Message from the Executive Chairman of the Board
Sound first-quarter results strengthen Hera’s competitiveness

First-quarter results demonstrate Hera’s ability to post healthy growth rates in an improving scenario. The increase of 3.7% in EBITDA indicates that around 70% of the negative impacts related to Covid-19 and mild temperatures, which affected the first quarter of 2020, have been recovered. The Net Profit growth of 6.2% – therefore higher than that at EBITDA level – proves the positive contribution of both financial and fiscal management.

Strong cash flow generation allows for a 159-million-euro reduction in Net Financial Debt and makes Hera’s potential to fund additional growth through M&A even more visible.

Given the results achieved in these first months of the year, Hera’s competitiveness comes out even stronger. A key premise, also in view of the forthcoming tenders in regulated businesses.

Dear Shareholders,

the results of the first quarter of 2021 with EBITDA up 3.7% and net profit improving by 6.3% compared to the first quarter of 2020 once again prove that Hera is continuing along its path toward sustainable and profitable development indicated in the Business Plan.

A reassuring set of quarterly results, driven by organic growth
If we look at the external context in which we have achieved these results, we can see that, compared to the first quarter of 2020, we have faced less restrictive lockdown, particularly in the month of March, which last year had seen a complete closure of non-essential production activities and severe limits to people’s mobility. From January 2021, with the start of the vaccination campaign, the prospect of a progressive return to normality is increasingly visible. In winter 2021, the weather was also much less mild than that of 2020, with temperatures more aligned to historical averages; this has certainly had a positive impact on gas demand.

If last year, in the first quarter, the penalising effects of the pandemic had completely neutralised the benefits of organic growth, and only the entry of EstEnergy into the Group’s perimeter, following the agreement reached with Ascopiave, had allowed us to post a quarterly EBITDA increase of 5.6%, in this first quarter of 2021 the growth drivers are purely organic.

Having achieved an EBITDA of 362 million euro, we can therefore state that solely on the basis of organic growth factors, in the first quarter of 2021 Hera managed to recover around 70% of the impact of the negative factors – essentially related to Covid-19 and mild temperatures – that had affected the same period in 2020.

Net cash generated in the period triples; debt therefore declines by approximately 150 million euro
Another important highlight in this set of results is the strong cash generation, with a Free Cash Flow that has more than tripled, having reached 150 million euro, leveraging on an effective working capital management. This strong cash generation is a solid premise on which Hera can rely also in the future, as we can continue to evaluate new growth opportunities through acquisitions, while having a significant “firepower” at our disposal, which is constantly fed.

Despite the first quarter results did not benefit from any expansion in the scope of consolidation, in 2021 we expect to have a contribution from the M&A side, most likely in the second half of the year. We expect to conclude negotiations for the acquisition of three companies operating in the waste management field by the end of June.

First-quarter results make the pillars of our competitive platform even more solid
Returning to results achieved in the first quarter of 2021, it is clear that Hera has strengthened the fundamental pillars of its competitive platform, not only in creating the conditions for further organic growth and in view of the completion of new M&A transactions, but also in investments dedicated to innovation and reinforcement of the sustainability of our assets, as demonstrated by the target of a 37% reduction in CO2 emissions by 2030 a goal that SBTi itself confirms is amongst the most ambitious if we consider those presented by Italian multi-utilities. The Shareholders’ Meeting of 28 April approved the Board’s proposal to integrate Article 3 of the Bylaws with a new corporate purpose, which aims to create value shared with stakeholders over the long term.

Looking back at the quarter just ended, we have also strengthened the pillars of our financial operations: leveraging on effective working capital management, the positive cash generation resulted in a 150 million reduction in Net Debt, while Net Operating Investments grew by 23.1% compared to the first quarter of 2020. On the fiscal side, we continued to leverage on the benefits of our investments in innovation.

Ready to compete, in a phase of regulated businesses tenders
It is essential that we have made these aspects of our competitive platform even more solid, particularly at a time when we are entering series of tenders in regulated businesses for the award of long-term concessions. In gas distribution, as well as in water and waste collection, we have had to compete in recent months with bids from the major operators in the respective sectors. In these tenders, we had to put our leadership into play. Now, we are waiting for their outcome, being confident of both the excellent technical level and the quality of management and planning that we have demonstrated over the last 18 years.

Shareholders’ remuneration increases after Shareholders’ Meeting approval of 2020 dividend
The Shareholders’ Meeting held at the end of April approved the proposal of the Board of Directors to distribute a dividend of 11-euro cents, therefore 0.5-euro cents higher than that anticipated when the new Business Plan was presented last January and 1-euro cent higher than the 10-euro cents distributed for 2020. With an ex-dividend date set on 5 July 2021, Hera shares offer a yield of 3.7% on the end-2020 price of 2.98 euro.

Even in a year heavily conditioned by the pandemic, we have therefore succeeded in creating the financial conditions to provide shareholders with a generous remuneration, while we remain focused on pursuing the Plan’s targets on a more solid basis, as also proven by first-quarter performance.

Tomaso Tommasi di Vignano
Tomaso Tommasi di Vignano
12 May 2021

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