Fiscal 2005 was marked by the strong increase in European wholesale prices for electricity and the new regulatory developments such as the EU Water Framework Directive, the regulation of the grid tariffs and the rules relating to the subsidization of renewable energies which led to a great deal of uncertainty in the European electricity market.
VERBUND reacted to these conditions by enhancing its focus on the group’s core activities: the generation, trade, distribution and transmission of electricity. By successfully expanding its end-customer business in Austria and enhancing the internationalization of it wholesale activities, VERBUND - in the sense of forward integration - took decisive steps towards covering the entire value chain and improving the margin structure. Parallel to this, costs in the generation and administration areas were greatly reduced through the implementation of consequent restructuring measures which are now more or less fully completed. In addition, the capital structure was clearly optimized as a result of the ongoing debt-clearing program. In its function as producer and wholesaler, VERBUND is more exposed to the forces in the deregulated European market than other electricity suppliers in Austria. In spite of the decline in sales volumes in Austria, VERBUND, through the implementation of these measures, managed to report a greater increase in sales and earnings than any of its Austrian competitors.
Extremely positive business development
Against this backdrop, VERBUND presented the best results in the group’s history. Sales revenues increased by 24.0 % to € 2,506.7 million, the operating result rose by 36.6 % to € 526.5 million, profits after taxes (result for the period) were up by as much as 49.5 % at €402.1 million and the consolidated result (result for the period excluding minority interests) climbed by 48.3 % to € 349.3 million. The focus was clearly directed on enhancing value creation in the individual business segments. As a result, the Economic Value Added (EVA) improved by € 137.3 million to € 201.8 million.
This also led to a significant improvement in the net worth and financial situation of the group. Due to the continued debt clearance, the net debt was further reduced and net gearing was lowered from 134.3 % to 91.3 %. In addition, the operating cash flow climbed by 55.2 % to € 680.5 million. As a result, the cash flow-based key ratios, which are relevant from a rating viewpoint, were also improved. Gross interest cover rose from 3.5 to 4.7 and the funds from operations (FFO) / gross debt coverage ratio improved from 25.8 % to 40.6 %.
On the basis of these successes, the Managing Board shall propose a dividend increase from € 3.00/share to € 5.00/share (+67 %) to the General Meeting. This will be the fifth dividend increase in succession. VERBUND is therefore one of the most dynamic utility stocks in Europe.