The EGL Group increased its gross margin slightly to CHF 810.4 million (+4%), which includes profit from energy derivatives trading, down 12% to CHF 239.2 million. Following a cash outflow in the first six months, EGL significantly improved its cash flow in the second half of the year. It achieved a cash flow from business activities of CHF 174.5 million for the full financial year (-41%). Equity ratio was up slightly to 31.1%.
Growth leads to increased expenditure
As a consequence of the growth strategy it has pursued over the last few years, EGL recorded an increase in operational expenditure for processes and personnel in the year under review. The Group's average headcount increased to 746 full-time positions (+24%), while personnel costs rose by 10% to CHF 149.9 million. Other operating expenses were up 38% to CHF 234.5 million. These included, in particular, expenses for various IT projects and consulting services, maintenance work at the two gas-fired combined-cycle power plants, Calenia and Rizziconi, as well as creation of contingency reserves.
Higher depreciation and negative financial result
Depreciation in the 2008/09 financial year amounted to CHF 112.8 million (+126%), primarily on account of grid installations, fixtures and fittings and depreciation of EGL's gas-fired combined-cycle power plants in Italy. Following the decision to sell the Energy Plus power plant project, accumulated costs and the corresponding goodwill were also recognised in this position.
The financial result of CHF -83.9 million was impacted by the interest expense for the gas-fired combined-cycle power plants, a lower year-on-year interest income and negative currency effects. EGL therefore achieved an EBT of CHF 247.6 million (-40%). The earnings situation led to consolidated income tax of CHF 60.9 million (-39%), which resulted in a net profit after tax of CHF 186.7 million (-41%) for the 2008/09 financial year.
Equity ratio up slightly
EGL's total assets decreased by 5% to CHF 6,788.4 million. Current assets were down to CHF 4,323.4 million (-8%), largely as a result of a reduction in positive replacement values to CHF 1,591.0 million (-22%). On the liabilities side, negative replacement values also fell to CHF 1,430.9 million (-28%). Equity of CHF 2,110.8 million remained at the level of the previous year, resulting in an equity ratio of 31.1% (previous year: 29.4%).
At 30 September 2009, cash and cash equivalents amounted to CHF 718.4 million (-9%). Investing activities declined to CHF -129.1 million in the year under review (previous year: CHF -277.4 million). Cash flow from financing activities amounted to CHF -96.9 million (previous year: CHF +102.4 million), resulting in a free cash flow of CHF +12.7 million (previous year: CHF +51.6 million).
Development of the three strategic business areas
In the period under review, EGL made good progress with the development of its three strategic business areas: energy trading, assets and the natural gas business. Despite a decline in demand, falling prices and seasonal volatility, EGL achieved good trading results – in particular in asset-backed trading, in trading between Italy and Switzerland and in the Iberian and Nordic markets. EGL continued to expand its trading activities during the reporting period and established a new trading hub in the UK.
Consistent with the move to build up its own assets, commissioning work on the SE Ferrara gas-fired combined-cycle power plant in Italy was completed. However, the plant is not scheduled to go into commercial operation until June 2010, once measures are in place for recycling the synthesis gas that accumulates at the site. With the acquisition of 51.6% of wind farm developer HS Kraft AB, EGL secured access to a series of wind power projects in southern Sweden. As part of the previously announced consolidation and diversification of its production and project portfolio in Italy, EGL decided not to build the Energy Plus gas-fired combined-cycle power plant in Salerno itself but to dispose of the project instead.
Falling demand in all markets and the negative price trend hindered EGL from meeting its commercial targets in natural gas trading. But it was able to make further preparations during the reporting period for opening up new future opportunities in the natural gas business – by intensifying its efforts in the liquefied natural gas business, making progress in the Trans Adriatic Pipeline project and establishing new subsidiaries in Southeast Europe.
Dividend unchanged
For the 2009/10 financial year, EGL is planning major investments with a view to building up its assets and expanding its activities in all areas. With this in mind, the Board of Directors proposes to the Annual General Meeting of Shareholders an unchanged dividend of CHF 18 per share.
Outlook
EGL is financially sound and is continuing to invest in the expansion of its business areas. The focus is on expanding the trading business in the UK and origination activities in Central Europe, intensifying efforts in Southeast Europe and pushing forward with the Trans Adriatic Pipeline project. The SE Ferrara gas-fired combined-cycle power plant is expected to commence full commercial operation in June 2010. 2010 will also see initial investments made in the projects of Swedish wind farm developer HS Kraft AB.
Due to the effects of the financial crisis on the real economy and the energy markets, energy trading will remain challenging in the 2009/10 financial year. In light of this, any forecast on business performance for the current business year is subject to great uncertainty at the present time.
Further information Media:
Lilly Frei, Head of Corporate Communications, Tel. +41 44 749 40 10, media.ch@egl.eu
Investors:
Dominik Anderhalden, Head of Investor Relations, Tel. +41 44 749 46 15, investor.ch@egl.eu
The EGL Annual General Meeting will take place on 25 January 2010 in the Trafo Culture and Congress Centre in Baden (Switzerland). More detailed information is available at www.egl.eu
