Jersey Electricity : Interim Report - 2021

DRIVING CHANGE FOR A

ZERO-CARBON FUTURE

INTERIM REPORT 2021

6 months ended 31 March 2021

CONTENTS	DIRECTORS, OFFICERS AND
	PROFESSIONAL ADVISERS

DIRECTORS' STATEMENT	2
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)	4
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME (UNAUDITED)	5
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)	6
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)	7
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)	8
NOTES TO THE CONDENSED INTERIM ACCOUNTS (UNAUDITED)	9

NON-EXECUTIVE DIRECTORS

Phil Austin MBE, FCIB, FCMI (Chairman)

Alan Bryce MSc, CEng, FIET

Wendy Dorman BA, ACA

Tony Taylor BSc

Peter Simon MA, MBA (Distinction)

Amanda Astall BA (Hons)

EXECUTIVE DIRECTORS

Christopher Ambler BA, MEng, CDipAF, CEng, MIMechE, MBA

(Chief Executive)

Martin Magee CA (Finance)

SECRETARY

Lisa Floris LLB (Hons)

REGISTERED OFFICE

Queen's Road, St. Helier, Jersey

PLACE OF INCORPORATION

Both Jersey Electricity plc ('the Company') and Jersey Deep Freeze Limited (together 'the Group') are incorporated in Jersey.

AUDITORS

PricewaterhouseCoopers CI LLP, 37 Esplanade, St Helier, Jersey, JE1 4XA

BANKERS

Royal Bank of Scotland International Limited, 71 Bath Street, St. Helier, Jersey

BROKERS

Canaccord Genuity Wealth Management,

PO Box 3, 37 The Esplanade, St. Helier, Jersey

REGISTRAR

Computershare Investor Services (Jersey) Limited, 13 Castle Street, St. Helier, Jersey

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DIRECTORS' STATEMENT

Financial Summary

	6 months	6 months
	2021	2020
Electricity Sales in kWh	374.9m	371.4m
Revenue	£67.1m	£64.2m
Profit before tax	£10.5m	£10.0m
Earnings per share	27.00p	25.95p
Final dividend paid per ordinary share	9.70p	9.25p
Proposed interim dividend per ordinary share	7.20p	6.80p
Net cash/(debt)	£5.9m	£(2.9m)

COVID-19 - impact on trading performance

The pandemic continued throughout the period since the end of our last financial year but did not materially impact our overall trading performance. In our Energy business we saw lower unit sales in the hospitality and retail sectors, due to lockdown measures but this was more than offset by increased domestic consumption associated with a combination of "home-working", and a colder winter period than in the previous year. Our other business units have not been greatly affected by the COVID-19 crisis, and as highlighted in our 2020 Annual Report, our Retail business continues to benefit from customers appearing to have more spending power, due to less travel taking place. We will continue to closely monitor the COVID-19 position as it develops, as we cannot be complacent, but our balance sheet, with no gearing, remains strong.

Brexit - licensing of French fishing vessels

In early May, post the balance sheet date, there was extensive media coverage of a dispute relating to a new licensing system for French fishing vessels in Jersey waters, introduced under the UK-EU Trade and Cooperation Agreement (TCA). During this incident, the French Maritime Minister made reference, within the French Parliament, to implementing retaliatory measures, including the possibility of cutting off electricity supplies transported to Jersey via submarine cables. The Company consider this a political issue to be resolved between the governments. Furthermore, we have strong relationships with our French partners, EDF (as supplier) and RTE (as network operator), that spans more than 35 years, and benefits from legal and contractual arrangements which cover imported electricity supplies to the end of 2027. Both RTE and EDF have confirmed our existing supply arrangements are unlikely to be impacted.

Overall trading performance in the 6 months to 31 March

Group revenue, at £67.1m, was 5% higher for the first half of 2020 compared to the same period last year mainly due to a rise in both Energy and Retail revenue. Profit before tax at

£10.5m was £0.5m higher than 2020 primarily due to a rise in Property and Retail profits. Cost of sales at £41.7m was £2.5m higher than last year with the rise in wholesale energy costs, and additional stock purchases associated with the increase

in Retail revenue being the main factors. Operating expenses at £14.1m were marginally lower than last year. The taxation charge in the period of £2.2m was £0.1m higher than last year due to increased profits. Earnings per share, at 27.00p, were ahead of 25.95p in 2020 due to higher profits. Net cash on the balance sheet, which comprises borrowings less cash and cash equivalents, at 31 March 2021, was £5.9m compared to £2.9m of net debt at this time last year (and £5.5m of net cash at our last year end on 30 September 2020).

Energy performance

Unit sales of electricity rose 1% from 371m to 375m kWh, compared with the same period last year. The mix of consumption altered from the same period in the prior year with lower sales to the commercial marketplace more than offset by increased domestic consumption associated with "home-working" and colder weather than in the previous year. Revenues in our Energy business at £52.0m were £1.8m higher than in 2020 with the year-on-year increase in unit sales and the 2.5% tariff rise in October 2020 being the primary drivers. Operating profit at £9.2m was £0.1m higher than the corresponding period last year as the increased revenue was largely offset by higher costs including increased wholesale import prices. We imported 96% of our on-island requirement from France and 4% from the Energy from Waste plant, owned by the Government of Jersey. Only

0.3% (around 1m units) of electricity was generated in Jersey using our traditional oil-fired plant (mainly for testing purposes) and we also saw a rising trend in our solar generation albeit still at a relatively low level compared to overall requirements. These importation and generation levels were materially consistent with the same period last year.

Non-Energy performance

Year-on-year revenue in our Powerhouse retail business, rose by 12% to £10.7m (2020: £9.6m) and profits rose by £0.2m to £1.0m with continued strong revenue growth linked to a combination of factors including a substantial proportion of customers having more disposable income due to an inability to travel, resulting from COVID-19 restrictions. Profit from our Property portfolio at £0.8m was £0.3m higher than last year, as we had an accelerated depreciation charge for air conditioning equipment of £0.4m, in our Powerhouse building, in the same period last year. JEBS, our building services unit, saw external revenue falling £0.3m to £1.6m and profitability at breakeven level compared to a profit of £0.1m last year. Our remaining business units produced profits of £0.3m being marginally behind that delivered in 2020.

Liquidity and cashflow

Net cash generated in the period was £0.4m (2020: £2.2m) post the continued investment in infrastructure of £4.8m (2020: £5.1m). The net debt figure of £2.9m at 31 March 2020 moved to a net cash figure of £5.9m at 31 March 2021 (being net cash of £5.5m at 30 September 2020). Net cash consists of £30.0m of long-term debt offset by cash and cash equivalents of £35.9m.

Forward hedging of electricity and foreign exchange, and customer tariffs

We continue to focus on delivering secure, low-carbon electricity supplies and our goal is to maintain relative stability in customer

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tariffs, despite volatility in both European wholesale electricity	Valuation of investment properties
and foreign exchange markets. We are seeing a rising trend in	We formally revalue investment properties, using an external
future wholesale prices in Europe, associated with carbon prices	valuer, once per annum to coincide with our financial year
reaching record levels, and we continue to monitor this position.	end, and any movement is reflected in our Income Statement.
Our electricity purchases are materially, albeit not fully, hedged	The value of such properties at 30 September 2020 was
for the period 2021-23. We also have around one third of our	around £22m, compared to the total net asset value, on our
expected 2024-27 liabilities hedged at known prices. As these	Consolidated Balance Sheet, of around £206m. We have not
are contractually denominated in the Euro, we enter into forward	revalued at this interim stage being consistent with previous
foreign currency contracts, on a three-year rolling basis, to	practice. The overall value of our investment properties may have
reduce the volatility of our cost base, and to aid tariff planning.	risen, despite uncertainties of COVID-19, due to the restructuring
In October 2020 we implemented a 2.5% rise in customer tariffs,	of one of our commercial leases in late March, along with current
largely driven by a rising trend in wholesale electricity prices,	buoyancy in the residential sector.
which we had delayed from 1 April 2020, in response to the	Dividend
COVID-19 crisis. The tariffs payable by an average customer
Your Board proposes to pay an interim net dividend for 2021 of
continue to benchmark well against other jurisdictions. The
7.20p (2020: 6.80p). As stated in previous years, we continue to
'default maximum tariff', introduced by Ofgem (the UK electricity
aim to deliver sustained real growth each year over the medium-
regulator) to cap prices payable in the UK, is set at a level over
term. At this time, we do not expect the COVID-19 outbreak to
35% higher than the average standard domestic tariff in Jersey.
influence our dividend strategy, but we will continue to review the
Pension scheme
position. The final dividend for 2020 of 9.70p, paid in late March
The defined benefit pension scheme surplus (without deduction
in respect of the last financial year, was an increase of 5% on the
of deferred tax) on our balance sheet at 31 March 2021 stood	previous year.
at £17.1m, compared to a surplus of £7.3m at 30 September	Risk and outlook
2020 (and a surplus of £14.3m at 31 March 2020). Since the last
financial year end, scheme liabilities have materially decreased	The principal risks and uncertainties identified in our last Annual
by approximately £10m (to £140m). This fall was primarily due	Report, issued in January 2021, have not materially altered in
to an increase to the discount rate assumptions from 1.6% at the	the interim period. We however have highlighted earlier in this
last financial year end to 2.1% at 31 March 2021 associated with	report, the current Brexit related fishing rights dispute, which
a rise in UK AA corporate bond yields in the interim. Assets in the	will hopefully be resolved in due course. Your Board is satisfied
Scheme rose by around £1m (to £157m). The defined benefit	that Jersey Electricity plc has sufficient resources to continue in
scheme has been closed to new members since 2013 and the	operation for the foreseeable future, a period of not less than
next triennial valuation of the scheme, as at 31 December 2021,	12 months from the date of approval of this report. Accordingly,
will be performed in 2022.	we continue to adopt the going concern basis in preparing the
	condensed financial statements.
Responsibility statement

We confirm to the best of our knowledge:

(a)	the condensed set of financial statements has been	(d) this half yearly interim report contains certain forward-
	prepared in accordance with IAS 34 'Interim Financial	looking statements with respect to the operations,
	Reporting';		performance and financial condition of the Group. By
(b)	the Interim Directors Statement includes a fair review of the	their nature, these statements involve uncertainty since
	information required by the Disclosure and Transparency	future events and circumstances can cause results and
	Rule DTR 4.2.7R (indication of important events during	developments to differ materially from those anticipated.
	the first six months and description of principal risks and	The forward-looking statements reflect knowledge and
	uncertainties for the remaining six months of the year); and	information available at the date of preparation of this
(c)	the Interim Directors Statement includes a fair review of the	half yearly financial report and the Company undertakes
no obligation to update these forward-looking statements.
	information required by the Disclosure and Transparency
	Nothing in this half yearly financial report should be
	Rule DTR 4.2.8R (disclosure of related party transactions
	construed as a profit forecast.
	and changes therein); and
C.J. AMBLER - Chief Executive	M.P. MAGEE - Finance Director	13 May 2021

Investor timetable for 2021

4	June	Record date for interim ordinary dividend
25	June	Interim ordinary dividend for year ending 30 September 2021
1	July	Payment date for preference share dividends
15	December	Preliminary announcement of full year results

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FINANCIAL STATEMENTS

Condensed Consolidated Income Statement (Unaudited)

		Six months ended	Six months ended		Year ended
			31 March		31 March		30 September
		2021	2020	2020
	Note	£000	£000	£000
Revenue	2	67,098	64,198	111,747
Cost of sales		(41,743)		(39,287)		(69,695)
Gross profit		25,355	24,911	42,052
Profit on revaluation of investment properties		-	-	515
Operating expenses		(14,108)		(14,152)		(26,360)
Group operating profit	2	11,247	10,759	16,207
Finance income		26	89	139
Finance costs		(779)		(806)		(1,516)
Profit from operations before taxation		10,494	10,042	14,830
Taxation	3	(2,162)		(2,064)		(3,090)
Profit from operations after taxation		8,332	7,978	11,740
Attributable to:
Owners of the Company		8,274	7,953	11,624
Non-controlling interests		58		25		116
		8,332	7,978	11,740
Earnings per share
- basic and diluted			27.00p		25.95p		37.94p

In 2020 the Directors 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 half year reported results, increasing both Operating expenses and Revenue by £221k, with no impact on Group operating profit.

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