Hera achieved significant half-yearly growth in terms of both size and quality.
A more favourable scenario than that of the first part of 2020, with regard to the effects of the pandemic and the climate, only partly explains the 10.4% progress in EBITDA: organic growth continued indeed, together with that driven by M&A. Comparison with pre-Covid levels of the first half of 2019 indicates even greater progress, in the order of 13.2%.
In liberalised areas, Hera has proven its ability in leveraging higher volumes as well as the incentives for energy efficiency included in the National Recovery and Resilience Plan, achieving significant returns, also in terms of sustainability.
The acquisitions recently made in the Waste business are set to create value, strengthening plant capacity and geographical expansion opportunities. The strong cash generation in the first half of the year has also made available new resources that increase our financial firepower to fund further M&A opportunities.
A set of healthy semi-annual results, which highlight a solid growth model
in the first half of 2021, we have achieved a significant growth, both in terms of operating margins and in terms of P&L bottom line. Against a 10.4% EBITDA increase, both EBIT and Net Profit are even more dynamic, with increases of 16.2% and 30% respectively. This growth, which is significant in absolute terms, is even more appreciable when analysed considering the context in which it took place and the nature of its various components.
The strong EBITDA increase – 58 million euro in these first six months of the year – reflects the solid contribution of 24 million euro from organic growth drivers as well as an early contribution from the M&A deals recently signed, for an amount of 3.5 million euro; on top of these sound results, there are those deriving from the activities to recover the Covid-19 impacts, which have provided a contribution of 30 million euro.
Noteworthy, in 2020 Hera had continued its path of uninterrupted growth, started in 2002. Therefore, the EBITDA reached in 2021 indicates a significant growth, at a 13.2% rate, even compared to first-half 2019.
Liberalised areas have driven the improvement in Group EBITDA
The increase of 58.2 million euro at EBITDA level was fuelled not only by a return to more normal operating conditions but also by organic growth, which provided a contribution of 24 million euro, and by the growth achieved via M&A, which provided an early contribution of 3.5 million euro.
Another element that qualifies the nature of this set of results is the evidence that all the strategic areas made a positive contribution.
The most significant boost came from non-regulated areas, where Hera proved its ability to position itself in a timely and effective manner to take full advantage of an economy emerging from the pandemic-induced crisis by leveraging volume expansion.
In the Energy area, in more detail, Hera has been able to intercept the opportunities provided by the National Recovery and Resilience Plan – i.e., the Recovery Plan of the Italian government – offering solutions linked to the “ecobonus” incentives, with a convenient formula for condominiums, which brings interesting returns in economic terms for the Company and contributes to carbon neutrality.
Three acquisitions in Waste, to strengthen and expand into adjacent territories, while creating value
On the M&A front, we achieved satisfactory results in these months of 2021. The recently acquired Recycla, which has been consolidated as of 1st January 2021 retroactively, contributed with 3.5 million euro to Group EBITDA. On a yearly basis, we must expect that the enlargement of the perimeter will be an even greater contributor. In 2021, we have signed other two acquisition in the Waste sector, in addiction to that of Recycla: SEA, in which we currently own a 31% stake, with a view to achieving 100% of the share capital by 2023, and a third deal, whose closing has been set on 9 September 2021. The aim is to strengthen Hera’s facilities, particularly in areas on the fringes of our territory, where having a strong presence is essential for further geographical expansion.
With a total consideration for the three acquisitions of 123 million euro in terms of Enterprise Value, we have secured a treatment capacity of 236,000 tons per year, against an EBITDA of approx. 20 million euro. These are three operations that will also create value because we expect that cumulative EBITDA will grow by 25% over the coming years through the extraction of synergies.
From cash generation, new “firepower” to fund further M&A
In first-half 2021, Hera has generated a Free Cash Flow of 270 million euro that allows us to look to the future with confidence. On 7 July 2021, Hera paid a more generous dividend than that originally envisaged in the Business Plan, considered the sound results achieved in 2020 despite the hard scenario. Even after the payment of the 2020 dividend, we will therefore have considerable residual resources available, allowing us to seize further opportunities in the fragmented Waste market.
All in all, these results that went well beyond expectations also strengthen the resources needed to fund future growth, given the strong cash generation.
Hera: a company capable of continuing to grow by adapting to new scenarios
Lastly, first-half performance confirms some structural strengths of Hera: a company that can promptly and effectively adapt its portfolio of activities to new scenarios, even if they present major discontinuities or changes in the regulatory framework.
However unforeseen and complex the playing field conditions may be, over time Hera has shown that it can count on a clear strategy, a solid business model and professional, tenacious people who are able to deliver consistent growth.