Renewable energy companies have not been dealt the greatest of hands through government policy over the past 12 months. Westminster's decision to scrap renewable generators' exemption from the Climate Change Levy in last year's budget was a particularly sore point, and for biomass generator Drax (DRX), removed £30m of its renewables support in 2015. Unlike previous cycles, the fall away in commodity prices was not offset by a reduction in the price of coal. Both fuel costs in generation and the cost of power purchases increased last year. This weighed on group operating profit, which fell 61 per cent to £76m.
The group's biomass generation reached 11.5 terawatt/hours, up 46 per cent on 2014. For the first time since the beginning of the last decade the group's coal units no longer ran continually, but at peak or optimal periods of demand. Greater biomass generation resulted in the group booking a £109m impairment on assets previously used in coal generation, which are no longer needed.
In response to narrowing margins management has focused on tightening its use of working capital. For example, the group ran down its coal stocks, releasing £95m in cash.
Analysts at Whitman Howard expect adjusted EPS of 4.6p in 2016, down from 11.3p the previous year.
DRAX (DRX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 260.3p | MARKET VALUE: | £1.06bn | |
| TOUCH: | 259.7-260.7p | 12-MONTH HIGH: | 451p | LOW: 205p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 394p | NET DEBT: | 12% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 11.8 | 338 | 127 | 27.8 |
| 2012 | 1.8 | 190 | 44 | 25.3 |
| 2013 | 2.1 | 31.8 | 13 | 17.6 |
| 2014 | 2.8 | 166 | 32 | 11.9 |
| 2015 | 3.1 | 59 | 14 | 5.7 |
| % change | +9 | -64 | -56 | -52 |
Ex-div: 21 Apr Payment: 13 May | ||||
