Ascopiave S.p.A. (ASC) Earnings Call Transcript & Summary

Welcome to the presentation of the results as of 31st March 2023 of Ascopiave. [Operator Instructions] Now Dr. Nicola Cecconato, Chairman and CEO of the company, is going to talk to you.

Thank you very much. Hello. Let me start with the consolidated results as of 31st of March 2023 and comparison with 31st March 2022. Let's go to Slide Page 4, structure of Ascopiave Group as of 31st March 2023. The slide shows the group's corporate structure as of 31st March 2023. The scope of consolidations undergone some changes compared to the first quarter of last year as a result of the extraordinary transactions finalized in recent months. In April 2022, Ascopiave expanded its perimeter in the gas distribution sector by acquiring the majority stake in Romeo Gas. Pursuant to the agreements signed with the minority shareholders, the latter completely exited from the shareholding structure of Romeo Gas. At a group through a demerger transaction finalized October 2022 and the Iren Group, January 2023 through the sale of its minority interest in the company. In January 2023 start of an overall territorial rationalization of its portfolio of concessions, certain business activities relating to the management of a number of concessions into the management of concessions Piedmont, Liguria and Emilia-Romagna were transferred to the group. March 2023, Ascopiave acquired the majority stake in Asco TLC, the company operating in the information and communication technology sector. The related data are fully consolidated in the group as of 31st March 2023. Consolidated income statement first quarter 2023. Slide Page 5. In the first quarter of 2023, the group realized revenues of EUR 40.7 million, achieving an EBITDA of EUR 22.3 million and an EBIT of EUR 8.4 million. The balance of financial expenses and income showed a negative value of EUR 2.7 million, up mainly due to the increase in interest rates on financial debt. Income from company's consolidated using the equity method amounting to EUR 0.6 million represents the pro rata result of Ascopiave's holdings in the EstEnergy Group and in Cogeide. Taxes weigh on the income statement for EUR 0.7 million. The tax rate calculated by normalizing the pretax result or the effect of the consolidation of the company's consolidated using the equity method on business disposals realized in January 2023 was 41.8%. Slide on Page 6, consolidated balance sheet. As of 31st March 2023, the group had an invested capital of EUR 1.307 billion. They consist of EUR 149.1 million from tangible fixed assets, EUR 776.7 million from intangible fixed assets, EUR 426.6 million from the value of minority interest held in EstEnergy, EUR 339.9 million, Hera Comm EUR 54 million, Acinque EUR 24.3 billion and Cogeide EUR 8.5 million, EUR 44.7 million from other fixed assets, EUR 93.4 million from the negative balance of working capital items and provisions. EUR 3.7 million from the net invested capital on the assets earmarked for sale relating to the gas distribution plan that in April 2023 was sold to the successful bidder of the ordinate. The intangible fixed assets show an asset, EUR 776.7 million mainly consists of gas distribution networks and plants owned by the group, EUR 682.6 million and goodwill recognized foreign business combination, EUR 75.3 million property, plant, equipment, real estate represent the intangible fixed assets. Shareholders' equity as of 31st March 2023 amounted to EUR 874.2 million, of which EUR 19 million was attributable to minority interest. Net financial position EUR 433.3 million, an increase of EUR 21.5 million compared to 31st December 2023. Debt-to-equity ratio is 0.50. Slide Page 8, operating data and gas distribution company's consolidated on a line-by-line basis. As of 31st March 2023, the group's distribution companies managed approximately 880,000 users, and in the first quarter, distributed 592 million cubic meters of gas through the networks, of which 83 million cubic meters related to the new consolidated scope of operations. Operational data, renewable energy, Slide Page 9, 31st March 2023, the group has 28 plants for the production of electricity from renewable sources, installed capacity 62.5 megawatts. In the first quarter, electricity production amounted to 20 gigawatt. The volume generated due to the period of dry weather was significantly lower than the historical average recorded in recent years. Revenue development Slide Page 10. Revenues amounted to EUR 40.7 million, an increase of EUR 6.6 million determined by the extension of the scope of consolidation duly acquired companies, EUR 4.5 million, increase of EUR 0.5 million in gas distribution tariff revenues, growth of revenues for energy efficiency certificate EUR 1.8 million, a decrease in other revenues of EUR 0.2 million. The operating results. The operating result of EUR 8.4 million showed an increase of EUR 5.5 million due to the effect of the extension of the scope of consolidation to the newly acquired companies, EUR 0.1 million, increase of EUR 0.5 million in gas distribution tariff revenues, increase in depreciation, EUR 0.4 million, decrease in net operating expenses, EUR 5.3 million. The result of the renewable energy sector was decisively influenced by the adverse climatic conditions with volumes produced well below normal levels of production as well as by the negative impact on the measures of the support degree, which affected all the companies in the sector. The contribution of the activities acquired in the gas distribution sector was positive and in line with expectations. Tariff revenue, Slide Page 12. Gas distribution tariff revenues amounted to EUR 29.8 million, an increase by EUR 3.9 million compared to the first quarter of the previous year, mainly due to the effects of the lag scope of consolidation for EUR 3.5 million. Other net operating cost, Slide Page 13. Net operating expenses of EUR 9.5 million decreased by EUR 3.2 million due to the change in the following cost items. Expansion of the scope of consolidation to include newly acquired companies, EUR 2.1 million, lower concession fees to municipalities, EUR 0.1 million, lower personnel costs EUR 0.1 million, lower consulting costs, EUR 1.1 million, higher costs for gas and electricity utilities related to the increased cost of energy used in different processes, capital gains from the sale of equity investments, Iren Group, certain concessions for the management of the distribution service Liguria, Piedmont, Emilia-Romagna, EUR 4.0 million, increased other nonrecurring costs, EUR 0.8 million, other changes of EUR 1.1 million. Number of employees, Page 14. As of 31st March 2023, group had 507 employees, a decrease of 6 compared to 31st December 2022. Personnel costs, EUR 5.4 million is the cost, an increase of EUR 0.2 million, mainly due to the expansion of the scope of consolidation to the newly acquired companies. Investments, capital expenditures in the first quarter of 2023 was EUR 13.8 million, an increase of EUR 0.8 million. The expansion of the scope of consolidation led to investments of EUR 0.9 million in the gas distribution sector. On a like-for-like basis, most of the technical investments concerns the development of maintenance and modernization of the gas distribution networks and plants, EUR 8.3 million, of which EUR 3.9 million in connections, EUR 4.1 million expansion and upgrades, EUR 0.4 million in reduction plans. Investments in measuring equipment amounted to EUR 2.7 million, while investments in the renewable energy sector, mainly for the development of new wind farms in Calabria, was EUR 1.6 million. Net financial position and cash flow. The net financial position, 31st March 2023 was EUR 433.3 million, an increase of EUR 21.5 million compared to 31st December 2022. During the first quarter of 2023, cash flow was EUR 17.5 million. Net investments in tangible and intangible assets had cash outflows of EUR 13.5 million. Net working capital management absorbed in resources of EUR 3 million, sale of gas distribution activities at the Iren Group, January 2023 led to a realization of EUR 14.3 million. Company acquisitions made during the year resulted in financial outlays of EUR 38.5 million and a reduction of EUR 1.8 million in the consolidated net financial position. The outlays referred to the acquisition of 19.7% minority stake in Romeo Gas from the Iren Group and 55.2% of the capital of Asco TLC. Net financial position and cash flow. Financial debt as of 31st March 2023 amounted to EUR 428.7 million, loans at 34% variable rate and weighted average cost of debt in the first quarter of 2023 was 1.91%. EstEnergy, income statement, balance sheet data, Slide Page 20. This slide shows the income statement for the first quarter of 2023, and the balance sheet as of 31st March 2023. Comparative income statement figures are given here for 2022 and 31st December 2022. In the first quarter of 2023, EstEnergy realized revenues of EUR 27.1 million and EBITDA of EUR 14.2 million and an EBIT of EUR 3.7 million. As of 31st March 2023, EstEnergy had an invested capital of EUR 801 million that consisted EUR 4 million in tangible assets, EUR 633.1 million in intangible assets, EUR 18.3 million value of participation, EUR 0.9 million other fixed assets, EUR 144.7 million, with a positive balance of working capital items and provisions. Net financial debt amounted to EUR 123.2 million. I have finished here with the illustration. Now there can be question-and-answer session.

[Operator Instructions] First question is from Enrico Bartoli, Mediobanca. My first question is about the reorganization of the concessions. What are your comments on the strategic territorial policies? And second question is at energy which has shown results. But the expectations where the results have been lower than in the fourth quarter of 2022. Can you give us a reason for this lower performance? On the operating costs, we have a question. Net of consolidation, there has been an improvement. Can you give us some details and what can be the evolution? And the last question about Asco TLC. Can you give us a comment on the synergies of Asco TLC EBITDA range of the business portfolio?

With relation to the reorganization of the concessions with Iren, this is a choice exclusively for organizational reasons, in the sense that we tried to make it more so that there could be some connections between all the concessions that we have. And as you could see what we did was removed the speed of some of the concessions that we had far away from Vercelli and La Spezia, and we replaced them with Parma and Piacenza, so the choice is mainly due to organizational reasons so that you can have a bigger efficiency to create higher economies of scale. So this is the reason. So let's say, it's because of efficient recognition. With regard to EstEnergy, there was -- here there was the contribution of EstEnergy where this contribution was surely lower than what we had expected. However, everything can be explained by the fact that we exercised the put option at the end of 2022 in regards the contribution of EstEnergy on our balance, it's 20% less than what we expected. It was 8% or 14%, so 20% less with respect to what was contributed in the previous years. The company operates in the field, in the commercial field, in the retail field like all the other operators which was struck by the adverse effects in procurement. So it had to face a seasonal cost related to procurement. So it was expected. And it will be managed surely in the year 2023. And it could have some adverse effects for this 2023 financial year also then done, everything should be normalized because we don't have the activities that we have just in the market in the previous months. So programming can be done also in a more consistent way. So there won't be other costs related to this phenomenon. Relating to operating costs. There has been an improvement. The operating cost of the previous year were impacted by the extraordinary -- with extraordinary consulting on merger and acquisitions. So those are strong depots will no longer be there. So there won't be any increase in costs. But there will be efficiencies and economies of scale that will be realized. Relating to Asco TLC, which was bought after a tender by a co-holding through a joint venture with Hera and Acantho. So Asco TLC forms part of an industrial project. So we think -- so there could be an integration, a total integration of Asco TLC and Acantho, and this will be to favor the growth of asset besides realizing efficiencies of all operations of this type. So everything was touched within the range of growth of an industrial operation.

On EstEnergy, so I think I've understood, so there could be a normalization of margins and the contribution of P&L that could be in the fourth quarter of this year? Is it true?

I would say so.