Drax Group (DRX) H1 2024 earnings summary

Executive summary

• Achieved strong operational and financial performance in H1 2024, with adjusted EBITDA up 24% to £515m, driven by renewable generation, pellet production, and Energy Solutions.

• Increased dividend per share by 12.6% to 10.4p, with a full-year target of 26.0p, and announced a £300m two-year share buyback program commencing Q3 2024.

• Strengthened balance sheet with over £680m in new facilities and repayment of £949m in shorter-dated debt, reducing net debt to £1,035m.

• Reduced safety incidents by 49% year-over-year (TRIR 0.24 vs. 0.47).

• Sale of non-core SME customer meters to EDF, expected to complete in Q3 2024.

Financial highlights

• Adjusted EBITDA rose to £515m (H1 2023: £417m), with adjusted basic EPS at 65.6p (H1 2023: 46.0p).

• Cash generated from operations was £400m (H1 2023: £404m); net debt reduced to £1,035m (Dec 2023: £1,084m).

• Interim dividend of 10.4p/share (£40m), with expected full-year dividend of 26.0p/share (~£100m).

• Net debt to Adjusted EBITDA: 0.9x (target: ~2.0x).

• Capital expenditure: £147m (H1 2023: £210m), focused on OCGT projects and pellet plant expansion.

Outlook and guidance

• Full-year 2024 Adjusted EBITDA expected at the top end of analyst consensus (£961m, range £881–996m), with strong cashflows and a robust hedge book.

• Targeting >£500m recurring adjusted EBITDA post-2027 from FlexGen & Energy Solutions and Pellet Production.

• Biomass generation expected to deliver over £1bn of operational cash flow between 2024 and 2027.

• Ongoing discussions with UK Government on BECCS and bridging mechanism; clarity expected in H2 2024.