Financial Results Summary
Year ended 30 September 2022
The Chair, Phil Austin, comments:
The turmoil that beset international energy markets in late 2021 has intensified further due to the escalating conflict between Russia and Ukraine, leading to a previously unthinkable global energy crisis. This has presented major new challenges to energy companies post the pandemic, sending wholesale prices soaring and threatening supply security throughout Europe. Jersey Electricity is not immune to these challenges, but we have shown resilience, returning a strong Group performance and protecting our customers from the huge retail price rises seen elsewhere, without Government intervention.
PERFORMANCE
Group revenue for the year at £117.4m was 1% lower than last year and profit before tax was £10.6m against £19.1m in 2021. If the non-cash upside from the revaluation of investment properties is excluded in both years, the underlying year-on-year profit before tax is £9.6m against £13.0m in 2021, a fall of 26%. This year’s financial performance reflects the effects of COVID-19 post the pandemic. Coupled with a mild winter, a return to more normal patterns of work and behaviour has reduced demand, with both unit volume sales in Energy, and Retail revenues, down on last year as electricity consumption and Powerhouse product sales returned to historical levels. The Board has recommended a final dividend for the year of 10.80p, a 6% rise on the previous year, payable on 23 March 2023. Our target return on assets continues to be 6%-7% over the long term and was 4.2% this year, but 6.2% on a rolling five-year basis.
ENERGY MARKETS
Elsewhere, the scale of the energy crisis has prompted Governments across Europe to intervene, each in their own way, to mitigate the impact of the rising prices on their citizens. In the UK, such Government intervention averted a proposed 80% year-on-year increase in energy prices in October when Ofgem was due to raise the regulated price cap to £3,549. The new Energy Price Guarantee now limits this cap to £2,500 a year until April 2023 when the cap will be increased to £3,000, prompting a further 20% price rise.
Although our hedging and risk mitigation policies have so far sheltered Jersey customers from such material price increases, we are not immune to these market forces. We therefore implemented a 4% tariff rise from 1 January 2022 and a further 5% increase from 1 July 2022, at which time we announced a further 5% tariff increase effective from 1 January 2023 to give our customers some degree of certainty for the coming winter period.
CLIMATE CHANGE
Despite the current challenges presented by the global energy crisis, climate change remains the biggest challenge we all face. We remain optimistic about the future, however, and the opportunities a net-zero Jersey will bring. Our low-carbon, Smart-enabled grid provides a strong platform to support the Government of Jersey’s net-zero 2050 carbon ambitions. In addition, increased digitalisation of our systems is enabling us to map scenarios and calculate the investment needed in the network. Publication of the Government’s Carbon Neutral Roadmap in May gives us confidence to make these investments and ensure we are well-placed to meet future challenges.
In April 2022, the UK became the first G20 country to introduce legislation making it mandatory for large businesses to disclose climate-related financial information in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. Jersey Electricity supports these recommendations and is working towards full compliance.
ENERGY SECURITY
Although last year’s French fishing dispute, which raised questions about energy sovereignty and the security of imported power supplies, has been resolved, the global energy crisis has kept us focused on the issue. To mitigate the supply security threats the energy crisis is causing in Europe, from where we imported 95% of our power this year, we have modelled various scenarios and evaluated our mitigations for technical failures to the submarine cables and other disruptions to supply. We have also established contingency plans to implement increased local emergency generation if required.
To increase energy sovereignty longer term, we are reviewing our energy sourcing strategies, with more detailed investigations into the viability of offshore wind generation which has fallen significantly in cost.
IN CONCLUSION
I would like to thank our entire ‘JE family’ for their hard work, commitment and dedication this past year which has presented renewed challenges post COVID-19. I am immensely proud of what we have achieved together and the progress we have made on the course we have set. I also thank my fellow Board members for their hard work and commitment, and our shareholders for their support. I remain confident the Company and its people can take advantage of the opportunities the future holds and meet the challenges it will demand of us all.
| Financial Highlights | 2022 | 2021 |
| Revenue | £117.4m | £118.6m |
| Profit before tax | £10.6m | £19.1m |
| Earnings per share | 27.17p | 52.73p |
| Dividend paid per share | 17.80p | 16.90p |
| Final proposed dividend per share | 10.80p | 10.20p |
| Net cash | £17.4m | £13.1m |
Group revenue for the year to 30 September 2022 at £117.4m was 1% lower than in the previous financial year. Energy revenues at £89.7m were marginally lower than the £89.8m achieved in 2021. Lower unit sales of electricity were linked to a milder winter and the positive uplift from increased home working, due to COVID-19, in the previous year. This was offset by a 4% tariff rise from January 2022 and a 5% rise from 1 July 2022. Revenue in the Powerhouse retail business decreased 6% from £19.8m in 2021 to £18.7m. Revenue in the Property business at £2.3m was at the same level as last year. Revenue from JEBS, our building services business, remained at the same level as 2021 at £3.4m. Revenue in our other businesses at £3.3m, was in line with the prior year.
Cost of sales at £77.2m was £3.1m higher than last year with an increase in wholesale electricity prices offset by the lower revenue level in our Powerhouse Retail business.
Operating expenses at £29.3m were £0.7m lower than last year. The fall is largely due to £1.8m incurred in the previous financial year for a non-cash ex-gratia award for pensions in service, in our defined benefits pension offset by the increased spend in systems and people, associated with the de-carbonisation vision for the Island.
Profit before tax for the year to 30 September 2022 was £10.6m against £19.1m in 2021. However, if the non-cash upside from revaluation of investment properties is excluded in both years the underlying year on-year profit before tax was £9.6m in 2022 against £13.0m in 2021, a decrease of 26%.
Profit in our Energy business, at £7.5m, was below the £10.7m achieved in 2021, largely due to lower unit sales volumes. Our target return on assets employed continues to be in the 6%-7% range over the longer-term and was 4.2% in 2022 against 5.9% in 2021, but 6.2% on a rolling 5-year basis. Unit sales volumes decreased by 4% from 639m to 613m kilowatt hours, due to milder than normal weather, combined with the previous year having benefited from home-working linked to the pandemic. In the financial year we imported 95.3% of our requirements from France (2021: 95.2%) and generated 0.3% of our electricity on-Island from our solar and diesel plant (2021: 0.4%). The remaining 4.4% (2021: 4.4%) of our electricity was purchased from the local Energy from Waste plant. A customer tariff rise of 4% was instigated on 1 January 2022 and a subsequent 5% increase took place in July 2022 and notice was given that a further 5% rise would take place on 1 January 2023.
The £1.4m profit in our Property division, excluding the impact of investment property revaluation, was at the same level as last year. Our investment property portfolio moved up in value by £1.0m to £28.8m, based on advice from our external consultants, who review the position annually. This increase compared to £6.1m in the 2020/21 financial year was due primarily to a restructuring of the lease arrangement for our largest tenant, whereby the existing break clause was moved to a later date, post commercial discussions, which materially moved the valuation upwards. The increase in this financial year was due to continued buoyant market conditions in the residential sector.
Our Powerhouse retail business saw profits fall 23% from £1.5m to £1.2m. However, this is in the context that in the previous financial year profits rose by 30% by when COVID-19 continued to influence the behaviours, and spending patterns of local customers, for example, due to less travel taking place over that year.
JEBS, our building services unit, produced a profit of £0.3m, being marginally ahead of 2021.
Our other business units (Jersey Energy, Jendev, Jersey Deep Freeze and fibre optic lease rentals) produced profits of £0.5m being £0.1m lower than last year.
The net interest cost in 2022 was £1.3m being £0.1m lower than 2021 due to a higher level of interest received on deposits. The taxation charge at £2.1m was lower than the previous year, due to lower profits.
Group basic and diluted earnings per share , at 27.17p, compared to 52.73p in 2021 due to decreased profitability.
Dividends paid in the year, net of tax, rose by 5%, from 16.90p in 2021 to 17.80p in 2022. The proposed final dividend for this year is 10.80p, a 6% rise on the previous year. Dividend cover, at 1.6 times, was lower than the comparable 3.1 times in 2021 due mainly to the large non-cash increase in the revaluation of investment properties in 2021.
Net cash flows from operating activities at £21.2m was £1.2m lower than in 2021. Investing activities, at £11.1m was £1.9m higher than £9.2m last year. Dividends paid were £5.5m compared to £5.3m in 2021. The resultant position was that net cash at the year-end was £17.4m, being £30.0m of borrowings offset by £47.4m of cash and cash equivalents, which was £4.3m more than last year.
| Consolidated Income Statement | 2022 | 2021 | ||
| For the year ended 30 September 2022 | £000 | £000 | ||
| Revenue | 117,421 | 118,608 | ||
| Cost of sales | (77,242) | (74,159) | ||
| Gross Profit | 40,179 | 44,449 | ||
| Revaluation of investment properties | 1,020 | 6,055 | ||
| Operating expenses | (29,293) | (29,991) | ||
| Group operating profit | 11,906 | 20,513 | ||
| Finance income | 218 | 112 | ||
| Finance costs | (1,523) | (1,540) | ||
| Profit from operations before taxation | 10,601 | 19,085 | ||
| Taxation | (2,135) | (2,794) | ||
| Profit from operations after taxation | 8,466 | 16,291 | ||
| Attributable to: | ||||
| Owners of the Company | 8,326 | 16,155 | ||
| Non-controlling interests | 140 | 136 | ||
| 8,466 | 16,291 | |||
| Earnings per share | ||||
| – basic and diluted | 27.17p | 52.73p |
| Consolidated Statement of Comprehensive Income | 2022 | 2021 | ||
| £000 | £000 | |||
| Profit for the year | 8,466 | 16,291 | ||
| Items that will not be reclassified subsequently to profit or loss: | ||||
| Actuarial gain on defined benefit scheme | 8,976 | 14,803 | ||
| Income tax relating to items not reclassified | (1,795) | (2,961) | ||
| 7,181 | 11,842 | |||
| Items that may be reclassified subsequently to profit or loss: | ||||
| Fair value gain/(loss) on cash flow hedges | 4,815 | (3,116) | ||
| Income tax relating to items that may be reclassified | (963) | 623 | ||
| 3,852 | (2,493) | |||
| Total comprehensive income for the year | 19,499 | 25,640 | ||
| Attributable to: | ||||
| Owners of the Company | 19,359 | 25,504 | ||
| Non-controlling interests | 140 | 136 | ||
| 19,499 | 25,640 |
Consolidated Balance Sheet as at 30 September 2022
| 2022 | 2021 | ||
| £ 000 | £ 000 | ||
| NON-CURRENT ASSETS | |||
| Intangible assets | 967 | 933 | |
| Property,plant and equipment | 216,235 | 216,550 | |
| Right of use assets | 3,280 | 3,113 | |
| Investment properties | 28,830 | 27,810 | |
| Trade and other receivables | 300 | 308 | |
| Retirement benefit asset | 26,434 | 18,761 | |
| Derivative financial instruments | 2,640 | 108 | |
| Other investments | 5 | 5 | |
| Total non-current assets | 278,691 | 267,588 | |
| CURRENT ASSETS | |||
| Inventories | 7,173 | 6,909 | |
| Trade and other receivables | 19,934 | 18,000 | |
| Derivative financial instruments | 483 | – | |
| Cash and cash equivalents | 47,397 | 43,136 | |
| Total current assets | 74,987 | 68,045 | |
| Total assets | 353,678 | 335,633 | |
| LIABILITIES | |||
| Trade and other payables | 21,043 | 18,373 | |
| Current tax liabilites | 2,088 | 3,020 | |
| Lease liabilities | 69 | 72 | |
| Derivative financial instruments | 330 | 1,256 | |
| Total current liabilities | 23,530 | 22,721 | |
| NET CURRENT ASSETS | 51,457 | 45,324 | |
| NON-CURRENT LIABILITIES | |||
| Trade and other payables | 25,162 | 24,006 | |
| Lease liabilities | 3,251 | 3,035 | |
| Derivative financial instruments | – | 874 | |
| Financial liabilities – preference shares | 235 | 235 | |
| Borrowings | 30,000 | 30,000 | |
| Deferred tax liabilities | 32,126 | 29,321 | |
| Total non-current liabilities | 90,774 | 87,471 | |
| Total liabilities | 114,304 | 110,192 | |
| Net assets | 239,374 | 225,441 | |
| EQUITY | |||
| Share capital | 1,532 | 1,532 | |
| Revaluation reserve | 5,270 | 5,270 | |
| ESOP reserve | (38) | (79) | |
| Other reserves | 2,234 | (1,618) | |
| Retained earnings | 230,232 | 220,178 | |
| Equity attributable to owners of the company | 239,230 | 225,283 | |
| Non-controlling interests | 144 | 158 | |
| Total equity | 239,374 | 205,039 |
Consolidated Statement of Changes in Equity for the year ended 30 September 2022
| Share | Revaluation | ESOP | *Other | Retained | Total | |
| capital | reserve | reserve | reserves | earnings | ||
| £ 000 | £ 000 | £ 000 | £ 000 | £ 000 | £ 000 | |
| At 1 October 2021 | 1,532 | 5,270 | (79) | (1,618) | 220,178 | 225,283 |
| Total recognised income and expense for the year | – | – | – | – | 8,326 | 8,326 |
| Amortisation of employee share option scheme | – | – | 41 | – | – | 41 |
| Movement on hedges (net of tax) | – | – | – | 3,852 | – | 3,852 |
| Actuarial gain on defined benefit scheme (net of tax) | – | – | – | – | 7,181 | 7,181 |
| Equity dividends | – | – | – | – | (5,453) | (5,453) |
| At 30 September 2022 | 1,532 | 5,270 | (38) | 2,234 | 230,232 | 239,230 |
| At 1 October 2020 | 1,532 | 5,270 | (120) | 875 | 197,359 | 204,916 |
| Total recognised income and expense for the year | – | – | – | – | 16,155 | 16,155 |
| Amortisation of employee share option scheme | – | – | 41 | – | – | 41 |
| Movement on hedges (net of tax) | – | – | – | (2,493) | – | (2,493) |
| Actuarial gain on defined benefit scheme (net of tax) | – | – | – | – | 11,842 | 11,842 |
| Equity dividends | – | – | – | – | (5,178) | (5,178) |
| At 30 September 2021 | 1,532 | 5,270 | (79) | (1,618) | 220,178 | 225,283 |
| Consolidated Statement of Cash Flows | 2022 | 2021 | |
| for the year ended 30 September 2022 | £000 | £000 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |||
| Operating profit | 11,906 | 20,513 | |
| Depreciation and amortisation charges | 11,094 | 10,924 | |
| Share based reward charges | 41 | 41 | |
| Gain on revaluation of investment property | (1,020) | (6,055) | |
| Pension operating charge less contributions paid | 1,303 | 3,357 | |
| Deemed interest income from hire purchase arrangements | 50 | – | |
| Profit on sale of property, plant and equipment | (7) | (6) | |
| Operating cash flows before movement in working capital | 23,367 | 28,774 | |
| Working capital adjustments: | |||
| Increase in inventories | (257) | (881) | |
| Increase in trade and other receivables | (1,926) | (2,263) | |
| Increase in trade and other payables | 4,444 | 904 | |
| Net movement in working capital | 2,261 | (2,240) | |
| Interest paid | (1,380) | (1,395) | |
| Preference dividends paid | (9) | (9) | |
| Income taxes paid | (3,020) | (2,742) | |
| Net cash flows from operating activities | 21,219 | 22,388 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Purchase of property, plant and equipment | (11,001) | (8,513) | |
| Investment in intangible assets | (319) | (805) | |
| Deposit interest received | 168 | 112 | |
| Net proceeds from disposal of fixed assets | 7 | 6 | |
| Net cash flows used in investing activities | (11,145) | (9,200) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Equity dividends paid | (5,453) | (5,178) | |
| Dividends paid to non-controlling interest | (154) | (101) | |
| Repayment of lease liabilities | (206) | (297) | |
| Net cash flows used in financing activities | (5,813) | (5,576) | |
| Net increase in cash and cash equivalents | 4,261 | 7,612 | |
| Cash and cash equivalents at beginning of year | 43,136 | 35,520 | |
| Effect of foreign exchange rates | – | 4 | |
| Cash and cash equivalents at end of year | 47,397 | 43,136 |