Don’t be too concerned about the hefty headline profit slide at Drax (DRX) - which operates Europe’s largest coal-fired power station. Strip-out such factors as the hit from marking-to-markets the group’s derivative contracts and underlying earnings fell 4 per cent in 2012 to £193m.
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 | ||||
