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

[Interpreted] Good morning. This is Chorus call. Welcome to the presentation of the financial results as of 31st December 2023, Ascopiave. [Operator Instructions]. Now Dr. Nicola Cecconato, Chairman and CEO of Ascopiave, is going to give the address.

Good afternoon, everyone. I'm going to illustrate the consolidated results as of 31st December 2023. Please have a look at the document, which you have, Slide on Page 3, the start of Ascopiave Group as at 31st December 2023. The [indiscernible] of consolidation and were some changes compared to 2022 as a result of some extraordinary operations during the year. The main ones, which are below. In February 2023, as part of an overall territorial restoration of the portfolio of transactions, [indiscernible] Present company and tax related to management of complexions of Piedmont sub corporate so there were some Piedmont [indiscernible] in Emilia-Romagna. With the same transaction Ascopiave acquired 90% of Romeo Gas holding 100% of the company. In March 2023, Ascopiave acquired the majority stake of Asco PLC, the company operating in this formation, communication technology sector. [indiscernible] were subsequently merged by corporations [indiscernible] and a result of this transaction, Ascopiave holds a minority stake of 11.35% in the merging company. This exercise of a put up option of 15% of Estenergy capital again in 2023. The Group's stake in the company was reduced from 40% to 25%. Finally at the end of 2023, the group acquired the minority interest held by third parties in the company's Salinnella Eolico, [indiscernible], becoming the core shareholder. It could be noted that the company's Romeo Gas, Serenissima Gas were acquired by the A2A group from 1st April 2022. And therefore, the economic data has been consolidated to the group's 2022 financial statements for the last 9 months only. Slide 5, consolidation profit and loss account for year 2023. In financial year 2023, the group realized revenues of EUR 180.8 million, which had an EBITDA of EUR 94.5 million an EBIT of EUR 46 million. The balance of financial expenses show a negative revenue of EUR 7.9 million, up by EUR 6.1 million compared to 2023. This change is mainly explained by the increase in interest rates payables. Income from companies [indiscernible] amounting to EUR 3.6 million [indiscernible] in preserve results of Ascopiave Holdings [indiscernible]. As since [indiscernible] income statement of EUR 5 million of tax rate populated by monopolizing the pretax results of the effect of consolidation of the company, also [indiscernible] to the debt [indiscernible] from investing companies. The capital loss realized as part of the rationalization operation of cash distribution and [indiscernible]. And the relative tax effect as well as the capital gain realized from the exercise of the auction of 15% of shareholding in [indiscernible] was from 23.6% as of 31 December 2022, 30.2%, 31 December 2023. Consolidated balance sheet as of 31 December 2023. As of 31 December 2023, the group invested capital of EUR 1.200 [indiscernible] consists of EUR 156.5 million from tangible successes, EUR 766.4 million in intangible fixed assets, EUR 308 8 million from the value of minority interest [indiscernible]. [indiscernible] EUR 53.3 million, EUR 21.6 million for [indiscernible], EUR 8. 3 million [indiscernible] and a [indiscernible] EUR 22.3 million. EUR 22.8 million from other fixed assets, EUR 30.4 million for the negative balance of working capital items and provisions EUR 0.1 milion from the net invested capital of assets held for sale. The intangible assets shown under assets equaled to EUR 766.4 million mainly consist of [indiscernible] networks and plant owned by the group, [indiscernible] and could be recognized foreign the combination of EUR 61.7 million. Capital assets consists mainly of real estate and the value of renewable energy production facility. Shareholders equity as of 31 December 2023 amounted to EUR 54.3 million of which EUR 9.5 million was attributable to minority [indiscernible] . The net financial position amounted to EUR [indiscernible] million decreased EUR 22.5 million compared to 31 December 2022. The debt net equity ratio is 0.46. Companies consolidated using the line by line [indiscernible], [indiscernible] operating data, gas distribution as of 31 December 2023 the group to distribution of the companies managed approximately 874,400 customers, a decrease of 2% compared to 31 December 2022. The change was mainly driven by the [indiscernible] of some concessions in Piedmont and Liguria [indiscernible] with approximately 10,200 users, the loss of [indiscernible] concessions with about 4,200 users. In first [indiscernible] 2023, the group distributed 1.482 billion cubic meters of gas, [indiscernible] net worth minus 2% of which 82 million cubic meters related to that function of consolidation from your [indiscernible] consolidated for 1 April 2022. Slide Page 9, operational data, renewable energies. The group has the game plan for the production of electricity from renewable hydro and green power with an installed capacity of 62.5 megawatts. In financial year 2023, electricity production amount to 120 gigawatts to the volume generate was higher than in the previous year of 69%, lower than the historical stronger average accounting recent years. Slide on Page 10. Revenue development, amounted to EUR 188 million, an increase of EUR 17.1 million depending about the extension of the scope of consolidation to newly acquired companies, EUR 0.45 million; Increase in distribution target revenue, EUR 7 million; growth and revenue from the sales of [indiscernible] generated from renewable sources, EUR 8. 4 million; the growth of revenue from energy efficiency facility, EUR 4.5 million; these other revenues EUR 7.3 million, of which EUR 6.5 million due to the combination of the penalty recognized as Ascopiave Group for the early combination of some service contracts, EUR 2.2 million for the termination of service contracts, [indiscernible] . Slide on Page 11, development of the operating result. Operating result of EUR 6 million increased by EUR 14.1 million, due to the effect of the expansion of the scope of consolidation to the newly acquired company; EUR 0.1 million, [indiscernible] gas distribution tariff revenue; EUR 7.1 million, gross revenue on the sale of [indiscernible]; EUR 8. 4 Million an increase in depreciation of EUR 1.3 million; growth in net operating costs, EUR 0.2 million. Slide page 12. Tariff revenues from the sale of distribution of the renewable energy. Tariff revenues are revenues amounted to EUR 124.1 million and for annual increase of EUR 10.5 million compared to the previous year and largely consolidation EUR 3.5 million; the increased 7.1 million in tariff revenue on a like-for-like basis. Revenues from Central Energy for renewable sources amounting to EUR 19.4 million increased mainly due to the increase in production that were generated in the segment affected by the government's price containment measures, which seems to take effect during the second half of the year. Slide 13, other net operating costs. Net operating expenses of EUR 14.9 million increased by EUR 2.3 million due to the change in the following revenue cost items. Content to the scope of consolidation to include newly acquired companies in the amount of EUR 2.1 million; increased license fee to municipalities for EUR 1.6 million; lower margin on energy efficiency bonds, EUR 0.3 million; lower consulting costs EUR 2.7 million; lower gas and utility cost, EUR 1.5 million; lower revenues of EUR 6.5 million due to revenue recognized as [indiscernible] other grew in the first half of 2022. For the recombination of some service contracts, lower revenues of EUR 3.2 million due to the termination of service contracts with Ascopiave Group [indiscernible]. Contribution for safety incentives. EUR 4.1 million; higher meter rating costs, EUR 1.6 million; high gains from the sale of assets and participation, EUR 6.8 million; higher nonrecurring costs, EUR 2.1 million. Page 14, number of employees. As a 31 December 2023, the group had 503 employees, a decrease of 10 from 30 December 2022. Personnel cost, EUR 20.9 million, increased by EUR 0.4 million, net of extension for the scope of consolidation to the newly acquired company. Investments, capital expenditures and tangible and intangible assets realized during the year amounted to EUR 87.6 million, an increase of EUR 0.6 million. Expansion of the scope of consolidation led to investments of EUR 0.7 million in the gas distribution sector. On a like-for-like basis, most of the technical investments [indiscernible] the development, maintenance and modernization of gas distribution networks and plants for EUR 45. 5 million, of which EUR 16.19 million interactions or EUR 35.3 million in network expansions and upgrades of EUR 2.3 million in reduction plans. Investments in major recruitment amounted to EUR 1.4 million by an investment in the renewable liability sector, mainly related to the development of [indiscernible] in Colombia, construction of [indiscernible] plant and the purchase of land by the company doing factory amounted to EUR 23.6 million. Now Page 17. Net financial position and cash flow. Net finance position as of 31 December 2023 of EUR 389.4 million, down by EUR 32.5 million on 31 December 2022. During the financial year, cash flow generated financial resources of $63.5 million, net investments in tangible and intangible assets of EUR 87.6 million; net [indiscernible] resulting in EUR 87.6 million, ;[indiscernible] of resources of EUR 61.6 million; the group [indiscernible] dividends of EUR 23.2 million.Consolidated [indiscernible] , of net assets resulted in cash outflows of EUR 38 5 million for the distribution of EBITDA shareholders, acquisition of minority interests the financial outlay of EUR 30.8 million [indiscernible] EUR 22.3 million; submission [indiscernible] of redemption value of the past quarter success of operators or EUR 9.5 million of [indiscernible] year end book resulting in the realizing of EUR 20.9 million. Finally, the sale of 15% of the [indiscernible] also booked is that EUR 170.5 million. Net financial position on Slide Page 18. As of 31 December 2023, amounted to EUR 386. 7 million. Financing is 43% variable tax [indiscernible] and the weighted average cost of [indiscernible] in the year was 2.57%. Page 20, income statement. The slide shows income statement 2023 and the balance sheet at 1 December 2023, [indiscernible] Group. Comparative income statement figures for 2022 have also been given as follows: the financial year has had revenues of EUR 1.123 billion; a gross operating margin of EUR 69.4 million; and operating profit of EUR 4.6 million [indiscernible] invested cap of EUR 131 million. That consists of 5.5 [indiscernible] million tangible; EUR 6.7 million intangible asset; 13.7 million in the end of expectations; [indiscernible] EUR 0.8 billion in other fixed assets; EUR 180.2 million in the negative balance of working capital items and provisions. The net financial position was positive EUR 168.6 million. Within Slide Page 22, proposed dividend. The Board of Directors of Ascopiave in consideration of the results of the year and the soundness of the group's equity and financial structure. We will propose to the Shareholders' Meeting with distribution of a dividend of EUR 0.14 per share, for a total of EUR 30.3 million, and now calculated on the basis of the shares in circulation and the crossing date of the financial year. If approved by the shareholders. The dividend will be in May 2024. The tax dividend rate on [indiscernible] 2024 . I have finished my presentation. Now there's a Q&A session.

[Operator Instructions] The first question is from Enrico Bartoli, Mediobanca.

The first question -- it's about the assets that you are discussing about. Maybe give us some information about how the company proposes to dispose of those assets and how much -- and how do we want to acquire new assets? And how you would like to use the cash resources from the sale of assets, especially from Estenergy. The next questions is about gas. There's been a big document -- this is an update on the gas degration in Italy and which proposes an update and acceleration of how to be about the disposal of assets and reposition of assets? What about EUR 95 million of EBITDA and EBIT of 81 million on gas distribution, how can you -- what can you say, what is your [indiscernible] on the subject? And the last question, what about the performance -- your performance in the last quarter where there has been an increase in the spend. And what amount of growth of 4% do you think can come from this growth in the 2 years? What do you think? Is there anything one-off because that you included in the performance of the company and our results?

[indiscernible]. Relating to the amount of [indiscernible] keep market pool in a more [indiscernible] after the fifth launch [indiscernible] from competitors will submit a bit of full cash. It was a bit in cash and about assets -- exchange of assets, I cannot say more because the rest is confidentiality. As far as we are concerned, that's the end of the issue. I don't think the deal has been now definitely closed. We will now focus on our strategic plan, which will be [indiscernible] and represented as an update on the 18th of month, as WB review the strategic which will submit to the financial community. It's our interest -- our interest is now to focus mainly on the distribution of gas. And on the end [indiscernible] on possible assets on gas distribution, there is our focus on after if there should be [indiscernible] her being this. We don't think there will be some new wins very soon since we have been announced many times. But that we know they haven't been been launched officially on the market. Also because there's a shortage of both human and material resources resources [indiscernible] cannot start very soon. Our gas distribution is our whole core business. And it also gives us a stability to the financial of the group. Thanks to the development of renewable energy, this is also another -- one of our second focus in gas distribution. We are going to focus on the development and investment on photovoltaic and wind power plants. And we will participate in the fees on hydroelectric plants, they will be announced something -- there's something in the pipeline, especially [indiscernible]. And obviously, we will conclude the work there. [indiscernible] works on wind power plants, especially in the interval -- and on wind power plants and in Colombia. About the collection of financial resources immediately channel to the development of new investments. And also to the maintenance and execution of new plants that will be operating. Now the CFO, Mr. Paggiaro, is going to illustrate to you on the split of revenues.

Relating to the split of EBITDA. EBITDA, EUR 95 million, EUR 22 million has been focused on distribution on the historic companies that we acquired in 2022, EUR 11 million to renewable sources. The difference comes from the operations of the group, and also on the gains that we're talking about. During the fourth quarter, EBITDA, the distribution activities have been quite stable relating to the turnover of the company. Renewable energies, especially in the last quarter, in the last 6 months, there has been quite a significant development starting from 30 June 2023 and the revenues in the second 6 months have been quite compared to the first 6 months. And the rainfall in the last 4 months of 2023 gave us a significant push for resources, financial resources. In the profit and loss account, we have put revenues which we [indiscernible] financial year, especially on the safety of the plants where we have been investing a lot of resources.

You think there will be -- this result can have a significant impact on the tankers in the field of gas? Or do you think it is any different?

Nicola speaking. You can say there is a consulting document, observations -- there have been some observations that have been made that we have submitted. And what we have to track is what the amount starting to the refund on the operations of plants. Anyway, this document is dated, we go back to some 6 months back. We also have to deal with municipalities but we are very much focused for the areas of interest. So this is an activity which is quite cumbersome. It takes a lot of financial resources and audit has also got to check what will be the refund value of the plants that belong to the municipalities. And so this is quite a long and tedious process, which takes a lot of time rather than shortening it, which is quite a length and tedious process. So with this contracting document. So there's need to be a train in the back month of assessment. So we have been working in this direction. So of course, it is not [indiscernible] what that is going to happen. So we cannot firmly say what impact this will have in the document and have on the company, if there are some incentives for the municipality or not. And if the municipalities can really collect the real amount of the plants that they own. So let's see if there's going to be a change in the legislation. Actually in our trajectory, we have noticed that there has been no significant impact locally in the local communities. Many times, there have been tenders, which are published then they are canceled in our territory, local territory. There was a tender, which we started a month ago that in [indiscernible] and the order of communication, the same better tender was going to be postponed because the sort of a stop and go. So sometimes the tenders are published. But then they're canceled, there was a small tender, which was a market in [indiscernible]. So the tender contain 2017 [indiscernible] started by Italgas and the operation started just a few months ago. it shows that the time process is quite strong. There are some incentives for the total municipality for the local boards to beat in the tenders. But there have been no news, which have been announced. And when there is a result is always the losers always file a court case, and these court cases also quite a long time. Because the losers [indiscernible] to the beat challenge -- in [indiscernible] our industrial plan, we have already stated water policy is. So we had to move within the jurisdiction within the framework of our industrial plan. So these are the objectives, the goals that we have in our industrial plan.

The next question is from Emanuele Oggioni.

[indiscernible] I have some questions in 2024. But I think we have got to wait until the presentation of our industrial plan. In order to know exactly what our strategy will be, and also to acknowledge to see if your performance in 2024 is better than in 2023. But surely, the rainfall and the snowfall can truly help you, especially compared to 2 years back compared to last year, especially about the 51 gigawatt hour, which you had in 2023. I'm not quite sure if you want to answer my question, if you want until the industrial plan is printed.

Rainfall can surely help us for the production of electric energy, for the generation of electric energy. And I hope we can grow by 25%, 30% in 2024 at the end of 2023 [indiscernible] we started a wind farm in Calabria. 21.6 megawatts and this plant has been giving us are deal of satisfaction because it is producing very well. So we believe that next to the rainfall and next to this new wind power plant operative. And another plant for the [indiscernible] plant, which we have been realizing in [indiscernible] where the work has started a few days ago, and we should finished in 2023. And in 2025, we will have surely very good results, very significant results and positive results.

I was referring to your organic growth of the company, especially against your expectations against the forecast in the field of hydroelectricity.

Are you possibly referring to what you can expect in the field of hydroelectric and with that 25%, 30% was referring to that.

[Operator Instructions]. Next question is a follow-up from Enrico Bartoli, Mediobanca.

So this is just a follow-up, taking advantage on information you've been giving us. What do you think -- come back to the last quarter [indiscernible] of 2023. What do you think can be the performance of 2024 and the margins -- profit margins that you can have. Also come back to 2023 and 2022. What are your expectations if we consider 2023 [indiscernible] transition?

The [indiscernible] performance of Estenergy is surely positive. So we can say the performance in 2023, has been [indiscernible] there's been a stabilization of business, surely results with positive results and significant results and better than what we had in 2023. So compared to the rises of the pandemic, surely, results will be growing and we will have a better performance for 2024 will be a return to the positive results that Estenergy had before 2023.

[Operator Instructions] So there are no further questions. Dr. Cecconato, so you can make a conclusion now.

So thank you, everyone. Thank you for the questions that you have asked me, and we hope that we have given you exhaustive answers. Have a great day, and see you soon for our next presentation.

This is Chorus Call. The conference is over. You can disconnect your phones. [Statements in English on this transcript were spoken by an interpreter present on the live call.]