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  • 1. Hera Group 2011 annual results10th financial report since establishmentAnalyst presentation, 22nd March 2012
  • 2. 2011 results at a Glance2011 annual growth rates Strong set of achievements in 2011(%) Growth underpinned by all businesses, and +11.3% particularly by Energy activities with commercial development and procurement position posting +6.2% +6.1% net growth. +5.3% M&A included Sadori Gas and 50% JV Enomondo (+9m€). Revenues Ebitda Ebit Net Profit* Positive free cash flows* accounting 317m€* Adjusted for extraordinary benefits related to advanced payments of deferred tax capex. Debt at 1.987m€ enhanced in Q4 (by ~68m€).Growing Ebitda and Ebit throughoutthe crisis Positive results in all businesses driving Ebitda(m€) up by +37.5m€ in line with business plan target. 607 645 567 Limited impact of additional Robin tax and 528453 IRAP. 315 334 Proposed dividend per share at 9c€. 281 291 221 Confirming resilience in each year of crisis period. 2007 2008 2009 2010 2011 Ebitda Ebit *Before M&A and Dividends 1
  • 3. 2011 Financial report: 10th since establishment Ever growing operating results Maintaining sustainable Debt/Ebitda (m€) 645 4700.0 607 3.3x 567 3.2x 3.0x 3.1x 3.1x600.0 2.8x 528 3 2.5x500.0 427 454 386400.0 1.8x 1.9x 293 281 291 315 334 2300.0 243 231 221 1.3x 192 216 177200.0 113 1 78 Ebitda100.0 Ebit 0.0 0 02 03 04 05 06 07 08 09 10 11 02 03 04 05 06 07 08 09 10 11 Overcoming peak in capex* Progressing dividend per share (m€) (€c) 505 10 9.0 9.0 500 472 9 442 427 429 8.0 8.0 8.0 8.0 8 400 7.0 354 7 321 325 6.0 291 6 300 5.3 5 200 177 4 3.5 3 100 2 02 03 04 05 06 07 08 09 10 11 02 03 04 05 06 07 08 09 10 11 *Gross capex 2
  • 4. 2011 results in line with planning and track records Enhancement of tariffs, 2010% 2011 Ch.% energy prices and Contribution from all volumes sold/traded. businesses and drivers. Revenues 3,877.3 4,315.9 +11.3% Ebitda 607.3 644.8 +6.2% Depreciation (223.2) (233.8) +4.7% Conservative accruals to Provisions (68.7) (76.6) +11.4% bad debts (49.7 m€) in Ebit 315.4 334.5 +6.1% difficult scenario and Net financial Interests (102.0) (106.4) +4.3% includes 7.3m€ for Financial inc./exp. IAS figurative interest* (13.6) (13.1) (3.1%) “salvaguardia service”. slightly increased in ‘11. Results from associates 5.8 6.3 +8.9% Pre tax Profit 205.6 221.2 +7.6% Tax adjusted (88.6) (102.0) +15.1% ‘10 taxes affected by Net Profit adj. 117.0 119.2 +1.9% 2011 taxes include extraord. benefits from increased Robin tax and Minorities (24.8) (22.2) (10.8%) advanced payments of IRAP (by 4.9m€) and Hera Net Profit adj. 92.2 97.1 +5.3% extraord. benefits from deferred taxes (~25m€). advanced payments of Net profit reported 117.2 104.6 (10.8%) deferred taxes (by * IAS figurative interests ("non cash out") related to provisions 7.6m€). 3
  • 5. All value drivers contributed to growth Ebitda growth drivers (m€) +6.2%700 +9.0 644.8 Organic Growth fuelled by Energy +22.5 +6.0 607.3 activities (Ebitda from 107m€ to 138m€).600 Increase in tariffs, customers, cross selling and synergies.500 New plants: WTE Rimini reached full400 capacity with power gen. turbine. 2010 Syn & New M&A 2011 Org.G. Plants M&A relates to JV Enomondo (50% pro quota consolidation) and Sadori Gas merger (accounted for from 1 July ‘11). Ebitda by strategic areas (m€) Portfolio activities show increasing Ebitda during last 4 years (+9.2% cagr). Both regulated and liberalised activities confirmed positive growth. Energy activities outperformed in last 4 years (+33.8% cagr). 4
  • 6. Positive cash flows before M&A and dividends 2011 cash flows (m€) 2011 free cash generation fully funded net +401 capex by 317 m€. Working Capital in line with 2010 despite significant turnover (317) increase. +2 (50) +35 0 (117) Financial debt reduced in Q4 from 2.055 b€ (45) (127) to 1.987 b€ thanks to better working capital management and cash flow generation. Op.CF* Net NWC Prov. CF pre Div. & M&A Debt Capex extraord. Min. Other Ch. No refinancing issues (available committed * Operating cash flows=Nnet profit + D&A+IAS interests credit lines reached ~400m€ as at today). Net debt change by quarters (m€) +14 Financial soundness confirmed: Q1 Q2 Q3 Q4 Y2011 D/Ebitda: Stable at 3.1x -50 (125) D/Equity: 1.06x-150 (84) (127) Duration: over 9 years on avg. +68-250 5
  • 7. Capital expenditure commitments confirmed Capital exp. & investments (m€) Capex further decreased in 2011 mainly due to the completion of WTE plants. 2010 2011 Waste 98.7 70.1 Water 94.2 100.6 Gas 48.8 52.2 56% capex on regulated asset base. Electricity 39.0 33.8 Other 13.3 14.0 Holding 51.8 54.2 Capex 345.8 324.9 Electricity “smart meters” roll out program Investments 8.1 0.0 (Dismissions) (12.0) (7.5) completed. Net Capex & Inv. 341.9 317.4 District Heating network expanded also in 2011 to optimize stream from generation assets. 6
  • 8. WASTE: Tackling with a tough scenario Financial highlights (m€) 2010% 2011 Ch. % Revenues up +5.3% driven by electricity production revenues (+18%) and regulated Revenues 703.1 740.1 +5.3% activities (+4%). Urban waste tariffs up by +3.3%. Ebitda 195.1 194.2 (0.5%) Economic slow down impact on Ebitda almost Volumes fully compensated by Rimini WTE results (at full regime with electric turbine) and by Enomondo 2010 2011 Ch.% consolidation (pro-quota by 50%;+7.5m€ effect). Urban W. Volumes 1,864.1 1,808.7 (3.0%) Special W. Volumes 1,608.5 1,573.3 (2.2%) Total from 3rd parties 3,472.6 3,382.0 (2.6%) Treatment mix managed to exploit green power Of which: generation capacity (0.7 TWh generated up by Landfill disposals 1,429.7 1,268.3 (11.3%) WTE treatment 800.6 923.0 +15.3% +31%), of WTE and biomass plants. Enhancement Composting treatment 463.8 574.7 +23.9% to 50.5% of sorted urban w. collection. The tender for industrial partner, aimed at construct Ebitda track record since 2002 and manage a new WTE in Florence province, (m€) was assigned to Hera in November 2011. 186 187 195 194200 156 131 151 Tackling with tough economic scenario (since 2008), focusing on high value100 86 58 62 added activities (’11 Ebitda margin 26.2% ). 0 02 03 04 05 06 07 08 09 10 11 7
  • 9. WATER: Committed to reach proper returns Financial highlights (m€) 2010% 2011 Ch. % Tariffs increase of +3.4% slightly offset by 160.1 158.3 -1.1% persistent slow down in works for third parties. Revenues 579.2 596.7 +3.0% Ebitda 142.0 150.2 +5.8% Ebitda reflects also efficiency improvements partially compensating higher electricity costs (pumping plants of soil water). Volumes Real estate industry still affecting new Data 2010 2011 Ch.% connection activity. Aqueduct (mm3) 250.8 253.7 +1.2% Sewerage (mm3) 220.0 222.6 +1.2% Confirmed original concession length (up to Purification (mm3) 220.0 221.4 +0.6% 2022 on avg). 2012 tariff increases safeguarded by Ato agreements (still in force) to progress toward Ebitda track record since 2002 proper returns (agreements in Bologna and (m€) Modena expire in 2015 and 2014 respectively).200 142 150 119 130 131 Uninterrupted resilient track record in 108100 77 94 10 financial reports in a row. 66 54 0 02 03 04 05 06 07 08 09 10 11 8
  • 10. Gas: still benefitting from commercial activities Financial highlights (m€) 2010% 2011 Ch. % Revenues growth mainly driven by higher commodity prices, larger trading Revenues 1,237.1 1,490.2 +20.5% volumes (+73.5%) offsetting mild winter Ebitda 193.9 208.7 +7.6% season. Ebitda increase mainly driven by supply Volumes and customers and trading activities. Slow down in Data 2010 2011 Ch.% District Heating activities due to mild Volumes sold (mm 3 ) 2,914.0 3,321.0 +14.0% winter (-5m€). of which trading (mm 3 ) 721.8 1,252.6 +73.5% District Heating (GWht) 534.5 499.3 (6.6%) Net growth in customer base through Customers (000) 1072.5 1114.5 +3.9% commercial expansion and M&A (Sadori Gas). Ebitda track record since 2002 (m€) Purchase portfolio for 2012/2013 ongoing. 194 209200 174 144 Sharp Ebitda increase record year 119 116 100 106 105 by year during crisis thanks to100 70 flexible procurement policies. 0 02 03 04 05 06 07 08 09 10 11 9
  • 11. Electricity: fast market expansion still progressing Financial highlights (m€) Revenues growth mainly driven by higher 2010% 2011 Ch. % volumes (+29.1%) related to “salvaguardia” Revenues 1,468.3 1,585.2 +8.0% services and market expansion (+25k and Ebitda 59.8 73.2 +22.5% +75k customers respectively). Commercial margins and power purchases Volumes and customers offset negative performance of power Data 2010 2011 Ch.% generation assets. Volumes sold (GWh) 7,744.0 9,996.1 +29.1% Volumes distrib. (GWh) 2,237.8 2,303.9 +3.0% Performance of distribution activities Customers (000) 382.5 482.1 +26.0% confirmed stable (+1m€). Ebitda margin up by 50 bp. Ebitda track record since 2002100 (m€) 73 54 53 60 Ebitda positive trend reflects short 43 position in power generation. 23 25 9 8 7 0 02 03 04 05 06 07 08 09 10 11 10
  • 12. Closing remarks‘11 results in line with plan target Strong competitiveness on energy market Business plan 2011 and positive developments on related activities underpinned positiveEbitda avg. growth (%) +5.7% +6.2% ✔ performance.Capex reduction (m€/Y) 345 317 ✔Cash flows increase +35 ✔Dividend policy no decrease Stable ✔ Business portfolio resilience shown alsoFinancial structure soundness enhance Stable ✔ during long crisis period.Market development :Electricity +60k +100k ✔ All business plan targets achieved.Gas +20k +42k ✔ M&A strengthened Waste asset base with a new biomass plant. Sadori Gas (accounted for from 1 July) merged.Market multiples* 2010 2011 Solid financial structure (3.1x D/Ebitda confirmed), no refinancing issues and D/E atMKT Cap/Book value 1.0x 0.69x 1.1xEV/Ebitda 5.9x 4.9xP/E 14.8x 11.4xDividend Yield 5.8% 8.4% DPS of 9 €c confirmed.*Calculated on 31/12/2010 and 21/03/2012 market prices respectively. 11
  • 13. 10Y Hera market multiples
  • 14. 10Y market valuation Multiples* EV/Ebitda P/E12 10,6x -16%11 10,0x -21%10 45 44 8,5x 43 42 9 8,0x 41 40 37,2x 39 38 8 37 36 35 32,3x 7 6,4x 5,9x 6,1x 6,3x 34 29,7x 31,4x 5,9x 33 32 6 5,0x 31 30 28,6x 29 28 5 27 26 25 23,4x 4 24 23 22 21 19,9x 3 20 19 18 17,7x 2 17 16 14,8x 15 14 11,7x 1 13 12 11 0 10 9 8 02 03 04 05 06 07 08 09 10 11 02 03 04 05 06 07 08 09 10 11 Mkt cap/Book value Dividend yield +42% -30% 10,00%2,4 2,3x 8,2% 2,1x 5,8% 1,7x 5,4% 1,6x 4,9% 4,3%1,4 1,2x 2,8% 2,8% 3,1% 1,1x 1,1x 1,0x 1,0x 2,4% 2,6% 0,7x 0,00%0,4 02 03 04 05 06 07 08 09 10 11 02 03 04 05 06 07 08 09 10 11 *multiples calculated on year end market prices of each year (in 2002 IPO price is the reference). 12