More on BG
BG: H1 2005
Higher volumes and better has prices have boosted British Gas’s half year operating profits by 43%. Turnover to June 2005 was up 22% (to £2,227m) and net earnings rose 44% to £545m.
The growth was in the upstream exploration and production business where operating profits (including JV’s) grew 48% to £794m. Volumes grew by 8% but the rest of the growth in operating profits was attributable to better gas prices.
Transmission and distribution profits improved by 55% to £102m due to a strong performance in its Brazilian venture Comgas. Of the £36m increase in profits for the half year £28m was was due to increase in profits of Comgas. Comgas’ volumes have grown 16% while a stronger Brazilian Real and lower gas costs helped boost margins.
Operating profits (inclusive of JV’s) in Liquefied Natural Gas (LNG) business grew 24% to £42m mainly due to better volumes.
The only weak performance was in power generation where operating profits slipped by 7% to £57m due to the weaker US Dollar and lower volumes. Volumes were down due to maintenance activity at Premier Power in Northern Ireland and reduced availability at Seabank, UK following the failure of a steam turbine which in June 2005. Repairs are expected to be completed in
2006.
While gas prices have not been as robust as crude oil prices they do tend to follow the same trend. The outlook on prices remain bright and overall prospects are still good, although the share price does seem to factor in much of the growth..
Trading on a prospective PE of 16x (2005 earnings at the current price of 475p ) it is at the upper end of the sector range. The yield is poor at 0.8%-far weaker than the 2%-3% that is the norm for the sector.
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