared to 6,703GWh in the pcp, due record low hydrological conditions caused by minimal rainfall. 

In FY20, earnings before interest, taxation, depreciation, amortisation, change in fair value of financial instruments, gain on sale and impairments (EBITDAF) was NZ$494 million, down NZ$12 million compared to the prior corresponding period.

Capital expenditure of NZ$279 million in FY20 was an increase on FY19's NZ$115 million. The company invested in generation assets and information communication technology (ICT). 

The board has approved a 9.4 cents per share dividend, taking the annual total to 15.8 cents per share for FY20. It represents an increase of 1.9% compared to the pcp and will be paid on 30 September 2020.

Outlook

The coronavirus pandemic will continue to impact on the company including the delayed construction of its Turitea wind farm, which it had committed $184 million in total to 30 June 2020, with 33 northern turbines expected to be completed in the final quarter of FY21.

For FY21, its EBITDAF has been set at NZ$515 million. However, the result is subject to material events, significant one-off expenses and other unforeseen events. 

It's expecting to be able to pay a 17 cents per share dividend in FY21. This represents a 7.6% increase on FY20. Pleasingly, it's the 13th consecutive year of dividend increases.

About the Mercury share price

Currently, the Mercury share price is trading at $4.58 and has fallen 1.93% in the past year.

Motley Fool contributor Matthew Donald 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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