- First half EBITDA up 24%
- £300 million buyback initiated
- 2024 earnings seen ‘top end’
Drax (DRX) shares powered up 12.5% to a 52-week high of 636p after the renewable energy generator delivered strong first-half results, issued a positive full-year outlook and said it would shortly begin a £300 million share buyback.
Investors were wowed by Drax’s smoking-hot results for the half to 30 June, which showed a 37% surge in pre-tax profit to £463 million.
Drawing confidence from the strong half-year showing, the FTSE 250 firm is now guiding for full-year 2024 adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) ‘around the top end’ of analysts’ estimates of between £881 million and £996 million.
KEEPING THE LIGHTS ON
For the uninitiated, Drax is the second-largest global sustainable biomass producer and the UK’s largest source of renewable power by output.
The company is also progressing options for BECCS (bioenergy with carbon capture and storage) at Drax Power Station in North Yorkshire.
Institutional backers include heavyweights such as BlackRock, Vanguard, Invesco, Bank of America and Schroders (SDR).
Commenting on the first-half performance, chief executive Will Gardiner said Drax delivered a ‘strong operational performance, playing an important role supporting the UK energy system with dispatchable, renewable power, keeping the lights on for millions of homes and businesses while supporting thousands of jobs throughout our supply chain.’
Adjusted EBITDA sparked up 24% to £515 million in the half as biomass generation saw improved volumes.
Drax also benefited from improvements in its industrial and commercial energy supply business and in pellet production, the latter seeing higher year-on-year production and margins. Its SME energy supply arm moved into a loss however, validating Drax’s decision to sell most of the SME customer book.
PUMPING OUT RETURNS
Given its healthy balance sheet - net debt as of 30 June of £1.035 billion represented less than one times EBTIDA on a 12-month basis – Drax initiated a two-year, £300 million share buyback programme and also signaled a 12.6% uplift in the full year dividend to 26p, better than the 25.4p Longspur Research was looking for.
OPPORTUNITY KNOCKS
‘As well as celebrating 50 years of operations in 2024, we are excited about the opportunities for Drax Power Station, including bioenergy with carbon capture and storage,’ enthused Gardiner.
‘Both the National Grid ESO and the UK’s Climate Change Committee have recently reiterated that BECCS is important for the UK to achieve its decarbonisation goals.’
Gardiner added Drax is looking forward to working with the new UK Government to help grow the economy and ‘take steps urgently to deliver a net zero electricity system by 2030. We believe Drax and our partners across the Humber and Scotland can accelerate growth, create thousands of new jobs and channel billions in private investment into carbon capture and green energy projects, subject to the right government policies to support regional development plans.’
