With a £36m boost from the hydro and gas assets acquired from ScottishPower last year, Drax (DRX) saw its adjusted operating profit surge by 35 per cent to £138m in the first half of 2019. In addition to the gains from this renewables portfolio, the power generation division saw the so-called ‘value from flexibility’ increase by 92 per cent to £69m, more than offsetting weakness elsewhere.
As adverse US weather dampened volumes, adjusted cash profits in pellet production declined by a fifth to £8m. Meanwhile, the customers' segment saw adjusted cash profits plunge by 44 per cent to £9m on the back of restructuring costs and warm weather depressing energy volumes sold by 12 per cent.
Reflecting £692m in acquisition costs, net debt jumped from £366m to £924m. But the group expects to achieve a ratio of net debt to adjusted cash profits of two times by the end of 2019 if the suspension on the capacity market (government payments to ensure reliable energy capacity) is lifted. If this were to happen this year, as RBC Capital Markets anticipates, an additional £68m of income would be recognised for 2019. Cash generation remains strong, with net cash from operating activities rising by over 75 per cent to £197m.
Investec expects adjusted pre-tax profit of £127m and EPS of 27p for the full year, rising to £161m and 33.5p in 2020.
| DRAX (DRX) | ||||
| ORD PRICE: | 294p | MARKET VALUE: | £1.16bn | |
| TOUCH: | 293-294p | 12-MONTH HIGH: | 432p | LOW: 260p |
| DIVIDEND YIELD: | 5.1% | PE RATIO: | 42 | |
| NET ASSET VALUE: | 469p* | NET DEBT: | 50% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018** | 2.07 | -11.3 | -1.0 | 5.6 |
| 2019 | 2.23 | 3.5 | 1.0 | 6.4 |
| % change | +8 | - | - | +14 |
| Ex-div: | 19 Sep | |||
| Payment: | 11 Oct | |||
| *Includes intangible assets of £464m, or 117p a share **Re-stated | ||||
