MetService profit drops

MetService wants to quit reliance on its MoT contract.

Meteorological Service of New Zealand's annual profit dropped by almost two thirds because of delays in finalising a new deal with the Ministry of Transport, its largest contract.

The state-owned, Wellington-based weather bureau's net profit slumped to $910,000 in the 12 months ended June 30, from $2.6 million a year earlier, as revenue was little changed at $46 million from $45.7 million. Excluding the MoT contract, annual commercial revenue increased 7.2%, it says.

The MoT's $18.6 million annual contract expired on June 30, 2013. The service extends beyond New Zealand boundaries down to the Ross Sea ice shelf and up to the Pacific Islands.  

Pending agreement on a new deal, the contract was topped up in the 2014 year by an extra $1.4 million, but not in the 2015 year. A new MoT contract, for an additional $15.9 million over the next four years, wasn't inked until the start of the new financial year on July 1. 

Some of the extra funds are earmarked for an updated meteorological forecasting system and a new off-site data back-up in Auckland. 

The new contract means MetService will increase its MoT funding by $2.6 million to $21.2 million in 2016, with an extra $3.3 million slated for 2017, $4.7 million in 2018 and $5.19 million in 2019, according to government Budget documents.

The company said today it won't pay a dividend for the 2015 financial year, after paying a $2.3 million dividend for the 2014 year, 39.7 percent of its operating profit. It had previously forecast a payout ratio of 10 percent in 2015, 9.8 percent in 2016, and 22 percent in 2017. Its policy is to distribute 35 percent of operating cash flow as dividends.

MetService wants to reduce reliance on the MoT contract by winning more sales outside New Zealand. To enable investment in international growth markets, the company says it will pay partial dividends in the 2015 and 2016 financial years, and step up the payment in its 2017 year.

It didn't specify a final dividend in its latest earnings announcement, although it has previously forecast a payout ratio of 10% in 2015, 9.8% in 2016, and 22% in 2017. Its policy is to distribute 35% of operating cashflow as dividends.

The company said its expenses rose 7.9% in the year through June, reflecting investment in growth opportunities, as well as depreciation and the need to maintain key services for New Zealand public safety.