Enav SpA
MIL:ENAV
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3.232
4.072
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Enav SpA
You don't have any saved screeners yet
Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAV's 9 Months 2021 Results Conference Call. [Operator Instructions]
At this time, I would like to turn the conference over to Vittorio De Domenico, Head of Investor Relations of ENAV. Please go ahead.
Thank you, Sandra. Good afternoon, ladies and gentlemen. Welcome, everybody, to ENAV 9 Months 2021 Results Call. I'm joined here by Mr. Paolo Simioni, ENAV's CEO; and Luca Colman, ENAV's CFO, that will be running you through the formal presentation. After that, we will be happy to answer your questions.
And with that, I leave the floor to Paolo.
Thanks, Vittorio. I have to underline our first 9-month results. Despite COVID-19 pandemic still impacting our business, and we have recently seen a reduction of its negative effects. Service units increased year-over-year by 24.1% for en-route and 14.5% for terminal. But more importantly is the 2021 quarterly traffic trend, which showed solid signs of improvement with the third quarter 2021 en-route and terminal traffic reaching respectively 71.2% and 71.5% of the pre-pandemic levels.
Net revenue in the 9 months remained stable year-on-year, with revenue from operations and nonregulated business showing solid growth, while balance decreased year-on-on-year.
With regards to balance, it's important to specify that in the 9 months 2021, it was determinated -- it was determined at per EU Regulation 1627 published in November 2020 and considering the EU Commission's cost efficiency target on the determined unit cost published in June 2021. While in 9 months 2020, it was determined according to our best estimate on the impact of the initial EU proposal published in July 2020.
There's 2 different methodologies applied to balance calculation. First, the EBITDA at EUR 146.8 million, decreasing by 16.4% year-on-year with margin at 25%. In the 9-month 2021, net profit was EUR 41.8 million compared with EUR 75.1 million profit recorded last year coming from the above mentioned EBITDA decrease.
CapEx was EUR 44.2 million compared with EUR 47.4 million recorded in 9 months 2020. The expenditure is in line with the guidance provided on CapEx for 2021 of approximately EUR 85 million.
Net financial debt raised in the 9 months 2021 at EUR 425.5 million because of cash-in operations still lower than sustained costs. Despite the increase in debt, ENAV's liquidity profile remains solid with a cash balance of EUR 267.6 million. Also thanks to new 2-year tenor term loans for EUR 180 million signed in July.
Moving in the next slide. As usual, you can see traffic trends in the 9 months 2021. Our open terminal service unit increased 24.1% and 14.5%, respectively, driven by a solid summer season. Within en-route traffic, national and overflight segments posted the highest percentage increase, 39.7% and 30.6%, respectively, with international segment growing 8.5% year-on-year. As you can see in the chart, overflight remains the most important component and accounts for 44% of total traffic, while international for 31% and national for 25%.
With regards to terminal traffic, the domestic component increased 32.2% year-on-year, while the international increased only 3.1%. Traffic increased in Zone 2 and 3 by 11.1% and 29%, respectively, thanks to summer seasonality. While in Zone 1, more exposed to the international and intercontinental flight, traffic decreased by 14.8%.
To be noted that in the 9 months 2021, traffic recovery in Italy was stronger than in the other major European countries. As already said, Italy en-route traffic grew 24.1% year-on-year compared to an Eurocontrol member state average growth of 8.3%.
The most important thing to note is that 2021 quarterly traffic trend, which shows further improvement compared with 2019 pre-pandemic trend. In fact, en-route service units in the first quarter 2021 were down 69.4%; in the second quarter 2021 were down 62.6%; while in the third were down only 28.8%. Terminal service units followed the same path with 1Q 2021 decreasing by 75.1%; second Q 2021 by 64.3%; while the third quarter declined only 28.5%.
One additional good that I want to underline to you is regarding the October performance, which shows further signs of traffic trend stabilization with a prolonged summer season. Last month, we managed approximately 77% of the flights managed in October 2019, which means only 23% down year-on-year. Finally, I can anticipate you that the last week in the first, 1 of November, managed the flight where approximately 85% of those managed by pre-pandemic period in the same period.
And with this, I leave the floor to Luca for a detailed view of the results.
Thank you, Paolo. This is a very impressing information about the traffic increase. I think I'll start with the next slide, #4. Before commenting the financial results, let me provide you with a more recent update on the regulation.
With [indiscernible] regulatory development, you can -- as you can see in the slide. I just would like to underline one point. As you maybe already know, in October 2021, ENAV and the National Supervisory Authorities submitted to the EU Commission the RP3 performance plan. That should be approved by year-end 2021 or at the beginning of 2022.
Let me now highlight 2 main elements. First of all, ENAV's performance plan is fully in line with the revised Union-wide performance target approved in June 2021. And second, with a couple of months of the sector, we go, let me say, back to normal, with tariff reset at the correct level -- higher level compared with 2020 and 2021 and based on updated traffic forecast, which considered COVID-19 effects.
I would move to the next slide, where we can see net revenue at EUR 587.6 million, stable year-on-year reflecting a positive performance in the nonregulated business counterbalanced by lower balance in comparison to the last year. This year, en-route revenue increased by 18.5%, while terminal revenue by 40.7%, thanks to a reduction impact from COVID-19 pandemic.
Please consider that the year-on-year comparison is not homogeneous because of COVID-19 essentially impacting 9 months 2021 on the same period of 2020 with January and February posted a 10% average increase in traffic.
Another element taking into account in the year-on-year comparison, as mentioned by Paolo, is the balance calculation that was based on 2 different regulatory frameworks. In the 9 months 2021, balance has been determined considering the June 2021 Commission's cost efficiency target to be applied on the determined unit cost. In the 9 months 2020, it was determined according to our best estimate on the impact of the initial EU proposal.
Our best estimate was built on the assumption of a reduction of ENAV's total actual determined unit cost of 2019 in accordance with Italian National Authority, to be applied to the 2020 calculation.
Looking now at revenue from nonregulated business, those increased by 24.6% year-on-year, reaching EUR 20.4 million, mainly driven by IDS' solid commercial performance. We signed a new contract to provide software and update existing technology in Colombia, Brazil and Russia, which boosted IDS' contribution to the group revenue.
Turning to Page 7. We can see how 9 months 2021 total operating costs increased by 6.6%, mainly as a result of traffic increase gone almost back to normal during the summer.
With regards to debt, I would like to highlight that in August, ENAV managed domestic traffic volumes that were 107% of those managed in August 2019, pre-COVID-19 pandemic.
As shown in the first graph, personnel costs went up by 5.8% year-on-year due to a rise in the variable fees. This increase was caused by the lower use of holiday balance that was grown almost zero in the 9 months 2020, setting an unfair point of comparison with 9 months 2021. And then the higher cost related to traffic almost back to normal during the summer, pushing up overtime and holiday working of air traffic controllers.
Analyzing external costs, those increased by 6.8% year-on-year, mainly driven by maintenance costs and controllers' business trips in connection to the restart of normal operations, these coupled with higher expenses from nonregulated business and the Eurocontrol's contribution.
Turning to Slide 8. We can see ENAV's net revenue evolution in the 9 months 2021 compared to the same period last year. Net revenue remained stable, as a combination of regulated and nonregulated business revenue growth, coupled with lower year-on-year balance accrued in the period due to the traffic increase [indiscernible] and the different way utilized for balance calculation.
Within revenue from operations, the largest year-on-year increase was recorded in the en-route components, which grew by EUR 34.5 million, while terminal revenue went up by EUR 26.6 million. Both solid performances were driven by recovery of the business. Thanks to the positive evolution of the traffic during the summer.
As previously said, the year-on-year decrease of EUR 69 million in the balance came out from the traffic increase and the different regulatory frameworks. Above all, the diverse efficiency target on costs applied to the 9 months 2021, in comparison with the 9 months 2020. This nonhomogeneous perimeter will fade away in the full year results when both years will follow same rule in the balance calculation. As a result of the above mentioned movement, EBITDA stood at EUR 146.8 million, decreasing 16.4% year-on-year, with EBITDA margin at 25%.
Let's now look at the items below EBITDA on Slide 9. D&A decreased by 5.7% year-on-year, mainly as a consequence of a reduced capital expenditure in the previous year. Provisions and write-downs also declined by EUR 1.6 million year-on-year, mainly due to higher user provisions in 9 months 2020 related to some litigation. Those provisions have been released in 2021 when related litigations have been successfully closed.
As already occurred in the first half, we had a positive financial income and expenses mainly due to the balance actualization included in the financial income. Those financial income totaled EUR 6.2 million, completely offset financial expenses of EUR 5 million.
Moving now to the income taxes. We can see EUR 2.7 million decrease because of the lower taxable income of the group in the 9 months 2021. As a result of these movements in the P&L, and thanks to the regulatory protection, which characterized our business. In the 9 months 2021, we achieved a net profit of EUR 41.8 million, lower than the one recorded in 9 months 2020 for the effect of the already mentioned different regulatory framework that was applied in this year.
In the last slide, as usual, we can see a summary of ENAV's liquidity and financial position, which remains solid despite the challenges coming from the pandemic. We closed the 9 months 2021 with EUR 268 million of cash and that means a EUR 48 million decrease versus year-end 2020. End of September cash position includes liquidity coming from new 2 years tenor term loan signed in July for a total of EUR 180 million subscribed by UniCredit, Mediobanca and the ENAV, which also accorded ENAV new revolving credit facility for a total of EUR 70 million full year growth.
In addition to the available cash, we also have undrawn credit lines of approximately EUR 294 million, out of which EUR 220 million committed and including the new RCF signed in July.
If we now look at our net financial debt, we see that as of the end of September, it was EUR 425 million, increasing EUR 180 million versus the end of 2020. The change is mainly due to cash-in from operations, still lower than sustained costs. The good news is the summer profit level puts us in cash neutral position, not yet fully visible in the September figures given the unusual -- usual, I would say, 2 months billing cycle.
Net debt on 2020 full year EBITDA ratio stood at 2x compared with 1.1x at the end of the last year.
And with that, we have ended the presentation, and we are now ready to answer your questions.
[Operator Instructions] The first question comes from Nicolò Pessina from Mediobanca.
So I would like to -- the first one is if you can give us an idea of the target for next year, at least the target that has been, so far, proposed and included in the performance plan and still under discussion?
Second question is on the timing for the cash-in other balance of '20 and '21. I mean, in the past, we learned that the idea was to recover the balance of '20 and '21 over a period of 5 years between '23 and '27. Now Eurocontrol recently released new traffic estimates that are much more aggressive than the ones included in the performance plan. So what does ENAV plan to do to maybe reduce the tariff between '23 and '27 and maintain a recovery period of 5 years? Or maybe to maintain the tariff as high as it may be in '22 and to cash-in the balance in a shorter period, maybe just 2 or 3 years?
Yes. Okay. Nicolò, I'll try to answer to your question for what concern tariffs. We confirm what we have said in our last meeting, I guess, in the second quarter, where the tariff -- with the consensus is at the moment, confirmed. So if I'm right, the consensus is around EUR 85, EUR 90 for 2022 en-route tariff.
At the moment, it gives us what we have in some way for [indiscernible] European Commission in our performance plan. For what concern is that the balance still in the -- at the moment, we are still confirming our planning in terms of recovery -- sorry, 2020 and 2021 balance recovery in the 5 years starting from 2023. Let's see what will happen in the next month. But at the moment, our strategy is unchanged.
The next question comes from Aleksandra Arsova from Equita.
So just a couple of questions on my end. First of all, just to go back to the new Eurocontrol traffic forecast, so are you comfortable with the new traffic forecast? Or do you think, according to your view, it's too aggressive? Or it is, I mean, okay for you given also the improvement you are seeing in October and currently?
And the second one is also related to this new forecast because as far as I understand that the October submission of the performance plan includes the old forecast of Eurocontrol. So the one with definitely lower traffic for the coming years. So since there is a difference in the new expected traffic and the old traffic, do you think this could, in some way, change something in there -- in the negotiation process with the regulator since on one end, of course, everybody wants to close the regulation as soon as possible after 2 years of back and forth in negotiation. And on the other hand, having a new traffic expectation, which is 20% or 30% higher than the previous one. It means on one hand, higher costs to bear. And on the other hand, also potentially higher traffic and so maybe a lower tariff to apply it for the airlines in the case you apply a new traffic also for 2022 and beyond. So color -- a little bit of color on this.
Okay. It's Paolo speaking regarding traffic forecasting published a few days ago by the European Commission, Eurocontrol. Really, we were waiting for this information with the update -- upgrade of the previous forecasting clearly. And the level of increasing, it's consistent. And we are confident that for the next year, this forecasting will be confirmed during the year. I don't know really if the upper level of the forecasting or a little bit up -- above or under this upper level. But we will expect a real good increasing in the next year.
Great. As Paolo said, we are very happy with the new forecast. So this means that the things are going better and better. You can -- also have seen in the presentation of our 9 months results that the traffic [indiscernible] was -- concerning Italy was -- the increase was quite important and higher than the other comparable countries, on the big 5.
So we are considering the new traffic. We are talking with our regulator at the moment, national authority. At the moment, we haven't decided any action yet. If we will, we will update you. But at the moment, that's the situation.
[Operator Instructions] Gentlemen, there are no more questions.
Thank you. Thank you so much, everybody. And if you have some, let's say, follow-up that comes in your mind later, you have the department is available here in Rome. You have our contacts. Hope the call was useful, and have a nice evening to everybody. See you with the full year results. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may now disconnect your telephone. Goodbye.