Enav SpA
MIL:ENAV
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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAV 9 Months 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Vittorio De Domenico, Head of Investor Relations of ENAV. Please go ahead, sir.
Thank you, Sabrina. Good afternoon, ladies and gentlemen, and welcome to 9 month results conference call. Here with me here are Mr. Paolo Simioni; and our CEO; and Mr. Luca Colman, and our CFO. They will be running through you the formal presentation. And after that, we will be happy to answer your questions. And with that, I leave the floor to Paolo. Please.
Thank you, Vittorio. Good afternoon to all, and welcome to ENAV's 9 months 2022 results call. In these 9 months, we posted a solid performance, which was driven by our [indiscernible] volumes recovery in the entire period and particularly through the turn. We have seen a return to the typical seasonality of the core business and back to normal in terms of traffic volumes, which in August exceeded the present [indiscernible]. Route and terminal traffic in 9 months 2022 in terms of service units, almost double year-on-year, reaching 94% and 88% of 2019 levels, respectively.
Net revenue were EUR 74.4 million, increasing 21.6% year-on-year driven by a solid growth, not only in our operative core revenue, but also in non-regulated business. EBITDA was EUR 219.8 million, up 49.7% year-on-year despite the expected rising cost -- and EBITDA margin stood at 30.8%, which means 5.8 percentage points higher than the 1 accorded in the 9 months last year. Thanks to the just mentioned solid performance, we recorded a EUR 91.8 million net profit, more than doubling the last year achievement. CapEx was EUR 48.4 million and net financial debt was EUR 429 million, decreasing versus the EUR483.8 million at the end of 2021. Therefore, also the ratio between net debt and full year 2021 EBITDA decreased to 1.9 times.
Cash at the end of the 9 months was EUR 256 million, which remains more than adequate to face all growth needs. Moving to the next slide. We can see the real traffic performance, which shows an 8.6% year-on-year growth in terms of service units. Within our route, international traffic increased the most, 119.8% year-on-year. Over light was up 86.9% and national grew 52.5%. Overnite continues to be the most important component within the route mix accounting for 44% of total traffic, while the international component accounts for 36% and national for 20%.
The 9-month 2022 are a assumed were 94% of those recorded in the same period of 2019. following a very strong traffic recovery, especially during the summer, indeed in the third quarter 2022 traffic volumes in service units reached 99% of prepandemic volumes with a month of August 2022 being 1 percentage point above almost 2019. Another element that if back to normal is the quarterly traffic trend, which reflects the return of standard seasonality typical of our core business. Let me provide you also with the last available data recorded in the month of October that so the revise unit managed at plus 3% if compared with October 2019.
In the next one slide, we let's focus now on the terminal traffic on this period. Service units reported an 86.2% year-on-year increase, showing solid performance in all 3 zones. Looking at terminal traffic by destination, the international component goes by -- goes up by EUR [indiscernible], 0.2% and the domestic by 53.2%.The 9-month 2022, terminal traffic reached 88% over 2019 volume, confirming also for terminals, the solid recovery already seen in [indiscernible]. The recovery is even stronger in the third quarter of 2022 in terms of traffic volumes, which reached excuse me, 94% of prepandemic 2019 third quarter. And with that, I leave the floor to Luca.
Thank you, Paolo. Thank you, Paolo, and good afternoon also from me to all of you on the call. On Slide 6, you can see that the total revenue reached EUR 74.4 million, growing 21.6% year-on-year. Within total revenue, the most important thing to note is the total shift in the relative weight of the various items compared with what we have seen in the last few 10 years. As already [indiscernible] in the first half of this year, main contribution to the 2022 growth comes from operating revenues to be led to airline and cash in within 2 months and no more from the balance credit.
As you can see from the first graph, and route revenue increased by 126.3% and terminal revenue by 84%, reporting a positive performance in all segments, thanks to the back to normal in terms of traffic volume, especially during the summer. With regard to the balance -- we have recorded a negative net amount of approximately EUR 16 million, which comes out from 4 main items. Firstly, the traffic growth this year was higher than the one expected and included an RP3 performance plan approved in May. Therefore, in the 9 months 2022, we have generated a negative balance as per the standard traffic [indiscernible] mechanism.
Secondly, we have achieved a positive balance driven by inflation that was materially higher than the one forecasted in the performance trend. The combined effect of these first-tier movements, together with some other minor adjustments, resulted in a negative balance of approximately EUR 29 million. Third component to take into account is related to the approximately EUR 10 million of a positive balance reversal related to the previous year, to which we have to add the fourth one related to another positive component for approximately EUR 3 million coming from the previous year uncontract adjustment. Moving now to the nonregulated business, shown in the second graph.
We can see a year-on-year increase, mainly thanks to the new contract signable one in [indiscernible]. Let's turn the page and move to the next slide, where we can see how practical recovery to prepandemic volumes and rising inflation impacted our cost. With regard to inflation, let me remind you that ENAV is fully covered by the protective regulation. The data between the Acticlate and the Forecast, including the performance plan, is generating a credit that will be recovered in the coming years throughout the user balance mechanism. In the 9 months 2020 total operating costs of EUR 494.6 million increased 12.2% year-on-year, in line with our expectations and mainly due to the valuable component of the personnel costs and the cost of energy accounted in external OpEx.
Deep diving into our expenses, we can see that personnel costs went up by 10.5% year-on-year, mainly due to a rise in variable remuneration related to over time needed to manage the increased number of flights expression in the summer, which caused also the right in social security contribution and higher accrual related to the new holidays recorded in the period and not yet utilized. External OpEx also increased year-on-year, mainly due to the cost of energy, which driven by inflation rise grew approximately EUR 11 million year-on-year, and it was the main reason for the total EUR 16 million OpEx increase. Then another one is the professional services that which went up approximately EUR 2 million versus 9 months 2021 and other costs related to operating personnel travels, which grew year-on-year for approximately EUR 1.8 million.
All these cost increases are fully manageable, given the regulation covering our sector and thanks to [indiscernible]. Now let's take a look to how [indiscernible] revenue and EBITDA evolved in the 9 months 2022 compared to the same period of the last year. As shown on Slide 8, total revenue increased 21.6% year-on-year, and the main drivers were route and terminal components, thanks to the solid traffic recorded in the period. coupled with the 30% growth in a nonregulated business.
These rises in operating revenues were partially offset by year-on-year balance decrease, which was driven by 19 impacting 2021 traffic volumes. -- extended flight contributes for positive EUR 1.2 million, while other operating revenue for negative EUR 3.2 million due to the lower year-on-year European finance. It is important to note that and route and terminal revenue growth generates a cash infused on our user [indiscernible] cycle, while the year-on-year balance decrease is not a cash item. The second graph, we show how a contribution to EBITDA growth comes from the top line rise, which was fully capable to absorb the cost increase in the period -- in the second -- in the 9 months 2020 EBITDA stood at EUR 219.8 million, showing a solid 49.7% growth year-on-year with margin at 30.8%, which means 5.8 percentage points better than last year.
The notable year-on-year performance at EBITDA and margin level is also partially coming from a nonfully comparability amongst the 2 periods under Xcel. Let me remind you that we said in previous results calls, in fact, last year, balance calculation methodology applied was based on actual costs on [indiscernible] instead of actual traffic volumes. This different methodology, deleted standard seasonality in our quarterly financial trend, flattening 2021 quarterly performance. As a result, last year's second and third quarters were partially penalized in favor of the first and the fourth, which were on the contrary boosted up.
Therefore, in the year-on-year comparison, the third quarter 2022 as well as the 9-month 2022 have been helped, while the fourth quarter 2022 will be slightly penalized versus last year fourth quarter. Anyway, this will not impact expected solid full year 2022 performance of the company. Moving to Slide 9, we can comment movements below EBITDA. G&A decreased by 4.7% year-on-year, mainly as a consequence of a reduced capital expenditure in the recent past. The item is expected to slightly slowly increase in the coming years as the new ATM platform currently under development will become operational. Provisions and write-downs in the 9 months amounted to EUR 3.3 million and prudentially include, amongst other items, the write-down of the total credit related to the Russian activities.
As already occurred in the previous quarters, we had a positive financial income and expenses, mainly related to the actualization of the previous year's month credit. With regards to the income taxes, we can see EUR 26.3 million increase year-on-year due to the higher taxable income in the 9 months of 2022 compared with the same period of the last year. As a result of these movements in the P&L, we recorded EUR 91.8 million net profit, which more than doubled year-on-yea. In Slide number 10, we summarize ENAV's liquidity and financial position, which, as you can see, remain very solid.
We closed the 9 months with EUR 256 million of cash, having additional drew credit lines for EUR 294 million, after which EUR 220 million are committed. Net financial debt stood at EUR 429 million, decreasing compared with a net debt of EUR 484 million at the end of 2021, mainly thanks to the dynamics of trade receivables and payables related to the ordinary operations. In more detail, the net debt reduction is mainly attributable to a net cash in from operations for approximately EUR 129 million. Cash outflows for approximately EUR 51 million related to the capital investment and change in noncurrent commercial debt that actually is related to the gross negative balance to be returned to a line for approximately EUR 24 million.
Therefore, net debt on full year 2021 EBITDA for the 9 months stood at 1.9 times compared with 2.2 times which is at the end of the last year. Please note that the net debt calculation does not include the EUR 58.5 million dividend paid at the end of October as well as cash in of the traffic manager in August and September. In conclusion, the 9 months 2022 solid results highlight a back to normal from all point of view. Starting from the traffic volumes, passing through the approval of our PT performance plan and lending to growth in revenue and EBITDA as well as a positive cash flow generation. And with that, I leave the floor to Paolo, who will provide you the outlook for the year 2020.
Thank you, Luca. With regard to our full year 2022 outlook, given the traffic flows recorded in the first 9 months of the year, we expect traffic to recover approximately at 96% of prepandemic levels with ENAV reaching 9.6 million service units in accordance with the latest Eurocontrol forecast issued in October 2022. Given that, our forecast 2022 is consequently improved, as you can see from the figures in the slide. Total revenue and nonregulated revenue are both expected to grow approximately 15% year-on-year. EBITDA is expected to grow approximately 25% year-on-year. Finally, with regard to the CapEx, we expect to reach at year-end, approximately EUR 90 million of investment. And with that, we are ready to answer your questions.
[Operator Instructions] The first question is from Ivar Billfalk-Kelly of UBS.
Can I please start with the balance unwind and the working capital position that you have that you generated over 2020 to 2021, what are your current expectations in terms of both timing and amount of how this is going to unwind? And linked to that, your leverage has now fallen below the threshold of 2 times, which you stated you wanted to fall below as a first priority for our capital allocation. Now that you've achieved that, do you see any material opportunities for M&A in the near term? Or is it more realistic to assume that excess cash will be used for shareholder remuneration? And secondly, you mentioned your CapEx outlook for the year is now lower at EUR 90 million compared to EUR 105 million previously. Is this simply a phasing issue? Or are there efficiencies that you've been able to realize that are driving the reduction equally are your longer-term targets of 350 over 22% to 24% or the even longer outlook of over EUR 1 billion to 2031 unchanged.
Yes. Okay. For what concern on what concerns the balance. The expectation is to have this EUR 650 million balance recovery in 5, 6 years. This is the actual forecast that we have. For what concern, the CapEx, the -- I mean the legal CapEx less that we have by -- we forecast by the end of this year versus the forecast, our initial forecast is mainly related to the -- some products that we may have with material with advertising as I would say, global problem, it's not up. I mean, it's not really something that could, in some way, affect our strategy, our implementation our strategic investment, but it is just a little slow down in the next year. We keep the EUR 1 billion -- we confirm EUR 1 billion CapEx in the next 10 years. So it would not change it. I guess maybe... Is the dividend.
Regarding the dividend, I confirm certainly the company to provide another quite return to its shareholders. like a has always done, but ensuring that this does not stress the medium-term prospect of the company. In the coming months, we will start thinking about it with the Board of the Directors considering expected full year 2022 results.
For more concerned M&A, let's say, at the moment we don't have in our pipeline, any particular item situation to analyze. So we -- I mean we have time to run and to check it. But it's not something that we have now.
Understood. Can I please follow up on the 5- to 6-year time line that you mentioned for the EUR 650 million. Is the expectation that, that will start from 2023 -- or might we be waiting until 2024 until that starts to unwind?
I confirm 2023 from the next tariff.
The next question is from John Campbell of Bank of America.
2, if I could. So I noticed that you upgraded your 2022 traffic guidance now to 96% of 2019. As we start to think sort of for the outlook for on-route traffic for 2023, if I remember properly, I think your forecast officially used November 2021 Eurocontrol forecast, which has traffic volumes about 4% to 5% above pre-COVID. Do you feel now, based on the information you currently have, does that look conservative? And could we see upgrades to 2023 traffic guidance? And the second question I had was on the inflation compensation that have is very likely to be entitled to for 2022. Please, could you kind of give us a quantification of how much is expected based on the percentage point deviation versus your RP3 performance plan.
For what concerns the 2023 traffic forecast, if we look at the very center, the last forecast and Eurocontrol published in October, I go by Demery, but it should be around 10.2% versus 2019 figures. So if you look at 2023 for Italy, issued this value. And this is something that we are looking at, at the moment. yes. There's also thank you, Vittorio will just tell me that there's also 2024 foreign casualty is 109% in 2024. So if you need also this information is available, and we confirm these are the forecasts of Eurocontrol for Italy, the very recent one. For what concern inflation, just to have the final number for the end of the year, we have to wait the [ actual ] inflation. Now the forecast is it can be somewhere around 7%, 8%, 9%. So we still -- we cannot confirm that the value. What we can say now that in the 9 months, 2022, what we have posted is EUR 21 million of inflation that is related to the -- actually the inflation that we foresee in this moment. Okay. That's good.
So you're basically saying you accrued EUR 21 million of an inflation balance in Q3, which happens, I guess, to be 9 months as well.
Yes, definitely. Because if we calculated just in the third quarter, the inflation, as you know at the beginning, in the first and second quarter, we have never calculated this value as the value of the figure could really change a lot in -- by the end of the year. So that's the reason we always every year normally calculate the inflation delta inflation in the third quarter.
[Operator Instructions] The next question is from Luigi De Bellis of Equita SIM.
Yes. I have 3. The first one on 2022, 2024 business plan, considering that you're better than expected 2022, do you confirm the target to achieve an EBITDA pointing to about EUR 300 million? The second question on the bonus [indiscernible]. Do you feel confident to reach the 100% bonus of EUR 12 million in 2022? And the last question, we are very close to the publication of 2023 tariff. What is your expectation for 2023 and the balance included in the tariff for 2023?
Okay. Just a second. At the moment, yes, we haven't changed -- we haven't given any other indication about the outlook that we gave for the business plan for the future year. So we, at the moment, confirm that as a prudential forecast. We will see in the next month if -- after also the budget 2022 budget process will be ended if update also but at the moment, we confirm it. For more concerned bonus models at the moment, the result of the 9 quarters are still in line what could be the best performer in terms of bonus, very, very close to you because the increased traffic was very, very high, where we are still in line. So we were very close to the most. We have to wait at the end of the year also because now the traffic, as Paolo said before, even October, I mean, we have registered in October 22, the highest traffic ever had in October in Italy.
So you can imagine that even if we could imagine to slow a little bit down, the volume of traffic management instead we still are increasing always compared to the relative month of the previous year, we are always increasing the traffic. So it will be tough hard, but we are working to reach the highest value of bonus that we can reach.
So what consider the tariff, they are no public still under discussion, but more or less, at the moment, we foresee actually, by definition, to have the tariffs that we have agreed with -- in the performance plan with the regulator. So the performance tariffs. And on top of this, put the balance that you know that is more or less EUR 150 million of EUR 650 million. So you should imagine a tariff very close, very close to 2022 tariff. A little bit less, a little bit higher, but more or less the same one at the moment. We can confirm just in a couple of weeks. I guess there is a larger committee next week where we will present officer together with other say, the 2023 tariff, but is in mind with what I told you.
The next question is from Marco Limite of Barclays.
I have got 2 questions. One is on actually your staff costs. So you have highlighted that I assume mainly during the summer period in Q3, you had to pay for more extra time of your employees given the traffic outturn. So I'm just wondering how are you going to prepare for next summer peaks? Or will you be able to hire more people? I'm just wondering if the market of tower controllers is a tight market and therefore, that's kind of a challenge or not?
And second question is again on your balance on inflation. You said that you booked about EUR 21 million of inflation balance in Q3. And in your Q4 guidance or implied Q4 guidance from the full year 2022 outlook, what's broadly the range of inflation balance you have assumed is a similar amount to the 21%? Or is something much different to the EUR 21 million of Q2.
Okay. So we concern the staff costs, 2024, I mean, the way we are going to manage the increase of traffic to manage the high traffic forecast now for 2023. So next year, probably we have finalized our budget. So our thinking is ongoing. Probably would be a mix between the 2 options, so hire people have a controller actually and extra time. So we are trying to find the best mix to manage this also forecasting what will be the traffic in 2024. So something that we have to do in time also to manage the increase of the future years. For what concern the inflation, just consider that 1 percentage point of inflation -- delta inflation between the plan and the data one is more or less EUR 5 million. So we should wait will be the end of the year inflation, the actual inflation and then depending on -- I imagine that we may have at least 1.15 inflation more from the 2021 9-month result inflation. So more or less, is an idea. But we need to wait for the final actual data inflation.
The next question is a follow-up from Luigi De Bellis of Equita SIM.
Just a follow-up on the cost of debt. We have seen higher interest rates due to central bank policy decision. Can you elaborate on your current average cost of debt and the evolution going into 2023?
We are just [indiscernible] and we will provide you with some details. Just a second, please.
At the moment, our net debt -- the cost of -- yes, our debt is around 1.1% on annual base at the moment. In the future, it's something that we haven't yet disclosure because it's something that we are now willing in this moment, analyzing also looking at the future actions that we can put in place in the next month in terms of raising the debt...
[Operator Instructions] Gentlemen, there are no more questions registered at this time.
Thank you, everybody, for joining us on the call. Anything should come in your mind after the call, please don't hesitate to contact the IR department here in Rome. And with that, I wish everyone a good evening.
Bye.
Bye-bye. Bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.