Drax (DRX) is betting on renewable energy generation, but the shift from coal giant to a clean-energy company has come at a price. Exceptional costs relating to the acquisition of ScottishPower’s renewable generation portfolio, as well as obsolescence charges for coal-specific assets, weighed heavily on the statutory figures. On an adjusted basis, however, cash profits rose 9 per cent to £250m.
The group converted its fourth coal unit for biomass generation, and the fuel source accounts for three-quarters of its electricity generation. Alongside this, the ScottishPower acquisition has added 2.6GW to Drax’s generating capacity from a combination of pumped storage, hydrogen and gas power. Management drew £550m from its debt facility to fund the deal in January this year, meaning the 13 per cent drop in net debt through 2018 will be short-lived.
The UK Capacity Market – which provides payments to support the development of renewable energy generation – was suspended by the European Court of Justice last November pending an investigation. Drax is expecting £68m in such payments in 2019 and management is predicting the market will be re-established in the year.
Analyst RBC Capital Markets is forecasting adjusted EPS of 36p in 2019, up from 10p in 2018.
| DRAX (DRX) | ||||
| ORD PRICE: | 371p | MARKET VALUE: | £ 1.46bn | |
| TOUCH: | 370.6-371.2p | 12-MONTH HIGH: | 432p | LOW: 236p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 74 | |
| NET ASSET VALUE: | 450p* | NET DEBT: | 18% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 2.81 | 166 | 32.0 | 11.9 |
| 2015 | 3.07 | 59.0 | 14.0 | 5.70 |
| 2016 | 2.95 | 197 | 47.7 | 2.50 |
| 2017 (restated) | 3.68 | -204 | -41.3 | 12.3 |
| 2018 | 4.23 | 13.8 | 5.00 | 14.1 |
| % change | +15 | - | - | +15 |
| Ex-div: | 18 Apr | |||
| Payment: | 10 May | |||
| *Includes intangible assets of £474m, or 120p a share | ||||
