Drax sees 1H profit surge, expects reduction in gearing

Drax posted a surge in its first half profits and guided towards a reduction in gearing by year end.

"In the first half of 2023, we delivered a strong system support and generation performance, providing dispatchable, renewable power for millions of UK homes and businesses, " chief executive officer, Will Gardiner said.

"Drax Power Station remained the UK's single largest provider of renewable energy by output during the period."

Over the six months ending on 30 June, the power generation outfit posted a 69% surge in profit before tax to reach £338m.

That saw its adjusted basic earnings per share more than double, from 20.0p to 46.0p.

Gardiner also said that Drax had made good progress in screening options for Bio Energy Carbon Capture and Storage projects in the U.S..

Management's ambition was to develop 14Mt of annual carbon removals by 2030 of which 8Mt would be in the States.

UK BECCS investment had been paused pending more clarity on government support at Drax Power Stations.

Net debt increased 14% to £1.27bn to 3.1 times the company's adjusted earnings before interest, taxes, depreciation and amortisation.

Full-year adjusted EBITDA guidance was unchanged and in line with analysts' estimates.

However, Drax anticipated that gearing would drop to "significantly" below "2 times target" by the end of the year.

At period end, the company's cash and committed facilities stood at £586m.

The interim dividend was raised from 8.4p per share to 9.2p and the full-year payout was seen rising by a tenth to 23.1p.

As of 1031 BST, shares of Drax were down by 1.61% to 609.80.