“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."
"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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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.
Global stock markets fall in the first quarter of 2020 due to the Covid-19 pandemic
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. Faced with a slowdown in the economy and uncertainty as to a return to normal conditions, in late February volatility increased on financial markets, sparking sharp drops in all world stock markets. The exceptional interventions and support provided by governments to protect national economies, and the virtually unlimited liquidity guaranteed by central banks allowed stock markets to regain confidence and record, beginning in mid-March, recovery in stock prices, which in any case remain negative in comparison with the beginning of the year. The Italian FTSE All Share index fell by -17.5% over the half-year, after reaching a low of -36.2% in mid-March, in line with the other indices for the main European stock markets.
Hera outperforms local utilities and the market
In this context, Hera stock closed the period with an official price of 3.367 euro, therefore falling less than -13.9% after reaching a record high of 4.494 euro on 20 February 2020, corresponding to a 6.7 billion euro capitalisation, following the roadshow presenting the business plan to 2023 in the main financial hubs in Europe and the United States. 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.
10.0 cent dividend paid, respecting the targets set out in the Business plan
On 6 July 2020, following the indications contained in the business plan, Hera paid a dividend coming to 10.0 cents per share, the eighteenth in a series of uninterrupted growth since being listed, owing to the solidity of its operating and financial fundamentals and the continuity of its activities, even during the entire lockdown period.
| euro | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dps | 0.035 | 0.053 | 0.06 | 0.07 | 0.08 | 0.08 | 0.08 | 0.08 | 0.09 | 0.09 | 0.09 | 0.09 | 0.09 | 0.09 | 0.09 | 0.095 | 0.10 | 0.10 |
+276% total shareholders return since the IPO
The joint effect of continuously remunerating shareholders through dividends and a rise in the price of the stock led the total shareholders return accumulated since the IPO to remain consistently positive and to settle, at the end of the half-year, at over +275.6%.
The financial analysts covering the company (Banca Akros, Banca Imi, Equita Sim, Fidentiis, Intermonte, Kepler Cheuvreux, MainFirst and Mediobanca) expressed positive or neutral opinions, with no negative opinion. At the end of the quarter, the consensus target price came to 3.99 euro, higher than the 3.87 euro recommended at the end of 2019.
46,4% share capital pertaining to the public stockholders agreement
At 30 June 2020, the shareholder breakdown showed its usual stability and balance, with 46.4% of shares belonging to 111 public shareholders located across the areas served and brought together by a stockholders agreement effective from 1 July 2018 to 30 June 2021, and a 53.6% free float. The shareholding structure is highly fragmentary, with a high number of public shareholders (111 municipalities, the largest of which holds shares amounting to less than 10% of the total) and a high number of private institutional and retail shareholders.
Since 2006, Hera Spa has adopted a share buyback program, renewed by the Shareholders Meeting held on 29 April 2020 for 18 further months, for an overall maximum amount of 270 million euro. This plan is aimed at financing M&A opportunities involving smaller companies, and smoothing out any anomalous market price fluctuations vis-à-vis those of the main comparable Italian companies. At the end of the first half-year, Hera Spa held 18.2 million treasury shares.
During the half-year, approximately 3.2 million treasury shares were made available for the M&A transaction with the utility company CMV, as indicated in the shareholders meeting mandate, annulling dilution for Hera shareholders.
On 22 June, Hera stock was included in the FTSE4Good index, that brings together companies having a high sustainability profile and showing the best performances in ESG parameters.
Communication with the market as an intangible asset
After the publication of the new 2019-2023 business plan, Hera’s Executive Chairman and CEO took part in a roadshow which visited the main financial centres in Europe and the USA, to illustrate the Group’s growth targets to investors. This specific communication initiative met with interest among institutional investors and boosted the share’s performance during the period in question.
The intense dedication shown by the Group towards dialoguing with investors contributed to reinforcing its market reputation and represents an intangible asset benefiting Hera stock and stakeholders.
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:
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 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.
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.
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:
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.
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.
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.
.
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.
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 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.
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.
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.
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
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 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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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 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.
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 2019 (mn m3)
|
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.
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.
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.
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 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..
Waste treated
|
Waste treated
|
| 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.
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.
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.
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 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.
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.
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.
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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