Message from the Executive Chairman of the Board
In Q1, growth goes together with a significant deleveraging

Hera opens 2023 with reassuring results from the first quarter, not just for the entity but also for the quality of the progress achieved.

All typical drivers contributed to the 9.4% increase in EBITDA: organic growth, mainly supported by the expansion of the customer base in the Energy areas and the strong competitive positioning in Waste, as well as activities that promote the circular economy and M&A.

Operating cash flow generation covered increasing capex and the disbursement for acquisitions, while the depletion of stored gas reserves contributed to the debt reduction of 472 million euro.

Therefore, evidence emerging from quarterly performance confirms Hera’s successful approach in managing challenges and scenario uncertainties, setting the conditions for continued growth along the Business Plan trajectory, while maintaining a very cautious risk profile.


Dear Shareholders,

the results achieved in the first quarter of 2023 offer a vivid demonstration of the growth that Hera can achieve despite the difficult external context, characterised by persistent geopolitical tensions, inflation in the energy markets and high cost of money induced by Central Banks’ tightening policies, aimed at fighting inflation during a still uncertain phase of economic recovery.

Quarterly performance reflects a choral improvement

All key performance indicators in Hera Group’s P&L show progress, starting with Revenues – underpinned by the continued expansion in the number of customers and higher volumes in the areas of Energy and Waste – down to the bottom line, i.e., Net Profit post minorities, which is up by approximately 1%. Despite higher Net Financial Charges – mainly related to an increased working capital due to the expansion of Revenues – the Group’s Net Profit improved, leveraging on the growth achieved at operational level, with a 9.4% rise in EBITDA and 6.7% progress at EBIT level.

With the decline in gas storage, deleveraging has also begun

As at 31 March 2023, the leverage, calculated as Debt-to-EBITDA ratio, is down at 2.84x, mainly as a result of the sale of the gas reserves that we had prudentially stocked from spring 2022 to face possible negative effects of the energy crisis, with a total investment of about 878 million euro. This choice allowed us to meet customer demand and ensure the continuity of the Group’s business in activities that involve energy absorption.

With the beginning of the thermal season, the amount of gas reserves in the storage facilities was progressively reduced, with a resulting benefit on the financial leverage. In fact, the leverage was above 3.6x in Q3 2022, then with the thermal season it first dropped to 3.2x at 2022 year-end and then to 2.84 in Q3, with the end of the winter.

Investments continued, underpinning the Group’s steady growth

In the first quarter 2023, we made investments for a total of 216 million euro, 60% up compared with the same period of 2022, mainly as a result of the acquisitions of ACR Reggiani and Asco Tlc, but with a significant weight also of the capex component, which increased by 21% reflecting – among other things – the important revamping works of the two WTE plants in Trieste and Ravenna.

The choice to stock a significant gas reserves proved to be rewarding

Therefore, cash flow generated by operating activities in the first quarter covered technical investments and the M&A disbursement – both increasing – while the reduction of gas stock favoured the 472 million euro decrease in Net Financial Debt recorded at the end of Q1 2023.  

With the results of this first quarter,
therefore, we have fully demonstrated the
validity of the risk hedging policies
implemented. Our Group succeeded in
navigating through the most uncertain
phase of the energy crisis, maintaining the
prerequisites for smooth operations while
continuing to fuel future growth.

The path of EBITDA growth continues uninterrupted, by leveraging a diversified set of drivers

The growth of over 35 million euro of the Group EBITDA, which reached 410.2 million euro, was driven by several factors. About 15 out of the 35 million of total growth can be attributed to organic growth, boosted by the expansion of market shares in gas and electricity, also in the last resort segments. The activities related to the circular economy – Energy Efficiency and Value-Added Services – confirm their fundamental role, and not only in terms of achieving environmental sustainability objectives, with a contribution to Group EBITDA in the quarter of 14 million euro. An additional 6 million euro increase can be attributed to the contribution of the newly acquired companies, Macero Maceratese and ACR Reggiani.

Even the portfolio diversification under a multi-business approach once again proves to be an essential element

The continuous growth enabled by Hera’s multi-utility model is clearly reflected in the performance achieved in this last quarter, driven, respectively, by the successful actions in commercial development and the stable margins in Energy, as well as the benefits deriving from the leadership position in Environment. In fact, the boost from these two areas more than offset the slight decline in regulated activities, due to an increase in operating costs.

Value creation continues even below EBIT

Hera has also created value in these last three months through a careful financial and fiscal management. On one hand, thanks to the long average duration of loans, the average cost of debt remained below 3% despite the sharp rise in interest rates, while, on the other hand, the tax rate fell by about one percentage point compared to the same period last year, to 26.8%, through the tax optimisation opportunities that were seized. Even after the end of the first quarter, we successfully continued the policy of optimising our debt profile, as we closed ESG financing transactions for about 1 billion euro, of which 600 million euro related to a Sustainability-Linked Bond, with benefits in terms of lengthening the average maturity of Hera’s entire debt stock.

Dividend distribution allows shareholders to benefit from the value that Hera creates over time

After the approval at the AGM held on 27 April, shareholders will receive a dividend of 12.5 euro cents per share from 21 June 2023, up 4% from the 12.0 euro cents of the 2021 dividend. The value that the company creates through the management of its activities is thus shared with shareholders, through a remuneration that the Business Plan envisages rising to 15 cents for the financial year 2026.

First-quarter 2023 results offer reassuring evidence  

In my new role as Hera’s Executive
Chairman, I can only be comforted by this
first quarter’s performance. We are
entering with the right pace into a 2023 that
will see us engaged in the execution of our
five-year Business Plan.

A scenario, however, that we proved able to manage, leveraging on prudential policies and careful execution of the Business Plan’s guidelines. Further evidence of the effectiveness of our strategic approach comes from the debt decrease recorded as we used the reserves of gas purchased in 2022, in line with the supply contracts signed with clients at fixed prices.

Hera can therefore continue along its growth path to 2026, maintaining a solid capital profile

With the premise of positive quarterly results, we can state to be well on track with the execution of the Plan, having already covered 44% of the 250 million euro increase of the EBITDA, which represents our five-year growth target. The reduction of the Debt-to-EBITDA ratio below 3x brings us back to a position of financial flexibility. Therefore, should the right occasion arise, we could seize additional investment opportunities beyond those already indicated in the Plan, while sticking to a logic of capital allocation inspired by value creation and long-term sustainability.

Cristian Fabbri
Cristian Fabbri
10 May 2023
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