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Financial Results Y2019
Message from the Executive Chairman of the Board
Year 2019 – considerable growth, also in quality
Dear Shareholders,
The release of 2019 results takes place in a particularly hard time for our Country, due to the consequences of the Coronavirus outbreak.
We promptly took action to deal with the Coronavirus risk
Thanks to a crisis management plan timely activated, Hera is today 100% operational, thus ensuring continuity of public utility services provided to the clients and carefully safeguarding the health of its employees, together with the health of people – either customers or suppliers – with whom they enter in contact while carrying out their duties. We have temporarily suspended only a few non-essential activities, such as customer service desks, and we have postponed some technical investments. At the same time, we offered a month deferment of payments for bills or rescheduling plans, in order to help customers in need because of the pandemic.
Tomaso Tommasi di Vignano
The “essential” nature of our business, the low correlation with Italian GDP, together with a structured risk management system, represent a solid certainty in a context whose evolution appears still uncertain.
The 2019 results indicate a remarkable growth, achieved with a limited risk profile
In this perspective, connected with the benefits of the strong risk management culture that pervades our way to plan and operate, we can be doubly pleased with 2019 results.
The growth of 54 million euro of the EBITDA went far beyond the target set in the Business Plan to 2019. Such growth, while certainly valuable for its size, it is even more remarkable for the low risk-profile framework in which it has been achieved.
In addition to a cautious portfolio mix, with 51% of activities in regulated businesses, we have a conservative approach in managing each single business.
We follow this approach not only in operations, but also in finance, where we kept a solid Net Debt/EBITDA ratio at 2.48 times, net of the figurative debt of the Ascopiave deal.
To manage risks means on one hand to mitigate any negative impacts, but on the other hand it also means to have a system at your disposal to evaluate and decide to seize the opportunities that arise.
From this point of view, 2019 was a year with plenty of growth opportunities for M&A activities, especially with the signing of the deal with Ascopiave, which will significantly contribute to generate additional growth starting from 1 January 2020. Last year, we also had new investments entering into operations, from the biomethane plant to the landfill sites capacity expanded in the second half.
In 2019, leveraging on the EBITDA organic growth of 87 million euro and the contribution from the newly-consolidated acquisitions for 7 million, we succeeded in holding back the expected margin reduction in the Safeguard business, which had an impact of 70 million euro.
The growth, as the value creation, continues
Our path towards value creation went ahead, with the ROI, the return on net investments, reaching 9.4% – a level two times higher than the WACC, the weighted average cost of capital, which today is around 4.5%.
Moreover, our call to circularity and the attention towards social responsibility topics took shape through some 60 dedicated projects, which generated a Shared Value EBITDA of 422.4 million euro.
The strong cash generation, with the Free Cash Flow growing by 40% compared to 2018, covered the development investments, the dividend distribution and almost entirely the cash-out for M&A, thus allowing for a continuous deleveraging.
Earnings per share, excluding the capital gain for the Ascopiave M&A, was equal to 20.4 euro cents, compared to 19.2 cents of 2018.
Hera’s Board of Directors has proposed to the Shareholders’ Meeting to approve the distribution of a dividend of 10 cents per share, in line with the amount indicated in the Business Plan.
After the general sell-off in stock markets, fuelled by the increased risk premium due to the pandemic, the dividend proposed by Hera’s Board of Directors foreshadows a yield around 3%.
We are working to execute our Business Plan even beyond 2023
In 2020, we will continue along our path, according to what we have clearly stated in the strategy presented the last 10 January, with a time-horizon extended to 2030 for some projects.
During this year, we know that we can count on the contribution of the deal signed at the end of 2019 with Ascopiave, which will be integrated into our efficient business model.
We will face the “essential” task we are called to as a supplier of public utility services, by continuing to manage our businesses according to long-term strategic logics. This way, we will ensure sound returns to our shareholders over time.