Half Year Results 2005

21 February 2005

Origin Energy announces a 21% increase in half year profit and Renounceable Rights Issue.


Directors' Report (19 pages)
Appendix 4D (27 pages)
Presentation to media (42 slides)


An initial three months of contribution from Contact Energy, increased oil production and energy retailing and profits from the sale of the Carpentaria pipeline have contributed to a 21% improvement in Origin Energy’s profit to $152 million for the half year to 31 December 2004.

Earnings per share increased by 18% to 22.6 cents and an interim fully franked dividend of seven cents per share was announced.

Origin Energy Limited also announced a 1 for 6 renounceable rights issue which will raise approximately $641 million in equity. 

Highlights of Half Year Results

  • Revenue up 24% to $2,292 million 
  • EBITDA up 44% to $440 million* 
  • Net profit after tax up 21% to $152 million 
  • Contact Energy contributes $6.6 million profit over three months 
  • Earnings per share increased 18% to 22.6 cents per share 
  • Dividend of 7 cents per share fully franked to be paid on 23 March, up 17% on last year
        *includes Contact at 100% 

Commenting on the result the Chairman Mr Kevin McCann said, “It is pleasing to see the successful completion of the Contact acquisition and the initial contribution that Contact has made to Origin’s profit. We are also pleased to announce a fully franked dividend of seven cents per share which is a 17% increase over last year and will be paid on 23 March 2005 to shareholders of record on 2 March 2005 (shares issued under the Rights Issue will not participate in this dividend). We expect to maintain the dividend for the full year at around 40% of earnings per share.”

Mr Kevin McCann said, “The proceeds of the Rights Issue will be used to repay the Convertible Undated Preference Shares issued to fund the acquisition of a 51.4% interest in Contact Energy in 2004 and to strengthen Origin’s balance sheet.” 

Details of the Rights Issue are contained in a Prospectus lodged with ASIC and ASX today. A letter advising shareholders of the Rights Issue will be sent to shareholders today and the Prospectus will be sent no later than 7 March 2005.

The Rights Issue will raise a total of approximately $641 million. The Rights Issue is fully underwritten by Citigroup and Deutsche Bank and is expected to settle on or around 1 April 2005.

Managing Director Mr Grant King said, “The initial contribution of Contact increased net profit after tax by $6.6 million while the sale of Origin’s interest in the Carpentaria pipeline contributed $9 million. Increased oil production, improved margins in energy retailing and earnings from the SEA Gas pipeline also contributed to growth in earnings.”

“Generation earnings were lower reflecting the one-off tax consolidation benefits last year and lower contributions from Osborne and Mt Stuart.” Commenting on the outlook for the year, Mr King said, “The second half will be lifted in comparison to the second half last year with the inclusion of a full six months of contribution from Contact.”

“The Moomba gas plant which saw reduced earnings in the second half last year will deliver the first full six months of production following the disruption to production in January 2004.”

“BassGas is currently being commissioned and will progressively increase contribution to earnings as the plant reaches full production.”

“Based on current market conditions and following the successful completion of the Rights Issue we expect that our earnings per share for the year to 30 June 2005 will be approximately 15% higher than the prior year.”

Looking further ahead, Mr King said, “Our prospects remain strong with a number of major projects which will make significant contributions in future years. These include:

  • An increase in production from coal seam gas fields in Queensland to supply long term contracts with AGL from May 2006, QAL from November 2006 and Incitec Pivot from mid 2007;
  • The offshore Otway Project which commenced development in the June quarter 2004 which is expected to deliver gas into the South Australian and Victorian markets from mid 2006; and
  • The Kupe gas field in New Zealand, in which Origin acquired a 50% interest and became operator in 2004, which is expected to produce around 20PJ of gas and 1.5 million barrels of hydrocarbons per annum from the second half of 2007.

“Origin also continues to progress planning for major power generation projects in Queensland and Victoria.” 

Rights Issue

The Rights Issue is being made to all Shareholders with registered addresses in Australia and New Zealand as at 7.00pm (Australian Standard Eastern Time) on 2 March 2005. The issue price for shares under the Rights Issue will be $5.70 per share. This represents a 17% discount to the closing market price of Origin Energy shares on 18 February 2005.

Shareholders whose registered address is outside Australia or New Zealand will not be eligible to participate in the Rights Issue and arrangements have been made to offer for sale their entitlements. If the rights are sold at a premium to the Issue Price, the excess over the Issue Price, less any selling expenses, will be sent to those non-qualifying shareholders. These arrangements will also apply to those shareholders who do not take up their rights or sell them.

The timetable for the Rights Issue is outlined below. Full details of the Rights Issue are set out in the Prospectus, which was lodged with the Australian Securities and Investment Commission today. A copy of this Prospectus is available to Eligible Shareholders at www.originenergy.com.au.

Eligible Shareholders will also be mailed a Prospectus together with an Entitlement and Acceptance Form no later than Monday, 7 March 2005. 

Rights Issue Timetable  
Rights trading on ASX commences Thursday, 24 February 2005
Record date for determining rights entitlements Wednesday, 2 March 2005 
Prospectus dispatched and Rights Issue opens  Monday, 7 March 2005 
Rights trading on ASX ends  Tuesday, 15 March 2005 
Shares quoted on a deferred settlement basis  Wednesday, 16 March 2005 
Last day for acceptance of application monies  Tuesday, 22 March 2005 
Allotment and issue of new shares  Friday, 1 April 2005 
Dispatch of shareholding statements for new shares  Friday, 1 April 2005 
Trading expected to commence for new shares on a normal T+3 basis  Thursday, 7 April 2005

Applications for new shares under the Rights Issue may only be made in accordance with the instructions in the Entitlement and Acceptance Form which accompanies the Prospectus. Shareholders eligible to participate should read the Prospectus carefully. For further information on the Rights Issue you should contact your professional advisor or call the Origin Rights Issue InfoLine on 1300 664 446 (Australia) or 0800 507 596 (New Zealand). 


    Contacts

Grant King
Managing Director
Telephone: 02 8345 5435
Angus Gunthrie
Manager, Investor Relations
Telephone: 02 8345 5558

Origin Energy Key Financials

  2004 ($m) 2003 ($m) Change %
Total revenue   2,292  1,846  24
EBITDA   440  306  44
EBIT   305  206  48
Profit before tax   251  182  38
Profit after tax   174  127  37
Profit after tax and outside equity interests   152  126  21
Free cash flow(1) 247  230  7
OCAT ratio(2) 13.6%  16.1% N/A
Capital expenditure (including acquisitions)   1,192  241  394
Total assets   7,838  3,393  131
Net debt   2,742  744  268
Total equity   3,915  1,870  109
Key Ratios       
Earnings per share   22.6¢  19.2¢  18
Free cash flow(1) per share   36.8¢  35.3¢  4
Interim dividend per share   7.0¢  6.0¢  17
Net asset backing per share   $5.81  $2.82  106
Net debt to capitalisation   41%  28% N/A
Net debt to equity   70%  40% N/A
EBIT Interest cover (times)   4.9  8.5 N/A
Return on equity(3) 5.7%  6.7% N/A
Segment Analysis (EBITDA)      
Exploration & Production   121.0  102.9  18
Retail   157.4  147.2  7
Generation   30.0  43.2  (31)
Networks   16.5  13.2  25
Contact   115.5  -
Total  440.4  306.5  44

  1. Cash flow available for funding growth and distributions to shareholders 
  2. Excludes Contact 
  3. Return on equity calculation treats Convertible Undated Preference Shares (CUPS) used to fund the acquisition of Contact as equity