Drax profit jumps, remains cautious

3rd Aug 2010 07:02

Coal-fired plant operator Drax announced a 23% increase in earnings but said it remains cautious in its outlook for the commodity markets in which it trades.Drax also said that development work to convert one of its units to burn biomass-only will now continue into 2011 before an investment case can be proven, citing regulatory uncertainty.The group was originally targeting the end of 2010 to prove the investment case for the plant."We do not believe it is possible to move forward with these investments in the absence of (...) clarity. We are urging the Government to address this particular issue early in the next banding review and we hope for an early conclusion," it said.Earnings before interest, tax, depreciation and amortisation rose to £184m in the six months ended 30 June compared with £150m last time. Revenue was also up, to £780m from £706.9m previously.Drax is paying an interim dividend of 14.1 pence per share, or £51m. This is in line with the group's new dividend policy, which is to distribute 50% of underlying earnings in each year."We remain cautious in our outlook for the commodity markets in which we trade. However, we will continue to benefit from our strong hedged position for 2010, 2011 and 2012," said chief executive Dorothy Thompson."For the remainder of 2010 we will maintain our focus on excellent operational performance and careful cash management to maximise shareholder returns in these challenging market conditions." The group has seen its share price warm up considerably since it said in mid-May that it continued to benefit from a very strong contracted position.