Results round-up

Power plant operator Drax increased operating profits by more than 70% in the first half of the year but slumped to a pre-tax loss after increases to depreciation and amortisation costs and unrealised losses on derivative contracts.

After the acquisition of SME energy supplier Opus Energy and the launch of a biomass unit, Drax generated revenue of £1.8bn in the six months to 30 June, up 21% on the same period last year.

Earnings before interest, tax, depreciation and amortisation leapt 73% to £121m but while a loss before tax of £83m compares badly with the profit of £184m a year ago this reflects accelerated depreciation of coal-specific assets and amortisation of intangible assets from the Opus acquisition and an increased net finance charge.

Chief executive Dorothy Thompson said the new strategy launched in December was not only creating greater diversification for the business but also shifting the earnings profile "to deliver higher quality more stable earnings, with opportunities for long-term growth".

Underlying earnings per share almost halved to 2.2p from 4.2p and a reported loss per share of 17p was the bottom line, which was worse than some analysts were expecting.

Deutsche Bank had anticipated a step up in EBITDA to £115m, but forecast the higher depreciation and interest costs were likely to leave its EPS broadly flat at 4.2p. Analysts at Citi were looking for EBITDA of £114m and EPS of 4.5p and a dividend of 6.1p.

However, the board had already in July declared an interim dividend of 40% of the expected full year payout, which came out at 4.9p per share.

After the acquisition of Opus for £367m and a third wood pellets plant for $35m, net debt stood at £372m at the half year stage, up from December's £93m, including cash £197m in the bank.

Thompson said it was a half year of "good progress" with the new strategy.

"Central to our strategy is the delivery of targeted growth through deploying our expertise across our markets and, in so doing, diversifying, growing and improving the quality of earnings whilst reducing exposure to commodity market volatility," she said.

Progress was being made on four new rapid response gas power projects and research and innovation work has identified potentially attractive options to repurpose the remaining coal assets, she added.

RPC Group, the plastic packaging specialist, reported first-quarter sales and profits ahead of last year's and intends to begin a £100m share buyback programme.
The FTSE 250-listed company said it had generated £960m revenues in the three months to 30 June 2017, not too far from the £1.2bn generated in the whole of the first half in 2016.

Continued organic growth, the contribution from acquisitions, including a good start from Letica, and positive foreign exchange movements all contributed to the increase.

Group margins and profitability were ahead of management expectations before and after exceptional items, with RPC saying favourable currency translation effect had offset the negative time lag impact from passing through higher polymer prices.

Cash flow development remains on track.

Having upped strategic buying of polymer from 310 kilotonnes in 2013/14 to 1,100kt on an annualised basis now, chief executive Pim Vervaat said the implementation of the Vision 2020 growth strategy was "progressing well with continued organic growth, good profitability levels and robust cash generation".

"The board is confident that the group's performance going forward will continue to deliver value to its shareholders."

RPC does not plan to make any significant acquisitions over the rest of the year over and above those already announced.

Directors still see a "significant" opportunity to consolidate European markets remains, but given the pace of its recent acquisition activity, the near term focus will be on "delivering the announced synergy realisation programme; demonstrating the contribution of the newly acquired businesses; whilst continuing to drive organic growth, margin improvement, return on capital and strong cash flow generation".

Executive pay will be re-aligned to include further emphasis on returns on capital and cash flow generation, with shareholders to be consulted as part of this process.