Infrastructure share APA Group (ASX: APA) has reported its result for the six months to 31 December 2019, which included another increase to the distribution.
What is APA Group?
It owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). It owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation's natural gas usage.
APA's report numbers
APA reported that its total revenue, excluding pass-through revenue, grew by 6.4% to $1.08 billion. APA's earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 6.9% to $842.2 million and operating cash flow increased by 8.9% to $511.9 million.
These numbers include six months of revenues flowing from completed organic growth projects including the Gruyere Power Station and Yamarna Gas Pipeline, the Darling Downs Solar Farm and the Badgingwarra Wind Farm.
Net profit after tax (NPAT) for the half-year increased by 11.2%, or $17.6 million, to $175 million.
During the period the infrastructure business repaid around $389 million of maturing debt with lower cost longer-term debt, which will reduce APA's annual interest expense into the future.
Of the total $213.6 million spent on capital expenditure, $145.1 million was for growth capex which shows the business isn't done growing yet.
Distribution
APA Group declared an interim distribution of 23 cents, which was a 7% increase. It includes franking credits of 3.65 cents per security.
Outlook
Next month APA's Orbost Gas Processing Facility will be processing gas from the Sole gas field.
APA has reaffirmed its EBITDA guidance for FY20 will be in the range of $1.66 billion to $1.69 billion with the net interest expense settling at the lower end of the range of $505 million to $515 million.
The total distribution per share is still expected to be 50 cents per share, which will be covered by operating cash flows.
The infrastructure giant also continues to assess opportunities to expand into the North American gas transmission and distribution sectors.
APA Managing Director Rob Wheals said: "Gas is a critical part of the energy mix, both now and into the future. Further, it will continue to play a significant and important role in the overall Australian energy system by supporting renewable generation, when the wind doesn't blow and the sun doesn't shine.
"Affordable, reliable and sustainable energy is essential for our nation. The decommissioning of ageing coal-fired power generation will require significant investment in new energy infrastructure."
Is APA a buy?
Based on the guidance, APA is trading with a FY20 distribution yield of 4.4%. Its share price is quite high, it has been a strong performer. It has a long distribution growth record, it has grown the distribution every year for around 15 years. If income is your primary goal then I'd definitely consider APA Group.
