Good afternoon, this is Chorus Call conference operator. Welcome, and thank you for joining ENAV first quarter 2024 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star then zero on their telephone. At this time, I would like to turn the conference over to Mr. Daniele Tutino, Head of Investor Relations. Thank you, and over to you, sir.
Good afternoon, everybody, and thank you for joining us today on our first quarter 2024 results conference call. I'm Daniele Tutino, Head of Investor Relations. Today, our CEO, Pasqualino Monti, will take you through our progress during the first quarter of this year, and then our CFO, Luca Colman, will take you through the first quarter financial results, and we will then welcome your questions. As we did, I will now hand over to our CEO, Pasqualino Monti.
Thanks, Daniele, and good afternoon, everybody, and thank you for taking the time to join us today. Let's start with the key points about our first quarter results. We are pleased to announce results which show a good start to the year, on track with our plan, with excellent traffic performance and strong financial results. In the first quarter of this year, the number of flights managed by ENAV recorded an increase near to a double-digit growth, up 99.6% compared to the first quarter of 2023. These results exceeded the traffic levels managed in the pre-COVID period in comparison with 2019. In the first quarter of 2024, traffic in Italy was up 6.3%. The result in Italy was higher than the rest of Europe, where, again compared to 2019, the average figure at the end of the first quarter of 2024 decreased by 8.5%.
The increase in flights led to a growth of service units, with en- route traffic exceeding 2 million service units in the first quarter of 2024, up 8.7% versus the first quarter of 2023, and up 30.2% versus 2019, while terminal traffic is up 10.5% and exceeding by 1.4% the pre-pandemic level. Even facing so high traffic volumes, we are continuing to be the best-in-class also in terms of quality of service, with volumes of minutes of delay almost equal to zero, well below the target set by the regulator. In terms of financials, total revenues are EUR 193.6 million, up 94.5% compared to the first quarter 2023, driven by the strong increase in traffic and with non-regulated revenues also contributing to this growth for EUR 7 million, with a strong increase of around 19% compared to last year.
We have also continued to improve our profitability, with EBITDA up 70% to EUR 16.5 million and strong margin at 8.5%, up 3% compared to the first quarter of 2023, while EBIT stands at EUR -10.3 million. Let me remind you that last year it was negative at EUR 20 million, with EBIT margin up 6%. You may have seen that our traditional seasonality is shaping our results with the first quarter of the year, typically the weakest in terms of traffic and top line, but not in terms of costs, which are fairly stable in the quarterly trend. Despite this trend, in this quarter we are seeing strong progresses at the bottom line with negative net results of EUR 13.8 million compared to the EUR 21.8 million loss of the first quarter of 2023.
In terms of CapEx, the amount in the first quarter stands at EUR 11.6 million, while net debt accounts for around EUR 300 million, and it decreased by 6.7% compared to the end of 2023, with the ratio net debt on EBITDA at 1x. Let me show you now the traffic performance achieved during the first quarter 2024. Service units went up 8.7% year-on-year, driven by a solid increase in international overflight traffic, which grew 17.2% in international traffic and 7% in overflight traffic. National traffic declined marginally year-on-year, having yet to recover the pre-pandemic volumes, starting from last year, earlier than the other traffic components. In terms of mix in the pie chart, you can see as national traffic accounts for 90%, international accounts for 40%, and overflight traffic, which is the most profitable, accounts for 41%.
Here, the performance was driven by an increase of intra-European flights and Euro-Asia connections. En- route traffic volumes showed a full recovery in the first quarter compared with the pre-pandemic levels, exceeding it by 13.2%. This positive traffic trend is progressing with an impressive tenor, as confirmed by the number of flights in April, which is up 11.9% compared to April 2023 and up 12.4% versus April 2019. Also, the terminal traffic shows a very strong growth. Service units grew by 10.5% year-on-year, showing a generally positive trend throughout all three charging zones. More in detail, Zone one is up 27.7% with such a strong increase, as its recovery in the post-pandemic period was lower than the other two zones. Very good performance in the quarter for Zone two, up 9%, and Zone three, up 3.7%.
In terms of destinations, the international component, representing 60% of the total traffic, increased by approximately 16%, while the residual 34% related to the national traffic grew by approximately 2%. In comparison with 2019, traffic volumes for the first quarter recorded a complete recovery, as they exceed by 1.4% the pre-pandemic level. With this, I want to leave the floor to Luca to run through the first quarter key group metrics.
Thank you, Pasqualino. It is a month and a half since we set out our detailed full-year 2023 results presentation. As you know, although Q1 is important to us as we look to start the year in the right way, it is always our smallest contributor to the full- year. It is important to bear this in mind when now we go through our figures. First of all, let's see the revenue breakdown.
In this slide, you can see that group revenue in the first quarter 2024 grew 9.5% or EUR 16.8 million year-on-year, reaching EUR 193.6 million. It is a very brilliant result, driven by the strong increase in traffic volume, with en- route and terminal revenues increasing by 3.5% and 9.5% year-on-year, respectively. Now, moving to the balance, you can see in the first quarter 2024, a balanced contribution for EUR -1.8 million due to the following elements. First of all, a balance accrued in the period of about EUR 18 million, mainly coming from EUR 10.6 million inflation balance for the period as a result of the higher inflation rate versus initial estimated rate included in the Performance Plan. EUR 8.7 million balance related to the Charging Zone three in line with the last year.
EUR 0.7 million balance actualization and EUR 0.4 million balance due to the traffic risk related to the Charging Zone two due to higher traffic management versus the planned one in the target. Then we have a balance reversal of EUR -19.7 million, mainly coming from 2020-2021 traffic COVID recovery. Moving now to the not-regulated business, also here, we can see a good evolution compared to last year, with an increase of about 19% on the back of the rising activity in international markets. Now let's see the cost evolution during the first quarter.
Total operating costs accounted for EUR 177.1 million, up 6% or EUR 10 million year-on-year, mainly due to the increase in personnel costs in response to the high volume of traffic to handle. Staff cost is up 6.7%, mainly due to the actions put in place to manage the high level of traffic.
Then we have fixed component of the remuneration is up EUR 2.8 million, mainly due to the increase in head counts for 75 average units at the group level, primarily controllers and technicians. This is in line with our planning. The variable remuneration increased by EUR 3.2 million year-on-year, mostly due to the flexible allowance for air traffic operators to manage traffic peaks. Social security contributions grew by EUR 1.7 million compared to the first quarter 2023 due to the above-mentioned increases, and other personal costs increased for approximately EUR 1 million related to the health insurance for staff redundancy incentives.
Then the other operating expenses. This line increased by 2.8%, which is about EUR 1 million, mainly due to the maintenance costs and professional service, partially offset by reduction in energy costs. The capitalized internal works related to group personal activities in investment projects are stable.
This compared to the first quarter of 2023. Now let's see the P&L below line cycle. EBITDA stood at EUR 16.5 million, nearly doubling year-on-year as a result of the higher air traffic volume, which pushed up total revenue. This is partially offset by the related increase of personal costs. D&A stood substantially in line year-on-year, and we reduced also a lower breakdown compared to first quarter 2023. EBIT is negative at EUR 10.3 million, an improvement of EUR 9.7 million compared to EUR -19.9 million reported in the first quarter 2023. Moving down to the next financial expenses, amounting to EUR 2.1 million in the first quarter, an increase of less than EUR 1 million, mainly due to the increase of interest rate on debt, partially offset by financial income from the balance actualization mechanism and from bank deposits.
Current and deferred taxation overall amounted to EUR 1.4 million, decreasing EUR 1 million year-over-year. As a result of these movements, the bottom line closed with a negative net result of EUR 13.8 million, with a significant improvement compared to the first quarter 2023, EUR +8 million, and in line with an up quarterly trend reflecting the traffic seasonality that is typical of our business. Let's now move briefly.
Let me now briefly update you on our liquidity and financial position, which, as you can see, remains very strong. We ended the first quarter with EUR 245 million of cash, with additional underwritten credit lines for EUR 199 million, of which EUR 150 million are committed. Net financial debt stood at EUR 300.6 million, decreasing EUR 21.7 million compared with net debt of EUR 322.3 million as of the end of December 2023. The free cash flow stood at EUR 22.3 million.
It was EUR 20.5 million in the first quarter 2023, and it's mainly driven by a net cash in from operations for approximately EUR 50 million, an increase of EUR 12.1 million compared to the first quarter 2023 that reported a cash in of EUR 37.7 million, and EUR 27.5 million cash out related to the capital investments. As a result of these changes, net- debt- on- EBITDA ratio at 1x slightly decreased compared with the end of 2023. This was 1.07x . On the back of the results achieved in this quarter, we are fully reconfirming our 2024 outlook. And with this, thank you for your attention, and I guess we can move to your questions.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. We will pause for a moment as the callers join the queue. The first question is from the line of Carlos Caburrasi from Kepler Cheuvreux. Please go ahead.
Hi, everyone. Thank you for the presentation and for taking my questions. I have three. The first one is on the dividend side. I'm not going to ask you to provide any guidance yet or anything like that, but how likely is it that once the year before is approved and new dividend policy is presented, then the second one, so far traffic remains strong and leisure is still on the driver's seat? What's your view here? For how long do you believe this situation is sustainable, and what are your future expectations? And lastly, I wanted to comment on a read-across from France. As recently, we have seen some tensions there with the air traffic controllers. Do you believe that in Italy the situation is better, or will you see some tensions as well? Thank you.
Okay. We start from the third one, answering your question. So for what concerns our controllers of the unions, let me see that at the moment we don't have a particular element of discussion with the staff. So other than trying to and this is coming with the second your question, the traffic volume, just trying to better plan the summer season where the traffic will be very, very important, really important. The forecast is going I mean, it's at the moment very, very significant. And this is the only, I mean, main thing that we are talking with our staff other than the renewal of the technical part of the contract, but we don't see any particular pressure on this second item. So at the moment, I don't have anything to underline on our discussion with them.
So I can answer also the second point, the traffic, the strong traffic that we are now managing. This traffic is going to be strong also for the second quarter. The very last operative forecast that your controller gave to our, let me say, controller's center said that even in the summer, the next eight weeks, because they have a very short, very strong forecast for the next eight weeks, it's going to be more or less the same level that we have now. And this is something that is quite, quite important for us because as much as we get closer to the summer season, we expect that the level of traffic should in some way decrease a little bit.
I mean, the increase, the trend that we are in now should not be the same because, as you can imagine, the airspace is kind of already managing high level of traffic, much higher than the one that we are normally managing during the first quarter. So saying that, in the year, we expect to have a very strong increase. Even in the summer, we still need to wait some more weeks to understand if July and August will be so strong. We believe that it cannot increase by double- digits as it is happening now because actually there is no more room in the space, but only in our part of Europe, actually, we have a capacity problem that probably in some way will affect all the network, the European network.
So even if we expect to have an increase of traffic, also a strong increase of traffic also for the next month, probably it will slow a little bit down. For what concerns the dividends, yes, the discussion with RP4 is going on in this period. So I confirm that in this moment, we can see that the timeline that we have given is something that will be probably respected. So we believe that within the end of the year, at the most at the beginning of the next year, January, February 2025, everything will be defined and fixed. So we will be able to deliver our new business plan with a new dividend policy. Did I answer your question?
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Thank you. As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from the line of Luca Bacoccoli from Intesa Sanpaolo. Please go ahead.
Hello. Good afternoon, everyone. Can you hear me?
Yes.
Okay. Good. So three questions from my side. The first one regards the staff cost increase. So I was wondering if the trend seen in the first quarter can be projected also for the remaining part of the year. The second one regards the full- year guidance that you rated. But in the first quarter, basically, in absolute terms, you already delivered half of the increase embedded in the full- year guidance. So what should we expect in the coming quarters in negative terms just to reconcile the full-year guidance with this strong start to the year that we have just seen? And finally, the other question is a sort of a follow-up on the RP4 regulatory period.
So I know that maybe it's too early to talk about next year's tariffs, but given the significant increase in OpEx during the last two years because of the inflation, what trend should we expect in 2025 for tariffs? Is it fair to assume a stable level increasing or, on the contrary, a drop on the back of the significant jump in the service units? Thank you.
Okay, Luca. Thank you. So starting from the first question, staff cost, let me see that yes, probably I confirm that the staff cost trend that you are seeing now could be more or less projected to the end of the year. The only element that we are still considering in this moment is the summer season. We still have to understand how much will deeply impact the increase of traffic in the summer season because, as you know, we are already reaching the highest record of traffic managed. So in the summer, this is much more important for us.
If you take into consideration that August and July too is almost we manage almost double the traffic that we normally manage in January and February, you can imagine how much it's important if we increase by 3% or by 6% because the volume is much higher.
But more or less, I can see the staff cost increase more or less projected. For what concerns the guidance, yes, from one side, let me see that the weight of the first quarter in terms of results, how much they bring to the total result of 2024 or normally of the year is very, very low for the traffic reason mainly. So yes, we performed very well. This is very important. It's a very good starting point. But I think it's much more important how the second quarter and the third quarter will impact the total the full- year results.
On top of this, there's always some RP4, some new regulation thought that is going on and negotiation too where we are definitely thinking what could be the best strategy to apply even in 2024, I mean, to put the company in not only in safe harbor, but in the best position to perform well also in the next regulatory period. Saying that, RP4 discussion is going, so answer to the third question, probably. I cannot say anything about the tariff because, as you can imagine, 2025 tariff is something that will depend, first of all, on the negotiation on the cost efficiency target. That is something that will be finalized in a couple of weeks. And then you can imagine that this is a very important part.
The second part, it depends on the balance because the tariff applied is somehow different from the DUC, so the KPI that is considered for the cost efficiency, mainly for the balance. In 2025, the balance will be quite important. Saying that, I think it's important to underline the RP4 discussion is I guess this is something that this information could be useful for all of you. Have seen a Single Sky Committee a couple of weeks ago where the European Commission presented their 2.1 CAGR cost efficiency target. And after discussion, the new target was 1.8, but the discussion went wrong.
So no decision has been taken. The Commission is thinking how to better move forward. There are some informal discussions with the state. We had with our national authorities some other discussion. Probably we expect to have a new proposal shortly, just in a couple of days.
And we are quite confident that this could be a good proposal also for our part, for Italy. So you should wait just a couple of days. Let me see. At the most, a couple of weeks, probably will be much, it will be a little bit less to have an answer of what will be the cost efficiency target given to the European country in terms of cost efficiency. But we are quite confident at the moment of how the discussion and how the negotiation is going on. We are quite positive.
Okay. Great, Luca. Thank you.
You're very welcome.
Thank you. The next question is from the line of Aleksandra Arsova from Equita. Please go ahead.
Hi. Good afternoon. Thank you for taking my questions. three on my end. The first one is a follow-up on regulation, on RP4. So you mentioned that the very last proposal is around -1.8 CAGR over the next five years. So let's assume that this is the final one or it could be even maybe better, but let's assume 1.8. So with such a target, will you be able to make EBITDA grow, let's say, in line with past track record, so mid-single digit in the coming years? The second one is on the bonus malus.
Again, looking at the proposal of the PRB, they want to set up, let's say, three elements to determine the bonus malus, so ATC disruption, weather delays, and system reliability buffer. So this new setup of the bonus malus will make life for you easier or tougher to achieve the bonus malus target.
The last one is on the guidance full-year 2024. So you confirmed the mid-single-digit growth and revenues and the EBITDA. So just a clarification, what is the assumption you have in this guidance on the bonus element, so in Euro millions, and what could be the sensitivity of this guidance depending on the summer season contract you are negotiating currently with trade unions? Thank you.
Okay, Aleksandra. Thank you for this nice question. Let me see what I can tell you about the first and second question we'll answer together. For what concerns, the 1.8 cost- efficiency target that at the moment is on the table and the Bonus Malus negotiation for what concerns capacity and delays. This is something that goes together in some way. The negotiation is going together because from one side, European Commission and the state understand that if you push too much on cost, probably we may have problem of capacity. I'm not talking about Italy. I'm talking about all Europe, the European network, and above all, the north Europe, the north part of Europe network. Saying that, this is exactly the point of discussion in this moment. I wouldn't but I cannot say anything.
I mean, in this moment, I wouldn't take into consideration this 1.8 at the moment, waiting for the new proposal if there will be any in some days. Then maybe on the basis of the new target, we may have probably another discussion also for what concerns the capability of the company to reach this target. In this moment, we understand that there's a new target that could be in some way presented where the company is in some way thinking positive about this target in terms of reaching the target and continue to grow. For what concerns the Bonus Malus, this discussion goes together with this cost efficiency target.
Let me say that starting from the beginning position of the PRB in particular, the new discussion brought the table to discuss with a different target, at least for what concerns ENAV. We have explained our reason.
We believe that the new target that is given to us now in an official way in this moment is for what concerns Bonus Malus—sorry, the capacity target is something much better than the first one. So even for the Bonus Malus, we believe that we could continue probably to challenge, to try to get also for RP4. And we'd be always more and more difficult about. I think this is the job of our regulator that is in some way try to push all the system, all the network to work better, not only Italy. The third point was related to the.
Guidance.
Guidance assumption.
Oh, the guidance assumption. What was the question? Sorry, I forgot your question about the guidance.
So the sensitivity on the EBITDA guidance depending on the summer season contract and how much of bonus you include in the guidance in Euro million.
We didn't disclose this second yes, information, but we believe we could be able to reach part of this bonus even with the increase of traffic, with the increase in traffic that we are having. In our forecast, in our guidance, there is a part of this bonus. There's a part of the traffic that is increasing. At the moment, we didn't change our I mean, we did update any figure of the guidance just because the summer season will be the one that in some way will drive the 2024 result. And in the moment, our figures are confirmed. So forecast traffic, Bonus Malus, part of the Bonus Malus is something that we are quite confident in the moment to reach.
Okay. Brilliant. Thank you.
You're welcome.
Thank you. The next question is from the line of Marco Limite from Barclays. Please go ahead.
Hi. Good afternoon. I've got only a couple of questions left. So you were mentioning earlier that in 2025, in the 2025 tariff, we'll see a meaningful amount of balance. So if you could just remind us, number one, what was the inflation balance in 2023 that will go in 2025 and what do you expect actually for the inflation balance in 2024? Because I can see that in Q1, the number wasn't massively different from last year. And also the second question, but still on a similar topic, out of the EUR 670 million of, let's say, pandemic traffic balance, how much have you been able to use in 2023 and 2024, and therefore, how much is left to be used for the years ahead? Thank you.
Allora, for what concerns the 2021 traffic balance, let me see. You should consider it. You should divide more or less by five. So if the total amount divided by five, you find somewhere something around EUR 127.25 million per year. This year, I'm thinking I'm talking about 2024, the total, the net cash, the net balance reversal would be around EUR 100 million because we have some balance that we give back to the market. That's the reason. But if you look at the 2021 recovery balance, so the EUR 670 million value, you should consider more or less EUR 125.27 per year. Reversal balance. And this is for what concerns the first one. For what concerns the inflation, 2023 inflation is around EUR 60-62 million. And this is the amount of inflation recognized in 2023, if I'm right.
What is the expectation for 2024 for the inflation balance?
Do you know the rate? The inflation rate that is expected? No, I'm kidding. This will depend on the inflation rate, the final, I mean, yes, the inflation rate that we will have by the end of this year. In this moment, it could be a range, you know, that the inflation that in some way is accrued in the previous year is something that is a carry forward. So, saying that, we should wait the end of this year to understand what could be the final value depending on the difference between the one in the tariff, planned in the tariff, and the one that is there that will be the actual one. In this moment, I can imagine a value higher than this EUR 62 million, but this will depend on the final inflation for Italy.
It could be maybe another EUR 15 million-EUR 20 million on top, but this is just an idea. We should wait some months. I mean, we normally start to count the final inflation, the real final inflation in the third quarter. In the third quarter, we have a good idea what could be the final one. In this moment, we just have a first I mean, a first indication, but it's as you can see from the figure that we have explained. But it's just a very, very first indication related only for what concerns Q1 then, that is a very small part.
Okay. Thank you. And actually, if I can ask one more question on a different topic, which is CapEx. So I mean, as part of your business plan, you have said that you want to accelerate on technology deployment. And therefore, I assume that that will drive higher CapEx in 2025 and forward. So just wanted to understand with you, is this a discussion you actually have also with the regulator to what extent what's the sort of amount of money you can do and you can recover, or it's all your decision and then you just bear the fruits of, let's say, the cost efficiencies that are coming from the CapEx? So is that your choice, or it's something you have to agree with the regulator? Thank you.
Okay, Marco. Always start from our, I mean, choice, our strategy. We share with our regulator, and we also share with the airlines in the meeting that we call the consultation meeting with the airlines because we have to. In the consultation, we show some of our figures in the Performance Plan. And one of these is the investment plan.
Say that we are not really increasing in a very, very important way the level of our CapEx and more than our CapEx, our D&A that will be paid by the tariffs, by the airlines because we are coming back to the level that we have already declared in the let me say, in a situation right after the COVID when we said that we are going to go back to a normal level of depreciation that will be sorry, the CapEx that will be around EUR 120 million per year, that if you remember, is more or less the level that we had also in pre-COVID in 2018, 2019. But in that time, most of this CapEx was to maintenance and was a maintenance investment. Now, there are investments to develop new technology substituting in some way the old one.
If you think, for example, one of the most important ones is the 4-Flight, Coflight, that's a new technology that we use in our ACC to manage the traffic that will help us to perform better in terms of cost, but also in terms of capacity. And this is a project that is now really at hand, and we will actually implement in a few months in our first ACC. This is something that is always CapEx, but it's kind of substitution of CapEx. But the total level of CapEx that is important is, let me say, back to normal, to EUR 120 million. So in some way, we don't expect to have any problem with the regulator or with airlines to be approved because it's something that is already in their mind.
It doesn't really increase the level that they were used to pay with the ENAV in the tariff pre-COVID period. Did I answer your question?
Yes, it did. Thank you.
You're welcome.
Thank you. Once again, if you wish to ask a question, please press star and one on your telephone. For any further questions, please press star and one now. We have a follow-up question from the line of Aleksandra Arsova from Equita. Please go ahead.
Hi. Yeah, very short one. Now in June, we are having the European elections. So do you expect maybe that this will change something in the negotiation process or maybe some delays or people in the technical body if you are discussing with to be maybe replaced? Thank you.
This is just my idea. I think they will not change any technical body or part of the commission that are actually in some way analyzing, discussing, and bringing forward the RP4 because they don't have the timing probably to do it. So my idea is they will keep this team until the end of the RP4 negotiation and approval of the performance plan. And then if change will be made, they will make only in that time, not before.
Okay. Thank you.
Okay.
Thank you. A final reminder at this time, if you would like to join the question queue, please press star and one now. Gentlemen, there are no more questions registered at this time. Do you perhaps have any closing comments?
Thanks a lot for this conference call. Obviously, the investor relations team remains available for further follow-ups. Thank you very much.
Bye.
Thank you. Ladies and gentlemen, thank you for joining. The conference call is now over. You may disconnect your telephones.