Jersey Electricity PLC

Earnings Release • Dec 14, 2018

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RNS Number : 4375K

Jersey Electricity PLC

14 December 2018

JERSEY ELECTRICITY plc                                                                                                                 Preliminary Announcement of Annual Results

Year Ended 30 September 2018

At a meeting of the Board of Directors held on 13 December 2018, the final accounts for the Group for the year to 30 September 2018 were approved, details of which follow.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 30 September 2018 or 2017, but is derived from those accounts. Statutory accounts for 2017, have been delivered to the Jersey Registrar of Companies, and those for 2018 will be delivered in early 2019. The auditor has reported on the accounts for both years and their reports were unmodified. 

A final dividend of 8.8p on the Ordinary and 'A' Ordinary shares in respect of the year ended 30 September 2018 was recommended (2017: 8.4p). Together with the interim dividend of 6.1p (2017: 5.8p) the proposed total dividend declared for the year was 14.9p on each share (2017: 14.2p).

The final dividend will be paid on 28 March 2019 to those shareholders registered in the books of the Company on 22 February 2019. A dividend on the 5% cumulative participating preference shares of 1.5% (2017: 1.5%) payable on 1 July 2019 was also recommended.

The Annual General Meeting of the Company will be held on 28 February 2019. On that date Geoffrey Grime will retire as Chairman and Director of the Company, and Phil Austin, currently a Board member, will assume the role of Chairman.

M.P. Magee                                                                           P.J. Routier

Finance Director                                                                   Company Secretary

Direct telephone number : 01534 505201                                      Direct telephone number :01534 505253

Email : [email protected]                                                        Email : [email protected]

13 December 2018    

The Powerhouse

PO Box 45

Queens Road

St Helier

Jersey JE4 8NY

JERSEY ELECTRICITY plc            

Preliminary Announcement of Annual Results

Year ended 30 September 2018                                                                                                    

The Chairman, Geoffrey Grime, comments:

"The Group recorded its best ever financial performance for the third year in succession. Group revenue for the year 2017/18 was £105.9m, 4% higher than 2017 and profit before tax increased to £15.3m up from the £13.5m achieved last year. This was supported by strong underlying performance in the Energy business, which saw a new record peak demand of 178MW set and a 2% increase in unit sales volumes from 621m to 634m units. Our Powerhouse retail business also witnessed continued strong growth in a challenging sector, with profits up 11% to £0.8m on an increased turnover of £13.6m, up 5% on last year.

We have made excellent progress on all our major investment projects during the year. St Helier West Primary Substation is about to be commissioned. Our smart metering programme, SmartSwitch, is entering its final phase, with 87% of our customers now converted and benefits already being realised.  We successfully launched an innovative "smart home" demonstration store, Smarter Living, embedded in the Powerhouse retail store which is receiving great interest from customers. In France, we completed an important £1m upgrade on our Normandie 2 circuit to increase both import capacity and security of supply.

As the Island's leading energy supplier, we bear an enormous responsibility to our customers and we continue our programme of activities to seek feedback from them. We are aware that there is more to do to promote energy efficiency, local renewables and electric transportation, but it is reassuring we continue to receive positive feedback from stakeholders. Once again, I am pleased to report that our ratings in both our supply service and overall customer service showed improvements on last year.

Maintaining profitability is essential to continued investment in infrastructure and to providing a sustainable electricity service for everyone including all of our stakeholders. I am also pleased to report a proposed final dividend for this year of 8.8p, a 5% rise on the previous year, payable on 28 March 2019.

I will be formally stepping down as Chairman at the AGM on 28 February 2019 but I am delighted to be handing over to Phil Austin a Company that is well positioned for the future and I wish Phil and the whole Board the very best in continuing to steer Jersey Electricity through the many exciting opportunities ahead."

Financial Highlights	2018	2017
Revenue	£105.9m	£102.1m
Profit before tax	£15.3m	£13.5m
Earnings per share	39.5p	34.6p
Dividend paid per share	14.5p	13.8p
Final proposed dividend per share	8.8p	8.4p
Net debt	£14.3m	£21.9m

Group revenue for the year to 30 September 2018 at £105.9m was 4% higher than in the previous financial year. Energy revenues at £82.3m were 2% higher than the £80.4m achieved in 2017 with a 2% increase in the unit sales volumes of electricity, largely driven by weather, being the main factor. Turnover in the Powerhouse retail business increased by 5% from £12.9m to £13.6m. Revenue in the Property business rose £0.1m to £2.3m due to higher rental income. Revenue from JEBS, our contracting and building services business, rose £0.8m from levels experienced in 2017 to £4.8m. Turnover in our other businesses rose £0.2m to £2.9m.

Cost of sales at £65.1m was £2.1m higher than last year with an increase in import costs in our Energy business and higher sales activity in the Powerhouse retail business being the main reasons.

Operating expenses, at £24.4m were at the same level as in 2017.

Profit before tax for the year to 30 September 2018, at £15.3m, increased by 14% from £13.5m in 2017. Our Energy business unit sales saw volumes increasing from 621m to 634m kilowatt hours with strong winter period sales and the benefits of switching customers from other heating fuels more than offsetting the continued impact of energy efficiency measures employed by our customers.

Profits in our Energy business moved up to £13.4m from £11.7m last year. The higher level of sales resulted in an improved gross margin and this was supplemented by ongoing initiatives to reduce both manpower and maintenance costs. Customer tariffs rose by 2% in June 2018 yet remained competitive with other jurisdictions but this accounted for only £0.4m of the increase in profits with the remainder driven by cost efficiencies and increased unit sales of electricity. The UK saw material increases in retail electricity prices for their customers during both 2017 and 2018 with an average rise of 24% across the 'Big 6' suppliers.

In the financial year we imported 95% of our requirements from France (2017: 93%) and generated only 0.2% of our electricity on-island at La Collette Power Station (2017: 1%). The remaining 5% (2017: 6%) of our electricity came from the local Energy from Waste plant being marginally below that seen in 2017.

Profits in our Property division, excluding the impact of investment property revaluation, at £1.8m, were £0.2m above the level last year due to a higher rental level and reduced costs. Our investment property portfolio was revalued upwards this year by £0.3m to £20.5m by the external consultants who review the position annually due primarily to the growth in the value of the residential properties that we rent to tenants.

Our Powerhouse retailing business saw continued strong growth in sales with profits moving up 11% to £0.8m in 2018.

JEBS, our contracting and business services unit had a challenging year and incurred a loss of £0.2m against a profit of £0.1m in 2017 as the business was impacted by both a decline in margins and some exceptional costs. Plans are being implemented to improve performance in this business unit.

Our other business units (Jersey Energy, Jendev, Jersey Deep Freeze and fibre optic lease rentals) produced profits of £0.6m being 12% higher than last year.

Net Interest in 2018 was £1.3m being £0.1m higher than last year because in 2017 there was still an element of capitalisation of interest associated with the new N1 subsea cable. The taxation charge at £3.2m was £0.3m higher than 2017 due to the increase in profit.

Group earnings per share rose to 39.5p compared to 34.6p in 2017 due mainly to increased profitability.

Dividends paid in the year, net of tax, rose by 5%, from 13.8p in 2017 to 14.5p in 2018. The proposed final dividend for this year is 8.8p, a 5% rise on the previous year. Dividend cover was 2.7 times compared to 2.5 times in 2017.

Net cash inflow from operating activities at £27.0m was £0.5m higher than in 2017 with higher operating profit being the primary driver. Capital expenditure, at £14.9m was marginally lower than £15.1m last year with spend on the St Helier West primary sub-station being the most material project in 2018. In the 2017 financial year the most material primary spend was on the N1 subsea cable project prior to commissioning in December 2016. The resultant position was that net debt at the year-end was £14.3m, being £30.0m of borrowings less £15.7m of cash and cash equivalents, which was £7.6m lower than last year.

Our defined benefits pension scheme, showed a surplus at 30 September 2018, under IAS 19 "Employee Benefits", of £3.8m, net of deferred tax, compared with a deficit of £3.4m at 30 September 2017. Scheme liabilities decreased 2% to £131.4m since the last year end with the discount rate assumption, which heavily influences the calculation of liabilities, rising from 2.7% in 2017 to 2.9% in 2018 to reflect sentiments in prevailing financial markets. In addition, scheme assets rose 5% to £136.2m in the same period.

Consolidated Income Statement		2018		2017
For the year ended 30 September 2018		£000		£000
Revenue		105,874		102,085
Cost of sales		(65,110)		(63,023)
Gross Profit		40,764		39,062
Revaluation of investment properties		310		40
Operating expenses		(24,380)		(24,379)
Group operating profit		16,694		14,723
Finance income		28		3
Finance costs		(1,377)		(1,268)
Profit from operations before taxation		15,345		13,458
Taxation		(3,152)		(2,834)
Profit from operations after taxation		12,193		10,624
Attributable to:
Owners of the Company		12,115		10,599
Non-controlling interests		78		25
		12,193		10,624
Earnings per share
- basic and diluted		39.54p		34.59p

Consolidated Statement of Comprehensive Income		2018		2017
		£ 000		£ 000
Profit for the year		12,193		10,624
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit scheme		10,166		8,859
Income tax relating to items not reclassified		(2,033)		(1,772)
		8,133		7,087
Items that may be reclassified subsequently to profit or loss:
Fair value loss on cash flow hedges		(4,261)		(1,673)
Income tax relating to items that may be reclassified		852		335
		(3,409)		(1,338)
Total comprehensive income for the year		16,917		16,373
Attributable to:
Owners of the Company		16,839		16,348
Non-controlling interests		78		25
		16,917		16,373

A presentational change to the 2017 figures has arisen as a result of elements previously embedded within cost of sales and finance costs being reclassified and shown in revenue. There has been no impact on profit.

Consolidated Balance Sheet
30 September 2018
					2018		2017
					£ 000		£ 000
NON-CURRENT ASSETS
Intangible assets					938		1,110
Property, plant and equipment					215,153		211,921
Investment properties					20,460		20,150
Trade and other receivables					501		592
Retirement benefit surplus					4,751		-
Derivative financial instruments					682		2,790
Other investments					5		5
Total non-current assets					242,490		236,568
CURRENT ASSETS
Inventories					7,092		6,825
Trade and other receivables					15,202		15,782
Derivative financial instruments					2,338		4,454
Cash and cash equivalents					15,735		8,076
Total current assets					40,367		35,137
Total assets					282,857		271,705
LIABILITIES
Trade and other payables					15,284		15,885
Current tax liabilities					2,299		1,034
Derivative financial instruments					120		-
Total current liabilities					17,703		16,919
NET CURRENT ASSETS					22,664		18,218
NON-CURRENT LIABILITIES
Trade and other payables					20,348		20,177
Retirement benefit deficit					-		4,219
Derivative financial instruments					89		172
Financial liabilities - preference shares					235		235
Borrowings					30,000		30,000
Deferred tax liabilities					25,753		23,719
Total non-current liabilities					76,425		78,522
Total liabilities					94,128		95,441
Net assets					188,729		176,264
EQUITY
Share capital					1,532		1,532
Revaluation reserve					5,270		5,270
ESOP reserve					(41)		(84)
Other reserves					2,249		5,658
Retained earnings					179,666		163,862
Equity attributable to owners of the company					188,676		176,238
Non-controlling interests					53		26
Total equity					188,729		176,264

Consolidated Statement of Changes in Equity for the year ended 30 September 2018	Share capital	Revaluation  reserve	ESOP reserve	Other reserves	Retained earnings	Total
	£ 000	£ 000	£ 000	£ 000	£ 000	£ 000
At 1 October 2017	1,532	5,270	(84)	5,658	163,862	176,238
Total recognised income and expense for the year	-	-	-	-	12,115	12,115
Funding of employee share option scheme	-	-	(9)	-	-	(9)
Amortisation of employee share option scheme	-	-	52	-	-	52
Unrealised loss on hedges (net of tax)	-	-	-	(3,409)	-	(3,409)
Actuarial gain on defined benefit scheme (net of tax)	-	-	-	-	8,133	8,133
Equity dividends	-	-	-	-	(4,444)	(4,444)
At 30 September 2018	1,532	5,270	(41)	2,249	179,666	188,676
	Share capital	Revaluation  reserve	ESOP reserve	Other reserves	Retained earnings	Total
	£ 000	£ 000	£ 000	£ 000	£ 000	£ 000
At 1 October 2016	1,532	5,270	(155)	6,878	150,523	164,048
Total recognised income and expense for the year	-	-	-	-	10,599	10,599
Funding of employee share option scheme	-	-	(2)	-	-	(2)
Amortisation of employee share option scheme	-	-	73	-	-	73
Unrealised loss on hedges (net of tax)	-	-	-	(1,338)	-	(1,338)
Actuarial gain to defined benefit scheme (net of tax)	-	-	-	-	7,087	7,087
Adjustment to reserves	-	-	-	118	(118)	-
Equity dividends	-	-	-	-	(4,229)	(4,229)
At 30 September 2017	1,532	5,270	(84)	5,658	163,862	176,238

Consolidated Statement of Cash Flows		2018	2017
for the year ended 30 September 2018		£ 000	£ 000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit		16,694	14,723
Depreciation and amortisation charges		11,242	10,695
Share based reward charges		52	73
Gain on revaluation of investment property		(310)	(40)
Pension operating charge less contributions paid		1,196	1,607
Profit on sale of fixed assets		(1)	(4)
Operating cash flows before movement in working capital		28,873	27,054
Working capital adjustments:
Increase in inventories		(267)	(863)
Decrease in trade and other receivables		671	892
Increase in trade and other payables		125	1,230
Net movement in working capital		529	1,259
Interest paid		(1,368)	(1,250)
Capitalised interest paid		-	(172)
Preference dividends paid		(9)	(9)
Income taxes paid		(1,045)	(421)
Net cash flows from operating activities		26,980	26,461
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(14,705)	(14,252)
Investment in intangible assets		(168)	(836)
Net proceeds from disposal of fixed assets		1	4
Net cash flows used in investing activities		(14,872)	(15,084)
CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividends paid		(4,444)	(4,229)
Dividends paid to non-controlling interest		(51)	(59)
Deposit interest received		28	3
Proceeds of borrowings		-	18,000
Repayment of borrowings		-	(18,943)
Net cash flows used in financing activities		(4,467)	(5,228)
Net increase in cash and cash equivalents		7,641	6,149
Cash and cash equivalents at beginning of year		8,076	1,925
Effect of foreign exchange rates		18	2
Cash and cash equivalents at end of year		15,735	8,076

A presentational change to the 2017 figures has arisen as a result of elements previously embedded within cost of sales and finance costs being reclassified and shown in revenue. There has been no impact on profit.

Notes to the accounts

Year ended 30 September 2018

1.   Basis of Preparation

The consolidated financial statements of Jersey Electricity plc, for the year ended 30 September 2018, 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 2019.

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 business segments as follows:
	2018	2018	2018		2017	2017	2017
	External	Internal	Total		External	Internal	Total
	£000	£000	£000		£000	£000	£000
Revenue
Energy	82,332	133	82,465		80,408	143	80,551
Building Services	4,823	876	5,699		3,976	915	4,891
Retail	13,571	56	13,627		12,888	37	12,925
Property	2,277	604	2,881		2,187	599	2,786
Other	2,871	909	3,780		2,626	1,324	3,950
	105,874	2,578	108,452		102,085	3,018	105,103
Intergroup elimination			(2,578)				(3,018)
Revenue			105,874				102,085
Operating profit / (loss)
Energy			13,418				11,651
Building Services			(245)				131
Retail			812				731
Property			1,813				1,645
Other			586				525
			16,384				14,683
Revaluation of investment properties			310				40
Operating profit			16,694				14,723

A presentational change to the 2017 figures has arisen as a result of elements previously embedded within cost of sales (£163,000) and finance costs (£72,000) being reclassified and shown in revenue. There has been no impact on profit.

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