ACEA GROUP Quarterly Report for the Three Months Ended 31 March
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ACEA GROUP Quarterly Report for the three months ended 31 March 2008 Board of Directors’ meeting of 12 May 2008 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9 MANAGEMENT OF THE PARENT COMPANY, Acea SpA Board of Directors Fabiano Fabiani Chairman Andrea Mangoni Chief Executive Officer Marco Maria Bianconi Director Massimo Caputi Director Jean Louis Chaussade Director Dino Piero Giarda Director Jacques Hugè Director Luigi Spaventa Director Luisa Torchia Director Board of Statutory Auditors Maurizio Lauri Chairman Roberto Pertile Auditor Francesco Lopomo Auditor Claudio Bianchi Alternate Auditor Claudio Valerio Alternate Auditor Consolidated quarterly report for the three months ended 31 March 2008 2 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9 CONTENTS Acea Group financial highlights page 4 Introduction page 6 Segment information page 10 Operating review page 12 Basis of presentation and consolidation page 40 Results of operations page 45 Financial position and cash flow page 69 Other information page 86 Declaration of the Executive Responsible for Financial Reporting page 90 Operating and financial outlook page 91 List of consolidated companies page 93 Consolidated quarterly report for the three months ended 31 March 2008 3 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9 ACEA GROUP FINANCIAL HIGHLIGHTS Increase/ % increase/ €000 Q3 2008 Q3 2007 (Decrease) (decrease) Consolidated net revenue 759,397 597,362 162,035 27.1 Staff costs 67,473 56,969 10,504 18.4 Cost of materials and overheads 552,674 422,053 130,621 30.9 Consolidated operating costs 620,148 479,022 141,126 29.5 Fair value of commodity derivatives (1,074) (2,496) 1,422 57.0 Gross operating profit/(loss) 138,175 115,844 22,331 19.3 Operating profit/(loss) 79,748 64,718 15,030 23.2 Finance (costs)/income (18,407) (15,296) (3,112) 20.3 Profit/(loss) on investments 108 4,827 (4,719) (97.8) Profit/(loss) before tax 61,448 54,249 7,199 13.3 Net profit/(loss) from continuing operations 35,575 32,215 3,359 10.4 Net profit/(loss) from discontinued operations 0 0 0 0.0 Net profit/(loss) for the period 35,575 32,215 3,360 10.4 Profit/(loss) attributable to minority interests 1,560 935 625 66.8 Net profit/(loss) attributable to the Group 34,014 31,280 2,734 8.7 Earnings/(loss) per share (€) basic 0.1597 0.1469 0.0128 diluted 0.1597 0.1469 0.0128 Consolidated quarterly report for the three months ended 31 March 2008 4 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9 Increase/ BALANCE SHEET 31 Mar 2008 31 Dec 2007 (Decrease) (€000) (A) (B) (A-B) Net invested capital 3,079,201 2,762,256 316,945 Shareholders’ equity 1,465,006 1,439,716 25,291 Net debt 1,614,195 1,322,540 291,655 Consolidated quarterly report for the three months ended 31 March 2008 5 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9 INTRODUCTION The consolidated results of operations for the three months ended 31 March 2008 show: 1. consolidated net revenue up 27.7% 2. cost of materials and overheads up 31.2% 3. staff costs up 18.4% 4. gross operating profit up 19.3% 5. net profit for the period up 8.7% The results for the period were influenced by the different method of consolidating Tirreno Power and Umbra Acque, the increase in the Group’s interest in GORI from July 2007, and the consolidation of Longano and Elga Sud, which were not consolidated in the consolidated quarterly report for the previous year. These changes contribute a total of 12 million euros to consolidated gross operating profit, including 10.4 million euros attributable to Tirreno Power. On a pro forma basis, enabling a like-for-like comparison of amounts with those of the previous year, gross operating profit for the first quarter of 2008 is 126.2 million euros, representing growth of 10.4 million euros. The improvement reflects increases of: (i) 16.6 million euros in the gross margin and (ii) 7.1 million euros in staff costs, less capitalised costs. In terms of business segment: 9 water services recorded growth of 8.1 million euros in the gross margin, to which all areas of operation contributed; 9 energy networks report a gross margin substantially in line with the figure for the previous year (73.7 million euros); 9 energy sales and generation saw the gross margin decline by 0.5 million euros due to (i) the substantially in-line performance (up 1 million euros) of generation, reflecting the complete shutdown of the Voghera plant throughout the quarter following a breakdown in November, and (ii) a loss of 1.5 million euros on sales, primarily reflecting commodity prices. The breakdown at the Voghera plant accounted for a decrease of approximately 3 million euros, after the insurance payout paid to date. The gross margin also rose as a result of the return of the 4.1 million euro fine imposed by the Antitrust Authority. This following the favourable judgement handed down by Consolidated quarterly report for the three months ended 31 March 2008 6 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9 Lazio Regional Administrative Court on 7 May in response to the appeals filed by Acea and Suez. Growth in staff costs reflects the 196 increase in the average headcount, the impact of contract renewals and increases in a number of other components such as holiday pay and a review of grades resulting in average rises due to company reorganisations. The rise in staff costs can be seen across all business segments, as follows: 9 Energy networks up 2.3 million euros; 9 Energy sales and generation up 0.6 million euros; 9 Italian water services up 3.3 million euros, including 2.3 million euros attributable to the Lazio and Campania-based companies; 9 Parent Company up 0.6 million euros. Amortisation and depreciation is up 8.2 million euros, including 3.5 million euros attributable to Tirreno Power and Umbra Acque. On a like-for-like basis, the increase is thus 4.7 million euros. 2.6 million euros of the increase regards completion and entry into service of the Roselectra and Leinì plants and changes to the useful lives of the hydroelectric plants (following the Constitutional Court sentence of January 2008), whilst 1.7 million euros regards the amount of investment carried out by Group companies during the current and previous years. Net finance costs are up 3.1 million euros, with 2 million euros reflecting the change in the basis of consolidation. The result reflects both increased borrowing and rising interest rates, with the Parent Company recording a 3 million euro increase in finance costs on short- and medium/long-term borrowings. In contrast, there was a 1.6 million euro increase in interest on receivables due from end users. The overall tax rate for the period, on a pro forma basis to enable like-for-like comparison with the first quarter of 2007, is around 37%, marking a reduction of 3.6% essentially due to changes to regulations introduced by the 2008 Finance Act. Tax expense for the period also reflects reversal of the accrued portion of tax assets accounted for in 2006 and 2007 (1.7 million euros), and the effects of the change in the method of consolidating Tirreno Power. The tax rate is thus 42.1%. Consolidated quarterly report for the three months ended 31 March 2008 7 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9 Net invested capital is up 11.47% (up 317 million euros) on the end of the previous year, with the increase amounting to 5.70% (157.3 million euros) on a like-for-like basis. The rise reflects increases in net working capital (up 117 million euros or 61.80%, and up 95 million euros or 50.21% on a like-for-like basis) and in net non-current assets (up 199.9 million euros or 7.77%, and up 62.3 million euros or 2.42% on a like-for-like basis). The increase in net working capital is due to: (i) a 146.4 million euro rise in current receivables (103.1 million euros on a like-for-like basis), above all those due from customers (up 99.3 million euros and 56.6 million euros on a like-for-like basis), and (ii) a 39.4 million euro increase in other current assets (28.5 million euros on a like-for-like basis); partially offset by (i) an increase in other current liabilities (up 61.3 million euros and 51.6 million euros on a like-for-like basis), primarily reflecting tax expense for the period, and (ii) an increase in current payables (up 9.4 million euros), deriving from the greater amount payable to the Comune di Roma (up 8.3 million euros) and a rise in trade payables (up 2.9 million euros). On a like-for-like basis, current payables are down 21.7 million euros, reflecting an increase in amounts payable to the Comune di Roma, offset by a reduction in trade payables (down 28.2 million euros). At the end of the period the Group reports net receivables of 28.6 million euros due from the Comune di Roma, after an increase of 27.2 million euros with respect to 31 December 2007. Investment during the period amounts to 92.9 million euros, marking an increase of 10.8 million euros compared with 31 March 2007 (up 6.9 million euros on a like-for-like basis). The movement reflects a 3.3 million euro reduction in investment in generation, following completion of the thermoelectric plants under construction, and an increase of 13.7 million euros in investment by the Group’s electricity distribution and water companies.