Annual Report and Accounts
Jersey Electricity Company Limited
18 December 2006
The Jersey Electricity Company
Preliminary Announcement of Annual Results
Year Ended 30 September 2006
At a meeting of the Board of Directors held on 15 December 2006, the final
accounts for the Group for the year to 30 September 2006 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 year ended 30 September 2006, but is
derived from those accounts. Statutory accounts for 2006 have been prepared
under IFRS and will be delivered to the Jersey Registrar of Companies in early
2007. The auditors have reported on those accounts and their report was
unqualified.
The financial information set out in this statement relating to the year ended
30 September 2005 does not constitute statutory accounts for that period. Full
statutory accounts for that period, prepared in accordance with UK GAAP, which
received an unqualified audit opinion, have been delivered to the Jersey
Registrar of Companies.
A final gross dividend of 85p (68p net of tax) on the Ordinary and 'A' Ordinary
shares in respect of the period ended 30 September 2006 was recommended which,
together with the interim gross dividend of 55p (44p net of tax), makes a total
proposed gross dividend declared for the year of £1.40 (£1.12 net of tax) on
each £1 share. In addition a special gross dividend of £5.55 (£4.44 net of tax)
was paid in March 2006 associated with the sale of an investment property.
The final dividend will be paid on 30 March 2007 to those shareholders
registered in the books of the Company on 2 March 2007. A dividend on the 5%
cumulative participating preference shares of 1.5% (2005 1.5%) payable on 2 July
2007 was also recommended.
The Annual General Meeting of the Company will be held on 6 March 2007.
P.J. Routier
Company Secretary
Direct telephone number : 01534 505253
Direct fax number : 01534 505515
Email : proutier@jec.co.uk
15 December 2006
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 2006
The Chairman, Derek Maltwood, comments :
'Last year we stated that your Board was convinced that the Company's
longer-term growth interests were best served by maintaining electricity's
reputation in Jersey for price competitiveness and stability. Accordingly we had
announced our decision to absorb, over the next two to three years, some of the
55% increase we had incurred in the cost of imported power. The resulting 9.7%
tariff rise from January 2006 was less than half the increase that our customers
would have suffered if we had immediately passed on our increase of costs in
full.
Group profits, as anticipated, have fallen by 30% in the year as a result, due
primarily to the resultant fall in profits in our core, electricity supply
business. Customer tariffs will rise by 19.5% from January 2007 as a result of
further continued pressure on power costs being experienced across Europe and to
facilitate required investment in the electricity infrastructure that is vital
to Jersey. Our aim is to ensure that no further rises will be experienced by our
customers in 2007 or 2008 and we have hedged both our power purchasing
requirements and euro exposure for the next two years to aid this objective'.
______________________________________________________________________________________
Financial Summary 2006 2005 % rise/(fall)
Turnover £65.6m £56.1m 17%
Profit before tax £7.3m £10.5m (30)%
Profit in Energy business £4.3m £6.7m (36)%
Earnings per share £3.88 £5.61 (31)%
Dividend paid per ordinary share (net of tax)* £1.06 £0.96 10%
* excluding the special dividend of £4.44 (net of tax) paid in March 2006
Jersey Electricity is required to adopt International Financial Reporting
Standards (IFRS) for 2006 and these are the first full year results to be
reported in accordance with them. The adoption of IFRS represents a change in
accounting policy only and does not change the Group's underlying cash flows or
business strategy.
Group turnover for the year to 30 September 2006 at £65.6m was 17% higher than
in the year ended 30 September 2005. The Energy business contributed £50.4m of
the Group turnover which was £6.2m above last year due to a 3.5% increase in
electricity units sold and a 9.7% rise in tariffs. Unit sales this year were
substantially aided by a higher than anticipated volume of sales over the winter
period.
Group profit before tax in 2006 of £7.3m was 30% lower than last year, despite
the increase in turnover. This was principally due to a 36% fall in profits in
our core electricity supply business, arising from our decision to absorb during
2006 and 2007 a substantial share of the increase in costs of electricity in the
European wholesale power market, from which we import virtually all of our
needs. When announcing our decision last October to increase our tariffs by only
9.7% in 2006, we forecast a significant fall in profits for the year and this
has occurred.
Our aim remains to restore by the end of 2007, the profitability upon which
planned investment in the continuing reliability of our electricity network
depends. However, our hopes to achieve this without increasing our tariffs by
more than 10% next year have been undermined by significant further increases in
the cost of European wholesale power for delivery in 2007. Therefore we recently
announced an average tariff rise of 19.5% from 1 January 2007. We have however
hedged our power purchase costs, and euro exposure, with the aim being to have
no further customer tariff rises before January 2009.
Power importation remained at the same level as seen in recent years at 97% of
our requirements during the year. Our indigenous power generating plant provided
the balance of the electricity which we supplied and in addition to its
principal role as emergency standby capacity it enabled us to make modest gains
from selling back power to our French supplier during their peak periods.
Our Retailing business had a very strong year with turnover rising 54% due
largely to buoyant flat screen television sales and the successful introduction
of our new computer retailing operation with profits moving up from £0.1m in
2005 to £0.4m in 2006. During the year our Retail interests expanded with the
opening of a new outlet in St. Helier in November 2005, the launch of an
internet site (day2dayshop.com) and the launch in September 2006 of Imagination,
a hobby, crafts and toy store, within our Powerhouse site. Profits from our
Property portfolio fell from £3.2m to £1.7m due to the sale of an investment
property which had an annual rental income of £0.6m and the property revaluation
upside falling from £2.4m in 2005 to £1.2m in 2006. Under IFRS any increase or
decrease in the valuation of investment properties has to be recognised in the
Income Statement. The Building Services business produced a £0.2m profit, up
from £0.1m in 2005, on an increased turnover up £0.8m to £3.1m. Our share of
losses at our data centre joint venture, Foreshore Limited, remained at £0.3m.
Interest received in 2006 was £0.8m compared to £0.4m last year. Cash at bank,
including short-term investments, rose £4.2m to £15.1m during the year.
Operating cash flow decreased to £12.9m in 2006 from £15.6m in 2005 with a
reduction in profit being the primary reason. Capital expenditure and financial
investment spend decreased marginally from £6.1m in 2005 to £5.7m in 2006. In
October 2005, £6.8m was received from the sale of one of our investment
properties which Jersey Electricity occupied prior to relocation of its retail
outlet some years ago and proceeds were subsequently distributed to shareholders
as a special dividend.
The taxation charge for the year was £1.4m being lower than 2005 due to the drop
in profits. Group earnings per share fell 31% to £3.88 compared to £5.61 in
2005.
Dividends paid in the year rose by 10% from 96p net of tax in 2005 to 106p for
2006, excluding the special dividend of £4.44 per share paid in March 2006.
Dividend cover, excluding the special dividend, fell to 3.7 times from 5.8 times
in 2005.
Consolidated Income Statement
for the year ended 30 September 2006
2006 2005
£000 £000
Revenue 65,617 56,096
Cost of sales (42,873) (32,025)
Gross Profit 22,744 24,071
Revaluation of investment properties 1,219 2,370
Operating expenses (17,107) (15,897)
Group operating profit before joint venture 6,856 10,544
Share of loss of joint venture (343) (355)
Group operating profit 6,513 10,189
Interest receivable 818 354
Finance costs (9) (9)
Profit from operations before taxation 7,322 10,534
Income tax (1,351) (1,911)
Profit from operations after taxation 5,971 8,623
Minority interest (29) (33)
Profit for the period attributable to the
equity holders of the parent company 5,942 8,590
£ £
Earnings per share
- basic and diluted 3.88 5.61
Statements of Recognised Income and Expense
for the year ended 30 September 2006
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Profit for the financial year 5,942 8,590 6,303 8,048
Actuarial gain on defined benefit
scheme (net of tax) 2,910 1,660 2,910 1,660
Fair value loss on cash flow hedges (570) (696) (696) (696)
Total recognised income and expense for
the year attributable to the equity
holders of the parent 8,282 9,554 8,643 9,012
Balance Sheets at 30 September 2006
Group Company
2006 2005 2006 2005
£ 000 £ 000 £ 000 £ 000
NON-CURRENT ASSETS
Intangible assets 131 130 131 130
Property, plant and equipment 108,289 109,798 108,287 109,798
Investment property 10,990 9,746 10,990 9,746
Other investments 1,884 1,609 3,905 3,288
Total non-current assets 121,294 121,283 123,313 122,962
CURRENT ASSETS
Inventories 4,196 3,927 4,109 3,834
Trade and other receivables 13,046 13,723 12,885 13,606
Short-term investments - cash
deposits 3,765 - 3,765 -
Cash and cash equivalents 11,346 12,240 11,266 12,168
Total current assets 32,353 29,890 32,025 29,608
Total assets 153,647 151,173 155,338 152,570
LIABILITIES
Trade and other payables 9,590 8,696 9,549 8,694
Derivative financial instruments 1,098 528 1,098 528
Current tax payable 1,190 1,195 1,170 1,195
Total current liabilities 11,878 10,419 11,817 10,417
NON-CURRENT LIABILITIES
Trade and other payables 13,245 12,947 13,245 12,947
Tax liabilities 813 1,173 735 1,110
Financial liabilities - preference
shares 235 235 235 235
Deferred tax liabilities 11,734 10,506 11,734 10,506
Total non-current liabilities 26,027 24,861 25,949 24,798
Total liabilities 37,905 35,280 37,766 35,215
Net assets 115,742 115,893 117,572 117,355
EQUITY
Share capital 1,532 1,532 1,532 1,532
Other reserves (1,098) (528) (1,098) (528)
Retained earnings 115,274 114,848 117,138 116,351
Shareholders' Funds 115,708 115,852 117,572 117,355
Minority interest 34 41 - -
Total equity 115,742 115,893 117,572 117,355
Cash Flow Statement
for the year ended 30 September 2006
Group Company
2006 2005 2006 2005
£ 000 £ 000 £ 000 £ 000
Cash flows from operating activities
Operating profit 6,856 10,544 6,819 10,648
Depreciation and amortisation charges 6,948 7,313 6,947 7,213
Revaluation of investment property (1,219) (2,370) (1,219) (2,370)
Pension operating charge less contribution paid (877) (779) (877) (779)
Operating cash flows before movement in working capital - 258 - 258
Increase in inventories (269) (1,343) (275) (1,334)
(Increase)/decrease in trade and other receivables (1,473) 2,195 (1,523) 2,086
Increase in trade and other payables 3,445 246 3,462 208
Interest received 761 319 761 319
Preference dividends paid (9) (9) (9) (9)
Taxation (1,233) (779) (1,191) (753)
Net cash flows from operating activities 12,930 15,595 12,895 15,487
Cash flows from investing activities
Purchase of property, plant and equipment (4,982) (5,395) (4,979) (5,395)
Investment in intangible assets (76) (13) (76) (13)
Proceeds from disposal of investment property 6,802 - 6,802 -
Investment in joint venture (613) (700) (613) (700)
Short-term investments (3,765) - (3,765) -
Net cash flows used in investing activities (2,634) (6,108) (2,631) (6,108)
Cash flows from financing activities
Equity dividends paid (8,450) (1,507) (8,426) (1,471)
Repayment of overdraft (1,370) - (1,370) -
Net cash flows used in financing activities (9,820) (1,507) (9,796) (1,471)
Net increase in cash and cash equivalents 476 7,980 468 7,908
Cash and cash equivalents at beginning of period 10,870 2,890 10,798 2,890
Cash and cash equivalents at end of period 11,346 10,870 11,266 10,798
Cash and cash equivalents
Cash in hand and balances at bank 11,346 12,240 11,266 12,168
- (1,370) - (1,370)
Cash and cash equivalents at end of period 11,346 10,870 11,266 10,798
Notes to the accounts
Year ended 30 September 2006
1. Basis of Preparation
The consolidated financial statements of The Jersey Electricity Company Limited,
for the year ended 30 September 2006 have been prepared for the first time in
accordance with International Financial reporting Standards (IFRS) as adopted
for use in the European Union (EU), including International Accounting Standards
(IAS) and Interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC). Results for the comparative period have been
restated under IFRS as adopted for use in the EU.
The principal accounting policies of the Group and details of the transition
from UK GAAP to IFRS were indicated in a shareholder communication issued in
February 2006 and were detailed in the 2006 Interim Report issued in May 2006 (a
copy of which can be found on the Group's website www.jec.co.uk).
While the financial information included in this preliminary announcement has
been computed in accordance with IFRS, 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 2007.
2 Segmental information
Revenue and profit information are analysed between
the businesses as follows:
2006 2006 2006 2005 2005 2005
External Internal Total External Internal Total
£000 £000 £000 £000 £000 £000
Revenue
Energy 50,391 216 50,607 44,231 247 44,478
Building Services 3,111 188 3,299 2,258 334 2,592
Retail 8,772 46 8,818 5,712 34 5,746
Property 1,556 286 1,842 2,100 297 2,397
Other 1,787 701 2,488 1,795 704 2,499
65,617 1,437 67,054 56,096 1,616 57,712
Inter-Group elimination (1,437) (1,616)
65,617 56,096
Operating profit 4,277 6,711
Energy 241 141
Building Services 383 70
Retail 442 830
Property
Other (49) 67
5,294
7,819
Revaluation of investment properties 1,219 2,370
6,513 10,189
3. Dividends paid
2006 2005
Ordinary and 'A' Ordinary Shares £000 £000
Final dividend of 62p net of tax per share (2005 - 56p per share) 950 858
Interim dividend of 44p net of tax per share paid (2005- 40p per share) 674 613
Special dividend of £4.44 net of tax per share paid (2005 - nil per share) 6,802 -
8,426 1,471
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