Drax Group (LSE:DRX) reported a solid start to 2026, with operational performance supporting expectations for full-year adjusted EBITDA in line with market consensus. The outlook is underpinned by strong contracted power sales and index-linked Capacity Market agreements, which provide earnings visibility through to 2043.
The Drax Group is continuing to expand its flexible generation capabilities across the UK. This includes progress on new open-cycle gas turbine projects, growth in its battery storage pipeline following the acquisition of Flexitricity, and ongoing upgrades at the Cruachan pumped storage facility.
Capital returns highlight confidence in cash generation
Drax also signaled confidence in its financial position by announcing a £450 million share buyback program while maintaining its dividend. These moves reflect management’s confidence in the group’s ability to generate strong cash flows and sustain shareholder returns as it positions itself for the long-term transition to a lower-carbon and more secure energy system.
Financial and technical outlook remain balanced
The company’s outlook is supported by solid cash generation and manageable leverage, although recent profitability has been more moderate. On the technical side, the stock is trading above key moving averages, with broadly neutral momentum.
Valuation metrics remain attractive, supported by a favorable price-to-earnings ratio and dividend yield. Management commentary also reinforced expectations for multi-year free cash flow generation and continued shareholder returns. However, these positives are partly offset by impairments and near-term earnings pressure linked to the new Contracts for Difference (CfD) regime.
More about Drax Group plc
Drax Group plc is a UK-based energy company focused on renewable and flexible power generation. Its portfolio includes biomass, hydro, pumped storage, open-cycle gas turbines, and battery energy storage. The company also produces biomass pellets, primarily in North America, and plays a significant role in supporting UK energy security by supplying a substantial portion of the country’s renewable electricity.
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