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FINANCIAL RESULT

Strong half-year results

BKW produced a very good result in the first half of 2019. Despite the continuing negative electricity price effects, revenue and profit went up significantly. This was due to the continued profitable growth of the Services business and an excellent management performance for the electricity position. Revenue grew by 7 % to CHF 1.4 billion. Net profit amounted to CHF 201 million and has risen by 59 %. The operating profit (EBIT) improved by 21 % compared with the previous year adjusted for special effects.

Excellent operating profit – negative effects of electricity prices more than offset

BKW closed the first half of 2019 with an extremely strong operating profit of CHF 207 million. Compared to the previous year’s figure, the increase amounted to CHF 36 million or 21 %. The persistent negative electricity price effects were therefore more than offset in the first half of the year. Besides the further expansion of the Services business and consistent cost management, the very successful management of the electricity position contributed to this excellent result.

At CHF 201 million, the net profit was CHF 75 million (+ 59 %) higher than in the previous year. Adjusted for the one-off effect from the change in benefit plan in 2018, the increase was as much as CHF 116 million (+ 135 %). The increase in net profit was due to the strong operating profit and the significantly better performance of the assets in the decommissioning and waste disposal funds.

CHF millions

1st half-year 2018 (reported)

Adjustments 1

1st half-year 2018 (comparable)

1st half-year 2019

% change

Total operating income

1,281.2

1,281.2

1,370.2

7 % 

Energy procurement/transport

– 450.8

– 450.8

– 424.6

– 6 % 

Operating costs

– 533.4

– 52.4

– 585.8

– 642.3

10 % 

Material and third-party services

– 154.9

– 154.9

– 178.8

15 % 

Personnel expenses

– 276.7

– 52.4

– 329.1

– 356.9

8 % 

Other operating expenses

– 101.8

– 101.8

– 106.6

5 % 

Operating profit before depreciation, amortisation and impairment

297.0

– 52.4

244.6

303.3

24 % 

Depreciation, amortisation and impairment

– 100.5

– 100.5

– 123.6

23 % 

Income from associates

27.1

27.1

27.7

2 % 

Operating profit/loss

223.6

– 52.4

171.2

207.4

21 % 

Financial result

– 56.1

– 56.1

41.5

Profit/loss before income taxes

167.5

– 52.4

115.1

248.9

116 % 

Income taxes

– 41.2

11.5

– 29.7

– 48.0

62 % 

Net profit

126.3

– 40.9

85.4

200.9

135 % 

1 2018 adjusted for the effect of the transition from the current defined benefit plan of the BKW pension fund to a defined contribution plan under the Swiss Occupational Benefits Act (BVG) as of 1 January 2019.

Increase in revenue in Energy and Services businesses: + 7 %

At CHF 1,370 million, total operating income was CHF 89 million higher than the previous year’s figure. The negative electricity price effects in the Energy business were more than compensated for. The Energy business area was able to make up for the price-related reduction in revenue thanks to higher production volumes from wind farms, very good trading results and higher ­volumes in the distribution business, and to increase its total operating income by 4 %. In the Grid business, revenue was slightly down (– 5 %) due to lower volumes of distributed power and reduced costs for the transmission grid. The Services business continued to grow strongly. With a growth rate of 20 %, it now accounts for around one third of BKW’s total revenue.

Further reduction of operating costs in the traditional business

The further expansion of the Services business resulted in an increase (+ 10 %) in operating costs. More than 300 new employees joined BKW in the first half of 2019 as a result of the acquisitions made. Meanwhile, operating costs were reduced again in organic business (– 2 %). There was a slight reduction in the number of personnel in the traditional business. As at the end of June, BKW had around 8,000 employees in total.

The new IFRS standard on leases was adopted on 1 January 2019. The new standard stipulates that almost all assets (right to use the leased asset) and liabilities arising from leases are ­recognised in the balance sheet. The change in the recognition of lease expenses for operating leases increased operating profit before depreciation, amortisation and impairment in the income statement by CHF 12 million. However, the amount of depreciation on the newly recognised right-of-use assets increased by a similar amount, which is why there was only a minor impact on operating profit.

Positive financial result thanks to the performance of the decommissioning and waste disposal funds

In the first half of 2019, the financial result was positive at CHF 42 million (previous year: – CHF 56 million). The reason for the noticeable increase was the performance of the state decommissioning and waste disposal funds. After being slightly negative in the previous year, the return on investment was very good in the first half of 2019. The positive development of the stock markets led to an 8 % gain in the decommissioning and waste disposal funds. The funds were valued at CHF 1.2 billion as at the end of June.

Energy: negative impact of electricity prices more than offset

The Energy business area builds, operates and maintains BKW’s pool of power plants in ­Switzerland and abroad. It is also responsible for the sale of energy and for trading in electricity, certificates and raw materials.

CHF millions

1st half-year 2018

1st half-year 2019

% change

Electricity sales Switzerland

246.7

264.1

7 % 

Other electricity sales

387.2

383.7

– 1 % 

Other operating income and own work capitalised

13.4

24.5

83 % 

Total operating income

647.3

672.3

4 % 

Energy procurement

– 399.9

– 372.5

– 7 % 

Operating costs

– 153.3

– 150.2

– 2 % 

Personnel expenses

– 60.4

– 51.8

– 14 % 

Material and third-party services and other operating expenses

– 92.9

– 98.4

6 % 

Operating profit before depreciation, amortisation and impairment

94.1

149.6

59 % 

Depreciation, amortisation and impairment

– 38.7

– 51.1

32 % 

Income from associates

16.8

16.0

– 5 % 

Operating profit

72.2

114.5

59 % 

Low electricity prices continued to negatively impact revenue in the Energy business in the first half of 2019. Electricity sales in 2019 were largely hedged three years ago at lower average prices than in the previous year (total CHF –  60 million). But the negative impact of the lower electricity prices was more than compensated for by additional volumes in the production of wind farms, a successful trading business and higher volumes in the distribution business. At CHF 672 million, total operating income was 4 % higher than in the pre­vious year. In the regulated Swiss distribution business, weather conditions had a slightly adverse effect on sales to private customers. On the other hand, business customers were won, so that the electricity sales through distribution channels increased by 0.4 TWh to 4.1 TWh. Accordingly, sales revenue rose by 7 %. Revenue from the other Energy business (market sales, direct sales from power plants and trading activities) fell by only 1 % despite the negative impact of price factors.

Energy procurement costs were down by CHF 27 million to CHF 373 million. This is due to lower costs for procurement on the market and lower procurement costs at the partner plants. Total electricity production fell by 5.7 TWh (– 0.4 TWh) in comparison to the previous year. This decline was due in particular to market-related shortfalls in production volumes from fossil-fuel power plants. However, wind farms increased their volume due to good wind conditions.

Operating costs fell by 2 % to CHF 150 million thanks to further consistent cost management. At CHF 115 million, the operating profit was markedly higher than in the previous year (+ 59 %). The effect of the renewed negative trend in electricity prices was therefore offset substantially.

Grid: stable contribution operating profit

The Grid business area builds, operates and maintains BKW’s distribution grid.

CHF millions

1st half-year 2018

1st half-year 2019

% change

Distribution grid usage fees

243.1

236.0

– 3 % 

Other operating income and own work capitalised

36.1

29.3

– 19 % 

Total operating income

279.2

265.3

– 5 % 

Energy transport expense

– 51.2

– 52.1

2 % 

Operating costs

– 95.3

– 92.7

– 3 % 

Personnel expenses

– 38.6

– 33.4

– 13 % 

Material and third-party services and other operating expenses

– 56.7

– 59.3

5 % 

Operating profit before depreciation, amortisation and impairment

132.7

120.5

– 9 % 

Depreciation, amortisation and impairment

– 42.1

– 40.8

– 3 % 

Income from associates

11.7

11.6

– 1 % 

Operating profit

102.3

91.3

– 11 % 

At CHF 265 million, total operating income from the Grid business was 5 % lower than the previous year’s figure. Revenue from distribution grid usage fees decreased by 3 % to CHF 236 million. This decrease was mainly due to lower volumes of distributed power and lower costs associated with the transmission grid. Own work capitalised in grid construction is below the figure for the same period in the previous year, contributing to the decline in total operating income.

Expenses for energy transport remained stable overall. Operating costs were slightly lower as a result of organisational changes as well as consistent cost management.

At CHF 91 million, the operating profit was stable overall, taking into account the lower volumes of distributed power.

Services: further profitable growth

The Services business area primarily includes engineering planning and consulting (Engineering) for energy, infrastructure and environmental projects, integrated services in the area of building technology (Building Solutions), as well as the construction, servicing and maintenance of energy, water and telecommunication networks (Infra Services).

CHF millions

1st half-year 2018

1st half-year 2019

% change

Revenue from services

379.1

457.7

21 % 

Other operating income

15.9

17.3

9 % 

Total operating income

395.0

475.0

20 % 

Operating costs

– 364.6

– 429.5

18 % 

Personnel expenses

– 187.8

– 224.6

20 % 

Material and third-party services and other operating expenses

– 176.8

– 204.9

16 % 

Operating profit before depreciation, amortisation and impairment

30.4

45.5

50 % 

Depreciation, amortisation and impairment

– 11.9

– 21.6

82 % 

Operating profit

18.5

23.9

29 % 

In the first half of 2019, the Services business expanded further and total operating income increased by 20 % to reach CHF 475 million. The repeated double-digit growth rate was largely due to acquisitions. BKW made a total of seven acquisitions in the first six months. In Germany, the Engineering business is being further expanded and strengthened with skills in testing and construction, supplemented by architectural skills for general planning. In the building solutions area, BKW is making targeted acquisitions to complement its network of companies across ­Switzerland that are optimised both geographically and technically. Growth in Infra Services is well above the market as a whole and purely organic.

Operating costs also increased due to the strong growth in revenue. The reported figures continue to include temporary acquisition and integration costs that have a negative impact on expenses. The operating profit of the Services business increased to CHF 24 million (29 %) in the first half of the year. This represents disproportionately high growth compared to sales. The margin has therefore been improved, despite acquisition-related costs. A stronger second half of the year is expected due to the heavily seasonal nature of the industry (especially in the areas of infra ­services and building solutions).

Funds from operations at record level

Funds from operations amounted to CHF 244 million (previous year: CHF 194 million), exceeding the already strong previous year’s figures and reaching the highest in recent years. Before ­utilisation of provisions for nuclear decommissioning and waste disposal, funds from operations amounted to CHF 268 million (+ 23 %).

The reported cash flow from operating activities includes not only cash flows from operating activities, but also the utilisation of provisions for nuclear decommissioning and waste disposal. Most of these utilisations lead to refund claims against the state-run decommissioning and waste disposal funds. To improve comparability and interpretability, BKW therefore uses the key figures “funds from operations before utilisation of nuclear provisions” and “cash flow from operating activities before utilisation of nuclear provisions”. This cash flow amounted to CHF 156 million (previous year: CHF 129 million) and was 22 % higher than in the previous year. Reported operating cash flow for the first half of 2019 amounted to CHF 132 million (previous year: CHF 104 million).

Investments in expansion of the Services business, in new power plants, and in the grid infrastructure amounted to CHF 141 million in the first half of 2019 (previous year: CHF 237 million). Around half of this was invested in the strategic growth areas of services and renewable energies. About CHF 70 million was invested in replacement/maintenance, especially the grid. Acquisitions and investments were financed from the funds generated internally in the first half of 2019. Short-term liquidity, including current financial assets, remained unchanged at around CHF 1 billion at the end of the first half-year.

CHF millions

1st half-year 2018

1st half-year 2019

% change

Funds from operations before utilisation of nuclear provisions

218.7

268.3

23 % 

Funds from operations

194.4

244.2

26 % 

Cash flow from operating activities before utilisation of nuclear provisions

128.5

156.3

22 % 

Utilisation of nuclear provisions with no claim to refunds of state funds

– 0.8

– 1.7

Utilisation of nuclear provisions with a claim to refunds of state funds

– 23.5

– 22.4

Cash flow from operating activities

104.2

132.2

27 % 

Equity and financing situation: financial and operational flexibility unchanged

The balance sheet total rose slightly by 0.9 % to year-end, to about CHF 9.1 billion. The main ­reason for the increase was the first-time application of the new IFRS 16 lease standard, which initially boosted non-current assets by around CHF 140 million and the lease liabilities by the same amount. Owing to the strong half-year results, the equity ratio rose to 39.0 % (end of 2018: 38.4 %).

CHF millions

31.12.2018

30.06.2019

Current assets

2,242.8

2,132.6

Non-current assets

6,810.5

6,998.4

Current liabilities

1,547.0

1,473.1

Non-current liabilities

4,034.0

4,095.1

Shareholders’ equity

3,472.3

3,562.8

Balance sheet total

9,053.3

9,131.0

BKW’s financing situation remains solid. Net debt (financial liabilities less current financial assets and cash and cash equivalents) were higher by CHF 211 million at the half-year point at CHF 686 million. The main reason for the increase of this key figure was the first-time appli­cation of the new lease standard IFRS 16. Excluding this accounting effect, the increase would have amounted to only CHF 80 million. The latter is due to investing and acquisition activity in the first half of 2019.

In July 2019, the CHF 350 million bond due was repaid. At the same time, BKW successfully issued a 0.25 % green bond worth CHF 200 million with a term of eight years. The partial refinancing will produce future interest savings of around CHF 11 million. In addition, BKW continues to have access to an unused syndicated loan totalling around CHF 250 million. The financial framework necessary for implementing and safeguarding financial and operational flexibility is sufficient and thus ensured at all times.

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