Rai Way SpA
MIL:RWAY
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 |
4.78
5.58
|
| 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.
Rai Way 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 Rai Way First Quarter 2023 Results Analyst Conference Call. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Giancarlo Benucci, Chief Corporate Development Officer of Rai Way. Please go ahead, sir.
Thank you, operator, and good afternoon. Let me start thanking all of you for joining us today, and welcome to our first quarter 2020 results presentation. Today, I have the pleasure of sharing the floor with Roberto Cecatto, the new CEO of Rai Way. Despite only 10 days at the helm, Roberto is obviously pleased to introduce himself, share its first impressions and priorities as well as the highlights of the first quarter. Afterwards, Adalberto will take you through the financial performance in more details to conclude with the usual Q&A session.
Let me therefore hand the call over to Roberto. Please Roberto, go ahead.
Thanks, Giancarlo, and good afternoon to all of you. My name is Cecatto -- Roberto Cecatto, and it's indeed a real pleasure to be here with you today for my first call.
As you know, since April 28, I have been appointed the new CEO of Rai Way and I take on this position together with the rest of the directors with great enthusiasm and sense of responsibility towards the shareholders and all stakeholders and towards the company itself and its teams, employees.
Let me spend a few words regarding my person. I am born at [indiscernible] and I'll come back in a telco infrastructure company. Let me say, it's the circle of life. For 8 years, I was the director of the largest business unit, let me say, a company inside the company, the TV Production department, 4,000 people consider that is more than 6x the people of Rai Way. Lastly, in the past 2 years, I was Director of Regional and for [indiscernible] and also the Director of Real Estate Department. EUR 1 billion of real estate assets developing for the first time in a 10-year plan to revamp and increase value and rationales.
But the Rai Way is not a strange to me because in the various roles and within Direct Group, I have also and were recently working a corporate wider, always appreciating it for its expertise and quality. And taking the helm of a solid company, constantly growing over time, with clear strategic lines, thanks also to the efforts stand of the Former CEO, Aldo Mancino, my very good friend, and I believe is a promising feature.
Let me add that I decide to accept this role because, believe me, I trust in this company. But to put it very simple, we are in front of a company with first point in outstanding infrastructure, not applicable and with clear features in terms of location and users. Second point, a core business referring to broadcasting and tower hosting being stable, but with excellent visibility in the medium term and significant cash generation. Third point, cash definition, which moreover fuels the capital structure with very little debt and the large financial flexibility.
Therefore, it looks reasonable to operate in 2 direction: On one hand, we will work to maximize as much as possible the value and the cash generated by the traditional business, whether it is through the feature of existing contract, CPI Link, deeper efficiencies, new business opportunities. I think about the possible rollout of -- network opting for 5G networks on the standing of transmission and contribution services, and also possible industry opportunities to generate synergies. The second direction is to use the cash generated and financial flexibility. This is very important to invest in value-accretive diversification in new businesses on which Rai Way can have a competitive positioning.
Rai Way, as I already mentioned, has already done a significant amount of work on this front. Obviously, the Board and I feel is important to underline just the right, and we will now go through all the growth initiatives, but in general terms, it's fair to say that one of the must to date among the most visible and concrete is the digital transition. Therefore, the plan to contribute to the creation of the infrastructure needed to enable digitalization processes and low-latency services underlying low-latency services because it's a factor of differentiation about other subject, while exploiting synergies with the current portfolio and the expertise and assets makes sense. And this is also the feedback we are getting from industrial and financial operators. It's not only a dream.
Moreover, this infrastructure could also be leveraged to introduce new services for existing, but also new media customers, for example, supporting more efficient content distribution on IP networks and platform. As said, we already started to review internally all these initiatives in terms of opportunities and risk. From Rai Way's positioning to where we are in terms of rollout to future commercial setup. And at the moment, there are no elements the different from what the company has already shared with you in terms of rational timing returns.
Therefore, the messages I would like to share with you today are, full awareness of the development path undertaken by the company, and I think this is fair considering the result recorded by the company [indiscernible] let me say, last but not least, this tough quarter, and the industrial interest together on new initiatives. And that's the focus mine of the new Board on the time management must be for rapid and effective execution.
Of course, in the execution, I will bring my own methods and expertise. I have only been here 10 days and have confidence in the work done so far by the company, but in my experience, every change brings the opportunity to see things and organization in a different perspective. So there will be great focus on speeding up execution and seeking possible additional areas of optimization and efficiency. The mission is to push forward initiatives with the best risk-reward for the company and where possible, accelerate the process to crystallize the existing value and to create new value by acting on clear operational and financial levers. And all this will set into the elaboration of the new industrial plan and we will be working in the coming months also in view the aspiration of the tariff on that terminate on the '23.
Coming now on the first quarter performance. The year confirmed a strong growth path we expect for 2023, leaving us as we see other to reiterate the full year guidance. I think this is very important. In particular, revenues are up to 12.8%, mainly as a result of indexation of inflation typical of our contracts and the growing contribution of the new regional multiplex business. These drivers together with the nice trend in hospitality to fiber to the wireless access operator and ready broadcaster as third-party revenue grew to over 30%. As Adalberto will explain in detail below, despite the progressively declining energy price in the first part of the year, electricity costs still suffer from an unfavorable comparison with first quarter in '22, remember that when prices were contractually fixed at the early '21 levels.
With the negative impact related to the price effect of over EUR 1.5 million in the quarter. Whilst energy price and other noncore assets are excluded like level of personnel capitalization on prior year adjustment, OpEx show a manageable increase, especially when compared to ongoing inflationary dynamics, demonstrating cost control that we intend to continue in the future. As a result, EBITDA is up 12.4% with marginality at 65.5%. The central growth drive to 25% at net income level. Also consider the traditional lower level of investment in the first quarter, cash conversion and excluding the cash generation was strong at 97% and over and over EUR 30 million, respectively. Net financial position, we include also the IFRS leasing pattern stands at under EUR 100 million.
And with this, I give the presentation to Adalberto to provide you with the details of the main items of our results. Please Adalberto, go ahead.
Thank you, Roberto, and good afternoon to everyone. Starting from Slide 6. As already mentioned, core revenues show a material growth in the first quarter of the year coming out at EUR 76.8 million, an increase of almost 13% compared to 2022 levels. In more detail, on the right component, the roughly 10% growth reflects the CPI indexation. The relevant index reached 11.5%, as you may recall, at the end of November 2022, only partially offset by the termination of the medium wave radio service that you may recall from our previous touch point has been effective since the end of third quarter and resulted in a EUR 2 million one-off penalty cash in last year.
On the other hand, acceleration in third parties' revenues was even stronger, exceeding the record level of EUR 10 million per quarter, plus 34% quarter-on-quarter, pushed by the full contribution from the new regional multiple capacity sold to local television broadcaster player on which we elaborated during the recent full year results call, and that started to be progressively flowing since March 2022. The increase was, of course, also pushed by the positive CPI linked that affects both Rai and third parties' revenues. And then we had a good performance on the fixed wireless access operators and the radio broadcaster. Moving now to cost.
Let's go to Slide 7 in the total cost in the first quarter amounted to EUR 23.7 million, against EUR 20.6 million recorded in the first quarter 2022, with other operating costs attach above EUR 11 million in the 3 months, negatively affected by the already anticipated by Roberto a tough comparison on the electricity bill. On this, let me elaborate a little bit more. With the previous year figures still benefiting from the fixed price on the raw energy component agreed back in 2021 and effective, as you probably may recall, till the end of March 2022.
All in all, consider that the first quarter 2023 average prices per megawatt hour, including all the components were equal to twice the first quarter 2022 level with the tax credit still in place, partially counterbalanced by lower incentive on ancillary cost. The comparison, according to the current energy unit prices, has been reversed in April and May, enjoying the downward trend we have been seeing since late 2022. On top, we also enjoy double-digit reduction in consumption. And in the first quarter alone, brought about mainly by the brand new equipment installed and the new network configuration.
Consider that if you strip out the impact of the electricity prices and other nonrecurring items, other operating costs were up by 5% in the quarter with around half of this increase related to initiatives eligible for public gains, confirming the tight cost control, we were able to carry out in such a strong inflationary environment. The same applies to personnel costs that when excluding -- without taking into consideration noncore impacts and lower capitalization compared to the first quarter 2022 value grew by just 3.6% quarter-on-quarter against the 12% reported.
Now moving to the profit and loss on Slide 8. Our bottom line enjoy a healthy 25% growth at EUR 23.5 million, mainly reflecting a significantly higher EBITDA, lower D&A following the early termination of the useful life of the old BBT equipment. And ever financial charge because of rising interest rates, but with limited impact in absolute number, with the tax rate broadly in line with the previous year.
Moving now to the cash generation, last slide from my side, #9. You can see how our debt slightly decreased in the first quarter in coherence with a seasonal effect down to EUR 92 million from the EUR 105 million recorded at the end of 2022 as a result of, among others, the strong EBITDA contribution, the EUR 6 million CapEx deployed in line with the historically low level for the first quarter out of which EUR 5 million were linked to development activities. The EUR 13.5 million net working capital absorption and the EUR 9.2 million of taxes, delivering all in all, a record recurring free cash flow to equity of roughly EUR 31 million in 3 months.
That's all on my side. I leave the floor back to Roberto for the guidance. Please, Roberto.
Okay. Thanks, Adalberto. Thanks for your attention. In term of expectation for the full year, as anticipated in the opening remarks, there are no changes from the guidance shared in mid-March. Specifically, an EBITDA level, the percentage growth is expected in the mid-teens area supported by CPI-link, ramp-up of the contribution from regional refarming and lower energy price compared to the last year, only partially offset by some negative comparison effect with 2022, which benefited from nonrecurring items. On the energy assumption behind this guidance compared to the call in March, the average raw energy price expectation are broadly stable, around EUR 150 per megawatt hours. Maybe in the future a little bit less, but we use these numbers. Tax credits has been extended to second quarter and so with a lower level of 10% compared to 35% of the first quarter because change the government helped on this faster from the industry.
But on the other hand, incentives on the other price, components have been largely reduced. The overall effect is slightly negative, but still leaving us in the range of the guidance communicated. No change also on CapEx, which remains substantially at last year level on both the development and maintenance components.
Let me say that before welcoming your question, just a brief closing remark from my side. Also the last one is mainly a marketing slide on the way equity story. I find quite impressive the strength and opportunities, organic external lines for value reaction. There are that where we have to focus and work on -- the ones supporting my enthusiasm and the optimism about the future.
That's all on our side. We can now open the line for the Q&A session. Thank you so much. Thank you.
[Operator Instructions] The first question is from Fabio Pavan with Mediobanca.
Yes, I would love to start with our coming question for the new CEO. May I ask you about your view on sector consolidation?
Good question. Let me say that I would like to avoid to repeat what is evident is really 10, 12 days, including some weekend and I work in that the weekend that I was appointed the old. I think that a question like that is giving me the chance to say that is professional to answer in the proper way. Let me say that independently from this specific case, in general, in the old infrastructure, potential asset consolidation is a level of industrial synergies and value creation.
Consider that I only been here from today. The consolidation file is one that I first check, studied and still analyze because I think it's very, very important. I am focusing my attention on that. And I committed to share with the Board as soon as possible. Consider that the Board is a new Board. There is a lot of new members of the Board. And I think that it is very important to give them as soon as possible all the information that I've found in the drop down in a part of continuity with the past approach of the company. But let me add a very personal approach. I prefer to speak not so much, but to facts.
The next question is from Stefano Gamberini with Equita SIM.
Welcome Mr. Cecatto. I have a question clearly now regarding the figures. If I'm not wrong in my math, the costs excluding -- the overall costs, excluding the energy costs, including the personnel costs, but excluding the energy costs that are not in the figures, in my calculation, should be up 14%? Am I wrong or not? And why there was such increase of OpEx while during 2025 -- 2022, sorry, you were able to keep all the costs under control?
And the second question is clearly what is the trend of OpEx that you expect for full year, excluding energy and one-offs. So in order to understand if the path of OpEx will be double-digit full year and what is the trend for the following years, more or less in order to have a long run time?
The second is regard to CapEx. You confirm the CapEx while in the first quarter, the figures were a little bit below our -- my estimate we can say. And so if you can update us on the development CapEx, where is the situation? What do you expect in terms of new edge computing that should be installed in 2023? And what is the remaining CapEx to finish the edge network that remains for '24?
I'm Adalberto. So in terms of cost, focusing on the cost in the first quarter, let's divide personnel from other OpEx. We have to remember, we had a one-off last year in the personnel amounting more or less EUR 0.5 million. So this is something that benefit in Q1 because of the renewal of the contract in place with our employees. And of course, such one-off is not [indiscernible] Q1 2023. Then again, on the personnel, we had a reduction a gain of almost, again, EUR 0.5 million coming from a lower level of the component of the cost that has been capitalized. So these are the main impact -- the main element that justify the variance in the personnel cost. Apart from this, as I mentioned before, the overall increase is not so significant.
And then on the other operating costs, the increase in absolute number of the other operating cost, excluding, as you mentioned, the energy cost is EUR 0.5 million in the quarter and half of this reduction is -- of this increase, sorry, is due to some initiatives that will have a benefit, actually, they already have a positive impact in our other income line. So nothing -- without any impact on the EBITDA. So the receivable increase is more or less EUR 250,000. So again, nothing of significant.
In terms of overall figures that we expect to have by the end of the year, as you know, we focus on the guidance on the EBITDA. So, we are going not to -- we're going not to give precise details on the figures of our OpEx. Generally speaking, we'll have a slight increase of our OpEx because of different components related to related to the new configuration that we have in place related to some, as you may recall last year, we talked a lot about some initiatives that we launched at the mid of the year in order to try to offset the increasing impact linked to the energy prices that finally at the end, decreased. But anyway, we already put in place at the time some actions that give an impact -- benefit on 2022 and some negative impact on 2023. So again, something extraordinary.
And then we expect to have some additional cost vis-a-vis last year due to the new initiatives that -- on which we are working and the that we start to give a limited impact, but some additional cost will be recorded. And this is the overall situation on our OpEx, confirming in any way the guidance that we gave to the market with the full year results. So the EBITDA is expected to significantly grow according to the guidance also mentioned by Roberto commenting the relevant slide.
And last question on CapEx. As you know, we finished the refarming process. So the most important project on which we work in 2022 is finished. Now we expect to have more or less the same level of development CapEx recorded in 2022 same level should be reached also in 2023. But with a more important component linked to the new initiatives, so to all the investments in relation, in particular, to the development of the initiative of the edge data center. So the trend in the first quarter is limited, but we expect according to the plan, which we are working on to have an increase in the coming quarters.
The next question is from Antonella Frongillo with Intesa Sanpaolo.
Welcome to Mr. Cecatto also from our side. I have a follow-up on the -- on your comment about the investor plan that you mentioned that you are going to work on in the second half of this year. I read on the press that Rai is also going to elaborate its industrial plan and also we have to renew its service contract with the government. So my question is on overall process. Could you help us understanding how you are going to work on your plan? Will it be in parallel with Rai work on industrial plan? And if there is any connection between your industrial plan and also the service contract? So if the service contract is a precondition also for your plan?
Antonella, let me say that, broadly speaking, our plan will be independent from the process followed by Rai. Having said that, let's see what will be the requirements of the new service contract to Rai to understand if there will be some additional opportunities for our company, for a way, for example, in terms of the rollout of the network or other opportunities. I mean, we have already done a lot of work with Rai in the context of the refarming. So let's see. But coming back to your question, the 2 processes are, let me say, broadly, unrelated.
Next question is from Giorgio Tavolini with Intermonte.
Let me stretch the congratulations to Mr. Cecatto to come aside on this new appointment. I was wondering back to Antonella's question, on what level of commitment you have by new management, I suppose, on the data center opportunities, they seem that they will, of course, imply higher leverage for IDA and indirectly to Rai, especially given the current financial position of the Rai Group. The second point, I was wondering if you can remind the OpEx start-up cost that you had in your guidance. You talk about the start-up costs related to new infrastructure and services. I was wondering if you can elaborate more in order to impact on the startup costs, and that's all from my side.
As concerned the last question, the impact is in the range of EUR 12 million. So nothing incredible for our overall figures. And then on the other question, I leave the floor to Roberto to give you some clarification.
Let me say that you see the new -- just from this afternoon, the new CEO of Rai that -- and the assembly we let them -- we'll close this role on the next Monday, give us some time to permit to the new that I know very well to recover all the job done by the right structure for the semi work at industrial plan and to understand in the different independent and autonomous role of the 2 companies, what will be the eventual impact interaction and so on. I think that there will be opportunity to find the best solution for the value of the Rai Way position. But this is my personal opinion. I usually am not so much optimistic but I have this perception just now.
Just a follow up on the service contracts, you're -- sorry I have some noise here. On the service contracts with Rai that we are going to renew to the previous question. I was wondering if you see any risk regarding the potential cap on inflation, such as the one that has been paused by media set and might need a second contract little bit late hours, 3% cap or something like that [indiscernible]
You refer to a negotiation that probably was referred to the contract between Rai and the industry. Anyway, as concern the contract we have in place with Rai, we already commented about this in the last call. Clearly, what we can say is that we have -- the contract is very clear, stringent was renewed at the end of 2019 in the context of the agreement. As you may recall, we reached -- we try for the years 2021, 2020. Then yes, of course, we know very well that now the CPI was high, but if you look at the past, we also had in some years negative CPI. So the overall increase since the IPO is if you take all the relevant index is a little bit more than 2%, so something that makes sense.
Finally, keep us in mind that with reference to our main customer, we offer not just hospitality but a turnkey service providing network. Therefore, the energy cost is not [indiscernible] and the headwind remains on our profit and loss. So this is the situation.
[Operator Instructions] Mr. Benucci, there are no more questions registered at this time.
Okay. So I will say thank you to all of you and speak soon. Bye-bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.