The EGL Group substantially increased income from trading in energy derivatives and emission certificates to CHF 179.3 million (+235%) in the first half of the 2007/08 financial year, thanks to optimal management of trading positions and effective leveraging of opportunities. The period saw a continuation of the shift from physical electricity sales to energy derivatives trading, resulting in a CHF 2,568.7 million or 12% drop in net sales. EGL increased its gross margin by CHF 123.3 million (+56%) compared to the previous-year figure adjusted for special factors.
EGL’s continued growth is also reflected in an increase in personnel expenses to CHF 57.7 million (+19%) due to an increase of headcounts by 135 FTEs (+31%) and in other operating expenses to CHF 68.8 million (+21%). EGL Group posted a fall in EBIT to CHF 198.6 million (-5%) (excluding the special factors from the prior-year period). The result from associates was down -33% at CHF 4.8 million.
EBT higher than previous-year figure adjusted for special factors
Financial income and expenses fell by CHF 45.0 million compared to the previous year, totalling CHF -38.5 million at 31 March 2008. The reason behind this was the interest expense relating to Calenia Energia S.p.A and negative currency effects due to increased volatility in the currency markets. Reported EBT totalled CHF 164.9 million, which represents a reduction of 26%. Adjusted for special factors, EBT grew by 43 % to CHF 49.9 million. This earnings situation resulted in consolidated income tax of CHF 39.0 million (previous half-year: CHF 46.4 million), leading to an after-tax profit of CHF 125.9 million (-29%) for the 2007/08 first half-year.
Cash flow from operating activities still at a low level
The EGL Group posted CHF 47.0 million in cash flow from operating activities (prior-year period: CHF 83.9 million). The lower year-on-year cash flow is attributed to income taxes paid totalling CHF 70.7 million, as well as items not affecting liquidity amounting to CHF 49.5 million – mainly from unrealised profits from energy derivatives.
Cash flow from investing activities amounted to CHF 110.5 million (prior-year period CHF 109.9 million), primarily due to investments relating to construction of the gas-fired combined-cycle power plants in Italy. Cash flow from financing activities fell to CHF 6.2 million (prior-year period CHF 93.8 million). At CHF 611.1 million, cash and cash equivalents at 31 March 2008 were down by CHF 72.7 million since the beginning of the financial year. In the period under review, EGL’s total assets rose by a moderate 3% to CHF 5,597.7 million.
Current assets were up 4% to CHF 3,286.8 million, mainly due to a stronger focus on trading activities, as reflected in the higher positive replacement values of CHF 1,178.2 million (+33%). On the liabilities side, negative replacement values rose to CHF 1,084.1 million (+30%). Since 30 September 2007 equity decreased slightly from CHF 1,928.3 million to CHF 1,914.3 million (-0.7%). At 34.2%, the equity ratio remains solid.
Key projects on track
In the period under review, EGL made good progress with the development of its three strategic business areas of energy trading, assets and the gas business and further continued to build up its own assets. EGL's second gas-fired combined-cycle power plant Rizziconi Energia in Italy is scheduled to go into operation in mid-June. Another plant, SE Ferrara, in which EGL has a 49% stake, is planned to be connected to the grid in the fourth quarter of 2008. Significant progress was also made in the Gas Division, with EGL acquiring StatoilHydro ASA of Norway as an equal partner for the development, construction and operation of the Trans Adriatic Pipeline (TAP). In addition, a long-term natural-gas delivery agreement was signed with the National Iranian Gas Export Company (NIGEC), under which first deliveries could start as early as 2009. In the period under review, EGL also gained initial experience in the liquefied natural gas (LNG) business in Spain, where it is licensed to trade in natural gas.
Strategically aligned
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. Following the decision by Jean-Claude Scheurer, Head of Markets South, to take early retirement at the end of 2007, the Division was dissolved and its departments internally re-assigned.
Joachim Conrad leaves EGL
Joachim Conrad, Member of the Executive Management, has decided to pursue new professional challenges and will step down from his position as Head EGL Gas Division as at end of November 2008. He will hand over the operational responsibility for the Gas Division to his current deputy Markus Brokhof who will also take on the management of the EGL Gas Division during the transition period. The process governing the succession of Joachim Conrad has been initiated and EGL will provide further information at given time.
Joachim Conrad has been working for EGL since 2003. As Head of the Gas Division he established EGL's gas business and built-up the electricity trading activities in Southeast Europe. Important milestones were the development of a long-term gas procurement portfolio, the Trans Adriatic Pipeline project as well as the establishment of local energy trading subsidiaries in Romania, Greece, Bulgaria and Turkey. We thank Joachim Conrad for this great commitment and achievements for EGL and wish him success and all the best for his professional and personal future.
Improved year-end results expected
Based on past experience, operating revenue and earnings are likely to be weaker in the second half of the year than in the winter half-year. EGL nevertheless expects to close the 2007/08 year with a higher result from operations than in the previous year and consequently an annual profit in excess of the previous-year figure adjusted for special factors.
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
dominik.anderhalden@egl.eu
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