Don’t be too concerned about the hefty headline profit slide at
That modest slippage reflects the fact that the average price received for wholesale power fell from £55.6 per MWh to £51.3MWh in the period - neither was that fully offset by cheap US gas having meant lower European coal prices. Still, forward power sales for the year ahead have risen marginally to £51.9 per MWh and Drax saw net power output rise 2.7 per cent in 2012 to a record 27.1TWh.
Drax is also continuing with plans to convert from coal to renewable biomass energy. It expects to spend £650m-£700m on this, with the first unit converting to biomass in April this year followed by another in 2014's second half. In 2013 capital expenditure of £250m-£300m is anticipated, up from £224m last year. "What investors are increasingly owning is a very interesting long-term growth story in renewable power," said finance director Tony Quinlan. "Drax in the short-term is not for dividend hunters."
Deutsche Bank expects headline pre-tax profit of £129m for 2013, giving EPS of 28.01p.
| DRAX (DRX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 630p | MARKET VALUE: | £2.5bn | |
| TOUCH: | 628-630p | 12-MONTH HIGH: | 639p | LOW: 390p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 368p | NET CASH: | £311m | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 1.75 | 443 | 98.0 | 43.4 |
| 2009 | 1.48 | 158 | 31.0 | 13.7 |
| 2010 | 1.65 | 255 | 52.0 | 32.0 |
| 2011 | 1.84 | 338 | 127 | 27.8 |
| 2012 | 1.78 | 190 | 44.0 | 25.3 |
| % change | -3 | -44 | -65 | -9 |
|
Ex-div: 24 Apr Payment: 17 May |
||||
IC VIEW
That costly conversion to biomass, while not without long-term promise, will hurt the dividend. While this April's introduction of the carbon price support mechanism is likely to erode coal power margins. So, after a decent share price run since end-December, scope for further near-term upside is hard to spot. Hold.
Last IC view: Hold, 472p, 31 July 2012
visible-status-Standard story-url-Drax_FYResults_19022013.xml
