VERBUND annual results for 2017

3/14/2018

Strong trend in the operating result and successful reduction of debt create basis for higher dividend

The income trend in financial year 2017 showed that, after adjusting for non-recurring effects, EBITDA was up 0.6% to €899.7m and the Group result up 8.8% to €354.5m. This increase is due primarily to significantly higher revenue from flexible products, particularly congestion management, the successful restructuring of thermal operations and the effects of the programmes implemented in recent years to reduce costs and increase efficiency. By contrast, the lower water supply, a slight decrease in average sales prices achieved for own generation from hydropower and a much lower result for the Grid segment had adverse effects.

Compared with the previous year, measurement-related non-recurring effects caused adjusted EBITDA to fall by 11.7% to €922.3m and the adjusted Group result to decrease by 29.0% to €301.4m. These effects resulted in particular from impairment losses and reversals of impairment losses relating to power plants as well as from the sale of shares in SMATRICS GmbH & Co KG and the measurement of an obligation to return an interest for the Jochenstein power plant.

VERBUND adjusted to the fundamental changes in conditions in a timely manner thanks to its clear strategic positioning coupled with systematic implementation in recent years of the measures defined in the Group’s restructuring programmes. This created the basis for sustainable, profitable corporate development.

Despite persistent volatile conditions in the market during financial year 2017, VERBUND succeeded in generating a strong result. The measures we implemented to strengthen free cash flow and focus on reducing the Group’s debt were effective. Rating agencies also paid tribute to our efforts. In December 2017, Standard & Poor’s published an upgrade of its rating for VERBUND AG by one notch from “BBB” to “BBB+/stable outlook”. Moody’s raised its outlook for the Baa2 rating from “stable” to “positive”.

Energy partnerships and innovations

We substantially accelerated the development of new lines of business and services along with
e-mobility projects in 2017. Under the umbrella of the H2FUTURE project, we kicked off the
far-reaching industrial alliance with voestalpine and Siemens for constructing one of the world’s largest hydrogen plants. Vienna-based internationally integrated oil and gas company OMV took a stake of 40% in e-mobility provider SMATRICS. The remaining interests are held by VERBUND (40%) and Siemens (20%). May 2017 also saw the kick-off of the SYNERG-E project, which focuses on the challenges related to ultra-fast charging stations for e-mobility.

Income trend

Compared with the previous year, VERBUND’s income trend in financial year 2017 showed an 11.7% decrease in EBITDA to €922.3m caused by measurement-related non-recurring effects and a decline of 29.0% in the Group result to €301.4m. In 2017, these effects resulted in particular from impairment losses and reversals of impairment losses relating to power plants as well as from the sale of shares in SMATRICS GmbH & Co KG and the measurement of an obligation to return an interest for the Jochenstein power plant. In total, positive non-recurring effects of €22.7m (2016: €149.7m) were recorded in EBITDA in 2017, while negative non-recurring effects of €53.1m (2016: positive non-recurring effects of €98.5m) were recorded in the Group result. Adjusted for non-recurring effects, EBITDA rose by 0.6% to €899.7m and the Group result by 8.8% to €354.5m. This increase is due primarily to significantly higher revenue from flexible products, particularly congestion management, the successful restructuring of thermal operations and the effects of the programmes implemented in recent years to reduce costs and increase efficiency. In addition, the continued reduction of the Group’s debt substantially improved the financial result. By contrast, the lower water supply (hydro coefficient in 2017: 0.99; 2016: 1.00), a slight decrease in average sales prices achieved for own generation from hydropower (2017: €30.4/MWh, 2016: €31.0/MWh) and a much lower result for the Grid segment had adverse effects.

Dividend for 2017

A dividend of €0.42 per share (+44.8% on the previous year) for financial year 2017 will be proposed at the Annual General Meeting to be held on 23 April 2018. The payout ratio for 2017 will amount to 48.4% based on the reported Group result, or 41.2% after adjustment for non-recurring effects.

Outlook for 2018

On the basis of average own generation from hydropower and wind, VERBUND expects EBITDA of around €850m and a Group result of around €300m for financial year 2018. For 2018, VERBUND is planning a payout ratio of 40–45% of the Group result after adjustment for non-recurring effects.

Key figures Unit 2016 2017 Change in %
Revenue €m 2795,9 2913,2 4,2
EBITDA €m 1044,2 922,3 -11,7
Operating result €m 615,1 400,1 -35,0
Group result €m 424,4 301,4 -29,0
Earnings per share 1,22;2 0,87;2 -29,0
EBIT margin % 22,0 13,7
EBITDA margin % 37,3 31,7
Cash flow from operating activities €m 804,3 640,6 -20,4
Free cash flow before dividend €m 580,7 416,1 -28,4
Net debt/EBITDA X 3,1 3,1 -0,3
(Proposed) dividend per share 0,29;2 0,42;2 44,8
Greenhouse gas emissions Scope 1 direct emissions kt CO2e 1007,0 1358,1 34,9
Specific GHG emissions (Scope 1/total electricity generated) g CO2e/kWh 31,5 41,3 31,3

Further information and non-financial indicators can be found in the 2017 Integrated Annual Report available at www.verbund.com > Investor Relations > Latest financial results.