2003 Group Results. Analyst Presentation Milan, 26 march 2004

Transcription

1 2003 Group Results Analyst Presentation Milan, 26 march 2004

2 Index Group economic results 2003 Group Balance sheet Outlook Conclusions Appendix Breakdown by business 2

3 Group economic results

4 Hera Group Established with the first huge merger incurred in the Italian utility sector among 11 multi - utility companies at the end of 2002 Leading position in the Waste, Water and Gas sector and a small trading electricity business Floated in June 2003 on the basis of a 5 years business plan 2003 main activities Reorganisation of 11 companies into a Group Further aggregation of smaller business into an unique business model Acquisition of 42% of AGEA, a major local player close to the Group New main procurement contracts signed Only 12 month to achieve the first synergies The IPO, the Group reorganisation and the business development deliver their first results in Group Results 2003: The Group first 12 month Financial Reports 4

5 Turnover: +17,1% Organic Growth Increase of customer base (+4,8% in Gas, +3,7% in Water), Territorial further expansion (3 new municipalities & New Services) Increase in tariffs (+3,7% water tariffs, Switch from tax-to-tariff in waste) Dual Fuel policy +6,4x medium sized clients in the Electricity business Favourable climate conditions EBITDA: +26,4% Increased margins thanks to 23 mln synergies exploited Net Profit: +43,6% Tax benefits 2002 % 2003 % Incr. Turnover 1.133,3 100,0% 1.331,3 100,0% 17,5% Other operating cost (751,9) (66,3%) (896,4) (67,3%) 19,2% Personnel costs (189,5) (16,7%) (192,4) (14,5%) 1,5% EBITDA 191,9 16,9% 242,5 18,2% 26,4% Provisions (33,0) (2,9%) (33,0) (2,5%) 0,1% Amm. & Depr., provisions (114,3) (10,1%) (129,7) (9,7%) 13,5% EBIT 77,6 6,8% 112,8 8,5% 45,3% Interest inc./(exp.) (12,9) (1,1%) (15,7) (1,2%) 21,7% Extraordinary inc./(exp.) 12,0 1,1% (3,3) (0,2%) (127,5%) Adj. On financial assets (1,4) (0,1%) (5,2) (0,4%) 261,1% Tax (38,7) (3,4%) (35,6) (2,7%) (7,9%) Tax rate -51,4% -40,2% Net Profit 36,6 3,2% 53,0 4,0% 44,8% Minorities (3,4) (0,3%) (3,6) (0,3%) 4,7% Group Profit 33,2 2,9% 49,4 3,7% 48,7% Group Results 2003: Strong Growth thanks to the First Synergies 5

6 Confirmed Personnel +5 mln 2003 Goal of 200 HC Reduction 2003 Total initial HC Net Outflow (214) Delta Perimeter 104 Total HC have been outperformed Outperformed Other savings +6 mln Services, warehouses and materials SAP is currently fully installed Cumulated Cost Savings Planned Confirmed Procurement costs +12mln Eni (75% procurement): good contractual conditions confirmed (-8% of AEEG average) VNG New contract (international shipping) Atel and Tirreno Power are procurement sources at good conditions A P2007 Gas Labour G&A IT Group Results 2003: Outperforming synergies 6

7 Outperformed Organic Growth +27 mln Ebitda Margin: 18,2% Natural extension of services supply on the territory served (3 new Municipalities, Geat and new services) +26,4% Natural increase in number of customers both in Gas and Water business Water tariffs increase Switch from tax to tariff scheme in Waste Unexpected increase in Gas volume sold Unexpected increase in Water volume sold with significant effect on Ebitda and Conservative assumptions on Gas Tariff decrease Ebitda 02 Ebitda 03 Synergies Tariff Increase (Water & Waste) Volume Increase (Gas & Water) EBITDA Growth Group Results 2003: and Organic Growth 7

8 Group Balance Sheet 8

9 Fixed Assets Capex plan on track (210 mln ) Significant investments in Agea, in Tirreno Power and other (110 mln ) Working Capital NFP Physiological growth following turnover expansion Increased maintaining a conservative leverage IPO Plan leverage goal realised (not including investments) Fixed Asset 1.202, ,0 Working Capital 73,9 89,2 (Provisions) (157,3) (177,4) INVESTED CAPITAL 1.119, ,8 Share Capital 788,5 793,2 Net Equity 865,3 894,5 Financial Debts 185,3 352,4 Net short term financial position 68,5 91,9 Net Financial Position 253,8 444,3 FINANCIAL STRUCTURE 1.119, ,8 Memorandum Accounts Mainly related to third party assets Group Balance Sheet: Sound Capital Structure with a D/(D+E) 0,33x 9

10 NFP 12/ 02 Net Profit D&A Change Net W.C. and Provisions Capex Investm. Net Equity changes Dividend NFP 12/ ST ST LT * LT * Cashflows in line with the IPO Plan (that could not include investments) * Balance Sheet NFP Group Balance Sheet: Cashflows Effort Strong Pay Out Ratios 10

11 TOTAL CAPEX mln WTE Plants and Land fields FEA plant construction is almost completed Gas, Water and E.E. network Efficient and wider networks Strategic Projects All authorisations for the other WTE plants are expected within summer Include Project costs of the plants Group Reorganisation SAP and other reorganisations Other Business District Heating, Public Light., Funerary service and telematic regional plan 75 mln 79 mln 2 mln 28 mln 26 mln Fea (WTE) Construction Fea (WTE) Faenza (WTE) Forlì (WTE) Ravenna* (WTE) Rimini (WTE) Timing Construction Operational *Included after IPO 5 year business Plan Timing Incr. (MW) Incr. (MW) Imola (CCGT) 80 Rimini (CCGT) 230 Construction Timing Operational Operational Incr. (MW) Group Balance Sheet: Capex budgeted on track 11

12 42% AGEA 58 mln Same portfolio business Profitable and synergic with Hera 10% of Hera size 5,5% TIRRENO POWER 18 mln Third and cheapest Genco sold by Enel Other Small investments 11 mln Strategic Investments: Multi- utility Companies fit table to Hera and close to the Group operational territory Willing to merger 100% based on Hera model Significant synergy potentials Organic growth and 23 mln other changes Consolidation of Gala and Geat and IAS effect Group Balance Sheet: Significant Strategic Investments 12

13 Agea Investment Acquisition of 42% stake and further 51% stake to be acquired with exchange of shares within mln consideration (include control premium and 10 mln of capital increase). Total consideration expected at an implied EV/Ebitda: 7x (37 mln E2003 NFP) >30 mln estimated value of synergies Core Operations in Ferrara (close to Hera Group) similar to Hera business portfolio Other Consolidations Geat: Multi-utility in Riccione 3 minor activities in Municipalities close to Hera 192 Proforma 2003 EBITDA with Agea +26,4% Proforma with Agea +38,8% 23,5 266,5 E On a proforma basis the Ebitda Growth reaches +38,8% Ebitda '02 Syn & O Growth Group Balance Sheet: Successful Sector Consolidation Activities Ebitda 02 Synergy & Ebitda 03 AGEA Ebitda 03 Org. Growth Proforma Ebitda '03 Agea FEA 13

14 Dividend ,3 cents DPS 85% pay out ratio of consolidated results 49,4 million Net Profit Dividends higher than expected ( cents) 4,9 +8,2% 5,2 5,3 5,3 IPO Commitments 4,9 cents DPS 85% pay out ratio Expected 46 million Net Profit E2003 A2003 *Yield calculated on the IPO price of 1,25 Dividend Yield of 4,2%* Group Balance Sheet : Higher than Expected Dividends 14

15 Outlook 15

16 Further synergies Further Personnel, Procurement Costs and Other Savings were estimated in the IPO business plan A deeper knowledge, gathered in this year, helped to find room for new synergies FEA (WTE) Enters in operation in 2004 Incentive tariff scheme (CIP 6) Organic Growth Agea Customers and tariffs increase Full integration in 2004 Agea Expected Ebitda Growth Expected Capex 2004 of 220 mln Expected NFP 2004 of 473 mln +26,4% 192 Estimated 2004 EBITDA Growth 51 Around +20% expected growth 243 Ebitda 02 Ebitda 03 FEA Ebitda 04 Synergy & Synergy & Estimates Org. Growth Org. Growth AGEA Outlook: Expected Ebitda Growth is Visible 16

17 The sector is moving towards major changes: consolidation is the response to face increasing competition pressure First movers are considered natural points of reference of the consolidation game Hera has interesting expansion opportunities: West: Emilia Romagna region (Group focus) South: fragmented and interesting market in the region of Marche North: Natural further expansion beyond AGEA (Ferrara) in southern Lombardia and Veneto HERA A unique open ended business model to catch increasing Sector Consolidation opportunities Outlook: On Top Sector Consolidation Opportunities 17

18 Strategic expansion guidelines include the business vertical integration in the Waste business The Group is enclosed in the short list for the ENI Ambiente waste treatment business in Ravenna that is going to be dismissed by ENI Group. An opportunity to strengthen the waste treatment business Strategic Joint ventures opportunities for the construction of electric generation plants are under evaluation in order to sustain the electricity business development. Consolidations and vertical integration in Waste and Electricity business are strategic Plans to be considered On top the IPO business plan Outlook: Vertical integration opportunities 18

19 E2004 Higher Ebitda Growth than planned Outperforming 2003 results Next Agea full consolidation Profitable WTE plant (FEA) on track Better knowledge of further synergies and organic growth potentials within the Group 5 year planned Ebitda Growth in IPO Plan Planned 5 year CAGR 14,4% Confirmed IPO Plan strategic rational A new business plan is requested considering 2003 outperforming synergies and sector consolidation results A2002 A2003 E 2004 E 2005 E 2006 E 2007 Outlook: Ebitda CAGR 19

20 2003 results outperformed expectations The huge growth realised has been driven only by synergies deriving from the Hera-merger Further Ebitda Growth is expected in 2004 thanks to: Further synergies New projects (FEA) Agea consolidation Organic Growth Expansion opportunities through further sector consolidations are constantly monitored Dividends per share at 0,053 higher than expected (yield of 4,2%): confirmed the 85% pay out commitment on consolidated results for year Conclusions 20

21 Break Down by Business Appendix 21

22 Turnover: -1,9% Increased sales thanks to switch from tax to tariff of further Municipalities served Reductions of volumes in low value added waste (Chemical treatment). Ebitda: +7,0% Synergy deriving from a rational use of the plants Increase in margin thanks to focus on higher value added activities Hera is focusing on WASTE Business with a huge investment plan in order to expand WTE capacity maintaining the leadership in this profitable field 2002 % 2003 % Incr.% Sales 288,4 99,0% 284,6 99,6% (1,3%) Capitalisation of cost 2,9 1,0% 1,2 0,4% (58,6%) Turnover 291,3 100,0% 285,8 100,0% (1,9%) Other operating cost (154,0) (52,9%) (148,4) (51,9%) (3,6%) Personnel costs (79,1) (27,2%) (75,1) (26,3%) (5,1%) EBITDA 58,2 20,0% 62,3 21,8% 7,0% Incr.% Volume treated (3,9%) Landfields (3,9%) WTE (2,4%) Sorting ,3% Composit ,5% Chemical treatment (19,3%) Tax to tariff. (N. Municipalities switched to tariff) (43,5%) waiting for FEA (WTE plant in Bologna) Break Down by Business: WASTE 22

23 Sales: +8,6% Hot climate boosts pro - capite consumption Customers increase of 3,7% Tariff increase of 3,6% Higher capitalised costs following new accounting for capex Ebitda: +23,9% Higher turnover with marginal cost increase No impact of capitalised cost on Ebitda Increased profitability mainly thanks to un-elastic cost structure and synergy exploitation 2002 % 2003 % Incr.% Sales 195,4 76,4% 212,3 70,3% 8,6% Other 45,3 17,7% 35,7 11,8% (21,2%) Capitalisation of cost 15,0 5,9% 53,8 17,8% 258,7% Turnover 255,7 100,0% 301,8 100,0% 18,0% Other operating cost (137,1) (53,6%) (175,7) (58,2%) 28,2% Personnel costs (65,0) (25,4%) (59,7) (19,8%) (8,2%) EBITDA 53,6 21,0% 66,4 22,0% 23,9% Incr.% Clients ,7% Domestic clients ,5% Industrial clients ,2% Volumes (mln c/mt) 176,3 180,2 2,2% Domestic clients 116,3 118,9 2,2% Industrial clients 60,0 61,3 2,2% Fresch Water Tariff incr. 3,6% Increase in customer base and volumes, tariffs and margins Break Down by Business: WATER 23

24 Energetic activities represent 49% of Group turnover The Strong position held in Gas sector is defended with a dual fuel policy Electricity business is currently based on trading activities 310 MW of Production facilities are planned to be built Sales: +25,4% 2002 % 2003 % Incr.% Sales and other rev. 511,0 90,3% 640,7 97,3% 25,4% Heat Mgt and Pub. Light. 40,5 7,2% 0,0 0,0% 0,0% Capitalisation of cost 14,1 2,5% 17,9 2,7% 27,0% Turnover 565,6 100,0% 658,6 100,0% 16,4% Other operating cost (449,8) (79,5%) (516,2) (78,4%) 14,8% Personnel costs (36,0) (6,4%) (34,5) (5,2%) (4,2%) EBITDA 79,8 14,1% 107,9 16,4% 35,2% Cold climate boosts pro-capite consumption Gas Customers increase of 4,8% Outperform customer base increase thanks to Dual Fuel Policy Gas business outperformed expectations Electric medium sized customers increase by 6,4x Ebitda margin: +230 basis points Low procurement costs Other synergies Break Down by Business: Energy Business 24

25 Sales: +18,8% More favourable Climatic conditions vs a Hot 2002 Customer base increase following natural expansion Ebitda: +41,4% Increased turnover Procurement cost savings 2002 % 2003 % Incr.% Sales and other rev. 432,6 89,1% 514,1 97,1% 18,8% Heat Mgt and Pub. Light. 40,5 8,3% 0,0 0,0% 0,0% Capitalisation 12,2 2,5% 15,5 2,9% 27,0% Turnover 485,3 100,0% 529,6 100,0% 9,1% Other operating cost (382,6) (78,8%) (400,0) (75,5%) 4,5% Personnel costs (32,2) (6,6%) (29,9) (5,6%) (7,1%) EBITDA 70,5 14,5% 99,7 18,8% 41,4% Other savings Dual Fuel policy applied, on gas customers helps to fidelise medium sized customers 2003 figures do not include activities reclassified in Other Business Incr.% Clients ,8% Domestic Industrial and medium sized c Volumes ,1% Domestic Industrial and medium sized c Avg. sales price per c/ mt ( ) 0,299 0,302 1,0% Benefit from synergies and Growth Break Down by Business: GAS 25

26 Turnover: +61,5% Commercial success (6,4x customers) Expectations outperformed in slightly more than half a year Ebitda: -11,8% Decreasing trade margins as expected Planned CCGT plants to gather the margins on production Electricity prices used as a commercial tool to preserve Gas customers Electricity business finalised to serve local customers 2002 % 2003 % Incr.% Sales and other rev. 78,4 97,6% 126,6 98,1% 61,5% Capitalisation of cost 1,9 2,4% 2,4 1,9% 26,3% Turnover 80,3 100,0% 129,0 100,0% 61,5% Other operating cost (67,2) (83,7%) (116,2) (90,1%) 72,9% Personnel costs (3,8) (4,7%) (4,6) (3,6%) 21,1% EBITDA 9,3 11,6% 8,2 6,4% (11,8%) Incr.% Clients ,3% Domestic ,5% Industrial and medium sized c ,5% Volumes (GW/h) ,4% Domestic (5,9%) Industrial and medium sized c ,2% Trader Avg. Tariffs Domestic 7,53 6,22 (17,4%) Industrial and medium sized c. 5,86 6,13 4,6% Dual fuel approach gathering a first strong growth in customer Break Down by Business: ELECTRICITY 26

27 Turnover The two reclassified businesses account for around 50% of turnover New service added in 2003 (Funerary in Bologna) Ebitda Sales Capitalisation of costs 2002 % 2003 % Incr. % 24,2 88,3% 83,7 82,5% 245,9% 3,2 11,7% 17,7 17,5% 453,1% Turnover 27,4 100,0% 101,4 100,0% 270,1% Other operating cost (17,6) (64,2%) (72,2) (71,2%) 310,2% Personnel costs (9,4) (34,3%) (23,2) (22,9%) 146,8% EBITDA 0,4 1,5% 6,0 5,9% 1400,0% Better margins are expected thanks to synergy and growth potentials Public Lighting business with light points Further rationalisations in progress to exploit synergy and growth potentials Funerary 22% Other 21% Sales 2003 Ebitda 2003 P Light. 25% Heat Mng. 32% Funerary 42% Other 15% Heat Mng. 7% P Light. 36% Huge increase thanks to Heat Mng./District Heating and Public Lighting reclassification and addition of new services Break Down by Business: OTHER 27