LESS DEBT, MORE PROFITS, DISPOSAL OF 4,4 BILLION. THE ENEL FORMULA IS PROMOTED BY BROKER
Fulvio Conti, CEO of Enel, archive a more positive 2013 than expected and launches a business plan that only receives consensus among analysts connected to the conference call with the top management of the electric giant. In summary, the company aims to reduce debts from 37 billion at the end of 2014 to 36 at the end of 2018 with a parallel drop in financial charges (from 4,9 to 4,6-4,7% of turnover) and confirm the tradition of high profitability for pay shareholders by increasing the out ratio from the current 40 to 50%, starting from 2015, in parallel with the increase in profits (3 billion for 2014, 3,7 billion in 2016 and 4,5 billion in 2018) and gross margin: 15,5 billion in 2014, 16,5 in 2016 and about 18 in 2018.
Reliable forecasts based on the results obtained in a 2013 that was anything but easy: the company closed 2013 with a Ebitda of 17,01 billion euros, well above the consensus and net profit adjusted to 3,11 billion (against 2,828 billion in 2012) which will allow for the distribution of a dividend of 13 cents per share, against 15 cents in 2013 . Results that are anything but obvious, given the situation in Mediterranean Europe and the constraints imposed by public finance actions. “The managerial actions implemented to improve cost efficiency and optimize investments – commented Conti – made it possible to achieve the economic-financial objectives and exceed the objective of reducing net financial debt. These results were achieved despite the persistence of the negative economic cycle in Italy and Spain and the heavily penalizing regulatory measures adopted by the Spanish government in 2012 and 2013. The Group continues to produce positive net cash flows” despite the reduction in revenues from sales of electricity, linked to the lower quantities sold in Italy and Spain, only partially offset by higher revenues from the transport of electricity and the sale of fuels. In short, what made the difference was the discipline on the cost front and in the management of capex, appreciated by analysts.
Market participants also like the prospect of strong growth in free cash flow: 9,7 billion, also thanks to the ax on costs, and the confirmation of disposals for 4,4 billion, including non-consolidated assets or those outside the "core business". There will be no progress towards the merger with Endesa, at least for this year (“the synergies work perfectly – explains Conti – and we will continue in this direction”). In reverse, the purchase of the shares of the minority shareholders of the South American subsidiaries will continue. "But the objective - admonishes the CEO - is to create value for the shareholders, therefore we will not buy at any cost". Speaking of costs, an analyst presses on, is it still worth producing energy in Italy? “For us it is a profitable activity – replies Conti – We have a well-balanced portfolio, without having pushed on new acquisitions or combined cycle plants”.
The results, underlined Conti, "confirm the effectiveness of the geographical and technological diversification strategy". For the future we continue on the same path. The strategic priorities indicated in the 2014-2018 Plan consist in continuing the path of organic growth, reads a company note. in conventional generation in emerging markets and in renewables, as well as in the distribution and sale of electricity and gas, leveraging on the strengths already consolidated at group level.
Initial reactions are largely positive. In Piazza Affari, on a negative day for the markets, the stock advanced by 13% at 1pm. Raymond James has decided to raise the recommendation from Market Perform to Outperform, setting a target price of 4,30 euros, the highest among the 32 analysts surveyed by Bloomberg, whose average is 3,55 euros: today's price is at a 30% discount on the historical average of the last 13 years on the EV/Ebitda and Ebit ratio.
