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Drax sees ?60m hit from virus; customers business to report loss
22nd Apr 2020 07:44
(Sharecast News) - Power generation company Drax said on Wednesday that core profit for 2020 should be in line with market expectations despite a potential ?60m hit from the coronavirus pandemic, although the customer business is expected to make a loss.
The company said full-year adjusted earnings before interest, tax, depreciation and amortisation are currently in line with consensus including the estimated hit from the impact of Covid-19.
However, Drax expects lower power demand and increased bad debts in its customer businesses.
"In the customers business, the consequences of Covid-19 are only now starting to become visible," it said. "It is expected to result in reduced demand and a potential increase in bad debt, which represents a major sensitivity, particularly in the SME market. As a result, Drax has significantly increased its expectation of potential customer business failures and higher bad debt."
Drax said that assuming the continued impact of the virus outbreak throughout 2020, it now expects the customers business to report a full-year adjusted EBITDA loss.
"The group will closely monitor the impact on the customers business and update the market accordingly," it said.
Still, Drax said full-year expectations remain underpinned by good operational availability for the remainder of 2020. In addition, the 2019 final dividend of 9.5p a share will be paid out, subject to approval at the annual meeting.
Drax said its operational performance in the first three months of 2020 was "robust" and that "strong" contracted forward power sales support 2020-21 earnings visibility.
Chief executive officer Will Gardiner said: "With our strong balance sheet, robust trading and operational performance, and resilient sustainable biomass supply chain, Drax is in a strong position to support its employees, business customers and communities, during the Covid-19 crisis, while continuing to generate returns for shareholders.
"As an important part of the UK's critical national infrastructure, we recognise our responsibility to support the country's response to Covid-19. We have strong business continuity plans in place and are in close contact with the UK Government."
The company said full-year adjusted earnings before interest, tax, depreciation and amortisation are currently in line with consensus including the estimated hit from the impact of Covid-19.
However, Drax expects lower power demand and increased bad debts in its customer businesses.
"In the customers business, the consequences of Covid-19 are only now starting to become visible," it said. "It is expected to result in reduced demand and a potential increase in bad debt, which represents a major sensitivity, particularly in the SME market. As a result, Drax has significantly increased its expectation of potential customer business failures and higher bad debt."
Drax said that assuming the continued impact of the virus outbreak throughout 2020, it now expects the customers business to report a full-year adjusted EBITDA loss.
"The group will closely monitor the impact on the customers business and update the market accordingly," it said.
Still, Drax said full-year expectations remain underpinned by good operational availability for the remainder of 2020. In addition, the 2019 final dividend of 9.5p a share will be paid out, subject to approval at the annual meeting.
Drax said its operational performance in the first three months of 2020 was "robust" and that "strong" contracted forward power sales support 2020-21 earnings visibility.
Chief executive officer Will Gardiner said: "With our strong balance sheet, robust trading and operational performance, and resilient sustainable biomass supply chain, Drax is in a strong position to support its employees, business customers and communities, during the Covid-19 crisis, while continuing to generate returns for shareholders.
"As an important part of the UK's critical national infrastructure, we recognise our responsibility to support the country's response to Covid-19. We have strong business continuity plans in place and are in close contact with the UK Government."