A JOURNEY OF TRANSFORMATION

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Annual Report 2017
ADNOC Distribution

ADNOC Distribution is the leading operator of retail fuel service stations in the United Arab Emirates (UAE) with an approximate 67 percent market share by number of service stations at 31 December 2017. The Company is the number one retail fuel brand and has the largest market share in the wholesale segment in the UAE.

Financial Highlights

ADNOC Distribution had a successful year, with an enhanced level of profitability and continued healthy margins. We opened 24 new service stations across the UAE in 2017, including 10 new ADNOC Xpress stations. Our market share in the UAE is approximately 67 percent, with 359 service stations.

Revenue* (AED million)

2016
17,670.1
2017
19,756.3
11.8%

Profit for the year (AED)

1,804.2m

Earnings per share

0.144AED

Gross profit* (AED million)

2016
4,226.5
2017
4,426.1
4.7%

Proposed dividend (AED)

735.0m

Proposed dividend per share

0.0588AED

EBITDA* (AED million)

2016
2,125.5
2017
2,281.0
7.3%

Net cash generated from operating activities (AED)

3,381.5m

Return on equity

63.4%

Operational Highlights

Our IPO in December 2017 was the largest in Abu Dhabi in 10 years.
Fuel volumes

Total fuel sold in 2017 amounted to 9.98 billion liters, 2.2 percent higher than 2016 excluding the impact of the Emarat Dubai transaction *.

Retail transactions

Fuel transactions rose by 7.5 percent to 164.8 million, while non-fuel transactions rose by 2.0 percent to 47.8 million.

SMART technology

We rolled-out our new SMART system, enabling automatic and seamless fuel payment at more than 200 stations.

Rental properties

Occupancy increased by 2.8 percent during the year. Leasing activity has risen by 25 percent since 2012.

Voyager engine oils

Now exported to 19 countries following the signing of agreements in Yemen and Ethiopia during 2017.

Vehicle inspections

653,000 vehicles were tested at our 21 inspection centers (fresh tests).

Aircraft refueling

Our fleet of 75 aircraft-refueling vehicles carried out close to 108,000 fueling operations at seven UAE airports.

HSE

ADNOC Distribution has maintained its commitment to world-class health, safety and environmental standards.

Chairman's Message

Transforming our business
to create value

Following the IPO, we now benchmark our performance at every level of the organization against our global peers and hold ourselves to the highest international standards of transparency and corporate governance.

I am pleased to present ADNOC Distribution’s first annual report as a publicly listed company, following a year marked by strong financial and operational performance, the strengthening of our management team and our landmark Initial Public Offering (IPO), which was significantly oversubscribed with strong interest from international investors.

In 2017, we were able to continue our growth while also embarking on an important business transformation. This would not have been possible without the support and guidance of our nation’s leadership, the backing of our majority shareholder, the dedication of our employees and, of course, the loyalty of our customers.

Following the IPO, we now benchmark our performance at every level of the organization against our global peers and hold ourselves to the highest international standards of transparency and corporate governance. These are good disciplines to follow.

The year ahead brings new opportunities, including realizing our goals for expansion, implementing important initiatives that will deliver greater choice and convenience to our customers, and continuing to improve our operational efficiency. By maintaining a relentless focus on performance, I am confident that ADNOC Distribution can continue to grow and prosper.

Following a year of unprecedented transformation, I join my Board colleagues and senior management in thanking the Abu Dhabi Securities Exchange, our customers and our employees for their dedication in taking the Company through the IPO process so seamlessly, and for successfully launching the next phase in our Company’s evolution.

As a key entity of one of the world’s largest energy producers, we will pursue our goal of becoming an operation that attracts international recognition for the quality of its management, its operational excellence, and its financial strength.

We look forward to continued collaboration with our local and international investors, our suppliers and our customers, as we strive to deliver world-class operations and a market- leading fuel and non-fuel business.

H.E. Dr Sultan Ahmed Al Jaber

Chairman

CEO’s Message

A retail destination
beyond fuel

Our success and positive momentum in 2017 means ADNOC Distribution is well positioned to continue our transformation as a company.

The year 2017 will surely be remembered as one of the most momentous periods in the Company’s 45-year history. The transformation of ADNOC Distribution following its successful listing on the Abu Dhabi Securities Exchange brings new and exciting opportunities and challenges.

As we address the responsibilities of public ownership, we must be agile enough to meet the new standards of transparency, disclosure and corporate governance that are now demanded of the Company. Our corporate culture will need to change, but I am confident that we will meet the challenge.

While our IPO was a major milestone that demanded considerable time and resources, there were many other notable and successful initiatives in 2017.

The opening of 24 new service stations, the extension of our Voyager lubricants into new markets, and our brand unification with ADNOC Group showed our ability to overcome logistical challenges, and to deliver major projects within budget, on time and – crucially – without compromising our 100% commitment to health, safety and the environment.

All of those initiatives have set us up for future success. Our twin businesses of fuel and non-fuel retail give us ample scope to expand commercially and geographically.

With plans to grow market share through strategic expansion into Dubai and Saudi Arabia already well advanced, our core UAE market is a testing ground for a number of new initiatives to deliver an enhanced customer experience and grow profitability.

We are also committed to generating new revenue streams. We are assessing every area of our business to ensure that each part contributes to the commercial and financial success of our company.

The ADNOC Distribution proposition is a powerful one for customers, investors and other stakeholders. Our market leadership position, our comprehensive fuel distribution infrastructure, a respected and popular brand, and the support of ADNOC have laid the foundations for our new management team to achieve ambitious objectives and maintain our upward trajectory.

Our strategic initiatives for 2018 have been clearly identified. We are focused on introducing new fuel services and optimizing our convenience store platform to improve the customer experience and embed greater cost efficiency across the business.

I am confident we have the momentum, expertise and support to deliver on our strategy in 2018.

Eng. Saeed Mubarak Al Rashdi

Acting Chief Executive Officer

Deputy CEO’s Message

Our successful 2017 has laid the groundwork for ADNOC Distribution to further transform as a company and, with it, the level of choice, service and convenience which customers receive. People visiting our network of service stations and convenience stores need to enjoy the experience and be delighted by our offer. This will ultimately contribute to a further improvement in our financial performance.

As successful as 2017 was, we cannot afford to stand still. We have a clear vision of where we want to take ADNOC Distribution for the Company to become a world-class operation.

This vision is distilled into a five-part strategy – covering fuel and non-fuel business, customer experience, cost optimization, international expansion, and leveraging relationships – that will drive us to become the best and most trusted fuel and convenience retailer in the GCC region.

As ADNOC Distribution’s new Deputy CEO, I have worked with colleagues to agree firm targets that aim to improve performance, margins and cost efficiency to maximize value for shareholders. This has occurred without compromising our customers’ experience, our 100% commitment to HSE or the value of our brand.

With our favorable operating profile, these goals are within reach. We want to take the act of refueling a vehicle to a different level, offering customers more choice than they’ve ever had before.

We want to offer convenience store customers a better experience overall by improving category management, offering more fresh food and making our supply chain more efficient. In the future, our offering is likely to be delivered alongside world-class retail brands. Across retail fuel and non-fuel, we need to encourage customers to stay longer and spend more.

Our LPG and lubricants businesses are in good health, but can be improved further. We are now piloting a scheme to deliver LPG to customers’ homes, through a new digital platform, and we see great potential for lubricants by leveraging ADNOC’s brand strengths.

Delivering on this strategy will take time, but I am confident it will also earn us a reputation for being operationally efficient, well-managed, a good employer, a responsible contributor to our communities, and a strong investment for our shareholders.

John Carey

Deputy Chief Executive Officer