Strong earnings for VR Group - EUR 100 million dividend to state
- The Group's comparable turnover fell 2.3 per cent
- The Group's operating profit was EUR 90.4 (70.6) million
- VR Group's Board proposes paying a dividend of EUR 100 million to the state
- Turnover and profit in passenger traffic reflects a changed market situation
- Operating profit and market share of VR Transpoint grew
- VR Track considerably improved profitability
"The result of VR Group was strong in 2014 in spite of a challenging economic situation. In spite of the decline in turnover it was possible to improve profitability thanks to cost-effectiveness", says President and CEO of VR Group Mikael Aro.
"Increasing turnover is very challenging in the current economic situation and under conditions of tougher competition. The situation of VR Transpoint looks especially weak early in the year, and we have already taken measures to adjust. I expect our operating profit to weaken this year", Mikael Aro observes.
The year 2014 was a time for big investments and improved efficiency for VR Group. The funding of investments requires sufficient results from business operations, as well as greater efficiency from the whole group. In passenger transport, commuter services were formed into a separate profit centre. Finrail Oy, which is responsible for traffic control, passenger information, and planning services, was separated from the VR Group to form an independent state-owned company as of 1.1.2015.
Extensive measures to improve profitability, which were announced in May 2013, led to improvements in efficiency worth EUR 16 million by the end of 2014. The number of personnel committed to railway activities is expected to decline permanently by 10 per cent. This is to be achieved by boosting efficiency and by taking advantage of the upcoming retirement of large numbers of personnel. In a few years 1,700 people will retire from the group, and about 1,000 new employees will be recruited to replace them. Over the year an average of 9,689 persons worked at VR Group (10,234 persons in 2013).
A good economic result
The comparative turnover of VR Group declined from the previous year, but the operating result improved. Turnover improved for VR Transpoint and VR Track, and passenger transport reached the levels of the previous year.
The group's turnover in 2014 was EUR 1,3672.2 million (EUR 1,437.8 million in 2013). Comparability with the previous year is weakened by the sale of Corenet. The comparable turnover declined by 2.3 per cent from 2013.
The Group's turnover was EUR 90.4 (70.6) million and profit for the fiscal year was EUR 67.6 (65.3) million. Turnover of the fiscal year includes profits on the sale of property, whose impact on operating profit was EUR 23.9 (19.0) million. Operating profit excluding non-recurring items improved over 2013 mainly thanks to measures to improve efficiency.
For 2014 the Board of the VR Group proposes a dividend of EUR 100 million. In 2013 the VR Group paid EUR 30 million in dividends. The VR Group is a 100 per cent state-owned company.
Fewer passengers in long-distance services
Turnover in passenger transport fell under last year's level. The development was affected by the overall economic situation, weakened employment, and tougher price competition in long-distance services. In the early part of the year, services to Russia continued their strong growth, but from the spring, passenger numbers for Allegro showed a clear decline with the weakening of the rouble.
Turnover for the whole year was EUR 566.3 (568.0) million. Turnover declined 0.3 per cent over the year, which includes a 3.4 per cent fall in turnover for train transport, and a 20.1 per cent increase in bus transport. The growth in bus services also reflects the success in a bid for tenders for local transport in the Helsinki region. Operating profit for passenger transport was EUR 32.8 (33.2) million.
A total of 103.9 million trips were made in passenger services in 2014, amounting to an increase of 5.6 per cent in comparison with the previous year. There was a clear decline in the number of trips taken by train: in long-distance services 12.9 (13.6) million journeys were made and 55.4 (55.8) million in commuter services. In road transport 35.6 million journeys were made, which is 22.5 per cent more than in the previous year.
Rail logistics continued to increase its market share
Turnover for VR Transpoint was EUR 435.3 (441.9) million, and it declined by 1.5 per cent from 2013. Operating profit for VR Transpoint was EUR 24.9 (13.0) million.
Total transport remained at the same level as the previous year, totalling 42.2 million tonnes. Total volume of rail logistics was 37.0 million tonnes, increasing by 1.8 per cent from the previous year. The amount of domestic transport remained nearly unchanged, eastern transport grew by 4.7 per cent. The market share of rail logistics reached 28.2 per cent in 2013 and the increase in total volume means that the market share continued to grow in 2014.
Turnover in railway logistics grew by 0.8 per cent, but turnover in road services declined by 8.3 per cent over the previous year.
VR Track improves profitability
The turnover of VR Track was EUR 314.0 (340.3) million, going down by 7.7 per cent from 2013. Turnover went down especially in construction. This was mainly the result of a decrease in government funding of track maintenance and increased competition. Growth in Swedish operations continued.
VR Track's operating profit was EUR 17.3 (8.3) million. Profitability improved in nearly all business operations. Machinery business operations split off to form a separate business operation in early 2014.
The Group’s total capital expenditure in 2014 amounted to EUR 169.0 (185.2) million. Leasing agreements amounted to EUR 47.7 million of overall investments. The largest investments, EUR 102.9 (84.0) million, were made in rolling stock. IT investments totalled EUR 21.2 (14.3) million and EUR 15.4 (55.7) million were invested in repairs to buildings. The Group’s liquidity remained good throughout the period.
The Group's liquidity remains strong. Funding of future investments into equipment and payment of dividends will reduce cash reserves in coming years. The Group's equity ratio was 71.6 per cent at the end of the year and without long-term leasing responsibilities, it was 82.5 per cent. The equity ratio is also expected to decline.
The financial statements and the Group Annual Report will be published on VR Group's website in March.