Summary of Results: performance of economic results

Income Statement Data (€ million)2018Of which GORI2017Change% Change
Revenue from sales and services2,836.922.32,669.9167.06.3 %
Other revenue and proceeds191.67.4127.164.550.7 %
Costs of materials and overheads1,918.911.01,768.6150.38.5 %
Personnel costs219.67.0215.24.42.0 %
Net income/(costs) from commodity risk management0. %
Income/(Costs) from equity investments of a non-financial nature43.30.026.916.561.3 %
Gross Operating Profit933.211.7840.093.311.1 %
Amortisation, depreciation, provisions and impairment charges454.712.2480.1(25.4)(5.3)%
Operating profit/(loss)478.6(0.5)359.9118.733.0 %
Financial items(82.9)2.9(72.0)(10.9)15.2 %
Equity investments13.30.00.313.1n.s.
Profit/(loss) before tax409.02.3288.2120.841.9 %
Taxes124.31.396.028.329.5 %
Net profit/(loss)284.71.0192.292.548.1 %
Profit/(loss) attributable to minority interests13.7(1.6) %
Net profit/(loss) attributable to the Group271.0(0.1)180.790.350.0 %

At 31 December 2018, changes in the scope of consolidation took place compared to 2017. Specifically:

  • on 28 June 2018 the company Acea Peru S.A.C. was established, whose shares are 90% owned by Acea International S.p.A. and 10% by Acea Dominicana S.A.;
  • with effect from 8 November 2018, GORI was fully consolidated following the amendment of the agreements with the Campania Area Authority, which allowed Acea to exercise control over the company pursuant to IFRS 10;we also note the merger by incorporation of Gori Servizi S.r.l. into GORI S.p.A. effective 1 January 2018;
  • on 29 November 2018 Acea Ambiente purchased 100% of the shares of Bioecologia S.r.l. from Siena Ambiente S.p.A.

For more details, see the paragraph “Criteria, procedures and area of consolidation”

The table below represents the impacts of the change to the consolidation scope and shows the contribution of each company net of intercompany adjustments.

€ millionGoriBIO ECOLOGIA srlConsorcio Servicio SurACEA PERU
NFP0.0 0.0(0.1)(0.1)

Revenue from sales and services amounted to € 2.8 billion, an increase of € 167.0 million

At 31 December 2018 revenues from sales and services amounted to € 2,836.9 million, up € 167.0 million (6.3%) compared to the first half of 2017: the main change is due to the increase in revenues from the sale and performance of electrical energy (+ € 108.2 million). The following contribute to the variation: (i) Acea Energia (+ € 71.4 million) due to the increase in prices and higher volumes relating to the optimisation of energy flows and the purchasing portfolio that was only partially mitigated by the decrease in the quantities sold to market customers of the protected and free market;(ii) areti (+ € 30.9 million) and (iii) Umbria Energy (+ € 4.9 million).

The increase in revenues from the integrated water service (+ € 55.0 million) and revenues from the sale of gas (+ €10.8 million) is mitigated by the reduction in revenues from services to clients (- €18.0 million) recorded by the parent company as a consequence of the reduction in the number of lighting bodies replaced with LEDs under the scope of the public lighting service provided in the municipality of Rome.

Revenues from the integrated water service include the best estimate of the premium for both commercial and technical quality recognised to Acea Ato2 (€ 33.6 million);it contributes to the increase the full consolidation of GORI (+ € 22.0 million). The positive change in revenues from the transfer of waste and landfill management depends directly on the greater contributions and the increase in the quantity of waste treated in the Aprilia plant.

Other revenues amounting to € 191.6 million

An increase of € 64.5 million is highlighted, mainly due to the following effects:

  • from the posting of € 14.8 million deriving from the update of the criteria for determining the margin IFRIC 12 (+ € 12.6 million) with reference to Acea Ato2 and Acea Ato5;
  • from line-by-line consolidation of GORI for € 7.4 million;
  • from the posting in Acea Energia of € 26.0 million relating to pass-through extraordinary items as well as the assessment of energy items from previous years;
  • from the € 16.6 million increase in contingent assets recorded in the companies in the Water Segment.Of these, worthy of note are: i) € 10.3 million of Acea Ato2 related to the recovery of tariff adjustments for the 2014-2017 period;ii) € 2.4 million refers to Acea Ato5 and relates to the settlement agreement of 15 May 2018 signed with the Consortium for Industrial Development for the period 2005-2011 for the management of water treatment plants and supply to some municipalities of the Province of Frosinone.

External costs for € 1,918.9 million, up € 150.3 million on 2017

This item shows an overall increase of € 150.3 million (+ 8.5%) compared to 31 December 2017. The change is due for € 11.0 million from the full consolidation of GORI and for the remaining part from opposite effects, and mainly:

  • higher costs related to the supply of electricity for both the protected market and the free market (+ € 138.3 million), partly offset by lower transport costs (- € 56.5 million);
  • from the increase in other operating expenses of + € 47.0 million deriving from pass-through extraordinary items and verification of energy items from previous years, from the recognition of costs not recorded in previous years and from the sanction imposed by the Antitrust Authority on the Acea Group (€ 16 million) for the abuse of a dominant position in the protected markets for the sale of electricity;
  • the increase in the mandatory management costs for the costs related to the mandatory Agreement for the water management of the Peschiera - Le Capore aqueduct system (ATO3 interference);
  • from the decrease in costs for raw material in areti (- € 5.1 million) mainly regarding the LED Plan which is now starting to be completed as required by the contract and subsequent agreements.

Personnel costs, net of the change in the scope of consolidation, decreased by € 2.7 million

Labour costs increased by € 4.4 million compared to the previous year. The change in the scope of consolidation mainly refers to GORI and contributed an increase of € 7.0 million.

The average number of employees was 6,471 and increased by 916 compared to the previous year, mainly due to the change in the scope of consolidation.

€ million31/12/201831/12/17Change Change %
Staff costs including capitalised costs342.6327.814.84.5 %
Costs capitalised(122.9)(112.5)(10.4)9.3 %
Personnel costs219.6215.24.42.0 %

Non-financial investment income increased by € 16.5 million

The income from non-financial equity investments represent the consolidated result according to the equity method included among the components forming the consolidated Gross Operating Profit of the companies previously consolidated using the proportional method. The following table also includes the results of GORI until 7 November 2018.

million31/12/201831/12/17Change % Change
Amortisation, depreciation, impairment charges and provisions(94.5)(100.9)6.3(6.3%)
Total profit/(loss) on equity investments(0.0)00.0(0.0)n.s.
Financial items(5.9)(6.8)0.8(12.2%)
Income from equity investments of a non-financial nature43.326.916.561.2%

EBITDA at € 933.2 million, up 11.1%

EBITDA rose from € 840.0 million in 2017 to € 933.2 million in 2018, recording an increase of € 93.3 million or 11.1%. The change in the area of consolidation accounts positively for € 9.7 thousand. The increase mainly derives from the tariff dynamics of the water sector (+ € 81.3 million), followed by a significant increase in margins in the distribution and generation sectors (+ € 37.5 million) due to the tariff updates of the fifth regulatory cycle and the increase in quantities produced by hydroelectric plants. Furthermore, the Engineering and Services Segment recorded a growth of € 3.5 million mainly due to the constant grown in services in the engineering, research and innovation performed primarily for the Water segment. The Environment, Overseas and Commercial and Trading Segments were substantially aligned in the two years compared. The Parent Company reported a decrease in EBITDA of € 21.2 million due to the reduction in margins on service contracts, the registration of the fine imposed by the Antitrust Authority, partially offset by the contribution to the results of the margin originating from the management of the Facility Management service acquired on 1 January 2018 as a result of the transfer of the Facility Management branch from Acea Elabori.The Public Lighting division also showed a decrease of € 9.8 million mainly deriving from the conclusion of the activities related to the LED Plan.

EBIT of € 478.6 million (+33.0%)

EBIT grows by € 118.7 million compared to last year. The items that influence this marginality indicator are mainly affected by the release of the risk provision set aside for GORI (- € 44.2 million) due to the absence of the conditions that had led to its establishment, the lower provisions for doubtful accounts, also due to the effect of the write-down made in 2017 of a part of the receivables recorded in areti and claimed from GALA.

€ million31/12/201831/12/17Change Change %
Amortisation and depreciation366.8328.937.911.5 %
Provision for doubtful accounts75.190.4(15.3)(16.9%)
Provision for risks and charges12.860.8(48.1)(79.0%)
Amortisation, depreciation, impairment charges and provisions 454.7480.1(25.4)(5.3%)

The increase change in depreciation is mainly linked to investments during the year in all areas of business and also takes account of technological developments related to the technological platform common to the Acea Group. It should also be noted that following the first application of the new IFRS 15 international standard, the costs incurred by the energy trading company for the acquisition of the customer base were capitalised. These costs are defined as incremental costs for obtaining the contract, the amortisation of which is consistent with the estimate of expected renewals.

Provisions, net of the release relating to GORI overall are in line with the previous year due to the combined effect: i) of the increase in tax and regulatory provisions for a total of € 5.0 million;ii) an increase of € 7.7 million in other risks and charges concerning in particular the energy items of Acea Energia;iii) the increase of € 2.2 million relating to provisions aimed at meeting the personnel reduction programme through the adoption of voluntary mobility programmes and facilitated exit of Group personnel, iv) the decrease in provisions aimed at dealing with risks of a legal nature (- € 3.3 million) and risks on tenders and supplies (- € 2.8 million) and v) the decrease in provisions (- € 9.1 million) deriving from the reduction in the provision for restoration charges.

The decrease in the item doubtful accounts relates mainly to the companies of the Energy Infrastructure Segment (- € 11.1 million): last year the receivables from Gala were written down for a total of € 15.7 million. The Water Segment compensates partially for this decrease with higher provisions for € 4.8 million.

Financial items increased by € 10.9 million

The result of financial operations shows net charges of € 82.9 million and an increase of € 10.9 million compared to 2017. The change is mainly due to the charges on two newly issued bond loans under the Euro Medium Term Notes (EMTN) programme. Note that as at 31 December 2018, the average all-in global cost of the Acea Group's debt stood at 2.21% compared to 2.59% for the previous year. The discounting of the post mortem provision for the Orvieto disposal site was also carried out last year for € 4.6 million.

Tax rate at 30.4% down by 2.9 p.p

The estimate of the fiscal charges amounted to € 124.3 million, compared to € 96.0 million for last year. The overall increase recorded in 2018, equal to € 28.3 million, derived mainly from the effects of the recalculation of deferred taxes and from the higher pre-tax profit. The tax rate for 2018 was 30.4% (33.3% at 31 December 2017).

Net result up by 50.0%

The Group's net income amounted to € 271.0 million, marking an increase of € 90.3 million compared to 2017.