Interim Report 2010 6 months ended 31 March 2010
Contents Directors, Officers and Advisors 2 Professional Directors Statement 3 Responsibility Statement 4 Investor Timetable 4 Consolidated Income Statement 5 (Unaudited) Consolidated Statement of 5 Comprehensive Income (Unaudited) Consolidated Statement of 6 Changes in Equity (Unaudited) Consolidated Balance Statement 7 (Unaudited) Consolidated Cash Flow 8 Statement (Unaudited) Notes to the Interim Accounts 9-11 1
Directors, Officers and Professional Advisers Non-Executive Directors Geoffrey Grime FCA (Chairman) Jeremy Arnold FCA Clive Chaplin BA Michael Liston OBE FREng, BSc, CEng, FIEE, CIMgt John Stares BSc, FCA Executive Directors Christopher Ambler BA, MEng, CDipAF, CEng, MIMechE, MBA (Chief Executive) Martin Magee CA (Finance) David Padfield BSc, CEng, FIEE, MCMI, CDir, MIOD (Operations) Richard Plaster FCIPD, CDir, MIOD (Commercial and Human Resources) Secretary Peter Routier BSc, FCIS Registered Office Queens Road, St. Helier, Jersey Place of Incorporation Jersey Auditors Deloitte LLP, 66-68 Esplanade, St. Helier, Jersey Bankers Royal Bank of Scotland International Limited, 71 Bath Street, St. Helier, Jersey Brokers Collins Stewart (CI) Limited, 38-39 Esplanade, St. Helier, Jersey Registrar Computershare Investor Services (CI) Limited, 31 Pier Road, St. Helier, Jersey 2
Governance Directors Statement Financial Summary 6 months 6 months % increase/ 2010 2009 (decrease) (restated) Electricity Sales kwh (000) 366,628 367,112 - Turnover 55.7m 49.9m 12 % Profit before tax 7.5m 5.6m 34% Profit in Energy business 4.4m 4.0m 10% Earnings per share 3.92 2.93 34% Net dividend proposed per ordinary share 81p 77p 5% Group turnover was 12% higher than 2009 and profit before tax in the first half of 2010 was 7.5m being 34% higher than in the same period last year. Most of this increase in profits came from our non-energy business units. Earnings per share rose by 34% in line with profits. Electricity revenues in the first half of 2010 were 8% higher than in 2009. Unit sales volumes were at the same level as last year but revenues increased by the net result of increased tariffs in the last financial year offset by a 5.1% decrease in prices to our customers from January 2010. Energy profits rose from 4.0m in 2009 to 4.4m mainly as a result of lower maintenance costs. Imported electricity met 89% of our requirements during the half year, which was slightly lower than in the previous year. Despite the tough trading conditions currently prevailing in markets our Retailing business saw year on year revenues rise 12% to 7.6m and profits increase by 0.1m to 0.4m. Profits from our Property portfolio rose by 0.6m to 1.2m due to an increase in rental flows and the settlement of a rent review with one of our tenants back-dated to June 2008. The Building Services business produced profits of 0.1m being at the same level as last year. Our remaining business units produced profits of 1.3m which included 1m received from our associate Newtel for fibre optic lease rentals and the part repayment of a loan written off in 2004 when the investment value was reduced to zero. These additional revenues are largely non-recurring and were associated with the distribution of funds raised by Newtel from the sale of its data centre assets in Guernsey. Interest received at 0.2m was 0.2m lower than last year due mainly to lower interest rates. Cash, including short-term investments, rose 1.4m to 18.2m during the last six months, with operating cash produced from trading activity offset by 2.4m of electricity infrastructure investment. In terms of capital expenditure, the Western Primary project to reinforce the network in the west of Jersey was completed during this period and the South Hill Primary project was initiated. Your Board proposes to pay an interim net dividend of 81p (2009: 77p) on the Ordinary and A Ordinary Shares payable on 30 June 2010 in addition to the final dividend for 2009 of 118p (2008: 112p) paid on 31 March 2010. Your Board aims to deliver sustained real growth each year and the proposed interim dividend is a 5% year on year increase. At our Annual General Meeting, Chris Evans, a non-executive director who joined the Board in 1998, retired and the Board would like to thank him for all his help during the last 12 years. 3
Governance Directors Statement Responsibility statement We confirm to the best of our knowledge: (a) the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting : (b) the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rule DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and (c) the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rule DTR 4.2.8R (disclosure of related party transactions and changes therein). (d) This half yearly financial report contains certain forward-looking statements with respect to the operations, performance and financial condition of the Company. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this half yearly financial report and the Company undertakes no obligation to update these forward-looking statements. Nothing in this half yearly financial report should be construed as a profit forecast. G.J. GRIME Chairman C.J.AMBLER Chief Executive 13 May 2010 Investor timetable for 2010 11 June Record date for interim ordinary dividend 30 June Interim ordinary dividend for year ending 30 September 2010 1 July Payment date for preference share dividends End July Interim Management Statement nine months to 30 June 2010 17 December Preliminary announcement of full year results 4
Condensed Consolidated Income Statement (Unaudited) 31 March 31 March Year ended 30 September Notes 2010 2009 2009 000 000 000 (restated) Revenue 2 55,706 49,897 93,594 Cost of sales (39,713) (35,214) (66,903) Gross profit 15,993 14,683 26,691 Revaluation of investment properties - - (106) Operating expenses (8,661) (9,456) (17,818) Group operating profit before joint venture 7,332 5,277 8,767 Share of profit/(loss) of joint venture 30 (11) (59) Operating profit 2 7,362 5,216 8,708 Interest receivable 166 405 577 Finance costs (7) (5) (11) Profit from operations before taxation 7,521 5,616 9,274 Taxation 3 (1,490) (1,125) (2,032) Profit from operations after taxation 6,031 4,491 7,242 Minority interest (31) - (38) Profit for the year attributable to the equity holders of the parent company 6,000 4,491 7,204 Earnings per share - basic and diluted 3.92 2.93 4.70 Dividends per share - paid 4 1.18 1.12 1.89 - proposed 4 0.81 0.80 1.18 Condensed Consolidated Statement of Comprehensive Income (Unaudited) 31 March 31 March Year ended 30 September 2010 2009 2009 000 000 000 (restated) Profit for the period 6,000 4,491 7,204 Other comprehensive income Actuarial gain/(loss) on defined benefit scheme (net of tax) 3,565 (8,178) (9,163) Fair value gain/(loss) on cash flow hedges (net of tax) (994) 1,906 (830) Total comprehensive income for the period 8,571 (1,781) (2,789) 5 Attributable to: Owners of the company 8,602 (1,781) (2,751) Minority Interest (31) - (38) 8,571 (1,781) (2,789)
Condensed Consolidated Statement of Changes in Equity (Unaudited) Share Other Retained Total capital reserves earnings reserves 000 000 000 000 At 1 October 2009 1,532 1,726 126,074 129,332 Total recognised income and expense for the period - - 6,000 6,000 Unrealised losses on hedges - (994) - (994) Actuarial gain on defined benefit scheme - - 3,565 3,565 Equity dividends paid by Jersey Electricity plc - - (1,808) (1,808) As at 31 March 2010 1,532 732 133,831 136,095 At 1 October 2008 1,532 2,556 130,928 135,016 Total recognised income and expense for the period - - 7,204 7,204 Unrealised losses on hedges - (830) - (830) Actuarial loss on defined benefit scheme - - (9,163) (9,163) Equity dividends paid by Jersey Electricity plc - - (2,895) (2,895) As at 30 September 2009 1,532 1,726 126,074 129,332 (restated) (restated) At 1 October 2008 1,532 2,556 130,928 135,016 Total recognised income and expense for the period - - 4,491 4,491 Unrealised gains on hedges - 1,906-1,906 Actuarial loss on defined benefit scheme - - (8,178) (8,178) Equity dividends paid by Jersey Electricity plc - - (1,716) (1,716) As at 31 March 2009 1,532 4,462 125,525 131,519 6
Condensed Consolidated Balance Sheet (Unaudited) As at As at As at 31 March 31 March 30 September 2010 2009 2009 000 000 000 (restated) Non-current assets Intangible assets 60 84 60 Property, plant and equipment 119,399 119,723 120,581 Investment property 12,635 12,635 12,529 Retirement benefit surplus 1,426 - - Other investments 1,803 1,907 1,804 Total non-current assets 135,323 134,349 134,974 Current assets Inventories 7,026 5,813 6,069 Trade and other receivables 18,560 17,127 14,871 Derivative financial instruments 357 5,019 1,599 Short-term investments cash deposits 9,980 5,585 8,200 Cash and cash equivalents 8,263 6,398 8,636 Total current assets 44,186 39,942 39,375 Total assets 179,509 174,291 174,349 Current liabilities Trade and other payables 13,244 11,962 13,858 Current tax payable 3,188 2,150 1,698 Total current liabilities 16,432 14,112 15,556 Net current assets 27,754 25,830 23,819 Non-current liabilities Trade and other payables 15,264 14,216 14,676 Retirement benefit deficit - 2,780 3,708 Financial liabilities preference shares 235 235 235 Deferred tax liabilities 11,450 11,422 10,827 Total non-current liabilities 26,949 28,653 29,446 Total liabilities 43,381 42,765 45,002 Net assets 136,128 131,526 129,347 Equity Share capital 1,532 1,532 1,532 Other reserves 446 5,019 1,726 Retained earnings 134,117 124,968 126,074 Shareholders funds 136,095 131,519 129,332 Minority interest 33 7 15 Total equity 136,128 131,526 129,347 7
Condensed Consolidated Cash Flow Statement (Unaudited) Year ended 31 March 31 March 30 September 2010 2009 2009 000 000 000 (restated) Cash flows from operating activities Notes Operating profit before joint venture 7,332 5,227 8,767 Depreciation and amortisation charges 3,873 3,705 7,828 Revaluation of investment property - - 106 Pension operating charge less contributions paid (700) (585) (1,039) (Profit)/loss on sale of fixed assets (3) - 24 Operating cash flows before movement in working capital 10,502 8,347 15,686 (Increase)/decrease in inventories (956) 289 33 (Increase)/decrease in trade and other receivables (3,552) (4,896) (2,841) Increase in trade and other payables 827 1,490 2,950 Interest received 31 314 690 Preference dividends paid (4) (4) (9) Income taxes paid - - (933) Net cash flows from operating activities 6,845 5,540 15,576 Cash flows from investing activities Purchase of property, plant and equipment (3,627) (8,175) (12,066) Investment in intangible assets (29) (8) (29) Proceeds from disposal of property - - 16 Repayment of long-term loan 50 100 150 Short-term investments (1,780) 5,440 2,825 Net cash flows from investing activities (5,386) (2,643) (9,104) Cash flows from financing activities Equity dividends paid 4 (1,832) (1,716) (2,907) Net cash flows used in financing activities (1,832) (1,716) (2,907) Net increase in cash and cash equivalents (373) 1,181 3,565 Cash and cash equivalents at beginning of period 8,636 5,217 5,071 Cash and cash equivalents at end of period 8,263 6,398 8,636 8
Notes to the Condensed Interim Accounts (Unaudited) for the period ended 31 March 2010 1 Accounting policies Basis of preparation The interim accounts for the six months ended 31 March 2010 have been prepared on the basis of the accounting policies set out in the 30 September 2009 annual report and accounts using accounting polocies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 Interim Financial Reportng. The Group has considerable financial resources and, as a consequence, the directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 2 Turnover and profit The contributions of the various activities of the Group to turnover and profit are in these columns listed below: 31 March 2010 31 March 2009 30 September 2009 External Internal Total External Internal Total External Internal Total 000 000 000 000 000 000 000 000 000 Revenue Energy 42,589 121 42,710 39,358 126 39,484 73,123 267 73,390 Building Services 1,908 107 2,015 1,881 63 1,944 3,569 184 3,753 Retail 7,648 24 7,672 6,856 32 6,888 12,954 60 13,014 Property 1,519 348 1,867 898 344 1,242 1,840 691 2,531 Other 2,042 313 2,355 904 313 1,217 2,108 574 2,682 55,706 913 56,619 49,897 878 50,775 93,594 1,776 95,370 InterGroup elimination (913) (878) (1,776) 55,706 49,897 93,594 Operating profit Energy 4,400 3,992 6,679 Building services 129 139 176 Retail 383 279 292 Property 1,181 620 1,263 Other 1,269 186 404 Operating profit before property revaluation 7,362 5,216 8,814 Revaluation of investment properties - - (106) Operating profit 7,362 5,216 8,708 Materially, all the Group s operations are conducted within the Channel Islands. All transfers between divisions are at arms-length basis. No segmental detail for assets or liabilities has been provided as there has been no material movement from the detail provided in the annual accounts to the 30 September 2009. 9
Notes to the Condensed Interim Accounts (Unaudited) for the period ended 31 March 2010 3 Income Tax 31 March 2009 2010 000 Year ended 31 March 2009 30 September 2009 2009 2009 000 000 (restated) Current income tax (1,490) (806) (1,237) Deferred income tax - (320) (795) Total income tax (1,490) (1,126) (2,032) Current Tax With effect from the 2009 year of assessment the standard rate of income tax for Jersey companies has changed. For the period ended 31 March 2010 and subsequent periods, the Company will be taxable at the rate applicable to utility companies of 20%. The comparative figures have been prepared using the previous standard rate of tax of 20% based on average profits under the provisions for transition to a current year basis of taxation. 4 Dividends 31 March 2009 2010 000 Year ended 31 March 2009 30 September 2009 2009 2008 000 000 Distribution to equity holders and by subsidiaries in the period 1,832 1,716 2,907 The distribution to equity holders in the period consisted of 1,807,760 (118p net of tax per share) in respect of the final dividend for 2009. In addition 24,000 was paid by subsidiaries to minority interests. The Directors have declared an interim dividend of 81p per share, net of tax (2009-77p) for the six months ended 31 March 2010 to shareholders on the register at the close of business on 11 June 2010. This dividend was approved by the Board on 13 May 2010 and has not been included as a liability at 31 March 2010. 5 Pensions In consultation with the independent actuaries to the scheme, the valuation of the pension scheme assets and liabilities has been updated to reflect current market discount rates, current market values of investments and actual investment returns applicable under IAS 19 Employee Benefits, and also consideration given to whether there have been any other events that would significantly affect the pension liabilities. The triennial actuarial valuation of the defined benefits scheme as at 31 December 2009 is currently being finalised which will dictate the applicable future required cash contributions. 10
Notes to the Condensed Interim Accounts (Unaudited) for the period ended 31 March 2010 6 Related party transactions a The Company currently leases the La Collette Power Station site from its largest shareholder, the States of Jersey, for a peppercorn rent of 1,000 per annum. This lease was subject to a rent review as at June 2006 which is being negotiated but it is anticipated to move the rental onto commercial rates. The Company is in dispute with it s landlord, The States of Jersey, concerning the rent review. The information usually required by IAS 37 Provisions, Contingent liabilities and contingent assets, is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the dispute. b The Company made electricity sales to the value of 3.8m (2009: 3.6m) and other sales of 0.8 (2009: 0.3m) to the States of Jersey for the months ended 31 March 2010. At the half-year end the States of Jersey had a debtors balance of 132,000 (2009: 243,000). The States of Jersey made sales to the value of 0.2m (2009: 0.1m) to Jersey Electricity for the six months ended 31 March 2010. c At the half-year end Foreshore Limited had a debtors balance of 119,000 (2009: 152,000). The long-term loan balance at 31 March 2010 was 550,000 (2009: 650,000) repayable to Jersey Electricity on a cash available basis. During the six months to 31 March 2010 the Company made electricity sales of 284,000 (2009: 245,000) and other sales of 366,000 (2009: 382,000) to Foreshore Limited. In addition to the transactions included above with the States of Jersey, the Company regularly makes payments of income tax, social security, GST (Goods and Services Tax) and other statutory costs. d The Company has a 34% shareholding in Newtel Holdings Limited ( Newtel ). During the six months to 31 March 2010 the Company made electricity sales of 16,000 (2009: 14,000) and received other income of 1,033,000 (2009: 25,000). Newtel made sales of 2,000 (2009: 1,000) to the Company for the six months ended 31 March 2010. 7 Prior year Adjustment - Energy revenues In the Annual Report for 2009 it was disclosed that a refinement had been made to the methodology employed to calculate the total number and values of unbilled units of electricity disclosed in our financial statements. For consistency, the Interim Report figures for 2009 have been restated to reflect this change. The impact is an increase in the Energy revenues (and profit) in the Income Statement of 0.3m and the net assets in the Balance Sheet by 2m. 11