Half Yearly Report

RNS Number : 9891S

Jersey Electricity Company Limited

29 May 2009

 

The Jersey Electricity Company

 Interim Management Report

for the six months ended 31 March 2009

At a meeting of the Board of Directors held on 28 May 2009, the Board approved the Interim Management Report for the Group for the six months ended 31 March 2009 and declared an interim dividend of  96.25p gross (77p net of tax) compared to 91.25p gross (73p net) in 2008 on the Ordinary and 'A' Ordinary shares. The dividend will be paid on 30 June 2009 to those shareholders registered in the books of the Company on 12 June 2009.

The Interim Management Report is attached and will be available to the public on the Company's website www.jec.co.uk.

The Interim Management Report for 2009 has not been audited or reviewed by our external auditors nor have the results for the equivalent period in 2008. The results for the year ended 30 September 2008 have been extracted from the statutory accounts for that period which had an unqualified audit opinion. 

P.J. Routier

Company Secretary

Direct telephone number : 01534 505253

Direct fax number : 01534 505515

Email : [e-mail]

28 May 2009

The Powerhouse,

PO Box 45,

Queens Road,

St Helier,

Jersey JE4 8NY 

Jersey Electricity Company Limited

Unaudited Interim Management Report

for the six months to 31 March 2009

Financial Summary	6 months 2009	6 months 2008	% increase/(decrease)
Electricity Sales -kWh (000)	367,112	359,772	2 %
Turnover	£49.6m	£45.4m	9 %
Profit before tax	£5.3m	£6.8m	(22)%
Profit in Energy business	£3.7m	£4.4m	(15)%
Earnings per share	£2.79	£4.02	(31)%
Net dividend proposed per ordinary share	77p	73p	5%

Group turnover was 9% higher than 2008 but profit before tax in the first half of 2009 was £5.3m being 22% lower than in the same period last year. Profits in our Energy business are down 15% having been impacted by a 40% increase in our electricity import costs from 1 January 2009 which was the regrettable catalyst for a 24% rise in customer tariffs from the same date.  Earnings per share fell by 31% as a result of the above profit decrease and the return to a normalized tax rate of 20%.   

Electricity revenues in the first half of 2009 were 13% higher than in 2008 with a 2% rise in unit sales volume and the remainder from the rise in tariffs. Energy profits fell from £4.4m in 2008 to £3.7m as the increase in revenues did not cover the rise in import costs in the first half of this financial year. Imported electricity met 92% of our requirements during the half year, which was slightly lower than usual as a result of periodic production from our own plant.  

Our other businesses are not immune to the tough trading conditions currently prevailing in markets. The Retailing business saw year on year revenues fall 5% and profits fell by £0.2m to £0.3m. Core profits from our Property portfolio rose from £0.5m to £0.6m but in 2008 there was also a sale of a property which produced a gain on sale of £0.4m. The Building Services business produced profits of £0.1m being down by £0.1m from last year. Our remaining business units produced profits on a par with the comparative period last year. Interest received at £0.4m was £0.2m lower than last year due to lower cash balances and lower interest rates.

Cash, including short-term investments, fell £4.3m to £12.0m during the last six months, with operating cash produced from trading activity offset by £8.2m of electricity infrastructure investment. In terms of capital expenditure the Western Primary project to reinforce the network in the west of Jersey was completed during this period. In addition £1m was paid as a deposit to RTE in France to secure the timing slot for the landside network build necessary as part of Normandie 3 project to deliver a third electricity interconnector between the Channel Islands and mainland Europe. 

Your Board proposes to pay an interim net dividend of 77p (2008: 73p) on the Ordinary and 'A' Ordinary Shares payable on 30 June 2009 in addition to the final dividend for 2008 of 112p (2007: 75p) paid on 31 March 2009. The increase in the level of dividends proposed during the last financial year followed a review by the Board on the level of dividend cover maintained by other listed and Jersey utilities balanced by the required levels of capital expenditure in the short to medium term. Following this re-basing of the dividend level in 2008 your Board will aim to deliver sustained real growth each year and the proposed interim dividend is a 5% year on year increase.  

The States of Jersey's Minister for Economic Development is likely to commission a review of the Company's tariffs, following the 24% increase in tariffs earlier this year. Article 22 of the Electricity (Jersey) Law 1937 permits the States to determine the tariffs set by the Company, having regard to a number of specified matters. The matters specified in the Law as being required to have been taken into account in setting tariffs reflect closely those adopted by the Board for determining tariffs and the Board are therefore confident that the review will serve to confirm the appropriateness of the current level of the Company's tariffs. Otherwise the anticipated principal risks over the second half of the financial year and beyond remain as stated in our 2008 Annual Report and Accounts.

At our Annual General Meeting, John Le Maistre, a non-executive director who joined the Board in 1997 retired and was replaced during May by John Stares, an accountant and management consultant who is also a non-executive director of Jersey Telecom.   

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).

(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        28 May 2009

INVESTOR TIMETABLE FOR 2009

12 June	Record date for interim ordinary dividend
30 June	Interim ordinary dividend for year ending 30 September 2009
1 July	Payment date for preference share dividends
End July	Interim Management Statement – nine months to 30 June 2009
18 December	Preliminary announcement of full year results

Condensed Group Income Statement (Unaudited)

			Six months ended 31 March				Year ended 30 September
	Note		2009 £000		2008 £000		2008 £000
Revenue	2		49,625		45,423		81,910
Cost of sales			(35,214)		(30,832)		(55,968)
Gross profit			14,411		14,591		25,942
Revaluation of investment properties			-		-		294
Profit from sale of property			-		407		405
Operating expenses			(9,456)		(8,750)		(17,806)
Operating profit before joint venture			4,955		6,248		8,835
Share of (loss)/profit of joint venture			(11)		14		46
Operating profit	2		4,944		6,262		8,881
Interest receivable			405		554		1,086
Finance costs			(5)		(4)		(11)
Profit from operations before taxation			5,344		6,812		9,956
Taxation	3		(1,071)		(639)		(84)
Profit from operations after taxation			4,273		6,173		9,872
Minority interest			-		(18)		(48)
Profit for the period attributable to the  equity holders of the parent company			4,273		6,155		9,824
EARNINGS PER SHARE
-    basic and diluted			£2.79		£4.02		£6.41
DIVIDENDS PER SHARE
-    paid	4		£1.12		£0.75		£1.48
-    proposed	4		£0.77		£0.73		£1.12

Condensed Group Statement of Recognised Income and Expense (Unaudited)

	Six months ended 31 March				Year ended 30 September
	2009		2008		2008
	£000		£000		£000
Profit for the financial period	4,273		6,155		9,824
Actuarial (loss)/gain on defined benefit scheme (net of tax)	(8,178)		2,283		(4,874)
Fair value gain on cash flow hedges (net of tax)	1,906		3,401		1,737
Total recognised income and expense for the period attributable to the equity holders of the parent company	(1,999)		11,839		6,687

Condensed Group Balance Sheet (Unaudited)

			As at 31 March				As at 30 September
	Note		2009 £000		2008 £000		2008 £000
NON-CURRENT ASSETS
Intangible assets			84		60		86
Property, plant and equipment			119,723		112,016		115,990
Investment property			12,635		12,340		12,635
Other investments			1,907		2,102		2,037
Retirement benefit surplus			-		15,506		6,702
Total non-current assets			134,349		142,024		137,450
CURRENT ASSETS
Inventories			5,813		4,695		6,102
Trade and other receivables			14,653		13,972		9,942
Derivative financial instruments			5,019		4,715		2,763
Short-term investments - cash deposits			5,585		4,930		11,025
Cash and cash equivalents			6,398		10,160		5,217
Total current assets			37,468		38,472		35,049
TOTAL ASSETS			171,817		180,496		172,499
CURRENT LIABILITIES
Trade and other payables			11,962		10,093		11,477
Derivative financial instruments			-		-		127
Current tax payable			1,656		887		905
Total current liabilities			13,618		10,980		12,509
NET CURRENT ASSETS			23,850		27,492		22,540
NON-CURRENT LIABILITIES
Trade and other payables			14,216		13,422		13,959
Retirement benefit deficit			2,780		-		-
Tax liabilities			-		1,093		-
Financial liabilities - preference shares			235		235		235
Deferred tax liabilities			11,422		15,221		12,535
Total non-current liabilities			28,653		29,971		26,729
TOTAL LIABILITIES			42,271		40,951		39,238
NET ASSETS			129,546		139,545		133,261
EQUITY
Share capital			1,532		1,532		1,532
Other reserves			5,019		4,220		2,556
Retained earnings			122,988		133,772		129,166
Shareholders' funds	7		129,539		139,524		133,254
Minority interest			7		21		7
TOTAL EQUITY			129,546		139,545		133,261

Condensed Group Cash Flow Statement (Unaudited)

		Six months ended 31 March				Year ended 30 September
	Note	2009 £000		2008 £000		2008 £000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit before joint venture		4,955		6,248		8,835
Depreciation and amortisation charges		3,705		3,458		6,950
Revaluation of investment property		-		-		(294)
Pension operating charge less contributions paid		(585)		(900)		(1,110)
Profit on sale of fixed assets		-		(407)		(406)
Operating cash flows before movement in working capital		8,075		8,399		13,975
Decrease/(increase) in inventories		289		(64)		(1,471)
(Increase)/decrease in trade and other receivables		(4,624)		(2,762)		1,388
Increase/(decrease) in trade and other payables		1,490		(1,045)		954
Interest received		314		601		1,010
Preference dividends paid		(4)		(5)		(9)
Income taxes paid		-		-		(896)
Net cash flows from operating activities		5,540		5,124		14,951
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	5	(8,175)		(5,593)		(13,270)
Investment in intangible assets		(8)		(22)		(49)
Proceeds from disposal of property		-		410		413
Repayment of long-term loan		100		-		109
Short-term investments		5,440		(1,175)		(7,270)
Net cash flows from investing activities		(2,643)		(6,380)		(20,067)
CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividends paid	4	(1,716)		(1,197)		(2,426)
Net cash flows used in financing activities		(1,716)		(1,197)		(2,426)
Net increase/(decrease) in cash and cash equivalents		1,181		(2,453)		(7,542)
Cash and cash equivalents at beginning of period		5,217		12,613		12,613
Cash and cash equivalents at end of period		6,398		10,160		5,071
Overdraft		-		-		146
Cash and cash equivalents at end of period		6,398		10,160		5,217

Notes to the Condensed Interim Accounts

1.     Accounting policies

Basis of preparation

The interim accounts for the six months ended 31 March 2009 have been prepared on the basis of the accounting policies set out in the 30 September 2008 annual report and accounts using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting'.

2.    Turnover and profit

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

	31 March 2009			31 March 2008			30 September 2008
	External	Internal	Total	External	Internal	Total	External	Internal	Total
Revenue	£000	£000	£000	£000	£000	£000	£000	£000	£000
Energy	39,086	126	39,212	34,590	132	34,722	61,751	271	62,022
Building services	1,881	63	1,944	1,785	82	1,867	3,402	172	3,574
Retail	6,856	32	6,888	7,257	25	7,282	13,135	51	13,186
Property	898	344	1,242	826	340	1,166	1,659	678	2,337
Other	904	313	1,217	965	359	1,324	1,963	723	2,686
	49,625	878	50,503	45,423	938	46,361	81,910	1,895	83,805
Inter Group elimination			(878)			(938)			(1,895)
			49,625			45,423			81,910
Operating profit
Energy			3,720			4,385			5,965
Building services			139			219			274
Retail			279			485			450
Property			620			485			953
Other			186			281			540
Operating profit before property revaluation/sale			4,944			5,855			8,182
Revaluation of investment  properties			-			-			294
Profit from sale of property			-			407			405
Operating profit			4,944			6,262			8,881
Other gains and losses
Interest receivable			405			554			1,086
Finance costs			(5)			(4)			(11)
Profit from operations before taxation			5,344			6,812			9,956
Taxation			(1,071)			(639)			(84)
Profit from operations after taxation			4,273			6,173			9,872
Minority interest			-			(18)			(48)
Profit for the period			4,273			6,155			9,824

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

In terms of seasonality unit sales of electricity are consistently higher in the first half of the year.

The only material movements between 2009 and 2008 half year segmental data is the increase in revenue and decrease in profit in the Energy business. This 13% rise was a result of a 2% increase in unit sales of electricity combined with the year on year impact of a tariff rise on 1 January 2009. The decrease in profit was primarily due to an increase in the cost of imported power from 1 January 2009. 

Notes to the Condensed Interim Accounts (Unaudited)

3.    Income tax

	Six months ended   31 March				Year ended 30 September
	2009 £000		2008 £000		2008 £000
Current income tax	(751)		(511)		(437)
Deferred income tax	(320)		(128)		353
Total income tax	(1,071)		(639)		(84)

On 30 January 2007 the draft 'zero-ten' legislation was approved by the States of Jersey. The legislation came into effect from 1 January 2009.  The effective tax rate for 2007 and 2008 was lower than in to 2006 due to the migration from a prior to current year basis but has reverted to 20% for Island utilities from 2009 onwards. This is why the tax charge has moved upwards.  

4.    Dividends

	Six months ended   31 March				Year ended 30 September
	2009 £000		2008 £000		2008 £000
Distributions to equity holders and by subsidiaries in the period	1,716		1,197		2426

The distribution to equity holders in the period consisted of £ 1,715,840 (112p net of tax per share) in respect of the final dividend for 2008. No dividends were paid by subsidiaries to minority interests in the period.

The Directors have declared an interim dividend of 77p per share, net of tax (2008 - 73p) for the six months ended 31 March 2009 to shareholders on the register at the close of business on 12 June 2009. This dividend was approved by the Board on 28 May 2009 and has not been included as a liability at 31 March 2009.

5.    Property, plant and equipment

During the period, Jersey Electricity spent approximately £3m on the finalisation of the £14m project to reinforce the electricity infrastructure in the west of Jersey. In addition £1m was paid as a deposit to RTE in France to secure the timing slot for the landside network build necessary as part of Normandie 3 project to deliver a third electricity interconnector between the Channel Islands and mainland Europe. Capital expenditure on other distribution reinforcement and new customer developments amounted to £2m in the last six months. 

Notes to the Condensed Interim Accounts 

6.    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 to consider whether there have been any other events that would significantly affect the pension liabilities. The next triennial actuarial valuation of the defined benefits scheme is at 31 December 2009 when the relevant assumptions will be reviewed to establish the applicable future required cash contributions. 

7.    Reconciliation of movements in equity

	Share	Other	Retained
	capital	reserves	earnings	Total
	£000	£000	£000	£000
At 1 October 2008	1,532	2,556	129,166	133,254
Total recognised income and expense for the period	-	-	4,273	4,273
Unrealised gains on hedges	-	1,906	-	1,906
Actuarial loss on defined benefit scheme	-	-	(8,178)	(8,178)
Equity dividends	-	-	(1,716)	(1,716)
As at 31 March 2009	1,532	4,462	123,545	129,539
At 1 October 2007	1,532	819	126,483	128,834
Total recognised income and expense for the period	-	-	9,824	9,824
Unrealised gains on hedges	-	1,737	-	1,737
Actuarial loss on defined benefit scheme	-	-	(4,874)	(4,874)
Equity dividends	-	-	(2,267)	(2,267)
As at 30 September 2008	1,532	2,556	129,166	133,254
At 1 October 2007	1,532	819	126,483	128,834
Total recognised income and expense for the period	-	-	6,155	6,155
Unrealised gains on hedges	-	3,401	-	3,401
Actuarial loss on defined benefit scheme		-	2,283	2,283
Equity dividends	-	-	(1,149)	(1,149)
As at 31 March 2008	1,532	4,220	133,772	139,524

The other reserves comprise of the foreign currency reserve of £4,014,000 and a revaluation reserve of £448,000. The increase from 30 September 2008 is due to the rise in the fair value of our forward currency hedges because of the recent weakening of Sterling against the Euro.

8.    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 which is being negotiated but it is anticipated that the rental will move onto commercial rates.

• The Company made electricity sales to the value of £3.6m (2008: £3.1m) and other sales of £0.3m (2008: £0.3m) to the States of Jersey for the six months ended 31 March 2009. At the half-year end the States of Jersey had a debtors balance of £243,000 (2008: £64,000).

At the half-year end Foreshore Limited had a debtors balance of £650,000 (2008: £859,000).

During the six months to 31 March 2009 the Company made electricity sales of £245,000 (2008: £190,000) and other sales of £382,000 (2008: £232,000) to Foreshore Limited.

All the above transactions were conducted at an arm's-length basis.    

 

END

 

 

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