Good afternoon. This is the Chorus Call operator. Welcome to the H1 2022 Financial Results for Hera Group. All participants are in listen-only mode, and following the initial presentation, there will be a Q&A session. Now let's give the floor to Mr. Tomaso Tommasi di Vignano, Hera Group's Executive Chairman. You have the floor, Mr. Tomasi.
Good afternoon. Here we are following a fairly long and complex board meeting to wrap up our first half of the year. The details of which we will be giving you in a few minutes, and I do hope you have already received the press release. Despite the difficulties that we are all aware of and that we are all trying to assess and measure so as to have some insight regarding the future and the present.
Despite all this, I think that the results we posted are good, and they are even more satisfactory if we compare them to the difficult situation we are currently going through. The context, as we know, is characterized by a number of events. The low availability of gas and raw materials, difficulties in the logistics chain, and hopefully the very last part of the pandemic along with the war, which is so close to our territories. To that, in recent days, we also have to add two other aspects I'd like to mention, namely the ECB's monetary decisions and the Italian government crisis. Uncertainty is on the rise, and this of course has an impact on the price of energy.
It has an increased effect on inflation, which as you can see on the first page of our presentation, inflation has reached 8% last month. The gas prices continue to be very volatile, with an average over the half of the year equal to EUR 96 per MWh , and even the price of electricity is higher compared to the past, with EUR 252 per MWh on average for the first half of the year. These price levels, as we all know, is well above our normal averages, showing a trend for at least the same prices, if not higher prices, in the near future. On page two, as far as H1 this year is concerned, we decided to highlight our results in terms of turnover, EBITDA and net profit.
The turnover during the first half of the year was up 111% compared to the same period in 2021. This is for the most part due to the commodity prices. EBITDA during H1 stands at EUR 631 million, with a EUR 20 million increase compared to the same period in 2021, with a growth equal to 3%. Which means that there has been a further increase compared to Q1 2022, which is equal to EUR 12 million, and which was underpinned by a number of different components that we will be looking at. The growth in EBITDA, which I mentioned, goes to show how positive our hedging policies have been despite the fluctuation of commodity prices.
The net profit results shows the good results that we've posted so far with a slight difference equal to -EUR 3 million compared to last year. This is equal to procurements for a devaluation of prices linked to commodity prices. The soundness of our customers has stayed as it was and with low bad payments and a substantial confirmation when it comes to the payment of bills. On page three, despite the scenario we all face. You'll notice that we were fully capable of executing our investment projects as far as maintenance of our infrastructure networks for the most part, plus the revamping activities on two waste-to-energy plants in Trieste and in Ravenna.
Then we have the net investments, which are up to almost EUR 300 million, EUR 289 million to be specific, which is equal to +16.7% compared to H1 last year. Which means that we are on track with the schedule that we defined in this year's business plan. The net debt-to-EBITDA ratio stands at 2.96 x. It is well in line with the goal we have given ourselves, which is equal to 3 x. Of course, the stocking of gas at market price has had an impact on the net debt-to-EBITDA ratio. Without that, things could have been even better. Now, these results underscore the resilience, including the financial resilience of our group.
In fact, we are continuing to execute our plans, and we are on schedule as far as the commitments we took when illustrating our business plan. In fact, in June we paid our dividend equal to EUR 0.12, which was what we had announced during the business plan presentation. On page four, you have the EBITDA drivers, which I mentioned earlier, which led to a EUR 20.3 million growth. This figure also offsets the negative effects of the WACC review, which was decided by ARERA in previous months, equal to - EUR 10.2 million. The very first contribution you can see here on the graph on page four is equal to EUR 20.9 million.
Stemming from all of our activities which are based on the circular economy model. This figure is broken down on the one hand by the positive effects we received for the bonus facciate and energy efficiency activities on condominiums, which is worth almost EUR 12 million. The second item included in the circular economy activities is equal to EUR 3.9 million. That refers to the commercial offers we made specifically on the value-added services in the energy sector. The third item refers to the continuation of the long-lasting good results equal to EUR 5.1 million. These are the positive results posted by the Aliplast company which can further benefit from the increase in the price of recycled plastic products.
We also had a contribution through organic growth equal to +EUR 5.8 million, which is brought about by the increase in our energy customer base with a further 107,000 customers, thanks to the growth of our market share and the tenders won on the Maggior Tutela market. In fact, we were able to win three out of nine tenders. The second element within organic growth refers to +4.6% stemming from 106,000 tons in further waste on the market. We have new cost efficiencies, premiums, and new connections on the regulated activities in the networks business.
Plus, we have the usual M&A contribution with a further EUR 3.8 million pertaining to one of the two transactions we finalized last year, but which became operational only in 2022. I'm referring to the Vallortigara transaction in the waste sector, to which we also have to add a significant acquisition in the district heating area in the area surrounding Bologna, plus two further transactions in the energy sector, namely the Ecogas and Con Energia companies. I hope that after this presentation and over the next few months, we can be able to give you some further information because our M&A activities continue to be very demanding and very significant.
Let me just devote a final remark on the waste sector, which I am very fond of since I deal with it every day. I think it's worth mentioning that even in H1 this year, waste treatment was able to post an EBITDA growth equal to 12.1%, equal to +EUR 12.7 million. Now, if we take into account that to this figure, we also have to add the contribution of the upcoming revamping of the two waste-to-energy plants I mentioned earlier, worth between EUR 6 million and EUR 8 million, we will be able to fully conclude the revamping activity.
Another remark refers to the effect of inflation on raw materials and on energy production, which also underpinned the treatment of waste. Now these negative consequences, which stem from the current state of inflation, were offset in effect by a positive price trend and by the production of energy in our treatment plants. As I mentioned earlier, Aliplast is working fully, and in this case, the further increase in the cost of plastic was able to boost the price of recycled plastic, the one treated by Aliplast, equal to a contribution worth EUR 5.1 million. Finally, synergies with EUR 0.8 million contribution, which is in line with the integration plan we had for the acquisitions for the companies that we had already made the acquisition of in 2021.
Finally, let me just complete the picture by going back to the perimeter delta I mentioned earlier. I'm referring to one of the two companies we made the acquisition of in 2021, plus a waste acquisition we made in the waste sector, in a new area for us in the Macerata province, which contributed to the EBITDA growth by a further EUR 3.8 million. As you can see, life goes on, and quite well, in fact. As you can see in this sector, which as we have often seen in the past was able to achieve good results, which wasn't accompanied in the urban waste collection, but let me explain. In fact, in this case, we had two recent news to deal with.
First of all, the fact that we had tenders for the renewal of concessions in the three largest provinces. We were able to replace the three old concessions. We were awarded all three tenders, but of course, since we didn't know what kind of competition we would be facing, since these were the very first three tenders, we had a negative impact equal to -EUR 4.6 million linked to the tenders and the start of these services, which also required a certain degree of discount.
This is nothing worrisome because our new concessions will be 13 years long, and therefore, we will have plenty of time to recover what we lost due to competition. These are the most important elements I wanted to highlight today. I have another important thing to mention, because for the very first time today, we are here to introduce our new CEO, Mr. Iacono, who I'd like to give the floor to.
Thank you, Mr. Chairman, and good afternoon, everyone. My name is Orazio Iacono. I wanted to be here with you today despite only being in Hera for a relatively short amount of time. Let's focus on page six of the presentation, focusing on energy with a EUR 225 million EBITDA, up EUR 6.8 million compared to H1 last year, which fully offsets the EUR 11 million negative impact linked to MSD normalized.
We had a higher contribution to growth equal to EUR 15.8 million, which is linked to the eco-efficiency services, which especially in the recent period, is becoming extremely strategic given the current context in which energy is no longer an abundant and cheap resource. It is no longer safe in terms of its supply. Now, this growth is linked to the Ecobonus. It still hadn't been fully used in the H1 2021, but it's also linked to all of the value-added services which contributed in a positive way to the result. The supply activities are slightly better, + EUR 2.3 million, which underscores the effectiveness of our group's policies to hedge against the commodity fluctuation risk.
In this context, Hera was able to assist its customers facing difficulties by offering installment plans for bills in three installments. We expect to receive full payment or most of the full payment by end of the year. Obviously, the scenario still doesn't give us a clear visibility regarding the future. However, we continue to stay focused on the current scenario by trying to take advantage of any possible opportunity. In fact, on June 30th, we were able to stock a considerable gas volume, + 70%, compared to the same period in 2021. This is a way of allowing us to guarantee our customers' demand for the next thermal season.
The gas stock is accounted for with the weighted average cost, which still doesn't represent the current scenario with very high oscillations of prices. In fact, the criterion considers all of the volumes of gas bought in the April to June price, including those which had the contracts for which have been signed in 2021. Which means that the weighted average cost, as of June 30, 2022, was equal to EUR 0.83 per cubic meter, while the market price over the same period was equal to EUR 1.03 per cubic meter. As a consequence of that, this difference applied to the 420 million cubic meters of gas we have stocked has an impact equal to EUR 88.3 million on the energy sector results.
Therefore, to give us a view which is more in line with our management, we were able to show you the current scenario on the graph you can see. Obviously the gas we have in our stocks is already hedged by the risk of market price variation. Now, if you continue the analysis of our results divided by the various activities, we can now move on to networks on page seven. Here we can see that EBITDA has grown by 3.6% compared to H1 2021, equal to roughly EUR 239 million. This is an especially positive result if we take into account that it offsets the WACC cut, as the chairman was mentioning.
Now, in order to achieve this result, the networks were supported by the contribution from all of the efficiency and growth drivers. Beginning with, as you can see, the premiums for quality, the contribution of which was above EUR 17 million, thanks to the technical quality recognized to our water assets with a premium equal to EUR 16.6 million. Which is, of course, a way of rewarding the investments we made over the years, especially in the more recent years, in which innovation, resilience, and the circular model were achieved with a great deal of commitment by Hera Group. We also have the technical quality of our gas distribution networks. They too contributed with a premium equal to EUR 0.7 million.
These premiums, therefore, go to show the excellent performance reached by our group in terms of the technical quality of our networks. The other driver you can see here is the typical one, which refers to general efficiency and optimization, which contributed to a further EUR 1.4 million. In this case, the main components were a number of items referring to a number of regulatory matters, but most of this result stems from the district heating sector, a business which performed very well, thanks to the low temperatures during the winter season, which we already commented during the Q1 presentation.
At this point, let me just underline the fact that, all of the, main businesses in our portfolio, allowed us to achieve a growth in EBITDA, as you can see on page eight. This is a result which I found surprising given the very difficult context we faced. This was made possible thanks to the diversification of our activities in each business. It was also due to the cautious policies, that we applied to, the management of these businesses. Let me just also mention the fact that I had the opportunity, to work with, all of the managers who are in charge of the various business areas.
I was able to work with them on a daily basis, even given the current difficult situation on the market, and I was able to appreciate their commitment, which gives our group its strength. In energy, the policies we have and our positioning on the various market segments allowed us to protect our margins on sales, despite the difficult market conditions. Networks are neutral vis-à-vis the scenario, thanks to the tariff regulation. These businesses, in fact, are protected by inflation and by the increase in tax rates and by the spread. We were also able to take advantage of the premiums obtained by our assets, which go to show the quality of these assets, thanks to which we were able to fully offset the WACC cut made by ARERA.
As the chairman was saying, we also have the waste treatment business, which was affected by the general context, but despite that, it was able to improve the positive growth we already saw in Q1 this year. This was due to our M&A activities and also thanks to the renewable asset base we have, meaning that we are capable of transferring the inflation to our sales prices. As you can see, all of our businesses are guaranteed. They are resilient. We have a very well-controlled risk performance profile, thanks to which we can have a portfolio marked by synergy. Therefore, we have a resilient formula, which is especially appreciated, especially now that we face the uncertain context around us. Let me give the floor to Luca Moroni now to illustrate the financial side of things.
Thank you, good afternoon. Let me begin with some good news. The cost of debt. We had promised that this was something we would have done. We had committed to doing this in recent years. In fact, we are now seeing the result of that, 2.6% of the cost of debt, compared to 2.8% over the same period last year, and compared to 3.2% in H1 2020. We had conducted a liability management operation in late October last year with the emission of a new sustainable bond, which allowed us to obtain this result.
We also admitted a new green bond in May, very quickly in effect, and ahead of schedule compared to the increase in the tax rates we saw. We were able to obtain some interesting conditions on the market capital. The capital market, excuse me. Tax rate stands at 29%, but in fact, we should read that at 27.8% or 27.5%. In this case, the difference refers to the extra profit contribution, the impact of which is worth EUR 2.5 million only. Pushing us up to 29% in terms of tax rate. Of course, this is a one-off event. We also have the ROI and ROE indicators, which are very good.
ROI, in this case, is marked by a decrease which stems from the increase in the working capital, which in turn was due to the commodity prices, especially the gas we stocked, as we can see later on. We have the ROE, which stands at absolutely good levels, roughly 10%. Let's move on to our cash flow analysis on the next page, which shows that our operating cash flow is very positive, EUR 524 million. We invested almost EUR 300 million. A further or more than EUR 40 million or EUR 45 million compared to the previous years.
We have an increase in our working capital, which, as is explained in the graph, is due, for the most part, to the effects of the price increases of our gas stock. Otherwise, once again, we would have had a positive performance as far as the net working capital is concerned. We have the M&A transactions, which were already mentioned. With the acquisitions we made earlier. Last but not least, we have the payment of dividends, which was worth EUR 223 million, as was mentioned earlier. We have EUR 420 million in terms of cash flow.
Our debt goes up to EUR 3.682 billion with a 2.96 net debt-to-EBITDA ratio with a very solid position as far as the financial point of view is concerned, with an average duration of debt equal to seven years. The increase of which, as I was mentioning, is mainly due to the effect of gas. Once those prices will be included on the contracts for the new thermal season, that effect will dry up, and we will be able to reabsorb the figures that we are currently seeing, which is normal given the seasonal nature of the business. That's it as far as I'm concerned. Let me hand it over to the chairman for some conclusions. Thank you.
I think that after a few months, we are back with the same kind of commitment to deal with a complicated year like this one. I think that the things you've heard so far go to show that we are capable of meeting our commitments, which is something that we have always done. Therefore, this is just a first stage. Our board of directors approved many of the aspects we dealt with during the board meeting. Also, they also approved the replacement of Mr. Moroni, who will be leaving the company. He will be here for a few more weeks. We have already identified a replacement among our group's managers so that we can deal with all events, including those which we didn't expect.
Having said that, we will continue to focus on all of the possibilities to achieve growth. This was made possible despite the current scenario linked to commodity prices, which is something entirely unprecedented. This is something that we had no way of expecting and that we have never seen before. However, I think the things that we've shared with you today can reassure you that we mean business and that we will continue to commit to all the things that we planned. This is a commitment which will continue to guide us into the upcoming months. With the support of our CEO and with Mr. Hansen's imagination, we will make sure that we meet all of these commitments.
Also, as far as the execution of the business plan is concerned, keep in mind that we are ahead of schedule compared to what our plans were in terms of the targets that we were already able to achieve vis-à-vis the business plan targets. This is yet another element that we think can underpin our activities. I'll leave it to you now for any questions, doubts, or comments you may have. Thank you.
This is the Chorus Call operator. We'll now begin our Q&A session. The first question is from the Italian conference call, Javier Suárez, Mediobanca.
Good afternoon. Good afternoon, everyone, and thank you for the presentation. I have three or four questions for you. The first is on the supply activity. I think we have to underscore the achievements you made in the supply margins in a very difficult context. Can you please explain your company strategy once again? I think that your strategy has to be underpinned. Do you think that your supply margins with your current strategy is something that will also be present in the H2 this year? Second question is on the network and capital absorption, which is linked to gas procurements. Can you give us some indications as to where do you see the company's debt standing at the end of the year, given the current context and also given the gas stocks context?
You have this temporary accounting difference that you mentioned, and when you mention that this is temporary, where do you think that this gas stock adjustment should be by year-end? As we've explained, this is a non-cash item. Finally, the chairman was mentioning that M&A is an ongoing development. I'd like to ask if there will be any additional steps during Q3. Can you give us some feedback as to what business you're focusing on as far as M&A is concerned, which has always been a very important growth driver?
Let me begin. This is Orazio Iacono speaking. As far as energy is concerned, the group's cautious policy allows us to cover what we do, and therefore, acquisitions and sales are balanced. We're hedged from all risks. We have already had sales which are consistent with their acquisition. As far as variable offers are concerned, of course, we transfer that price to the end customer. Going back to the fixed price, the extra consumptions for customers who have fixed price contracts for quite some time now, the group has a risk aversion strategy, which is withstanding the difficult market conditions.
We have started to transfer to the largest customers the larger shaping costs that all customers have accepted as a way of avoiding losing the very good fixed price contracts they have. When it comes to the retail customers, the issue is less relevant because retail customers are more regular, so to speak.
Furthermore, let me just mention that as a way of curbing this risk, we equipped ourselves as of June thirtieth with a stocking ability which is far above that we had in the H1 2021. We stand at + 70% compared to last year as far as our gas stocks are concerned, and this will certainly contribute to the way we can hedge ourselves vis-à-vis commodity price fluctuation. Let me move on to your second question, the one on stocks. We are certainly looking at the opportunity to further increase our stocks. Of course, we will be studying the market. We will be observing the market conditions carefully. We will be looking at the price scenario. Consequently, were we to increase our stocks, we would also have an increase in working capital.
That, of course, will depend on volumes and on prices. If that goes up, of course, we know that that will be a temporary situation. As far as the third question is concerned, the question on M&A is a question that our chairman can answer.
Well, as far as M&A is concerned, you know that that is something we always look at, and we will continue to do so. It's obvious that, the businesses, we look at, for the most part, are the liberalized ones. We look to the market more than elsewhere. Therefore, I think that gives you, a pretty good idea as to, where we are looking. We won't be giving you any clues, but I do hope that one of the transactions we're looking at, will be, a fairly positive size.
The next question is by Davide Candela, Intesa Sanpaolo.
Good afternoon, and thank you for your presentation, and I want to welcome the new CEO. I have a couple of questions for you. The first is linked to the energy supply sector. Now, given what was approved in the EU as far as gas prices are concerned, beginning in late August this year to March 31 next year, I was wondering if these tax cuts will be sizable. Will they have an impact on the business? And can you give us a breakdown on consumption between retail and business as a way of understanding the possible impact on the company? And will you have some kind of a liability management from this point of view?
A second question on your debt and on the working capital for gas stocks. Despite any possible new gas stocks, do we have to consider the debt as being reabsorbed by your net compared to the levels we have in H1, or do you think they will be increasing in Q3 before they are reabsorbed towards the end of the year? Thank you.
As far as your first question is concerned, we are obviously looking at the market carefully. We are paying close attention to all the news we are getting regarding further decreases in supply. On possibly reducing consumption next winter.
Of course, we will have an emergency plan by the government, which will have to rebalance demand vis-à-vis the gas supply available, also considering the gas stocks and the country's strategic resources. Therefore, Italy will be using the gas from imports plus stocks, and the latter is sizable. What impact will there be on consumption? Well, we feel that the largest cuts will be happening on the larger customers, on the large energy consuming customers. The impact on this segment is very limited for Hera. As far as the retail sector is concerned, which is most of our margin, this, of course, will have a priority in terms of gas consumption.
In fact, the reduction in consumption will probably be reduced, from what we know so far, only in terms of decreasing the temperature of heating systems by a couple of degrees. Therefore, in a nutshell, were there to be rationing, we feel we are fairly hedged. As far as the second question is concerned, let me give the floor to Luca Moroni.
Now, had we not considered that with the right market conditions, we could increase our gas stocks, which is what we did, the reabsorption of working capital would be consistent with the seasonal elements. Typically in December, which means that we are currently halfway through the thermal season, stocks would decrease by 40%.
Were there to be the right market conditions, we would take advantage of them to increase our gas stocks so that we could deal with the thermal season in a more resilient way, so that we could transfer that resilience to our customers. Well, the trend of the net financial position would depend on that aspect too. I think it's a little too early to say given the fact that the market is somewhat volatile, and there need to be the right conditions there to do what we planned. Therefore, I think we have to give you an update later on.
Thank you very much.
The next question is by Emanuele Oggioni, Kepler Cheuvreux.
Good afternoon. Thank you for your presentation, and congratulations for your results. I have a question on the water business.
Recently, you were given premiums for technical quality, and I'd like to ask if you've already seen an impact in H1 and what the full impact can be for the entire year. Premiums on the technical quality for water.
As far as the water business is concerned, thanks to the significant investments we made, as we were saying earlier, we were able to receive these premiums for 2018 and 2019, which we were awarded in 2022. Of course, Hera Group's investment on our networks will continue. We have EUR 2 billion in the business plan out of a total EUR 3.8 billion, which means that our network will be more resilient, it will be more digital, it will be more reliable and more efficient. Therefore we expect to continue this way. Therefore we feel that we will able to have a similar pace that will guarantee further quality premiums.
Thank you. Just a follow-up question, if I may. Your water EBITDA in H1 2022 compared to the same period last year was fairly in line, some EUR 3 million. So there must have been a negative effect stemming from your new tenders, which of course, initially, had a certain degree of pressure on the margins, like the one we saw at Rimini. Can we have an idea of the effects this will have on premiums for technical quality?
Well, thank you for that follow-up question, which allows us to give you some further information. Well, certainly we had to deal with a WACC cut, which is worth EUR 10 million for all networks. Of course, we also have the Rimini tender for which we had to give up a certain amount. Despite that, we were still capable of having a further EUR 3 million growth, which is significant. Of course, we have to continue along this way. We have to continue working so that we can receive further premiums, given the good performance that Hera has always had so far.
Thank you.
Mr. Tomaso Tommasi di Vignano? There are no further questions.
Thank you very much for joining us today, and we will see you after the summer holidays. We're a little tired, but we will continue to pay close attention to the situation.
Thank you very much. See you soon.