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Message from the Executive Chairman

“The consolidated operating results for the first half of 2020, with main operating-financial indicators improving, confirm the positive growth trend and reflect our effective business model."
 

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Message from the CEO

"The solid economic and financial performance of the first semester was achieved thanks to changes in the scope of operations which, along with many measures introduced to enhance efficiency, allowed Hera to keep growing, above all in the energy areas."

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MESSAGE FROM THE EXECUTIVE CHAIRMAN

“The consolidated operating results for the first half of 2020, with main operating-financial indicators improving, confirm the positive growth trend and reflect our effective business model.

We are satisfied with our ability to protect these half-year results from the negative impact of the Coronavirus emergency. Continuing efforts will be made in pursuing growth during the second half of the year as well, in line with the targets set out in our Business plan, hoping that the external context also moves in the direction of a complete recovery.

Our solid growth levers (internal growth and M&As) have allowed us to continue creating value for our shareholders, by paying more than 160 million euro in overall dividends in early July, entirely covered by the cash generation achieved over the period.”

 

Tomaso Tommasi di Vignano
Executive Chairman

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MESSAGE FROM THE CEO

“The solid economic and financial performance of the first semester was achieved thanks to changes in the scope of operations which, along with many measures introduced to enhance efficiency, allowed Hera to keep growing, above all in the energy areas.

Thanks to the numerous initiatives introduced and our growth strategy, we have succeeded in containing the negative financial impact of the Coronavirus emergency within the limit foreseen, at the same time confirming our profitability and financial solidity, as witnessed by the positive figures in the income statement and the decreased net financial position.

In addition to meeting our commitments with shareholders and providing continuity in all main services, producing positive effects for our network of service suppliers as well, this solidity allowed us to sustain our stakeholders experiencing difficulty, including customers and suppliers, confirming our close relations with local communities.”

Stefano Venier
CEO

Highlights

Benchmark

  • REVENUES MLN €
  • EBITDA MLN €
  • EBIT MLN €
  • NET PROFIT MLN €
  • NET FINANCIAL POSITION MLN €
  • DEBT/EBITDA (x)
  • KPI - GAS SALES(MLN MC)
  • KPI - WATER SUPPLIED (MLN MC)
  • KPI - WASTE TREATED ('000 TON)
  • KPI - ENERGY SALES (GWh)

Analyst

ESG Coverage

  • ESG coverage

     

  • ESG coverage

     

Economic data

  • RESULTS IN BRIEF


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Summary Report

Estimates

  Consensus Hera's results Δ %
Ebitda (mln €) 559.1 559.7 +0.1%
Ebit (mln €) 290.7 295.7 +1.7%
Net profit post min. (mln €) 161.7 166.2 +2.8%
Net Financial Position (mln €) 3,187.3 3,083.6 (3.3%)

Target Price

    Preview Post Results
Analista Broker Rating Target Price (€) Rating Target Price (€)
Emanuele Oggioni Banca Akros Buy 3.90 Buy 3.90
Roberto Ranieri Banca IMI Buy 4.70 Buy 4.70
Roberto Letizia Equita Sim Buy 3.80 Buy 3.80
Dario Michi Fidentiis Hold 4.20 Hold 4.20
Federico Pezzetti Intermonte Outperform 4.20 Outperform 4.20
Claudia Introvigne Kepler Cheuvreux Hold 3.50 Hold 3.50
Enrico Bartoli MainFirst Neutral 3.60 Neutral 3.60
Javier Suarez Mediobanca Outperform 4.00 Outperform 4.00
    Media 3.99 Media 3.99

 

Summary Report

Broker Analysts' comments on financial results
Banca Akros "The H1 results were in line with our forecast and defitely resilient. We welcome this set of results, which were positive thanks to the management's effective measures to limit the impact of the lockdown on operating costs, the regulated business exposure and the positive contribution from the change in scope of consolidation due to the Ascopiave deal in 2019. The decrease in Net debt was definitely better than our forecast, despite higher investiments. The H1 results show Hera's business resiliency. We confirm our full-year estimates and our positive stance on the stock."
Banca IMI "Results were positive and broadly in line with our estimates and consensus, well on track with our FY20E estimates. The company financials showed resilience to the negative effect of the lockdown. We expect Hera could continue to exploit significant synergies from Estenergy going forward, with a positive impact on financials."
Equita Sim "Positive quarter for Hera, that reported growing numbers thanks to efficiency and M&A. Cash flow, working capital and net debt definitely improved despite Covid impacts. We confirm our annual estimates."
Fidentis "The company's business mix allowed Hera to post better results YoY at an operative level. We continue to appreciate the company's strategy and its short generation position."
Intermonte "Hera reported a positive set of 2Q2020 results that was better than expected at all levels, with Ebitda 1.6% above estimates and a bottom line that also benefited from lower D&A and provisions. Net Debt was also better than expected despite a larger amount of Capex. We continue to like Hera as we believe that the group is well positioned to benefit from the growth of the Energy supply customer base and its leadership in the Waste business, as well as slow-but-sure market consolidation. The slowdown in economic activity generated by the coronavirus emergency has clearly affected all companies; still, we expect the group to be able to continue to show above-average resilience and would take recent weakness in the share price as a buying opportunity."
Kepler Cheuvreux "Q2 results came out better than our estimates, on all lines, showing the resilience of the company during Covid-19 emergency. The best number, compared to the other Italian utilities, is the net debt, down 5% QoQ with a positive impact of working capital management."
MainFirst "In our opinion, Q2 results confirmed the solidity of Hera's business model even in the very difficult business environment due to the Covid emergency. The company offers solid low-risk value creation thanks to strategic consistency and management stability."
Mediobanca "Results showed Hera's solid resilience: Ebitda grew by +2.5% thanks the contribution of Estenergy and the better performance of the electricity business. What we see remarkable is the solid CF generation, that has to do with strong billing, and the comment from the management team that they do not see the need to increase the overall level of provisions for bad debt. We stay Outperform."

Areas of activity

Total EBITDA Group 559.7 mln €, + 2.5% vs. 1H'19

 

 

 

 

The Hera share

Share performance and investor relations

The first half of 2020 was deeply affected by the worldwide spread of the Covid-19 virus, which led most governments to introduce unprecedented measures in social distancing, with extraordinarily negative implications for economic activity.

From late February to the end of the half-year, even though the context was marked by volatility in share prices, Hera stock showed greater resilience and endurance than other local utilities (-17.2%) and the market as a whole (-17.5%), confirming the Group’s low beta (volatility index) and the solidity of its economic fundamentals, as recognised by investors.

 

Share performance

FOCUS ON SUSTAINABLE MANAGEMENT

Hera is keeping its track of sustainable development, on the road to 2030, by actively managing also environmental, social and governance issues, despite the uncertainty of current times.
Following the coronavirus pandemic new challenges emerged and the Group is facing them as a sustainability-focused stimulus for a further growth, pursuing a business model that Hera believes is capable of building an even more inclusive economy.
Here are three updates on the Group sustainable management:

 

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Hera 4
shareholders

The first six months of this year have been quite intense for Hera stock, communications with shareholders, shareholder return and changing perspectives on the Group’s future development.
 

Hera’s stock opened the year at 3.90€, mainly underpinned by the +50% total shareholders return reached in 2019, and increased to 4.45€ by mid-February, just before the coronavirus hit Italy. This rise was largely supported by the announcement of the new business plan to 2023, which projected an increase in all economic and financial targets, along with all main KPIs, expected to reach the Goals set by international standards to 2030. The M&As finalised in 2019 and the Group’s sound financials provided a solid platform for the future Plan.

A long roadshow in Europe and the US to present the new Business Plan and hold discussions with investors was underway when the Covid-19 pandemic struck, interrupting meetings scheduled with Scandinavian investors. Communications were in any case pursued through video and conference calls, set up by brokers as well during their annual conferences, allowing Hera to meet, all in all, about 100 investors during the first 2 months on the year.

Despite the lockdown due to Covid-19, the Group continued to guarantee 100% of its primary services, introducing new measures and organizational changes in order to guarantee appropriate health and safety conditions for all stakeholders. A redirection of activities, still in line with the business plan, intended to minimize the impact and to maintain prospects for growth in economic figures for 2020, was promptly implemented.

 

 

Continuous communication with shareholders helped keep a close view of how the Covid-19 emergency progressed. This has proven, so far, to impact on Hera as forecasted (or below forecast) and, in some cases, even to impact positively. Furthermore, it was reassuring to note the emergency’s negligible impact on the health of people working in and with Hera.

The Annual General Meeting was held respecting the usual calendar (late April), which approved the good results for 2019 and renewed the Board of Directors, with the Executive Chairman and CEO fully confirmed, assuring stability/continuity in Group governance. Furthermore, the AGM approved the dividend payments promised in the Business plan to 2023, resolved to implement bylaws allowing the less represented gender to increase to 40% of the BoD, and approved the remuneration report, supported by a large majority and a few proxy advisors.

The conference call on the performance achieved in 1Q 2020 (showing positive growth in all main economic figures and stronger financial leverage), with Borsa Italiana and other broker conferences, as well as EticaNews Labs, gave us a further opportunity to discuss sustainability issues with investors. The progress made in several of the Group commitments was highlighted, which has not suffered delays due to the emergency, and has underpinned the increase of “green” investors in Hera.

The Group’s fundamentals and financial strength were confirmed by the first-half results, once again offering visibility on the sustainability of a 10-euro cent/share dividend payment, in line with last year’s DPS and the planned targets. This offers solid ground for the prospects for growth in the annual results for 2020.

 

HERA 4 SHAREHOLDERS

 

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Behind ESG performance:
the accountability

Hera has opted to embrace a new approach to sustainability and accountability.

 

Three years ago, the Group implemented the Porter and Kramer approach to Creating Shared Value, measuring the amount of Ebitda and investments closely related to development activities that satisfy all main stakeholders. This includes “future generations”, through initiatives that bring emissions and the use of the planet’s resources to zero. An effective approach, that moves in the direction of the principles set out by the United Nations and Europeans commitments and laws guaranteeing a sustainable future for our planet.

This way of approaching ESG performance and its accounting has uniformed our strategic planning and internal business control activities, causing a profound change in our organizational procedures.

Efforts are still being made to evolve further. ESG performance accountability is the focus of every company, since it is “the" issue of the current period, in which stakeholders are increasingly searching for third-party reassurance/verification and increasingly in-depth benchmarking possibilities. Furthermore, international players and institutions are developing new criteria and standards that completely change the world of accountability. This challenges companies to change the KPIs they monitor, how they represent them and the degree of external verification needed.

 

 

Hera is currently engaged in working out the changes to be introduced in order to develop the accountability of ESG KPIs and related targets to 2030, in compliance with TCFD criteria and standards.

One of the main issues involves working out a scientifically based methodology for setting future targets, and reporting in a different way on the risks and opportunities emerging from the scenario, meeting all criteria now required to obtain the best certifications.

Other projects, such as developing an internal carbon pricing model and adapting the organisational procedures used in defining investment and capital expenditure prioritization, are currently being worked out. The assistance of consultants will help implement an effective model, capable of increasing KPIs and performances.

This year’s Covid-19 emergency has shown how effective Hera’s risk management is. Procedures and tools were introduced to face certain risks once analysed, and it was partially applicable to a different and unexpected emergency such the one caused by the virus. This has unquestionably helped maintain a solid commitment towards all our targets, including those concerning ESGs, and continues to represent a solid point of reference for all our main stakeholders. Clients, suppliers and employees, as well as the reference areas, which is one of Hera’s most fundamental stakeholders, have been supported by the Group and have furthermore underpinned the positive results achieved by Hera in 2020 as well.

Improving year by year is the battle cry in ESG issues, at a time when standardised methods and criteria still do not exist; an effort must be made to maintain full transparency with all parties in contact with the Group.

 

Behind ESG performance: the accountability

 

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2020 growth perspectives despite Covid-19

Risk management has proven to be the most important issue for all companies this year, given that the disruptive impact of Covid-19 has put business continuity in serious danger.

In first quarter of this year, the emergency occurred during the month of March. Hera soon implemented the measures defined by the emergency committee, yielding good results in protecting people’s health and safety, alongside service continuity, maintained at close to 100%. The results reported highlight positive growth in all main economic lines, fully compensating the lockdown’s negative effects by way of organic growth and M&As, giving continuity to the Group’s long track record of growth. The impact on working capital was negligible and financial leverage closed the period with a further reduction, reaching a 2.4x Debt/Ebitda.

This outcome supports the Group’s decision to propose and approve the distribution of dividends as expected and promised in the business plan to 2023, discussed at the beginning of this year during a long roadshow with investors. The AGM renewed (once again) the mandate (for 3 further years, through to 2023) to both executive members of the Board of Directors (Mr. Tommasi and Mr. Venier), who have been in Hera since 2002.

In the second quarter of this year, the lockdown lasted for two full months and the post-lockdown phase is still not fully in stride compared to the pre-lockdown period. The months of April and May saw demand decrease, peaking at minus 25% both in commodities and industrial waste treatment, that came progressively back to normal in the month of June. Year-to-date, the volumes recorded have reached 90% of the pre-lockdown figures and the first-half results show positive growth in all P&L main lines, down to the bottom, with financial leverage also improving. The main drivers underpinning this positive growth came from M&As and internal growth factors; these are the same drivers that have maintained growth un-interruptedly positive for over 17 years.

 

 

Hera has managed the post-lockdown phase by giving high attention to the health and safety of its personnel (about 50% of personnel is still in smart working and will continue until year-end). Indeed, thanks to measures promptly adopted by the company, employee’s health impact within Hera have remained at a very comfortable level (well below the data recorded in reference territories).

The Group’s business model and business mix have once again proven their resilience to external turbulence, even during this global event, thanks to factors including the strategic priority given to risk management, confirmed in the latest strategic plan to 2023. The prospects for growth to 2023, described in the business plan, as well as for the 2020 annual results, have been confirmed by top management.

Hera is approaching its 18th birthday in November 2020, and now shows full maturity in its balances together with a strong awareness of its responsibility in social and environmental issues, that has recently been rewarded, when the Group was included within the FTSE4Good index in late June.

 

2020 growth perspectives despite Covid-19

 

Financial results

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Overview of operating and financial trends

Operating APMs and investments

 

Operating APMs and investments (mn€) June 20 June 19 Abs. change % change
Revenues 3,402.3 3,371.6 +30.7 +0.9%
Ebitda 559.7 545.9 +13.8 +2.5%
Ebitda/revenues 16.5% 16.2% +0.3 p.p.  
Ebit 295.7 288.9 +6.8 +2.4%
Ebit/revenues 8.7% 8.6% +0.1 p.p.  
Net profit 174.9 173.9 +1.0 +0.6%
Net profit/revenues 5.1% 5.2% -0.1 p.p.  
Net investments * 240.6 207.0 +33.6 +16.2%

* for the data used in calculating investments, see notes 14, 16, 17 and 18 of the explanatory notes and paragraph 1.03.03 of the directors’ report.

Financial APMs

 

Financial APMs (mn€) June 20 Dec 19 Abs. change % change
Net non-current assets 6,893.2 6,846.3 +46.9 +0.7%
Net working capital (172.3) 87.0 -259.3 -298.0%
Provisions (638.7) (649.1) -10.4 -1.6%
Net invested capital 6,082.2 6,284.2 -202.0 -3.2%
Net debt (3,083.6) (3,274.2) -190.6 -5.8%

 

 

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Operating and financial results

Resilience and growth in results

The Hera Group closed the first half of 2020 with improvement over the same period of the previous year in its main operating results. Ebitda settled at 559.7 million euro, up 2.5%, while Ebit came to 295.7 million euro, up 2.4%, and net profits amounted to 174.9 million euro, up 0.6%. Net debt settled at 3,083.6 million euro, falling by 5.8% compared to 2019, owing to the Group’s solid asset structure and a good trend in cash flow.

The Ascopiave partnership, along with other operations in external growth, which will be discussed below, alongside internal growth, were the main factors responsible for the results achieved by the Hera Group in the first half of 2020. These actions allowed the effects of the mild temperatures seen in the first quarter of 2020 and those linked to the Covid-19 emergency to be contained. The Group’s multi-business industrial strategy, which balances regulated and free market activities, continues to be a considerable strong point, demonstrating the Group’s resilience even at a very difficult moment such as the present.

The main corporate and business operations having an effect on the first half of 2020 are as follows:

  • On 17 July 2019, Herambiente Spa acquired the entire shareholding of Pistoia Ambiente Srl, which manages the special waste landfill located in the Municipality of Serravalle Pistoiese. This company was consolidated with operating and financial effects as of 1 July 2019.
  • Hera Comm Spa was awarded, through a tender and for the period from 1 October 2019 to September 2020, four portions of the last resort gas service (for customers who offer public services or do not have a supplier) and two portions of the default gas distribution service (for customers in arrears).
  • On 19 December 2019, with the finalised closing of the corporate transaction between the Hera Group and the Ascopiave Group, the following transactions were completed: shareholdings in the companies Ascotrade Spa, Ascopiave Energie Spa, Blue Meta Spa, Etra Energia Srl, Asm Set Srl and Hera Comm NordEst Srl were transferred to Estenergy Spa, a company controlled by Hera Comm Spa; the shareholding in the company Amgas Blu Srl was transferred to Hera Comm Spa; shareholding in the company AP Reti Gas Nord Est Srl was transferred to Ascopiave Spa. Furthermore, AcegasApsAmga Spa’s Gas Distribution branch concerning the Padua 1, Padua 2, Udine 3 and Pordenone Atems, effective as of 31 December 2019, was transferred to AP Reti Gas Nord Est Srl. For further information, see paragraph 1.03.01.
  • On 30 March 2020, AcegasApsAmga Servizi Energetici Spa acquired 9.72% of Hera Servizi Energia Srl from a third-party shareholder. The percentage of control held in the latter company went from 57.89% to 67.61%.
  • On 31 January 2020, Hera communicated its acquisition from the Amber fund of 2.5% of the share capital of Ascopiave, increased to 2.9% during the following months through purchases on the market. On 18 June 2020, Hera communicated its acquisition from A2A of a further 2% of the share capital of Ascopiave, bringing its overall shareholding to 4.9%.

The acquisitions of Pistoia Ambiente Srl, the Gaggio Montano plant in the waste management area, the companies involved in the Ascopiave transaction and the transfer of the gas distribution branch are considered hereinafter as changes in the scope of operations.

Results confirmed

The following table shows operating results at 30 June 2020 and 2019:

Income statement
(mn€)
June 20 % inc. June 19 % inc. Abs. change % change
Revenues 3,402.3   3,371.6   +30.7 +0.9%
Other operating revenues 222.6 6.5% 249.0 7.4% -26.4 -10.6%
Raw and other materials (1,605.1) -47.2% (1,699.2) -50.4% -94.1 -5.5%
Service costs (1,151.0) -33.8% (1,075.1) -31.9% +75.9 +7.1%
Other operating expenses (32.5) -1.0% (29.8) -0.9% +2.7 +9.1%
Personnel costs (290.9) -8.5% (286.6) -8.5% +4.3 +1.5%
Capitalised costs 14.3 0.4% 16.0 0.5% -1.7 -10.6%
Ebitda 559.7 16.5% 545.9 16.2% +13.8 +2.5%
Amortisation, depreciation and provisions (264.0) -7.8% (257.0) -7.6% +7.0 +2.7%
Ebit 295.7 8.7% 288.9 8.6% +6.8 +2.4%
Financial operations (56.2) -1.7% (44.9) -1.3% +11.3 +25.1%
Pre-tax result 239.5 7.0% 244.0 7.2% -4.5 -1.8%
Taxes (64.6) -1.9% (70.1) -2.1% -5.5 -7.9%
Net profit for the period 174.9 5.1% 173.9 5.2% +1.0 +0.6%
Attributable to:            
Parent company shareholders 166.2 4.9% 166.2 4.9% +0.0 +0.0%
Non-controlling interests 8.7 0.3% 7.7 0.2% +1.0 +13.1%

 

Revenues stable thanks to changes in the scope of operations, which offset lower prices and volumes

Revenues came to 3,402.3 million euro, up 30.7 million euro or 0.9% over the 3,371.6 million euro seen in the same period of 2019. This growth in revenues was mainly sustained by changes in the scope of operations, amounting to 312 million euro. Revenues from activities in trading, generation and electricity and gas distribution fell by roughly 240 million euro, owing to the lower price of commodities and lower volumes sold. Revenues in the heat management and district heating services also fell by roughly 9 million euro. Revenues in the waste management sector also dropped, owing to lower revenues for energy production, linked to the fall in the unitary national price, and lower amounts of waste treated, by roughly 17 million euro. Lastly, revenues from subcontracted works decreased by roughly 10 million euro, partially offset by revenues for works in public lighting coming to 8.7 million euro, no longer recorded as other operating revenues but as revenues.

For further details, see the analyses of each single business area.

Revenues (bn€)
Revenues

 

Other operating revenues dropped compared to the same period in the previous year by 26.4 million euro or 10.6%. This trend is mainly due to the different way of recording public lighting works, as mentioned above, coming to 8.7 million euro, operations leaving the scope of operations coming to roughly 5.0 million euro and the loss of the CEC contribution for two Group plants coming to roughly 3 million euro. Furthermore, lower contributions for energy efficiency certificates amounted to roughly 4.0 million euro, and lower contributions and reimbursements came to a further 5.0 million euro.

 

Fall in costs for raw materials linked to trends in the price of commodities

Costs for raw and other materials fell by 94.1 million euro compared to 30 June 2019, showing a 5.5% drop. This decrease was caused by lower costs due to the price of raw materials and lower volumes of electricity and gas sold, despite the roughly 160 million euro increase in costs owing to changes in the scope of operations.

Other operating costs rose by 78.6 million euro overall (higher costs for services coming to 75.9 million euro and higher operating expenses coming to 2.7 million euro). Not including the changes in scope of operations, which amounted to roughly 110 million euro, note the higher costs for expenses in the ICT area, coming to roughly 6 million euro for the digitalisation and innovation process currently being implemented by the Hera Group. The higher costs mentioned above were more than offset by lower costs for subcontracted works coming to roughly 10.0 million euro, lower costs for volumes transmitted amounting to roughly 6 million euro, lower costs for waste treatment totalling roughly 18 million euro and lower costs for the efficiencies introduced by the Group to counter the ongoing health emergency.

+1.5% increase in the cost of personnel

The cost of personnel rose by 4.3 million euro or 1.5%. This increase is due to changes in the scope of operations coming to 5.5 million euro and the increases in remuneration foreseen by the National labour contract, but was contained thanks to the benefit brought by the large-scale plan for holiday leave adopted by the Group due to the health emergency.

Capitalised costs reached 14.3 million euro at 30 June 2020, falling by 10.6% compared to the same date of the previous year owing to a temporary suspension of works following the health emergency.

Ebitda settled at 559.7 million euro, up 13.8 million euro or 2.5% over the first half of 2019. This growth can be traced to the performance seen in the energy areas, which grew by 15.7 million euro overall, mainly due to the entry of the companies belonging to the EstEnergy Group. The other service area rose by 2.0 million euro. The water cycle area remained constant and, lastly, the waste management area fell by 3.9 million euro. The Covid-19 health emergency impacted all areas in the first half of 2020, with a reduction in margins coming to roughly 30 million euro overall, entirely involving non-recurring effects.

For further details, see the analyses of each single business area.

Ebitda (mn€)
Ebitda

 

Higher amortisation for changes in scope of operations

Amortisation, depreciation and provisions rose by 7.0 million euro, going from 257.0 million euro in the first half of the previous year to 264.0 million euro. This higher amortisation was mainly due to changes in the scope of operations and the higher amounts disposed of in landfills, partially offset by an adjustment carried out during the previous year of in the technical-economic useful lives of assets in the integrated water cycle, in an analysis carried out in collaboration with a company working in asset valuation; following this revision, the amount of amortisation in the integrated water cycle was essentially in line with the rates defined by Arera for the 2020–2023 tariff period. Allocations to the doubtful debt provision dropped in sales companies.

Ebit for the first half of 2020 came to 295.7 million euro, up 6.8 million euro or 2.4% compared to the 288.9 million euro seen in the same period in 2019.

.

Ebit (mn€)
Ebit

Financial operations increase owing to changes in scope of operations

At 30 June 2020, the result of financial operations came to 56.2 million euro, up 11.3 million euro or 25.2% compared to 30 June 2019. This increase is entirely due to higher notional financial charges coming to 11.3 million euro caused by the put option held by Ascopiave SpA for its 48% shareholding in EstEnergy (9.7 million euro) and 3% in Hera Comm (1.6 million euro). The 2.8 million euro in lower profits from joint ventures, mainly involving the consolidation of EstEnergy Spa which in 2019 contributed with 2.7 million euro, also had an effect. This result was offset to an equal degree by the improved debt management with a reduction of the medium and medium-long term rate.

The pre-tax result fell by 4.5 million euro or 1.8%, going from 244.0 million euro at 30 June 2019 to 239.5 million euro for the first six months of 2020.

Tax rate falls

Taxes for the first half of the year went from 70.1 million euro in 2019 to 64.6 in 2020. The tax rate came to 27% and thus improved significantly compared to the 28.7% seen in the first half of 2019. This result was sustained, as in previous years, by the benefits grasped in terms of large and extremely large amortisations, in addition to the tax credit introduced by the 2020 Budget Law, for the significant investments that the Group has continued to make for some time now in moving towards a technological, digital and environmental transformation. To the latter, one must add the “removal” of the balance for 2019 IRAP, in addition to the first deposit for 2020 IRAP, for companies with revenues lower than 250 million euro, introduced by the Relaunch Decree no. 34 of 19 May 2020, later converted into law.

+0.6% Net profit

Net profit thus rose by 0.6% or 1.0 million euro, going from 173.9 million euro in the first half of 2019 to 174.9 million euro for the same period in 2020.

Profits pertaining to the Group amounted to 166.2 million euro, in line with the figure seen at 30 June 2019.

Net profit post minorities (mn€)
Net profit post minorities


 

 

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Analysis of the Group’s financial structure and investments

Group solidity increases

What follows in an analysis of trends in the Group’s net invested capital and sources of financing at 30 June 2020.
 

Investited capital and sources of financing (mn€) June 20 % inc. Dec 19 % inc. Abs. change % change
Net non-current assets 6,893.2 113.3% 6,846.3 108.9% +46.9 +0.7%
Net working capital (172.3) -2.8% 87.0 1.4% -259.3 -298.0%
(Provisions) (638.7) -10.5% (649.1) -10.3% +10.4 +1.6%
Net invested capital 6,082.2 100.0% 6,284.2 100.0% -202.0 -3.2%
Equity (2,998.6) 49.3% (3,010.0) 47.9% +11.4 +0.4%
Long-term borrowings (3,370.1) 55.4% (3,383.4) 53.8% +13.3 +0.4%
Net current financial debt 286.5 -4.7% 109.2 -1.7% +177.3 +162.4%
Net debt (3,083.6) 50.7% (3,274.2) 52.1% +190.6 +5.8%
Total sources of financing (6,082.2) -100.0% (6,284.2) 100.0% +202.0 +3.2%


At 30 June 2020, net invested capital (NIC) came to 6,082.2 million euro, falling by -3.2% compared to the 6,284.2 million euro recorded in December 2019.

The increase in net non-current assets is mainly due to the investments made during the half-year, most importantly the acquisition of 4.9% of the shareholding in Ascopiave Spa which reinforced the partnership initiated in December 2019.

The change in net working capital is mainly due to the increase in debt seen in June for the dividends paid in July 2020 (165.2 million euro), in addition to recurring debts for excise taxes and IVA in line for the reporting period analysed.

Net invested capital (bn€)
Net invested capital


Net investments amount to 240.6 million euro

In the first half of 2020, Group investments amounted to 240.6 million euro, including the 45.5 million euro involved in the acquisition of financial holdings in Ascopiave Spa.

Capital grants totalled 8.1 million euro, of which 6.6 million for FoNI investments, as foreseen by the tariff method for the integrated water service, up 0.4 million euro overall compared to the previous year. Net operating investments came to 195.1 million euro, down 11.8 million euro compared to the previous year.

Total net operating investments (mn€)
 
Total net operating investment


Strong commitment continues to be seen in operating investments in plants and infrastructures

The following table shows a breakdown by business area, with separate mention of capital grants:
 

Total investments(mn€) June 20 June 19 Abs. change % change
Gas area 53.9 52.2 +1.7 +3.3%
Electricity area 21.5 18.8 +2.7 +14.4%
Integrated water cycle area 75.4 74.6 +0.8 +1.1%
Waste management area 21.7 34.7 -13.0 -37.5%
Other services area 3.9 6.4 -2.5 -39.1%
Headquarters 26.8 28.0 -1.2 -4.3%
Total operating investments gross 203.3 214.6 -11.3 -5.3%
Capital grants 8.1 7.7 +0.4 +5.2%
of which FoNI (New Investment Fund) 6.6 6.5 +0.1 +1.5%
Total net operating investments 195.1 206.9 -11.8 -5.7%
Financial investments 45.5 0.1 +45.4 +100.0%
Total net investments 240.6 207.0 +33.6 +16.2%


Including capital grants, the Group’s operating investments came to 203.3 million euro, down 11.3 million euro compared to the previous year, and mainly concerned interventions on plants, networks and infrastructures, in addition to regulatory upgrading involving above all gas distribution, with a large-scale metre substitution, and the purification and sewerage areas.
Remarks on investments in each single area are included in the analyses by business area.
At Group headquarters, investments concerned interventions on corporate buildings, IT systems and the vehicle fleet, as well as laboratories and remote control structures.

Overall, investments in structures dropped by 1.2 million euro compared to the precious year, mainly concerning vehicle fleets and real estate investments, since a few significant interventions on corporate buildings were completed during the previous year.

638.7 million euro provisions

In the first 6 months of 2020, provisions amounted to 638.7 million euro, in line with the figure recorded at the end of the previous year. This result is mainly due to an increase in post-mortem landfill provision adjustments and reinstatements of third party goods, due to the application of accounting standard IAS 37, which offset expenses for usage.

3.0 billion euro equity

Equity fell from 3,010.0 million euro in 2019 to 2,998.6 million euro in June 2020. This change is due to the positive result for the period, coming to 174.9 million euro, offset by the impact of the dividends paid, the use of treasury shares and the decrease in minority interests.

 

 

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Analysis of net cash (net borrowings)

A solid financial position

An analysis of net financial debt is shown in the following table:

mn€   June 2020 Dec 2019
a Cash and cash equivalents 705.5 364.0
b Other current financial receivables 48.0 70.1
  Current bank debt (317.0) (111.5)
  Current part of bank borrowings (55.6) (63.1)
  Other current financial liabilities (75.5) (130.9)
  Current lease payments (18.9) (19.4)
c Current financial debt (467.0) (324.9)
d=a+b+c Net current financial debt 286.5 109.2
  Non-current bank debt and bonds issued (excluding put option) (2,809.7) (2,815.1)
  Other non-current financial liabilities (excluding put option) (26.2) (20.2)
  Non-current lease payments (70.1) (76.1)
e Adjusted non-current financial debt (2,906.0) (2,911.4)
f=d+e Adjusted net financial position (2,619.5) (2,802.2)
g Non-current financial receivables 136.7 135.3
h=f+g Net financial debt (excluding put option) (2,482.8) (2,666.9)
  Nominal amount - fair value put option (459.2) (450.6)
  Net financial debt with adjusted put option (net debt adj put option) (2,942.0) (3,117.5)
  Portion of future dividends – fair value put option (141.6) (156.7)
  Net financial debt (3,083.6) (3,274.2)

 

The overall amount of net financial debt, coming to 3,083.6 million euro, showed a drop of roughly 190 million euro compared to December 2019. The Group’s financial structure at 30 June 2020 shows current debt coming to 467 million euro, of which 55.6 million euro in medium-term bank loans reaching maturity within the year, 75.5 million euro in debts towards other lenders, and 317 million euro in current bank debt. The latter consists mainly of roughly 277.9 million euro in usage of current credit lines and 39.0 million euro in accruals for passive interest on financing. The amount of non-current bank debt and bonds issued remained essentially in line with the previous year. At 30 June 2020, medium- and long-term debt was largely made up of bonds issued on the European market and listed on the Luxembourg Stock Exchange (74% of the total), with repayment at maturity. The value of the put option linked to the 19 December 2019 Ascopiave transaction for the minority shareholding in EstEnergy Spa fell by 6.5 million euro overall, owing to the higher value of the nominal amount, coming to 8.6 million euro, offset by a decrease in the amount of future dividends, coming to 15.1 million euro. See paragraph 1.03.01 “Hera – Ascopiave Partnership” for a reading of the detailed movements concerning the put options in the first half of 2020.

The total debt shows an average time to maturity of over 6 years, with 56.5% maturing after more than five years.

Net financial debt went from 3,247.2 million euro in 2019 to 3,083.6 million euro in June 2020. The first half-year showed a positive cash flow, due not only to the effect of seasonal factors for the period in question but also to the postponement of dividend payments to the month of July. Also note the positive contribution towards financial flows linked to the decreased cost of raw materials and the limited impact on the financial situation in the first half of 2020 coming from the Covid-19 health crisis.

net financial debt (bn€)
Net financial debt (bn€)

 

 

 

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Analysis by business area

A multi-business strategy

An analysis of the operating results achieved in the Group’s business areas is provided below, including: the gas area, which covers services in natural gas distribution and sales, district heating and heat management; the electricity area, which covers services in generation, distribution and sales; the integrated water cycle area, which covers aqueduct, purification and sewerage services; the waste management area, which covers services in waste collection, treatment and recovery; the other services area, which covers services in public lighting and telecommunications, as well as other minor services.

Over 50% of the contribution coming from the Group’s various business areas to overall Ebitda involves the energy areas

 

ebitda June 2020
Ebitda June 2020

  

The Group’s income statements include corporate headquarter costs and account for intercompany transactions at arm’s length.

The following analyses of each single business area take into account all increased revenues and costs, having no impact on Ebitda, related to the application of Ifric 12. The business areas affected by this accounting standard are: natural gas distribution services, electricity distribution services, all integrated water cycle services and public lighting services.

In all business areas, as in the income statements, accounting standard Ifrs 16 on operating leases has been applied, with an equal effect on both reporting periods.

 

GAS

Margins rise

The first half of 2020 showed growth over the same period in the previous year, in terms of both Ebitda and volumes sold. This result was mainly achieved thanks to commercial development linked to the Ascopiave Group partnership transaction, which saw the Hera Group acquire the companies belonging to the EstEnergy Group and AmgasBlu Srl in exchange for a distribution branch in the Veneto region (concerning the PD1, PD2, UD3 and PN Atems) and was able to offset the negative effects of the Covid-19 pandemic. Lastly, in the tender for the period going from 1 October 2019 – 30 September 2020, Hera Comm Spa was awarded four portions of the last resort gas service and two portions of the default gas distribution service.

Ebitda gas area 2020
Ebitda gas area 2020

 

Ebitda gas area 2019
Ebitda gas area 2019

 

 
Ebitda up +2.6%

The following table shows the changes occurred in terms of Ebitda:
 

(mn€) June 20 June 19 Abs. change % change
Area Ebitda 200.8 195.6 +5.2 +2.6%
Group Ebitda 559.7 545.9 +13.8 +2.5%
Percentage weight 35.9% 35.8% +0.1 p.p.  


The number of gas customers rose by 558.5 thousand or 38.0% over the first half of 2019. The entry within the Group’s consolidated scope of the companies belonging to the EstEnergy Group and AmgasBlu Srl brought 599.5 thousand customers and offset a drop in the customer base, mainly due to the result of the tenders for last resort markets, mentioned above, coming to roughly 30 thousand customers.

Customers (k)
Customers


The overall volume of gas sold increased by 1,781.2 million m3 or 42.3%, going from 4,215.2 million m3 in June 2019 to 5,996.4 in June 2020. Trading volumes showed growth coming to 1,420.6 million m3 (33.4% of total volumes), due to higher foreign trading. Volumes sold to end customers rose by 26.1% or 360.6 million m3 over June 2019, thanks to the contribution coming from the EstEnergy Group companies and AmgasBlu Srl, and amounted to 456.1 million m3. This growth was only partially offset by a 63.8 million m3 drop in traditional markets and a 31.8 million m3 fall in last resort markets, mainly caused by climatic factors including a very mild winter which saw higher average temperatures than in 2019 and the negative effects of the Covid-19 emergency.

Volumes sold (mn m3)
Volumes sold

 

The following table summarises operating results for the gas area:
 

Income statement (mn€) June 20 % inc. June 19 % inc. Abs. change % change
Revenues 1,634.6   1,502.0   +132.6 +8.8%
Operating costs (1,378.9) -84.4% (1,251.5) -83.3% +127.4 +10.2%
Personnel costs (59.5) -3.6% (60.0) -4.0% -0.5 -0.8%
Capitalised costs 4.6 0.3% 5.1 0.3% -0.5 -9.8%
Ebitda 200.8 12.3% 195.6 13.0% +5.2 +2.6%

 

Revenues went from 1,502.0 million in June 2019 to 1,634.6 million euro at 30 June 2020, showing a 132.6 million euro or 8.8% growth. The main reasons underlying this increase are the higher revenues coming from the EstEnergy Group companies and AmgasBlu Srl acquisition, coming to 257.8 million euro, and higher trading activities, amounting to roughly 34.0 million euro. This growth was offset by lower revenues due to the lower price of gas as a raw material, coming to roughly 79 million euro, and lower volumes of gas sold, amounting to roughly 37 million euro. The latter, along with lower revenues in district heating and heat management coming to roughly 17.0 million euro and lower revenues from activities in Bulgaria, totalling 2.0 million euro, confirm the negative effects of the climate and the Covid-19 emergency, as mentioned above.
Energy efficiency certificates also fell by roughly 10.8 million euro, as did revenues for long-term commissions and subcontracted works, by 3.2 million euro, with an equal effect on operating costs.  Regulated revenues for gas distribution were down by 10.5 million euro, mainly due to the transfer of local areas managed in the PD1, PD2, UD3 and PN Atems to Ascopiave.
From a regulatory point of view, note furthermore that 2020 is the first year of the 5th regulatory period (approved with resolution 570/2019/R/Gas), which calls for a significant reduction in recognised operating costs, in addition to a reduction in metering Wacc.

Revenues (mn€)
Revenues


The increase in revenues was proportionally reflected by rising operating costs, which went from 1,251.5 million euro in June 2019 to 1,378.9 million euro in June 2020, thus showing an overall growth of 127.4 million euro. This trend is mainly due to the higher activity in trading and the companies acquired, as mentioned above.

Ebitda rose by 5.2 million euro or 2.6%, going from 195.6 million euro in the first half of 2019 to 200.8 million euro in the first half of 2020, thanks to the entry of the new EstEnergy Group companies and AmgasBlu Srl. Their contribution offset the lower volumes of gas sold and the lower margins coming from district heating and heat management due to the mild winter and the negative effects of the Covid19 emergency, which impacted the reduction in Ebitda by roughly 15.4 million euro.

Ebitda (mn€)
Ebitda


In the first half of 2020, net investments in the gas area came to 52.9 million euro, up 0.7 million euro over the first half of the previous year. In gas distribution, an overall decrease coming to 1.2 million euro was seen, owing to 4.5 million euro in lower investments in the AcegasApsAmga Spa gas distribution branch concerning the Padua 1, Padua 2, Udine 3 and Pordenone Atems, transferred on 31 December 2019 as part of the Ascopiave transaction, not entirely offset by increased interventions in the ongoing large-scale meter substitution (resolution 554) and non-recurring maintenance on networks and plants in the other local areas served. In gas sales, investments coming to 4.3 million euro were linked to activities in acquiring new customers. Investments rose by 1.7 million euro in heat management, with the activities of the companies Hera Servizi Energia Srl and AcegasApsAmga Servizi Energetici Spa, and in district heating, where requests for new connections were lower than the same period of the previous year.

Net investments gas (mn€)
Net investments gas


Details of operating investments in the gas area are as follows:

Gas
(mn€)
June 2020 June 2019 Abs. change % change
Networks and Plants 40.8 42.0 -1.2 -2.9%
Gas Sales 4.3 3.3 +1.0 +30.3%
DH/Heat Management 8.7 7.0 +1.7 +24.3%
Total Gas Gross 53.9 52.2 +1.7 +3.3%
Capital Grants 1.0 0.0 +1.0 +100.0%
Total Gas Net 52.9 52.2 +0.7 +1.3%

 

ELECTRICITY

Margins rise

At the end of the first half of 2020, Ebitda in the electricity area rose over the same period in the previous year thanks to the Ascopiave Group partnership transaction, with the acquisition of the companies belonging to the EstEnergy Group and AmgasBlu Srl and margins coming from electricity generation, in spite of the negative effects related to the Covid-19 pandemic.

Ebitda electricity area 2020
Ebitda electricity area 2020

 

Ebitda electricity area 2019
Ebitda electricity area 2019

 

+12.3% Growth in Ebitda

The following table shows the changes occurred in terms of Ebitda:

(mn€) June 20 June 19 Abs. change % change
Area Ebitda 97.0 86.3 +10.7 +12.3%
Group Ebitda 559.7 545.9 +13.8 +2.5%
Percentage weight 17.3% 15.8% +1.5 p.p.  

 

The number of electricity customers settled at 1.3 million supply points, up 14.0% (160.4 thousand customers) over 30 June 2019. This significant growth was seen on the free market, which accounted for 20.0% of the total, mainly due to the entry within the consolidated scope of operations of the companies belonging to the EstEnergy Group and AmgasBlu, which contributed with roughly 109.2 thousand customers, and the reinforced marketing initiatives introduced, coming to roughly 76.8 thousand customers. This growth was able to offset the drop in safeguarded and protected customers.

Customers(k)
Customers


The volumes of electricity sold went from 6,124.5 GWh at 30 June 2019 to 6,130.7 GWh at 30 June 2020, with an overall increase of 0.1% or 6.2 GWh. Volumes sold on the free market rose by 6.1% of the total, thanks to the companies acquired as mentioned above, which contributed with 229.1 GWh, as well as an inertial internal growth coming to 144.8 GWh. This increase was able to offset the drop in safeguard and protected volumes, which came to 367.7 GWh or 6.0% of the total.

Volumes sold (GWh)
Volumes sold

 

Ebitda up by 10.7 million euro

The following table summarises operating results for the area:
 

Income statement (mn€) June 20 % inc. June 19 % inc. Abs. change % change
Revenues 1,097.3   1,208.4   -111.1 -9.2%
Operating costs (979.4) -89.3% (1,103.3) -91.3% -123.9 -11.2%
Personnel costs (24.9) -2.3% (22.7) -1.9% +2.2 +9.7%
Capitalised costs 4.1 0.4% 4.0 0.3% +0.1 +2.5%
Ebitda 97.0 8.8% 86.3 7.1% +10.7 +12.3%


Revenues dropped by 111.1 million euro or 9.2%, going from 1,208.4 million euro in June 2019 to 1,097.3 million euro in June 2020. The main causes lie in lower revenues in trading activities coming to 40.6 million euro, linked to the 40% drop in the average single national price for the first six months of 2020, the lower price of raw materials, coming to 70.0 million euro, and lower revenues from generation coming to roughly 17.0 million euro. Furthermore, the negative effects of the Covid-19 emergency confirmed a fall in volumes sold, as mentioned above, which led to lower revenues coming to roughly 25.0 million euro and lower revenues for transmission outside the grid amounting to roughly 10.0 million euro, with no change on costs. This drop was only partially offset by the higher revenues from the acquisition of the EstEnergy Group companies and AmgasBlu Srl, which came to roughly 52.3 million euro.
Regulated revenues rose compared to June 2019 by 0.5 million euro, with Wacc remaining the same in the two periods, at 5.9%. 2020 is the first year of the 2020-2023 regulatory semi-period, regulated by resolution 568/2019.

Revenues (mn€)
Revenues

 

The fall in revenues was proportionally reflected by operating costs, which went from 1,103.3 million euro in June 2019 to 979.4 million euro in June 2020, thus showing a 123.9 million euro decrease. This trend was mainly due to lower prices for raw materials, in spite of the growth due to the changes in the scope of operations.

At 30 June 2020, Ebitda increased by 10.7 million euro or 12.3%, going from 86.3 million in 2019 to 97.0 million euro in 2020, due to the higher margins produced by the entry of the EstEnergy Group companies and AmgasBlu Srl, and generation activities, which offset the lower volumes and margins due to the Covid-19 emergency, with an overall impact of a 4.1 million euro fall in margins.

Ebitda (mn€)
Ebitda


Investments in the electricity area came to 21.5 million euro in the first half of 2020, up 2.7 million euro over the previous year.
The interventions carried out mainly concern non-recurring maintenance on plants and distribution networks in the Modena, Imola, Trieste and Gorizia areas.
Compared to the first half of the previous year, a 1.8 million euro increase was seen in electricity distribution, and a 0.9 million euro rise was seen in energy sales, linked to activities in acquiring new customers. Requests for new connections fell compared to the previous year.

Net investments electricity (mn€)
Net investments electricity


Details of operating investments in the electricity area are as follows:

Electricity
(mn€)
June 2020 June 2019 Abs. change % change
Networks and Plants 13.2 11.4 +1.8 +15.8%
Electricity Sales 8.3 7.4 +0.9 +12.2%
Total Electricity Gross 21.5 18.8 +2.7 +14.4%
Capitale Grants 0.0 0.0 +0.0 +0.0%
Total Electricity Net 21.5 18.8 +2.7 +14.4%

 

INTEGRATED WATER CYCLE

Margins rise

In the first half of 2020, results for the integrated water cycle area remained essentially in line with the previous year, showing a slight drop in Ebitda that came to 0.1 million euro or 0.1%. From a regulatory perspective, note that 2020 is the first year in which the tariff method defined by the Authority for the third regulatory period (MTI-3), 2020-2023 (resolution 580/2019), is applied. A revenue (Vrg) is recognised to each manager based on operating costs and capital costs, according to the investments made and with a view to increasing efficiency in costs, in addition to measures intended to promote and valorise interventions aimed at sustainability and resilience.

 

Ebitda water cycle area 2020
Ebitda water cycle area 2020

 

Ebitda water cycle area 2019
Ebitda water cycle area 2019

 

-0.1% Ebitda virtually unchanged

The following table shows the changes occurred in terms of Ebitda:

(mn€) June 20 June 19 Abs. change % change
Area Ebitda 122.7 122.8 (0.1) (0.1%)
Group Ebitda 559.7 545.9 +13.8 +2.5%
Percentage weight 21.9% 22.5% -0.6 p.p.  

 

The number of water customers settled at 1.5 million, up 3.1 thousand or 0.2% over the first half of 2019, confirming the moderate trend of internal growth in the Group’s reference areas, mainly the Emilia-Romagna area served by Hera Spa.

Customers(k)
Customers


137.5 million m3: quantity managed in the aqueduct

The area’s main quantitative indicators are shown below:

Quantity managed 2020 (mn m3)                        
Quantity managed 2020

 

Quantity managed 2019 (mn m3)  
Quantity managed 2019

 


Volumes dispensed through the aqueduct were essentially in line with the first half of 2019, showing a slight 0.2 million m3 or 0.2% drop. Little change was also seen in the quantity managed in sewerage and purification, which both fell slightly, by 0.1 million m3 and 0.2 million m3 respectively compared to the first half of the previous year. The volumes dispensed, following the Authority’s resolution 580/2019, are an indicator of activity in the areas in which the Group operates and are subject to equalisation owing to norms that call for a regulated revenue to be recognised independently from volumes distributed.

An overview of operating results for the water area is provided in the table below:

Income statement (mn€) June 20 % inc. June 19 % inc. Abs. change % change
Revenues 415.6   430.8   -15.2 -3.5%
Operating costs (202.4) -48.7% (219.7) -51.0% (17.3) (7.9%)
Personnel costs (92.4) -22.2% (90.8) -21.1% +1.6 +1.8%
Capitalised costs 1.9 0.4% 2.5 0.6% (0.6) (24.4%)
Ebitda 122.7 29.5% 122.8 28.5% -0.1 -0.1%


In June 2020, revenues fell by 15.2 million euro or 3.5%, going from 430.8 million euro in the first half of 2019 to 415.6 million euro in the same period in 2020. This trend was due to lower revenues for subcontracted and third-party works in the first half of 2020, coming to 10.3 million euro overall, and lower revenues for new connections and customer requests. Note the lower other revenues mainly linked to contributions received, coming to roughly 3.0 million euro, of which 1 million covering non-recurring costs for the 2017 water emergency, recorded in June 2019. Revenues for dispensing fell by 1.7 million euro, mainly due to a reduction in equalised costs for electricity and water as a raw material, partially offset by the tariffary adjustments foreseen by the new method, MTI-3.

Revenues (mn€)
Revenues


Operating costs fell by 17.3 million euro or 7.9%, going from 219.7 million euro in the first half of 2019 to 202.4 million euro in the same period of 2020. Not including the lower costs related to lesser amount of works carried out, as described under revenues, coming to 9.3 million euro overall, note the lower costs for water as a raw material and electricity, which amounted to roughly 9.2 million euro.

Ebitda remained fundamentally unchanged compared to the previous year, with a slight drop coming to 0.1 million euro or 0.1%, going from 122.8 million euro in June 2019 to 122.7 million euro in June 2020. The negative effects on business in the first six months of the year due to the Covid-19 epidemic brought about a 0.4 million euro overall drop in Ebitda, consisting in lower new connections, customer requests and third-party works, partially offset by the control measures introduced by the Group.

Ebitda (mn€)
Ebitda


In the first half of 2020, net investments in the integrated water cycle area amounted to 68.3 million euro, up 1.3 million euro compared to the previous year. Including the capital grants received, which dropped by 0.4 million euro, the investments made rose by 0.8 million euro and came to 75.4 million euro.
These investments mainly involved extensions, reclamations and network and plant upgrading, in addition to regulatory upgrades involving above all purification and sewerage.
Investments were made coming to 47.3 million euro in the aqueduct, 17.7 million euro in sewerage and 10.4 million euro in purification.

Net investments water cycle (mn€)
Net investments water cycle

 

The more significant works include: in the aqueduct, increased activity in network and connection improvement linked to Arera resolution 917/2017 on the regulation of the technical quality of the integrated water system, enhancing and replacing feeding pipes in two municipalities in the Bologna area; in sewerage, continued progress was made in the important works for the Rimini seawater protection plan, even though the interventions are expected to have a lesser on impact Hera in 2020 than in the previous year. Further work was done in maintenance and upgrading for the sewerage network in other areas, and in drainage adaptation pursuant to regional resolution 201/2016; in purification, upgrading on the Lido di Classe and Lugo purifiers.
Requests for new water and sewerage connections increased over the previous year.
Capital grants amounting to 7.2 million euro included 6.6 million euro deriving from the tariff component called for by the New Investments Fund (FoNI) tariff method and fell by 0.4 million euro compared to the previous year.
On the whole, the favourable weather seen during the first quarter of the year allowed strong progress to be made in worksites, leading to positive results for the half-year even though a few sites suffered delays due to the health emergency during the second quarter.

Significant operating investments in the aqueduct, sewerage and purification

Details of operating investments in the integrated water cycle area are as follows:
 

Integrated water cycle (mn€) June 20 June 19 Abs. change % change
Aqueduct 47.3 44.5 +2.8 +6.3%
Purification 10.4 10.7 -0.3 -2.8%
Sewerage 17.7 19.3 -1.6 -8.3%
Totale integrated water cycle gross 75.4 74.6 +0.8 +1.1%
Capital grants 7.2 7.6 -0.4 -5.3%
of which FoNI (New Investment Fund) 6.6 6.5 +0.1 +1.5%
Total integrated water cycle net 68.3 67.0 +1.3 +1.9%

 

WASTE MANAGEMENT

Ebitda falls

In June 2020, the waste management area accounted for 21.9% of Group Ebitda, with margins falling compared to the same period in 2019. The first six months of the year felt the negative effects of the Covid-19 epidemic. The measures made necessary by the health emergency, including restrictions on personal movement and a closure of most business and industrial activity during the lockdown, led to a decrease in the amount of waste produced and, as regards the plastic waste recovery and recycling market, a decrease in demand for recycled plastic material and a drop in the prices for recycled products. In this exceptional context, the Hera Group showed its ability to react swiftly, making its professional services available to communities and its own customers across the areas served in a joint effort to overcome the emergency. All waste treatment plants remained operational and at the service of client companies that continued to produce essential goods. Even in this particular context, the initiatives developed supporting a circular economy continued to represent not only a distinctive feature of the Group’s business model but also one of its main strategic drivers. In this direction, note the beginning of the processes aimed at obtaining authorisation for a second plant producing biomethane from organic waste and the fully operational status of Aliplast’s first polyethylene regenerator, installed during the previous year, and the start of work on installing the second regenerator. Environmental resource protection was confirmed as a priority goal in the first half of 2020 as well, along with optimising reuse, as is demonstrated by the Group’s special focus on promoting sorted waste, which increased by 1.0 p.p. over June 2019.
 

waste management area EBITDA 2020
Waste management area EBITDA 2020

 

waste management area EBITDA 2019
Waste management area EBITDA 2019

 

Decrease in Ebitda: -3.1%

The following table shows the changes occurred in terms of Ebitda:

(mn€) June 20 June 19 Abs. change % change
Area Ebitda 122.4 126.3 -3.9 -3.1%
Group Ebitda 559.7 545.9 +13.8 +2.5%
Percentage weight 21.9% 23.1% -1.2 p.p.  


The following table provides a breakdown of the volumes commercialised and treated by the Group during the first half of 2020:
 

Quantity (k tons) June 20 June 19 Abs. change % change
Municipal waste 1,030.6 1,149.3 -118.7 -10.3%
Market waste 1,111.6 1,110.4 +1.2 +0.1%
Waste commercialised 2,142.2 2,259.7 -117.5 -5.2%
Plant by-products 1,278.9 1,373.8 -94.9 -6.9%
Waste treated by type 3,421.1 3,633.5 -212.4 -5.8%


Market waste stable, drop in municipal waste

An analysis of this data shows a drop in waste commercialised, due to the decrease in municipal waste, while market waste remained essentially unchanged. As regards municipal waste, the first half of 2020 saw a 10.3% decrease, which concerned in particular both the amount of sorted and sandy shore waste and the amount of unsorted waste.

Market waste was basically in line with the previous year: the higher volumes treated owing to an increase in the scope of operations, as discussed below, and an increase in intermediated flows, fully offset the lower amount of activity caused by the Covid-19 health emergency.

Lastly, plant by-products decreased compared to the previous year due to the lesser quantities treated and a lower amount of rainfall.

Further progress was made in sorted municipal waste, which went from 63.4% in the first half of 2019 to 64.4% in the same period of the current year. In June 2020, sorted waste increased by 1.0 p.p. in Emilia Romagna and by 2.2 p.p. in the Triveneto region, with slighter growth in the Marche region, coming to 0.4 p.p..

Sorted waste(%)
Sorted waste


 

Waste treated
by type of plant 2020
Waste treated by type of plant 2020

 

Waste treated
by type of plant 2019
Waste treated by type of plant 2019

 

Quantity (k tons) June 20 June 19 Abs. change % change
Landfills 342.8 247.7 +95.1 +38.4%
WTE 623.9 632.0 -8.1 -1.3%
Selecting plants and other 238.1 264.6 -26.5 -10.0%
Composting and stabilisation plants 247.3 245.4 +1.9 +0.8%
Inertisation and chemical-physical plants 678.1 613.4 +64.7 +10.5%
Other plants 1,291.0 1,630.2 -339.2 -20.8%
Waste treated by plant 3,421.1 3,633.5 -212.4 -5.8%

 

The Hera Group operates in the entire waste cycle, with 93 plants used for municipal and special waste treatment and plastic material regeneration. The most important of these include: 9 waste-to-energy plants, 12 composters/digesters and 14 selecting plants.

Compared to the first half of 2019, the current year benefitted from both the acquisition of Pistoia Ambiente Srl, that manages the Serravalle Pistoiese landfill, and the operational status of the new non-dangerous waste treatment plant in Cordenons, in the province of Pordenone. Furthermore, note the management of the municipal and special non-dangerous waste treatment plant in Gaggio Montano.

Waste treatment showed a 5.8% drop compared to the first half of 2019. Note in particular the higher quantity in landfills, mainly due to the enlarged scope of operations mentioned above. In waste-to-energy plants, waste treated was essentially in line with the previous year, with a slight decrease coming to 1.3%. The fall in selecting plants is due to the lower quantity treated, mainly in the Rimini and Bologna plants. Volumes treated remained constant in composters and stabilisers, and the higher volume treated in the Voltana plants and the Tremonti mechanical-biological treatment plant fully offset the decrease in volumes treated in the Ostellato and Cesena plants. The higher amount treated in stabilisation and chemical-physical plants is due to a different classification of some plants in the subcontracted/other plants area, despite the decrease in landfill leachate due to lesser rainfall. Lastly, the decrease in subcontracted/other plants is mainly due to the representation of a few plants in other categories, partially offset by the increase in intermediated volumes.

Ebitda increases

The table below summarises the area’s operating results:

Income statement (mn€) June 20 % inc. June 19 % inc. Abs. change % change
Revenues 580.0   595.1   -15.1 -2.5%
Operating costs (356.6) -61.5% (369.3) -62.0% -12.7 -3.4%
Personnel costs (103.9) -17.9% (102.9) -17.3% +1.0 +1.0%
Capitalised costs 2.9 0.5% 3.3 0.6% -0.4 -12.0%
Ebitda 122.4 21.1% 126.3 21.2% -3.9 -3.1%

 

Revenues fell by 2.5% or 15.1 million in June 2020, going from 595.1 million euro at 30 June 2020 to 580.0 million euro in the first half of 2020. Not including changes in the scope of operations involving the entry of Pistoia Ambiente Srl and the Gaggio Montano plant (henceforth, changes in the scope of operations), which contributed with roughly 10.9 million euro, the waste management area saw revenues drop by roughly 26 million euro compared to the previous year. This trend is mainly due to lower revenues from electricity generation on account of the loss of energy incentives for a few plants, a drop in the price of market and thermal energy, a decrease in the volume of products sold by Aliplast Spa, coming to roughly 15% and, lastly, a fall in volumes treated and a decrease in upgrading activities. These negative effects were only partially offset by the positive trend in prices for special waste.

Revenues (mn€)
Revenues


Operating costs decreased by 3.4% or 12.7 million euro in the first half of 2020, going from 369.3 million euro in June 2019 to 356.6 million euro in the first half of 2020. Excluding changes in the scope of operations, which contributed with 4.9 million euro, lower costs amounting to 17.6 million euro were seen. Note the lower costs for planned maintenance on Group plants and lower costs for outsourcing by-products and upgrading activities. Lastly, note the fall in the cost of purchasing on the Pet sustained by Aliplast, linked to the trend in revenues mentioned above.

The cost of personnel, not including changes in the scope of operations, increased by roughly 1.2 million euro or 0.2%.

Ebitda went from 126.3 million euro in the first half of 2019 to 122.4 million euro in the same period in 2020, showing a 3.9 million euro or 3.1% decrease. This trend is due to lower revenues from electricity generation, the negative effects of the Covid-19 emergency, coming to roughly 9.4 million euro in terms of lower volumes treated and lower margins from plastic recovery and recycling, despite the actions undertaken by the Group to limit this decrease. These negative effects were only partially offset by the higher prices seen for special waste treatment and the enlarged scope of operations.

Ebitda (mn€)
Ebitda

Net investments in the waste management area concerned treatment plant maintenance and upgrading and amounted to 21.7 million euro, down 12.8 million euro compared to one year earlier.
The composter/digester sector dropped by 3.6 million euro, due to the significant interventions carried out the previous year on the Sant’Agata Bolognese composter in constructing the biomethane plant, in addition to other interventions including upgrading the Tre Monti mechanical biological treatment plant.
Investments in landfills fell by 5.0 million euro, owing to the work done in 2019 in Cordenons, the tenth sector of the Ravenna landfill and plants belonging to Marche Multiservizi Spa. Among the work begun in 2020, note the intervention on the Il Pago plant.
The WTE plants sector saw a 2.7 million euro drop in investments, mainly involving non-recurring maintenance done on the Bologna, Forlì, Rimini and Ravenna plants.
Investments in the special waste plants sector, in line with the previous year, mainly concerned revamping on the Ravenna F3 plant.
Investments in the ecological islands and collection equipment sector showed a 0.3 million euro increase over the previous year, and the 1.9 million euro decrease in the selection and recovery plants sector mainly concerned the investments made by the Aliplast Group and the end of work on the mobile soil washing plant in Chioggia in 2019.

Net investments waste management (mn€)
Net investments waste management


Operating investments on treatment plants


Details of operating investments in the waste management area are as follows:
 

Waste management
(mn€)
June 2020 June 2019 Abs. change % change
Composting/Digestors 0.8 4.4 -3.6 -81.8%
Landfills 5.2 10.2 -5.0 -49.0%
WTE 4.5 7.2 -2.7 -37.5%
RS Plants 1.6 1.6 +0.0 +0.0%
Ecological areas and collection equipment 4.4 4.1 +0.3 +7.3%
Transshipment, selecting and other plants 5.2 7.1 -1.9 -26.8%
Total Waste Management Gross 21.7 34.7 -13.0 -37.5%
Capital Grants 0.0 0.2 -0.2 -100.0%
Total Waste Management Net 21.7 34.5 -12.8 -37.1%

 

OTHER SERVICES

Ebitda rises

The other services area covers all minor businesses managed by the Group, including public lighting, telecommunications and cemetery services. In the first six months of 2020, results for this area increased by 13.5% over the previous year, with Ebitda going from 14.9 million euro in the first six months of 2019 to 16.9 million euro in the same period of 2020.
 

Ebitda other services 2020
Ebitda other services 2020

 

Ebitda other services 2019
Ebitda other services 2019

 


The changes occurred in terms of Ebitda are as follows:
 

(mn€) June 20 June 19 Abs. change % change
Area Ebitda 16.9 14.9 +2.0 +13.5%
Group Ebitda 559.7 545.9 +13.8 +2.5%
Percentage weight 3.0% 2.7% +0.3 p.p.  


The following table shows the area’s main indicators as regards public lighting services:
 

Quantity June 20 June 19 Abs. change % change
Public lighting        
Lighting points (k) 562.8 535.8 +27.0 +5.0%
  of which led 27.3% 17.9% +9.4 p.p.  
Municipalities served 186.0 179.0 +7.0 +3.9%

 

562.8 thousand lighting points

An analysis of the data regarding public lighting shows a growth of 27.0 thousand lighting points and the acquisition of 7 new municipalities served. Over the first half of 2020, the Hera Group acquired roughly 29 thousand lighting points in 10 new municipalities. The most significant of these were: roughly 5 thousand lighting points in Lombardy, roughly 8.5 thousand lighting points in Emilia-Romagna, roughly 9.1 thousand lighting points in Friuli-Venezia Giulia,  roughly 1.1 thousand lighting points in Sardinia and roughly 4.5 thousand lighting points in the regions of central Italy. These increases fully offset the loss of roughly 2 thousand lighting points and 3 municipalities served in Friuli-Venezia Giulia. The percentage of lighting points using led light bulbs also increased, settling at 27.3% in June 2020, up 9.4 percentage points. This trend reflects the constant attention shown by the Group towards an increasingly efficient and sustainable management of public lighting.

Among the quantitative indicators for the other services area, note also the 4,300 Km fibre optic ultra-broadband network owned by the Hera Group through its digital company, Acantho. This network serves the main cities in the Emilia Romagna region as well as Padua and Trieste, offering businesses and private customers a high-performance connectivity with outstanding reliability, system and data security and service continuity.

Area grows

The area’s operating results are provided in the table below:

 

Income statement (mn€) June 20 % inc. June 19 % inc. Abs. change % change
Revenues 67.5   66.2   +1.3 +2.0%
Operating costs (41.2) -61.1% (42.3) -63.9% -1.1 -2.6%
Personnel costs (10.2) -15.2% (10.1) -15.3% +0.1 +1.0%
Capitalised costs 0.8 1.2% 1.1 1.6% -0.3 -28.3%
Ebitda 16.9 25.0% 14.9 22.4% +2.0 +13.


Revenues in this area increased slightly over June 2019, up 2.0% or 1.3 million euro. This trend is due to higher revenues from the telecommunications business, only partially offset by lower revenues for public lighting. These lower revenues are due to a change in the price of electricity in management fees (with an equal effect on costs), in spite of the higher amount of work done by Hera Luce in plant upgrading and energy efficiency in the municipalities served.

The more contained operating costs, despite the increase in municipalities served, is mainly due to the change in the price of electricity mentioned above.

Revenues (mn€)
Revenues


Ebitda rose by 2.0 million euro over the first half of 2019, settling at 16.9 million. This trend is due to higher margins in the telecommunications and public lighting services, in spite of the negative effects of the Covid-19 epidemic, which caused an overall drop in Ebitda coming to 0.5 million euro.

 

Ebitda (mn€)
Ebitda


In the first half of 2020, investments in the other services area came to 3.9 million euro, down compared to the same period in the previous year.

In telecommunications, 2.7 million euro were invested in networks and TLC and IDC (Internet data centre) services, down by 0.7 million euro compared to the previous year. The 1.2 million euro invested in the public lighting service went to maintaining, upgrading and modernising lampposts in the areas served, down compared to the previous year mainly due to the different way of recording public lighting contracts falling under Ifric 12.

Net investments other services (mn€)

 

Net investments other services


Details of operating investments in the other services area are as follows:
 

Other Services
(mn€)
June 2020 June 2019 Abs. change % change
TLC 2.7 3.4 -0.7 -20.6%
Public Lighting and Street Lights 1.2 3.0 -1.8 -60.0%
Total Other Services Gross 3.9 6.4 -2.5 -39.1%
Capital Grants 0.0 0.0 +0.0 +0.0%
Total Other Services Net 3.9 6.4 -2.5 -39.1%

 

 

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Hera – Ascopiave Partnership

Following the agreement signed on 19 December 2019 with Ascopiave Spa, the Hera Group manages, through the newly established EstEnergy Group, over one million energy customers in the Veneto, Friuli-Venezia Giulia and Lombardy regions. Note that EstEnergy Spa, now controlled by the Hera Group, brings together the commercial activities carried out by both the Ascopiave Group (including subsidiaries Ascotrade Spa, Ascopiave Energie Spa, Blue Meta Spa, Etra Energia Srl and the associated companies Asm Set and Sinergie Italiane Srl, in liquidation) and by the Hera Group through its subsidiary Hera Comm Nord-Est Srl.

Note that in the first half of 2020, within the overall framework of the Ascopiave Group partnership transaction, the Hera Group acquired, in a sequence of transactions agreed upon, shareholdings in Ascopiave Spa amounting to 4.9% of the share capital.

In order to immediately generate an added value from the partnership transaction for the Group, activities aimed at integrating the various business areas were begun in early 2020. As regards marketing policies, the process of bringing offers for customers into line was begun, giving priority to proposals focused on green energy coming exclusively from renewable sources; furthermore, guidelines were defined for developing sales channels, especially concerning producing and publicising offers, and communication strategies. Particular attention also went to rationalising costs, thanks to synergies with the Group’s central structures. As regards the procurement phase, sourcing strategies were integrated, extending the Group’s policies in terms of defining requirements and subdividing volumes by contract cluster. Also note that the new scope of operations was fully integrated into the Group’s model for energy risk control. Lastly, work on the IT integration process was begun, and the full inclusion of the companies in the Group’s accounting and planning processes.

Impact on the Group’s consolidated financial statement

Acquiring these energy sales activities was an important step in the evolution of the Group’s activity portfolio, fully reflecting the lines of development set out in the business plan. Through this transaction, more specifically, the Group now manages roughly 3.3 million customers in energy sales activities.

The following table shows the operating contribution made by the newly established EstEnergy Group to the consolidated values of the Hera Group over the first half of the year:

Income statement  
Revenues 396.9
Other operating revenues 1.0
Raw material consumption (201.3)
Service costs (147.5)
Personnel costs (7.6)
Other operating expenses (0.5)
Amortisation, depreciation and provisions (12.1)
Operating profit 28.9
Financial operations 0.9
Pre-tax profit 29.8
Taxes (7.0)
Net profit for the period 22.8

These values include infra-Group transactions with other companies belonging to the Hera Group.

The entry “Depreciation and amortisation” includes depreciation for the customer lists recorded during the acquisition of control of the energy companies transferred by Ascopiave, amounting to 6 million euro.

Note that work began on fiscal optimisation during the first half of the year, as previously planned while the partnership agreement was being negotiated. More specifically, a substitute tax coming to 65.3 million euro overall was paid as a tax redemption for the higher implicit values in the transaction’s prices, which required lists of customers and goodwill to be recorded in the consolidated financial statement. Since this operation is closely related to the partnership agreement and, therefore, included within the valuation of the corporate aggregation, the portion of the substitute tax pertaining to the Group amounted to 40.2 million euro. See note 23 “Current tax assets and liabilities” in paragraph 2.02.04 “Commentary notes to the financial statement formats” for a more detailed illustration of the operation in question.

Impact on alternative performance measures

Note that, to ensure a better evaluation of performance and make the data more easily comparable, as of the financial statements at 31 December 2019 it was considered suitable to introduce a new statement entitled “Adjusted net financial debt”, containing a higher degree of segregation between items and the alternative performance measure “Net debt adj. put option”.

The adoption of this indicator is linked to Ascopiave Spa’s irrevocable put option concerning its minority shareholding in EstEnergy Spa (which can be exercised annually, discretionally concerning all or part of the shareholding, within and not beyond 31 December 2026), which is subject to fair value valuation based on the future scenario of its exercise held to be most probable by management. Since the Group’s policy, when dealing with this sort of option, calls for minority shareholder interests not to be represented in the period result component, in evaluating the amount of debt for the option any dividends expected to be paid by EstEnergy Spa during the hypothetical life of the option itself were taken into consideration. The fair value recorded in the financial statements as a liability therefore not only represents the current value of the expected price at the date on which the option is exercised, but also contains a discounted estimate of the future dividends paid. This mechanism ensures that the fair value part of the put option that will be extinguished through payment of future dividends is actually self-liquidating, since the financial resources required (i.e. 48% of the dividends) will be directly generated by the purchased companies, and will thus not create any real additional financial needs during this period of time for the Group. Therefore, in order to express the actual additional financial needs created by the transaction and correlate the latter to the Group’s increased profitability, it was considered suitable to also state, among the alternative performance measures, the amount of net financial debt that will include the fair value of the put option, adjusted so as not to consider the dividends expected to be paid in the future (based on the projections contained in the multi-year business plans) for the period covered by the option.
Note that the debt for the put option linked to the minority shareholding in EstEnergy Spa requires, each year, since the amount in question is discounted, notional financial charges to be stated.

Note lastly that the transfer of 3% of the share capital of Hera Comm Spa to Ascopiave Spa is represented, in accounting terms, as the subscription of fixed-rate financing valued according to the criterion of amortised cost (one of the clauses included contains a put option in favour of Ascopiave Spa).

See “Analysis of financial structure and investments” for a detailed representation of the amounts used in the adjusted statement.

Based on the accounting methods illustrated above, the following trends were seen in the value of the put options in the first half of 2020:

  Value at
31-12-19
Financial
charges
Dividends paid Value at
30-06-20
Put option (fair value) 396.6 7.0   403.6
Put option (future dividends) 156.7 2.7 (17.8) 141.6
Financing to Ascopiave 54.0 1.6   55.6
Equivalent fair value 607.3 11.3 (17.8) 600.8

 

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INCOME STATEMENT

mn€ notes first six months of 2020 first six months of 2019
Revenues 1 3,402.3 3,371.6
Other operating revenues 2 222.6 249,0
Use of raw materials and consumables 3 (1,605.1) (1,699.2)
Service costs 4 (1,151.0) (1,075.1)
Personnel costs 5 (290.9) (286.6)
Other operating costs 6 (32.5) (29.8)
Capitalized costs 7 14.3 16.0
Amortisation, depreciation and provisions 8 (264.0) (257.0)
Operating revenues   295.7 288.9
Share of profits (losses) of associated companies 9 3.7 6.5
Financial income 10 30.9 67.8
Financial expenses 10 (90.8) (119.2)
Financial operations   (56.2) (44.9)
Earnings before taxes   239.5 244
Taxes 11 (64.6) (70.1)
Net profit for the period   174.9 173.9
Attributable to:      
Parent company shareholders   166.2 166.2
Minority shareholders   8.7 7.7
Earnings per share 12    
basic   0.113 0.113
diluted   0.113 0.113

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate income statement in paragraph 2.04.01 of this consolidated financial statement.

 

 

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STATEMENT OF COMPREHENSIVE INCOME

mn€ notes first six months of 2020 first six months of 2019
Profit (loss) for the period   174.9 173.9
Items reclassifiable to the income statement      
Fair value of derivatives, change for the period 20 (1.4) (58.9)
Tax effect related to items reclassifiable to the income statement   0.5 16.2
Shares valued at fair value 17 (2.5)  
Items not reclassifiable to the income statement      
Actuarial income (losses) post-employment benefits 27 2.8 (2.6)
Tax effect related to items not reclassifiable to the income statement   (0.6) 0.3
Total comprehensive profit (loss) for the period   173.7 128.9
Attributable to:      
Parent company shareholders   164.8 121.5
Minority shareholders   8.9 7.4

 

 

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STATEMENT OF FINANCIAL POSITION

mn€ notes 30-Jun-20 31-Dec-19
ASSETS      
Non-current assets      
Property, plant and equipment 13 1,951.1 1,992.7
Rights of use 14 91.0 96.9
Intangible assets 15 3,823.2 3,780.2
Goodwill 16 812.8 812.9
Equity investments 17 183.0 143.5
Non-current financial assets 18 136.7 135.3
Deferred tax assets 19 177.9 174.8
Derivative financial instruments 20 43.3 41.1
Non-current assets   7,219.0 7,177.4
Current assets      
Inventories 21 170.7 176.5
Trade receivables 22 1,746.9 2,065.3
Current financial assets 18 48.0 70.1
Current tax assets 23 39.3 42.1
Other current assets 24 379.9 395.7
Derivative financial instruments 20 84.8 72.2
Cash and cash equivalents 18 705.5 364.0
Total current assets   3,175.1 3,185.9
TOTAL ASSETS   10,394.1 10,363.3

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate statement of financial position outlined in paragraph 2.04.02 of this consolidated financial statement.

SHAREHOLDERS' EQUITY AND LIABILITIES

mn€ notes 30-Jun-20 31-Dec-19
SHAREHOLDERS' EQUITY AND LIABILITIES      
Share capital and reserves 25    
Share capital   1,470.6 1,474.8
Reserves   1,176.5 948.0
Profit (loss) for the period   166.2 385.7
Group net equity   2,813.3 2,808.5
Non-controlling interests   185.3 201.5
Total net equity   2,998.6 3,010.0
Non-current liabilities      
Non-current financial liabilities 26.31 3,451.7 3,456.3
Non-current lease liabilities 14.31 70.1 76.1
Post-employment and other benefits 27 120.0 127.3
Provisions for risks and charges 28 518.7 521.8
Deferred tax liabilities 19 145.8 154.5
Derivative financial instruments 20 28.3 27.4
Total non-current liabilities   4,334.6 4,363.4
Current liabilities      
Current financial liabilities 26.31 448.1 305.5
Current lease liabilities 14.31 18.9 19.4
Trade payables 29 1,087.9 1,391.8
Current tax liabilities 23 79.4 86.9
Other current liabilities 30 1,286.1 1,047.9
Derivative financial instruments 20 140.5 138.4
Total current liabilities   3,060.9 2,989.9
TOTAL LIABILITIES   7,395.5 7,353.3
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES   10,394.1 10,363.3

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate statement of financial position outlined in paragraph 2.04.02 of this consolidated financial statement.

 

 

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CASH FLOW STATEMENT

mn€ notes 30-Jun-20 30-Jun-19
Earnings before taxes   239.5 244.0
Adjustments to reconcile net profit to the cash flow from operating activities      
Amortisation and impairment of assets   214.9 199.3
Allocation to provisions   49.1 57.7
Effects from valuation using the net equity method   (3.7) (6.5)
Financial (income) expenses   59.9 51.4
Capital (gains) losses and other non-monetary elements   (15.7) (2.7)
Change in provision for risks and charges   (15.1) (16.2)
Change in provision for employee benefits   (5.6) (4.49)
Total cash flow before changes in net working capital   523.3 522.6
(Increase) decrease in inventories   5.8 7.6
(Increase) decrease in trade receivables   280.8 32.6
Increase (decrease) in trade payables   (303.9) (270.3)
Increase/decrease in other current assets/liabilities   102.5 131.6
Changes in working capital   85.2 (98.5)
Dividends collected   5.0 7.9
Interest income and other financial income collected   13.6 25.5
Interest expenses, net charges on derivatives and other paid financial charges   (53.2) (62.2)
Taxes paid   (86.8) (10.8)
Cash flow from operating activities (a)   487.1 384.5
Investments in property, plant and equipment   (46.2) (60.5)
Investments in intangible assets   (157.1) (154.1)
Investments in companies and business units net of cash and cash equivalents 31 (45.6) (0.6)
Sale price of property, plant, equipment and intangible assets   2.3 1.3
Divestments in equity investments and contingent consideration 31 1.4  
(Increase) decrease in other investment activities   21.1 (24.9)
Cash flow from (for) investing activities (b)   (224.19 (238.8)
New issue of long-term binds 31 7.3 127.6
Repayments and other net changes in financial payables 31 111.1 (45.8)
Finance lease payments 31 (13.9) (9.4)
Acquisition of stakes in consolidated companies 31 (1.2) (2.8)
Dividends paid out to Hera shareholders and non-controlling interests   (2.7) (151.1)
Changes in treasury share   (22.1) 19.7
Cash flow from (for) financing activities (c)   78.5 (61.8)
Increase (decrease) in cash and cash equivalents (a+b+c)   341.5 83.9
Cash and cash equivalents at the beginning of the period   364.0 535.5
Cash and cash equivalents at the end of the period   705.5 619.4

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate cash flow statement in paragraph 2.04.03 of this consolidated financial statement.

 

 

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STATEMENT OF CHANGE IN NET EQUITY

mn€ Share capital Reserves Reserves derivatives valued at fair value Reserves actuarial income (losses) post-employment benefits Reserves shares valued at fair value Revenues for the period Net equity Non-controlling interests Total
Balance at 31 December 2018 1,465.3 926.8 16.5 (29.8)   281.9 2,660.7 186.0 2,846.7
Adoption of IFRS 16   (4.5)         (19.3) (0.6) (19.9)
Balance at 01-Jan-19 1,465.3 922.3 16.5 (29.8) 281.9 2,656.2 185.4 2,841.6
Revenues for the period           166.2 166.2 7.7 173.9
Other components of comprehensive income:                  
Fair value of derivatives, change for the period     (42.7)       (42.7)   (42.7)
Actuarial income (losses) post-employment benefits       (2.0)     (2.0) (0.3) (2.3)
Overall revenues for the period (42.7) (2.0) 166.2 121.5 7.4 128.9
Changes in treasury share 6.2 13.5         19.7   19.7
Changes in equity investments   (0.9)         (0.9) (1.9) (2.8)
Changes in the scope of consolidation             11.9 11.9
Allocation of revenues:                  
Dividends paid out           (149.1) (149.1) (11.4) (160.5)
Allocation to reserves   132.8       (132.8)  
Balance at 30 June 2019 1,471.5 1,067.7 (26.2) (31.8) 166.2 2,647.4 191.4 2,838.8
                   
Balance at 31-Dec-19 1,474.8 1,019.7 (37.9) (33.8) 385.7 2,808.5 201.5 3,010.0
Revenues for the period           166.2 166.2 8.7 174.9
Other components of comprehensive income:                  
Fair value of derivatives, change for the period     (0.9)       (0.9)   (0.9)
Actuarial income (losses) post-employment benefits       2.0     2.0 0.2 2.2
Fair value of shares, change for the period         (2.5)   (2.5)   (2.5)
Overall revenues for the period (0.9) 2.0 (2.5) 166.2 164.8 8.9 173.7
Changes in treasury share (4.2) (7.8)         (12,0)   (12)
Changes in equity investments             (11.3) (11.3)
Other movements   2.2         2.2 0.9 3.1
Dividends paid out           (150.2) (150.2) (14.7) (164.9)
Allocation to reserves   235.5       (235.5)  
Balance at 30 June 2020 1,470.6 1,249.6 (38.8) (31.8) (2.5) 166.2 2,813.3 185.3 2,998.6

 

 

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Net financial indebtedness

mn€   June 2020 Dec 2019
a Cash and cash equivalents 705.5 364.0
b Other current financial receivables 48.0 70.1
  Current bank debt (317.0) (111.5)
  Current part of bank borrowings (55.6) (63.1)
  Other current financial liabilities (75.5) (130.9)
  Current lease payments (18.9) (19.4)
c Current financial debt (467.0) (324.9)
d=a+b+c Net current financial debt 286.5 109.2
  Non-current bank debt and bonds issued (excluding put option) (2,809.7) (2,815.1)
  Other non-current financial liabilities (excluding put option) (26.2) (20.2)
  Non-current lease payments (70.1) (76.1)
e Adjusted non-current financial debt (2,906.0) (2,911.4)
f=d+e Adjusted net financial position (2,619.5) (2,802.2)
g Non-current financial receivables 136.7 135.3
h=f+g Net financial debt (excluding put option) (2,482.8) (2,666.9)
  Nominal amount - fair value put option (459.2) (450.6)
  Net financial debt with adjusted put option (net debt adj put option) (2,942.0) (3,117.5)
  Portion of future dividends – fair value put option (141.6) (156.7)
  Net financial debt (3,083.6) (3,274.2)

 

 

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