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Summary
- Drax Group Plc had reported a marginal decline in its adjusted revenues to £2,205 million during H1 FY20 ended on 30 June 2020.
- Drax Canadian Holdings Inc would acquire Pinnacle Renewable Energy Inc for the total consideration of £226 million.
- DRX had generated £226.4 million of cash from operating activities during H1 FY20.
- DRX had completed the sale of four Combined Cycle Gas Turbine ("CCGT") power stations, to VPI Generation Limited on 01 February 2021.
Drax Group Plc (LON:DRX) is the LSE listed energy stock. The Company is the leading energy producer based out in the UK. DRX’s shares have generated a return of about 35.08% in the last 12 months. The Company is listed on the FTSE 250 Index.
DRX will announce full-year FY20 results on 25 February 2021.
Business Model
The Company operates across three major areas –
- Power generation and system services
- Biomass production
- B2B Energy supply and electrification solutions
All businesses are focused on achieving zero carbon, low-cost energy.
Biomass Strategy
The Company is focused on delivering long-term future of biomass power generation which would result in cost reduction and increasing sustainability.
(Source: Company presentation)
Recent News
On 08 February 2021, DRX updated that its subsidiary Drax Canadian Holdings Inc would acquire Pinnacle Renewable Energy Inc for the total consideration of £226 million with subject to shareholder’s approval. This transaction is expected to get completed by Q2 FY21 or Q3 FY21.
The combined entity would become one of the most prominent sustainable biomass generation and supply business, with 4.9 million tonnes of production capacity. The Company would expect to fund this transaction from its existing cash and financial facilities.
On 01 February 2021, DRX had compeletd the sale of four Combined Cycle Gas Turbine ("CCGT") power stations, to VPI Generation Limited for £193.3 million. The Company would utilize the sale proceeds to enhance its biomass supply chain and pace up the objective of carbon-negative initiative.
On 19 November 2020, the Company had availed new revolving credit facility (RCF) of £300 million, maturing in 2025. It had replaced the previous facility of £165 million maturing in 2021. On 04 November 2020, DRX had completed the bond issue of €250 million maturing in 2025.
H1 FY20 Financial Highlights (for six months period ended 30 June 2020, as on 29 July 2020)
(Source: Company result)
- DRX had reported a decline in its adjusted revenue from £2,227 million during H1 FY19 to £2,205 million during H1 FY20.
- The Group had delivered a robust growth of 30% in adjusted EBITDA to £179 million during H1 FY20 ended on 30 June 2020, while it was £138 million during H1 FY19.
- The Company had incurred capital expenditure of £78 million during H1 FY20, which is higher than the levels of H1 FY19 due to higher investment made towards expanding pellet production facilities in the U.S.
- On the leverage front, the Company had a net debt of £792 million as of 30 June 2020, while it was £841 million at 31 December 2019. DRX had met its objective of maintaining net debt to adjusted EBITDA ratio of 1.8x for its 12-month period ending 30 June 2020.
- DRX had made three year extension of its contractual maturity of existing £125 million ESG facility till 2025
- DRX had announced an interim dividend of 6.8 pence per share during H1 FY20. The Company would expect to pay a total dividend of 1 pence per share during FY20. The interim dividend represented almost 40% of the total 2020 dividend.
- DRX had generated £226.4 million of cash from operating activities during H1 FY20.
H1 FY20 Operational Highlights (for six months period ended 30 June 2020, as on 29 July 2020)
- DRX had achieved a decline of 9% in biomass cost during H1 FY20, while it had shown an increase of 15% in its production volume during H1 FY20.
- The Company had shown strong operational performance as it had generated a total of 11% of UK’s renewable electricity.
Share Price Performance Analysis of Drax Group Plc
(Source: EODHD/Others, chart created by Kalkine group)
Shares of Drax Group Plc were trading at GBX 382.60 and were down by close to 2.20% against the previous closing price as on 09 February 2021, (before the market close at 09:22 AM GMT). DRX's 52-week Low and High were GBX 118.90 and GBX 402.60, respectively. Drax Group Plc had a market capitalization of around £1.55 billion.
Business Outlook
DRX had anticipated its adjusted EBITDA for FY20 to meet its expectations. The estimated negative impact of Covid-19 pandemic would be £60 million during FY20. Despite various business challenges, the Company is looking forward to making lucrative investments for biomass growth and capacity augmentation as DRX had announced the acquisition of Pinnacle Renewable Energy. It would continue to work on the plans to achieve low-cost biomass supply of five million tonnes in 2027. The Company is accelerating its progress on delivering the strategy of reaching low-cost zero-carbon energy in the UK. Drax Group had anticipated incurring total FY20 capital expenditure ranging between £190 million and £210 million. DRX remained on track to achieve net debt to adjusted EBITDA of around 2.0x during FY20.
