After the brilliant results achieved in 2023, which provide a challenging basis for comparison, Hera manages to deliver further progress in the first half of 2024, as proven by EBITDA increasing by 2%, EBIT improving by 2.8%, and Earnings per Share up 16%.
The half-year growth in Group EBITDA is based on structural components and fully organic: a strong impetus came from the positive dynamics of Networks, where Hera has taken full advantage of the new regulatory framework, and from the strong position in industrial waste treatment. Significant expansion was achieved in the energy customer base, with a million new customers entering the Gradual Protection service as of July 1.
While the investments envisaged in the Plan continue and the commitment to share the healthy results of the business with shareholders is maintained, the solid financial profile remains intact, with leverage of 2.7 times that puts Hera in a position to seize new M&A opportunities.
Dear Shareholders,
Hera is consistently following the growth path outlined in the 2023-2027 Business Plan, with half-year results providing further evidence and strength to the signs already emerged in the first quarter.
A forward-looking growth strategy set up and executed quarter after quarter in a structured and timely way
The 2% increase achieved at EBITDA level, which reaches 732.7 million euro, is a significant accomplishment, not only because it highlights an improvement compared to the very strong performance of 2023, but also due to the more structural quality of the drivers that fuel the growth.
In the new scenario, which saw the tax benefits of the 110% Ecobonus coming to an end, Hera leveraged on the solid organic growth of its multi-business portfolio to deliver significant improvements in results.
In the new regulatory framework, Hera fully captures the benefits of an efficient operational management
The EBITDA of regulated activities, which cumulatively accounts for 299.9 million euro, weighing for 41% of the Group Total, posted a 10.7% increase compared to the first half of 2023: a result that is the product of an efficient management of the business, able to best capture the positive effects of the regulatory review set by ARERA, which adjusted the return on invested capital to the higher levels of interest rates, allowed the RAB to evolve in line with inflation, and included new costs among those recognised in the electricity distribution business.
In the liberalised markets, Hera grows by leveraging on valuable assets: the plants portfolio in the Waste business and the customer base in the Energy services supply
In terms of consolidated EBITDA, a 37 million euro progress recorded in liberalised businesses, in addition to the 29 million euro increase in regulated businesses, more than compensated the absence of approximately 51 million euro of Ecobonus contributions that were present in the first half of 2023.
In the Waste area, Hera benefited from a strong competitive position, leveraging on a broad asset capacity and the offer of a global service. The integration of ACR Reggiani, whose acquisition was closed in March 2023, is also proving to be fully effective, with very favourable impacts in terms of new major customers entering the portfolio and steady volume expansion.
The significant expansion of the customer base recorded in the first half of the year: an asset that Hera will succeed in cultivating
In the first half of the year, we have also made substantial breakthroughs in strengthening such a key asset as the customer base. The lots won in the tender at the beginning of the year in the Higher Protection market resulted in the entry of more than one million new customers into the Gradual Protection service, as of July 1. In addition, the intensive marketing campaign allowed Hera to add about 147 thousand new customers to the liberalised market segment.
The customer base is a crucial asset that Hera has proved to be able not only to expand but also to grow and manage with profitable results over time, by leveraging a multi-utility service offer that effectively meets customer needs – as Hera’s customer churn rates, far below the industry average, demonstrate. With energy commodity prices returning to more normal levels, shaping costs also decreased, resulting in improved margins that have allowed for lower credit-risk provisions.
Therefore, the EBITDA growth achieved is valuable,
being organic in nature and reflecting both factors
linked to the business portfolio structure
and sustainable competitive advantages.
Encouraging signs also from EBIT, which is growing at a higher rate than EBITDA
Against an increase of 2.0% in EBITDA, EBIT posted a progress of 2.8%, essentially due to lower provisions, of about 16 million, for credit losses of the sales companies, because of the deflation of the energy commodities. On the other hand, the EBIT performance reflects an increase of more than 20 million in D&A, against operating investments up by about 7%, mainly concentrated in Networks and Waste treatment.
The confirmed improvement in financial management allows for the release of higher margins directly at the level of the bottom line, which grows by 16.4%
The liability management operations successfully conducted in the recent past, in addition to the normalisation of the energy scenario, now requiring lower financial funding, paved the way to a 35 million euro increase in net financial management, which, in turn, made it possible a 16% growth at the P&L bottom line, with Net Profit after minorities reaching 218.4 million euro in the first half of the year.
The investment plan continues while the leverage remains cautious
The strong cash generation in the first half of 2024 allowed for the financing of investments and the remuneration of shareholders at the end of June with a 12% higher dividend compared to the previous year, while maintaining solid financial strength: the Net Financial Debt-to-EBITDA ratio as of 30 June 2024 amounted to a prudent level of 2.7x.
Therefore, our ability to take advantage
of external growth opportunities remains intact,
given the significant financial flexibility we can count on
A closer look at the half-year performance confirms that we are delivering on our commitment to shareholders in terms of Total Shareholder Return
With a ROI that went from 8.6% of the first half of 2023 to 9.6% and a ROE increasing from 10.1% to 11.3%, we have evidence proving the greater value created in quantitative terms. The organic and structural nature of the drivers of this improvement also strengthens the effectiveness of the results in terms of quality.
Hera’s shareholders, which were remunerated with a dividend yield in excess of 4%, calculated on a share price of 3.4 euro, also benefited from a growth in earnings per share of nearly 17% in the six-month period: we are therefore well above the average TSR per year of 12% included in the Plan commitments.
A Company that is increasingly responsible towards its stakeholders, with an ever more ambitious commitment to enable the energy transition
Shareholders are not the only stakeholders towards whom we are committed to creating value. Evidence of this is the highly evolved agreement we have reached with our People, through the signing of the Good Work Deal, as well as the increasingly close partnership we have structured with key suppliers, who are so crucial in the execution of our investment plan: we want to support them in their own ESG transition path, by sharing know-how and making available a series of services tailored to their needs.
Hera continues to set new challenges in terms of environmental responsibility as well: thus, we have made a formal commitment to neutralise CO2 emissions by 2050, after we committed to cut them by 37% by 2030. Already having a low carbon footprint, we will remain focused on facilitating the reduction of Scope 3 emissions, which are produced by third parties, while we expect that in 2050 only 10% of CO2 emissions – i.e., a marginal share – cannot be abated and must therefore be compensated for.
The half-year period just ended also confirmed Hera’s ability to achieve results consistent with the Plan’s strategies and targets, by leveraging the strengths that are our true assets: an effective business model, quality assets, and a management geared to long-term sustainability – an aspect also reflected in the continuous increase of the Shared-Value EBITDA, which in this half-year period reached 53% of total EBITDA.
