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Financial Results Y2020
Message from the Executive Chairman of the Board
A more generous dividend based on a 2020 cash flow beyond expectations
Despite the pandemic scenario, 2020 proved to be a year of reassuring results in many regards. Behind the performance of financials, which exceeded forecasts, we boast a solid business model, a proven successful growth strategy, as well as a thorough execution of stakeholder-supporting policies that can be shaped by the needs of the moment.
Such an evidence provides higher visibility to the 2024 targets of the Business Plan and encourages the distribution of a dividend of 11 euro cents, meaning 0.5 cent higher than the amount originally indicated. The increase in shareholder remuneration, which will be carried forward over the next years of the Plan, is fully funded by the cash generation already achieved in 2020.
Tomaso Tommasi di Vignano
The results recorded in 2020 prove Hera’s progress in all key performance indicators, to an extent that exceeded our forecasts and the preliminary indications we provided at the beginning of January, in the presentation of the new Business Plan to 2024.
Positive results started with the effective policies implemented against pandemic
The great attention paid to our stakeholders was rewarding. On the one hand, for example, the payment extensions granted to customers in financial troubles due to the Covid-19 scenario allowed us to maintain an effective relationship with them without altering the level of working capital, since payments were then made in a physiological manner. On the other hand, by implementing reverse factoring policies, we were able to keep construction sites open counting on our usual suppliers, who would otherwise have been affected by liquidity problems; so, we could continue to execute our capex plan. We have also redesigned the way in which many of our people work, especially for activities that were restricted by the anti-Covid measures; in this case, we have leveraged the new possibilities provided by IT tools and internalised certain tasks.
A fruitful year, also for the agreements that will open up new business developments
During 2020, we also continued to pursue initiatives to create new synergies in promising market areas, through the signing of partnerships with names that are a benchmark in each specific business segment. This is the case of the collaboration started with Snam in the development of projects for the use of hydrogen, the agreement signed with NextChem, part of the Maire Technimont group, for the recycling of waste from rigid plastics and, last but not least, the agreement reached with Eni for the construction of a platform for the treatment of special waste in Ravenna.
Financials improve in any area of the 2020 P&L
The 3.5% growth posted at Group EBITDA level was also reflected into the 1.0% increase in Earnings per Share, due both to an effective financial management that reduced the average cost of debt and to a three percentage points decrease in the tax rate, which thus stood at 25.7%.
No interruption in value creation for our shareholders
Indicators for Return on both Investment and Equity – with ROI and ROE respectively at 8.6% and 10.2% – were at a similar level to the previous year. We have therefore maintained returns well above the weighted average cost of capital, ensuring continuity in the value creation path.
“Cash is king”: never before has cash flow been such a crucial indicator of the Group’s health
Again in 2020, Hera confirmed its nature of strong cash generator. In a year marked by the pandemic, we succeeded in generating a Free Cash Flow of 343 million euro, after fully funding a capex in line with the previous year. We used this cash generation to create value for shareholders: after the payment of the 2019 dividend of 10 euro cents per share, we have funded 68 million euro of external growth operations and a buyback of 45 million euro that allows us to counter-dilute shareholders in future M&A deals, thereby strengthening the earnings per share profile that we had included in the Business Plan’s targets. The excess cash of 47 million euro, which exceeds the amount forecast in the Business Plan, translated into a Net Financial Debt reduction of the same amount.
We mean to direct these extra-resources towards a more generous remuneration of equity
In light of such performance, the Board of Directors has proposed the Shareholders’ Meeting to approve the distribution of a 2020 dividend per share of 11 euro cents, up by 10% compared to the last dividend paid (in 2020, equal to 10 euro cents). The proposed dividend will be the new basis for the policy of steadily increasing dividends already launched in the Plan, which will bring the 2024 dividend to 13 cents per share. The higher cumulative disbursement for dividend payments until 2024 resulting from the new dividend proposal is fully covered by the reduction in Net Debt already achieved in 2020.
We are now even more aware that the targets of the Plan to 2024 are achievable
The 2020 results have allowed us to maintain the sustained pace indicated in the Business Plan, despite the complex operating scenario; this fact, together with the significant recovery in demand from industrial customers in the latest few weeks of the year, allows us to look to the future with greater positivity, considering Hera’s strengths that emerged clearly also in recent months. On one hand, we have demonstrated our ability to provide effective responses to the challenges imposed by the pandemic; on the other hand, we have verified the prompt responsiveness of Revenues to the return to more physiological operating conditions. We are therefore confident that, with the rollout of the vaccination plan and the gradual removal of anti-Covid restrictions, Hera will be able to achieve the solid growth indicated in the Plan to 2024.