FOR sparkling results Hydro-Electric's interim yesterday took some
beating. Pre-tax profits soared 66.4% to #40.6m, far ahead of the most
optimistic expectations, with the dividend given a 10.8% lift.
The shares responded with a 3p rise to 240p, close to the peak of
247p. With analysts sharing the company's optimism about trading
prospects, expectations for the full year are being raised to around
#145m.
''These are very satisfactory first-half results and we are well on
target for a strong full-year performance,'' said chairman Sir Michael
Joughin.
Industry regulators can have little complaint. Hydro's pricing tariff
is the second lowest in Britain and far below the cost in, for example,
rural Wales. Besides customer service is said to have ''improved
markedly'' in recent months.
The fact that sales across the Border increased 20.2% to #60.3m is
significant, with total power sales up 6.8% to #301m. ''Sheer hard work
and effort,'' was chief executive Roger Young's explanation, with eight
new contract customers won in England in spite of recession.
The company could be earning good profits there when the
interconnector upgrade is completed at the end of next year, adding 30%
to export capacity.
On production, Hydro showed an improved operating margin of 16.7%,
largely as a result of having two months' benefit from the Miller gas
flow to Peterhead power station. Higher summer rainfall also helped.
Distanced from the topical issues over coal use the company might even
benefit, if English generators are forced into price rises. Effectively
it is sold out of electricity at present.
Already the planned output from the new Keadby power station on
Humberside, a joint venture with Norweb, has been substantially sold
ahead. The project is not scheduled to complete until 1995. Supplies
have been purchased from France for two years now, and these could also
be stepped up.
Even appliance retailing has gone well, which will stun the English
distributors. Turnover rose 15% on the same sales area but benefiting
from refurbishment of the shops and a new warehouse opened in Perth.
Although it will rise slightly in the current half, with #48m drawn
down towards the Keadby project, at end-September gearing had been cut
to 20.6% from 41.6% at the same point in 1991. The interest charge was
down a third to #9.7m.
Added to which #116m of 11.5% Government debt is being redeemed next
week, taking #12.5m mainly from cash but saving #4m in a full year.
Earnings will eventually benefit and jumped from 5.11p to 7.93p in the
half-year. The interim dividend is 3.6p.
Hydro's initial 1,600,000 shareholders has reduced to 700,000, with
30% of the capital held by individuals.
There may be selling ahead of the final 70p-a-share call due in April,
but on these figures and a prospective yield of just over 6%, hydro
power is attractive.
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