ENAV earnings up on efficiency, traffic increase

Italy’s ENAV recorded a solid performance in terms of growth in air traffic with a positive impact on first quarter revenue from operations.

The uptick came despite the typical seasonality of traffic flows characterised by low levels of activity, even though costs remained linear throughout the period.

En-route traffic in service units – a conventional weighted measurement unit which takes in to the aircraft weight at take-off and, in case of en-route traffic, the distance travelled in Italian airspace – delivered an increase of 7.6 per cent over the same period of 2017.

The growth in en-route traffic over Italian airspace involved both domestic and international traffic, and, in particular, over-flight traffic, which increased 11.7 per cent in terms of service units.

This performance is also attributable to the implementation of the Free Route procedure that allows all aircraft flying at an altitude above 11,000 metres, to cross national airspace following a direct route thus enabling airlines to plan the shortest trajectories with no restrictions and to save on fuel, lower operating costs and reduce CO2 emissions.

The positive trend in en-route traffic, despite the ongoing limitations of the Libyan airspace, is also attributable to the increase in medium and long-haul air traffic flows from Italy’s neighbouring countries such as Turkey, Greece, Egypt and Tunisia, and to the increase in the average distance flown within Italian airspace.

Terminal traffic – takeoff and landing activities within a radius of 20 km from runway – grew 5.2 per cent in terms of service units with a positive contribution from the majority of airports throughout the country. Also with regard to terminal traffic, the international component proved to be the most significant growth driver with an increase in service units of 6.3 per cent.

In terms of financial performance, total consolidated net revenue at 31 March declined marginally by 0.5 per cent compared to 2017 to €175.5 million driven by an increase in revenue from operations offset by a negative balance.

Revenues from operations, grew 5.9 per cent to €170.9 million , driven by en-route revenues (+8.1 per cent at €120.5 million) and terminal revenues (+1.7 per cent at €44.2 million). Non-regulated activities were substantially stable compared to the same period in 2017 and amounted to €3.1 million.

The balance in the first quarter of 2018 – i.e. the mechanism that allows ENAV to recover from, or return to carriers, the amounts resulting from the difference between the planned air traffic and the actual traffic, as well as the recovery of costs and traffic for services provided to Terminal Zone 3 airports – those with less than 70,000 movements per year – had a detrimental impact on revenues posting a negative amount of €4 million compared to a positive balance of €6.3 million recorded at 31 March 2017, due to lower en-route traffic balance – as a result of strong growth in traffic – and to the higher balance recorded in previous years reversed into the 2018 tariff.

In the first quarter of 2018 the ENAV Group continued to deliver on its efficiency plan by optimising a number of cost items and by streamlining the processes between the Group companies. Operating costs were 1.5 per cent lower than the previous year at €145.5 million. The personnel costs were substantially stable compared to the same period of 2017 (-0.1).

External costs declined by 4.9 per cent year year-on-year to €34.4 million mainly driven by the decrease in utilities and telecommunications costs, the reduction in lease costs related to office buildings as well as lower external services costs thanks to the process of internalisation and productivity increase of the Group personnel.

The consolidated EBITDA as at 31 March 2018 grew by 4.3 per cent compared with the same period of the previous year, and reached 30 million euro, with an EBITDA margin of 17.1 per cent (16.3 per cent in 1Q 2017). The consolidated EBIT was negative for €1.7 million, with an improvement of €1.2 million compared to 1Q 2017.

Net results in the first quarter of 2018 was negative for €4.4 million, substantially in line with the result of the first quarter of 2017 (-€4.2 million) as a result of the higher financial income recorded in the first quarter of 2017 related to the positive accounting effect of balance receivables actualisation for €1.1 million.

Net results in the first quarter of 2018 was negative for €4.4 million, substantially in line with the result of the first quarter of 2017 (-€4.2 million) as a result of the higher financial income recorded in the first quarter of 2017 related to the positive accounting effect of balance receivables actualisation for €1.1 million.

It is worth noting that the first quarter of the year is typically affected by the negative seasonality effect in air traffic trends compared to the linearity of costs.

In Q1 2018, ENAV’s net financial debt stood at €83.3 million, with an improvement of €34.2 million compared to 31 December 2017, due to the positive cash flow generated from operations

For 2018, ENAV confirmed the guidance communicated to the market in March with net revenue growth expected to be flat to ‘low-single digit’, as a result of the decrease in the performance plan regulated tariff of 2018 compensated by growth in traffic, and with an EBITDA margin around 32 per cent, in line with 2017.

In terms of capex, ENAV plans to invest approximately €125 million, higher than the €115 million spent in 2017. ENAV also confirms its guidance on the dividend for 2019 which is expected to increase by 4 per cent over the dividend of 2018 approved by the AGM held on April 27, in line with our dividend policy of paying out no less than 80 per cent of equity free cash flow.

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