SUMMARY OF THE
2015 ANNUAL REPORT
VERDO A/S Verdo is determined to be the greenest, most efficient energy provider in Denmark. Our ambition is to develop the most profitable solutions within production and supply of green energy, at home and abroad. Verdo produces and distributes electricity, water and heat. We have highly competitive products within telephony and Internet, electrical installation, plumbing and sanitation, energy consultancy, plus the production and sale of biofuels in Denmark and the UK. We are one of the global market leaders in special coal for silicon and the ferrosilicon industry. Our approximately 500 employees are responsible for an annual turnover of about DKK 2.2 billion.
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ANNUAL REPORT 2015
Contents GROUP & STRATEGY Foreword
4
Executive and Supervisory boards
6
The Group’s Financial Highlights
8
ANNUAL REPORT Profit and loss statement
11
Balance
12
Balance sheet
13
Statement of equity
14
Cash flow statement
15
ANNUAL REPORT 2015
3
Foreword
Consolidation
- built on focus and simplification Despite a challenging year, Verdo has delivered satisfactory results. We have managed to simplify our business areas and streamline our supply areas and CHP plants. An optimisation of several internal processes has also contributed to the good results, which have consolidated and reinforced our business. Both are essential when we operate in markets sensitive to weather conditions, with fluctuating commodity prices and new regulations. We look back on a financially beneficial year at Verdo. Our revenue rose by five percent, ending up at DKK 2.2 billion. The year’s operating profit improved to a total of DKK 248 million before interest and depreciation (EBITDA). The good results were most obvious on the bottom line, which show a pre-tax profit of DKK 46 million – an improvement of 52 percent. Simplification and increased focus within several divisions was, amongst other things, the key to the great results. Verdo Entreprise A/S is now targeting sales to business customers within three product areas only, and has closed and sold off several services and products. Verdo Tele A/S has signed a strategic co-operation agreement with Stofa to reap the benefits of economies of scale. Going forward the primary task will be to expand the fibre optic network. We have sharpened our cross division consulting business within sustainable energy production, and have turned our attention to advising waterworks and CHP plants among others. The CHP plant Grenaa Kraftvarmeværk has been sold with effect from 1 January 2018. Until then, Verdo Produktion A/S will continue to operate the plant and supply heat to Grenaa Varmeværk, and thereby continue to help to keep the citizens of Grenaa warm. Focus and simplification have also characterised the Group’s internal development over the past year. In 2014, we implemented an ERP system (Enterprise Resource Planning) which led to major changes in our business processes. In 2015 the advantages and positive effects already began to show for our employees, and it will benefit our customers in the future. Energy companies are sensitive to weather conditions, and this was also the case in 2015, when we encountered climate-related head-
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ANNUAL REPORT 2015
winds. It has in fact been the windiest year ever, which has resulted in historically low electricity prices. 2015 was also the warmest year ever. This has affected sales of wood pellets, production at the CHP plants, and sales of district heating. Outside Denmark, Verdo Renewables in the UK was also affected by the weather in 2015. Besides the record heat and strong winds, it was also one of the wettest years ever in the UK, which resulted in increased costs. It is impressive that under these circumstances, Verdo Renewables nonetheless managed to double its sales in 2015. We now have 31 percent of the market in the UK, and have thereby further consolidated our position as market leader. We got three new warehouses in 2015, bringing our total to seven. The new warehouses make us even stronger, and we can now service the entire market. In 2015 we established a sales department in Croatia to service the Italian market. We also investigated the possibilities for an even stronger sourcing strategy for Africa, in relation to sustainable wood chips. Our subsidiary, Carbon Partners, has once again been able to navigate in a difficult market for special coal for silicon and the ferrosilicon industry in 2015, while still creating good results. We have done well despite a market under pressure, with declining demand and falling prices for the products. These years extensive regulatory changes are taking place in the supply of electricity, water and heating; changes that affect the operations of utility companies. In 2015 our granted obligation to supply electricity in the Randers and Hobro area ceased, but we held on to the granted obligation to supply in Hillerød. We acquired new customers to our district heating network In our efforts to be Denmark’s greenest utility company, among other things we have obtained solar panels for our waterworks. Market conditions are not the only challenging factors in our industry. More extensive and comprehensive regulations in 2015 made it more difficult to run an energy company. Despite this, once again in 2015 Verdo succeeded in providing some of the lowest electricity, water and heating prices. We are proud to have yet again shown ourselves to be one of the most efficient utility companies in the country.
Claus Omann Jensen Chairman of the Board
Kim Frimer CEO
ANNUAL REPORT 2015
5
MANAGEMENT’S REVIEW The Supervisory board and the executive board have today, 19 April 2016, considered and adopted the annual report for 1 January - 31 December 2015 for Verdo A/S. The annual report is presented in accordance with the Danish Financial Statements Act. In our opinion, the consolidated accounts and annual accounts give a true and fair view of the group’s and company’s assets, liabilities and financial position as at 31 December 2015, and of the result of the group’s and company’s activities and the group’s cash flow for the fiscal year of 1 January - 31 December 2015. We are furthermore of the opinion that the management’s review contains a true and fair description of the development of the group’s and company’s activi-
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ANNUAL REPORT 2015
ties and financial status, profit for the year and for the financial position of the group and company. There is significant uncertainty concerning subsidiaries, including accounting for equity capital. Please refer to note 1. The annual report is recommended for approval by the general meeting.
Claus Omann Jensen Chairman of the Board
Niels Rasmussen Vice-Chairman
Ejvind Clemmensen Board Member
Pia Maach Møller Board Member
Thomas Post Employee Representative
Erik Busk Jensen Board Member
Søren Sørensen Board Member
Arne Erikslev Board Member
Bent Hede Board Member
Jan Holst Employee Representative
Ebbe Bagge Hansen Employee Representative
Jess Hansen Employee Representative
Kim Frimer CEO
ANNUAL REPORT 2015
7
The Group’s Financial Highlights
The year for Verdo Verdo delivered satisfactory financial results in 2015, taking the general economic trends and climate into account. The Group’s total revenue was DKK 2.2 billion, as against DKK 2.1 billion in 2014. Operating profit (EBITDA) was DKK 248 million, which is a fair improvement and acceptable in relation to the economic trends. The operating profit is regarded as satisfactory. Consolidated profit before tax was DKK 46 million, as against the budgeted DKK 44 million, which is also satisfactory. The improved result is primarily due to a strong focus on the Group’s costs and lower expenditure on external financing. The European economy has not yet totally recovered. We still have low interest rates, which affect both credit facilities and returns. This is actually positive, as the Group’s credit facilities are getting less expensive overall. However, it significantly affects the permissable returns on supply assets (electricity networks, heating networks and CHP plants), as under the applicable legislation, these are tied to the actual rate of interest. Consequently, the low interest rates have an overall adverse effect on the Group. Another effect of the very low interest rates is that the Group’s interest rate swaps have a significant negative value at year-end. The year’s overall positive value adjustment of interest rate swaps comprises DKK 19 million. It is essential to emphasise that this affects only equity, as the Verdo Group does not have to make liquidity available for swaps. In the long term, neither profit nor equity will be affected by the swaps.
on which to expand the business in the coming years. In 2015, the Group sold a 25 percent stake in Verdo Tele A/S to Syd Energi Fibernet A/S. Stofa, which is owned by Syd Energi, is taking over the customers and the obligation to supply them. The Group enjoyed strong liquidity in 2015. Cash flow was better than in both 2013 and 2014. The satisfactory results have been achieved despite the fact that 2015 was generally a difficult year for most of the markets in which Verdo operates. Industrial and raw materials had and continue to have poor prospects. Electricity prices fell further to an extremely low level, where they remained for almost all of 2015. This is in line with other commodities such as coal and oil, which also had low prices in 2015, and there is no sign of an immediate upturn in 2016. It is difficult to set a course for the year ahead in relation to trends in the real economy. We expect to see continued low interest rates, low prices for fuel, and electricity prices remaining at the same low level as in 2015. All three factors have a major influence on our overall business. However, we expect to further improve our results in 2016.
The return on equity capital is 2.4 percent, which is a fair improvement in relation to the previous years. The financial gearing (EBITDA/net interest-bearing debt) has been reduced compared to previous years, which is highly satisfactory. The Group works with a goal for financial gearing of five or less, which was achieved at the end of 2015. The Verdo Group expects that the gearing ratio will continue to decline. This gives Verdo a solid foundation
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ANNUAL REPORT 2015
Kenneth R. H. Jeppesen Økonomidirektør Verdo A/S
The Group’s Financial Highlights
FINANCIAL AND OPERATING DATA
Amounts in TDKK
2015
2014
2013
2012
2011
2.236.865
2.122.902
2.405.028
2.429.995
2.283.435
98
93
105
106
100
247.759
233.939
234.389
258.178
236.400
105
99
99
109
100
93.894
78.836
95.119
119.482
106.155
88
74
90
113
100
-47.857
-48.559
-62.566
-60.043
-52.896
90
92
118
114
100
46.037
30.277
32.553
59.439
53.259
86
57
61
112
100
32.230
21.777
25.062
41.498
50.463
64
43
50
82
100
3.252.152
3.287.817
3.343.922
3.301.467
3.325.436
98
99
101
99
100
96.160
124.555
127.529
144.345
163.618
59
76
78
88
100
1.355.493
1.289.930
1.294.324
1.238.044
1.240.060
109
104
104
100
100
Financial results Net turnover Index EBITDA Index Operating profit Index Results from net financials Index Pre-tax profit Index Profit for the year Index
Balance sheet Total assets Index Investment in tangible assets Index Equity Index
Liquidity Net cash flow from: Operations
196.113
136.089
143.894
109.996
250.436
Investments
-21.427
-129.944
-133.174
-86.640
-174.355
Financing
-43.764
-25.105
-38.499
-41.090
372.999
The year’s effect on cash flow
130.922
-18.960
-27.779
-17.734
449.080
2015
2014
2013
2012
2011
KEY FIGURES
Gross margin ratio
26,6%
27,1%
23,4%
24,4%
23,8%
EBITDA margin
11,1%
11,0%
9,7%
10,6%
10,4%
Financial gearing
4,5
5,5
5,5
5,0
5,5
Return on equity
2,4%
1,7%
2,0%
3,3%
4,0%
41,7%
39,2%
38,7%
37,5%
37,3%
Solvency ratio
ANNUAL REPORT 2015
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10
ANNUAL REPORT 2015
Profit and loss statement
GROUP
Net turnover Other operating income Expenses for raw products and auxiliary materials Other external expenses
PARENT COMPANY 2015
2014
2015
2014
DKK
TDKK
DKK
TDKK
2.236.865.208
2.122.902
86.718.812
80.001
5.222.411
0
12.000
0
-1.641.502.619
-1.547.209
-668.792
-845
-132.430.147
-125.250
-41.625.041
-40.652
Gross profit
468.154.853
450.443
44.436.979
38.504
Staff costs
-220.396.227
-216.504
-47.648.866
-37.912
Result before depreciation Depreciation and amortisation
247.758.626 -153.529.288
233.939 -154.327
-3.211.887 -9.241.570
592 -6.476
-335.556
-776
0
0
93.893.782
78.836
-12.453.457
-5.884
-972
Other operating expenses Operating profit or loss
Income from equity investments in subsidiaries
0
0
30.102.589
Income from other equity Âinvestments
-26.673
-23
0
0
Gains from partial sale of subsidiary
293.034
6.237
293.034
6.237
2.868.528
2.208
43.090.330
30.580
Other financial expenses
Other financial income
-50.992.036
-56.981
-29.483.620
-7.119
Total financial items
-47.857.147
-48.559
44.002.333
28.726
Pre-tax profit
46.036.635
30.277
31.548.876
22.842
Tax on profit
-12.069.884
-8.266
681.150
-1.065
Group profit for the year Of which minority interests
33.966.751 -1.736.725
22.011 -234
32.230.026 0
21.777 0
Profit for the year
32.230.026
21.777
32.230.026
21.777
Profit for the year is proposed transferred to equity as profit carried forward and reserve for net revaluation following the equity value method.
ANNUAL REPORT 2015
11
Balance
ASSETS
GROUP
PARENT COMPANY 31.12.15
31.12.14
31.12.15
31.12.14
DKK
TDKK
DKK
TDKK
25.496.945
31.417
0
0
399.271
0
0
0
25.896.216
31.417
0
0
Property and buildings
169.085.151
171.042
101.694.684
100.509
CHP plant and peak load stations
442.059.247
471.209
0
0
1.577.056.356
1.575.518
0
0
250.261.108
251.590
28.163.471
29.895
13.720.524
22.454
2.018.842
5.054
2.452.182.386
2.491.813
131.876.997
135.458
FIXED ASSETS Goodwill CO2 rights TOTAL INTANGIBLE ASSETS
Distribution systems and installation as well as meters Operating material Tangible assets under construction TOTAL TANGIBLE ASSETS
Equity investment in associated Âcompanies
0
0
1.873.797.770
1.445.807
7.250.220
4.080
0
0
Other securities and equity investment
19.729.459
19.841
7.671.038
0
TOTAL FINANCIAL ASSETS
26.979.679
23.921
1.881.468.808
1.445.807
2.505.058.281
2.547.151
2.013.345.805
1.581.265
204.202.704
224.311
157.487
72
0
694
0
0
TOTAL STOCKS
204.202.704
225.005
157.487
72
Receivables from sales and services
Other receivables
TOTAL FIXED ASSETS CURRENT ASSETS Raw products and auxiliary materials Prepayment for products
258.969.045
239.408
573.533
2.247
Current contract work
18.187.595
14.390
0
0
Receivables Receivables from associated companies
84.781.404 0
96.281 0
0 270.072.601
0 824.720
Equity loan
0
0
510.000.000
510.000
55.172.468
69.116
0
1.667
0
0
138.019
0
Other receivables
94.320.026
72.453
61.481.189
18.379
Prepaid expenses
12.125.619
9.257
3.525.813
2.261
523.556.157
500.905
845.791.155
1.359.274
19.334.589
14.756
164.209
1.207
747.093.450
740.666
846.112.851
1.360.553
3.252.151.731
3.287.817
2.859.458.656
2.941.818
Deferred tax assets Corporate tax
TOTAL RECEIVABLES Cash TOTAL CURRENT ASSETS TOTAL ASSETS
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ANNUAL REPORT 2015
Balance sheet
LIABILITIES
GROUP
PARENT COMPANY 31.12.15
31.12.14
31.12.15
31.12.14
DKK
TDKK
DKK
TDKK
263.024.000
263.024
263.024.000
263.024
53.959.135
53.959
0
0
EQUITY Share capital Revaluation reserves Reserve for net revaluation following the equity value method
0
0
138.314.859
36.770
Retained earnings
1.038.509.799
972.947
954.154.075
990.136
TOTAL EQUITY
1.355.492.934
1.289.930
1.355.492.934
1.289.930
132.938.663
15.028
0
0
53.360.891
56.705
0
0
0
0
6.700.000
0
4.000.000
4.000
0
0
57.360.891
60.705
6.700.000
0
Debt to mortgage credit institute
334.695.705
357.023
52.522.794
55.005
Other credit institutes
173.210.756
190.534
171.286.397
188.633
MINORITY INTERESTS DEBT Reserves for pensions Deferred tax Other deferrals TOTAL PROVISIONS
12.037.964
15.047
0
0
Investment contribution, accrual basis of accounting
Other debt
152.775.947
149.543
0
0
TOTAL LONG-TERM DEBT
672.720.372
712.147
223.809.191
243.638
Long-term debts due within 1 year Other credit institutes Debt to associated companies
47.340.974
46.396
18.975.000
17.997
575.612.841
701.957
483.370.913
629.674
0
0
667.483.722
664.598
152.899.181
151.121
4.688.656
4.359
Pre-paid current work
5.601.119
1.782
0
0
Corporate tax
3.241.819
7.849
0
2.980
243.918.916
289.304
98.938.240
88.642
5.024.021
11.598
0
0
TOTAL SHORT-TERM DEBT
1.033.638.871
1.210.007
1.273.456.531
1.408.250
TOTAL DEBT
1.706.359.243
1.922.154
1.497.265.722
1.651.888
TOTAL LIABILITIES
3.252.151.731
3.287.817
2.859.458.656
2.941.818
Suppliers of products and services
Other debt Accrued income
ANNUAL REPORT 2015
13
Statement of equity
GROUP
Amounts in DKK
Equity as at 01.01.14
Revaluation reserves
Share capital
Retained earnings
263.024.000
53.959.135
Profit for the year
0
0
991.615.518 24.324.339
Ajustments for exchange rates, subsidiaries
0
0
11.858.743
Equity adjustment prior years
0
0
-14.283.120
Adjustment of hedging instruments: Balance as at 01.01.14
0
0
134.678.682
Balance as at 31.12.14
0
0
-185.907.876
0
0
10.660.489 972.946.775
Tax of equity adjustment Equity as at 31.12.14
263.024.000
53.959.135
Profit for the year
0
0
32.230.026
Adjustment for exchange rates, subsidiaries
0
0
14.206.097
Adjustment of hedging instruments: Balance as at 01.01.15
0
0
185.907.876
Balance as at 31.12.15
0
0
-158.926.247
0
0
-7.854.728
263.024.000
53.959.135
1.038.509.799
Tax of equity adjustment Equity as at 31.12.15
PARENT COMPANY
Amounts in DKK
Equity as at 01.01.14
Retained earnings
263.024.000
89.748.452
955.826.201
Profit for the year
0
1.575.164
22.749.175
Adjustment for exchange rates, subsidiaries
0
3.992.358
7.866.385
Disposals af subsidiaries
0
231.987
-231.987
Paid dividend from subsidiaries
0
-13.527.360
13.527.360
Equity ajustments prior years
0
-14.283.120
0
Adjustment of hedging instruments
0
-30.967.127
-9.601.578 990.135.556
Equity as at 31.12.14
263.024.000
36.770.354
Profit for the year
0
30.102.589
2.127.437
Adjustment for exchange rates, subsidiaries
0
4.239.628
9.966.469
Group contribution
0
25.261.157
-25.261.157
Disposals af subsidiaries
0
44.253.297
-44.253.297
Paid dividend from subsidiaries
0
-10.623.062
10.623.062
Adjustment of hedging instruments
0
8.310.896
10.816.005
263.024.000
138.314.859
954.154.075
Equity as at 31.12.15 The share capital comprises 263,024 shares at nominal DKK 1.000. No shares have been allocated special rights. There has been no changes of share capital the last 5 years.
14
Net revaluation following the equity value method
Share capital
ANNUAL REPORT 2015
Cash flow statement
GROUP
Operating profit Adjustments
2015
2014
DKK
TDKK
93.893.782
78.836
142.039.932
147.205
Received interest income and similar income
2.868.528
2.208
Paid interest expenses and similar expenses
-50.992.036
-56.981
-9.846.554
-6.455
177.963.652
164.813
20.802.698
-52.262
Paid company tax Operating income adjusted for non-cash items Change in working capital: Stocks Receivable
1.098.307
72.081
Suppliers of products and services
1.778.604
-46.091
-5.530.152
-2.452
Operation’s cash flow
196.113.109
136.089
Acquisition of tangible assets
-105.293.629
-129.580
Other operation derived debt
Installation under construction
8.734.274
5.025
-10.340.068
-5.890
Long-term receivables
2.045.196
-1.789
Sale of financial assets
77.176.254
0
6.250.918
2.290
Investments´ cash flow
-21.427.055
-129.944
Total cash flow from operations and investments
174.686.054
6.145
Purchase of associated companies / payed earn out
Sale of intangible and tangible assets
Paid dividend Financial leasing contracts Conversion of mortgage loan, net
-2.655.765
0
1.490.875
573
0
14.492
Instalment payments of long-term loan
-42.598.727
-40.170
Financing cash flow
-43.763.617
-25.105
Total cash flow for the year
130.922.437
-18.960
Cash at bank and in hand at the beginning of the year
-687.200.689
-668.241
Cash at bank and in hand at the end of the year
-556.278.252
-687.201
Cash at bank and in hand at the end of the year is specified thus: Short-term bank and savings bank debt
19.334.589
14.756
Kortfristet gæld til kreditinstitutter
-575.612.841
-701.957
Total
-556.278.252
-687.201
ANNUAL REPORT 2015
15
VERDO
|
Agerskellet 7
|
8920 Randers NV
|
Tel. +45 8911 4811
|
info@verdo.dk
|
www.verdo.dk