Enav SpA
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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAV First Quarter 2023 results and conference call. [Operator Instructions]. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Vittorio De Domenico, Head of Investor Relations. Please go ahead, sir.
Thank you, Sheryl. Good afternoon, ladies and gentlemen, and welcome to ENAV First Quarter 2023 Results Call. Here with me there are [indiscernible] Mr. Pasqualino Monti; and our CFO, Mr. Luca Colman, they will be running you through the presentation. After that, we will be happy to answer your questions. And with that, I leave the floor to Mr. Monti.
Thank you, Dr. Vittorio. Good afternoon, ladies and gentlemen. As Vittorio said, I'm Pasqualino Monti, the new Chief Executive Officer of ENAV, appointed last week by the new Board of Directors, which have been established at the General Meeting held on 28 of April. I'm very proud to be here and to begin this new adventure in ENAV. And we will certainly have the opportunity to talk and meet in the coming months. I will now leave the floor to Mr. Colman to give you an overview of the results for the first quarter of 2023.
Thank you, Mr. Monti, and good afternoon to all of you. The first quarter of this year demonstrated a substantial growth in traffic in terms of service units, with a significant year-on-year rise in [indiscernible] 26.8%, coupled with a strong 22.5% in Terminal. But most important, is the fact that the total wood service unit volume exceeded by 4.2%, the last pandemic year 2019. That's very important.
It is worth noting that our business is back to its traditional seasonality, which is clearly visible in the first quarter of the year, typically the weakest in terms of traffic and top line. But not in terms of costs, which are fairly stable in the quarterly trend. Net revenue was EUR 176.8 million, up 5.2% year-on-year, primarily driven by the alternative core business, which was EUR 177.6 million, growing 20.5% year-on-year.
EBITDA was $9.7 million, down 35.9% year-on-year mainly due to staff costs, which reflected the labor contract renewal completed in the fourth quarter 2022 and not included in the first quarter of the last year. EBITDA margin stood at 5.5%. As a result of our business, typical above mentioned seasonality, we included EUR 21.8 million net loss in the first quarter of the 2021.
CapEx was EUR 14.7 million, while net financial debt was EUR 219.9 million, improving from the EUR 47.8 million recorded at the end of 2022. As a result, the ratio net debt to EBITDA decreased to 1.4x from the 1.5x at the end of December last year. The cash balance at the end of the first quarter was EUR 313 million.
Let's take a deeper look on Slide #3, at the traffic trends reported in the first quarter 2023. And with service units were up 26.8% year-on-year, with international traffic increasing the rates, [indiscernible] % year-on-year overflight, up 33.1% and national up 4.3%. When we look at annual traffic from a different perspective, we can see that overflight is the most important component accounting for 42% of total, while international account [indiscernible] wide international accounts for 37%, and Nishan accounts for 21%. As already mentioned, it is notable that annual traffic in the first quarter in 2023 exceeded by 4.2% the volume we managed in the first quarter 2019, with the month of April following the same trend.
Concerning the terminal traffic on Slide #4, service units increased 22.5% year-on-year, demonstrating a strong performance in all 3 charging zones, particularly Zone 1 and 2. When we assign terminal traffic by definition, the international component increases by 34.3%, while the domestic component increased by 7.1%. Also for terminal, it has confirmed, once again, the strong recovery trend in traffic that reached. In the first quarter this year, 91.8% of the volume managed in the first quarter '19.
On Slide #6, we can see that overall group revenue in the first quarter of 2023 reached EUR 176.8 million, up EUR 8.7 million year-on-year, which means respectable plus 5.2%. This performance is primarily due to a positive contribution of EUR 197.6 million from operative revenue, which increased by 20.5% year-on-year, reporting a growth in both annual and terminal revenue, which went up year-on-year by 22% and 20.3%, respectively. At the same time, we see a negative balance contribution for EUR 9.3 million compared to positive EUR 12.4 million recorded in the same period of the last year. The negative balance in the first quarter of this year is mainly due to a couple of factors.
The first one is EUR 18.7 million negative balance reversal, almost completely related to balance security in the combined period 2020, 2021 due to the pandemic, and the cashed in started from the beginning of this quarter and for the next 5 years. The second point is a positive balance generated in the quarter of EUR 9.7 million, mainly related to Terminal Zone 3. Looking at nonregulated business, as shown on the second graph, it is somewhat declining due to a different year-on-year season of the contract signed.
On Slide #7, we can see the costs incurred by the group in the first quarter in comparison with the same period of the last year. Total operating costs were EUR 167.1 million, up 9.2% year-on-year due to the increase in both personnel and external OpEx. For what concerns staff costs, it went up by 8% due to -- and year-on-year increase in headcount in the group that coupled with the renewal of the labor contract completed in the first quarter 2022, we pushed up fixed remuneration by EUR 4.5 million. It is important to notice that the year-on-year comparison is not homogeneous because the first quarter 2022 cost base didn't include the renewal of the labor contract. Higher overtime paid to air traffic controllers, it's the second reason, and the accrual of the related NDO as a result of the increased number of flights managed in the quarter, is pushed up variable elimination by EUR 2.5 million.
As a consequence of these 2 hikes, also social security contributions went up in the quarter by EUR 2.4 million. Our consume external OpEx, this increased $3.8 million year-on-year, mostly due to a rise in the euro control contribution, which went up by EUR 1.5 million and an increase in maintenance costs.
Moving on, we can comment EBITDA at the movements below; EBITDA stood at EUR 9.7 million with margin at 5.5%, both decreasing year-on-year due to seasonality that characterized ENAV core business. As you may be aware, the seasonality foreseeing revenue quarterly trend slightly linked to the air traffic volume, which is at its lowest in the first quarter of the year, also cost remain relatively stable over the quarter. D&A stood at EUR 27.9 million, substantially in line year-on-year.
Provisions and write-downs were EUR 1.8 million for the quarter, increasing EUR 0.6 million year-on-year. In terms of financial expenses, they amounted to EUR 1.5 million in the first quarter, mainly due to increased interest rate on that, which resulted in financial expenses totaling EUR 3.5 million, partly offset by $2.2 million of financial income, primarily coming from the balance authorization mechanism. With regards to the income taxes, we recorded a negative EUR 0.4 million, decreasing EUR 1.4 million year-on-year due to the lower taxable income.
As a result of this movement, we recorded EUR 21.8 million net loss in the quarter, which is in line with annual quarterly trend, reflecting the seasonality -- the traffic seasonality typical of our business. In the next slide, we summarize, as usual, enough liquidity and financial position, which, as you can see, remains very strong. We closed the first quarter with EUR 313 million of cash and an additional undrawn lines, credit lines for EUR 214 million, out of which EUR 165 million are committed. Net financial debt stood at EUR 391 million, decreasing EUR 17 million compared with a net debt of EUR [indiscernible] million as of the end of December 2020.
In more detail, the net debt reduction is mainly driven by net cash from operations for EUR 37.7 million, cash out for EUR 17.2 million related to capital investments, a catch-up outflow for EUR 2.2 million related to 500,000 treasury stocks by buyback. That was performed between January and February. A negative change for EUR 1.1 million in non-current commercial debt, mainly related to gross negative balance to be returned at the [indiscernible] line. Therefore, net debt and EBITDA stood at 1.4x compared with 1.5x [indiscernible] at the end of 2022.
Let me finally remind you that in March, we have recognized EUR 360 million of term loans expiring in July 2023, with new 3 lines years per our term loan for the same amount to be repaid in full upon maturity. Now, I'm going to provide you an update on 2022 outlook after the newer Europe control on traffic forecast, that was really at the end of March. We now expect annual traffic to be 6% above the pre-COVID level, reaching $10.6 million service unit.
Total revenue are expected now, to grow middle single digit year-on-year with not-regulated revenue confirmed to increase high single digits. EBITDA is also now expected to grow potentially be single digit year-on-year, we think to better understand how we'll evolve the summer season. CapEx is confirmed to reach roughly EUR 100 million. And with that, we are now ready to answer your questions.
This is the Chorus Call conference operator. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Aleksandra Arsova of Equita.
Hi, good afternoon to everybody. So first of all, welcome to the new [indiscernible]. And then I have 2 questions from my end. The first one, if and when in case you will be able or willing to provide an indication on 2023 dividend and beyond and any update on the business plan targets. The second one is on the bonus [malus] and so, if I remember correctly, you expected to recover something like EUR 4 million from 2020 bonus. So if it's confirmed that you will recover it? And what is the amount of bonus you expect for 2023? And the last one is upon financial interest. So do you expect this EUR 1.5 million for to be annualized? So should we expect around EUR 6 million, EUR 7 million in net financial income for the full year.
Okay, Aleksandra, I will take your questions. For the first one, for the dividend, just led to the CEO and the new Board of Directors to get in the company. They just -- they were just appointed as the CEO said before, just a couple of weeks ago, so they need to get in. And then, we will give you any information and update if they will be at -- on dividend and dividend policy and so on. At the moment, the divident policy, as you know, is valid. And so, we will see the next -- in the next -- in the month. For what concerns that the bonus models, the part of 2022, these numbers are not in the guideline that we have given. That's it. We are still ongoing the discussion with the commission. Actually we still are waiting for the feedback [indiscernible], I think there would be -- in a short time, we will have an answer. The last -- I guess, the last question, if I'm right, was about interest -- financial interest. At the moment, our interest average rate is 3.2% annual and this is the one we believe to have by the end of the year. If the interest will not increase, but this is the actual cost of debt that we have.
Just to understand better, for the bonus -- models for what you expect for 2023? And then when you say on the interest to 3.3%, the average interest rates. And what do you expect on balance after elevation, which is the positive portion of net interest income.
Okay. For what concern -- the first -- hold on a second. Okay. So the both models for 2023, at the moment, we are -- for the first quarter, actually, we are in line with that performance that we can get in the bonus-models for a [indiscernible] capacity. But as you can imagine, we have to wait the summer season because on the forecast is the last talk that we had with Euro contract, we're seeing a very, very high peak in the summer other than the total number of flights that we will have in the next -- in the year, the summer is going to be very, very tough. So at the moment, we still are looking for to get our sale. I mean, as the best performance as much as we can, but we prefer to give some more detail on this point later on -- on the year for the reason I told you before in the summer season. We need to see how the summer season will go on. For a concern, the second one, maybe you want to answer.
Yes. So Luca mentioned the average annual interest rate on the gross debt of approximately 3.3%. And let's say, we expect to offset part of it with the mechanism of the balance consolidation. We -- on a full year basis should be approximately, let's say, something around EUR 9 million, EUR 10 million positive to offset part of this interest in the P&L.
The next question is from John Campbell of Bank of America.
I wanted to ask if you had any guidance related to the amount of inflation balance that ENAV expects to accrue in 2023? And would you say that assuming you do have an expectation, would you say that, that would offset the expected increase in operating expenses from, for example, the fixed remuneration increase and the variable remuneration increase?
Okay. Sorry, I will just check if I understood right the question, but yes, I did. So the inflation that we expect to have this year you know that it actually depends on the real [indiscernible] on that there will be at the end of the year by -- I mean, registered by Euro. So -- say that we have our forecast -- in our forecast, if the -- sorry, the inflation rate is confirmed, we should more -- kind of double the balance for inflation that we had last year, just a little bit less than double. So this amount of money is definitely enough to cover [indiscernible]
Just if I could follow up, do you expect that the amount in millions of euros will be double the amount that we've seen in 2022?
Okay. Just to say that we are thinking about a number -- a value that could be around EUR 50 million, EUR 55 million, depending on the total actually, the total 2023 because you know that the inflation that we had in 2022 is something you carry over also in 2023 because the cost base that we negotiate is without inflation. So let me see if the rate for 2023 will be confirmed and rate around 7%, 8% that is something is [indiscernible] I think it is the one now is to consider it, we should have a tax -- sorry, we should have a balanced -- inflation balance of the round of about roughly EUR 50 million, EUR 55 million.
[Operator Instructions]. So there are no more questions registered at this time.
Okay. Perfect. Thank you, Sheryl. Thank you, everybody, who has joined this call. For any further questions you may have, please feel free to follow up with us in Investor Relations. And with that, I wish you -- everybody, good evening.
Thank you. Bye.
The conference is now over, and you may disconnect your telephones.