Drax Group (DRX) H2 2023 earnings summary

Executive summary

• FY23 adjusted EBITDA was £1,009m including the Electricity Generator Levy (EGL), or £1,214m excluding EGL, versus £731m in FY22; cash generation and lower net debt strengthened the balance sheet.

• EBITDA growth was driven by system support services, renewable generation and energy solutions; strategic priorities include biomass pellets, flexible generation and BECCS.

• Long-term growth plans target c.£4bn of investment by 2030 across UK and US BECCS, pumped storage and pellet production, subject to policy and investment conditions.

Financial highlights

• Revenue was £8,125m in FY23 versus £7,775m in FY22; total operating profit was £908m versus £146m, and profit after tax was £561m versus £83m.

• Adjusted EBITDA including EGL was £1,009m versus £731m; excluding EGL, FY23 adjusted EBITDA was £1,214m, with EGL of £205m.

• Adjusted basic EPS was 119.6p versus 85.1p; adjusted profit after tax was £469m, with exceptional items contributing £92m to total profit after tax.

• Cash generated from operations was £1,111m versus £320m; FY23 included a £155m collateral inflow, compared with a £407m collateral outflow in FY22.

Outlook and guidance

• Flexible generation and energy solutions and pellet production each target post-2027 recurring adjusted EBITDA above £250m pa.

• Biomass generation has strong contracted cash flows in 2024-2026; 22.3TWh of forward power sales were contracted at an average £127.3/MWh, worth £2.8bn.

• Expect to repay Q4 2025 debt maturities through cash generation and refinancing activities in 2024.

• Target c.£4bn of investment by 2030, with further opportunities in the 2030s; plans include UK and US BECCS, pumped storage and pellet capacity.

• 2024 capital investment is estimated at £410m-£450m; pellet output is expected to rise, supporting improved profitability.