Half Yearly Report

RNS Number : 9366E

Jersey Electricity PLC

17 May 2013

 



Jersey Electricity plc

 Interim Management Report

for the six months ended 31 March 2013

The Board approved the Interim Management Report for the Group for the six months ended 31 March 2013 and declared an interim dividend of 4.75p compared to 4.50p for 2012. The dividend will be paid on 28 June 2013 to those shareholders registered in the books of the Company on 7 June 2013.

The Interim Management Report is attached and will be available to the public on the Company's website www.jec.co.uk/investor-relations/financial-reports.aspx

The Interim Management Report for 2013 has not been audited or reviewed by our external auditors nor have the results for the equivalent period in 2012. The results for the year ended 30 September 2012 have been extracted from the statutory accounts which had an unqualified audit opinion.

M.P. Magee                                                               P.J. Routier

Finance Director                                                     Company Secretary

Direct telephone number : 01534 505321             Direct telephone number: 01534 505253

Direct fax number : 01534 505466                         Direct fax number : 01534 505515

Email : [e-mail]                                    Email : [e-mail]

16 May 2013

The Powerhouse,

PO Box 45,

Queens Road,

St Helier,

Jersey JE4 8NY

 

Jersey Electricity plc

Unaudited Interim Management Report

for the six months to 31 March 2013

Financial Summary	6 months 2013	6 months 2012	% increase/(decrease)
Electricity Sales -kWh (000)	381,266	357,724	7%
Turnover	£56.8m	£54.2m	5%
Profit before tax	£ 1.4m	£ 6.4m	(77) %
Profit in Energy business	£ 0.1m	£ 4.5m	(97)%
Earnings per share	3.71p	16.66p	(78) %
Final dividend paid per ordinary share	6.50p*	6.50p	-

* paid on 4 April 2013

Trading update

As indicated in our last Interim Management Statement in January 2013, the change in operating regime, due to the reduced ability to import electricity from France, will result in a swing in profitability from the first half to the second half of the financial year when compared to financial results reported in prior years. We expect the second half of our financial year to benefit from a lower cost base as the proportion of imports increase and it will also be aided by the customer tariff rise implemented on 1 January 2013.

Group turnover, at £56.8m, was 5% higher for the first half year 2013 than the same period in 2012 but profit before tax in the first half of 2013 was £1.4m against £6.4m in the equivalent period last year. Cost of sales increased by £7.5m due mainly to the increased use of oil for on-island generation than in the previous year in our Energy business. Operating expenses at £9.7m were at the same level as last year. Earnings per share fell by 78% in line with profit movements.  

Electricity revenues in the first half of 2013 were 14% higher than in 2012 at £46.0m. Unit sales volumes were up 7% due to a combination of the temperatures being below the seasonal norm this winter and the corresponding period last year being particularly mild. Each of the six winter months in this financial year experienced lower temperatures than its corresponding month in 2011/12 and were at, or below, the long-term average level. The remainder of the increase in turnover was due to average tariff increases of 3% in May 2012 and 9% in January 2013. In spite of these price rises, our tariffs continue to remain competitive with other jurisdictions.

Drivers of trading performance

Despite the rise in revenues there was an anticipated fall in Energy profits from £4.5m last year to £0.1m in 2013 due to the change in the winter operating regime, with less importation and more oil usage, following the failure of our oldest subsea interconnector cable in June 2012.  As reported previously, until we install a new interconnector to France, which is scheduled for 2015, we are capacity constrained on importation and reliant on a heavier mix of more expensive on-island oil-fired generation, particularly in winter, when volumes are higher. The result was that in the last six months we generated 31% of our electricity on-island (compared to only 1% last year) and only imported 66% of our requirements from France (down from 93% in 2012). The remaining 3% of our electricity came from the Energy from Waste plant, owned by the States of Jersey, against 6% in the same period in 2012.  

Forward hedging of electricity, oil and foreign exchange

Our power purchase requirements are materially hedged for the period 2013-16 and foreign exchange to a lesser extent out to 2015. We have also hedged a proportion of our estimated oil requirements for the winter period 2013/14. Our goal continues to be the delivery of competitive and stable customer tariffs, secure electricity supplies whilst maintaining an appropriate return for our shareholders. 

Non-energy performance

Tough trading conditions continue to prevail in markets for our other business units and we saw our Retailing business year-on-year revenues for the first half of the financial year fall 5% on a like for like basis to £6.5m. The overall reduction was 30% due to the closure of our internet retailer, day2dayshop.com, in the second half of the last financial year. Profits in Retail fell by £0.2m to £0.1m.

Turnover rose 3% in our Property portfolio with profit rising 7% to £0.9m. Our Building Services business saw a 12% reduction in turnover with profit falling to £0.1m. Our remaining business units produced profits of £0.2m being £0.1m less than in 2012. Interest received fell from £0.2m last year to a much lower level due to the reduction in cash.

Cash/Debt

A £60m Revolving Credit Facility was established in February 2013 to fund the new interconnector to Europe. This is a two year facility which will be re-financed post the delivery of this major capital project.

As anticipated cash and cash equivalents, including short-term investments, fell from £14.3m at the last financial year end to £9.2m as at 31 March 2013. The net cash position, after deducting the bank loan of £8m drawn down from the aforementioned facility was £1.2m. During the last six months, the operating cash produced, before working capital movements, was £4.7m against £10.0m for the corresponding period last year with the lower level of profit being the main reason. Working capital requirements were high at the end of March 2013 with our unbilled units debtors figure at £10.2m against £8.3m at March 2012 (and £5.6m at 30 September 2012) with the cold last quarter being the primary reason.

Investment

Capital expenditure was £11.9m, with £4.4m being the first stage payments to the main contractor for our project to install a second interconnector to France which is still on schedule to be commissioned by 2015. The project to import and refurbish two used diesel engines was successfully completed since the last financial year end, with the final £1.4m of cost in the period, taking the overall project spend to £9.8m. The engines replace two units within our existing generating fleet, which have recently come to the end of their useful lives, and provide additional on-island flexibility and resilience.

Pension scheme

The pension scheme deficit at 31 March 2013 was £1.0m against a deficit of £6.1m at 30 September 2012, as a result of an increase in asset values in the last quarter. Although this reduction is positive, it merely reinforces the volatility in financial markets, and how the pension scheme is impacted. In that context a decision has been made to close the existing final salary scheme to new members, with new employees in future, being offered defined contribution pension arrangements.           

Dividend

Your Board proposes to pay an interim net dividend of 4.75p (2012: 4.50p). We continue to aim to deliver sustained real growth each year. This decision was made on the basis that financial results for the second half of this financial year are expected to materially improve from the first half. The final dividend for 2012 of 6.5p, paid in early April in respect of the last financial year, was maintained at the same level as 2011. 

Risk and outlook

The principal risks and uncertainties identified in our last Annual Report have not materially altered in the interim period.

Your Board is satisfied that Jersey Electricity plc has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, we continue to adopt the going concern basis in preparing the condensed financial statements.

Responsibility statement

We confirm to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b) the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rule DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rule DTR 4.2.8R (disclosure of related party transactions and changes therein); and

(d) this half yearly financial report contains certain forward-looking statements with respect to the operations, performance and financial condition of the Company. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this half yearly financial report and the Company undertakes no obligation to update these forward-looking statements. Nothing in this half yearly financial report should be construed as a profit forecast.

G.J. GRIME - Chairman       C.J.AMBLER - Chief Executive            16 May 2013

INVESTOR TIMETABLE FOR 2013

7 June	Record date for interim ordinary dividend
28 June	Interim ordinary dividend for year ending 30 September 2013
1 July	Payment date for preference share dividends
End July	Interim Management Statement - nine months to 30 June 2013
18 December	Preliminary announcement of full year results

Condensed Consolidated Income Statement (Unaudited)

			Six months ended 31 March				Year ended 30 September
	Note		2013 £000		2012 £000		2012 £000
Revenue	2		56,788		54,169		97,182
Cost of sales			(45,622)		(38,138)		(69,346)
Gross profit			11,166		16,031		27,836
Loss on revaluation of investment properties			-		-		(325)
Operating expenses			(9,686)		(9,768)		(20,900)
Group operating profit before joint venture			1,480		6,263		6,611
Share of loss of joint venture			(70)		(28)		(15)
Exceptional item - impairment of investment			-		-		(1,137)
Group operating profit	2		1,410		6,235		5,459
Interest receivable			41		175		287
Finance costs			(5)		(4)		(11)
Profit from operations before taxation			1,446		6,406		5,735
Taxation	3		(294)		(1,271)		(1,796)
Profit from operations after taxation			1,152		5,135		3,939
Attributable to:
Owners of the company			1,138		5,103		3,846
Minority interest			14		32		93
Profit for the period attributable to the equity holders of the parent company			1,152		5,135		3,939
EARNINGS PER SHARE
-     basic and diluted			3.71p		16.66p		12.55p
DIVIDENDS PER SHARE
-     paid	4		0.00p		6.50p		11.00  p
-     proposed	4		4.75p		4.50p		6.50  p

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

			Six months ended 31 March				Year ended 30 September
			2013 £000		2012 £000		2012 £000
Profit for the period/year			1,152		5,135		3,939
Other comprehensive income
Actuarial gain/(loss) on defined benefit scheme			5,098		2,165		(2,278)
Fair value gain/(loss) on cash flow hedges			6,841		(1,624)		(4,021)
Tax related components relating to other comprehensive income			(2,265)		(108)		1,227
Total comprehensive income for the period/year			10,826		5,568		(1,133)
Attributable to:
Owners of the company			10,812		5,536		(1,226)
Minority Interest			14		32		93
			10,826		5,568		(1,133)

Condensed Consolidated Statement of Changes in Equity (Unaudited)

	Share	ESOP	Other	Retained	Total
	capital	reserves	reserves	earnings	reserves
	£000	£000	£000	£000	£000
At 1 October 2012	1,532	(100)	(2,381)	137,097	136,148
Total recognised income and expense for the period	-	33	-	1,105	1,138
Unrealised  gain on hedges (net of tax)	-	-	5,554	-	5,554
Actuarial gain on defined benefit scheme (net of tax)	-	-	-	4,120	4,120
Equity dividends paid by Jersey Electricity plc	-	-	-	-	-
As at 31 March 2013	1,532	(67)	3,173	142,322	146,960
At 1 October 2011	1,532	-	836	138,477	140,845
Total recognised income and expense for the period	-	-	-	5,103	5,103
Unrealised losses on hedges (net of tax)	-	-	(1,299)	-	(1,299)
Actuarial gain on defined benefit scheme (net of tax)	-	-	-	1,732	1,732
Equity dividends paid by Jersey Electricity plc	-	-	-	(1,992)	(1,992)
As at 31 March 2012	1,532	-	(463)	143,320	144,389
At 1 October 2011	1,532	-	836	138,477	140,845
Total recognised income and expense for the period	-	(100)	-	3,846	3,746
Unrealised losses on hedges (net of tax)	-	-	(3,217)	-	(3,217)
Actuarial loss on defined benefit scheme (net of tax)	-	-	-	(1,856)	(1,856)
Equity dividends paid by Jersey Electricity plc	-	-	-	(3,370)	(3,370)
As at 30 September 2012	1,532	(100)	(2,381)	137,097	136,148

Condensed Consolidated Balance Sheet (Unaudited)

			As at 31 March				As at 30 September
			2013 £000		2012 £000		2012 £000
NON-CURRENT ASSETS
Intangible assets			40		36		51
Property, plant and equipment			144,833		134,597		138,125
Investment property			14,865		14,813		14,865
Other investments			5		1,134		5
Long-term loans			400		400		400
Total non-current assets			160,143		150,980		153,446
CURRENT ASSETS
Inventories			6,113		6,148		7,245
Trade and other receivables			22,508		19,411		17,970
Derivative financial instruments			2,434		-		-
Short-term investments - cash deposits			-		11,200		9,020
Cash and cash equivalents			9,175		6,227		5,311
Total current assets			40,230		42,986		39,546
TOTAL ASSETS			200,373		193,966		192,992
CURRENT LIABILITIES
Trade and other payables			13,205		14,182		17,037
Bank loan			8,000		-		-
Derivative financial instruments			-		1,137		4,002
Current tax payable			685		2,864		762
Total current liabilities			21,890		18,183		21,801
NET CURRENT ASSETS			18,340		24,803		17,745
NON-CURRENT LIABILITIES
Trade and other payables			17,613		17,611		17,644
Retirement benefit deficit			970		1,963		6,068
Financial liabilities - preference shares			235		235		235
Deferred tax liabilities			12,710		11,562		11,033
Total non-current liabilities			31,528		31,371		34,980
TOTAL LIABILITIES			53,418		49,554		56,781
NET ASSETS			146,955		144,412		136,211
EQUITY
Share capital			1,532		1,532		1,532
ESOP reserve			(67)		-		(100)
Other reserves			3,173		(463)		(2,381)
Retained earnings			142,322		143,320		137,097
Equity attributable to the owners of the Company			146,960		144,389		136,148
Minority interest			(5)		23		63
TOTAL EQUITY			146,955		144,412		136,211

 

Condensed Consolidated Cash Flow Statement (Unaudited)

		Six months ended 31 March				Year ended 30 September
	Note	2013 £000		2012 £000		2012 £000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit before joint venture		1,480		6,263		6,611
Depreciation and amortisation charges		3,976		4,034		8,293
Loss on revaluation of investment property		-		-		325
Pension operating charge less contributions paid		(220)		(303)		(630)
Adjustment for foreign exchange hedges		(536)		-		465
Profit/(loss) on sale of fixed assets		5		(24)		(16)
Operating cash flows  before movement in working capital		4,705		9,970		15,048
Decrease/(increase) in inventories		1,132		303		(794)
Increase in trade and other receivables		(4,483)		(3,956)		(2,771)
(Decrease)/increase in trade and other payables		(2,627)		87		1,903
Interest received		86		81		347
Preference dividends paid		(5)		(5)		(9)
Income taxes paid		-		-		(1,820)
Net cash flows from operating activities		(1,192)		6,480		11,904
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(11,897)		(11,579)		(18,823)
Investment in intangible assets		(4)		(4)		9
Net proceeds from disposal of  fixed assets		-		17		53
Short-term investments		9,020		6,545		8,725
Net cash flows from investing activities		(2,881)		(5,021)		(10,036)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank loan		8,000		-		-
Equity dividends paid	4	(63)		(2,020)		(3,414)
Net cash flows used in financing activities		7,937		(2,020)		(3,414)
Net increase/(decrease)  in cash and cash equivalents		3,864		(560)		(1,546)
Cash and cash equivalents at beginning of period/year		5,311		6,787		6,787
Net cash and cash equivalents at end of period/year		9,175		6,227		5,241
Overdraft		-		-		70
Cash and cash equivalents at end of period/year		9,175		6,227		5,311

Notes to the Condensed Interim Accounts (Unaudited)

1.         Accounting policies

 

Basis of preparation

The interim accounts for the six months ended 31 March 2013 have been prepared on the basis of the accounting policies set out in the 30 September 2012 annual report and accounts using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting'.

Jersey Electricity plc has considerable financial resources and, as a consequence, the directors believe that it is well placed to manage its business risks successfully despite the current uncertain economic outlook. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

2.         Turnover and profit

The contributions of the various activities of the Group to turnover and profit are listed below:

                                                                          Six months ended                                                             Year ended

	31 March 2013			31 March 2012			30 September 2012
	External	Internal	Total	External	Internal	Total	External	Internal	Total
Revenue	£000	£000	£000	£000	£000	£000	£000	£000	£000
Energy	46,020	69	46,089	40,525	129	40,654	72,671	197	72,868
Building Services	1,933	200	2,133	2,299	118	2,417	4,195	325	4,520
Retail	6,489	21	6,510	9,227	32	9,259	15,472	64	15,536
Property	1,100	349	1,449	1,058	344	1,402	2,141	690	2,831
Other	1,247	380	1,627	1,060	318	1,378	2,703	601	3,304
	56,789	1,019	57,808	54,169	941	55,110	97,182	1,877	99,059
Inter-segment elimination			(1,019)			(941)			(1,877)
			56,789			54,169			97,182
Operating profit
Energy			115			4,540			4,240
Building Services			63			193			300
Retail			146			327			64
Property			867			813			1,609
Other			219			362			708
Operating profit before property revaluation			1,410			6,235			6,921
Loss on revaluation of investment  properties			-			-			(325)
Exceptional item -
Impairment of investment			-			-			(1,137)
Operating profit			1,410			6,235			5,459

Materially, all the Group's operations are conducted within the Channel Islands. All transfers between divisions are at an arm's-length basis.

The assets and liabilities of the Group are not reported on as there has been no significant movement in the values in the six months to 31 March 2013.

Notes to the Condensed Interim Accounts (Unaudited)

3.         Income tax

	Six months ended             31 March				Year ended 30 September
	2013 £000		2012 £000		2012 £000
Current income tax	(77)		1,044		762
Deferred income tax	371		227		1,034
Total income tax	294		1,271		1,796

For the period ended 31 March 2013 and subsequent periods, the Company is taxable at the rate applicable to utility companies of 20%.

4.         Dividends

	Six months ended     31 March				Year ended 30 September
	2013 £000		2012 £000		2012 £000
Distributions to equity holders and by subsidiaries in the period	63		2,020		3,371

The distribution to equity holders in respect of the final dividend for 2012 of £1,991,600 (6.50p net of tax per share) was paid on 4 April 2013 and therefore is not included as a cash outflow in the 6 months to 31 March 2013. Dividends of £63,324 were paid by subsidiaries to minority interests for the six months to 31 March 2013.

The Directors have declared an interim dividend of 4.75p per share, net of tax (2012 - 4.50p) for the six months ended 31 March 2013 to shareholders on the register at the close of business on 7 June 2013. This dividend was approved by the Board on 16 May 2013 and has not been included as a liability at 31 March 2013.

5.         Pensions

In consultation with the independent actuaries to the scheme, the valuation of the pension scheme assets and liabilities has been updated to reflect current market discount rates, current market values of investments and actual investment returns applicable under IAS 19 'Employee Benefits', and also consideration given as to whether there have been any other events that would significantly affect the pension liabilities. The latest triennial valuation was performed as at 31 December 2012 but the results have not yet been finalised.

Notes to the Condensed Interim Accounts (Unaudited)

6.         Related party transactions

The Company currently leases the La Collette Power Station site from its largest shareholder, the States of Jersey, for a peppercorn rent of £1,000 per annum. This lease was subject to a rent review as at June 2006 and the Company is in dispute with its landlord. The information usually required by IAS 37 Provisions, 'Contingent liabilities and contingent assets', is not disclosed on the grounds that it may prejudice the outcome of the dispute.  

	Value of    electricity  services supplied by Jersey Electricity		Value of goods  & other services supplied by Jersey Electricity		Value of goods & services purchased by Jersey Electricity		Amounts due to  Jersey Electricity		Amounts due by  Jersey Electricity
Six months ended 31 March	2013	2012	2013	2012	2013	2012	2013	2012	2013	2012
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
The States of Jersey	4,217	3,911	691	1,157	912	1,632	933	734	1	1
JT Group Limited	841	770	107	76	76	97	38	247	-	-
Jersey Post Int Limited	57	50	-	-	19	22	9	-	-	-
Jersey New Waterworks Ltd	319	516	32	6	72	42	3	69	-	-
Foreshore Limited	291	269	408	378	5	5	109	163	-	-

The States of Jersey is the Company's majority and controlling shareholder. Jersey New Waterworks is majority owned by the States of Jersey. JT Group Limited and Jersey Post International Limited are both wholly owned by the States of Jersey. All transactions are undertaken at an arm's length basis.

As at the 31 March 2013 Foreshore Limited had a long-term loan, to the value of £400,000 (2012: £400,000) due to Jersey Electricity plc.

 

END

 

 

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