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Financial and Economic Results from 2002

P&L (ml€)2002200320042005200620072008200920102011Cagr.
Revenues1,099.31,241.01,528.92,147.6  2,364.5 2,905.1 3,792.0 4,436.03,877.3 4,315.9+16.4%
Ebitda191.9242.5292.5386.4426.7453.4528.3567.3607.3644.8+14.4%
D&A(114.3)(129.7)(115.3)(171.0)(195.3)(232.8)(247.6)(276.0)(291.9)(310.3)+11.7%
Ebit77.6112.8177.2215.7231.4220.6280.7291.3315.4334.5+17.6%
Pre tax profit75.488.6147.5189.3179.2142.5188.9162.6205.6221.2+12.7%
Tax(38.7)(35.6)(61.1)(80.5)(79.0)(32.6)(78.6)(77.6)(63.6)(94.5)+10.4%
Net profit36.753.086.5108.8100.2109.9110.385.0142.1126.8+14.8%
Minorities3.53.55.57.410.113.715.513.924.824.8+24.5%
Hera net profit33.249.581.0101.490.196.294.871.1117.2104.6+13.6%

The economic results for the entire decade show constant growth in sales, which have almost quadrupled compared with 2002 (with a strong contribution from electricity sales and activity connected with trading energy raw materials). EBITDA and Operating Income increased respectively by 3.4 and 4.3 times compared with the starting figure, with constant and uninterrupted growth.

The improvement in operating results was supported by organic growth, which contributed to two thirds of the growth in EBITDA.

 
Organic growth

Organic growth relating to synergies, operating efficiencies and development of markets constitutes the most important organic factor, with a contribution of +€219 million (equal to 48% of growth in EBITDA over the ten years) compared with €192 million in EBITDA in 2002. This factor has contributed to growth, year after year and on a continuing basis, making an incisive contribution to the rationalisation of costs in the first years and operating efficiencies in later years, while the expansion of the markets has been a constant feature throughout the decade.

Organic growth has also been supported by the development of large plants (which contributed +€83 million, equal to the 18% increase in EBITDA): five new waste-to-energy plants, two thermoelectric power plants, an 80 MW cogeneration power plant, plus the acquisition of a waste-to-energy plant for hazardous waste, a biomass power plant, several photovoltaic plants and the electricity distribution network in the province of Modena. The development of this significant plant structure has committed the Group to a challenging investment plan which has gradually started to make a contribution to results in the second part of the ten-year period. One third of the growth in EBITDA has been supported by external growth activity, which has contributed approximately +€151 million, thanks to merger and acquisition transactions which took place almost every year and which have, in effect, constituted a “constant” improvement factor in the period.

 
M&A targetyearEV/EbitdaBusinessTurnoverEbitdaNPFStake (%)
11 Companies 2002 - multi-utility 1,100.0   192.0 (252.0) 100%
Agea 2004 5.9x multi-utility 144.0 25.0 (15.0) 100%
Meta 2005 7.7x multi-utility 278.0 65.0 5.8 100%
Aspes 2007 5.5x multi-utility 90.0 13.0 (5.7) 42%
Geat  2007 7.0x multi-utility 13.0 2.0 (1.4) 100%
Modena province network 2006 8.2x Electricity network 51.0 12.0 0.0 100%
SAT 2007 8,5x multi-utility 62.0 12.0 (18.5) 100%
Aimag 2009 6,0x multi-utility 31.0 31.0 (41.0) 25%

All the core businesses contributed to EBITDA, each with average growth rates in double figures over the ten years.

Thanks to appropriate management, both regulated activities (integrated water service, collection and disposal of urban waste, distribution of methane gas, electricity and district heating) and liberalised activities (sale of methane gas and electricity, trading energy commodities, treatment and disposal of waste and public lighting) have made a balanced contribution to company results. The balanced collection of activities, thanks to the various portfolio businesses internally offsetting the effects related to external variables (GDP, inflation, taxes, exchange rates, weather conditions, etc.) has ensured that the Groups’ consolidated results for the entire period have been soundly protected.

 
Ebitda

The effectiveness of this multi-business approach has been particularly evident in 2006 and 2007 when, following an unusually mild winter, the negative effects on the results of gas and district heating activities were more than offset by growth in other business areas (unaffected by weather conditions). Therefore, in recent years, affected by the crisis in the reference context, growth in the liberalised activities of waste disposal has slowed down as a result of the fall in consumption and production levels in Italy; this dynamic has been more than offset by growth in energy sales and trading activities, in which the Group has created structures which have benefited from energy commodity market conditions caused by the macroeconomic crisis.

The results for net profit over the ten years, which have fluctuated due to changes in tax laws (and periods of disruption such as the tax moratorium, goodwill tax redemption transactions and, recently, the introduction and subsequent increase in the Robin Hood Tax) have increased to over €104 million, almost triple compared with 2002.

The Group’s economic development has been associated with maintaining a solid financial structure, which has supported the execution of a significant investment plan and mergers and acquisitions (approximately €4 billion).

 
Balance Sheet
(ml€)
2002200320042005200620072008200920102011Cagr.
Total net equity8658951,0641,4841,5161,5391,5791,7011,8701,879+9.0%
Net financial position2544445629741,1731,4321,5721,8921,8601,987+25.7%
Net invested capital1,1191,3391,6262,4582,6902,9703,1513,5933,7303,866+14.8%
D/E book value0.290.500.530.660.770.931.001.110.991.06+15.3%
NFP/Ebitda (x)1.31.81.92.52.73.23.03.33.13.1+9.8%
EBITDA/OF (x)13.912.811.09.57.95.75.64.85.35.4(10.0%)
 

This financial soundness has essentially been achieved without the help of capital increases (to which the Group only has recourse for the inclusion of new public shareholders into the Group through “reserved” increases). Financial leverage has constantly increased during the years of the implementation of the plan for constructing large plants and then decreased and stabilised over the last two years thanks to the gradual increase in cash generation by the plants constructed. Thanks to the alliance with a financial partner, with a minority share in a subsidiary and the continuous improvement in cash flows, the Group is currently renowned for the sustainability of its debt, which has a ratio of 3:1 with EBITDA and 1:1 with regards to shareholders’ equity.

Financial debt has an average duration of 9 years and is fully protected against the risk of interest rate variations. It is also accompanied by committed credit lines which have not yet been used, equal to €280 million.

Company capitalisation has also strengthened since the establishment of the Group, with reserved capital increases related to the mergers and the provision of profit sharing, resulting in shareholders’ equity of more than Euro 1.7 billion, approximately 1.5 times the market capitalisation recorded at the end of the year.