Slide 1: Analyst presentation
GRUPPO i =HER Analyst presentation HER
Slide 2: Introduction to 2004 Group results
Introduction to 2004 Group results Tomaso Tommasi di Vignano Chairman 2
Slide 3: Hera Group is today a leading player; mission to grow
Thanks to the first significant merger in the Italian Utility Sector, Hera Group is today a leading player. The Group mission is to be faithful to its “unique” and successful aggregation philosophy to: • Expand markets and vertically integrate the low risk and diversified portfolio business (Waste,
Slide 4: Strategic guidelines implemented successfully in 2003 and 04
Strategic guidelines implemented successfully in 2003 and 2004 • Achieve organic growth through cross-selling and customer Top Line base development Growth • Upstream integration in Waste and Energy through direct investments • Keep on leading sector consolidation Profitability • Further exploit syn
Slide 5: Two years results of the aggregation model
Two years results of the aggregation model 2002 2003 2004 • Establishment of Hera • Investment rationalisation • Further investment rationalisation Group through: the first and • Acquisition/Merger of Geat • Merger with Ferrara multi-utility most significant sector consolidation initiative of • Acqu
Slide 6: Two years outstanding profitable results
Hera strategy, brought to “system”, has proved to be successful Two years outstanding profitable results mln euro 2002 2003 2004 2Y Cagr % Sales 1,099 1,241 1,520 +16% Ebitda 192 242 300 +25% Net Profit 33 50 57 +31% In a fierce competitive industry, the Hera Dividend 3.5 5.3 6.0 +31% project will s
Slide 7: Hera Group Consolidated Results
Hera Group Consolidated Results Stefano Aldrovandi Chief Executive 7
Slide 8: Significant Growth track record
Significant Growth track record • Hera has recorded a fast increase in the main financial figures: • outperforming expectations already inthe first year after the Hera establishment • confirming expectations in 2004 and setting higher targets for the future • Group Ebitda has increased in 2 years of
Slide 9: Sales Growth drivers
Sales Growth (16% cagr in 2 years) balanced drivers for market expansion Sales Growth Drivers Sales +22% mln euro Org. 1,519 Growth 35% Sector Consolidation 35% 1,241 Dual fuel 1,099 30% mln euro 2003 2004 2Y 2002 2003 2004 Sector C. 0 +146 +146 Dual fuel +48 +78 +126 Org. Growth +94 +54 +148 Total
Slide 10: EBITDA up by +108 mln € in 2 years
EBITDA up by +108 mln € (25% cagr) in 2 years driven by Internal growth and Sector Consolidation Ebitda Growth Drivers Sector +24% Cons. Ebitda Synergies 23% mln euro 300 31% 242 (18.3%) +77% Organic (18.2%) Growth 192 46% mln euro 2003 2004 2Y (16.9%) Org. Growth +27 +22 +49 2002 2003 2004 Synergie
Slide 11: Ebitda - Organic Growth
Organic Growth Tariff 34% Volume 53% Ebitda - Organic Growth FEA 13% mln euro 2003 2004 Total Volumes incr. +15 +11 +26 Tariff incr. +12 +5 +17 FEA WTE* 0 +6 +6 Total +27 +22 +49 *FEA WTE entered into operation in October 2004 Ebitda: Organic Growth 11
Slide 12: Ebitda - Synergies
Synergies Other saving Personnel 35% 26% Ebitda - Synergies mln euro 2003 2004 Total Gas Proc. Gas Procur. +12 +1 +13 39% Personnel c. +5 +7 +12 HC reduction (214) (105) (319) Cost cutting +6 +3 +9 Total +23 +11 +34 Ebitda: Synergies 12
Slide 13: Ebitda - Sector Consolidation
Sector Consolidation Centro Ecologico di Ravenna 7% Ferrara multi-utility 93% Ebitda – Sector Consolidation mln euro 2003 2004 Total Ferrara multi-ut. +0 +23 +23 CE of Ravenna* +0 +2 +2 Total +0 +25 +25 *Centro Ecologico of Ravenna acquisition was signed in September 2004 Ebitda: Sector Consolidatio
Slide 14: Ebit
Operating Profit growth at 36% cagr over the last 2 years. Ebit mln euro +27% 144 +45% 113 78 2002 2003 2004 EBIT 14
Slide 15: Net profit
2004 Net Profit grows by 14%. The increase is up to +39% excluding 9 mln € 2003 extraordinary tax benefits. Net profit +14% mln euro 57 50 9 33 41 2002 2003 2004 Net Profit 15
Slide 16: Earnings per share
Earning per share: Cagr +27% in 2 years. In 2004 share capital increased by 46.7 mln shares following the merger of Ferrara multi-utility Eps euro cent 6.8 6.2 4.2 2002 2003 2004 N. of shares 785.8 mln 793.2 mln 839.9 mln Earnings per Share 16
Slide 17: Operating and Free Cash Flows
Operating Cash Flows increased by +42% in 2004 Free Cash Flows improved by +54% mln € 2003 2004 Incr. % Net Profit 50 57 Deprec, Amm.& Accruals 125 155 NWC (26) 32 Operating CF 149 244 +42% Capex & Investments (320) (276) Leasing effect, Minorities & Other 9 (23) Ferrara multi-utility Consolidation
Slide 18: Net Financial Position 2004
Net Financial Position: Outperformed expectations Net Financial Position 2004 mln euro Capex& Agea '03 NFP 03 Oper. CF Investm. Consol. Other Dividends NFP 04 mln euro 244 (444) (276) (20) (23) (42) (561)* *Including 100% of FEA financial net debts (equal to 81,8 mln €) mainly related to a non- reco
Slide 19: Debt/Equity
D/E ratio permits further expansion opportunities and implies a low exposure to changes in interest rates. Debt/Equity % 57,3% 49,7% 29,3% 2002 2003 2004 Debt to Equity 19
Slide 20: 2004 Capex & Investments
Operating Capex and Investments in “up stream” activities. 2004 Capex & Investments mln euro 276 2 23 202 49 42 29 37 67 27 Capex Capex & g * er gy . a er te .E er n ol Investm. th as at di er th C r ve O ol W En O W H Te et *Net of Italgestioni and other investment rationalisations N Capex & Invest
Slide 21: Return on Invested Capital
Return on Invested Capital increased by 250 basis points Return on Invested Capital % 9,4% 8,4% 6,9% 2002 2003 2004 ROI 21
Slide 22: Low Group Risk Profile
Low Group Risk Profile Balanced business portfolio Low gearing S&P’s S&P’s A+ A+ Strong track record rating rating Sound economic perspectives ... not forgetting … ISO 9001, ISO 14000, EMAS cert. Positive customer satisfaction (88%) Risk Profile 22
Slide 23: Conclusions
Conclusions • 2004 results confirm the significant growth of Hera business model • Synergy exploitation and Organic growth increased the profitability in 2004 from top to bottom line • 2004 ROI is up by 100 basis point with significant capex & investments • Low risk profile and leverage confirmed in
Slide 24: Breakdown by business
Breakdown by business Roberto Barilli General Manager 24
Slide 25: EBITDA by business
300 mln € 2004 Ebitda target confirmed mainly thanks to Waste, Water and Other activities EBITDA 2004 Ebitda Increase: +58 mln € mln euro Contribution by Business Other Water 19% 20% +58 mln€ 300 Energy 15% 242 Waste 46% 192 Contribution by Company Ferrara CE di Ravenna 40,9% 2,9% Energy Energy Ener
Slide 26: Waste: Sales Growth Drivers
2004 Sales Growth: +77 mln€ (+27%) Sales* 362 Increase Breakdown 288 285 CE di Ravenna 6% Ferrara 45% Hera 2002 2003 2004 49% * Including transactions at market prices among business areas and excluding Work in progress Drivers & Data Volumes RS RU k tons mln euro 2004 2,676 2,490 2,393 Service incr
Slide 27: Waste: Ebitda Growth Drivers
2004 Ebitda growth: +27 mln € +44% 2004 Ebitda drivers 89 Other S. Volumes 19% 22% 62 58 mln euro Tariff EE WTE 33% 26% 2002 2003 2004 mln euro 2004 C. E. di Ravenna Service increase & Other +5 6% Volumes increase (+12%) +6 Hera 60% Tariff increase (+3.9%) +9 urban waste collection & Treatment Ferra
Slide 28: Waste: Highlights
Highlights • The new waste to energy plant of Bologna contributed to results starting from October 2004 • The Autorità Territoriale d’ambito Ottimale (“ATO”) has set an yearly average tariff increase of +2.5% on urban waste collection and treatment for the years 2005-2007 in line with Hera plan. • 2
Slide 29: Water: Sales Growth Drivers
2004 Sales* Growth: +57 mln€ +23% Increase Breakdown 305 241 248 Hera 46% Ferrara mln euro 54% 2002 2003 2004 Drivers & Data Volume mln mc 206 mln euro 2004 180 176 Organic Growth +43 Of which Ferrara operation +31 Other Services +14 Tariff increase +0 Total increase +57 * Including transactions at
Slide 30: Water: Ebitda Growth Drivers
2004 Ebitda growth: +12 mln€ (+18%) +18% 2004 Ebitda drivers Org. 78 Growth 66 92% 54 mln euro Tariff 0% Other Service 2002 2003 2004 8% mln euro 2004 Ferrara Organic Growth +11 38% Of which Ferrara operation +4 Other Services +1 Hera Tariff increase +0 62% Total increase +12 Water: Ebitda Growth Dr
Slide 31: Water: Highlights
Highlights • The Autorità Territoriale d’ambito Ottimale (“ATO”) has set an average yearly tariff increase of +3.65% on water services for the years 2005-2007 slightly better than expectations (all contracts are signed) • Obtained 10 years longer Water concessions (guaranteed business of over 5.0 bl
Slide 32: Energy: Sales
2004 Sales* growth: +154 mln € +24% Increase Breakdown 795 Gas Hera Electricity 10% 641 205 551 Electricity EE 127 Hera Electricity 78 Gas 51% mln euro Agea Gas 39% Gas 590 Gas 514 473 2002 2003 2004 * Including transactions at market prices among business areas and not including Work in progress En
Slide 33: Energy: Sales Growth Drivers
2004 Sales* Growth: Gas and Electricity drivers Drivers & Data Volume mln mc 1.912 mln euro 2004 1.661 GAS Volume increase +97 1.444 Tariff/Prices increase (29) Other services increase +8 Total increase +76 2002 2003 2004 Drivers & Data Volume GWh Domestic Business Trading 2,282 Electricity 43 mln e
Slide 34: Energy: Ebitda Growth Drivers
2004 Ebitda growth: +8 mln€ (+7%) +7% 2004 Ebitda growth drivers EE Volume 116 EE 23% Electricity 108 8 Tarif./Marg Electricity . 8 (31)% 80 Electricity Gas mln euro 9 Gas 109 Volume 100 Gas Gas 204% 71 Tariff/Marg in Gas (96)% 2002 2003 2004 Gas Ferrara mln euro Gas EE 2004 89% Volumes +17.0 +1.9 +
Slide 35: Energy: Highlights
Highlights • Dual fuel commercial proposal has significant results in Electricity sales expansion on Hera gas and positive returns in terms of customer retention Gas Churn Rates Gas client change in 2004 (units) Gas volume change in 2004 (mln mc) Cum. Additional Lost Cum. Dec. 03 New Clients Lost cl
Slide 36: Other: Sales Drivers & Data
2004 Sales* Growth: +43 mln € (+51%) +51% D.H. Volumes 434 GWht 127 270 280 84 mln euro 24 P2002 2003 2004 2002 ** 2003 2004 Increase Breakdown Light Towers 249 Kunit Ferrara 202 43% 183 Hera 57% * Including transactions at market prices among business areas and not including Work in progress P2002
Slide 37: Other: Ebitda Growth
2004 Ebitda growth: +11 mln€ (+183%) Increase Breakdown Ferrara +183% 25% 17,0 Hera 75% Drivers & Data mln euro 6,0 mln euro 2004 District Heating +5 0,4 Public Lighting +2 2002* 2003 2004 Other services +4 Total increase +11 * 2002 figure does not include District Heating and Public Lighting Other:
Slide 38: Other: Highlights
Highlights • Ferrara multi-utility consolidation contribution in Other business was significant in 2004 (mainly District Heating) • Public Lighting growth was equally driven by Hera internal growth and Ferrara consolidation • The above mentioned business still highlight synergy and growth potentials
Slide 39: Hera complementary business portfolio
Hera complementary business portfolio Hera Business Portfolio Group Ebitda Breakdown Other 5,7% WASTE Water 25,9% Energy Low relation among 38,7% WATER OTHER business drivers Waste 29,7% GAS ELECTRICITY In 2004 Hera Group achieved results thanks to this “Low- Risk-Related” businesses portfolio Portf
Slide 40: Conclusions
Conclusions • Ferrara multi utility contribution to future results will increase thanks to the significant synergy and growth potentials (+9 mln€ in 2005-2007) • Bologna new WTE entered into full operations in October 2004 • 2004 results have been reached also thanks to important internal growth rat
Slide 41: Conclusions
Conclusions Tomaso Tommasi di Vignano Chairman 41
Slide 42: Hera 2 years Trends
Hera 2 years Trends Hera 2Y Growth cagr % Sales +16,0% EBITDA +25,0% Net Profit +30,7% Dividend +30,9% Total Return '04 * 75,2% * Dividend yield based on 2004 average stock price of 1.73€ and capital gain in 2004 Hera Historical Trends 42
Slide 43: ... and the upcoming future
… and the upcoming future 1. On the basis of last two years results Business Plan confirms to be “consistent and achievable” 2. First 2 months showed results in line with budget and for 2005 deployment will work on well known drivers: • Further headcount reduction (-100 units) and cost synergies • E
Slide 44: Appendix
ah Appendix 44 B=HERA
Slide 45: Profit & Loss
Profit & Loss mln euro 2003 % 2004 % Inc% Sales 1,221.5 91.8% 1,491.4 91.0% 22.1% Other revenues 109.8 8.2% 147.6 9.0% 34.4% Value of production 1,331.3 100.0% 1,639.0 100.0% 23.1% Raw Materials (520.6) (39.1)% (619.6) (37.8)% 19.0% Other Operating costs (375.8) (28.2)% (498.7) (30.4)% 32.7% Personn
Slide 46: Balance sheet
Balance sheet mln euro 2003 % 2004 % Intangible fixed assets 386.1 26.9% 379.5 24.8% Tangible fixed assets 774.4 68.0% 1167.3 76.2% Financial fixed assets 44.9 11.7% 167.9 11.0% Total Fixed Assets 1427 106.6% 1722.4 111.8% Net Working Capital 89.2 6.7% 56.7 3.7% (Provisions) (177.4) (13.3%) (238.8)