Improvement seen in all operating, financial and sustainability indicators. These results, which exceeded expectations, crown a path of development that has led the multi-utility to quintuple its EBITDA over its 15 years of operations. Proposed dividends rise to 9.5 cent/share.
Financial highlights
- Turnover at € 6,136.9 million (+10.3%)
- EBITDA at € 984.6 million (+7.4%)
- Net profits at € 266.8 million (+21.1%)
- Net debt improves, coming to € 2,523.0 million
- Proposed dividends rise to 9.5 cent/share
- S&P rating: BBB with positive outlook
Operating highlights
- Contributions to growth come from all business areas, in particular free market activities, such as the Electricity and Waste
- Benefits derive from recent Group acquisitions in liberalised waste management and energy markets (most notably Aliplast)
- Further reinforcement of the energy customer base, reaching 2.4 million users, thanks to marketing operations, recent acquisitions and the tender awarded for safeguarded services
- Improvement in all sustainability indicators, with 2017 shared value EBITDA rising by 10% to € 329 million
Today, the Hera Group’s Board of Directors unanimously approved the consolidated financial results at 31 December 2017, along with the Sustainability Report.
All operating, financial and sustainability indicators improve, crowning 15 years of uninterrupted growth
The 2017 financial year closed for the Hera Group with results higher than expected, and with all operating, financial and sustainability indicators showing clear improvement over 2016. These particularly positive results, in line with the content of the Business Plan to 2021, confirm the validity of the company’s multi-business strategy, which allows it to successfully balance regulated and free-market activities, in addition to maintaining a sustainable risk profile. The combination of two fundamental levers, internal growth and external development, furthermore permitted the Group to achieve continued growth, which resulted from factors including its ability to foresee and grasp the best opportunities in an increasingly challenging regulated and free-market scenario, whose models for future development continue to evolve.
These results represent the culmination of a path that has led the multi-utility to achieve significant goals over its 15-year lifespan: from a quintupled EBITDA to almost eight times the amount of net profits (compared to 2002), only to mention a couple, without counting the 25 acquisitions brought to completion, which have produced considerable synergies.
Moreover, the results reached confirm the Group’s constant pursuit of objectives involving all aspects of sustainable development: environmental, social and economic. A 10% rise in shared value created was in fact seen in 2017, through activities that meet the UN Agenda’s drivers for sustainable development and the goals defined by various levels of government.
In line with this perspective, the Group is now part of international programs such as the CEO Water Mandate and the Ellen MacArthur Foundation’s CE100, a network made up of the world’s 100 companies most committed to the transition towards a circular economy.
EBITDA for Gas, which includes services in natural gas distribution and sales, district heating and heat management, rose to € 301.7 million, fundamentally in line with the € 300.6 million seen in 2016.
This result was obtained mainly thanks to internal growth, with positive contributions coming from the management of distribution and sales activities, an expanded customer base, the positive trend seen in prices and higher volumes of trading. These positive results proved more than able to offset lower earnings in district heating. The results were also sustained by the acquisition of the Abruzzo company Verducci Servizi and the default gas service, which allowed volumes sold to increase, with the number of customers rising to roughly 1.4 million (+14,900 customers), to which sales activities and customer loyalty programs also contributed.
Net investments in Gas exceeded € 100 million in 2017, with a € 6.2 million increase compared to 2016, mainly destined to non-recurring maintenance on networks and plants and the large-scale meter substitution introducing new-generation devices and making the networks smarter.
The gas business accounted for 30.6% of Group EBITDA.
The integrated water cycle, which includes aqueduct, purification and sewerage services, recorded an EBITDA of € 229.9 million, showing a slight growth over the € 228.8 million seen in 2016, thanks to higher regulated revenues and operative efficiencies, which offset the lower revenues for new connections. Owing to the high level of service quality, moreover, the corresponding bonuses were granted by the Authority.
Net investments in the integrated water cycle amounted to € 113.1 million. Including capital grants, investments in this area came to € 156.6 million (up compared to the € 131.8 million seen in 2016), of which € 63.8 million in the aqueduct, € 42 million in sewerage and € 50.8 million in purification.
The integrated water cycle business accounted for 23.3% of Group EBITDA.
EBITDA for Waste, which includes waste collection, treatment and disposal services, settled at € 246.0 million, growing by 6.6% over the € 230.7 million recorded in 2016. This positive result is due to both changes in the scope of operations, with the 2017 acquisitions of the Aliplast Group and Teseco, which gave an important impulse towards a circular economy and the management of industrial waste, and internal growth sustained by higher volumes of market waste treated and a positive trend in prices.
This allowed the loss of incentives concerning the Isernia plant and a few non-recurring entries to be offset, the latter mainly involving a temporary halt in some WTE plants (in the first part of the year) and costs for demolition in the S. Agata Bolognese site, where one of Italy’s first plants for bio-methane production is now in the advanced stages of construction, which will become operational within 2018.
Good results were also seen in the area of sorted urban waste collection, which rose to 57.7%, compared to the 56.4% seen in 2016, thanks to a range of projects implemented across all areas served.
The waste management business accounted for 25% of Group EBITDA.
Electricity, which includes services in electricity production, distribution and sales, recorded an EBITDA of € 184.5 million, with a sharp improvement compared to the € 135.3 million recorded in 2016 (+36,4%), thanks to activities in trading, higher income in production and in free market and safeguarded market sales. The number of electricity customers is now over 980,000 (+9% compared to 2016), thanks to reinforced marketing operations and the larger customer base deriving from the tender awarded for safeguarded services.
The amount of Group EBITDA accounted for by the electricity area rose to 18.7%.
"The results reached allow us to draw a few conclusions as to the path of growth followed by Hera over these first 15 years of its history: an operating performance that clearly shows through in Group EBITDA, which has quintupled compared to the one seen in 2002, without counting the positive effects of financial and fiscal management, which in turn bear witness to an even more considerable growth, given that 2017 net profits reached 7.8 times those recorded in 2002. Opportunities for internal and external development (with 25 companies acquired over the years) have led not only to an increase in size, but above all to higher efficiencies and productivity, as is proven by EBITDA per employee, which has virtually tripled. The central role given to creating value for our shareholders has also been confirmed: on the basis of the results reached, we will put to the Shareholders Meeting a dividend of 9.5 cents/share, up 5.5% compared to the dividend paid in 2016 and in line with the policy communicated last January. The return implied by this dividend would thus come to 3.3% and, considering the 32.8% rise in the price of Hera stock seen over 2017, the overall return for shareholders will exceed 36%."
"The 2017 results confirm the validity of our actions in financial planning and management, to the point that they have already allowed us to lower our debt more than was expected. The substantial improvement in operating and financial indicators, furthermore, was accompanied by excellent working performances, confirming the quality of the business initiatives deployed to achieve a long-lasting and sustainable growth. Even the targets met in terms of higher creation of shared value allow us to affirm that 2017 was, for us, an important milestone along our path of growth and, in various senses, represented a new starting point to give an effective response and a tangible contribution to the noteworthy challenges that lie in the future."
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