Interim Results

RNS Number : 4777U

Jersey Electricity Company Limited

15 May 2008

 

The Jersey Electricity Company

 Interim Management Report

for the six months ended 31 March 2008

At a meeting of the Board of Directors held on 14 May 2008, the Board approved the Interim Management Report for the Group for the six months ended 31 March 2008 and declared an interim dividend of 91.25p gross (73p net of tax) compared to 61.25p gross (49p net) in 2007 on the Ordinary and 'A' Ordinary shares. The dividend will be paid on 30 June 2008 to those shareholders registered in the books of the Company on 16 June 2008.

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 2008 has not been audited or reviewed by our external auditors nor have the results for the equivalent period in 2007. The results for the year ended 30 September 2007 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]

14 May 2008

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 2008

Financial Summary	6 months 2008	6 months 2007	% increase
Electricity Sales -kWh (000)	359,772	335,986	7%
Turnover	£45.4m	£40.0m	13%
Profit before tax	£6.8m	£4.9m	40%
Profit in Energy business	£4.4m	£3.0m	44%
Earnings per share	£4.02	£2.84	41%
Net dividend proposed per ordinary share	73p	49p	49%

Group profit before tax in the first half of 2008 was £6.8m being 40% higher than in the same period last year due to strong growth across all our businesses and a higher level of electricity unit sales in the last six months, following a very mild first half last year. This performance restores profitability to the levels prevailing prior to 2006 when we voluntarily pledged a two-year electricity price freeze and importantly, will support planned major investment, on which the continuing reliability of our electricity network depends. Earnings per share rose by 41% in line with the above profit increase.  

Having hedged our position in the forward power and currency markets, we were able to honour our pledge last year that prices to customers would remain unchanged until 2009. European wholesale electricity prices have risen by around 30% since the start of this financial year and in addition the value of Sterling against the Euro, in which our power purchases are denominated, has deteriorated by 15% in the same period. Regrettably, we anticipate a need for tariff increases in 2009, which will mean that the majority of our customers will pay power prices similar to those in the UK, where rises of 11% have already taken place in the first quarter of 2008, but our tariff levels will still be lower on average than those in mainland Europe.

Electricity sales in the first half of 2008 were 7% higher than in 2007 following the mild winter experienced throughout Europe last year and this was the primary reason for Energy profits rising to £4.4m from £3.0m last year. Imported electricity met 94% of our requirements during the half year, which was slightly lower than usual as a result of periodic production from our own plant to prove its capability to fully meet the Island's electricity requirements in the event of a loss of power imports from the Continent. 

Our Retailing business continued last year's trend of strong growth, with year-on-year turnover rising 14% and profits moving up from £0.4m to £0.5m. Profits from our Property portfolio rose from £0.8m to £0.9m which included the sale of a residential property used previously to house employees, for a capital gain of £0.4m. The Building Services business produced profits of £0.2m being at a similar level to last year. Our consultancy businesses Jersey Energy and Jendev produced profits on a par with the comparative period last year. Our data centre joint venture, Foreshore Limited, moved into profit for the first time with turnover up 30% against the same six months last year.  

Cash, including short-term investments, fell £1.3m to £15.1m during the last six months, with operating cash produced from trading activity offset by £5.6m of electricity infrastructure investment and payment of the £1.2m final 2007 dividend. 

Your Board proposes to pay an interim net dividend of 73p (2007: 49p) on the Ordinary and 'A' Ordinary Shares payable on 30 June 2008 in addition to the final dividend for 2007 of 75p (2006: 68p) paid on 31 March 2008. The increase in the level of proposed dividend 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 a re-basing of the dividend level at the interim and final stages in 2008 your Board will aim to deliver sustained real growth thereafter.  

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).

G.J. GRIME - Chairman    M.J.LISTON - Chief Executive        14 May 2008

INVESTOR TIMETABLE FOR 2008

16 June	Record date for interim ordinary dividend
30 June	Interim ordinary dividend for year ending 30 September 2008
1 July	Payment date for preference share dividends
End July	Interim Management Statement – nine months to 30 June 2008
18 December	Preliminary announcement of full year results

Condensed Group Income Statement (Unaudited)

			Six months ended 31 March				Year ended 30 September
	Note		2008 £000		2007 £000		2007 £000
Revenue	2		45,423		40,048		75,871
Cost of sales			(30,832)		(27,268)		(52,117)
Gross profit			14,591		12,780		23,754
Revaluation of investment properties			-		-		900
Profit on sale of property			407		309		309
Operating expenses			(8,750)		(8,504)		(16,951)
Operating profit before joint venture			6,248		4,585		8,012
Share of profit/(loss) of joint venture			14		(116)		(135)
Operating profit	2		6,262		4,469		7,877
Interest receivable			554		413		868
Finance costs			(4)		(5)		(11)
Profit from operations before taxation			6,812		4,877		8,734
Taxation	3		(639)		(519)		(1,074)
Profit from operations after taxation			6,173		4,358		7,660
Minority interest			(18)		(2)		(90)
Profit for the period attributable to the  equity holders of the parent company			6,155		4,356		7,570
EARNINGS PER SHARE
-    basic and diluted			£4.02		£2.84		£4.94
DIVIDENDS PER SHARE
-    paid	4		£0.75		£0.68		£1.17
-    proposed	4		£0.73		£0.49		£0.75

Condensed Group Statement of Recognised Income and Expense (Unaudited)

	Six months ended 31 March				Year ended 30 September
	2008		2007		2007
	£000		£000		£000
Profit for the financial period	6,155		4,356		7,570
Actuarial gain on defined benefit scheme (net of tax)	2,283		-		5,431
Fair value gain on cash flow hedges (net of tax)	3,401		361		1,469
Revaluation of freehold land and buildings	-		-		448
Total recognised income and expense for the period attributable to the equity holders of the parent	11,839		4,717		14,918

Condensed Group Balance Sheet (Unaudited)

			As at 31 March				As at 30 September
	Note		2008 £000		2007 £000		2007 £000
NON-CURRENT ASSETS
Intangible assets			60		117		82
Property, plant and equipment			112,016		107,783		109,790
Investment property			12,340		10,990		12,340
Other investments			2,102		2,031		2,099
Retirement benefit surplus			15,506		4,389		11,684
Total non-current assets			142,024		125,310		135,995
CURRENT ASSETS
Inventories			4,695		4,228		4,631
Trade and other receivables			13,972		12,837		11,258
Derivative financial instruments			4,715		-		464
Short-term investments - cash deposits			4,930		-		3,755
Cash and cash equivalents			10,160		14,026		12,613
Total current assets			38,472		31,091		32,721
Total assets			180,496		156,401		168,716
LIABILITIES
Trade and other payables			10,093		8,803		11,348
Derivative financial instruments			-		737		-
Current tax payable			887		1,173		944
Total current liabilities			10,980		10,713		12,292
NON-CURRENT LIABILITIES
Trade and other payables			13,422		12,905		13,123
Tax liabilities			1,093		1,305		487
Financial liabilities - preference shares			235		235		235
Deferred tax liabilities			15,221		11,833		13,670
Total non-current liabilities			29,971		26,278		27,515
Total liabilities			40,951		36,991		39,807
Net assets			139,545		119,410		128,909
EQUITY
Share capital			1,532		1,532		1,532
Other reserves			4,220		(737)		819
Retained earnings			133,772		118,588		126,483
Shareholders' funds	7		139,524		119,383		128,834
Minority interest			21		27		75
Total equity			139,545		119,410		128,909

Condensed Group Cash Flow Statement (Unaudited)

		Six months ended 31 March				Year ended 30 September
	Note	2008 £000		2007 £000		2007 £000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit before joint venture		6,248		4,585		8,012
Depreciation and amortisation charges		3,458		3,544		7,568
Revaluation of investment property		-		-		(900)
Pension operating charge less contributions paid		(900)		(391)		(1,110)
Profit on sale of fixed assets		(407)		(309)		(312)
Operating cash flows before movement in working capital		8,399		7,429		13,258
Increase in inventories		(64)		(23)		(435)
Increase in trade and other receivables		(2,762)		(3,813)		(1,979)
(Decrease)/increase in trade and other payables		(1,045)		(577)		1,139
Interest received		601		420		844
Preference dividends paid		(5)		(4)		(9)
Income taxes paid		-		-		(1,159)
Net cash flows from operating activities		5,124		3,423		11,659
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	5	(5,593)		(3,506)		(8,529)
Investment in intangible assets		(22)		(7)		(17)
Proceeds from disposal of property		410		318		318
Investment in joint venture		-		(263)		(350)
Short-term investments		(1,175)		3,765		10
Net cash flows from investing activities		(6,380)		307		(8,568)
CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividends paid	4	(1,197)		(1,050)		(1,824)
Net cash flows used in financing activities		(1,197)		(1,050)		(1,824)
Net increase/(decrease) in cash and cash equivalents		(2,453)		2,680		1,267
Cash and cash equivalents at beginning of period		12,613		11,346		11,346
Cash and cash equivalents at end of period		10,160		14,026		12,613

Notes to the Condensed Interim Accounts

1.     Accounting policies

Basis of preparation

The interim accounts for the six months ended 31 March 2008 have been prepared on the basis of the accounting policies set out in the 30 September 2007 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 2008			31 March 2007			30 September 2007
	External	Internal	Total	External	Internal	Total	External	Internal	Total
Revenue	£000	£000	£000	£000	£000	£000	£000	£000	£000
Energy	34,590	132	34,722	30,510	130	30,640	56,957	246	57,203
Building services	1,785	82	1,867	1,731	98	1,829	3,204	199	3,403
Retail	7,257	25	7,282	6,359	18	6,377	11,934	53	11,987
Property	826	340	1,166	745	340	1,085	1,597	683	2,280
Other	965	359	1,324	703	453	1,156	2,179	865	3,044
	45,423	938	46,361	40,048	1,039	41,087	75,871	2,046	77,917
Inter Group elimination			(938)			(1,039)			(2,046)
			45,423			40,048			75,871
Group operating profit
Energy			4,385			3,036			4,493
Building services			219			203			305
Retail			485			412			479
Property			485			441			954
Other			281			68			437
			5,855			4,160			6,668
Revaluation of investment  properties			-			-			900
Sale of property			407			309			309
			6,262			4,469			7,877
Other gains and losses
Interest receivable			554			413			868
Finance costs			(4)			(5)			(11)
Profit from operations before taxation			6,812			4,877			8,734
Taxation			(639)			(519)			(1,074)
Profit from operations after taxation			6,173			4,358			7,660
Minority interest			(18)			(2)			(90)
Profit for the period			6,155			4,356			7,570

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

The only material movement between 2008 and 2007 half year segmental data is the increase in revenue in the Energy business. This 13% rise was a result of a 7% increase in unit sales of electricity combined with the year on year impact of a tariff rise on 1 January 2007.

Notes to the Condensed Interim Accounts (Unaudited)

3.    Income tax

	Six months ended   31 March				Year ended 30 September
	2008 £000		2007 £000		2007 £000
Current income tax	(511)		(420)		(587)
Deferred income tax	(128)		(99)		(487)
Total income tax	(639)		(519)		(1,074)

On 30 January 2007 the draft 'zero-ten' legislation was approved by the States of Jersey. The legislation will come into effect from 1 January 2009 but transitional rules apply to any company currently taxed on a prior year basis, so that they become taxed on a current year basis. This results in Jersey tax paying companies being taxed in the 2008 year of assessment at 20% on the average of the profits which they generate in the financial year ended in 2007 and 2008. The effective tax rate for those two years is therefore around half that experienced up to 2006 due to the migration from a prior to current year basis but will revert to 20% for Island utilities from 2009 onwards.  

4.    Dividends

	Six months ended   31 March				Year ended 30 September
	2008 £000		2007 £000		2007 £000
Distributions to equity holders and by subsidiaries in the period	1,197		1,050		1,824

The distribution to equity holders in the period consisted of £1,149,000 (75p net of tax per share) in respect of the final dividend for 2007. In addition £8,400 was paid by subsidiaries to minority interests.

The Directors have declared an interim dividend of 73p per share, net of tax (2007 - 49p) for the six months ended 31 March 2008 to shareholders on the register at the close of business on 15 August 2008. This dividend was approved by the Board on 14 May 2008 and has not been included as a liability at 31 March 2008.

5.    Property, plant and equipment

During the period, the Group spent approximately £3,550,000 on a continuing project to reinforce the electricity infrastructure in the west of Jersey. In addition £1,498,000 was spent on distribution reinforcement and new customer developments.

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, and also to consider whether there have been any other events that would significantly affect the pension liabilities.

7.    Reconciliation of movements in equity

	Share	Other	Retained
	capital	reserves	earnings	Total
	£000	£000	£000	£000
At 1 October 2007	1,532	819	126,483	128,834
Total recognised income and expense for the period	-	-	6,155	6,155
Other recognised gains	-	3,401	2,283	5,684
Equity dividends	-	-	(1,149)	(1,149)
As at 31 March 2008	1,532	4,220	133,772	139,524
At 1 October 2006	1,532	(1,098)	115,274	115,708
Total recognised income and expense for the period	-	-	7,570	7,570
Other recognised gains	-	1,469	5,431	6,900
Revaluation of freehold land and buildings	-	448	-	448
Equity dividends	-	-	(1,792)	(1,792)
As at 30 September 2007	1,532	819	126,483	128,834
At 1 October 2006	1,532	(1,098)	115,274	115,708
Total recognised income and expense for the period	-	-	4,356	4,356
Other recognised gains	-	361	-	361
Equity dividends	-	-	(1,042)	(1,042)
As at 31 March 2007	1,532	(737)	118,588	119,383

The other reserves comprise of the foreign currency reserve of £3,772,000 and a revaluation reserve of £448,000. The increase from 30 September 2007 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 £2.7m (2007: £2.5m) and other sales of £0.3m (2007: £0.3m) to the States of Jersey for the six months ended 31 March 2008. At the half-year end the States of Jersey had a debtors balance of £83,000 (2007: £238,000).

At the half-year end Foreshore Limited had a debtors balance of £859,000 (2007: £896,000).

During the six months to 31 March 2008 the Company made electricity sales of £190,000 (2007: £148,000) and other sales of £232,000 (2007: £276,000) to Foreshore Limited.

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

 

END

 

 

IR SFMFMLSASESI