The EGL Group posted a substantial improvement in its operating result compared to the previous year, primarily due to revenue from energy trading which rose 210% to CHF 272.4 million. EGL also achieved a significant increase in the gross margin generated by activities in the physical electricity business as well as trading in energy derivatives. Compared to the previous-year figure adjusted for special factors, gross margin rose by 77% to CHF 780.8 million.
131 new jobs created
The sustained growth of EGL is also reflected in its employee numbers. In the 2007/08 financial year the Group created 131 new positions (full-time equivalents), representing a 25% growth in headcount which at the end of September 2008 was 656 full-time equivalents. Personnel expenses rose accordingly to CHF 136.4 million (+27%), while other operating expenses increased by 46% to CHF 170.4 million, largely due to IT and consulting expenses as well as scheduled maintenance and repair work on EGL's two gas-fired combined-cycle power plants.
EBT virtually doubled
Depreciation in the 2007/08 financial year amounted to CHF 49.9 million (+44%), primarily on account of grid installations, fixtures and fittings and depreciation of EGL's gas-fired combinedcycle power plants in Italy. The financial result of CHF -30.6 million was impacted by the interest expense for these power plants as well as by currency effects. At CHF 415.3 million, EBT (earnings before tax) was 95% higher than the previous-year figure adjusted for special factors. The earnings situation resulted in consolidated income tax of CHF 99.9 million, giving rise to an after-tax profit of CHF 315.4 million for the 2007/08 financial year (+110% higher than the previous-year figure adjusted for special factors).
Higher cash flow from operating activities
The EGL Group posted CHF 295.9 million in cash flow from operating activities (+88%), mainly on account of the high income generated by energy trading activities. Cash outflow relating to investing activities, mainly concerning the construction of gas-fired combined-cycle power plants in Italy, was 57% higher at CHF 277.4 million. Cash inflow from financing activities fell by 48% to CHF 102.4 million, resulting in a free cash flow of CHF +51.6 million (previous year period CHF -9.1 million). Cash and cash equivalents at 30 September 2008 amounted to CHF 786.5 million (+15%). EGL's total assets increased by 32% to CHF 7,180.1 million.
In the 2007/08 financial year EGL's current assets rose by 48% to 4,694.5 million, largely as a result of an increase of CHF 1,515.5 million or 130% in positive replacement values to CHF 2,039.6 million. On the liabilities side, negative replacement values also rose by CHF 1,148.3 million or 138% to CHF 1,981.4 million. Equity was 9% higher year-on-year at CHF 2,110.1 million, while the equity ratio fell from 35.4% to 29.4% as a direct consequence of the sharp rise in replacement values.
Dividend unchanged
For the 2008/09 financial year EGL is planning further major investments with a view to building up assets and expanding its activities in all areas. With this in mind, the Board of Directors will propose to the Annual General Meeting of Shareholders an unchanged dividend of CHF 18 per share.
Progress in all areas
In the reporting period EGL made good progress with the development of its three strategic business areas: energy trading, assets and the natural gas business. Consistent with the move to build up its own assets, EGL's second gas-fired combined-cycle power plant in Italy (Rizziconi Energia) went into operation in July 2008. Significant progress was also made in the gas business, with EGL acquiring StatoilHydro ASA of Norway as an equal partner for the development, construction and operation of the Trans Adriatic Pipeline, and signing a long-term contract with the National Iranian Gas Export Company for deliveries of natural gas. In the reporting period EGL also acquired initial experience in the liquefied natural gas business in Spain, where it is licensed to trade in this commodity. In Switzerland EGL's activities focused primarily on the forthcoming liberalisation of the electricity market, with intensive preparations being made in the power plant operation and grid infrastructure areas ahead of this event.
Organisation further optimised
In the period under review EGL's management structure and internal organisation were aligned more closely to the business model and market challenges facing the company. The Markets South Division was dissolved and its departments re-assigned to the Energy Trading & Origination and Assets Divisions. Since 1 October 2008, a new joint Trading and Origination Department has been managing EGL's multi-commodity portfolio across all liquid markets.
Outlook
EGL is financially solid and will continue to invest in expanding its business fields in the new financial year, with the emphasis on further development of the Trans Adriatic Pipeline project, building up trading business in the UK, and expanding business activities in south-east Europe. Construction on the Winbis wind farm in Italy and the Agroenergética de Pinzón biomass power plant in Spain is also scheduled to commence in the forthcoming financial year. As things stand at present, commissioning work on the SE Ferrara gas-fired combined-cycle power plant, in which EGL has a 49% stake, should be completed in the first half of 2009, although the plant as a whole will likely not go into commercial operation until the beginning of 2010 or later.
Judging by the first few weeks of the 2008/09 financial year, European energy markets will remain challenging, not least on account of the current financial crisis. Given the current environment, EGL assumes that it will be difficult to repeat its exceptionally good 2007/08 trading result. The crisis on financial markets has led to a sharp drop in prices for electricity and other energy commodities. Added to this, demand for energy by the real economy is expected to fall due to the economic outlook. Hence, any forecast concerning business performance in the current financial year is subject to major uncertainty at this point in time.elastet.
Further information
Media:
Lilly Frei, Head Corporate Communications, Tel. +41 44 749 40 10, media.ch@egl.eu
Investors:
Dominik Anderhalden, Head Investor Relations, Tel. +41 44 749 46 15, investor@egl.eu
