Good afternoon. This is the Chorus Call Conference Operator. Welcome. Thank you for joining the ENAV Nine- Month 2020 Results Conference Call. As a reminder, all participants are on listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, please signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Vittorio De Domenico, Investor Relations Manager of ENAV. Please go ahead, sir.
Thank you, Claudia. And good afternoon, ladies and gentlemen. Good morning to those of you connecting from the United States. Welcome, everybody, to the ENAV Nine-M onth 2020 Results Call. I'm joined here by Paolo Simioni, ENAV CEO, and Luca Colman, ENAV CFO, that will be running you through the formal presentation. After that, we will be happy to answer your questions. With that, I leave the floor to Paolo. Thank you.
Okay. Good afternoon, ladies and gentlemen. Welcome to ENAV nine months 2020 results. As you know, in the first nine months of 2020, the aviation sector has been heavily impacted by COVID-19, with the service unit down 59.6% and 58.8% for en route and terminal respectively. After the lockdown, when the traffic was down approximately 90%, we saw traffic volumes recovering during the summer season, with September traffic trading at the - 60.1% year-on-year. Second wave of COVID-19, currently afflicting Italy and Europe, has halted this recovery, leaving October traffic at approximately - 60% year-on-year. Despite this challenging environment in which we are operating and the lockdown measures undertaken in Italy from March to May, we keep full business continuity, and at the same time, we took care on the health and safety of our employees.
Let's focus now on our nine months 2020 financial results. As you may see, the net revenue decreased by 14.8% year-over-year from EUR 691.3 million to 589.1 million, despite a 62.6% year-over-year decline in revenue from operations, largely offset by a positive balance, which includes our best estimate on the effect of the temporary derogation to the Performance Scheme Regulation, proposed in July and published the 4th November by the European Commission for 2020 and 2021.
In the first nine months of 2020, we were able to offset a large part of the EUR 102.3 million net revenue decline, thanks to several cost efficiency measures put in place, leading to a EUR 175.7 million EBITDA, down 61.2 million or 25.8% year-on-year. EBITDA margin stood at 29.8%. Notwithstanding the revenue decline, we closed the first nine months 2020 with a net profit of EUR 55.3 million, compared with 98.8 million achieved in the same period last year. This, thanks to the efficiency measures put in place and the solid traffic risk sharing mechanism. CapEx was EUR 47.4 million. That means 12.1% lower than 2019.
As you will see later in the presentation, ENAV is well equipped to deal with COVID-19 dramatic situation, thanks to a solid balance sheet and a strong liquidity profile, further enhanced by two new ESG-linked term loans recently signed for a total amount of EUR 150 million. Let's move on the slide two to look at the traffic trend recorded in the first nine months of 2020. En route service unit decreased 59.6% year-over-year, reflecting the effect of the COVID-19 pandemic. This decline is combined effect of a very strong growth in traffic experienced in January and February, when service unit growth was 8.5% and 11.2%, followed by a sharp slide in March, reaching a 90% decline in April and May. The recovery started in June until the end of September, which saw a year-over-year decline, approximately 60%.
It's worth noting that within our group, the largest percentage decline over last year was related to international flights, with national traffic and overflights recording a less severe decrease. You can see the traffic split in the upper right of the slide. Over flight accounts for 42% of total traffic, international for 36%, and national for 22%. To be noted also that traffic decrease in Italy in the first nine months of the year was in line with the other major European countries' performance. As a whole for our group, terminal traffic was also severely hit by the COVID-19 pandemic, showing a service unit decrease of 58.8%. All three checking zones were impacted, with terminal zone one having the largest percentage decrease year-over-year, followed by terminal zone three and terminal one, two.
As already said, in the second wave of COVID-19 currently afflicting Italy and Europe, has halted the traffic recovery, leaving October traffic in line with the first nine months of 2020 at approximately - 60% year-on-year. Looking on slide three, as already said in the highlights, we can see net revenue decreasing by 14.8% year-on-year from EUR 691.3 million to 589.1 million due to a 62.6% decline in revenue from operations, largely offset by a positive balance amounting to EUR 286.7 million. We saw a material decrease in both en route and terminal revenue, down 65.5% and 63.4% respectively, mainly as a result of the COVID-19 pandemic, combined with the lower 2020 tariffs versus last year.
It's worth highlighting that the just mentioned positive balance posted in our first nine months 2020 accounts, was mainly driven by materially lower than forecasted traffic for both en route and terminal, and includes our best estimate on the impact of the European Commission new regulation on temporary derogation to RP3 performance scheme for 2020 and 2021, approved November the 4th. As we know, the derogation indirectly poses a cap on the amount balance that can be recovered by the service provider over these two years in order to help the air traffic sector in such a difficult scenario. The best estimate is built on our assumption of a reduction of ENAV's total actual determined cost of 2019 to be applied to the cost recoverable in the tariff of 2020, assuming a recovery over five years starting from 2023 of the capped balance accumulated in 2020 and 2021.
Non-regulated business in nine months 2020 almost doubled year-over-year, reaching EUR 16.4 million, mainly driven by revenue from IDS AirNav that was not consolidated in the first six months of 2019. Finally, other operating income was EUR 26.4 million compared to 29.4 million recorded in the same period last year, mainly due to a lower level of EU-funded projects. Moving now on slide four, we can see that in the first nine months of 2020, we continued to deliver on our cost efficiency plan to offset as much as possible the revenue decline and reduce our cash burn. Overall, we were able to reduce total cost by 9% year-on-year at EUR 413.4 million.
We show in the graph, in the first nine months of the year, we recorded a 10% year-on-year, equal to EUR 10 million external cost savings driven by lower utilities and telecommunication costs resulting from lower consumption in our facilities for most admin— administrative staff and not working from home. The lower costs related to our full IP digital network The lower cost SG&A and business trip costs are coming from the reduced mobility coming from COVID-19 counter measures undertaken. These meaningful reductions were partly counterbalanced by higher costs for external services linked to COVID-19 specific initiatives undertaken by the company, including the extraordinary sanitization of our facilities. It's worth noting that the external cost savings, excluding the impact of IDS AirNav, which was not consolidated in the first half of 2019, would have been a material 14.2% on a like-for-like basis.
Personal costs in the first nine months decreased by 8.5% year-on-year to EUR 342.9 million. This notable result was mainly driven by a material decrease in variable pay and social security costs, thanks to reduced overtime, especially during the summer period, and the use of outstanding vacation balances of all our personnel. The fixed salary component increased 2.1% year-on-year due to mainly the inclusion of IDS AirNav employees not included in the first half of 2019, coupled with the 2019 labor contract renewal. Also here, it's worth noting that excluding IDS AirNav, personal costs would have decreased by a material 9.8% over last year. Lastly, capitalized internal works remain stable year-over-year at EUR 20 million. Let's move to page five, which summarizes certain developments occurred in the first nine months of this year.
As you know, ENAV has undertaken several measures to cope with the consequences of COVID-19 and will have on the aviation sector for 2020 and beyond. Eurocontrol and most of its member states agreed to postpone the payment of traffic charges due by airlines to ANSP related to the period February-May 2020 from November 2020 onwards. The aim was to allow airlines to deal with the liquidity issues they are facing. As shown in the slide, February 2020 invoice will be cashed in this month, while March, April, and May payments will be postponed to 2021. However, it's worth noting that in April and May, traffic was down approximately 90%, which means a minimal impact on cash flow of roughly EUR 35 million in total for the three months from March to May.
Starting from the traffic flow in June, the normal two-month billing and settlement cycle has been reinstated, and the receivables from airlines have been cashed in regularly. Let's pass to slide six, where you can find a summary on the regulation status. As you will recall, the RP3 regulatory framework was approved in January 2019, and the EU-wide cost efficiency targets were set in May 2019. Based on this framework and targets, each country submitted its performance plan for RP3 at the end of 2019. The approval by European Commission of country-specific performance plans for RP, originally scheduled for May 2020, was put on hold due to the COVID-19 pandemic.
In July 2020, the European Commission published a proposal that has been approved on the 4th of November for the temporary deviation to Single Sky performance and charging scheme, allowing for special rules for the setting of revised union-wide performance targets for 2020 and 2021 in order to mitigate the impact of the COVID-19 pandemic and ensure the long-term viability of the sector. Based on this proposal, the Commission expects a National Supervisory Authority to provide us data and information about traffic forecast for the third reference period by December 2020, as input for the setting of the revised union-wide performance target for RP3. The Commission should adopt the revised performance target for RP3 within May 2021. Later, the National Supervisory Authority should submit the new RP3 performance plan up to 2024 to the Commission within October 2021.
Finally, the Commission should approve the RP3 performance plan by year- end 2021 or in the first part of 2022. Let me now pass the floor to Luca to detail the view of the nine months 2020 financials.
Okay. Thank you, Paolo. As you can see on slide eight, ENAV's net revenue in the first nine months of the year decreased by 14.8% year-on-year, driven by negative performance in both en route and terminal revenue, which were largely offset by positive balance. Within the revenue from operations, the largest decline year-over-year came from the en route component, which decreased EUR 354.4 million, while terminal revenue went down by EUR 113.3 million. Both performance were mainly caused by COVID-19 pandemic, coupled with lower traffic supply in 2020 on both en route and terminal. The year-over-year increase in balance of EUR 362.6 million over nine months 2019 offset a substantial part of the decrease in revenue from operations.
As previously mentioned by Paolo, the balance recorded in the first nine months of 2020 was defined as the best estimate by the company on the new rules published on November 4 by the European Commission. With regard to the temporary delegation for 2020 and 2021 to the Single European Sky performance and charging scheme of RP3. Thanks to our relentless focus on cost optimization, we managed to contain to EUR 61.2 million the EBITDA decline despite the EUR 102.3 million reduction in the top line. EBITDA for the first nine months 2020 came in at EUR 175.7 million, with an EBITDA margin of 29.8%. Looking at the below EBITDA items in the P&L on slide nine, you can see as D&A remained stable year-over-year at approximately EUR 95 million.
Provisions and write downs in the first nine months of 2020 grew to EUR 3.[timely] million Due to the application of valuation model utilized to measure the recoverability of receivables in light of the current issues faced by the air traffic sector. This is purely prudential accounting approach, since, as mentioned before, we did not have any issue with the receipt of payments due so far that were fully cashed in. The item net financial income and expenses increases to EUR 4.4 million in the first nine months of 2020, compared to the 3.1 million recorded on the same period last year, mainly due to the balance actualization. Moving on to income taxes for the period, the material decrease was driven by lower taxable income and by the positive impact of deferred taxes, for the larger part related to the balance actualization.
As a result of the above movements, we were able to have a net profit of EUR 55.1 million in the first nine months of 2020, despite the severe impact on revenue caused by COVID-19. In the last slide, let's have a closer look at our cash flow and financial position. ENAV's liquidity and financial position remain solid. In addition to the cash available at the end of September 2020 of EUR 156 million, we also have a financial investment for EUR 25 million and undrawn credit line for EUR 297.5 million.
Our net financial position as of September 30 decreased by EUR 365 million compared with the end of the last year, reaching a net debt of EUR 228 million, mainly due to the lower cash in caused by the sharp decline in traffic and to the postponement of receivables due from airlines, as well as the payment in May of dividends for EUR 112.1 million.
We note that en route and terminal charges from June onwards have been cashed in regularly, which means within the normal two-month billing and settlement cycle. On the cost side, we have reduced our average cost run rate from approximately EUR 50 million per month to 45 million per month, thanks to further cost cutting initiatives. We also have two additional liquidity buffer coming from the postponement of EUR 40 million CapEx and the new ESG linked term loans for a total EUR 150 million signed at the end of October 2020. With regard to CapEx, as I already said in the past, on a 2020 full year basis, we expect to spend approximately EUR 80 million compared to the pre-COVID expectation of EUR 120 million.
Finally, I would like to highlight that we have no material debt maturities until 2022. With that, we are now ready to answer your questions.
Excuse me, this is the Chorus Call Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touch-tone telephone. To remove yourself from the question queue, please press star then two. Please pick up your receiver when asking questions. Anyone who has a question may press star and one at this time. Our first question is from Nicolò Pessina with Mediobanca. Please go ahead.
Yes, good afternoon, everyone. Thanks for taking my questions. The first one is on the derogation to the regulatory framework approved by the European Commission. I wonder if the impact of the potential EUR 65 million-7 0 million you provided in September is confirmed, also considering the recent downturn in the traffic evolution of these days. Second question, still related to this derogation. Would you say that the EUR 65 million- 70 million is also a good proxy of the reduction in operating costs you may achieve in 2020? Final question, I'm wondering if there has been any internal discussion or reasoning that you may be able to disclose on the dividend. Thank you.
Okay. Very easy. If you agree with dividends or what? Okay. Talking about the derogation, yes, I confirm at the moment our forecast of EUR 65 million- 70 million of high CapEx for what concerns the balance could be a good proxy of the one we will have at the end of the year 2020. Even if at the moment the traffic that we are recording is not so bad as what we can hear from other operators. In the last month, October, we were around 6% decrease versus 2019. Still in line what we had in September. Let's see what will happen the next month. Yes, I confirm also because the derogation, just to be more clear on answering, it will also add to the second question that you asked.
As for 2020 to 2021, into 2021, it's a kind of a cost recovery with a cap of the costs that are eligible in the tariff. They have to be lower than 2019 level. If we reduce costs even more, they will not impact the balance. The balance will be the one we told you, and more or less, our cost reduction will be not at this level. We will not be able to reach this level of cost reduction. For the level, I mean the level of cap of the balance.
Regarding the dividend matter, the current situation, as we all see, remains very [volatile] especially given the second wave of COVID-19 currently ongoing in Europe. And it's now difficult to have a clear position on dividends for next year.
We will continue to monitor our cash flows and to evaluation of the business in the coming months. Based on this, we will discuss the topic with the Board that approves the 2020 financials. As already stated in the past, in any case, I confirm that in general terms, I'm in favor to the company providing an adequate return on its shareholders like ENAV has [able] , ensuring that this doesn't stress the medium-term prospects of the company.
Thank you.
Our next question is from Luigi De Bellis with Equita SIM. Please go ahead.
Yes, good afternoon. I have a different question. The first one on the regulation. Last November, the European Commission approved the draft published last July. Can you update us on the ongoing negotiation? How does it affect the negotiation? The traffic is not recovering as hoped given this second wave. Can the news about the vaccine somehow affect traffic forecast for 2021 and beyond? Are you more or less optimistic that you can achieve a recognized cost level similar to the pre-pandemic level? The second question regarding the cash flow. Payments due from airlines in the period February-May have been shipped due to the liquidity difficulties encountered by airlines a few months ago. Given the current traffic trend, do you expect the airlines will ask for another postponement of payment? The third question is on the cost.
If the traffic situation does not improve significantly, do you think further cost efficiency action are possible? The fourth question is on the net financial position. Can you provide us an indication of the net financial position expected by year-end and tax rate for 2020? My last question is, if you have an idea on when do you expect to present the new business plan for the market? Thank you.
Luigi, long list of questions, try to put together. The first one was about the negotiation and the level of cost and some of the level of traffic. In general term, let's say that the negotiation now has been focused until a couple weeks ago, to close the new regulation framework. When the European Commission published last November 4th, the new regulation, for us it was a very important first step. In that first step, we actually found everything we expected to find. So we worked together with our national authorities to be sure that this could be driven in the correct and right way for Italian interests in general way. Looking what is nothing that could reach at that level.
Saying that, now as before the CE— CIO said, the next step would be that every state has to present the first draft of planning the cost, the planning and traffic planning within the 15th of December. On the basis of that, the European Commission will propose some targets, cost efficiency targets, that will be discussed and agreed with the state within the 1st of November 2021. The level of traffic that we assume to take is the one that Eurocontrol published just a couple days ago. They show three scenarios. On these three scenarios, what we— no matter what Eurocontrol say is to take the base one, the middle one, so the second scenario. You may find this information on the Eurocontrol website. We are using that one. You will find that the scenario one is the best scenario, the middle scenario, and the worst scenario.
Talking about our liquidity, we don't foresee at the moment to have other postponed payment from the airline. We just had a talk with Eurocontrol yesterday about how is the payment of February. As you remember, we stopped for four months our billing and our cash in cycle. November is supposed to be the month where we should cash in the February traffic that was billed in April. At the moment, Eurocontrol see that this is happening. It is the very first day of the month, we are not still able to understand if the payment will be full. In general term, Eurocontrol see that this is happening. We could be more precise by 20th of the month— 20th of November, where we could understand if the amount of money is in line with respect. At the moment, we feel that it's okay.
For what concerns the final net at the end of the year, let's say that we didn't give any disclosure on that. In general terms, if you look at the position that we are now, there will be a little bit lower, I mean, worse in some way. Not so much, actually. This is by the end of 2020. I think we said everything. I leave the floor to Paolo for the last question.
Yeah, strategic plan. We kicked off a review of our strategic plan 2020-2024 at the end of September. And together with the management team and our consultant, we expect to have the new plan at the beginning of 2021. Let me say, however, that our strategic plan will depend on the targets that the European Commission will set in the mid 2021. As such, we have not planned a investor day to present the new plan, and we will only officially communicate our targets after we have a clear indication from the European Commission.
In terms of business initiatives, our updated strategic plan will maintain continuity with regards to the core activities included in the previous one, and will englobe new elements that will provide a new leap to the company within the context.
Thank you very much.
Once again, if you have a question, please press star then one on your telephone. Our next question is from Arthur Truslove with Credit Suisse. Please go ahead.
Good afternoon, everybody. A couple from me. You obviously mentioned that you saw a EUR 65 million-70 million headroom as a result of the temporary delegation. Just a few kind of questions around that, really. I mean, firstly, is that as a result of the Determined Unit Cost being applied, in 2020 and 2021 being lower than what you previously expected? If so, if you have any idea you can give us about what that Determined Unit Cost was, would be very helpful. Secondly, does it relate in any way to concerns about your ability to actually utilize that balance? In particular, whether you're going to be able to charge the airlines the necessary sort of actual tariff, to be able to do that. That's it for now. Thank you.
Yes. Okay. For what concerns the [headcount], we confirm what we said before. We believe that could be a good proxy of what will be the [headcount] by the end of the year. For what concerns the balance, yes, still, we believe, that with the new regulation, we'll have also the airline to pay the demands when they will be in a better shape. As you remember, the new regulations say that from 2023, we will start to recover for five years these balances. It will be split in more than one year. We believe, and we think that there will be not any problem to recover it.
Just expanding on your, with that second answer a little bit, if I may. I mean, obviously, I don't know what you have in mind for the balance receivable kind of at the end of next year and indeed at the end of the regulatory period. But if one assumes that it's sort of EUR 500 million-600 million or so, then clearly, one would assume that tariffs are going to have to go up quite materially. I guess my question would be, is that a reasonable way to think about it? Secondly, how confident are you that you would actually be able to raise the traffic control tariffs from the airlines? Thank you.
To try to better explain this point, I guess it's useful also to say what the new regulations underline. From 2022, the tariff will be, let's say, reset, even if the process of approving the performance plan will be not ended before the beginning of the, you know, 2022 year— fiscal year. We will be able to apply the new tariff that we will present in October 2021 in the performance plan, the proposal one. This means that even in 2022, the tariff, even if there is no balance, the tariff will increase because the traffic that is planned now, that we are planning now for 2022, is still much lower than the one that is normal is like in 2019. So the tariff will increase in 2022. There will be, let me say, no more balance created in that year.
And in the future year, where the balance for 2023 will start to put the balance in the tariff, the traffic should be more or less in line with the one we are used to have before the COVID pandemic situation. This happened that in part, the tariff will not increase so much in 2022 level, as we will have a substitution between the traffic that will increase and the cost that will increase by the balance that we will put.
Thanks.
As a reminder, if you wish to register for a question, please press star then one on your telephone. Ladies and gentlemen, there are no further questions registered at this time.
Well, thank you everybody for joining us on this call. Thank you to Paolo and Luca. For any further questions you may have, please don't hesitate. Feel free to follow up with investor relations here in Rome. Have a nice evening, and bye-bye to everybody.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.