REG - Jersey Electricity - Preliminary Announcement of Annual Results
JERSEY ELECTRICITY plc Preliminary Announcement of Annual Results
Year Ended 30 September 2019
At a meeting of the Board of Directors held on 19 December 2019, the final accounts for the Group for the year to 30 September 2019 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 2019 or 2018, but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Jersey Registrar of Companies, and those for 2019 will be delivered in early 2020. The auditor has reported on the accounts for both years and their reports were unmodified.
A final dividend of 9.25p on the Ordinary and 'A' Ordinary shares in respect of the year ended 30 September 2019 was recommended (2018: 8.80p). Together with the interim dividend of 6.45p (2018: 6.10p) the proposed total dividend declared for the year was 15.70p on each share (2018: 14.90p).
The final dividend will be paid on 26 March 2020 to those shareholders registered in the books of the Company on 21 February 2020. A dividend on the 5% cumulative participating preference shares of 1.5% (2018: 1.5%) payable on 1 July 2020 was also recommended.
The Annual General Meeting of the Company will be held on 5 March 2020 at 12.30 pm at the Powerhouse, Queens Road, St Helier, Jersey.
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
19 December 2019
The Powerhouse
PO Box 45
Queens Road
St Helier
Jersey JE4 8NY
JERSEY ELECTRICITY plc
Preliminary Announcement of Annual Results
Year ended 30 September 2019
The Chairman, Phil Austin, comments:
"It was a privilege to be appointed Chairman of Jersey Electricity at the AGM in February. I would like to offer my sincere thanks to my predecessor Geoffrey Grime for his hard work and commitment during 10 years as Chairman throughout which he helped steer the Company through a significant and sustained programme of investment. That investment is today bearing fruit for customers in terms of supply reliability, competitive pricing and carbon reduction, and for shareholders in terms of sustained growth in dividends.
Jersey now benefits from an energy platform that is substantially 'future proofed' for years to come, and the business is strategically well positioned to meet the challenges and opportunities ahead.
Group revenue for 2018/19 was £110.3m, 3% higher than last year, however, profits were impacted by the mild winter which saw electricity unit sales fall 1% to 627 million from 634 million. Profit before tax fell 3% to £14.8m, down from the £15.3m achieved last year. The Board has recommended a final dividend for this year of 9.25p, a 5% rise on the previous year, payable on 26 March 2020.
Looking ahead, new technology and digitalisation are major global factors impacting virtually all companies, including utilities, and these have the potential to positively transform the customer experience. We therefore expect new services, technologies and digital to play an increasing role in our business.
Climate change presents us with both challenges and opportunities. While warmer temperatures may have some adverse impact on unit sales of electricity, Jersey Government's declaration of a climate emergency and ambition to push for net zero carbon by 2030 presents us with many opportunities for growing our share of the energy market. Given that electricity is now almost completely decarbonised, the main way the Island will reduce carbon emissions further is by displacing fossil fuels with electricity and energy efficiency. To adapt to this changing landscape we have reset our Vision to 'enable life's essentials and inspire a zero-carbon future' which recognises the importance of working with the community, customers and partners. We have made some key strategic management appointments this year and have also welcomed to the Board a new non-Executive Director in Peter Simon. We held a Board Away Day in March at which we established seven strategic themes to achieve that Vision.
Our core objective, however, remains to serve our customers with secure, affordable and sustainable electricity now and long into the future. Our below inflation 3.5% tariff rise in April 2019 was only our second rise in five years and our tariffs remain very competitive compared with other jurisdictions, including the EU and UK. The electricity we supply is not only virtually completely decarbonised but one third of our imports is already from certificated renewable sources. Furthermore, this year we have invested in local renewables and brought solar PV on to the grid.
As well as performing better than many UK power companies at an operational level, this year we took part in the UK Customer Satisfaction Index (UKCSI), which for the first time has enabled us to benchmark ourselves against UK mainland utilities against various customer service and satisfaction attributes. With an overall rating of 78%, I am very pleased to report that we delivered a solid debut result and materially outperformed UK utilities, which averaged 72%.
These strong performance levels would not be possible without a highly skilled and dedicated team. My thanks go to our Executive and non-Executive Directors and, just as importantly, all colleagues throughout the business for their commitment, hard work and loyalty."
Financial Highlights
2019
2018
Revenue
£110.3m
£106.6m
Profit before tax
£14.8m
£15.3m
Earnings per share
38.42p
39.54p
Dividend paid per share
15.25p
14.50p
Final proposed dividend per share
9.25p
8.80p
Net debt
£5.1m
£14.3m
Group revenue for the year to 30 September 2019 at £110.3m was 3% higher than in the previous financial year. Energy revenues at £86.6m were 5% higher than the £82.3m achieved in 2018. The sale of heavy fuel oil to Guernsey Electricity (amounting to £2.7m) and a 3.5% rise in tariffs from 1 April 2019 were offset by a 1% decrease in the unit sales volumes of electricity due to milder weather. Revenue in the Powerhouse retail business increased by 6% from £14.3m to £15.2m. Revenue in the Property business at £2.3m was at the same level as last year. Revenue from JEBS, our contracting and building services business, fell £1.6m from levels experienced in 2018 to £3.3m as the previous year was influenced by one exceptionally large contract. Revenue in our other businesses remained at £2.9m.
Cost of sales at £69.3m was £3.4m higher than last year with an increase in the imported cost of electricity, the cost associated with the sale of heavy fuel oil to Guernsey Electricity and higher sales activity in the Powerhouse retail business being the main reasons.
Other income was recognised during the year arising from the receipt of a £0.8m rebate for a subsea cable repair in 2014.
Operating expenses at £26.4m were £2.0m higher than 2018 primarily due to a £1.1m increase in the IAS 19 pensions cost as explained in more detail later in this report and an increase of £0.6m in depreciation charges.
Profit before tax for the year to 30 September 2019, at £14.8m, decreased by 3% from £15.3m in 2018 largely due to lower profits in our Energy business. A £0.7m upward revaluation of our investment property portfolio (against £0.3m in 2018) was another material year-on-year movement.
Profits in our Energy business fell from £13.4m in 2018 to £12.3m this year. Unit sales volumes decreased from 634m to 627m kilowatt hours with a milder winter period being the main reason. Adverse foreign exchange, and rising wholesale prices, impacted the cost of imported electricity. Customer tariffs rose by 3.5% in April 2019 yet remained competitive with other jurisdictions. During the year we sold our remaining stock of heavy fuel oil to Guernsey Electricity which produced a profit of around £1.0m. The oil was no longer required post the decommissioning of our legacy on-Island steam plant. We also impaired assets associated with this change of operating regime at a cost similar to the quantum of such profit. In the 2014 financial year, a repair was performed to the subsea cable between Jersey and Guernsey and Jersey Electricity made a contribution of £1.8m towards the total cost. In March 2019 a cash payment of £0.8m was received which in effect was a rebate towards the repair costs. A non-cash pension cost of £1.1m was incurred in the year associated with the granting of an ex-gratia rise in pensions in service.
In the financial year we imported 94% of our requirements from France (2018: 95%) and generated only 0.3% of our electricity on-island at La Collette Power Station (2018: 0.2%). The remaining 6% (2018: 5%) of our electricity was purchased from the local Energy from Waste plant.
The £1.7m profits in our Property division, excluding the impact of investment property revaluation, was £0.1m lower than last year due to higher maintenance and depreciation costs. Our investment property portfolio was revalued upwards this year by £0.7m to £21.2m based on advice from our external consultants who review the position annually, due primarily to the growth in the value of the residential properties that we rent to tenants as yields have increased in Jersey in the last year.
Our Powerhouse retail business saw continued strong growth in sales with profits also improving by 10% to £0.9m in 2019.
JEBS, our contracting and business services unit had a challenging year with a £0.1m loss, against a loss of £0.2m in 2018, and a plan is underway to re-focus, and 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 at a similar level to last year.
Net interest paid in 2019 was £0.1m lower than last year at £1.3m due to interest received on higher cash balances. The taxation charge at £3.0m was £0.2m lower than 2018 due to the decrease in taxable profit.
Group basic and diluted earnings per share fell to 38.42p compared to 39.54p in 2018 due mainly to reduced profitability.
Dividends paid in the year, net of tax, rose by 5%, from 14.50p in 2018 to 15.25p in 2019. The proposed final dividend for this year is 9.25p, a 5% rise on the previous year. Dividend cover, at 2.5 times, was lower than the comparable 2.7 times in 2018.
Net cash inflow from operating activities at £27.7m was £0.7m higher than in 2018 with the impact on working capital from the sale of heavy fuel oil stock being a primary driver. Capital expenditure, at £13.9m was £1.0m lower than £14.9m last year with spend on the St Helier West primary sub-station being the most material project in 2019. The resultant position was that net debt at the year-end was £5.1m, being £30.0m of borrowings less £24.9m of cash and cash equivalents, which was £9.2m lower than last year.
Our defined benefits pension scheme showed an increased surplus at 30 September 2019, under IAS 19 "Employee Benefits", of £8.3m, net of deferred tax, compared with a surplus of £3.8m at 30 September 2018. Assets rose 14% from £136.2m to £154.7m during the year. However, liabilities also increased 10% from £131.4m to £144.2m since the last year-end. This was largely due to the discount rate assumption, which heavily influences the calculation of liabilities, falling from 2.9% in 2018 to 1.9% in 2019, reflecting sentiments in prevailing financial markets.
Consolidated Income Statement
2019
2018
For the year ended 30 September 2019
£000
£000
Revenue
110,294
106,641
Cost of sales
(69,282)
(65,877)
Gross Profit
41,012
40,764
Other income
750
-
Revaluation of investment properties
689
310
Operating expenses
(26,369)
(24,380)
Group operating profit
16,082
16,694
Finance income
103
28
Finance costs
(1,365)
(1,377)
Profit from operations before taxation
14,820
15,345
Taxation
(2,969)
(3,152)
Profit from operations after taxation
11,851
12,193
Attributable to:
Owners of the Company
11,773
12,115
Non-controlling interests
78
78
11,851
12,193
Earnings per share
- basic and diluted
38.42p
39.54p
Consolidated Statement of Comprehensive Income
2019
2018
£000
£000
Profit for the year
11,851
12,193
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit scheme
7,643
10,166
Income tax relating to items not reclassified
(1,529)
(2,033)
6,114
8,133
Items that may be reclassified subsequently to profit or loss:
Fair value loss on cash flow hedges
(3,007)
(4,261)
Income tax relating to items that may be reclassified
601
852
(2,406)
(3,409)
Total comprehensive income for the year
15,559
16,917
Attributable to:
Owners of the Company
15,481
16,839
Non-controlling interests
78
78
15,559
16,917
A presentational change to the 2018 figures has arisen as a result of elements previously embedded within cost of sales (£767k rebates credit) being reclassified and shown in revenue. Gross profit remains unchanged.
Consolidated Balance Sheet
30 September 2019
2019
2018
£000
£000
NON-CURRENT ASSETS
Intangible assets
683
938
Property, plant and equipment
217,046
215,153
Investment properties
21,240
20,460
Trade and other receivables
383
501
Retirement benefit surplus
10,417
4,751
Derivative financial instruments
208
682
Other investments
5
5
Total non-current assets
249,982
242,490
CURRENT ASSETS
Inventories
6,018
7,092
Trade and other receivables
17,995
15,202
Derivative financial instruments
197
2,338
Cash and cash equivalents
24,915
15,735
Total current assets
49,125
40,367
Total assets
299,107
282,857
LIABILITIES
Trade and other payables
17,320
15,284
Current tax liabilities
2,714
2,299
Derivative financial instruments
298
120
Total current liabilities
20,332
17,703
NET CURRENT ASSETS
28,793
22,664
NON-CURRENT LIABILITIES
Trade and other payables
21,757
20,348
Derivative financial instruments
303
89
Financial liabilities - preference shares
235
235
Borrowings
30,000
30,000
Deferred tax liabilities
26,936
25,753
Total non-current liabilities
79,231
76,425
Total liabilities
99,563
94,128
Net assets
199,544
188,729
EQUITY
Share capital
1,532
1,532
Revaluation reserve
5,270
5,270
ESOP reserve
(45)
(41)
Other reserves
(157)
2,249
Retained earnings
192,882
179,666
Equity attributable to owners of the company
199,482
188,676
Non-controlling interests
62
53
Total equity
199,544
188,729
Consolidated Statement of Changes in Equity for the year ended 30 September 2019
Share
capital
Revaluation
reserve
ESOP
reserve
Other
reserves
Retained
earnings
Total
£000
£000
£000
£000
£000
£000
At 1 October 2018
1,532
5,270
(41)
2,249
179,666
188,676
Total recognised income and expense for the year
-
-
-
-
11,773
11,773
Funding of employee share option scheme
-
-
(20)
-
-
(20)
Amortisation of employee share option scheme
-
-
16
-
-
16
Unrealised loss on hedges (net of tax)
-
-
-
(2,406)
-
(2,406)
Actuarial gain on defined benefit scheme (net of tax)
-
-
-
-
6,114
6,114
Equity dividends
-
-
-
-
(4,671)
(4,671)
At 30 September 2019
1,532
5,270
(45)
(157)
192,882
199,482
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 to 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
Consolidated Statement of Cash Flows
2019
2018
for the year ended 30 September 2019
£000
£000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit
16,082
16,694
Depreciation and amortisation charges
11,604
11,242
Share based reward charges
16
52
Gain on revaluation of investment property
(689)
(310)
Pension operating charge less contributions paid
1,977
1,196
Profit on sale of fixed assets
(2)
(1)
Operating cash flows before movement in working capital
28,988
28,873
Working capital adjustments:
Decrease/(increase) in inventories
1,074
(267)
(Increase)/decrease in trade and other receivables
(2,675)
671
Increase in trade and other payables
4,023
125
Net movement in working capital
2,422
529
Interest paid
(1,356)
(1,368)
Preference dividends paid
(9)
(9)
Income taxes paid
(2,300)
(1,045)
Net cash flows from operating activities
27,745
26,980
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(13,850)
(14,705)
Investment in intangible assets
(90)
(168)
Net proceeds from disposal of fixed assets
2
1
Net cash flows used in investing activities
(13,938)
(14,872)
CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividends paid
(4,671)
(4,444)
Dividends paid to non-controlling interest
(69)
(51)
Deposit interest received
103
28
Net cash flows used in financing activities
(4,637)
(4,467)
Net increase in cash and cash equivalents
9,170
7,641
Cash and cash equivalents at beginning of year
15,735
8,076
Effect of foreign exchange rates
10
18
Cash and cash equivalents at end of year
24,915
15,735
Notes to the accounts
Year ended 30 September 2019
1. Basis of Preparation
The consolidated financial statements of Jersey Electricity plc, for the year ended 30 September 2019, 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 2018 annual report and accounts, except for IFRS9 and IFRS15, the impacts of which are disclosed in the 31 March 2019 interim report.
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 2020.
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:
2019
2019
2019
2018
2018
2018
External
Internal
Total
External
Internal
Total
£000
£000
£000
£000
£000
£000
Revenue
Energy - arising in the course of ordinary business
83,907
126
84,033
82,332
133
82,465
- arising from the sale of heavy fuel oil
2,723
-
2,723
-
-
-
Building Services
3,286
809
4,095
4,841
876
5,717
Retail
15,199
59
15,258
14,320
56
14,376
Property
2,262
612
2,874
2,277
604
2,881
Other
2,917
898
3,815
2,871
909
3,780
110,294
2,504
112,798
106,641
2,578
109,219
Intergroup elimination
(2,504)
(2,578)
Revenue
110,294
106,641
Operating profit / (loss)
Energy
12,281
13,418
Building Services
(79)
(245)
Retail
895
812
Property
1,679
1,813
Other
617
586
15,393
16,384
Revaluation of investment properties
689
310
Operating profit
16,082
16,694
A presentational change to the 2018 figures has arisen as a result of elements previously embedded within cost of sales (£767k rebates credit of which £18k is related to Building Services and £749k to Retail) being reclassified and shown in revenue. Gross profit remains unchanged.
The revaluation of investment properties is shown separately from Property operating profit as this income is reflected solely by a movement in reserves.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDFR FFUFLUFUSELE
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