DRIVING GROWTH DELIVERING VALUE

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Annual Report 2018
ADNOC Distribution

Financial Highlights

Hitting our targets and accelerating our growth plans

We achieved significant cost efficiencies by optimizing operating expenses and reducing construction costs for our new service stations.

Revenue

AED m

15.9%
22,893
2018
22,893
2017
19,756

Profit for the year

AED m

2,128

Earnings per share

AED m

0.170

Gross profit

AED m

14.5%
5,069
2018
5,069
2017
4,426

2018 dividend*

AED m

1,470

2018 dividend per share

AED m

0.1176

EBITDA

AED m

21.6%
2,774
2018
2,774
2017
2,281

Net cash generated from operating activities

AED m

4,914

Return on equity

 

59.3%

*Includes an AED 735 million (AED 0.0588 per share) dividend approved by our Board of Directors that will be submitted for ratification at our 2019 Annual General Meeting of Shareholders.

Operational Highlights

We recorded numerous significant achievements during 2018, most notably our expansions into Dubai and Saudi Arabia. We opened 17 service stations across the UAE, including our first three locations in Dubai, and opened our first two service stations in Saudi Arabia in 2018.

Our convenience store revitalization program included the opening of 13 Géant Express stores, and the expansion of our Oasis Café bakery and cafe concept, with 12 outlets open by year-end.

Fuel volumes

Total fuel volumes sold in 2018 amounted to 9.61 billion liters.

Domestic expansion

Our retail network grew to 376 service stations across the seven emirates of the UAE during the year, including our first three locations in Dubai.

Retail transactions

The number of fuel transactions in 2018 was 167.8 million, while nonfuel transactions totaled 42.7 million.

International expansion

We opened our first two service stations in Saudi Arabia during 2018, and signed a memorandum of understanding for the marketing and distribution of our lubricants in India.

Customer service

We launched ADNOC Flex, which offers customers the option of premium and self-service refueling, a first for the UAE.

Rental properties

Occupancy at our rental properties increased by 36.5 percent in 2018, the seventh successive year of growth. We have continued to transition our tenancy business to a revenuesharing model to maximize revenue and profitability.

Smart technology

We significantly expanded customer adoption of our Smart Tag technology, a world-class payment option that enables customers to refuel and pay without using cash or bank cards.

Energy management

We were awarded the ISO 50001 certification for our Energy Management System (EnMS).

Chairman's Message

EMBRACING CHANGE AND
FOCUSING ON OUR CUSTOMERS AND GROWTH

Our Annual Report this year sets out how ADNOC Distribution is embracing change, with particular emphasis on improving the customer experience, and our expansion into new markets.

The successful IPO of ADNOC Distribution in December 2017 marked the beginning of significant transformation for our business into a more commercially minded, performance-driven and growth-orientated organization.

Our Annual Report this year sets out how ADNOC Distribution is embracing change, with particular emphasis on improving the customer experience, and our expansion into new markets. Our continued growth across all seven emirates of the UAE, our entry into promising growth markets for retail fuel, and the signing of agreements to distribute our lubricant products in new markets are all indicative of this new approach.

In 2018, we made significant progress across all three pillars of our strategy: fuel, non-fuel, and cost efficiency. Our continued focus on customer satisfaction and financial performance has generated positive results, reinforced by greater fuel offerings and service, an enhanced convenience store experience, and improved service quality.

In this context, our 2018 financial results are very encouraging. Net profit surged by 18 percent to AED 2.13 billion, or AED 0.17 per share, and earnings before interest, tax, depreciation and amortization (EBITDA) increased by 21.6 percent to AED 2.77 billion. Net cash generated from operating activities grew by 45.3 percent to AED 4.91 billion, driven by strong cash flow from operations and proactive working capital management.

My fellow board directors, the executive management and I thank our customers, our partners, and our colleagues for their support. The Company’s progress to date is founded on these relationships, and on a collective willingness to improve and advance our business.

We enter 2019 with renewed determination to grow and progress. As the nation’s fuel provider of choice, our heritage demands nothing less than maximum effort to achieve our objectives, whether in redefining the retail customer experience, or as a trusted commercial partner to world-class companies.

The ADNOC Distribution brand enjoys widespread trust and respect. I am confident in our ability, now and in the future, to help sustain that reputation.

Dr. Sultan Ahmed Al Jaber

Chairman

CEO’s Message

DELIVERING ON OUR BUSINESS
PLAN COMMITMENTS FOR 2018

Tackling costs, managing operating expenses and capital expenditure, and improving efficiency have also been critical to our 2018 performance. We accelerated our cost-efficiency programs and prudently managed expenses.

Our 2018 results confirm our ambition to sustain strong financial performance – through operational excellence, greater fuel offerings, an enhanced convenience store experience and premium customer service.

We have been successful in fulfilling the promises made at the time of our IPO.

Our recent entry into Dubai and Saudi Arabia is our opportunity to showcase to customers in these markets our great service and products. This is just the beginning of our move into Dubai and Saudi Arabia, with further expansion to come as we strengthen our presence across the nation and look to expand internationally.

The launch of ADNOC Flex, our premium and self-service fueling offer, was a significant initiative during the year, and our convenience store revitalization led to a double-digit increase in average transaction size. The success of our new partnership with Géant is another measure of our progress towards achieving our strategic objectives, with 13 Géant Express stores opened by year-end.

Tackling costs, managing operating expenses and capital expenditure, and improving efficiency have also been critical to our 2018 performance. We accelerated our cost-efficiency programs and prudently managed expenses. This initiative will continue in 2019.

In the short to medium term, we remain focused on a number of growth initiatives. Our ambition is to transform ADNOC Distribution into a more performance-driven and commercially minded business through our disciplined and return-driven capital allocation strategy.

Longer term, we are positioning the Company in line with the Abu Dhabi Economic Vision 2030. The energy landscape is changing dramatically, so making the Company fit for purpose for the next stage in its evolution – and 20 to 30 years beyond that – is already under way.

We appreciate the trust our customers and shareholders continue to show in us. Our ongoing mission is to repay that trust by harnessing our unique market position to provide a world-class customer experience, to create and deliver value, and to meet the challenges ahead with creativity and resilience.

Eng. Saeed Mubarak Al Rashdi

Acting Chief Executive Officer

Deputy CEO’s Message

Our ambition is to transform ADNOC Distribution into a more performance-driven and commercially minded business through our disciplined and return-driven capital allocation strategy.

We expect to accelerate our Dubai expansion during 2019 and continue to grow in Saudi Arabia.

We began 2018 with an ambitious agenda for regional and international expansion, as well as becoming a more cost-efficient organization. The challenging priorities we set ourselves – those that offered the greatest payback in transforming our business – have helped us to meet and exceed our business targets.

Last year we promised to grow across the UAE, including entering Dubai, and to expand into the Saudi Arabian market – with a target to open a total of 10 to 12 service stations during the year. I am pleased to report that we exceeded that promise and are confident of maintaining our momentum. We expect to accelerate our Dubai expansion during 2019 and to continue to grow in Saudi Arabia.

We also prioritized the need to become more customer- and market-focused in our commercial operations, and to enhance our operating margins. Significant progress has been made on both fronts.

In our non-fuel business, we have delivered growth through an improved product range, store revitalizations, and our partnership with Géant. We believe that the improved customer experience we are creating will deliver continued momentum in this business.

While the Company will continue to expand in the UAE, especially in Dubai, we are also pursuing opportunities internationally. With the size of the Saudi Arabian market being three times that of the UAE, we have ample scope for significant growth there. Our entry into the Indian lubricants market also holds great potential.

Overall, we can look forward to capitalizing on the opportunities we have created, as well as continuing to grow in our traditional network. Our leadership is strong and we have built capabilities throughout the organization. The Company is more rigorous and willing to adapt, leaving us well-positioned to build on the successes of the past year.

John Carey

Deputy Chief Executive Officer