Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on SNAM SPA. We currently have 9 research reports from 1 professional analysts.
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Robust 2016 results; guidance slightly below forecasts and decreasing pay-out expected
07 Mar 17
The group has provided better than expected results on a pro-forma basis after the spin-off of Italgas with revenues reaching €2,560m, which represents -2.6% yoy, but an increase of 1.8% yoy once adjusted for the WACC revision effect. In line with this, EBITDA decreased by 3.4% yoy to €1,984m, but increased 2.1% yoy on an adjusted basis. The reported net income of the group reached €861m, down by 30.1% yoy due to the new regulatory parameters and the deconsolidation of the gas distribution business, but on a pro-forma adjusted basis reached €845m which is greater than both the market’s and our expectations. Net debt reached €11.06bn, which represents a 20% yoy decrease, but is slightly above expectations. The group is proposing a dividend payment of €0.21/share, in line with expectations. The group has also revealed its 2017-2021 plan with RAB growth of 1% per year and net income average growth of 4% per year. The dividend policy is confirmed with 2.5% growth per year over 2016-18, and the 2018 dividend will be used as a floor thereafter. The company has increased its investment plan to €5bn (+8.7% from the previous level) focused on the pipeline and storage developments in Italy.
Lower allowed revenues and distribution business performance weigh on results
15 Nov 16
Snam has released its 9M results which showed revenue decreasing 5.9% yoy to €2,586m, mainly driven by a reduction in the allowed WACC under the new regulatory environment. Moreover, with operating costs being reduced less than revenues (-3.4%), EBITDA contracted by 6.6% yoy to €1,968m which, added to the greater depreciation charges, has pushed the operating profit of the group to a 12% yoy decrease to €1,296m, while net profit decreased by 11.8% to €783m. Net debt increased by 1.7% ytd to €14,019m, but it fell by €158m since the half-year results. This is also confirmed by the slight improvement compared to the half-year mark as revenues decreased in H1 16 by 6.2% and net income fell 14.1%.
Italgas spin-off achieved within estimates
08 Nov 16
Yesterday, Snam achieved its spin-off of its gas distribution business (Italgas) at a price of €4/share (within our estimates), which represents a €3.75bn market cap. The spin-off has been completed such that Snam’s shareholders will receive one Italgas share for every five held of Snam (1:5). The company’s new shareholding structure will allow Snam to keep Italgas as a minority interest with a 13.5% stake. The Italian state (via CDP Reti and CDP Gas) holds 26%, and there is a free float of 60.5%. Snam and the Italian state have a 3-year lock-up under their shareholding agreement. Moreover, it has been confirmed that Italgas has been given a Baa1 rating by Moody’s with a stable outlook.
Results fall in the regulation setting and higher opex in the distribution business
27 Jul 16
Under the new regulatory environment, Snam’s results are broadly in line with expectations, with revenue falling 6.2% yoy to €1,724m as lower revenues in the gas transportation and distribution segments were partially offset by higher revenue in the storage activities, which had an upward revision on the allowed WACC. Operating profit fell by 14.3% to €867m due to higher risk provisions, charges related to the Italgas spin-off and higher depreciation from new infrastructure in service. Following this, net profit was down 14.1% to €526m, slightly above expectations due to lower financial expenses from a lower cost of debt and a reduction in the income tax. Net debt increased by 2.9% ytd to €14,177m, while cash flows where resilient and resisted the earnings contraction, and there was an 8% yoy increase in capex mainly attributed to the transportation segment. The Italgas separation, which was approved on 28 June 2016 by the board of directors is likely to take effect by 31 December 2016. Italgas has already been attributed a BBB+ rating or equivalent by rating agencies. The board has also approved a share buy-back programme of up to 3.5% of Snam’s share capital, or up to €500m over 18 months. Guidance has been confirmed at €1.75bn operating profit for the full year, without taking into account the €15m expected from the restructuring charges related to the Italgas spin-off.
Gas distribution spin-off to focus on Italy as an European gas hub
01 Jul 16
At the capital markets day on 29 June 2016, Snam provided the much-awaited details of the spin-off structure of its gas distribution business (Italgas), and it also provided the parameters for the 2016-20 period. The Italgas separation will be performed through a partial and proportional demerger, resulting in the listing of ITG Holding, a company 13.5% owned by Italgas, 26% by the Italian public financial institution (Cassa Depositi e Presiti “CDP”), with the remaining 60.5% as free float. For this, ITG Holding’s shares will be assigned to Snam’s current shareholders with a 1:5 ratio (1 ITG Holding share for each 5 Snam shares). The transaction is expected to be neutral to Snam’s credit rating, as Italgas is expected to have a similar rating to the one held by Snam: a BBB rating. Moreover, Snam should retain a 13.5% stake, backed by a shareholders’ agreement between both entities and a similar risk profile (even though, from an industry view, the transmission and distribution networks no longer have high synergies). Following the demerger, Snam has proposed a €0.21 dividend for 2016, followed by at least 2.5% yearly growth for 2017 and 2018. Italgas (subject to the approval of its Board of Directors) should be able to pay a dividend to allow current Snam shareholders to receive in 2016 a dividend at least equal to 2015’s (i.e. €0.25/share, translating into a €0.04/share dividend for Italgas). Moreover, for the first time in its history, Snam has proposed a share buy-back programme which would target up to 3.5% of outstanding shares with a maximum amount of €500m and a timing limited to 18 months. Snam has provided guidance for 2016 on a pro-forma base of its demerged operation with €0.9bn capex, €19.5bn RAB and €0.8bn net income.
Fall in earnings impacted by WACC reduction; EBIT guidance reduced
12 May 16
Snam’s results reveal a faster than expected deterioration in revenues and earnings due to the negative impact from the downward revision in the allowed WACC for the new regulatory period. Due to this, revenue fell by 8.3% yoy to €852m, missing forecasts by 2%, with operating profit falling -16% yoy to €429m and net income reaching €266m, a 18.2%yoy decrease, both being slightly below expectations. Operating cash flow fell 12.4%, although it was enough to cover a 2.5% increase in capex and debt repayments to maintain the group with a positive free cash flow. Despite this, the group confirms its FY outlook, focusing on operating efficiency; however, the guidance has been reduced from €1.8bn to the mid-range between €1.7 – 1.8bn.
N+1 Singer - T. Clarke - Strong conclusion to FY16, record order book
28 Mar 17
After significant upgrades at the time of the full year update (PBT forecast +43% FY16; +14% FY17), today’s results are c.4% ahead of our expectations at the PBT level and show strong growth on the prior year (PBT +48%). All regions achieved positive growth in revenue. The outlook statement refers to a still growing order book (£350m at the end of February vs. £330m at the year end) and the strength of recent trading, with London & the South East and Scotland said to be particularly positive. The Group has reiterated its ambitions to improve margins, but we have not incorporated this into our forecasts at this stage. We have nudged up our FY’17 forecasts (PBT +5%) and introduced FY’18 forecasts that imply 2% PBT growth. Despite the well justified bounce in the share price, the shares still trade at a significant discount to the peer group (7.6x FY17 PE, 4% yield).
Panmure Morning Note 29-03-2017
29 Mar 17
We are cutting our recommendation to HOLD as we see little upside from current levels given the lack of positive surprises in today’s trading update. Multiples of 4.4x 2017 sales and 17x 2017 EBITDA imply an expectation of at least slightly exceeding expectations. We had assumed that acquisitions will provide the momentum until organic investments deliver. However, acquisitions are proving elusive and excess cash is diluting returns. Moreover, our forecast relies on at least one order in vehicle simulator market, which has yet to be announced. The management has shown that it can use the financial markets to raise equity but it now needs to show that it can deploy excess equity productively.
N+1 Singer - Severfield - Strong H2 drives upgrades; CEO temporarily steps down due to ill health
28 Mar 17
Severfield’s trading update highlights that trading during H2 was strong and the Group now expects results to be ahead of expectations. Cash flow performance has been similarly strong with net funds at the year end also expected to be ahead of expectations. The strong performance was driven by both a better than expected revenue performance and better than expected growth in the operating margin. We expect to increase our FY16 PBT forecasts by c.9% to around £19.5m. In addition, we are disappointed to see that Ian Lawson (CEO) has taken a temporary leave of absence due to physical ill health. John Dodds (non-executive Chairman) will step up to Executive Chairman on an interim basis and Alan Dunsmore (FD) has agreed to assume the role of CEO on a similar basis. This should ensure the continuity of the business whilst Ian is recovering. The outlook for Sevefield remains positive and the Group has reiterated its medium term target to double PBT from £13.2m in FY16 by FY20. We remain positive on Severfield (one of our best ideas for 2017) and continue to see clear potential for it to outperform its medium term targets.
28 Mar 17
ClearStar* (CLSU): Building a background for growth (CORP) | Sound Energy (SOU): TE-8 results (HOLD) | LiDCO* (LID): 2017 should be a transformative year (CORP) | Proteome Sciences* (PRM): FY 2016 in line. Moving towards breakeven (CORP) | Fulcrum (FCRM): Significant market potential, rising margins and a strong balance sheet (BUY) | Mortgage Advice Bureau (MAB1): Strong and growing intellectual property (BUY) | 7digital* (7DIG): Open offer result (CORP)