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."

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.

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. 

3. Dividends paid and proposed