In the 2005/06 financial year EGL posted a 30% increase in physical energy sales to 77.5 TWh and a 59% jump in consolidated net sales to CHF 6,377.1 million. Procurement costs rose at a slower rate thanks to an optimally managed electricity portfolio and the absence of negative special factors from the previous year. This, coupled with the significant growth of trading activities in standard for-ward contracts and derivatives, resulted in a gross margin of CHF 436.2 million (+88%). The year under review saw a continuation of the shift, identified in recent years, from traditional physical elec-tricity sales towards energy derivatives trading. As a result, revenue from trading in energy deriva-tives and emission certificates rose to CHF 72.7 million (previous year CHF 5.1 million).
Costs for material and third-party supplies rose moderately by 7%. Personnel costs stood at CHF 83.6 million. Taking into account the good course of business and the increase in average number of employees (FTE) to 363 (+25%), this trend was within expectations. Likewise, operating expenses also rose by 31%. Higher operating expenses for the continued development of the internal organ-izational as well as various projects had a corresponding impact on costs. EGL is continuing to strengthen its business areas and international presence. Consequently it accords high priority to an adequate level of training and development of employees and investment in process standardisation and IT system expansion. Personnel and infrastructure costs will continue to rise in the future as the company pushes ahead with implementation of its strategy. After depreciation and amortisation of CHF 32.4 million, primarily in respect of grid installations and equipment, coupled with an impair-ment for NMK (Norsk Miljøkraft AS), EGL posted an operating profit before interest and taxes (EBIT) of CHF 276.3 million (+170%) as at 30 September 2006.
Significant increase in net profit
At CHF 19.7 million, the share in the net profit of associated companies is slightly down on the pre-vious-year figure (CHF 21.5 million). Increased financial expenses in connection with the Group's expansion strategy produced a balanced financial result. The improvement in earnings resulted in a substantially higher tax burden, with income taxes amounting to CHF 48.1 million compared with CHF 14.8 million for the previous year. As a result, net profit for the 2005/06 financial year amounted to CHF 247.0 million (+119%).
Balance sheet impacted by investments in Italy and growth
Since the end of the last financial year total assets have risen by 36% to CHF 4,419.4 million. Non-current assets increased by 40% to CHF 2,026.7 million, primarily due to investments in gas-fired combined cycle power plants in Italy. Thanks to rapid progress with construction according to plan, the first plant is expected to go on-stream in the second quarter of 2007.
Cash flow from operating activities negatively impacted by growth
Cash flow from operating activities amounted to CHF 149.5 million. As a result of the strong growth enjoyed by the EGL Group, cash flow was negatively impacted in particular by changes in trade receivables and other receivables to the tune of CHF 361.9 million. The cash outflow of CHF 509.5 million (+20%) mainly comprises investments related to the construction of the gas-fired combined cycle power plants Calenia Energia and Rizziconi Energia.
EGL saw a net funds inflow amounting to CHF 594.0 million (previous year CHF 135.7 million) from project financing and a bond issue. The negative free cash flow of CHF -311.8 million (previous year CHF -332.2 million) reflects the high level of investment activity in Italy. Despite the substantial vol-ume of investments, cash and cash equivalents increased from CHF 257.4 million to CHF 495.9 million.
Solid equity ratio
Equity capital has risen to CHF 1,672.6 million since the end of the last financial year. At 38%, the equity ratio remains solid and, in line with expectations, is slightly down on the prior-year ratio of 42% due to borrowing to finance investment.
Outlook: investments expected to remain high
The European energy markets will continue to prove highly challenging. EGL has succeeded in the last few years in creating a sound basis for the implementation of its strategy. It intends to continue along this path in 2006/07, investing in building up its assets in key markets and in the development of its strategic business areas. Construction of the power plants in Italy and the continuing develop-ment of the natural gas pipeline across the Adriatic Sea (Trans Adriatic Pipeline/TAP – planned jointly with partners) will remain a priority. On the cost side, EGL will continue to carry the burden of investments in various future-oriented projects. Furthermore, the volatility of the trading sector will continue, due to the specific nature of the energy derivatives business and other factors.
Change in the Board of Directors
Doris Leuthard stepped down from the EGL Board of Directors following her election to the Federal Council. The nomination of Benedikt Weibel (1946, Swiss), CEO of SBB Group (Swiss National Rail-ways) as successor to Ms Leuthard will be proposed at the Annual General Meeting.
Higher dividend
The Board of Directors will propose to the Annual General Meeting an increased dividend by CHF 3 to CHF 18 per share (previous year CHF 15). The clearly higher than anticipated year-end result coupled with the encouraging headway in building up the strategic business areas confirm the ex-pected long-term profitability of the company.
Further information
Media:
Lilly Frei, Head Corporate Communications
Phone: +41 (0)44 749 41 21
media.ch@egl.eu
Investors:
Marcus Seiler, Head Group Treasury
Tel. +41 44 749 42 47
marcus.seiler@egl.eu
