Thank you, Shirley. Good afternoon, ladies and gentlemen, and welcome to the ENAV first half 2020 results call.

Here with me, there are Mr. Paolo Simioni, ENAV CEO; and Mr.

Luca Colman, ENAV CFO. They will be running you through the formal presentation, and after that, we'll be happy to answer your questions.

And with that, I leave at the floor to Paolo.

Thank you, Vittorio. Good afternoon to all ladies and gentlemen.

Welcome to ENAV first half 2022 results call. Before debriefing in ENAV's result, I'm glad to announce that in May, the European Commission officially approved the Italian Performance Plan related to the third regulatory period, publishing the related decision [ 773/2022 ].

This formal act and the process or the definition of the performance plan related to RP3, which was impacted by the spread of COVID-19 pandemic. It is worth noting how the EU commission in this decision naturally stated that Italy outperforms by a significant margin, both the RP3 [indiscernible] unit cost trend, and the long-term union wide [indiscernible] trend, observing that Italy's on route to [indiscernible] trend of minus 2.3% of RP3 out-performs the union wide trend of plus 1% over the same period.

I'm also glad to confirm that traffic is recovering better than expected, almost reaching the pre-pandemic volumes and coming back to the standard pre-pandemic seasonality. Compared with our estimate included in the performance plan that foreseen 2022 4 year route traffic at 85% of 2019, we now expect to reach 90% of pre-pandemic volumes.

Now, with the regulation and the pre-pandemic condition, traffic volumes are almost at 2019 level, and [indiscernible] to take into account COVID effects. We can finally state that we are in effect normal situation, despite the rising inflation and the consequences of Russian UK conflict.

During the second quarter, we have also finalized and disclosed to the financial community our new business plan, which is part of our long-term future strategic vision with a 10 years horizon that we call the Future Sky 2031. Both the business plan and Future Sky are purely oriented to the sustainable success of the group, keeping as always safety as main priority and aiming to increase value for all stakeholders.

Within the projects included in the business plan and in line with the scheduled timeline, I'm proud to communicate that in mid-June, ENAV has inaugurated the first digital remote tower in [indiscernible]. This is the first step towards the digital digitization and modernization of our new technical and operating model that will live the new remote tower apps, the largest one in Europe together with the other one that we will be developed in [indiscernible].

The first half 2022, we have seen a solid year on year recovery in en route and traffic and [indiscernible] traffic, which were both almost 3 time first half 2021 [indiscernible] unit reaching 90% and 84% respectively over 2019 levels. That revenue in the first half of 2022 were 412.1 million Euro, increasing 9.9% year on year, driven by a solid growth in en route and terminal revenue.

EBITDA was 97 million after 26.6% year on year, despite of the expected rise in cost. EBITDA margin stood at 23.5%, 3.1 percentage point higher than 2021 first half.

The first half 2022, we recorded a 70 -- 27.7 million net profit with the second quarter performance more than offsetting the first quarter net loss, following standard seasonality in our P&L quarterly trend. CapEx was EUR 31.5 million in line with the provided guidance.

Net financial debt slightly raised in the first half 2022, reaching EUR 493.3 million compared with EUR 483.5 million at the end of 2021. [indiscernible] on full year 2021, EBITDA [indiscernible] 2.2x.

Cash balance at the end of the first half was EUR 176 million, which remains more than adequate to face the need the needs coming from the business as usual. Let's go to the next slide.

We can see the performance of en route traffic, which show service unit growth of 178.8% year on year. Within en route, international traffic increased 270, 58% year on year.

Route other flight was up 141.2% and national view, 115.6%. Other flight confirms to be the most important component within the en route mix, accounting for 41% of total traffic, while the international component accounts for 37% and national for 22%.

First half of 2022, en route services unit were 90% of those recorded in the first half 2019, heading the way to a very strong summer. This expectation is planted by the second quarter 2022 performance in terms of traffic volumes, which reached 95% of pre-pandemic 2019 second quarter.

The quarterly trend also reflects the return of standard seasonality typical of our core business, as you know. Let me provide you also with last available data, which are aligned to the last quarter results.

Total number of flight minutes in the last week of July 2022 were 95.3% of those recorded in the same period of 2019. So for what concern terminal traffic in the next slide, service units reported a 165.5% year on year increase, showing a solid performance in north region.

International component went up 228.5%, and the domestic component view 111.8%. First half 2022 terminal traffic reached 84% of 2019 first half volume, confirming also for terminal the solid recovery already seen in en route.

The recovery is even stronger in the second quarter 2022 in terms of traffic volumes, which reached 90, 91 of pre-pandemic 2019 second quarter. And with that, I give the floor to Luca.

Thank you, Paolo, and good afternoon to all of you on the call. Moving to Slide 6 is that the total revenue reaches EUR 412.1 million, growing 9.9% year on year.

Worth noting within total revenue the change in relative weight of the various item contribution to the total growth compared with the last few years. The main contribution came from operative revenue related to airline and [indiscernible] within 2 months.

And no more from the balance credit like accrued in the last few years. I think this is one of the most important point of this summit.

Most important point of this semester. And root revenue increases by 219% and terminal revenue by 177.4%, thanks to the year on year practical recovery.

Therefore, balance accrued in the first half amounted to EUR 3.1 million, a negligible amount compared to the last year, which was fully impacted by COVID-19 pandemic. The EUR 3 million positive balance reflect back to normal situation from the regulatory point of view and is the sum of a positive contribution from previous year balance reversal for approximately EUR 6 million.

Euro contra adjustment of approximately EUR 3 million, also related to the previous year, and a negative balance generated in the first half 2022 for EUR 6 million due to managed traffic volumes, which were higher than the forecast included in the first performance plan, in the total performance plan. Moving now to the non-regulated business.

We can see a year on year decrease mainly due to the different phasing of the Sign X contract in the fiscal year of 2022 compared to the fiscal year 2021. Moving now to the next slide, the next page, we can see the above mentioned back to normal ultra number costs.

First up, 2022, total operating costs increases of 5.6% year on year in line with our budget. And mainly due to the valuable component of personal costs and the other operational costs.

These increases are derived from 2 main elements. First one is derived in manage the flight.

And the second one is increase of inflation. But what concern the first one, it is worth nothing that the cost increase is not fully proportional to the revenue's growth, driving an increase in inhibit and the marginality.

For what concern inflation impacting personal and external cost, let me remind you that [indiscernible] is covered by its protective regulation. The Delta between the act on inflation and the forecast included in the performance plan will generate a credit to be recovered in the coming years through the user balance mechanism.

Personal went up by 4.5% year on year mainly due to a rise in a valuable remuneration related to overtime needed to manage increased number of flights, which cost also the rise in social security contributions. And an higher accrual related to the new holiday generated in the period and not yet with light.

External cost also increased year, mainly through the recovery in the earth traffic volumes recorded in the period. The 10.7% rise equivalent to a EUR 6.8 million growth was mainly attributable to cost of energy for EUR 4.1 million and other cost related to operative personal travels for approximately EUR 1 million.

Let's now take a look to end up total revenue and EB evolution. And the first of 2022 compared to first of 2021.

Total revenue increase 9.9% year on year, mainly driven by root and terminal component, thanks to the solid air traffic recorded in the period. Escrow was only partially upset by year on year balance decrease, which was driven by COVID 19 pandemic impacting last year traffic points.

Exempt flights contributes for a positive EUR 0.8 million, not regulated business contributed for negative EUR 2.4 million while other operating revenue for negative EUR 3.5 million related to a lower erroneous European financing. It is important to know that end root and terminal revenue growth will generate and increase cash in increase cash in veranda.

Based on our usual 2 month billing cycle, while the balance decrease is not a cash movement. All these resulting in a net positive effect on our cash flow.

In the first half 2022 stood at EUR 97 million showing a solid 26.6 year on year with a margin at the 23.5%, which means 3.1 percentage points better than last year. With a second quarter in line with 2019 second quarter, meaning company performance are back to normal.

Growing in both EBITDA and margin is driven by the above mentioned increase in revenue at a higher piece than the corresponding rise in cost, which is not fully proportional to increase in traffic and the related revenue. Moving to the next slide.

We can comment below EBITDA movements, DNA decreased by 5.4% here. Meaning is a consequence of a reduced capital expenditure in the recent past.

This item is expected to slightly and slowly increase in the coming years as the new ATL platform currently under development will become operational. Revisions and write-downs in the first half where EUR 1.3 million [indiscernible] and potentially include, amongst other items, the write-downs of the total credit related to the Russian customers.

As already occurred in the previous quarters we had a positive financial income and expenses mainly related to the actualization of the previous year's balance set rate. Moving now to income taxes.

We can see EUR 9.4 million increase mainly due to the higher taxable income in the first half of 2022, compared to the same period of the last year. And the fact of the deferment taxes.

As a result of these movements in the P&L, we recorded EUR 27.7 million net profit, in the first half, which doubled year on year, confirming the back to normal from both regulatory point of view on one side and traffic and the related seasonality on the other side. It is worth nothing that the second quarter net profit, more than upset the first quarter net loss following end ups pandemic P&L, quarterly trend, which includes standard traffic and seasonality.

Moreover, this performance is even more brilliant if we compared second quarter 2022 net profit of EUR 43.1 million with a pre pandemic 2019 second quarter of EUR 37.7 million. In the last slide, we usually summarize enough liquidity and the financial position, which, as you can see, remains solid.

We closed the first half with EUR 176 million year of cash, having additional under own credit lines for EUR 294 million, out of which EUR 220 million are committed. Net financial debt stood that EUR 494 million, likely increasing, compared with the net debt of EUR 484 million at end of 2021 may lead you to the dynamics of trader receivables and tables related to ordinary operations, which reflect end ups usual few months billing cycle based on which as of the end of June, we did not yet cash in May and June traffic.

In more detail, the EUR 10 million Delta is mainly related to cash in from operational for approximately EUR 16 million. Cash Cap Ex for approximately EUR 36 million, EUR 9 million reduction of non-current commercial debt.

As we said, in the last results poll, we expect to generate cash in year, given the tariff has been right and aligned to traffic expectations for the year and after traffic volumes are even better than the performance plan forecast. That on full year 2021, we did that for the first half stood at 2.22 times, compared with 2.70 times reaching end of the last year.

Finally, I would like to announce that we have recently recognized that the EUR 180 million private placement due in the first half of August with a new 12 months, 10 or term loans for the same amount. And with that, we are ready to answer your questions.

There are a couple of questions on my end. The first one: you were mentioning that you see, you have a very positive outlook on traffic for 2022, and also you will be able to book inflation rev -- can you hear me?

Yes, I understand. You can go on.

Yes. And that you will book inflation revenues, inflation balance in -- You will book inflation revenues, about inflation balance in the coming months.

So do you see room for an upgrade of the full-year 2022 outlook, the one you provided some months ago? Then, another one on the cost evolution.

So you had approximately 6% year-on-year growth in cost, in the first half, so should we expect a similar growth rate of cost in the second part of the year And what do you see in terms of cost evolution and inflation for 2023 and beyond? And then a final one.

Can you give a little bit of color on previous generation in this first part of the year? So, what was the operating free cash flow?

So, it is back to positive? That's all.

Thank you.

Thank you, Aleksandra. I will take your answer.

I mean, your question, actually, hopefully, with a good answer. For what concerns the updating or not our outlook, we are thinking about it.

We actually are waiting for the end of the summer season as well. Luckily, in these last few years, as you know, it's very, very important.

So, we prefer to wait the end of the summer season, and then came out with an update of the outlook, if it's okay. If it's still a good thing.

For what concerns the other point, you asked for cost evolution. More or less, yes, we confirm that what you have seen...

What we have seen in the first half may be, could be, will be the same, with just a little adjustment. Let's see by the end of the year.

For what concern, you said the free cash flow generation. When I explained the slide, slide number 10, I confirm that 60 million of our generations...

I'm sorry, cash income from operational. So, yes, let me say that we are starting to regenerate cash-in from our core business, and this is a positive that we have cash CapEx that is approximately 36 million that are absorbing cash in this moment.

Yes, let me say, the operative cash flow is positive.

I'd like to ask for a little bit more clarification on this so-called inflation balance, which I suppose will compensate ENAV for actual inflation above the level assumed in the RP3 Performance Plan. I think based on my reading, I was able to find that they compare April 2022 inflation in Italy, which I saw was 6.3%, with the forecast from the IMF, which I think, were 1.8%.

Do management sort of have any visibility on how much they expect to accrue? And considering it doesn't appear that they accrued any in the first half, is this all going to be...

Appear in the second half?

Okay. Yes.

As you know, the regulatory [indiscernible] foresee that we can cover the inflation for what concern personnel costs and other operating costs. So, if there is difference between the inflation planned in the tariff and the actual one by the end of year, we're allowed to adjust with the balance -- as with the balance, the difference.

Just to give you an idea, what could be the amount, you should take EUR 3 million, EUR 3.5 million around for each percentage point of inflation... Different percentage point of inflation.

So you have 2 percentage point of inflation between the planned one, the actual one. The planned and the actual one, you should calculate around EUR 6 million, EUR 7 million.

So each point is equal EUR 3 million, EUR 3.5 million more or less.

Thank you. And will that all be accrued then in the second half, because it doesn't appear that any was accrued in the first?

Yes, definitely. Well, we'd normally wait at least the second half to calculate inflation.

And now, it's too early. So we had always...

And we're still doing the same thing waiting for the second half to calculate the inflation.

I'll ask another question. So I suppose, ENAV is a heavily unionized company.

And at least, on the face of it, it looks like in your first half results, there wasn't enormous or large increases in fixed labor costs. Please, can you provide an update on how any negotiations with unions are going?

And if ENAV feels comfortable that it can avoid maybe some of the industrial action that airports and airlines are suffering with at the moment.

Just to clarify this point, the increase of personnel cost is mainly related to the variable part, and this is due to cover... What is the extra time that we need to cover the traffic we're managing.

Just to give you a couple number, just to give you... If you think the level of traffic this first 6 month of 2022 is almost...

I mean, say, is 90% of 2019, so pre-COVID traffic, instead last year in the same period, same 6 months, we had minus 65% traffic compared 2019. You can imagine how much is the difference in term of...

For the people effort. So mainly the cost is...

The personnel cost is related to these extra traffic that we are managing. And the variable part, not the fixed part.

The fixed part is more or less stable, so it's not impacted. For what concern level costs, yes, we will start to talk with...

I mean, we are already talking with our trade unions. And we are going to fund...

I mean, to continue coming back from the summer break in September, trying to finalize everything within the year, et cetera. We will see.

Did I answer your question?

Yes. I think that's the gist.

If I can ask a follow-up, I think, look at the European airports that at least we cover, they feel very comfortable, very confident on summer traffic. And some of them are having to limit traffic.

I think they have less confidence and less visibility on the fourth quarter. I don't know if you had any view based on the trends that you are seeing.

Is there likely to be somewhat of a softening in traffic in the fourth quarter versus summer, beyond what would be seasonal?

Yes. Yes.

This is good point. We are talking with our...

I mean, with airport, with airlines. Last fourth quarter of last year was quite good.

The expectation now in this moment, it's not really, I mean, something easy-peasy to see. What we expect is to have a summer season like last year that would pass also over September.

Probably, we will have a good October in line with last year. November and December still, we have not visibility in this moment.

In general, though, it doesn't really affect too much our total, I mean, results in term of revenue, in term of traffic management, because the summer season is the period where we almost... I mean, we do most of our revenues and traffic manage.

Say that at the moment, the forecast also given by Eurocontrol actually confirmed by the end of year, at least for Italy, to have 90% of traffic... Level of traffic compared 2019.

Right now, we are at 90%. If you look to what is the traffic that we're recording in these few months, in these weeks, it's very close to 95%, 96%.

So this mean that probably it could be a little bit decrease in November and December, but just will not affect so much the total volume managed. But it's still something that is not easy to still to...

I mean, already to try to figure out.

As a follow-up on the guidance. Do you think you will be able to provide a dividend policy update in...

If you decide, of course, to give an update on [indiscernible] everything in the autumn. And the second question is on the bonds mechanism...

My question is on the bonus of miles mechanism. Since we are seeing some operational disruptions all over Europe, and partially within Italy, do you expect that strikes or other activities like that will put a risk on you achieve the 12 million bonus for the current year?

Okay. So, what concerns the first question?

Let me say that in general, we already have employee that allows us to... What the dividend employees say is we have the floor at 80%.

We [indiscernible] that at least 80% of our free cash flow as they calculate and the proxy. But this is the floor.

So already, this data policy allowed us to increase the volume. The volume of dividend.

So, say that we don't foresee to change this dividend policy, didn't give any other guideline in the short term, this probably would be a discussion by the end of the year, when we were left with the final result for 2022 with the border director, and define what would be the level of dividend that we will distribute. So the dividend policy is employed, and it gives us enough flexibility to manage any possible increase.

For what concern is that... The second point, our bonus models, yes.

The bonus models at the moment, at a 6 month, half years old, we are still in line with our target to over perform the capacity, the punctuality target that was given to us. So we are over performing by the end of year.

At the moment, we are still working to get that target. Let me see.

We can have a better view right after the summer season, because on summer season, the level of complexity and level of traffic is... But with the peak time is really, really important in summer, important that we are reaching traffic that is higher than 2019 peaks.

So you can imagine our difficulties. At the moment, our side is still to over perform.

Is still to over perform punctuality target.

I have a small question on your balance sheet policy. So you've said that in the second quarter, you had positive operating cash flow.

And we're aware that starting from 2023, we start to see the cash impact from the balance accrued over the pandemic. And on my balance sheet forecast, you will quickly get to your debt position.

So I'm just wondering if you can remind us what's your budget position, and if you've got a leverage target below, which you are happy to start thinking a bit more seriously about M&A, or extra [indiscernible] shareholders.

Yes, we confirm our 3 legs of investment. The first one is to readjust, will be our financial structure, capital structure.

Just a little, because we are now 2 point something times our EB data. That app is 2 times 17 EBITDA.

So it is already in a good shape and a good position. So just a little bit of adjustment around 2%, 1.5%-2%.

Sorry, in times, not percent, 1.5 to 2x EBITDA. That's the first leg.

The second leg is, look for and see if there are some opportunity of M&A. M&A opportunities.

Still, if we have opportunities that make sense for us to grow in a not organic way, for example, not [indiscernible] business, or to increase, to better work with our core business, we will look at it. We are not thinking about huge acquisition, but thinking some very finalized, and cherry picking companies.

And the third leg is the dividend. We have already given the policies that allowed us to give more cash, more dividend to our shareholders than the one is calculated, applying 80% of our free cash flow generated as the policy.

So, that's the 3 legs that we think, and we will use to put our money in.

And you would be happy to pay above a hundred percent in case you, in a couple, 2 years' time, you get to zero net deposition. Would you be happy to pay about a hundred percent of your cash flow?

Looking what is the balance of this, we will impart also. Other than that, the performance of the company, and top of this, we will also have extra cash.

We have already done in the past, these actions, to pay more than 80% of the pre-cash flow generated. So I don't see why we shouldn't do also in the future.

But this is a decision that will be taken by our border director year by year, actually.

Yes, it's my final question. Just picking up on a comment you made there relating to potential M&A.

In the past, the company's discussed the potential of acquiring a neighboring countries or a small countries navigation. Is that intention still alive?

Or are you looking elsewhere? Can you comment on that please?

Look. Yes, the deal is definitely still on floor, but the point is to have these opportunities.

So it's an opportunity more than... See the opportunities that is on the floor, and then validate the opportunity and see if we can do it.

Yes.

Okay. If there are no questions, let me please, thank you everyone who has joining the call, let me thank you, Paolo, Luca.

For further question, you have our contact investor relations. Don't hesitate to contact us.

And we also take your occasion, the chance to wish you a pleasant summer break. Bye.