VERBUND AG: annual results for 2017: strong trend in the operating result and successful reduction of debt create basis for higher dividend

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 in the past 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".

Compared with the previous year, VERBUND's income trend in financial year 2017 showed an 11.7% decrease in EBITDA to EUR922.3m and a decline of 29.0% in the Group result to EUR301.4m both caused by non-recurring effects. 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 in the power plant Jochenstein. In total, positive non-recurring effects of EUR22.7m (2016: EUR149.7m, mainly resulting from the settlement of various outstanding issues between VERBUND and EconGas GmbH) were recorded in EBITDA in 2017, while negative non-recurring effects of EUR53.1m (2016: positive non-recurring effects of EUR98.5m) were recorded in the Group result. Adjusted for non-recurring effects, EBITDA rose by 0.6% to EUR899.7m and the Group result by 8.8% to EUR354.5m. This increase is due primarily to significantly higher revenue from flexibility 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: EUR30.4/MWh, 2016: EUR31.0/MWh) and a much lower result from the Grid segment had adverse effects.

Dividend for 2017
A dividend of EUR0.42 per share (+44.8% on the previous year) 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 EUR850m and a Group result of around EUR300m for financial year 2018. For 2018, VERBUND AG is planning a payout ratio of 40-45% of the Group result after adjustment for non-recurring effects.

KPIs                               Unit                           2016                 2017              Change
Revenue                         EURm                   2,795.9             2,913.2                   4.2%
EBITDA                           EURm                   1,044.2                922.3                -11.7%
Operating result              EURm                      615.1                400.1                -35.0%
Group result                    EURm                      424.4                301.4                -29.0%
Earnings per share         EUR                             1.22                  0.87              -29.0%
EBIT margin                    %                               22.0                  13.7                          -
EBITDA margin               %                               37.3                  31.7                          -
Cash flow from
operating activities          EURm                     804.3                640.6                 -20.4 %
Free cash flow before
dividends                         EURm                     580.7                416.1                 -28.4%
Net debt/EBITDA             X                                 3.1                    3.1                   -0.3%
(Proposed) dividend
per share                         EUR                            0.29                  0.42                44.8%
Greenhouse gas emissions
Scope 1 direct
emissions                         kt CO₂e               1,007.0             1,358.1                  34.9%
Specific GHG
emissions(Scope 1/
total electricity generated) g CO₂e/kWh           31.5                   41.3                  31.3%

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

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