24th Feb 2015 07:31
LONDON (Alliance News) - Drax Group PLC Tuesday slashed its dividend after reporting a fall in underlying earnings in 2014 and cut its capital expenditure budget by over a quarter for 2015, as it warned the outlook for this year is set to reflect "deterioration in the commodity markets".
Although underlying earnings and EBITDA for the year fell, the company did report a rise in pretax profit for the year on the back of unrealised financial gains from derivative contracts, it said.
For the year ended December 31, the company reported a fall in earnings before interest, tax, depreciation and amortization to GBP229 million from GBP230 million in 2013.
This led to the company reporting underlying earnings of GBP96 million, down from GBP142 million a year earlier, and a pretax profit of GBP165.9 million, which is up from GBP31.8 million in 2013.
However, the company slashed its total dividend to 11.9 pence per share from 17.6p, as expected by analysts and which Drax said was in line with the company's policy to distribute 50% of underlying earnings.
Drax reported GBP80.7 million in depreciation, mainly linked to its conversion of its power stations to biomass, which was higher than anticipated. In 2013, it recorded GBP65 million in depreciation, and Drax said this will continue to rise year on year as its biomass transformation progresses.
The settlement of CESP, additional depreciation, and interest charges have resulted in an incremental pre-tax charge of GBP41 million in 2014. However the increase in pre-tax profit was driven by unrealised gains on derivative contracts of GBP66 million, compared to unrealised losses of GBP110 million last year.
Revenue for the year reached GBP2.45 billion, up from GBP1.78 billion in 2013.
"External factors have been challenging, with regulatory headwinds in 2014 exacerbated by the recent major deterioration in commodity markets. In these conditions we are placing particular focus on business efficiencies and cost control measures," said Chief Executive Dorothy Thompson.
Drax added the "current earnings outlook for 2015 reflects major deterioration in commodity markets, following the oil market decline."
The company spent a total of GBP201 million in capital expenditure in 2014, and Drax said its biomass transformation is in line with its original cost guidance of between GBP650 million and GBP700 million.
But the company did cut its budget in 2015 to GBP150 million, and Drax said it continues to "assess options for value enhancing investments, including a potential third US Gulf pellet plant," it said.
By Joshua Warner; [email protected]; @JoshAlliance
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