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Breaking News, Research 2 Aug 2023

BREAKING NEWS – 02.08.2023

In the press release of July 31st, 2023, Convergenze SpA – a Benefit Company active in the 100% green Telecommunications and Energy sectors, operating nationwide through its registered EVO (Electric Vehicle Only) network and proprietary fiber-optic network with innovative XGS-PON technology and listed on the Euronext Growth Milan market – announced its preliminary consolidated results as of June 30th, 2023, examining revenues and margins, as well as some business KPIs that are not subject to audit.

At the closing of the first half of fiscal year 2023, the Company achieved revenues of € 10.20 million, registering a slight decrease compared to the same period of fiscal year 2022, when revenues amounted to € 12.50 million. Specifically:

– revenues from the TLC busienss unit amounted to € 4.90 million (against 49,270 contracted services), registering a growth of 6.2% compared to 1H22A;
– revenues related to the Energy business unit amounted to € 5.30 million (against 10,250 contracted services), a lower result than in 1H22A, which amounted to € 7.90 million.

The generalized decrease in revenues can be attributed exclusively to the significant drop in the cost of raw energy materials in Italy, which was about 55.0% compared to the first half of last year.

In addition, there is a slight decrease in the percentage of users transiting on the proprietary FTTH and Wi-Fi network in the period under consideration, amounting to approximately 50.0% (50.6% in 1H22A). This trend is exclusively caused by the increase in the overall user base following the acquisition of the business unit of the subsidiary Positivo Srl.

It should also be noted that a further expansion of the proprietary fiber optic network was finalized during the six-month period under review, which reached a total extension of approximately 8,600 km (as of 1H22A it amounted to 6,558).

Analyzing the estimates of management in terms of margins, the following is highlighted:

– the data for the TLC business unit appears to be in line with the trend recorded in 1Q23A, standing in a range between 26.5 % and 27.5 %;
– as far as the Energy business unit is concerned, margins are expected to range between -1.0% and +0.5%, an estimate that reflects the effect of government social bonuses in terms of credit notes for end customers, for which recovery is expected on supplier invoices and which are subject to recurring regulatory evolutions in the computation and recognition to customers. In addition, the estimate under consideration is to be considered as non-final, as the official version of the estimates of the asset and liability cycle of the Energy business unit is not yet available, due to the non-receipt of invoices that recurrently happens in the reference market.

The observations on margins identify a marked improvement over the 1Q23A and 1H22A results, particularly marked in the Energy business unit. This testifies to the steady recovery of losses that affected the business unit during previous periods. 

The expectation of such positive results is attributable to the various efficiency measures, laid out by the Company during the first and second quarters of 2023.

The preliminary results further strengthen our positive view on the Company. While waiting to meet the management and evaluate the half-year results, we confirm our estimates: target price € 3.52 BUY rating and risk Medium.
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