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: [email protected]                                                             Email: [email protected]

 

 

 

 

 

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.