Jersey Electricity PLC

Earnings Release • Feb 2, 2023

National Storage Mechanism | Additional information

RNS Number : 7625O

Jersey Electricity PLC

02 February 2023

JERSEY ELECTRICITY plc

Financial Results Summary

Year Ended 30 September 2022

At a meeting of the Board of Directors held on 20 December 2022, the final accounts for the year ended 30 September 2022 were approved and have been published on our website (www.jec.co.uk).

The financial information set out in this summary does not constitute the statutory accounts for the year ended 30 September 2022, or 2021, but is derived from those accounts. Statutory accounts for 2021 have been delivered to the Jersey Registrar of Companies, and those for 2022 will be delivered in early 2023. The auditor reported on the accounts for both years and their reports were unmodified.

A final dividend of 10.80p on the Ordinary and 'A' Ordinary shares in respect of the year ended 30 September 2022 was recommended (2021: 10.20p). Together with the interim dividend of 7.60p (2021: 7.20p) the proposed total dividend declared for the year was 18.40p on each share (2021: 17.40p).

The final dividend will be paid on 23 March 2023 to those shareholders registered on 17 February 2023 (not 16 February as earlier stated). A dividend on the 5% cumulative participating preference shares of 1.5% (2021: 1.5%) payable on 3 July 2023 was also recommended.

The Annual General Meeting will be held on 8 March 2023 at 2.00 pm at the Powerhouse, Queen's Road, St Helier, Jersey.

M.P. Magee                                                                           

Finance Director                                                                  

Direct telephone number: 01534 505201                                     

Email: [email protected]                                                       

20 December 2022    

The Powerhouse

PO Box 45

Queens Road

St Helier

Jersey JE4 8NY

JERSEY ELECTRICITY plc            

Financial Results Summary

Year ended 30 September 2022                                                                                                     

The Chair, Phil Austin, comments:

The turmoil that beset international energy markets in late 2021 has intensified further due to the escalating conflict between Russia and Ukraine, leading to a previously unthinkable global energy crisis. This has presented major new challenges to energy companies post the pandemic, sending wholesale prices soaring and threatening supply security throughout Europe. Jersey Electricity is not immune to these challenges, but we have shown resilience, returning a strong Group performance and protecting our customers from the huge retail price rises seen elsewhere, without Government intervention.

PERFORMANCE

Group revenue for the year at £117.4m was 1% lower than last year and profit before tax was £10.6m against £19.1m in 2021. If the non-cash upside from the revaluation of investment properties is excluded in both years, the underlying year-on-year profit before tax is £9.6m against £13.0m in 2021, a fall of 26%. This year's financial performance reflects the effects of COVID-19 post the pandemic. Coupled with a mild winter, a return to more normal patterns of work and behaviour has reduced demand, with both unit volume sales in Energy, and Retail revenues, down on last year as electricity consumption and Powerhouse product sales returned to historical levels. The Board has recommended a final dividend for the year of 10.80p, a 6% rise on the previous year, payable on 23 March 2023. Our target return on assets continues to be 6%-7% over the long term and was 4.2% this year, but 6.2% on a rolling five-year basis.

ENERGY MARKETS

Elsewhere, the scale of the energy crisis has prompted Governments across Europe to intervene, each in their own way, to mitigate the impact of the rising prices on their citizens. In the UK, such Government intervention averted a proposed 80% year-on-year increase in energy prices in October when Ofgem was due to raise the regulated price cap to £3,549. The new Energy Price Guarantee now limits this cap to £2,500 a year until April 2023 when the cap will be increased to £3,000, prompting a further 20% price rise.

Although our hedging and risk mitigation policies have so far sheltered Jersey customers from such material price increases, we are not immune to these market forces. We therefore implemented a 4% tariff rise from 1 January 2022 and a further 5% increase from 1 July 2022, at which time we announced a further 5% tariff increase effective from 1 January 2023 to give our customers some degree of certainty for the coming winter period.

CLIMATE CHANGE

Despite the current challenges presented by the global energy crisis, climate change remains the biggest challenge we all face. We remain optimistic about the future, however, and the opportunities a net-zero Jersey will bring. Our low-carbon, Smart-enabled grid provides a strong platform to support the Government of Jersey's net-zero 2050 carbon ambitions. In addition, increased digitalisation of our systems is enabling us to map scenarios and calculate the investment needed in the network. Publication of the Government's Carbon Neutral Roadmap in May gives us confidence to make these investments and ensure we are well-placed to meet future challenges.

In April 2022, the UK became the first G20 country to introduce legislation making it mandatory for large businesses to disclose climate-related financial information in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. Jersey Electricity supports these recommendations and is working towards full compliance.

ENERGY SECURITY

Although last year's French fishing dispute, which raised questions about energy sovereignty and the security of imported power supplies, has been resolved, the global energy crisis has kept us focused on the issue. To mitigate the supply security threats the energy crisis is causing in Europe, from where we imported 95% of our power this year, we have modelled various scenarios and evaluated our mitigations for technical failures to the submarine cables and other disruptions to supply. We have also established contingency plans to implement increased local emergency generation if required.

To increase energy sovereignty longer term, we are reviewing our energy sourcing strategies, with more detailed investigations into the viability of offshore wind generation which has fallen significantly in cost.

IN CONCLUSION

I would like to thank our entire 'JE family' for their hard work, commitment and dedication this past year which has presented renewed challenges post COVID-19. I am immensely proud of what we have achieved together and the progress we have made on the course we have set. I also thank my fellow Board members for their hard work and commitment, and our shareholders for their support. I remain confident the Company and its people can take advantage of the opportunities the future holds and meet the challenges it will demand of us all.

Financial Highlights	2022	2021
Revenue	£117.4m	£118.6m
Profit before tax	£10.6m	£19.1m
Earnings per share	27.17p	52.73p
Dividend paid per share	17.80p	16.90p
Final proposed dividend per share	10.80p	10.20p
Net cash	£17.4m	£13.1m

Group revenue for the year to 30 September 2022 at £117.4m was 1% lower than in the previous financial year. Energy revenues at £89.7m were marginally lower than the £89.8m achieved in 2021. Lower unit sales of electricity were linked to a milder winter and the positive uplift from increased home working, due to COVID-19, in the previous year. This was offset by a 4% tariff rise from January 2022 and a 5% rise from 1 July 2022. Revenue in the Powerhouse retail business decreased 6% from £19.8m in 2021 to £18.7m. Revenue in the Property business at £2.3m was at the same level as last year. Revenue from JEBS, our building services business, remained at the same level as 2021 at £3.4m. Revenue in our other businesses at £3.3m, was in line with the prior year.

Cost of sales at £77.2m was £3.1m higher than last year with an increase in wholesale electricity prices offset by the lower revenue level in our Powerhouse Retail business.

Operating expenses at £29.3m were £0.7m lower than last year. The fall is largely due to £1.8m incurred in the previous financial year for a non-cash ex-gratia award for pensions in service, in our defined benefits pension offset by the increased spend in systems and people, associated with the de-carbonisation vision for the Island.

Profit before tax for the year to 30 September 2022 was £10.6m against £19.1m in 2021. However, if the non-cash upside from revaluation of investment properties is excluded in both years the underlying year on-year profit before tax was £9.6m in 2022 against £13.0m in 2021, a decrease of 26%.

Profit in our Energy business, at £7.5m, was below the £10.7m achieved in 2021, largely due to lower unit sales volumes. Our target return on assets employed continues to be in the 6%-7% range over the longer-term and was 4.2% in 2022 against 5.9% in 2021, but 6.2% on a rolling 5-year basis. Unit sales volumes decreased by 4% from 639m to 613m kilowatt hours, due to milder than normal weather, combined with the previous year having benefited from home-working linked to the pandemic. In the financial year we imported 95.3% of our requirements from France (2021: 95.2%) and generated 0.3% of our electricity on-Island from our solar and diesel plant (2021: 0.4%). The remaining 4.4% (2021: 4.4%) of our electricity was purchased from the local Energy from Waste plant. A customer tariff rise of 4% was instigated on 1 January 2022 and a subsequent 5% increase took place in July 2022 and notice was given that a further 5% rise would take place on 1 January 2023.

The £1.4m profit in our Property division, excluding the impact of investment property revaluation, was at the same level as last year. Our investment property portfolio moved up in value by £1.0m to £28.8m, based on advice from our external consultants, who review the position annually. This increase compared to £6.1m in the 2020/21 financial year was due primarily to a restructuring of the lease arrangement for our largest tenant, whereby the existing break clause was moved to a later date, post commercial discussions, which materially moved the valuation upwards. The increase in this financial year was due to continued buoyant market conditions in the residential sector.

Our Powerhouse retail business saw profits fall 23% from £1.5m to £1.2m. However, this is in the context that in the previous financial year profits rose by 30% by when COVID-19 continued to influence the behaviours, and spending patterns of local customers, for example, due to less travel taking place over that year.

JEBS, our building services unit, produced a profit of £0.3m, being marginally ahead of 2021.

Our other business units (Jersey Energy, Jendev, Jersey Deep Freeze and fibre optic lease rentals) produced profits of £0.5m being £0.1m lower than last year.

The net interest cost in 2022 was £1.3m being £0.1m lower than 2021 due to a higher level of interest received on deposits. The taxation charge at £2.1m was lower than the previous year, due to lower profits.

Group basic and diluted earnings per share, at 27.17p, compared to 52.73p in 2021 due to decreased profitability.

Dividends paid in the year, net of tax, rose by 5%, from 16.90p in 2021 to 17.80p in 2022. The proposed final dividend for this year is 10.80p, a 6% rise on the previous year. Dividend cover, at 1.6 times, was lower than the comparable 3.1 times in 2021 due mainly to the large non-cash increase in the revaluation of investment properties in 2021.

Net cash flows from operating activities at £21.2m was £1.2m lower than in 2021. Investing activities, at £11.1m was £1.9m higher than £9.2m last year. Dividends paid were £5.5m compared to £5.3m in 2021. The resultant position was that net cash at the year-end was £17.4m, being £30.0m of borrowings offset by £47.4m of cash and cash equivalents, which was £4.3m more than last year.

Consolidated Income Statement		2022		2021
For the year ended 30 September 2022		£000		£000
Revenue		117,421		118,608
Cost of sales		(77,242)		(74,159)
Gross Profit		40,179		44,449
Revaluation of investment properties		1,020		6,055
Operating expenses		(29,293)		(29,991)
Group operating profit		11,906		20,513
Finance income		218		112
Finance costs		(1,523)		(1,540)
Profit from operations before taxation		10,601		19,085
Taxation		(2,135)		(2,794)
Profit from operations after taxation		8,466		16,291
Attributable to:
Owners of the Company		8,326		16,155
Non-controlling interests		140		136
		8,466		16,291
Earnings per share
- basic and diluted		27.17p		52.73p

Consolidated Statement of Comprehensive Income		2022		2021
		£000		£000
Profit for the year		8,466		16,291
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit scheme		8,976		14,803
Income tax relating to items not reclassified		(1,795)		(2,961)
		7,181		11,842
Items that may be reclassified subsequently to profit or loss:
Fair value gain/(loss) on cash flow hedges		4,815		(3,116)
Income tax relating to items that may be reclassified		(963)		623
		3,852		(2,493)
Total comprehensive income for the year		19,499		25,640
Attributable to:
Owners of the Company		19,359		25,504
Non-controlling interests		140		136
		19,499		25,640

Consolidated Balance Sheet as at 30 September 2022

		2022	2021
		£ 000	£ 000
NON-CURRENT ASSETS
Intangible assets		967	933
Property,plant and equipment		216,235	216,550
Right of use assets		3,280	3,113
Investment properties		28,830	27,810
Trade and other receivables		300	308
Retirement benefit asset		26,434	18,761
Derivative financial instruments		2,640	108
Other investments		5	5
Total non-current assets		278,691	267,588
CURRENT ASSETS
Inventories		7,173	6,909
Trade and other receivables		19,934	18,000
Derivative financial instruments		483	-
Cash and cash equivalents		47,397	43,136
Total current assets		74,987	68,045
Total assets		353,678	335,633
LIABILITIES
Trade and other payables		21,043	18,373
Current tax liabilites		2,088	3,020
Lease liabilities		69	72
Derivative financial instruments		330	1,256
Total current liabilities		23,530	22,721
NET CURRENT ASSETS		51,457	45,324
NON-CURRENT LIABILITIES
Trade and other payables		25,162	24,006
Lease liabilities		3,251	3,035
Derivative financial instruments		-	874
Financial liabilities - preference shares		235	235
Borrowings		30,000	30,000
Deferred tax liabilities		32,126	29,321
Total non-current liabilities		90,774	87,471
Total liabilities		114,304	110,192
Net assets		239,374	225,441
EQUITY
Share capital		1,532	1,532
Revaluation reserve		5,270	5,270
ESOP reserve		(38)	(79)
Other reserves		2,234	(1,618)
Retained earnings		230,232	220,178
Equity attributable to owners of the company		239,230	225,283
Non-controlling interests		144	158
Total equity		239,374	205,039

Consolidated Statement of Changes in Equity for the year ended 30 September 2022

	Share	Revaluation	ESOP	*Other	Retained	Total
	capital	reserve	reserve	reserves	earnings
	£ 000	£ 000	£ 000	£ 000	£ 000	£ 000
At 1 October 2021	1,532	5,270	(79)	(1,618)	220,178	225,283
Total recognised income and expense for the year	-	-	-	-	8,326	8,326
Amortisation of employee share option scheme	-	-	41	-	-	41
Movement on hedges (net of tax)	-	-	-	3,852	-	3,852
Actuarial gain on defined benefit scheme (net of tax)	-	-	-	-	7,181	7,181
Equity dividends	-	-	-	-	(5,453)	(5,453)
At 30 September 2022	1,532	5,270	(38)	2,234	230,232	239,230
At 1 October 2020	1,532	5,270	(120)	875	197,359	204,916
Total recognised income and expense for the year	-	-	-	-	16,155	16,155
Amortisation of employee share option scheme	-	-	41	-	-	41
Movement on hedges (net of tax)	-	-	-	(2,493)	-	(2,493)
Actuarial gain on defined benefit scheme (net of tax)	-	-	-	-	11,842	11,842
Equity dividends	-	-	-	-	(5,178)	(5,178)
At 30 September 2021	1,532	5,270	(79)	(1,618)	220,178	225,283

Consolidated Statement of Cash Flows		2022	2021
for the year ended 30 September 2022		£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit		11,906	20,513
Depreciation and amortisation charges		11,094	10,924
Share based reward charges		41	41
Gain on revaluation of investment property		(1,020)	(6,055)
Pension operating charge less contributions paid		1,303	3,357
Deemed interest income from hire purchase arrangements		50	-
Profit on sale of property, plant and equipment		(7)	(6)
Operating cash flows before movement in working capital		23,367	28,774
Working capital adjustments:
Increase in inventories		(257)	(881)
Increase in trade and other receivables		(1,926)	(2,263)
Increase in trade and other payables		4,444	904
Net movement in working capital		2,261	(2,240)
Interest paid		(1,380)	(1,395)
Preference dividends paid		(9)	(9)
Income taxes paid		(3,020)	(2,742)
Net cash flows from operating activities		21,219	22,388
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(11,001)	(8,513)
Investment in intangible assets		(319)	(805)
Deposit interest received		168	112
Net proceeds from disposal of fixed assets		7	6
Net cash flows used in investing activities		(11,145)	(9,200)
CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividends paid		(5,453)	(5,178)
Dividends paid to non-controlling interest		(154)	(101)
Repayment of lease liabilities		(206)	(297)
Net cash flows used in financing activities		(5,813)	(5,576)
Net increase in cash and cash equivalents		4,261	7,612
Cash and cash equivalents at beginning of year		43,136	35,520
Effect of foreign exchange rates		-	4
Cash and cash equivalents at end of year		47,397	43,136

Notes to the accounts

Year ended 30 September 2022

1.   Basis of Preparation

The consolidated financial statements of Jersey Electricity plc, for the year ended 30 September 2022, 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).  This is consistent with the accounting policies in the 30 September 2021 annual report and accounts and the 31 March 2022 interim report.

While the financial information included in this summary 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. Full financial statements that comply with IFRS have additionally been published on our website; www.jec.co.uk.

Segmental information
Revenue and profit information are analysed between the business segments as follows:
	2022	2022	2022		2021	2021	2021
	External	Internal	Total		External	Internal	Total
	£000	£000	£000		£000	£000	£000
Revenue
Energy	89,683	100	89,783		89,780	100	89,880
Building Services	3,365	780	4,145		3,399	645	4,044
Retail	18,695	41	18,736		19,808	68	19,876
Property	2,345	639	2,984		2,304	645	2,949
Other*	3,333	625	3,958		3,317	945	4,262
	117,421	2,185	119,606		118,608	2,403	121,011
Intergroup elimination			(2,185)				(2,403)
Revenue			117,421				118,608
Operating profit
Energy			7,502				10,693
Building Services			266				217
Retail			1,174				1,533
Property			1,436				1,393
Other*			508				622
			10,886				14,458
Revaluation of investment properties			1,020				6,055
Operating profit			11,906				20,513

*Other segment includes the divisions of Jersey Energy and Jendev as well as Jersey Deep Freeze Limited, the Group's sole subsidiary.

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

The revaluation of investment properties is shown separately from Property operating profit as this income is reflected solely by a movement in reserves.

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