REG - Jersey Electricity - Half Yearly Report <Origin Href="QuoteRef">JLEC.L</Origin>

Jersey ElectricityAnnouncement

15/07/2015 19:09

RNS Number : 1051O
Jersey Electricity PLC
22 May 2015
JerseyElectricity plc  
 Interim Management Report
 for the six months ended 31 March2015
  
The Board approved at a meeting on 22 May 2015 the Interim Management Report for the six months ended 31 March 2015 and declared an interim dividend of 5.25pcompared to 5.00p for 2014. The dividend will be paid on 30 June 2015 to those shareholders registered in the records of the Company on 5 June 2015.
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 2015 has not been audited or reviewed by our external auditors nor have the results for the equivalent period in 2014. The results for the year ended 30 September 2014 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
22 May 2015
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 2015
Financial Summary
6 months
2015
6 months
2014
Electricity Sales in kWh (000)
357,362
353,729
Revenue
55.8m
55.0m
Profit before tax pre-exceptional items
 8.0m
 4.8m
Profit in Energy business 
 7.4m
 3.6m
Earnings per share pre-exceptional items 
20.75p
12.46p
Final dividend paid per ordinary share
7.20p
 6.80p 
Proposed interim dividend per share 
 5.25p
 5.00p
Net Debt
21.9m
19.5m
Overall Trading Performance
Group revenue, at 55.8m, was 2% higher for the first half year of 2015 than the same period in 2014 and profit before tax, pre-exceptional items, was 8.0m in the first half of 2015 against 4.8m in the equivalent period last year. This returns profit to 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 decreased by 4.1m to 35.7m due mainly to the reduced use of oil for on-island generation in our Energy business because of the commissioning of a new submarine cable to France in September 2014. Operating expenses at 11.4m were 1.1m above last year with an increase of 1.0m in depreciation charges, associated mainly with the commissioning of our new subsea cable. In the corresponding period last year we had exceptional costs of 0.6m and 1.1m incurred in restructuring our Retail operation and selling the shareholding in Foreshore, our data hosting joint venture, respectively. Profit before tax in 2014 was 3.1m post such exceptional costs. Earnings per share, pre-exceptional costs, rose to 20.75p from 12.46p in 2014. In 2014 the post-exceptional costs earnings per share figure was 7.36p. Net debt on the balance sheet at 31 March 2015 was 21.9m (2014: 19.5m) with the year-on-year rise driven mainly by our continued investment in infrastructure assets in our Energy business. At the last year end a provision for 1.8m was established for a likely repair to the subsea cable between Jersey and Guernsey. This preventative repair was successfully performed during January with the cost fully covered by the provision. 
Energy Division
Unit sales of electricity rose by 1%, from 354m to 357m kWh, compared with the same period in the prior year. Mild weather, compared with long-term average temperatures, has been experienced in the first half of the last two financial years, resulting in a reduced use of electricity primarily in the heating of residential properties. Revenues in our Energy Division rose by 2% from 44.5m to 45.5m as a result of the increased unit sales and the small rise in tariffs in April 2014. Operating profit rose in Energy to 7.4m from 3.6m in the same period last year. As reported previously, until we installed a new submarine cable to France, we were constrained on importation capacity and reliant on a heavier mix of more expensive on-island oil-fired generation, particularly in winter, when volumes are higher. The increase in Energy profit in this half year is driven by a combination of less use of oil and a higher level of invested capital on which we need to achieve a sustainable return. We imported 94% of our on-Island requirement from France (up from 75% in 2014) and only generated 2% of our electricity in Jersey (compared to 20% last year). The remaining 4% (2014: 5%) of our electricity came from the Energy from Waste plant, owned by the States of Jersey.
Investment in Infrastructure
The N3 subsea cable to France was successfully commissioned in late September 2014 ahead of schedule and the cable network has generally performed well in the early post-commissioning period where problems are more likely to surface. The N3 network was out of service for 8 days during March when a technical problem occurred with a joint on the land cable in France but this was successfully resolved at no cost to the Company and without any disruption to customer supplies in Jersey. The original projected cost of N3 was 70m but the final cost was closer to 64m including the capitalisation of associated financing costs. The project was a joint one between Jersey Electricity and Guernsey Electricity and the net cost to the Company was in the region of 48m. 
 
Capital expenditure was 9.2m in the first 6 months of the financial year, with the most material spend being on final contractor payments for the N3 project. We are moving forward with plans to install an additional undersea supply cable to France known as Normandie 1 (N1). The 27km, 100MW cable is a direct replacement for EDF1, Jersey's first subsea cable installed in 1984and which came to the end of its life in June 2012 after 28 years' service. The project, expected to cost in the region of 40m, is a joint venture with Guernsey Electricity as partners in the Channel Islands Electricity Grid. We expect to lift the old cable from the seabed before the installation of N1. Tenders for the manufacture of N1 are currently being considered. Planning permission in both France and Jersey is nearing completion and if there are no delays, the installation of N1 is scheduled for 2016/17.
Non-energy performance
Trading conditions remain challenging for our other business units. Retailing year-on-year revenue, as expected, fell by 12% because of a restructuring of this business unit as reported last year and it is now trading from a smaller footprint.Encouragingly profitability improved to 0.3m from 0.1m. Revenue remained at 1.0m for our Property portfolio but profit rose by 0.1m to 0.8m as maintenance spend was lower than in the corresponding period last year. Our Building Services business saw a 0.7m increase in revenue to 2.3m but profitability remained around breakeven with the business currently undergoing a restructuring. Our remaining business units performed well but produced profits of 0.3m being 0.1m lower than in 2014 as Jendev is currently undergoing a period of upgrade and development of its utility billing product. 
Forward hedging of electricity and foreign exchange and customer tariffs
Our tariffs to customers continue to remain competitive with other jurisdictions and the restoration of additional capacity between Jersey and France from September 2014, combined with our hedging programme, should enable us to continue to deliver stable pricing for our customers. Our electricity purchase requirements are materially hedged for the period 2015-18. 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 volatility in foreign exchange in the last six months which is why we seek to largely eliminate exposure. This has resulted in a fair value reduction of 4.4m (net of tax) against our Other Reserves due to the current strength of Sterling against the Euro. 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. 
Debt and financing
The net debt figure, as expected, rose to 21.9m at 31 March 2015 compared to 19.5m at the last year end. If the N1 cable project proceeds as anticipated we have a bank facility in place to fund such investment.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 2015 of 5.25p (2014: 5.00p). We continue to aim to deliver sustained real growth each year over the medium-term. The final dividend for 2014 of 7.20p, 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. 
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 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); and
(d) this half yearly financial report contains certain forward-looking statements with respect to theoperations, performance and financial condition of the Company. 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 22 May 2015
 
 
INVESTOR TIMETABLE FOR 2015
5 June
Record date for interim ordinary dividend
30 June
Interim ordinary dividend for year ending 30 September 2015
1 July
Payment date for preference share dividends 
18 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

2015
000

2014
000

2014
000








Revenue
2

55,840

54,954

98,443








Cost of sales


(35,705)

(39,826)

(68,468)
Gross profit


20,135

15,128

29,975








Revaluation of investment properties


-

-

145
Operating expenses


(11,408)

(10,327)

(20,079)








Group operating profit before exceptional items 


8,727

4,801

10,041
Exceptional items - disposal of investment 


-

(1,100)

(1,178)
 - provision for subsea cable repair


-

-

(1,800)
 - restructuring costs in retail business


-

(576)

(570)








Group operating profit
2

8,727

3,125

6,493








Interest receivable/(payable)


15

7

(26)
Finance costs


(786)

(28)

(11)








Profit from operations before taxation


7,956

3,104

6,456








Taxation
3

(1,583)

(834)

(1,478)








Profit from operations after taxation


6,373

2,270

4,978
































Attributable to:







Owners of the Company


6,357

2,256

4,932
Non-controlling interests


16

14

46








Profit for the period/year attributable to the equity holders of the parent Company


6,373

2,270

4,978








Earnings per share







 - basic and diluted


20.75p

7.36p

16.10p








Dividends per share







 - paid 
4

7.20p

6.80p

11.80p
 - proposed
4

5.25p

5.00p

7.20p
Condensed Consolidated Statement of Comprehensive Income (Unaudited)



Six months ended
31 March
Six months ended
31 March
Year ended
30 September



2015
000

2014
000

2014
000








Profit for the period/year


6,373

2,270

4,978








Items that will not be reclassified subsequently to
profit or loss:







Actuarial gain/(loss) on defined benefit scheme 


1,329

2,575

(392)
Income tax relating to items not reclassified


(266)

(515)

78



1,063

2,060

(314)








Items that may be reclassified subsequently to profit
or loss:







Fair value loss on cash flow hedges 


(5,487)

(730)

(4,567)
Income tax relating to items that may be reclassified


1,097

161

913



(4,390)

(569)

(3,654)








Total comprehensive income for the period/year


3,046

3,761

1,010








Attributable to:







Owners of the Company


3,030

3,747

964
Non-controlling interests 


16

14

46



3,046

3,761

1,010
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 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 by Jersey Electricity plc 
-
-
-
-
(2,206)
(2,206)
At 31 March 2015
1,532
5,270
(103)
(7,904)
148,092
146,887














At 1 October 2013
1,532
5,270
(58)
139
141,925
148,808
Total recognised income and expense for the period
-
-
-
-
2,256
2,256
Unrealised loss on hedges (net of tax)
-
-
-
(569)
-
(569)
Actuarial gain on defined benefit scheme (net of tax)
-
-
-
-
2,060
2,060
Equity dividends paid by Jersey Electricity plc 
-
-
-
-
(2,083)
(2,083)
At 31 March 2014
1,532
5,270
(58)
(430)
144,158
150,472














At 1 October 2013
1,532
5,270
(58)
139
141,925
148,808
Total recognised income and expense for the period
-
-
-
-
4,932
4,932
Amortisation of employee share scheme
-
-
22
-
(22)
-
Unrealised loss on hedges (net of tax)
-
-
-
(3,654)
-
(3,654)
Actuarial loss on defined benefit scheme (net of tax)
-
-
-
-
(314)
(314)
Equity dividends paid by Jersey Electricity plc 
-
-
-
-
(3,643)
(3,643)
At 30 September 2014
1,532
5,270
(36)
(3,515)
142,878
146,129







Other reserves consist of foreign exchange hedge reserves and oil hedge reserves.
Condensed Consolidated Balance Sheet (Unaudited)

Note

As at 31 March
As at 31 March
As at 30 September



2015
000

2014
000

2014
000
Non-current assets







Intangible assets


80

77

20
Property, plant and equipment


183,377

170,839

184,846
Investment property


20,505

20,360

20,505
Other investments 


5

5

5
Retirement benefit surplus


-

1,557

-
















Total non-current assets


203,967

192,838

205,376








Current assets







Inventories


6,173

9,260

7,334
Trade and other receivables


20,081

21,028

16,750
Derivative financial instruments


-

242

-
Cash and cash equivalents


8,106

11,456

9,776
















Total current assets


34,360

41,986

33,860








Total assets


238,327

234,824

239,236








Current liabilities







Trade and other payables


16,113

18,774

24,113
Derivative financial instruments
6

9,733

724

4,246
Current tax payable


-

412

-
















Total current liabilities


25,846

19,910

28,359
Net current assets


8,514

22,076

5,501








Non-current liabilities







Trade and other payables


19,540

18,057

18,279
Retirement benefit deficit


193

-

1,372
Financial liabilities - preference shares


235

235

235
Borrowings


30,000

31,000

30,000
Deferred tax liabilities


15,603

15,141

14,852
















Total non-current liabilities


65,571

64,433

64,738








Total liabilities


91,417

84,343

93,097








Net assets


146,910

150,481

146,139








Equity







Share capital


1,532

1,532

1,532
Revaluation reserve


5,270

5,270

5,270
ESOP reserve


(103)

(58)

(36)
Other reserves


(7,904)

(430)

(3,515)
Retained earnings 


148,092

144,158

142,878
















Equity attributable to owners of the Company


146,887

150,472

146,129








Non-controlling interests


23

9

10








Total equity


146,910

150,481

146,139
Condensed Consolidated Cash Flow Statement (Unaudited)


Six months ended
31 March
Six months ended
31 March
Year ended
30 September

Note
2015
000

2014
000

2014
000
Cash flows from operating activities













Operating profit before exceptional items

8,727

4,801

10,041
Depreciation and amortisation charges

4,865

3,961

8,259
Profit on revaluation of investment property

-

-

(145)
Pension operating charge less contributions paid

150

-

(38)
Adjustment for foreign exchange hedges

-

61

63
Profit/(loss) on sale of fixed assets

4

3

(11)
Restructuring costs

-

(476)

-














Operating cash flows before movements in working capital

13,746

8,350

18,169







Decrease in inventories 

1,160

174

2,100
Increase in trade and other receivables 

(3,328)

(5,233)

(252)
(Decrease)/increase in trade and other payables

(1,016)

4,511

513
Interest paid

(767)

(17)

(28)
Preference dividends paid

(4)

(4)

(9)
Cash amounts relating to exceptional items

-

-

(353)














Net cash flows generated from operating activities

9,791

7,781

20,140







Cash flows from investing activities













Purchase of property, plant and equipment

(9,160)

(19,920)

(33,048)
Investment in intangible assets

(67)

(51)

(6)
Net proceeds from disposal of investment

-

-

1,579
Net proceeds from disposal of fixed assets

-

3

16














Net cash used in investing activities

(9,227)

(19,968)

(31,459)







Cash flows from financing activities













Equity dividends paid
4
(2,234)

(2,155)

(3,703)
Repayment of borrowings

-

-

(10,000)
Proceeds from borrowings

-

21,000

30,000














Net cash (used in)/from financing activities

(2,234)

18,845

16,297







Net (decrease)/increase in cash and cash equivalents

(1,670)

6,658

4,978
Cash and cash equivalents at beginning of period/year

9,776

4,798

4,798







Net cash and cash equivalents at end of period/year

8,106

11,456

9,776
Notes to the Condensed Interim Accounts(Unaudited)
1.  Accounting policies
Basis of preparation
The interim accounts for the six months ended 31 March 2015 have been prepared on the basis of the accounting policies set out in the 30 September 2014 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 annual 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 2015
31 March 2014
30 September 2014

External
Internal
Total
External
Internal
Total
External
Internal
Total
Revenue
000
000
000
000
000
000
000
000
000










Energy
45,510 
46 
45,556 
44,499
 72
44,571
79,459
141
79,600
Building Services
2,251 
289 
2,540 
1,587
361
1,948
3,294
907
4,201
Retail
5,891 
16 
5,907 
6,669
22
6,691
11,414
33
11,447
Property
962 
299 
1,261 
1,000
316
1,316
1,957
616
2,573
Other
1,226 
378 
1,604 
1,199
453
1,652
2,319
878
3,197











55,840 
1,028 
56,868 
54,954
1,224
56,178
98,443
2,575
101,018
Inter-segment elimination


(1,028)


(1,224)


(2,575)



55,840


54,954


98,443










Operating profit









Energy


7,354 


3,631


7,952
Building Services


(4)


10


(44)
Retail


286 


86


(86)
Property


798 


684


1,415
Other


293 


390


659
Operating profit before property revaluation


8,727 


4,801


9,896
Gain on revaluation of investment properties


-


-


145
Exceptional items :









Disposal of investment


-


(1,100)


(1,178)
Provision for subsea cable repair


-


-


(1,800)
Restructuring costs in retail business


-


(576)


(570)










Operating profit 


8,727


3,125


6,493
Notes to the Condensed Interim Accounts (Unaudited)
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 2015.
3. Taxation
 Six months ended
 31 March

Year ended
30 September

2015
000

2014
000

2014
000






Current income tax 
-

119

-
Deferred income tax
1,583

715

1,478
Total income tax
1,583

834

1,478
For the period ended 31 March 2015 and subsequent periods, the Company is taxable at the rate applicable to utility companies of 20% (2014: 20%).
4. Dividends

Six months ended
 31 March

Year ended
30 September

2015
000

2014
000

2014
000






Distributions to equity holders and by subsidiaries in the period
2,234

2,155

3,703
 
The distribution to equity holders in respect of the final dividend for 2014 of 2,206,080 (7.20p net of tax per share) was paid on 27 March 2015. Dividends of 28,000 were paid by subsidiaries to minority interests for the six months to 31 March 2015. 
The Directors have declared an interim dividend of 5.25p per share, net of tax (2014: 5.00p) for the six months ended 31 March 2015 to shareholders on the register at the close of business on 5 June 2015. This dividend was approved by the Board on 22 May 2015 and has not been included as a liability at 31 March 2015.
 
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 2015.
Recurring fair value measurements:
Six months Year Ended
Ended 31 March 30 September


2015
000

2014
000


Financial liabilities




Foreign exchange currency hedges
9,733

4,246






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 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 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
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
000
000
000
000
000
000
000
000
000
000











The States of Jersey
3,867
3,793
590
517
561
758
661
773
128
1
JT Group Limited
980
906
173
116
66
29
118
153
-
-
Jersey Post Int Limited 
49
68
0
1
16
15
7
9
-
-
Jersey New Waterworks Ltd
417
439
47
37
55
63
63
56
-
-
The States of Jersey is the Company'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. Foreshore Limited is no longer considered a related party due to the disposal of our investment during the year ended 30 September 2014.

This information is provided by RNS
The company news service from the London Stock Exchange
  END
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