REG - Jersey Electricity - Half-year Report <Origin Href="QuoteRef">JLEC.L</Origin>
RNS Number : 1195YJersey Electricity PLC13 May 2016JerseyElectricity plc
Interim Management Report
for the six months ended 31 March2016
The Board approved at a meeting on 12 May 2016 the Interim Management Report for the six months ended 31 March 2016 and declared an interim dividend of 5.50pcompared to 5.25p for 2015. The dividend will be paid on 30 June 2016 to those shareholders registered in the records of the Company on 3 June 2016.
The Interim Management Report is attached and will be available to the public on the Company's website www.jec.co.uk/about-us/investor-relations/financial-figures-and-reports.
The Interim Management Report for 2016 has not been audited or reviewed by our external auditors nor have the results for the equivalent period in 2015. The results for the year ended 30 September 2015 have been extracted from the statutory accounts which had an unqualified audit opinion.
M.P. Magee P.J. Routier
Finance Director Company Secretary
Direct telephone number : 01534 505201 Direct telephone number : 01534 505253
Email : mmagee@jec.co.uk Email : proutier@jec.co.uk
13 May 2016
The Powerhouse,
PO Box 45,
Queens Road,
St Helier,
Jersey JE4 8NY
Jersey Electricity plc
Unaudited Interim Management Report
for the six months to 31 March 2016
Financial Summary
6 months
2016
6 months
2015
Electricity Sales in kWh (000)
351,942
357,362
Revenue
57.0m
55.8m
Profit before tax
7.9m
8.0m
Profit in Energy business
6.9m
7.4m
Earnings per share
20.65p
20.75p
Final dividend paid per ordinary share
7.60p
7.20p
Proposed interim dividend per ordinary share
5.50p
5.25p
Net debt
21.1m
21.9m
Overall trading performance
Group revenue, at 57.0m, was 2% higher for the first half year of 2016 than the same period in 2015 with this rise coming from increased activity in the non-Energy business units. Profit before tax was 7.9m being marginally behind the equivalent period last year and remains at a level commensurate with a sustainable rate of return typical for a regulated utility and at a quantum needed to maintain our continued investment in infrastructure. Cost of sales increased by 0.9m to 36.6m due mainly to additional costs in the non-Energy business units associated with the aforementioned rise in revenue. Operating expenses at 11.9m were 0.4m above last year with an increase in depreciation charges and pension costs being the primary drivers. Earnings per share fell to 20.65p from 20.75p in 2015. Net debt on the balance sheet at 31 March 2016 was 21.1m (2015: 21.9m) but will rise in the second half driven by our continued investment in infrastructure assets in our Energy business.
Energy Division
Unit sales of electricity fell by 1.5%, from 357m to 352m kWh, compared with the same period in the prior year. Mild weather, compared with long-term average temperatures, was experienced in the first half of this financial year, resulting in a reduced use of electricity primarily in the heating of residential properties. Revenues in our Energy Division at 45.5m remained at the same level as 2015 because although unit sales were lower the level of activity in ad-hoc rechargeable work was much higher. Operating profit in Energy at 6.9m was 0.5m lower than in the same period last year with lower unit sales, higher depreciation, increased maintenance and higher IAS19 pension costs being the reasons. We imported 90% of our on-Island requirement from France (2015: 94%) and generated 4% of our electricity in Jersey (2015: 2%). Additional training for power station staff was the main reason for the higher level of generation/lower level of importation between 2016 and the previous year. The remaining 6% (2015: 4%) of our electricity came from the Energy from Waste plant, owned by the States of Jersey.
Investment in infrastructure
Capital expenditure was 11.5m in the first 6 months of the financial year. The main area of spend was for the N1 subsea cable which is currently being manufactured in Italy and is expected to be laid between Jersey and France later in 2016 and be commissioned by early 2017. The previous EDF1 cable which it replaces was successfully removed from the seabed during Spring 2016. N1 is a joint project between Jersey Electricity and Guernsey Electricity with a budgeted cost of around 40m and we are pleased with the progress made to date in terms of both timing and cost. We are also continuing with the preparation of the site for our new West of St Helier Primary sub-station which has an estimated cost of 17m and is planned to be commissioned in 2018.
Non-Energy performance
Year-on-year revenue in our retailing business, Powerhouse.je, rose by 9% post the restructuring of this business unit in recent years to 6.4m (2015: 5.9m) and encouragingly profitability improved to 0.4m from 0.3m in what is a competitive marketplace, both locally and off-island. Revenue rose by 0.1m to 1.3m for our Property portfolio and profit rose to 0.9m (2015: 0.8m) due to improved rental yield. JEBS, our contracting and business services unit, saw a 0.5m increase in revenue to 3.1m and moved from a breakeven position in 2015 to a profit of 0.1m despite it being a challenge to recruit new skilled staff in a tight local market. Our remaining business units were on target and produced profits of 0.3m being at the same overall level as in 2015.
Forward hedging of electricity and foreign exchange and customer tariffs
Our goal, through use of our power purchase contract and associated hedging policies, continues to be the delivery of competitive and stable customer tariffs, along with secure low-carbon electricity supplies whilst maintaining an appropriate, fair return for our shareholders. Our electricity purchases are materially hedged for the period 2016-19. As these are contractually denominated in the Euro we enter into foreign currency contracts to eliminate a large percentage of exposure to aid tariff planning. We have seen significant volatility in foreign exchange in the last six months against the Euro largely associated with the impending UK vote as to whether to remain within the EU, which is why we seek to largely eliminate exposure. This has resulted in a fair value increase of 5.6m (net of tax) as shown in the Condensed Consolidated Statement of Comprehensive Income, and a resultant rise in our balance sheet net assets, whereas last year we saw a movement in the opposite direction.
Debt and financing
The net debt figure, as expected, rose to 21.1m at 31 March 2016 compared to 17.5m at the last year end and we have additional bank facilities in place to fund our continued forecast investment spend.It is the aim of the Board that Jersey Electricity continues to maintain a prudent level of debt in the context of our overall balance sheet, which remains strong.
Dividend
Your Board proposes to pay an interim net dividend for 2016 of 5.50p (2015: 5.25p). We continue to aim to deliver sustained real growth each year over the medium-term. The final dividend for 2015 of 7.60p, paid in late March in respect of the last financial year, was an increase of 6% on the previous year.
Risk and outlook
The principal risks and uncertainties identified in our last Annual Report have not materially altered in the interim period. However as mentioned previously in the text above the potential exit of the UK from the EU has created recent volatility in foreign exchange markets. If the vote on 23 June results in a planned exit it is likely that such volatility would continue and may influence our longer-term tariff planning strategy (albeit we are largely hedged in the short-term).
Your Board is satisfied that Jersey Electricity plc has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, we continue to adopt the going concern basis in preparing the condensed financial statements.
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 Directors Statement 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 Directors Statement 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); and
(d) this half yearly interim report contains certain forward-looking statements with respect to theoperations, performance and financial condition of the Group. By their nature, these statements involveuncertainty since future events and circumstances can cause results and developments to differ materiallyfrom those anticipated. The forward-looking statements reflect knowledge and information available atthe date of preparation of this half yearly financial report and the Company undertakes no obligation toupdate these forward-looking statements. Nothing in this half yearly financial report should be construedas a profit forecast.
C.J. AMBLER - Chief Executive M.P.MAGEE - Finance Director 13 May 2016
INVESTOR TIMETABLE FOR 2016
3 June
Record date for interim ordinary dividend
30 June
Interim ordinary dividend for year ending 30 September 2016
1 July
Payment date for preference share dividends
14 December
Preliminary announcement of full year results
Condensed Consolidated Income Statement (Unaudited)
Six months ended
31 March
Six months ended
31 March
Year ended
30 September
Note
2016
000
2015
000
2015
000
Revenue
2
57,036
55,840
100,479
Cost of sales
(36,610)
(35,705)
(64,604)
Gross profit
20,426
20,135
35,875
Revaluation of investment properties
-
-
(45)
Operating expenses
(11,851)
(11,408)
(21,931)
Group operating profit before exceptional items
8,575
8,727
13,899
Exceptional items - RTE outage compensation
-
-
479
- reversal of EDF1 related provision
-
-
310
Group operating profit
2
8,575
8,727
14,688
Finance income
19
15
36
Finance expense
(668)
(786)
(1,555)
Profit from operations before taxation
7,926
7,956
13,169
Taxation
3
(1,573)
(1,583)
(2,397)
Profit from operations after taxation
6,353
6,373
10,772
Attributable to:
Owners of the Company
6,326
6,357
10,725
Non-controlling interests
27
16
47
Profit for the period/year attributable to the equity holders of the parent Company
6,353
6,373
10,772
Earnings per share
- basic and diluted
20.65
20.75
35.00
Dividends per share
- paid
4
7.60
7.20
12.45
- proposed
4
5.50
5.25
7.60
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
Six months ended
31 March
Six months ended
31 March
Year ended
30 September
2016
000
2015
000
2015
000
Profit for the period/year
6,353
6,373
10,772
Items that will not be reclassified subsequently to
profit or loss:
Actuarial gain/(loss) on defined benefit scheme
1,595
1,329
(5,706)
Income tax relating to items not reclassified
(319)
(266)
1,141
1,276
1,063
(4,565)
Items that may be reclassified subsequently to profit
or loss:
Fair value gain/(loss) on cash flow hedges
6,979
(5,486)
(874)
Income tax relating to items that may be reclassified
(1,396)
1,097
175
5,583
(4,389)
(699)
Total comprehensive income for the period/year
13,212
3,047
5,508
Attributable to:
Owners of the Company
13,185
3,031
5,461
Non-controlling interests
27
16
47
13,212
3,047
5,508
Condensed Consolidated Statement of Changes in Equity(Unaudited)
Share
Revaluation
ESOP
Other
Retained
capital
reserve
reserve
reserves
earnings
Total
000
000
000
000
000
000
At 1 October 2015
1,532
5,270
(97)
(4,214)
145,223
147,714
Total recognised income and expense for the period
-
-
-
-
6,326
6,326
Additional shares for employee share scheme
-
-
(114)
-
-
(114)
Amortisation of employee share scheme
-
-
20
-
-
20
Unrealised gain on hedges (net of tax)
-
-
-
5,583
-
5,583
Actuarial gain on defined benefit scheme (net of tax)
-
-
-
-
1,276
1,276
Equity dividends paid
-
-
-
-
(2,329)
(2,329)
At 31 March 2016
1,532
5,270
(191)
1,369
150,496
158,476
At 1 October 2014
1,532
5,270
(36)
(3,515)
142,878
146,129
Total recognised income and expense for the period
-
-
-
-
6,357
6,357
Additional shares for employee share scheme
-
-
(93)
-
-
(93)
Amortisation of employee share scheme
-
-
26
-
-
26
Unrealised loss on hedges (net of tax)
-
-
-
(4,389)
-
(4,389)
Actuarial gain on defined benefit scheme (net of tax)
-
-
-
-
1,063
1,063
Equity dividends paid
-
-
-
-
(2,206)
(2,206)
At 31 March 2015
1,532
5,270
(103)
(7,904)
148,092
146,887
At 1 October 2014
1,532
5,270
(36)
(3,515)
142,878
146,129
Total recognised income and expense for the period
-
-
-
-
10,725
10,725
Additional shares for employee share scheme
-
-
(112)
-
-
(112)
Amortisation of employee share scheme
-
-
51
-
-
51
Unrealised loss on hedges (net of tax)
-
-
-
(699)
-
(699)
Actuarial loss on defined benefit scheme (net of tax)
-
-
-
-
(4,565)
(4,565)
Equity dividends paid
-
-
-
-
(3,815)
(3,815)
At 30 September 2015
1,532
5,270
(97)
(4,214)
145,223
147,714
Condensed Consolidated Balance Sheet (Unaudited)
Note
As at 31 March
As at 31 March
As at 30 September
2016
000
2015
000
2015
000
Non-current assets
Intangible assets
198
80
227
Property, plant and equipment
192,780
183,377
187,845
Investment property
20,460
20,505
20,460
Secured loan accounts
708
731
731
Other investments
5
5
5
Total non-current assets
214,151
204,698
209,268
Current assets
Inventories
5,853
6,173
6,239
Trade and other receivables
19,038
19,350
14,777
Derivative financial instruments
6
4,423
-
1,194
Cash and cash equivalents
8,905
8,106
12,503
Total current assets
38,219
33,629
34,713
Total assets
252,370
238,327
243,981
Current liabilities
Trade and other payables
15,620
16,113
17,597
Derivative financial instruments
6
2,564
9,733
6,314
Current tax payable
619
-
404
Total current liabilities
18,803
25,846
24,315
Net current assets
19,416
7,783
10,398
Non-current liabilities
Trade and other payables
20,930
19,540
18,884
Retirement benefit deficit
5,696
193
7,291
Financial liabilities - preference shares
235
235
235
Borrowings
30,000
30,000
30,000
Deferred tax liabilities
18,185
15,603
15,529
Total non-current liabilities
75,046
65,571
71,939
Total liabilities
93,849
91,417
96,254
Net assets
158,521
146,910
147,727
Equity
Share capital
1,532
1,532
1,532
Revaluation reserve
5,270
5,270
5,270
ESOP reserve
(191)
(103)
(97)
Other reserves
1,369
(7,904)
(4,214)
Retained earnings
150,496
148,092
145,223
Equity attributable to owners of the Company
158,476
146,887
147,714
Non-controlling interests
45
23
13
Total equity
158,521
146,910
147,727
Condensed Consolidated Cash Flow Statement (Unaudited)
ended31 MarchNotes to the Condensed Interim Accounts(Unaudited)
1. Accounting policies
Basis of preparation
The interim financial statements for the six months ended 31 March 2016 have been prepared on the basis of the accounting policies set out in the 30 September 2015 annual report and accounts using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting'.
Jersey Electricity plc has considerable financial resources and, as a consequence, the directors believe that it 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. Thus they continue to adopt the going concern basis of accounting in preparing the interim financial statements.
2. Revenue and profit
The contributions of the various activities to Group revenue and profit are listed below:
Six months ended Six months ended Year ended
31 March 2016
31 March 2015
30 September 2015
External
Internal
Total
External
Internal
Total
External
Internal
Total
Revenue
000
000
000
000
000
000
000
000
000
Energy
45,462
72
45,534
45,510
46
45,556
80,698
129
80,827
Building Services
2,772
280
3,052
2,251
289
2,540
4,148
808
4,956
Retail
6,413
20
6,433
5,891
16
5,907
11,087
40
11,127
Property
1,046
299
1,345
962
299
1,261
2,084
599
2,683
Other
1,343
393
1,736
1,226
378
1,604
2,462
777
3,239
57,036
1,064
58,100
55,840
1,028
56,868
100,479
2,353
102,832
Inter-segment elimination
(1,064)
(1,028)
(2,353)
57,036
55,840
100,479
Operating profit
Energy
6,904
7,354
11,514
Building Services
116
(4)
(58)
Retail
411
286
334
Property
870
798
1,562
Other
274
293
592
8,575
8,727
13,944
Revaluation of investment properties
-
-
(45)
Exceptional items :
RTE outage compensation
-
-
479
Impact of reversal of EDF1 related provision
-
-
310
Operating profit
8,575
8,727
14,688
Materially, all of the Group's operations are conducted within the Channel Islands. All transfers between divisions are at an arm's-length basis. The assets and liabilities of the Group are not reported on as there has been no significant movement in the values in the six months to 31 March 2016.
Notes to the Condensed Interim Accounts (Unaudited)
3. Taxation
Six months ended
31 March
Year ended
30 September
2016
000
2015
000
2015
000
Current income tax
215
-
404
Deferred income tax
1,358
1,583
1,993
Total income tax
1,573
1,583
2,397
For the period ended 31 March 2016 and subsequent periods, the Company is taxable at the rate applicable to utility companies of 20%.
4. Dividends
Six months ended
31 March
Year ended
30 September
2016
000
2015
000
2015
000
Distributions to equity holders
2,329
2,206
3,815
The distribution to equity holders in respect of the final dividend for 2015 of 2,329,000 (7.60p net of tax per share) was paid on 29 March 2016.
The Directors have declared an interim dividend of 5.50p per share, net of tax (2015: 5.25p) for the six months ended 31 March 2016 to shareholders on the register at the close of business on 3 June 2016. This dividend was approved by the Board on 12 May 2016 and has not been included as a liability at 31 March 2016.
5. 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 consideration has also been given as to whether there have been any other events that would significantly affect the pension liabilities.
6. Financial instruments
The Group held the following derivative contracts, classified as level 2 financial instruments at 31 March 2016.
Recurring fair value measurements:
Six months Year Ended
Ended 31 March 30 September
Foreign exchange currency hedges
2016
000
2015
000
Derivative assets
4,423
1,194
Derivative liabilities
(2,564)
(6,314)
Notes to the Condensed Interim Accounts (Unaudited)
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy. This hierarchy is based on the underlying assumptions used to determine the fair value measurement as a whole and is categorised as follows:
Level 1 financial instruments are those with values that are immediately comparable to quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 financial instruments are those with values that are determined using valuation techniques for which the basic assumptions used to calculate fair value are directly or indirectly observable (such as to readily available market prices);
Level 3 financial instruments are shown at values that are determined by assumptions that are not based on observable market data (unobservable inputs).
The derivative contracts for foreign currency shown above are classified as level 2 financial instruments and are valued using a discounted cash flow valuation technique. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.
7. Related party transactionsThe 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 and the Company is in dispute with its landlord, the States of Jersey, concerning the outstanding rent review. The information usually required by IAS 37 Provisions, 'Contingent liabilities and contingent assets', is not disclosed on the grounds that it may prejudice the outcome of the dispute.
Value of electricity services supplied by Jersey Electricity
Value of goods & other services supplied by Jersey Electricity
Value of goods & services purchased by Jersey Electricity
Amounts due to Jersey Electricity
Amounts due by Jersey Electricity
Six months ended 31 March
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
000
000
000
000
000
000
000
000
000
000
The States of Jersey
3,761
3,867
725
590
1,102
561
732
661
1
128
JT Group Limited
980
980
268
173
19
66
157
118
3
-
Jersey Post Int Limited
58
49
-
-
17
16
7
7
-
-
Jersey New Waterworks Ltd
409
417
74
47
64
55
63
63
7
-
The States of Jersey is the Group's majority and controlling shareholder. Jersey New Waterworks is majority owned and controlled by the States of Jersey. JT Group Limited and Jersey Post International Limited are both wholly owned by the States of Jersey. All transactions are undertaken at an arm's length basis.
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR LLFIEESIFLIR
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