Annual Report and Accounts

Jersey Electricity Company Limited 15 December 2005 The Jersey Electricity Company Preliminary Announcement of Annual Results Year Ended 30 September 2005 At a meeting of the Board of Directors held on 14 December 2005, the final accounts for the Group for the year to 30 September 2005 were approved, details of which, are attached. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 30 September 2005 or 2004, but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Jersey Registrar of Companies and those for 2005 will be delivered in early 2006. The auditors have reported on those accounts and their reports were unqualified. A final gross dividend of 77.5p (62p net of tax) on the Ordinary and 'A' Ordinary shares in respect of the period ended 30 September 2005 was recommended which, together with the interim gross dividend of 50p (40p net of tax), makes a total gross dividend for the year of Â£1.275 (Â£1.02p net of tax) on each Â£1 share. The dividend will be paid on 31 March 2006 to those shareholders registered in the books of the Company on 10 March 2006. A dividend on the 5% cumulative participating preference shares of 1.5% (2004 1.5%) payable on 3 July 2006 was also recommended. The Annual General Meeting of the Company will be held on 14 March 2006. P.J. Routier Company Secretary Direct telephone number : 01534 505253 Direct fax number : 01534 505515 Email : proutier@jec.co.uk 15 December 2005 The Powerhouse, PO Box 45, Queens Road, St Helier, Jersey JE4 8NY THE JERSEY ELECTRICITY COMPANY LIMITED Preliminary Announcement of Annual Results Year ended 30 September 2005 The Chairman, Derek Maltwood, comments : 'I am pleased to report on another year of outstanding performance by the Company and its people. Group profits have risen by 5% in the year, despite a slight fall in profits in our core, electricity supply business. Our customers remained sheltered from escalating global energy costs, by the fixed price agreement under which we have imported power from Europe throughout the past three years. The expiry of this contract in December, 2005 exposes our electricity supply business to high and volatile power prices in the European wholesale market. Your Board is convinced that the Company's longer term growth interests are best served by maintaining electricity's reputation in Jersey, for price competitiveness and stability. It believes too, that tariff restraint is especially appropriate in the context of the new Competition Law and a Competition Regulatory Authority seeking to establish competitive behaviour in a constrained market. As a result, your Board has decided to pass on to customers the 55% increase in the cost of imported power, over the next two to three years, rather than immediately, and this will reduce profits in our core business over that period.' ________________________________________________________________________________ Group turnover for the year to 30 September 2005 at Â£57.2m was at a very similar level as in the year ended 30 September 2004. The Energy business contributed Â£44.2m of the Group turnover which was Â£1.0m above last year due to a 1.3% increase in units sold and a rise in tariffs. Our electricity tariff increase of 2.5% in 2005 was the first since January 2001 and contrasted with dramatically increased heating oil and gas prices in Jersey's energy market. Again this year we won more than 80% of the significant growth in this market arising from the Island's buoyant property development sector. Our three year fixed price power contract with Electricite de France expired on 1 December 2005, since when our realignment with the European wholesale power market has increased our costs for imported power by 55%. Tariff rises for customers will, however, be phased in over a two to three year period rather than the full increase being applied immediately. In January 2006 tariffs will rise by an average of 9.7% and we have announced that a similar increase can be expected in 2007. We have mitigated our power purchasing risks for 2006 and have negotiated the facility to cap or fix our procurement costs on a rolling basis for the following year, as opportunities arise. Turnover in our Retail business rose by 7% to Â£5.7m, despite a difficult business climate, due to a strong performance in the second half of the financial year. Diversification away from the retailing of core white and brown products, where demand has fallen, into mobile phones and computers has aided performance. Turnover in the Property business rose 4% to Â£2.1m but fell in Building Services from Â£3.7m to Â£2.3m due to delays in the refurbishment of supermarkets, in particular. Turnover in our Other businesses segment fell by Â£0.5m to Â£2.9m with the primary reason being the sale in October 2004 of our small loss making JET telecommunications business. Profit on ordinary activities, before tax and exceptional costs, for the year to 30 September 2005 rose by 5% to Â£7.4m. Profit on ordinary activities, after exceptional costs, rose 35% from Â£5.5m in 2004. Profit in the Energy business fell by Â£0.6m to Â£5.9m with increased unit sales and tariffs offset by higher electricity import costs largely due to the strengthening of the euro against sterling. In our Property division there was a 4% increase in core rental income due to higher occupancy rates but profits were down Â£0.3m to Â£0.8m due to a book loss of Â£0.3m on the sale of our Commercial House property in St Helier, Jersey on 30 September 2005 for Â£6.8m (against an original cost, before revaluations, of Â£0.7m). The Retail Appliance Sales business decreased profits marginally to Â£0.1m. The Building Services business produced profits Â£0.1m lower than 2004, at Â£0.1m, due to a lower level of sales. Other businesses, including joint ventures and associates, produced a profit of Â£0.1m against losses of Â£0.8m in 2004. The improvement results from a number of factors: losses at our Newtel associate in 2004 no longer impact Group profits, reduced losses in our Foreshore joint venture, the exit from our JET telecommunications business and improved performance in Jendev and Jersey Energy. Interest received in 2005 was Â£0.4m compared to interest paid of Â£0.1m last year as bank deposits increased in the year. The cash at bank at the year end was Â£10.9m. The net cash inflow of Â£8.0m during the year was Â£0.6m higher than in 2004 mainly due to a lower level of capital expenditure and investment spend. Cash on the sale of the Commercial House property was not received until early October 2005. The taxation charge for the year was Â£1.8m consistent with 2004. Group earnings per share, excluding the impact of exceptional costs, rose 7% to Â£3.66 compared to Â£3.41 in 2004. Earnings per share including the impact of exceptional charges were Â£3.66 compared to Â£2.40 in the previous year. Dividends for the year rose by 11% from a gross level of 115.0p (92.0p net of tax) in 2004 to a proposed 127.5p (102.0p net of tax) for 2005 consistent with the rise in earnings per share in the year. Dividend cover, excluding exceptional costs, fell marginally to 3.6 times. From 1 October 2005 the Group will comply with the International Financial Reporting Standards (IFRS). The first financial information to be reported by the Group in accordance with IFRS will be for the six months ending 31 March 2006. An IFRS Transition Statement will be issued with the 2005 Annual Report and Accounts which will detail the likely impact on the main financial performance indicators by re-stating the 2005 year end figures under IFRS. THE JERSEY ELECTRICITY COMPANY LIMITED Consolidated Profit and Loss Account for the year ended 30 September 2005 Notes 2005 2004 Â£ 000 Â£ 000 Turnover: Group and share of joint venture 2 57,214 57,684 Less: Share of joint venture turnover (1,118) (771) Group turnover 56,096 56,913 Cost of sales (32,078) (32,039) Gross profit 24,018 24,874 Net operating expenses (16,623) (16,808) Group operating profit 7,395 8,066 Share of operating loss in joint venture (355) (517) Share of associate's operating loss - (417) Exceptional item - impairment of investment 3 - (1,545) Profit on ordinary activities before interest and taxation 2 7,040 5,587 Net interest 354 (101) Profit on ordinary activities before taxation 7,394 5,486 Tax on profit on ordinary activities (1,755) (1,759) Profit on ordinary activities after taxation 5,639 3,727 Minority Interest (33) (42) Profit on ordinary activities after taxation and minority interest 5,606 3,685 Dividends paid and proposed (1,572) (1,418) Retained profit for the group and share of joint venture loss 4,034 2,267 Earnings per ordinary share (basic and diluted) Â£3.66 Â£2.40 Earnings per ordinary share (basic and diluted) excluding exceptional items Â£3.66 Â£3.41 THE JERSEY ELECTRICITY COMPANY Consolidated Statement of Total Recognised Gains and Losses for the year ended 30 September 2005 2005 2004 Â£ 000 Â£ 000 Profit on ordinary activities after taxation and minority interest 5,606 3,685 Unrealised surplus on revaluation of plant 82 11 Unrealised surplus/(deficit) on revaluation of investment properties 2,370 (18) Total recognised gains since last annual report and accounts 8,058 3,678 Consolidated Note of Historical Cost Profits and Losses for the year ended 30 September 2005 2005 2004 Â£ 000 Â£ 000 Profit on ordinary activities before taxation (after minority interest) 7,361 5,444 Difference between the historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount 435 884 Realised profit on sale of investment property 6,243 - Historical cost profit on ordinary activities before taxation 14,039 6,328 (after minority interest) Historical cost profit for the year retained after taxation, minority interest and dividends 10,712 3,151 THE JERSEY ELECTRICITY COMPANY Balance Sheets 30 September 2005 Group Group Company Company 2005 2004 2005 2004 Â£ 000 Â£ 000 Â£ 000 Â£ 000 Fixed Assets Intangible fixed assets - 100 - - Tangible fixed assets 119,756 126,183 119,756 126,181 Investments: subsidiary - - 477 477 other investments 5 5 5 5 joint venture - - 1,951 2,251 Share of associate's net assets - - - - Share of joint venture gross assets 526 542 Share of joint venture gross liabilities (3,428) (3,071) Loans to joint venture 3,651 2,951 Net joint venture assets 749 422 - - 120,510 126,710 122,189 128,914 Current Assets Stocks and work in progress 3,927 2,584 3,834 2,500 Debtors due within one year 14,020 9,501 13,903 9,285 Debtors due after more than one year 7,069 6,973 7,069 6,973 Cash at bank and in hand 12,240 2,890 12,168 2,865 37,256 21,948 36,974 21,623 Creditors Amounts falling due within one year 10,841 10,678 10,839 10,647 Net Current Assets 26,415 11,270 26,135 10,976 Total assets less current liabilities 146,925 137,980 148,324 139,890 Creditors Amounts falling due after more than one year 13,395 11,387 13,332 11,296 Provisions for Liabilities and Charges Pensions and similar obligations 495 487 495 487 Deferred taxation 11,792 11,346 11,792 11,346 25,682 23,220 25,619 23,129 121,243 114,760 122,705 116,761 Capital and Reserves Called-up share capital - Equity 1,532 1,532 1,532 1,532 - Non-equity 235 235 235 235 Reserves - Equity 119,435 112,949 120,938 114,994 Shareholders' Funds 121,202 114,716 122,705 116,761 Equity minority interest 41 44 - - 121,243 114,760 122,705 116,761 THE JERSEY ELECTRICITY COMPANY LIMITED Consolidated Cash Flow Statement for the year ended 30 September 2005 2005 2004 Â£ 000 Â£ 000 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES Group operating profit 7,395 8,066 Depreciation and amortisation charges 7,313 7,793 Loss on sale of fixed assets 258 - (Increase)/decrease in stocks & work in progress (1,343) 377 Decrease/(increase) in debtors 2,195 (24) Increase in creditors 246 1,077 NET CASH INFLOW FROM OPERATING ACTIVITIES 16,064 17,289 Returns on investments and servicing of finance 319 (101) Taxation (779) (336) Capital and investment expenditure (6,108) (8,209) Dividends paid (1,516) (1,243) INCREASE IN CASH 7,980 7,400 RECONCILIATION OF NET CASHFLOW Increase in cash 7,980 7,400 Net funds/(debt) as at beginning of year 2,890 (4,510) Net funds as at end of year 10,870 2,890 Net funds comprise of: Cash at bank and in hand 12,240 2,890 Overdraft (1,370) - Net funds as at end of year 10,870 2,890 THE JERSEY ELECTRICITY COMPANY LIMITED Notes to the accounts Year ended 30 September 2005 1. Basis of Preparation The accounts have been prepared on the basis of the accounting policies set out in the Group 2004 Annual Report and Accounts. 2. Turnover and profit The contributions of the various activities of the Group to turnover (including joint venture) and profit are listed below: Turnover Profit/(loss) 2005 2004 2005 2004 Principal activities: Â£000 Â£000 Â£000 Â£000 Energy 44,231 43,232 5,932 6,549 Building Services 2,258 3,712 141 154 Retail Appliance Sales 5,712 5,351 70 106 Property 2,100 2,010 830 1,107 Other 2,913 3,379 67 (784) 57,214 57,684 7,040 7,132 Exceptional item: Impairment of investment in associate - (1,545) Profit on ordinary activities before interest and 7,040 5,587 taxation The information currently available to report the net assets of each business class as a reportable segment is limited, as each business operates as a division of the Group and therefore in certain instances there is no reasonable basis to allocate the Group net assets to each business class. On a geographical basis, the Group's material operations are conducted within the Channel Islands. 3. Exceptional Item - impairment of investment in associate The exceptional charge of Â£1,545,000 that was disclosed in 2004 was for the write-down in the previous year of the investment in Newtel Holdings Limited following an impairment review. There was no related tax benefit associated with this charge. This information is provided by RNS The company news service from the London Stock Exchange

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