Jersey Electricity Regulatory News (JEL)

17 Dec 2008 07:00



The Jersey Electricity Company

 Preliminary Announcement of Annual Results

Year Ended 30 September 2008

At a meeting of the Board of Directors held on 16 December 2008, the final accounts for the Group for the year to 30 September 2008 were approved, details of which, are attached. 

The financial information set out in the announcement does not constitute the Company's statutory accounts for the year ended 30 September 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Jersey Registrar of Companies and those for 2008 will be delivered in early 2009. The auditors have reported on those accounts and their reports were unqualified.

A final gross dividend of £1.40 (£1.12 net of tax) on the Ordinary and 'A' Ordinary shares in respect of the year ended 30 September 2008 was recommended which, together with the interim gross dividend of 91.25p (73p net of tax), makes a total proposed gross dividend declared for the year of £2.31 (£1.85 net of tax) on each £1 share. 

The final dividend will be paid on 31 March 2009 to those shareholders registered in the books of the Company on 27 February 2009. A dividend on the 5% cumulative participating preference shares of 1.5% (2007 1.5%) payable on 1 July 2009 was also recommended.

The Annual General Meeting of the Company will be held on 5 March 2009.

M.P. Magee P.J. Routier

Finance Director Company Secretary

Direct telephone number : 01534 505321 Direct telephone number : 01534 505253

Direct fax number : 01534 505466 Direct fax number : 01534 505515

Email : mmagee@jec.co.uk Email : proutier@jec.co.uk

17 December 2008

The Powerhouse,

PO Box 45,

Queens Road,

St Helier,

Jersey JE4 8NY 

THE JERSEY ELECTRICITY COMPANY LIMITED

Preliminary Announcement of Annual Results

Year ended 30 September 2008

The Chairman, Geoffrey Grime, comments :

 "Group profit before tax rose by 14% to £10.0m in the year as a result of the growth in our many commercial enterprises and the recovery of margins in our energy business. As expected, those margins have been depressed during the past two years by our voluntary two-year price freeze which cushioned customers from high and volatile energy markets. Returns in the energy business are now returning to a level commensurate with those in other regulated energy utilities and importantly the level required for essential ongoing investment in infrastructure.

However, our energy business remains under pressure from conditions in the wholesale energy markets which have been, and continue to be, highly priced and volatile. Furthermore our energy business has been significantly impacted by the progressive weakening of Sterling. The combined effect is an increase in the cost of imported power for 2009 of 40% compared with 2008.  Whilst we have absorbed some of this cost increase, we have unfortunately had to announce a tariff increase of 24% from 1 January 2009. We have fully hedged our energy costs for 2009 to guarantee price stability for our customers regardless of any further price shocks in global energy markets. 

We achieved our highest ever reliability of electricity supplies this year and we recognise its critical importance to the Island's business community in particular. Our infrastructure investment of £13m during the year was part of a programme which anticipates in the next 10 years an investment commitment similar to that of the past decade, in which we spent over £100m on our network. Much of this year's capital spending has been directed at reinforcing the grid in the west of the Jersey. In addition we are continuing to make progress on our third subsea interconnector project with France, which will replace the ageing first interconnector and build capacity and resilience for growth.

Environmental sustainability, standards of service, care in our community, health and safety and staff relationships remain high priorities and we remain committed to supporting energy conservation initiatives in Jersey. To this end we have provided a £0.5m donation to the States of Jersey to help create the Jersey Energy Trust which will provide grant aid for the most needy in our community providing help with improved insulation and the promotion of other long term energy saving measures."

Financial Summary	2008	2007	% rise/(fall)
Turnover	£81.9m	£75.9m	8%
Profit before tax	£10.0m	£8.7m	14%
Profit in Energy business	£ 6.0m	£4.5m	33%
Earnings per share	£6.41	£4.94	30%
Dividend paid per ordinary share	£1.48	£1.17	27%

Group turnover for the year to 30 September 2008 at £81.9m was 8% higher than in the year ended 30 September 2007. The Energy business contributed £61.8m of this turnover being £4.8m above last year due to a 5% rise in unit sales of electricity (following the mild winter in 2006/07) and the residual impact of our tariff rise in January 2007. 

Group profit before tax in 2008 of £10.0m was 14% higher than the corresponding £8.7m last year. This compares to a level of £10.5m in 2005 before the decision was made to absorb an element of the substantial rise in the price of imported power, which impacted the level of Energy profits in both 2006 and 2007. 

Profits in our Energy business moved up from £4.5m last year to £6.0m in 2008, with a 5% growth in unit sales of electricity and the full year impact of our last tariff rise on 1 January 2007 being the main reasons. As stated last year profitability was expected to rise in 2008 to previous levels experienced prior to our decision to absorb an element of the substantial rise in our electricity importation costs. Power importation levels rose to 96% from 89% in 2007 having returned to the average level experienced in the previous 5 years. In 2007 a short-term fall in oil prices made it financially advantageous to generate power rather than import electricity. 

Profits in our Property division, excluding upside from property revaluations/disposals, were maintained at the same level as last year at £1m. Gains recognised in the income statement from the revaluation/sale of properties were lower at £0.7m against £1.2m in 2007. 

Our Retailing business maintained profits at £0.5m. Flat screen television and computer sales were offset by trading losses from Imagination, our hobby, crafts and toy store, within our Powerhouse site and our e-retailing internet start-up operation (day2dayshop.com). 

The Building Services business produced a £0.3m profit on a par with 2007 despite a very competitive marketplace. 

Our other business units - Jersey Energy, Jendev and Jersey Deep Freeze all had a profitable year and Foreshore, our data centre joint venture, moved into profitability during the last financial year on an increased annual turnover that rose 17% from £3.5m to £4.1m.

Interest received in 2008 was £1.1m, against £0.9m last year, due to a higher average level of cash linked to the timing of capital projects, improved profitability and higher interest rates.

The taxation charge for the year, at £0.1m, was lower than the 2007 charge of £1.1m despite the rise in profits. As indicated last year transitional rules introduced in Jersey as a prelude to changes in the corporate tax regime result in the effective tax rate for 2007 and 2008 being lower than in 2006 due to the migration from a prior year to current year basis of tax assessment. During 2008 the treatment of capital allowances for the two-year period impacted was clarified resulting in a reduction in our deferred tax liability which created a lower taxation charge. In 2009 the effective rate will revert to around 20%.

Our earnings per share rose by 30% to £6.41 compared to £4.94 in 2007 as a result of increased profits but primarily due to the tax changes as described above. 

Cash at bank, including short-term investments, fell £0.3m to £16.1m during the year. Operating cash flow at £14.9m was £3.2m higher than 2007 with increased profits being the main reason. Investment expenditure increased from £8.9m in 2007 to £13.3m in 2008 with the spend on the £13m Western Primary capital project to reinforce the electricity network in the west of Jersey being the primary driver. 

Dividends paid in the year rose by 27% from £1.17 net of tax in 2007 to £1.48 for 2008, driving a dividend yield considered to be more in line with peer group comparables. Dividend cover rose marginally from 4.2 times last year to 4.3 times in 2008. 

Our defined benefits pension scheme, which showed a £9.3m surplus, net of deferred tax, at the 2007 year end showed a reduced surplus of £5.4m, on the same basis, as at 30 September 2008 due primarily to the recent turmoil in financial markets.

Consolidated Income Statement
for the year ended 30 September 2008
					2008				2007
					£000				£000
Revenue					81,910				75,871
Cost of sales					(55,968)				(52,117)
Gross profit					25,942				23,754
Revaluation of investment properties					294				900
Profit from sale of property					405				309
Operating expenses					(17,806)				(16,951)
Group operating profit before joint venture					8,835				8,012
Share of profit/(loss) of joint venture					46				(135)
Group operating profit					8,881				7,877
Interest receivable					1,086				868
Finance costs					(11)				(11)
Profit from operations before taxation					9,956				8,734
Taxation					(84)				(1,074)
Profit from operations after taxation					9,872				7,660
Minority interest					(48)				(90)
Profit for the year attributable to the equity holders of the parent company
					9,824				7,570
					£				£
Earnings per share
- basic and diluted					6.41				4.94
Statements of Recognised Income and Expense
for the year ended 30 September 2008
				Group								Company
				2008				2007				2008		2007
				£000				£000				£000		£000
Profit for the year				9,824				7,570				9,822		7,601
Actuarial (loss)/gain on defined benefit scheme  (net of tax)				(4,874)				5,431				(4,874)		5,431
Fair value gain on cash flow hedges (net of tax)				1,737				1,469				1,737		1,469
Revaluation of freehold land and buildings				-				448				-		448
Total recognised income and expense for the year attributable to the equity holders of the parent				6,687				14,918				6,685		14,949

Balance Sheets at 30 September 2008			Group				Company
			2008		2007		2008	2007
			£ 000		£ 000		£ 000	£ 000
NON-CURRENT ASSETS
Intangible assets			86		82		86	82
Property, plant and equipment			115,990		109,790		115,988	109,788
Investment property			12,635		12,340		12,635	12,340
Other investments			2,037		2,099		3,395	3,395
Long-term loans			-		-		750	860
Retirement benefit surplus			6,702		11,684		6,702	11,684
Total non-current assets			137,450		135,995		139,556	138,149
CURRENT ASSETS
Inventories			6,102		4,631		6,041	4,556
Trade and other receivables			9,942		11,258		9,724	11,075
Derivative financial instruments			2,763		526		2,763	526
Short-term investments - cash deposits			11,025		3,755		11,025	3,755
Cash and cash equivalents			5,217		12,613		5,180	12,400
Total current assets			35,049		32,783		34,733	32,312
Total assets			172,499		168,778		174,289	170,461
LIABILITIES
Trade and other payables			11,477		11,348		11,436	11,301
Derivative financial instruments			127		62		127	62
Current tax payable			905		944		905	887
Total current liabilities			12,509		12,354		12,468	12,250
NET CURRENT ASSETS			22,540		20,429		22,265	20,062
NON-CURRENT LIABILITIES
Trade and other payables			13,959		13,123		13,904	13,123
Tax liabilities			-		487		-	454
Financial liabilities - preference shares			235		235		235	235
Deferred tax liabilities			12,535		13,670		12,535	13,670
Total non-current liabilities			26,729		27,515		26,674	27,482
Total liabilities			39,238		39,869		39,142	39,732
Net assets			133,261		128,909		135,147	130,729
EQUITY
Share capital			1,532		1,532		1,532	1,532
Other reserves			2,556		819		2,556	819
Retained earnings			129,166		126,483		131,059	128,378
Shareholders' funds			133,254		128,834		135,147	130,729
Minority interest			7		75		-	-
Total equity			133,261		128,909		135,147	130,729

Cash Flow Statement
for the year ended 30 September 2008
		Group		Company
		2008	2007	2008	2007
		£ 000	£ 000	£ 000	£ 000
Cash flows from operating activities
Operating profit		8,835	8,012	8,834	7,810
Depreciation and amortisation charges		6,950	7,568	6,949	7,568
Revaluation of investment property		(294)	(900)	(294)	(900)
Pension operating charge less contribution paid		(1,110)	(1,110)	(1,110)	(1,110)
Profit on sale of fixed assets		(406)	(312)	(406)	(312)
Operating cash flows before movement in working capital		13,975	13,258	13,973	13,056
Increase in inventories		(1,471)	(435)	(1,485)	(447)
Decrease/(increase) in trade and other receivables		1,388	(1,979)	1,424	(1,957)
Increase in trade and other payables		954	1,139	933	1,150
Interest received		1,010	844	1,008	837
Preference dividends paid		(9)	(9)	(9)	(9)
Income taxes paid		(896)	(1,159)	(876)	(1,136)
Net cash flows from operating activities		14,951	11,659	14,968	11,494
Cash flows from investing activities
Purchase of property, plant and equipment		(13,270)	(8,529)	(13,270)	(8,529)
Investment in intangible assets		(49)	(17)	(49)	(17)
Net proceeds from disposal of property		413	318	413	318
Investment in joint venture		-	(350)	-	(350)
Repayment of long-term loan		109	-	109	-
Short-term investments		(7,270)	10	(7,270)	10
Net cash flows used in investing activities		(20,067)	(8,568)	(20,067)	(8,568)
Cash flows from financing activities
Equity dividends paid		(2,426)	(1,824)	(2,267)	(1,792)
Net cash flows used in financing activities		(2,426)	(1,824)	(2,267)	(1,792)
Net increase in cash and cash equivalents		(7,542)	1,267	(7,366)	1,134
Cash and cash equivalents at beginning of period		12,613	11,346	12,400	11,266
Net cash and cash equivalents at end of period		5,071	12,613	5,034	12,400
Overdraft		146	-	146	-
Cash and cash equivalents at end of period		5,217	12,613	5,180	12,400

Notes to the preliminary announcement

Year ended 30 September 2008

 

 1. Basis of preparation

The financial information set out in this announcement has been derived from the consolidated financial statements of The Jersey Electricity Company Limited for the year ended 30 September 2008 which have been prepared in accordance with International Financial reporting Standards (IFRS) as adopted for use in the European Union (EU), including International Accounting Standards (IAS) and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC).

While the financial information included in this preliminary announcement has been prepared in accordance with the 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 2009. 

2 Segmental information
Revenue and profit information are analysed between the businesses as follows:
	2008	2008	2008		2007	2007	2007
	External	Internal	Total		External	Internal	Total
	£000	£000	£000		£000	£000	£000
Revenue
Energy	61,751	271	62,022		56,957	246	57,203
Building Services	3,402	172	3,574		3,204	199	3,403
Retail	13,135	51	13,186		11,934	53	11,987
Property	1,659	678	2,337		1,597	683	2,280
Other	1,963	723	2,686		2,179	865	3,044
	81,910	1,895	83,805		75,871	2,046	77,917
Inter-Group elimination			(1,895)				(2,046)
Revenue			81,910				75,871
Operating profit
Energy			5,965				4,493
Building Services			274				305
Retail			450				479
Property			953				954
Other			540				437
Operating profit before property revaluation/sale			8,182				6,668
Revaluation of investment properties			294				900
Profit from sale of property			405				309
Group operating profit			8,881				7,877

3. Dividends paid and proposed

	2008	2007
Ordinary and 'A' Ordinary Shares	£000	£000
Final dividend proposed of 112p net of tax per share (2007 - 75 per share)	1,716	1,149
Interim dividend paid of 73p net of tax per share paid (2007- 49p per share)	1,117	750
	2,833	1,899

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