Preliminary Announcement of Annual Results

RNS Number : 8288R

Jersey Electricity PLC

14 December 2016

 

             

JERSEY ELECTRICITY plc                                                                                                                 Preliminary Announcement of Annual Results

Year Ended 30 September 2016

At a meeting of the Board of Directors held on 13 December 2016, the final accounts for the Group for the year to 30 September 2016 were approved, details of which are attached.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 30 September 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Jersey Registrar of Companies and those for 2016 will be delivered in early 2017. The auditor has reported on those accounts and their reports were unmodified. 

A final dividend of 8.00p on the Ordinary and 'A' Ordinary shares in respect of the year ended 30 September 2016 was recommended (2015: 7.60p). Together with the interim dividend of 5.50p the proposed total dividend declared for the year was 13.50p on each share (2015: 12.85p).

The final dividend will be paid on 30 March 2017 to those shareholders registered in the books of the Company on 24 February 2017. A dividend on the 5% cumulative participating preference shares of 1.5% (2015: 1.5%) payable on 3 July 2017 was also recommended.

The Annual General Meeting of the Company will be held on 2 March 2017.

M.P. Magee                                                                           P.J. Routier

Finance Director                                                                   Company Secretary

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

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

13 December 2016    

The Powerhouse

PO Box 45

Queens Road

St Helier

Jersey JE4 8NY

JERSEY ELECTRICITY plc            

Preliminary Announcement of Annual Results

Year ended 30 September 2016                                                                                                    

The Chairman, Geoffrey Grime, comments:

"I am pleased to report that Jersey Electricity has delivered another excellent year's performance in 2015/16. The Company has continued to make great progress in implementing its infrastructure strategy, at the centre of which was the successful delivery of another 100MW interconnector, Normandie 1 (N1), installed between Jersey and France, and delivered ahead of schedule and materially below budget. A shared investment with our partners Guernsey Electricity, N1 is the replacement for EDF1, Jersey Electricity's first interconnector, which came to the end of its life in 2012. This new cable link gives Jersey and Guernsey the benefit of three submarine cables between Jersey and France, across two diverse routes. The primary project was completed in just four years at a cost of around £30m representing another notable achievement.

The Company's success this year is not limited to delivering capital projects. In addition we also produced our best ever Group financial performance supported by strong improvements in its non-Energy businesses. In the Energy business, Jersey Electricity has built on the good progress made last year, maintaining profitability at a level needed to support ongoing investment and commensurate with a rate of return that we see in regulated entities elsewhere.  Importantly, despite the recent period of sustained investment, we have been able to maintain prices at current levels for nearly three years and remain competitively priced relative to other islands and even larger EU countries. Furthermore, we have announced that electricity prices will not increase until 1 January 2018 at the earliest. Our supply reliability, health and safety and environmental performance, including the carbon intensity of supplied electricity, remain strong relative to peers which is a significant achievement given the particular challenges of operating in an island context.

As sole supplier of over 40% of the Island's energy requirements we have a huge responsibility to our customers and it is gratifying that we maintained our overall customer service rating at a level assessed as being "excellent" when compared with similar service providers in the market.

Finally there have been reports in recent weeks of potential supply security issues in France because of unexpected inspection shutdowns in a number of nuclear generation plants. We have received a high degree of comfort from EDF that the supplies to the Channel Islands will not be impacted by what is viewed as a short-term issue."

Financial Summary	2016	2015
Electricity Sales in kilowatt hours	625m	627m
Revenue	£103.4m	£100.5m
Profit before tax pre-exceptional items	£  13.1m	£  12.4m
Earnings per share pre-exceptional items	33.31p	32.94p
Dividends paid per ordinary share	13.10p	12.45p
Final proposed dividend per share	8.00p	7.60p
Net debt	£ 29.0m	£ 17.5m

Group revenue for the year to 30 September 2016 at £103.4m was 3% higher than in the previous financial year. Unit sales volumes of electricity were marginally behind last year with Energy revenues at £81.2m against £80.7m in 2015, slightly higher due to some non-recurring installation work in the year. Turnover in Powerhouse.je, our retail business, increased by 8% from £11.1m to £11.9m. Revenue in the Property business rose by £0.1m to £2.1m due to a higher level of rental income. Revenue from JEBS, our contracting and building services business, rose £1.0m from levels experienced in 2015 to £5.1m. Turnover in our Other Businesses rose £0.5m to £3.0m.

Overall cost of sales rose by £0.6m to £65.2m due mainly to additional costs in the non-Energy business units associated with the aforementioned rise in revenue, partially offset by a fall in the Energy business. Operating expenses, at £23.5m, rose by £1.6m from their 2015 level with an increase in IAS19 pension costs of £0.4m and a £0.7m ex-gratia award for current pensioners being the main items.

Profit before tax, pre-exceptional items, for the year to 30 September 2016, at £13.1m, increased by 6% from £12.4m in 2015. The rise was primarily generated from improved performance in our non-Energy business units. Profit before tax post-exceptional items, rose from £13.2m last year to

£14.8m in 2016.  The exceptional credit of £1.7m in 2016 was in respect of the release of a rent accrual that had been accumulated over many years for our La Collette Power Station site.

As highlighted previously in our Related Party Transactions note to the accounts the lease had been subject to a rent review dispute which was settled by an arbiter (and confirmed by subsequent legal judgement) in our favour and retained at a peppercorn rent, rather than at a higher level suggested by our landlord.

Our Energy business unit sales saw volumes falling marginally from 627m to 625m kilowatt hours after another relatively mild winter period with both the last two winters seeing temperatures above the long-term average. Profits in our Energy business rose from £11.5m to £11.6m. A lower cost of sales resulted in a higher margin but this was offset by higher pension costs. The main factor that contributed to the increase in such costs was a £0.7m charge of a non-recurring nature associated with the granting of an ex-gratia rise in pensions in service. In the financial year we imported 92% of our requirements from France (2015: 94%) and generated 3% of our electricity on-island at La Collette Power Station (2015: 1%). Additional generation for training was the main reason for the lower levels of importation in 2016 compared to the previous year. The remaining 5% of our electricity came from the local Energy from Waste plant being at the same level as in 2015. Continuing with the trend since 2014 there were no tariff changes during 2016 and our prices continue to remain competitive with other jurisdictions. Our last tariff movement was an average 1.5% increase in April 2014.

Profits in our Property division, excluding the impact of investment property revaluation, at £1.7m, rose by £0.1m from last year with a higher rental level and lower maintenance cost being the main drivers. Our investment property portfolio was revalued downwards this year by £0.3m to £20.1m by the external consultants who review the position annually. The main reason for this 2% devaluation is that a break clause, exercisable in 2023, for one of the leases, impacts such calculations between now and that date. Our retail business, Powerhouse.je, had a strong year post the restructuring and re-branding of the business with a loss of £0.1m in 2014 moving to a profit of £0.3m in 2015 and to £0.5m in 2016. JEBS, our contracting and business services unit produced a profit of £0.1m compared with a near breakeven position in 2015 in a challenging industry with high competition for staff. Our other business units - Jersey Energy, Jendev and Jersey Deep Freeze all had profitable years ahead of internal targets.

The interest charge in 2016 was £1.1m against £1.5m in 2015 with a capitalisation of interest associated with the new N1 subsea cable being the primary reason for the reduction. The taxation charge at £3.2m was £0.8m higher than 2015 due to a higher level of profitability.

Group earnings per share, pre-exceptional items, rose 1% to 33.31p compared to 32.94p in 2015 due mainly to an increase in profits. Earnings per share, before adjusting for exceptional items, increased from 35.00p in 2015 to 37.69p in 2016.

Dividends paid in the year, net of tax, rose by 5%, from 12.45p in 2015 to 13.10p in 2016. The proposed final dividend for this year is 8.00p, a 5% rise on the previous year. Dividend cover, pre-exceptional items, at 2.5 times fell marginally from 2.6 times in 2015. If exceptional items are included, dividend cover rose from 2.8 times last year to 2.9 times in this financial year. 

Net cash inflow from operating activities at £25.2m was £1.9m higher than in 2015 with an increase in profit, prior to IAS 19 pension accounting, being the primary driver. Capital expenditure, at £32.4m rose from £16.8m last year as the N1 project spend dominated this year and resulted in net debt at the year-end of £29.0m being £11.5m higher than last year.

Our defined benefits pension scheme, which had an IAS 19 deficit of £5.8m, net of deferred tax, at the 2015 year end increased to a £9.2m deficit as at 30 September 2016. Scheme assets rose 20% since the last year end, but liabilities increased 22% due to a reduction in the discount rate applied, reflecting sentiments in financial markets after the UK decision in June 2016 to prepare to leave the EU. The formal triennial valuation was performed by our external actuary as at 31 December 2015 and this exercise showed a surplus of £6.9m at that point in time.

Consolidated Income Statement		2016		2015
For the year ended 30 September 2016		£000's		£000's
Revenue		103,361		100,479
Cost of sales		(65,249)		(64,604)
Gross Profit		38,112		35,875
Revaluation of investment properties		(350)		(45)
Operating expenses		(23,498)		(21,931)
Group operating profit before exceptional items		14,264		13,899
Exceptional item     - La Collette rent accrual reversal		1,676		-
- RTE outage compensation		-		479
- impact of reversal of EDF1 related provision		-		310
Group operating profit		15,940		14,688
Finance income		22		36
Finance costs		(1,154)		(1,555)
Profit from operations before taxation		14,808		13,169
Taxation		(3,166)		(2,397)
Profit from operations after taxation		11,642		10,772
Attributable to:
Owners of the Company		11,547		10,725
Non-controlling interests		95		47
		11,642		10,772
Earnings per share
- basic and diluted		37.69p		35.00p
		2016		2015
Consolidated Statement of Comprehensive Income		£ 000		£ 000
Profit for the year		11,642		10,772
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit scheme		(2,829)		(5,706)
Income tax relating to items not reclassified		566		1,141
		(2,263)		(4,565)
Items that may be reclassified subsequently to profit or loss:
Fair value gain/(loss) on cash flow hedges		13,865		(874)
Income tax relating to items that may be reclassified		(2,773)		175
		11,092		(699)
Total comprehensive income for the year		20,471		5,508
Attributable to:
Owners of the Company		20,376		5,461
Non-controlling interests		95		47
		20,471		5,508

Balance Sheet		2016		2015
For the year ended 30 September 2016		£ 000		£ 000
NON-CURRENT ASSETS
Intangible assets		162		227
Property, plant and equipment		209,168		187,845
Investment properties		20,110		20,460
Secured loan accounts		683		731
Derivative financial instruments		5,957		414
Other investments		5		5
Total non-current assets		236,085		209,682
CURRENT ASSETS
Inventories		5,962		6,239
Trade and other receivables		16,583		14,777
Derivative financial instruments		2,788		780
Cash and cash equivalents		1,925		12,503
Total current assets		27,258		34,299
Total assets		263,343		243,981
LIABILITIES
Trade and other payables		16,084		17,597
Bank overdraft		943		-
Current tax liability		420		404
Derivative financial instruments		-		3,892
Total current liabilities		17,447		21,893
NET CURRENT ASSETS		9,811		12,406
NON-CURRENT LIABILITIES
Trade and other payables		19,600		18,884
Retirement benefit deficit		11,471		7,291
Derivative financial instruments		-		2,422
Financial liabilities - preference shares		235		235
Long-term borrowings		30,000		30,000
Deferred tax liabilities		20,482		15,529
Total non-current liabilities		81,788		74,361
Total liabilities		99,235		96,254
Net assets		164,108		147,727
EQUITY
Share capital		1,532		1,532
Revaluation reserve		5,270		5,270
ESOP reserve		(155)		(97)
Other reserves		6,878		(4,214)
Retained earnings		150,523		145,223
Equity attributable to owners of the Company		164,048		147,714
Non-controlling interests		60		13
Total equity		164,108		147,727

Consolidated Statement of changes in Equity	Share	Revaluation	ESOP	Other	Retained	Total
for the year ended 30 September 2016	capital	reserve	reserve	reserves	earnings
	£ 000	£ 000	£ 000	£ 000	£ 000	£ 000
At 1 October 2015	1,532	5,270	(97)	(4,214)	145,223	147,714
Total recognised income and expense for the year	-	-	-		11,547	11,547
Funding of employee share option scheme	-	-	(114)	-	-	(114)
Amortisation of employee share option scheme	-	-	56	-	-	56
Unrealised gain on hedges (net of tax)	-	-	-	11,092	-	11,092
Actuarial loss on defined benefit scheme (net of tax)	-	-	-	-	(2,263)	(2,263)
Adjustment arising from change in non-controlling interest					31	31
Equity dividends	-	-	-	-	(4,015)	(4,015)
At 30 September 2016	1,532	5,270	(155)	6,878	150,523	164,048
	Share	Revaluation	ESOP	Other	Retained	Total
	capital	reserve	reserve	reserves	earnings
	£ 000	£ 000	£ 000	£ 000	£ 000	£ 000
At 1 October 2014	1,532	5,270	(36)	(3,515)	142,878	146,129
Total recognised income and expense for the year	-	-	-		10,725	10,725
Funding of employee share option scheme	-	-	(112)	-	-	(112)
Amortisation of employee share option scheme	-	-	51	-	-	51
Unrealised loss on hedges (net of tax)	-	-	-	(699)		(699)
Actuarial loss on defined benefit scheme (net of tax)	-	-	-	-	(4,565)	(4,565)
Equity dividends	-	-	-	-	(3,815)	(3,815)
At 30 September 2015	1,532	5,270	(97)	(4,214)	145,223	147,714

Statements of Cash Flow		2016	2015
for the year ended 30 September 2016		£ 000	£ 000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit before exceptional items		14,264	13,899
Depreciation and amortisation charges		10,295	9,926
Loss on revaluation of investment property		350	45
Pension operating charge less contributions paid		1,351	213
(Loss)/profit on sale of fixed assets		(6)	7
Operating cash flows before movement in working capital		26,254	24,090
Decrease in inventories		277	1,095
(Increase)/decrease in trade and other receivables		(1,758)	1,884
Increase/(decrease) in trade and other payables		2,359	(2,640)
Interest paid		(1,148)	(1,548)
Capitalised interest paid		(374)	(4)
Preference dividends paid		(9)	(9)
Cash amounts relating to exceptional item		-	479
Income taxes paid		(396)	-
Net cash flows from operating activities		25,205	23,347
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property,plant and equipment		(32,391)	(16,629)
Investment in intangible assets		(4)	(207)
Proceeds from part disposal of subsidiary		10	-
Net proceeds from disposal of fixed assets		9	3
Net cash flows used in investing activities		(32,376)	(16,833)
CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividends paid		(4,067)	(3,859)
Deposit interest received		22	36
Payment for foreign exchange option		(250)	-
Repayment of borrowings		5,500	-
Proceeds of borrowings		(5,500)	-
Net cash flows used in financing activities		(4,295)	(3,823)
Net (decrease)/increase in cash and cash equivalents		(11,466)	2,691
Cash and cash equivalents at beginning of year		12,503	9,776
Effect of foreign exchange rates		(55)	36
Overdraft		943	-
Cash and cash equivalents at end of year		1,925	12,503

Notes to the accounts

Year ended 30 September 2016

1.   Basis of Preparation

The consolidated financial statements of Jersey Electricity plc, for the year ended 30 September 2016, have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), including International Accounting Standards and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). 

While the financial information included in this preliminary announcement has been prepared in accordance with the appropriate recognition and measurement criteria, this announcement does not itself contain sufficient information to comply with IFRS.  The Group expects to publish full financial statements that comply with IFRS in early 2017.

The Group has considerable financial resources together with a large number of customers both corporate and individual. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going-concern basis in preparing the financial statements.

Segmental information
Revenue and profit information are analysed between the businesses as follows:
	2016	2016	2016		2015	2015	2015
	External	Internal	Total		External	Internal	Total
	£000	£000	£000		£000	£000	£000
Revenue
Energy	81,215	144	81,359		80,698	129	80,827
Building Services	5,120	786	5,906		4,148	808	4,956
Retail	11,933	45	11,978		11,087	40	11,127
Property	2,143	599	2,742		2,084	599	2,683
Other	2,950	876	3,826		2,462	777	3,239
	103,361	2,450	105,811		100,479	2,353	102,832
Intergroup elimination			(2,450)				(2,353)
Revenue			103,361				100,479
Operating profit
Energy			11,650				11,514
Building Services			134				(58)
Retail			452				334
Property			1,683				1,562
Other			695				592
			14,614				13,944
Revaluation of investment properties			(350)				(45)
Exceptional item - La Collette rent accrual reversal			1,676				-
- RTE outage compensation			-				479
- impact of reversal of EDF1 provision			-				310
Group operating profit			15,940				14,688

 

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