Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on SNAM SPA. We currently have 8 research reports from 1 professional analysts.
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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.
Positive FY15 results; spin-off of distribution business being evaluated (Italgas)
17 Mar 16
Positive results for Snam but mostly in line with expectations. Revenues improved 2.3% yoy to €3.65bn (0.5% better than expected) mainly due to the contribution of investments made in 2013 in the regulated business. EBITDA increased 1% to €2.8bn, while adjusted EBIT rose by 0.9% yoy to €1.99bn, although the increase in revenues was partially offset by higher operating costs and an increase in depreciation. Net profit increased 3.3% yoy to €1.24bn, and adjusted net profit increased 12.2% to €1.21bn, which is 1% better than expected mainly due to lower financial expenses (reduction of cost of debt from 3.2% to 2.8%), higher income from equity investments and the removal of the Robin Hood tax (reducing the adjusted tax rate from 36.8% in 2014 to 30.7%); a 31% tax rate is expected for 2016. Operationally, all indicators increased with gas transportation rising 8% yoy, the number of active meters +1.8% yoy and storage capacity +0.9%. Operating cash flow increased 34.4% to €2.05bn helped by positive working measures, allowing the group to show a decrease in gross debt, while maintaining free cash flows relatively flat. This helped net debt to decrease by 0.4% yoy to €13.77bn, which is better than expectations. A dividend of €0.25 per share will be paid, which is in line with last year. In terms of guidance, no financial information was provided, although it expects gas demand in Italy to remain at 2015’s levels, as well as investment, with a focus on operational efficiency to decrease operating costs. Moreover, management expects organic growth in Italy and consolidation of the company’s presence in Europe. However, net debt for 2016 is expected at around €14.2bn (at the consolidated level) and capex at €1.25bn.
Emerging from the clouds
16 Feb 17
Rolls-Royce’s underlying performance in FY16 was ahead of both its own and market expectations. Media focus on the non-cash £4.4bn headline FX loss is missing what looks to be the basis for optimism. As the civil model starts to move from investment in engines for the A350 and A330neo into the aftermarket delivery phase over the remainder of the decade, we think cash flow is likely to improve, particularly if supported by an eventual recovery in Marine.
15 Feb 17
At the current market capitalisation of £29m, we believe the shares are significantly undervalued. We estimate that the highly profitable Maritime business is alone worth at least £40m. With net cash of £9m at end-2016, this implies that the market is currently ascribing a combined negative value of £17m to the rest of the group, which together account for c.54% of group revenues. This is very harsh given the management actions to transform TP Group to a profit-driven Tier 2 specialist services and engineering company are bearing fruits across the divisions. TPG Managed Solutions is expected to more than double its profits in 2017, while TPG Engineering and Design & Technology are on course to deliver sustainable profits from 2019. Even if we ascribe zero value to Engineering, Design & Technology and Managed Solutions, the shares are worth 9.5p a share, a 38% upside from the current share price. BUY.
Taking the bull by the horns
15 Feb 17
Avon Rubber announced this morning that CEO Rob Rennie has left and been replaced with Paul McDonald, formerly managing director of Avon’s Dairy division. This news comes as a surprise and is likely to raise some questions over the CEO and CFO transition, with the CEO only being in post for just over a year. However, the group has appointed an executive already known to many who have followed the business, and as such should be seen as a good appointment with a track record of decisiveness and getting things done.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
Share & share alike
14 Feb 17
The rally in the last fortnight, highlighted in the table, reflects a continued flow of positive updates and economic news. The FTSE 250, Small cap and Fledgling indices have reached record highs. We are in the lull ahead of results for those companies with a December year end, a welter of economic data regarding the UK economy, the State of the Union address in the US on 28 February and the UK Budget on Wednesday 8 March. We will learn at that stage the latest forecasts from the Office of Budget Responsibility. As highlighted previously, the reaction to corporate updates will continue to set the tone.