Jan 2022
Well
JEL of these financials.
Jersey Electricity is the sole distributor of electricity services to
Jersey, the largest of the Channel Islands. This part of the business is responsible for about
75% of the company's profits. Its other services include
electricity supply and a range of building services (mechanical, plumbing, design, air-conditioning and facilities management). It also offers
equipment, including space and water heaters, heat pumps, and air-conditioning and refrigeration units which it sells through its Powerhouse store.
This business model is a fairly
simple one, so our rationale for buying into this business is mainly based on the numbers. Let's get right into it, starting with the interim statement for the first half of 2021.
Source: JEL PLC
As you can see, a
strong 2020 has been followed up by an even
stronger start to 2021.
Full year results in 2020 saw JEL's
operating profit
increase by
7% to
£16.1m with revenue up in almost all of its divisions. In the first half of 2021, operating profit
increased again by
1% to
£11.2m, which we were impressed by given that this was at a time when the pandemic was in full swing. It seems though that energy consumption has
increased in the region due to the number of consumers working from home. One thing we always look at when looking to invest is the business's ability to generate
cash. JEL's strong cash generation of
£10.6m resulted in net cash of
£2.6m at 2020 year end, which increased to
£3.0m in the first half of 2021. Continued strong free cash flow is
forecast for the second half of 2021 and for the full year in 2022.
Another string to JEL's bow is that Government of Jersey is expected to
finalise its policy for reducing carbon emissions this year. Policy initiatives to reduce emissions from road transport and heating are likely to be based on the greater use of electricity and could give JEL the opportunity to
grow its sales. Additionally, the production of new homes are expected to increase
0.5% per year for the next
10 years,
increasing JELs’ supply customer base.
Conclusion
Jersey Electricity has
strong underlying financials and a simple business model. The company has produced
strong returns over the last 18 months and looks well set to continue doing so over the next few years with
favourable market conditions. We are also encouraged by its
affordable and
growing dividend.
We will be adding it to the CC
portfolio on Monday.
