FOREWORD
Strengthened by adversity
Energy suppliers are sensitive to the wind and weather. Verdo is no exception. One of the things we will remember in particular about 2014 is the warm winter, which caused sales of district heating, CHP production and sale of wood pellets to fall. But despite the warmest European winter in living memory, we still managed to make a reasonable profit, indicating that this is a very robust company. Verdo will look back on 2014 as one of its most difficult years, something that is also reflected in our bottom line. Turnover was DKK 2.1 billion, well under the figure for 2013. Earnings before interest, depreciation and amortisation (EBITDA) were DKK 237 million, and pre-tax profit was DKK 34 million. Energy companies have to constantly adapt to the many new rules that can limit profit - and to which most of our concessionary business areas are subject. For example, we are additionally taxed on district heat, and the price of electricity to our customers is under pressure from regulatory changes. A political decision has also been made to prevent us from gaining returns on equity within water supply. These are all factors that limit profit. To protect our business as much as possible, we therefore streamline the group constantly and have disposed of anything that is non-core business. We need to focus on what we are good at. This was reflected in 2014 by focusing even more on the customer, including the provision of more precise information via a new website, not to mention public meetings and information when we improve the supply grid. We were once again one of the most efficient utility companies in Denmark, proving once and for all that we are good at providing heating, water and electricity to the benefit of our customers in terms of both quality and price. Our customers can now also benefit from our expertise within wood pellets. We have introduced Heatlets, our new pellet brand, at home and abroad. This is a product with the highest quality in the industry and we guarantee supplies - something unique to us. By doing so, we strengthen our image as the professional, stable sup-
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ANNUAL REPORT 2014
plier of the highest quality - something the customers much appreciate. The production and sale of wood pellets by Renewables in the UK continues to hold a leading market position in terms of price, sales and brand. We have succeeded in getting in to many of the leading retailers and have built up a market share of around 30 percent. Renewables has delivered an operating profit and has expanded with a new warehouse to service the Midlands. Our subidiary Carbon Partners, operating in Norway and the USA, has once again made a handsome profit and is clearly one of the best when it comes to supplying special coals to the global metal and silicium industries. We have expanded our consultancy business and utilise our considerable experience and know-how throughout the range of our core competences: water, heating and electricity direct to the consumer and to power stations, other energy generators and to industry at home and abroad. Consultancy is a growing part of our business. Contracting shrank in 2014, but only because we want to do what we are good at. We have focused in previous years on contracting, adapted, disposed of parts of the business and generally became more efficient. That has already led to sharply increased sales and fuller order books for this business unit. The high level of demand for fibre continues. We were once again nominated as the best TV and internet provider by our customers in 2014, and have more than half of all households connected. We expect that figure to continue to grow, and that this business unit will become profitable within a few years. The fact that this was a difficult year for Verdo has of course been felt by our employees. Our skilled and committed workforce has really been put to the test, but their spirit, durability, sense of humour and skills have helped ensure that we now do even more of what we are really good at - and Verdo emerged strengthened from the challenges of 2014. Looking ahead, we can already see the effects of more focus and restructuring. We will continue to apply more focus and thus specialise even further.