RNS Number : 0610J

Jersey Electricity PLC

17 December 2020

JERSEY ELECTRICITY plc Preliminary Announcement of Annual Results

Year Ended 30 September 2020

At a meeting of the Board of Directors held on 17 December 2020, the final accounts for the year ended 30 September 2020 were approved, details of which follow.

The financial information set out in the announcement does not constitute the statutory accounts for the year ended 30 September 2020 or 2019, but is derived from those accounts. Statutory accounts for 2019 have been delivered to the Jersey Registrar of Companies, and those for 2020 will be delivered in early 2021. The auditor reported on the accounts for both years and their reports were unmodified.

A final dividend of 9.70p on the Ordinary and 'A' Ordinary shares in respect of the year ended 30 September 2020 was recommended (2019: 9.25p) . Together with the interim dividend of 6.80p (2019: 6.45p) the proposed total dividend declared for the year was 16.50p on each share (2019: 15.70p).

The final dividend will be paid on 25 March 2021 to those shareholders registered on 19 February 2021. A dividend on the 5% cumulative participating preference shares of 1.5% (2019: 1.5%) payable on 1 July 2021 was also recommended.

The Annual General Meeting will be held on 4 March 2021 at 12.30 pm at the Powerhouse, Queens Road, St Helier, Jersey.

   M.P. Magee                                                                            L. Floris 

Finance Director Company Secretary

Direct telephone number: 01534 505201 Direct telephone number: 01534 505253

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

17 December 2020

The Powerhouse

PO Box 45

Queens Road

St Helier

Jersey JE4 8NY


Preliminary Announcement of Annual Results

Year ended 30 September 2020

The Chairman, Phil Austin, comments:

"When we entered the year, we could not have imagined that the world would be so impacted by a virus. As I write, countries across the globe are battling COVID-19 and both lives and economies are being hugely disrupted, with tragic consequences. Even now, the world is far from through it.

Strong response to COVID-19

Though unprecedented, a critical service provider like Jersey Electricity should be prepared for such events. I am pleased to report that we were well prepared.

The Company has a well-tested contingency plan and had been closely monitoring the COVID-19 situation since the beginning of January, formally invoking its Business Continuity Plan in April. Throughout the crisis, we have taken steps to keep our people and the community safe, as well as maintaining continuity of electricity supplies and other essential services, on which the Island so depends.

The response of the whole workforce has been exceptional and I'd particularly like to thank those who went out every day in the field, or into their place of work, to ensure that we continued to keep our organisation functioning and able to power homes, businesses and Government throughout this difficult period. Through our ongoing investment in technology, our people were able to successfully migrate to home working, such that overall productivity and performance levels have been remarkably unaffected.

As well as focusing on core services, we took immediate action to lessen any financial hardship of customers by deferring our 2.5% tariff rise by six months, at a cost of around GBP1m. We also adopted a more flexible approach to electricity customers and investment property tenants. Measures included a more sympathetic debt collection process and suspension of service terminations, and we worked closely with Government and charities to establish new processes to support vulnerable customers.

Given Jersey Electricity's scale and role, we offered the full strength of the Company in support of the community by providing, without charge and on a fast-track basis, new infrastructure, plumbing and electrical services for Jersey's Nightingale Hospital, including professional services support. In addition, Jersey Electricity has fulfilled all its own contractual obligations and has not taken advantage of any forms of Government furlough or other financial support schemes.

Leaders in clean energy

Last year we communicated our new Vision "to enable life's essentials and inspire a zero-carbon future". Whilst we continue to flesh out how we can best support the Island to deliver carbon neutrality, the COVID-19 pandemic has only re-emphasised the importance of this Vision to the Company and to the Island as a whole. There now seems to be a clear and widespread recognition of the climate issue and, crucially, a real appetite to take action. We have made considerable progress during the year in transforming this Vision into tangible work streams, including, for example, conducting a larger scale assessment of what investment is required to facilitate carbon neutrality by 2030. It is now well understood that our grid is substantially decarbonised and the only way Jersey can materially reduce its carbon emissions is by switching from high-carbon fossil fuels to low carbon imported or locally generated electricity.

Resilient performance

Despite the challenges of COVID-19, the Company's financial performance has been remarkably resilient. Revenue for 2019/20 was GBP111.7m, 1% higher than last financial year. Electricity unit sales initially fell 13% in the immediacy of lockdown, but largely recovered, and for the full year were 619m units, only 1% lower than those in the 2018/19 financial year.

Profit before tax was unchanged from the prior year at a level of GBP14.8m, with the cost impact of the deferred tariff being completely offset by outperformance in other areas, most notably our Powerhouse retail business, which saw profits increase by almost one third from GBP0.9m to GBP1.2m.

The Board has therefore recommended a final dividend for the year of 9.70p, a 5% increase on the previous year, and payable on 25 March 2021.

Our core objective remains to deliver an affordable, secure and sustainable supply of electricity now and long into the future - and our performance this year, across all our key metrics, reflects real success."

 Financial Highlights                        2020        2019 
 Revenue                                GBP111.7m   GBP110.7m 
 Profit before tax                       GBP14.8m    GBP14.8m 
 Earnings per share                        37.94p      38.42p 
 Dividend paid per share                   16.05p      15.25p 
 Final proposed dividend per share          9.70p       9.25p 
 Net cash/(debt)                          GBP5.5m   GBP(5.1)m 
-----------------------------------  ------------  ---------- 

Group revenue for the year to 30 September 2020 at GBP111.7m was 1% higher than in the previous financial year. Energy revenues at GBP85.1m were 2% lower than the GBP87.0m achieved in 2019. Lower unit sales of electricity, linked to the COVID-19 crisis, combined with the sale of heavy fuel oil to Guernsey Electricity last year were the main reasons for the reduction. Revenue in the Powerhouse retail business increased 17% from GBP15.2m in 2019 to GBP17.8m. The business had a strong first half, but was impacted when the shop was forced to close due to COVID-19, but then recovered well helped by the strong on-line offering. Revenue in the Property business, at GBP2.3m, was at the same level as last year despite initial concerns that rental flows could be impacted by COVID-19 . Revenue from JEBS, our building services business, increased from GBP3.3m in 2019 to GBP3.8m. Revenue in our other businesses, at GBP2.7m, was marginally lower than in 2019.

Cost of sales at GBP69.7m was GBP0.4m higher than last year with the increased revenue level in the Powerhouse Retail business being offset by a lower volume of imported units of electricity in 2020 and the costs associated with the sale of heavy fuel oil to Guernsey Electricity last year.

Other income was recognised during the previous year arising from the receipt of a GBP0.8m rebate for a subsea cable repair.

Operating expenses at GBP26.4m were GBP0.4m lower than last year primarily due to the pension cost in 2019 being GBP0.6m higher than in 2020.

Profit before tax for the year to 30 September 2020, at GBP14.8m, was maintained at the same level as 2019 despite the challenges of COVID-19.

Profits in our Energy business, at GBP12.3m, were at the same level as in 2019. Unit sales volumes decreased from 627m to 619m kilowatt hours with the impact of COVID-19 in the second half of the financial year being the main reason. However, revenue from electricity sales was GBP0.8m higher due to the sales mix, with an increase in usage in domestic premises more than offsetting the fall in the commercial sector. In 2019 Energy had a GBP1m profit from the sale of heavy fuel oil being a 'one-off' transaction. During this year overhead costs were GBP0.9m lower than in 2019 largely due to lower depreciation charges. In the financial year we imported 95% of our requirements from France (2019: 94%) and generated 0.2% of our electricity on island from our solar and diesel plant (2019: 0.3%). The remaining 5% (2019: 6%) of our electricity was purchased from the local Energy from Waste plant. A planned 2.5% tariff rise from 1 April 2020 was postponed to 1 October 2020 to provide some further assistance to our customers in light of the COVID-19 pandemic.

The GBP1.3m profit in our Property division, excluding the impact of investment property revaluation, was GBP0.4m lower than last year due mainly to accelerated depreciation on air conditioning plant that was replaced during this year. Our investment property portfolio moved up in value by GBP0.5m to GBP21.8m based on advice from our external consultants who review the position annually, due primarily to the growth in the value of residential properties despite COVID-19 challenges.

Our Powerhouse retail business saw profits rise by 31% from GBP0.9m to GBP1.2m in a turbulent year where flexibility in the business model, due to our strong on-line presence, aided this business during the COVID-19 crisis. The business was also helped by our customers appearing to have more spending power, due to less travel taking place, with some sales lines seeing material growth - such as electric bikes.

JEBS, our building services unit, positively moved to a profit of GBP0.2m against a GBP0.1m loss in 2019 as a result of an increase in revenue, and a move to higher margin work.

Our other business units (Jersey Energy, Jendev, Jersey Deep Freeze and fibre optic lease rentals) produced increased profits of GBP0.8m being GBP0.2m above last year.

The net interest cost in 2020 was GBP1.4m being GBP0.1m higher than in 2019 due to the implementation of IFRS 16

('Leases'). The taxation charge   at GBP3.1m was marginally higher than the level in 2019. 

Group basic and diluted earnings per share at 37.94p compared to 38.42p in 2019 due to profitability being similar in both years.

Dividends paid in the year, net of tax, rose by 5%, from 15.25p in 2019 to 16.05p in 2020. The proposed final dividend for this year is 9.70p, a 5% rise on the previous year. Dividend cover, at 2.4 times, was marginally lower than comparable 2.5 times in 2019.

Net cash inflow from operating activities at GBP26.9m was GBP0.8m lower than in 2019. Capital expenditure , at GBP11.2m was GBP2.7m lower than GBP13.9m last year as there was material spend in 2019 in completing the St Helier West primary sub-station. Dividends paid were GBP5.0m compared to GBP4.7m in 2019. The resultant position was that net cash at the year-end was GBP5.5m, being GBP30.0m of borrowings offset by GBP35.5m of cash and cash equivalents, which was GBP10.6m more positive than last year.

Our defined benefits pension scheme showed a s urplus at 30 September 2020, under IAS 19 "Employee Benefits", of GBP5.9m, net of deferred tax, compared with a surplus of GBP8.3m at 30 September 2019. Assets rose 1% from GBP154.7m to GBP156.6m during the year. However, liabilities also increased 4% from GBP144.2m to GBP149.3m since the last year-end. This was largely due to the discount rate assumption, which heavily influences the calculation of liabilities, falling from 1.9% in 2019 to 1.6% in 2020, reflecting sentiments in prevailing financial markets.

Impact of new accounting standard - IFRS 16 was adopted from 1 October 2019, applying the "modified retrospective" approach whereby comparative figures are not restated. In adopting this approach, the results for the year to 30 September 2020 are not directly comparable with those reported in the prior year under the previous applicable accounting standard IAS 17 "Leases".

This adoption has resulted in an increase in Group operating profit of GBP86k, (a GBP189k reduction in rent expense has been partially offset by an increase of GBP103k in depreciation). Finance costs have increased by GBP131k, resulting in a decrease in profit from operations before taxation of GBP45k. At 30 September 2020 the net value of right of use assets under IFRS 16 totalled GBP2.9m, with a corresponding lease liability of GBP2.9m.

Whilst there is no impact on total cash and cash equivalents, there has been a reclassification of lease payments resulting in a deterioration of net cash flows arising from financing activities, whilst there is a corresponding increase in net cash flows from operating activities.

   Consolidated Income Statement                2020       2019 
 For the year ended 30 September 2020         GBP000     GBP000 
 Revenue                                     111,747    110,709 
 Cost of sales                              (69,695)   (69,282) 
                                           ---------  --------- 
 Gross Profit                                 42,052     41,427 
 Other income                                      -        750 
 Revaluation of investment properties            515        689 
 Operating expenses                         (26,360)   (26,784) 
                                           ---------  --------- 
 Group operating profit                       16,207     16,082 
 Finance income                                  139        103 
 Finance costs                               (1,516)    (1,365) 
 Profit from operations before taxation       14,830     14,820 
 Taxation                                    (3,090)    (2,969) 
                                           ---------  --------- 
 Profit from operations after taxation        11,740     11,851 
                                           =========  ========= 
 Attributable to: 
 Owners of the Company                        11,624     11,773 
 Non-controlling interests                       116         78 
                                           ---------  --------- 
                                              11,740     11,851 
                                           =========  ========= 
 Earnings per share 
 - basic and diluted                          37.94p     38.42p 

In 2020 the Directors have made a classification change in relation to the amortisation of deferred infrastructure charges. In order to present the results in a consistent format, the Directors have reclassified the prior year reported results, increasing both Operating expenses and Revenue by GBP415k, with no impact to Group operating profit.

  Consolidated Statement of Comprehensive                2020      2019 
                                                       GBP000    GBP000 
 Profit for the year                                   11,740    11,851 
 Items that will not be reclassified subsequently 
  to profit or loss: 
 Actuarial (loss)/gain on defined benefit 
  scheme                                              (1,663)     7,643 
 Income tax relating to items not reclassified            333   (1,529) 
                                                     --------  -------- 
                                                      (1,330)     6,114 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Fair value gain/(loss) on cash flow hedges             1,290   (3,007) 
 Income tax relating to items that may be 
  reclassified                                          (258)       601 
                                                     --------  -------- 
                                                        1,032   (2,406) 
 Total comprehensive income for the year               11,442    15,559 
 Attributable to: 
 Owners of the Company                                 11,326    15,481 
 Non-controlling interests                                116        78 
                                                     --------  -------- 
                                                       11,442    15,559 
 Consolidated Balance Sheet 
 30 September 2020 
                                              2020             2019 
                                            GBP000           GBP000 
 Intangible assets                             479              683 
 Property, plant and equipment             217,936          217,046 
 Right of use assets                         2,899                - 
 Investment properties                      21,755           21,240 
 Trade and other receivables                   300              383 
 Retirement benefit surplus                  7,315           10,417 
 Derivative financial instruments              277              208 
 Other investments                               5                5 
                                          --------  --------------- 
 Total non-current assets                  250,966          249,982 
-------------------------------------     --------  --------------- 
------------------------------------      --------  --------------- 
 Inventories                                 6,028            6,018 
 Trade and other receivables                16,645           17,995 
 Derivative financial instruments              960              197 
 Cash and cash equivalents                  35,520           24,915 
 Total current assets                       59,153           49,125 
                                          --------  --------------- 
 Total assets                              310,119          299,107 
----------------------------------------  --------  --------------- 
------------------------------------      --------  --------------- 
 Trade and other payables                   18,193           17,320 
 Current tax liabilities                     2,742            2,714 
 Lease liabilities                              65                - 
 Derivative financial instruments              143              298 
 Total current liabilities                  21,143           20,332 
                                          --------  --------------- 
 NET CURRENT ASSETS                         38,010           28,793 
--------------------------------------    --------  --------------- 
 Trade and other payables                   22,714           21,757 
 Lease liabilities                           2,879                - 
 Derivative financial instruments                -              303 
 Financial liabilities - preference 
  shares                                       235              235 
 Borrowings                                 30,000           30,000 
 Deferred tax liabilities                   27,209           26,936 
 Total non-current liabilities              83,037           79,231 
                                          --------  --------------- 
 Total liabilities                         104,180           99,563 
                                          --------  --------------- 
 Net assets                                205,939          199,544 
----------------------------------------  --------  --------------- 
------------------------------------      --------  --------------- 
 Share capital                               1,532            1,532 
 Revaluation reserve                         5,270            5,270 
 ESOP reserve                                (120)             (45) 
 Other reserves                                875            (157) 
 Retained earnings                         198,259          192,882 
 Equity attributable to owners of 
  the company                              205,816          199,482 
 Non-controlling interests                     123               62 
                                          --------  --------------- 
 Total equity                              205,939          199,544 
----------------------------------------  --------  --------------- 
 Statement of 
 in Equity for the 
 year ended                       Share           Revaluation            ESOP           Other       Retained 
 30 September 2020              capital               reserve         reserve        reserves       earnings     Total 
                                 GBP000                GBP000          GBP000          GBP000         GBP000    GBP000 
 At 1 October 2019                1,532                 5,270            (45)           (157)        192,882   199,482 
 Total recognised 
  income and 
  expense for the 
  year                                -                     -               -               -         11,624    11,624 
 Funding of 
  employee share 
  scheme                              -                     -            (78)               -              -      (78) 
 Amortisation of 
  employee share 
  option scheme                       -                     -               3               -              -         3 
 Unrealised gain 
  on hedges (net 
  of tax)                             -                     -               -           1,032              -     1,032 
 Actuarial loss on 
  defined benefit 
  scheme (net of 
  tax)                                -                     -               -               -        (1,330)   (1,330) 
 Equity dividends                     -                     -               -               -        (4,917)   (4,917) 
 At 30 September 
  2020                            1,532                 5,270           (120)             875        198,259   205,816 
                    ===================  ====================  ==============  ==============  =============  ======== 
                                  Share           Revaluation            ESOP           Other       Retained 
                                capital               reserve         reserve        reserves       earnings     Total 
                                 GBP000                GBP000          GBP000          GBP000         GBP000    GBP000 
 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 
  scheme                              -                     -            (20)               -              -      (20) 
 Amortisation of 
  employee share 
  option scheme                       -                     -              16               -              -        16 
 Unrealised loss 
  on hedges (net 
  of tax)                             -                     -               -         (2,406)              -   (2,406) 
 Actuarial gain to 
  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 
                    ===================  ====================  ==============  ==============  =============  ======== 
   Consolidated Statement of Cash Flows              2020       2019 
 for the year ended 30 September 2020              GBP000     GBP000 
 Operating profit                                  16,207     16,082 
 Depreciation and amortisation charges             11,424     11,604 
 Share based reward charges                             3         16 
 Gain on revaluation of investment property         (515)      (689) 
 Pension operating charge less contributions 
  paid                                              1,439      1,977 
 Profit on sale of fixed assets                      (24)        (2) 
                                                ---------  --------- 
 Operating cash flows before movement in 
  working capital                                  28,534     28,988 
 Working capital adjustments: 
      Decrease/(increase) in inventories             (10)      1,074 
      (Increase)/decrease in trade and other 
       receivables                                  1,433    (2,675) 
      Increase in trade and other payables          1,071      4,023 
                                                ---------  --------- 
 Net movement in working capital                    2,494      2,422 
 Interest paid                                    (1,376)    (1,356) 
 Preference dividends paid                            (9)        (9) 
 Income taxes paid                                (2,714)    (2,300) 
                                                ---------  --------- 
 Net cash flows from operating activities          26,929     27,745 
 Purchase of property, plant and equipment       (10,922)   (13,850) 
 Investment in intangible assets                    (337)       (90) 
 Deposit interest received                            139        103 
 Net proceeds from disposal of fixed assets            24          2 
                                                ---------  --------- 
 Net cash flows used in investing activities     (11,096)   (13,835) 
 Equity dividends paid                            (4,917)    (4,671) 
 Dividends paid to non-controlling interest          (55)       (69) 
 Purchase of shares by Employee Benefit 
  Trust                                              (78)          - 
 Repayment of lease liabilities                     (189)          - 
                                                ---------  --------- 
 Net cash flows used in financing activities      (5,239)    (4,740) 
 Net increase in cash and cash equivalents         10,594      9,170 
 Cash and cash equivalents at beginning 
  of year                                          24,915     15,735 
 Effect of foreign exchange rates                      11         10 
 Cash and cash equivalents at end of year          35,520     24,915 

In 2020 the Directors have made a presentational change in relation to deposit interest received, presenting this within investing activities, in compliance with IAS 7 "Statement of Cash Flows". In the prior year deposit interest received was presented within financing activities. In order to present the consolidated cash flow statement in a consistent format, the Directors have reclassified prior year's deposit interest received of GBP103k. This adjustment has had no impact on the 2019 reported Net increase in cash and cash equivalents.

Notes to the accounts

Year ended 30 September 2020

   1.   Basis of Preparation 

The consolidated financial statements of Jersey Electricity plc, for the year ended 30 September 2020, 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 2019 annual report and accounts, except for IFRS16, the impacts of which are disclosed in the 31 March 2020 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 2021.

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, including the impact of COVID-19. 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: 
                                                    2020       2020      2020       2019       2019      2019 
                                                External   Internal     Total   External   Internal     Total 
                                                  GBP000     GBP000    GBP000     GBP000     GBP000    GBP000 
 Energy - arising in the course 
  of ordinary business                            85,140        122    85,262     84,322        126    84,448 
            - arising from the sale of heavy 
             fuel oil                                  -          -         -      2,723          -     2,723 
 Building Services                                 3,767      1,027     4,794      3,286        809     4,095 
 Retail                                           17,825         60    17,885     15,199         59    15,258 
 Property                                          2,266        645     2,911      2,262        612     2,874 
 Other                                             2,749        891     3,640      2,917        898     3,815 
                                               ---------  ---------  --------  ---------  ---------  -------- 
                                                 111,747      2,745   114,492    110,709      2,504   113,213 
 Intergroup elimination                                               (2,745)                         (2,504) 
                                                                     --------                        -------- 
 Revenue                                                              111,747                         110,709 
                                                                     --------                        -------- 
 Operating profit 
 Energy                                                                12,257                          12,281 
 Building Services                                                        216                            (79) 
 Retail                                                                 1,176                             895 
 Property                                                               1,270                           1,679 
 Other                                                                    773                             617 
                                                                     --------                        -------- 
                                                                       15,692                          15,393 
 Revaluation of investment properties                                     515                             689 
 Operating profit                                                      16,207                          16,082 
                                                                     --------                        -------- 

The revaluation of investment properties is shown separately from Property operating profit as this income is reflected solely by a movement in reserves.

In 2020 the Directors have made a classification change in relation to the amortisation of deferred infrastructure charges. In order to present the results in a consistent format, the Directors have reclassified the prior year reported results, increasing both Operating expenses and Revenue by GBP415k, with no impact to Group operating profit.

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(END) Dow Jones Newswires

December 17, 2020 10:20 ET (15:20 GMT)

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